Form 6-K
Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2018

 

 

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

 

 

LG Twin Towers, 128 Yeoui-daero, Yeongdeungpo-gu, Seoul 07336, Republic of Korea

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F   ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

    Yes  ☐            No  ☒

 

 

 


Table of Contents

QUARTERLY REPORT

(From January 1, 2018 to March 31, 2018)

THIS IS A TRANSLATION OF THE QUARTERLY REPORT ORIGINALLY PREPARED IN KOREAN AND IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SUPERVISORY COMMISSION.

IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED AND CERTAIN NUMBERS WERE ROUNDED FOR THE CONVENIENCE OF READERS. REFERENCES TO “Q1”, “Q2”, “Q3” AND “Q4” OF A FISCAL YEAR ARE REFERENCES TO THE THREE-MONTH PERIODS ENDED MARCH 31, JUNE 30, SEPTEMBER 30 AND DECEMBER 31, RESPECTIVELY, OF SUCH FISCAL YEAR.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON A CONSOLIDATED BASIS IN ACCORDANCE WITH KOREAN INTERNATIONAL FINANCIAL REPORTING STANDARDS, OR K-IFRS, WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. K-IFRS ALSO DIFFERS IN CERTAIN RESPECTS FROM THE INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ISSUED BY THE INTERNATIONAL ACCOUNTING STANDARDS BOARD. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES IN THIS DOCUMENT.

Contents

 

1.   Company      4  
  A.    Name and contact information      4  
  B.    Domestic credit rating      4  
  C.    Capitalization      6  
  D.    Voting rights      6  
  E.    Dividends      6  
2.   Business      7  
  A.    Business overview      7  
  B.    Industry      7  
  C.    New businesses      9  
3.   Major Products and Raw Materials      9  
  A.    Major products      9  
  B.    Average selling price trend of major products      9  
  C.    Major raw materials      9  
4.   Production and Equipment      10  
  A.    Production capacity and output      10  
  B.    Production performance and utilization ratio      10  
  C.    Investment plan      11  
5.   Sales      11  
  A.    Sales performance      11  
  B.    Sales route and sales method      11  
6.   Market Risks and Risk Management      12  
  A.    Market risks      12  
  B.    Risk management      12  
7.   Derivative Contracts      13  
  A.    Currency risks      13  
  B.    Interest rate risks      13  

 

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8.    Major Contracts      13  
9.    Research & Development      14  
   A.    Summary of R&D-related expenditures      14  
   B.    R&D achievements      14  
10.    Intellectual Property      16  
11.    Environmental and Safety Matters      17  
12.    Financial Information      19  
   A.    Financial highlights (Based on consolidated K-IFRS)      19  
   B.    Financial highlights (Based on separate K-IFRS)      20  
   C.    Consolidated subsidiaries      21  
   D.    Status of equity investment      21  
13.    Audit Information      22  
   A.    Audit service      22  
   B.    Non-audit service      22  
14.    Board of Directors      23  
   A.    Members of the board of directors      23  
   B.    Committees of the board of directors      23  
   C.    Independence of directors      24  
15.    Information Regarding Shares      24  
   A.    Total number of shares      24  
   B.    Shareholder list      24  
16.    Directors and Employees      24  
   A.    Directors      24  
   B.    Employees      25  
17.    Other Matters      26  
   A.    Material Events Subsequent to the Reporting Period      26  
Attachment: 1. Financial Statements in accordance with K-IFRS   

 

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1. Company

 

  A. Name and contact information

The name of our company is “EL-GI DISPLAY CHUSIK HOESA,” which shall be “LG Display Co., Ltd.” in English.

Our principal executive office is located at LG Twin Towers, 128 Yeoui-daero, Yeongdeungpo-gu, Seoul 07336, Republic of Korea, and our telephone number is +82-2-3777-1010. Our website address is http://www.lgdisplay.com.

 

  B. Domestic credit rating

 

  (1) Corporate bonds

 

Subject instrument

  

Month of rating

   Credit rating(1)   

Rating agency (Rating range)

Corporate bonds    June 2016    AA    NICE Information Service Co., Ltd. (AAA ~ D)
   September 2016      
   May 2017      
   February 2018      
   April 2016    AA    Korea Investors Service, Inc. (AAA ~ D)
   May 2017      
   October 2017      
   April 2016    AA    Korea Ratings Corporation (AAA ~ D)
   September 2016      
   May 2017      
   October 2017      
   February 2018      

 

(1) Domestic corporate bond credit ratings are generally defined to indicate the following:

 

Subject instrument

  

Credit rating

  

Definition

   AAA    Strongest capacity for timely repayment.
   AA+/AA/AA-    Very strong capacity for timely repayment. This capacity may, nevertheless, be slightly inferior than is the case for the highest rating category
   A+/A/A-    Strong capacity for timely repayment. This capacity may, nevertheless, be more vulnerable to adverse changes in circumstances or in economic conditions than is the case for higher rating categories.
   BBB+/BBB/BBB-    Capacity for timely repayment is adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity.
Corporate bonds    BB+/BB/BB-    Capacity for timely repayment is currently adequate, but that there are some speculative characteristics that make the repayment uncertain over time.
   B+/B/B-    Lack of adequate capacity for repayment and speculative characteristics. Interest payment in time of unfavorable economic conditions is uncertain.
   CCC    Lack of capacity for even current repayment and high risk of default.
   CC    Greater uncertainties than higher ratings.
   C    High credit risk and lack of capacity for timely repayment.
   D    Insolvency.

 

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  (2) Commercial paper

 

Subject instrument

  

Month of rating

   Credit rating(1)   

Rating agency (Rating range)

   June 2016    A1    Korea Ratings Corporation (A1 ~ D)
   June 2016    A1    NICE Information Service Co., Ltd. (A1 ~ D)
   September 2016    A1    NICE Information Service Co., Ltd. (A1 ~ D)
Commercial paper    September 2016    A1    Korea Ratings Corporation (A1 ~ D)
   May 2017    A1    Korea Investors Service, Inc. (A1 ~ D)
   May 2017    A1    Korea Ratings Corporation (A1 ~ D)
   October 2017    A1    Korea Investors Service, Inc. (A1 ~ D)
   December 2017    A1    Korea Ratings Corporation (A1 ~ D)

 

(1) Domestic commercial paper credit ratings are generally defined to indicate the following:

 

Subject instrument

  

Credit rating

  

Definition

Commercial paper    A1    Timely repayment capability is at the highest level with extremely low investment risk and is stable such that it will not be influenced by any reasonably foreseeable changes in external factors.
   A2    Strong capacity for timely repayment with very low investment risk. This capacity may, nevertheless, be slightly inferior than is the case for the highest rating category.
   A3    Capacity for timely repayment is adequate with low investment risk. This capacity may, nevertheless, be somewhat influenced by sudden changes in external factors.
   B    Capacity for timely repayment is acknowledged, but there are some speculative characteristics.
   C    Capacity for timely repayment is questionable.
   D    Insolvency.

LOGO ‘+’ or ‘-’ modifier can be attached to ratings A2 through B to differentiate ratings within broader rating categories.

 

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  C. Capitalization

 

  (1) Change in capital stock (as of March 31, 2018)

There were no changes to our issued capital stock during the annual reporting period ended March 31, 2018.

 

  (2) Convertible bonds

Not applicable.

 

  D. Voting rights (as of March 31, 2018)

 

      (Unit: share)  

Description

    Number of shares  

A. Total number of shares issued(1):

     Common shares (1)      357,815,700  
    

 

 

 
     Preferred shares       —    

B. Shares without voting rights:

     Common shares       —    
     Preferred shares       —    

C. Shares subject to restrictions on voting rights pursuant to our articles of incorporation:

     Common shares       —    
     Preferred shares       —    

D. Shares subject to restrictions on voting rights pursuant to regulations:

     Common shares       —    
     Preferred shares       —    

E. Shares with restored voting rights:

     Common shares       —    
     Preferred shares       —    

Total number of issued shares with voting rights (=A – B – C – D + E):

     Common shares       357,815,700  
    

 

 

 
     Preferred shares       —    
    

 

 

 

 

(1) Authorized: 500,000,000 shares

 

  E. Dividends

Dividends for the three most recent fiscal years

 

Description (unit)

     2018 Q1      2017     2016  

Par value (Won)

 

     5,000        5,000       5,000  

Profit (loss) for the year (million Won)(1)

 

     (59,454      1,802,756       906,713  

Earnings (loss) per share (Won)(2)

 

     (166      5,038       2,534  
     

 

 

    

 

 

   

 

 

 

Total cash dividend amount for the period (million Won)

 

     —          178,908       178,908  
     

 

 

    

 

 

   

 

 

 

Total stock dividend amount for the period (million Won)

 

     —          —         —    
     

 

 

    

 

 

   

 

 

 

Cash dividend payout ratio (%)(3)

 

     —          9.92     19.73

Cash dividend yield (%)(4)

     Common shares        —          1.69     1.58
     Preferred shares        —          —         —    

Stock dividend yield (%)

     Common shares        —          —         —    
     Preferred shares        —          —         —    

Cash dividend per share (Won)

     Common shares        —          500       500  
     Preferred shares        —          —         —    

Stock dividend per share (share)

     Common shares        —          —         —    
     Preferred shares        —          —         —    

 

(1) Based on profit for the year attributable to the owners of the controlling company.
(2) Earnings per share is based on par value of W5,000 per share and is calculated by dividing net income by weighted average number of common shares.
(3) Cash dividend payout ratio is the percentage that is derived by dividing total cash dividend by profit for the year attributable to the owners of the controlling company.
(4) Cash dividend yield is the percentage that is derived by dividing cash dividend by the arithmetic average of the daily closing prices of our common shares during the one-week period ending two trading days prior to the closing of the register of shareholders for the purpose of determining the shareholders entitled to receive annual dividends.

 

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2. Business

 

  A. Business overview

We were incorporated in February 1985 under the laws of the Republic of Korea. LG Electronics and LG Semicon transferred their respective LCD business to us in 1998, and since then, our business has been focused on the research, development, manufacture and sale of display panels, applying technologies such as TFT-LCD and OLED.

As of March 31, 2018, in order to support our business activities, we operated TFT-LCD and OLED production and research facilities in Paju and Gumi in Korea, and we have also established subsidiaries in the Americas, Europe and Asia.

As of March 31, 2018, our business consisted of the manufacture and sale of display and display related products utilizing TFT-LCD, OLED and other technologies under a single reporting business segment.

2018 Q1 consolidated operating results highlights

 

 

     (Unit: In billions of Won)  

2018 Q1

   Display business  

Sales Revenue

     5,675  

Gross Profit

     542  

Operating Profit (loss)

     (98

 

  B. Industry

 

  (1) Industry characteristics and growth potential

 

    The entry barriers to manufacture display panels are relatively high due to the technology and capital intensive nature of the mass manufacturing process that is required to achieve economies of scale, among other factors.

 

    While growth in the market for displays used in notebook computer, monitor and other traditional IT products has stagnated or declined, the market for small- and medium-sized displays (including those used in smartphones) in the rapidly evolving IT environment has shown steady growth. The display market for televisions has also shown steady growth mainly due to growing demand from developing countries as well as from consumers in general for larger sized display panels. As for displays used in industrial, automobile and other value added products, we expect to see growth in these markets.

 

  (2) Cyclicality

 

    The display panel business is highly cyclical and sensitive to fluctuations in the general economy. The industry experiences recurring volatility caused by imbalances between supply and demand due to capacity expansion and changing production utilization rates within the industry.

 

    Macroeconomic factors and other causes of business cycles can affect the rate of growth in demand for display panels. Accordingly, if supply exceeds demand, average selling prices of display panels may decrease. Conversely, if growth in demand outpaces growth in supply, average selling prices may increase.

 

  (3) Market conditions

 

    There is a concern over excessive competition and resulting adverse effects on supply and demand in the LCD industry amidst continued increases in new investments in manufacturing facilities and supply of panels. In particular, Chinese manufacturers have continued to make further investments, which have been driven by local governments, despite concerns of over-investment in the LCD industry.

 

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    Most display panel manufacturers are located in Asia.

 

  a. Korea: LG Display, Samsung Display, etc.

 

  b. Taiwan: AU Optronics, Innolux, CPT, HannStar, etc.

 

  c. Japan: Japan Display, Sharp, Panasonic LCD, etc.

 

  d. China: BOE, CSOT, CEC Panda, HKC, etc.

 

  (4) Market shares

 

    Our worldwide market share of large-sized display panels (i.e., panels that are 9 inches or larger) based on revenue is as follows:

 

     2018 Q1     2017     2016  

Panels for Televisions(1)

     26.8     28.1     28.2

Panels for Monitors

     37.2     36.3     36.6

Panels for Notebook Computers

     24.7     21.3     27.8

Panels for Tablet Computers

     36.5     29.1     24.1
  

 

 

   

 

 

   

 

 

 

Total

     29.8     29.2     29.4
  

 

 

   

 

 

   

 

 

 

Source: Large-Area Display Market Tracker (IHS Technology)

 

(1) Includes panels for public displays.

 

  (5) Competitiveness

 

    Our ability to compete successfully depends on factors both within and outside our control, including product pricing, our relationship with customers, timely investments, adaptable production capabilities, development of new and premium products through technological advances, competitive production costs, success in marketing to our end-brand customers, component and raw material supply costs, foreign exchange rates and general economic and industry conditions.

 

    In order to compete effectively, it is critical to be cost competitive and maintain stable and long-term relationships with customers which will enable us to be profitable even in a buyer’s market.

 

    A substantial portion of our sales is attributable to a limited number of end-brand customers and their designated system integrators. The loss of these end-brand customers, as a result of customers entering into strategic supplier arrangements with our competitors or otherwise, would result in reduced sales.

 

    Developing new products and technologies that can be differentiated from those of our competitors is critical to the success of our business. It is important that we take active measures to protect our intellectual property internationally by obtaining patents and undertaking monitoring activities in our major markets. It is also necessary to recruit and retain experienced key managerial personnel and skilled line operators.

 

    As a leading technology innovator in the display industry, we continue to focus on delivering differentiated value to our customers by developing various technologies and products, including display panels with OLED, IPS, in-TOUCH and other technologies. With respect to OLED panels, following our supply of the world’s first 55-inch OLED 3D panels for televisions in January 2013, we have supplied ultra-high definition (“Ultra HD” or “UHD”) OLED panels as well as “Wallpaper” and “Crystal Sound” OLED panels for televisions, flexible plastic OLED panels for smartphones, round OLED panels for wearable devices among others and have shown that we are technologically a step ahead of the competition. With respect to TFT-LCD panels, we are leading the market with our differentiated products with IPS technology, such as our ultra-large and high definition UHD television panels and 21:9 screen aspect ratio ultra-wide IPS curved monitors, and have prepared our production facilities to produce products with in-TOUCH technology.

 

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    Moreover, we entered into long-term sales contracts with major global firms to secure customers and expand partnerships for technology development.

 

  C. New businesses

For our continued growth, we are actively exploring and preparing for new business opportunities that may arise in the changing market environment. As such, we are continually reviewing and looking at opportunities in the display and promising new industries.

 

3. Major Products and Raw Materials

 

  A. Major products

We manufacture TFT-LCD and OLED panels, of which a significant majority is sold overseas.

 

              

(Unit: In billions of Won, except percentages)

Business area

  

Sales
type

  

Items (Market)

  

Usage

  

Major
trademark

   Sales in 2018 Q1 (%)

Display

   Product/ Service/ Other sales    Display panel (Overseas(1))    Panels for notebook computers, monitors, televisions, smartphones, tablets, etc.    LG Display    5,241  (92.4%)
      Display panel (Korea(1))    Panels for notebook computers, monitors, televisions, smartphones, tablets, etc.    LG Display    434  (7.6%)
              

 

Total

               5,675  (100.0%)
              

 

 

    Period: January 1, 2018 ~ March 31, 2018.

 

(1) Based on ship-to-party.

 

  B. Average selling price trend of major products

While average selling prices of LCD panels exhibited varying trends according to demand by product category, the average selling price of LCD panels per square meter of net display area shipped in the first quarter of 2018 decreased by approximately 11% compared to the fourth quarter of 2017 due to a continued decline in average selling prices and a decrease in the proportion of small- and medium-sized panels for mobile products, which generally have higher selling prices per square meter of net display area, in our product mix. There is no assurance that the average selling prices of LCD panels will not fluctuate in the future due to changes in market conditions.

 

            (Unit: US$ / m2)  

Description

   2018 Q1      2017 Q4      2017 Q3      2017 Q2  

Display panel(1)(2)

     522        589        600        574  

 

(1) Quarterly average selling price per square meter of net display area shipped.
(2) Excludes semi-finished products in the cell process.

 

  C. Major raw materials

Prices of major raw materials depend on fluctuations in supply and demand in the market as well as on change in size and quantity of raw materials due to the increased production of large-sized panels.

 

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               (Unit: In billions of Won, except percentages)

Business area

  

Purchase type

  

Items

  

Usage

   Cost(1)      Ratio (%)     

Suppliers

Display

   Raw materials    Backlights   

Display panel

manufacturing

     560        17.8    HeeSung Electronics, etc.
      Polarizers         509        16.2    LG Chem, etc.
      Glass         312        9.9    NEG, Asahi Glass, etc.
      Printed circuit boards         376        12.0    Korea SMT, etc.
      Others         1,385        44.1    —  
           

 

 

    

 

 

    

Total

              3,141        100.0   
           

 

 

    

 

 

    

 

    Period: January 1, 2018 ~ March 31, 2018.

 

  (1) Based on total cost for purchase of raw materials which includes manufacturing and development costs, etc.

 

4. Production and Equipment

 

  A. Production capacity and output

 

  (1) Production capacity

The table below sets forth the production capacity of our Gumi, Paju, Guangzhou and Ochang facilities in the periods indicated.

 

                 (Unit: 1,000 glass sheets)  

Business area

   Items      Location of facilities    2018 Q1(1)      2017(2)      2016(2)  

Display

     Display panel      Gumi, Paju,
Guangzhou,
Ochang
     2,422        10,538        9,906  

 

(1) Calculated based on the maximum monthly input capacity (based on glass input substrate size for eighth generation glass sheets) during the period multiplied by the number of months in the period (i.e., 3 months).
(2) Calculated based on the maximum monthly input capacity (based on glass input substrate size for eighth-generation glass sheets) during the year multiplied by the number of months in a year (i.e., 12 months).

 

  (2) Production output

The table below sets forth the production output of our Gumi, Paju and Guangzhou facilities in the periods indicated.

 

                 (Unit: 1,000 glass sheets)  

Business area

   Items      Location of facilities    2018 Q1      2017      2016  

Display

     Display panel      Gumi, Paju,
Guangzhou, Ochang
     2,291        9,262        8,996  

 

    Based on glass input substrate size for eighth-generation glass sheets.

 

  B. Production performance and utilization ratio

 

          (Unit: Hours, except percentages)

Production facilities

   Available working hours
in 2018 Q1
   Actual working hours in
2018 Q1
   Average utilization ratio

Gumi

   1,968(1)

(82 days)(2)

   1,968(1)

(82 days)(2)

   100.0%

Paju

   2,160(1)

(90 days)(2)

   2,160(1)

(90 days)(2)

   100.0%

Guangzhou

   2,160(1)

(90 days)(2)

   2,160(1)

(90 days)(2)

   100.0%

 

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(1) Based on the assumption that all 24 hours in a day have been fully utilized.
(2) Number of days is calculated by averaging the number of working days for each facility.

 

  C. Investment plan

In 2017, our total capital expenditures on a cash out basis was W6.6 trillion. In 2018, we plan to continue capital expenditures to invest in new OLED and oxide technologies and respond to increases in demand for large-sized panels.

 

5. Sales

 

  A. Sales performance

 

                    (Unit: In billions of Won)  

Business area

  

Sales types

  

Items (Market)

  

2018 Q1

   2017      2016  

Display

   Products, etc.    Display panel    Overseas(1)    5,241      25,794        24,679  
         Korea(1)    434      1,996        1,825  
           

 

  

 

 

    

 

 

 
         Total    5,675      27,790        26,504  
           

 

  

 

 

    

 

 

 
(1) Based on ship-to-party.

 

  B. Sales route and sales method

 

  (1) Sales organization

 

    As of March 31, 2018, each of our television, IT, mobile and OLED businesses had individual sales and customer support functions.

 

    Sales subsidiaries in the United States, Germany, Japan, Taiwan, China and Singapore perform sales activities and provide local technical support to customers.

 

  (2) Sales route

 

  Sales of our products take place through one of the following two routes:

 

    LG Display HQ and overseas manufacturing subsidiaries g Overseas sales subsidiaries (USA/Germany/Japan/Taiwan/China/Singapore), etc. g System integrators and end-brand customers g End users

 

    LG Display HQ and overseas manufacturing subsidiaries g System integrators and end-brand customers g End users

 

  (3) Sales methods and sales terms

 

    Direct sales and sales through overseas subsidiaries, etc. Sales terms are subject to change depending on the fluctuation in the supply and demand of LCD panels.

 

  (4) Sales strategy

 

    As part of our sales strategy, we have secured stable sales to major personal computer manufacturers and leading consumer electronics manufacturers globally, led the television market with our OLED and other market leading television panels, increased the proportion of sales of our differentiated television panels, such as our Ultra HD and large television panels, in our product mix and strengthened sales of high-resolution, IPS, narrow bezel and other high-end display panels in the monitor, notebook computer and tablet markets.

 

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    In the smartphone, commercial products (including interactive whiteboards and video wall displays), industrial products (including aviation and medical equipment) and automobile displays segment, we have continued to build a strong and diversified business portfolio by expanding our business with customers with a global reach on the strength of our differentiated products applying IPS, plastic OLED, high-resolution, high-reliability, Super Narrow bezel, in-TOUCH and other technologies.

 

  (5) Purchase orders

 

    Customers generally place purchase orders with us one month prior to delivery. Our customary practice for procuring orders from our customers and delivering our products to such customers is as follows:

 

    Receive order from customer (overseas sales subsidiaries, etc.) g Headquarter is notified g Manufacture product g Ship product (overseas sales subsidiaries, etc.) g Sell product (overseas sales subsidiaries, etc.)

 

6. Market Risks and Risk Management

 

  A. Market risks

The display industry continues to experience continued declines in the average selling prices of TFT-LCD and OLED panels irrespective of cyclical fluctuations in the industry, and our margins would be adversely impacted if prices decrease faster than we are able to reduce our costs.

The display industry is highly competitive. We have experienced pressure on the prices and margins of our major products due largely to additional industry capacity from panel manufacturers in Korea, Taiwan, China and Japan coupled with changes in the production mix of such manufacturers.

Our ability to compete successfully depends on factors both within and outside our control, including product pricing, performance and reliability, timely investments, adaptable production capabilities, utilization of differentiated technologies in product development, success or failure of our end-brand customers in marketing their brands and products, component and raw material supply costs, and general economic and industry conditions. We cannot provide assurance that we will be able to compete successfully with our competitors on these fronts and, as a result, we may be unable to sustain our current market position.

Our results of operations are subject to exchange rate fluctuations. To the extent that we incur costs in one currency and generate sales in a different currency, our profit margins may be affected by changes in the exchange rates between the two currencies. Our sales of display panels are denominated mainly in U.S. dollars, whereas our foreign currency denominated purchases of raw materials are denominated mainly in U.S. dollars and Japanese Yen. Seeking to achieve stable management, we take every precaution in our foreign currency risk management to minimize the risk of foreign currency fluctuations on our foreign currency denominated assets and liabilities.

 

  B. Risk management

As the average selling prices of TFT-LCD and OLED panels can continue to decline over time irrespective of industry-wide cyclical fluctuations, we may find it hard to manage risks associated with certain factors that are outside our control. However, we counteract such declines in average selling prices by increasing the proportion of high value added panels in our product mix while also implementing various cost reduction measures. In addition, in order to manage our risk against foreign currency fluctuations, we continually monitor our currency position and risk, and when needed, we may from time to time enter into cross-currency interest rate swap contracts and foreign currency forward contracts.

 

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7. Derivative Contracts

 

  A. Currency risks

 

    We are exposed to currency risks on sales, purchases and borrowings that are denominated in currencies other than in Won, our functional currency. These currencies are primarily the U.S. dollar, the Japanese Yen and the Chinese Yuan.

 

    Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by our underlying operations, primarily in Won, the U.S. dollar and the Chinese Yuan.

 

    In respect of other monetary assets and liabilities denominated in foreign currencies, we ensure that our net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates, when necessary, to address short-term imbalances.

 

    As of March 31, 2018, we had no outstanding amounts to be settled under any foreign currency derivative instruments.

 

  B. Interest rate risks

 

    Our exposure to interest rate risks relates primarily to our floating rate long term loan obligations. We have established and are managing interest rate risk policies to minimize uncertainty and costs associated with interest rate fluctuations by monitoring cyclical interest rate fluctuations and enacting countermeasures.

 

    As of March 31, 2018, we have entered into an aggregate of W350 billion in interest rate swap agreements with Shinhan Bank and NongHyup Bank, for which we have not applied hedge accounting.

We recognized a loss on valuation of derivative instruments in the amount of W242 million with respect to interest rate derivative instruments held as of March 31, 2018.

 

8. Major contracts

Our material contracts, other than contracts entered into in the ordinary course of business, are set forth below:

 

Type of agreement

  

Name of party

  

Term

  

Content

Technology licensing agreement

   Semiconductor Energy Laboratory    October 2005 ~    Patent licensing of LCD and OLED related technology
   Hewlett-Packard    January 2011 ~    Patent licensing of semi-conductor device technology
   Ignis Innovation, Inc.    July 2016 ~    Patent licensing of OLED related technology
Technology licensing/supply agreement    HannStar Display Corporation    December 2013 ~    Patent cross-licensing of LCD technology
   AU Optronics Corporation    August 2011~    Patent cross-licensing of LCD technology
   Innolux Corporation    July 2012 ~    Patent cross-licensing of LCD technology
   Universal Display Corporation    January 2015 ~ December 2022    Patent cross-licensing of OLED related technology

 

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9. Research & Development

 

  A. Summary of R&D-related expenditures

 

 

   (Unit: In millions of Won, except percentages)  

Items

  

2018 Q1

   2017      2016  

Material Cost

   119,419      646,622        677,423  

Labor Cost

   186,872      668,429        479,650  

Depreciation Expense

   95,172      298,383        136,826  

Others

   87,637      298,256        129,348  
     

 

  

 

 

    

 

 

 

Total R&D-Related Expenditures

   489,100      1,911,690        1,423,247  
     

 

  

 

 

    

 

 

 
   Selling & Administrative Expenses    215,169      917,645        880,794  

Accounting Treatment(1)

   Manufacturing Cost    183,827      786,494        220,165  
   Development Cost (Intangible Assets)    90,104      207,551        322,288  
     

 

  

 

 

    

 

 

 

R&D-Related Expenditures / Revenue Ratio

(Total R&D-Related Expenditures ÷ Revenue for the period × 100)

   8.6%      6.9      5.4
     

 

  

 

 

    

 

 

 

 

(1) For accounting treatment purposes, selling & administrative expenses are presented as research and development expenses in our statements of comprehensive income, net of amortization of capitalized intangible asset development costs.

 

  B. R&D achievements

Achievements in 2016

 

  (1) Developed the world’s narrowest, at the time, bezel videowall product (55-inch/49-inch FHD, bezel to bezel 1.8mm)

 

    Delivered 0.9mm even bezel, four-sided borderless product (bezel to bezel 1.8mm)

 

  (2) Developed the world’s first ultra-stretch format display product (86-inch, 58:9 screen aspect ratio)

 

    Developed new display panel size and screen aspect ratio (86-inch, 58:9 screen aspect ratio)

 

    Applied next-generation stain (per pixel) offset technology

 

  (3) Developed the world’s first ultra-large display product utilizing data single bank and GIP technology (86-inch Ultra HD)

 

    Achieved cost-competitiveness by developing world’s first ultra-large display product utilizing data single bank and GIP technology

 

  (4) Developed the world’s first in-TOUCH monitor product (23-inch)

 

    Improved touch functionality and strengthened cost-competitiveness by applying the world’s first in-TOUCH technology to monitor display products

 

    Simplified customer software configuration management by providing touch total solution

 

  (5) Developed ultra-slim OLED television display product applying high dynamic range (65-inch, 800 nit luminance, 2.52 mm module thickness)

 

    Applied high dynamic range (HDR) technology to achieve 800 nit peak luminance and improved display quality

 

    Achieved module thickness of 2.52mm (without back cover) and 5.92mm (with back cover)

 

  (6) Developed combined 5.3-inch QHD in-TOUCH + 3D cover glass product for LG Electronics

 

    Developed world class smartphone product (G5) through collaboration with other LG Group companies

 

    Strengthened competitiveness of design by achieving processability and productivity for 0.4t 3D cover glass

 

    Improved power consumption of AoD Mode from Self Font Generation technology and operation optimization

 

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  (7) Developed the world’s first large-scale outdoor high luminance 3000 nit product (75-inch Ultra HD)

 

    Developed the world’s first large-scale outdoor 75-inch Ultra HD, high luminance 3000 nit product

 

    Achieved cost competitiveness and power consumption reduction through utilization of high transmittance M+ panel

 

  (8) Developed the world’s first FHD/Ultra HD multi-input Interactive Whiteboard product (75-inch Ultra HD)

 

    Strengthened product competitiveness through delivery of customer FHD/Ultra HD selective input functionality

 

  (9) Developed 4.9mm depth Art Slim2 Ultra HD television (55-inch/65-inch Ultra HD)

 

    Strengthened design competitiveness through delivery of ultra-slim product with application of Glass Light Guide Plate

 

  (10) Developed the world’s largest 21:9 screen aspect ratio curved monitor (37.5-inch UltraWide Quad HD (“WQHD”)+)

 

    Continued pioneering of the market with the world’s largest 21:9 screen aspect ratio IPS curved monitor lineup (37.5-inch, 2300R curvature radius, 44mm curvature depth)

 

    Established flagship line through application of new high definition technology (WQHD+, 3840 x 1600 resolution)

 

    Improved panel transmittance and backlight bleeding through our first-time application of a Super-IPS COT panel structure to monitor models

 

  (11) Developed the world’s first in-TOUCH GIP/DRD notebook product (15.6-inch FHD)

 

    Strengthened competitiveness through application of GIP/DRD technology to FHD-quality notebook in-TOUCH products

 

  (12) Developed a transparent 32-inch FHD product

 

    Achieved high transmittance of transparent panel through application of RGBW(M+) panel technology

 

  (13) Developed the world’s first Light Absorption Polarizer (“LAP”) product (65-inch/60-inch Ultra HD)

 

    Developed differentiated wide color gamut solution

 

  (14) Developed the world’s first UHD DRD product (50-inch UHD)

 

    Utilized UHD RGBW(M+) pixel structure-based DRD technology to strengthen product competitiveness and optimize picture quality (high definition, high luminance, low energy consumption and HDR)

 

  (15) Developed a 5.7-inch QHD flexible display product

 

    Developed a flexible display smartphone product through collaboration with other LG Group companies

 

    Reduced the lower bezel size by 0.59mm and improved power consumption by applying VESA Display Stream Compression 1.1

 

  (16) Developed the world’s first wallpaper OLED television product (65-inch Ultra HD)

 

    Achieved an ultra-slim wallpaper-style design that completely sticks to walls (65-inch, 3.9 mm hindmost thickness, 7.4 kg)

 

    Achieved long-distance signal and power transmission technology for the separation of the driver circuit

Achievements in 2017

 

  (1) Developed 5.7-inch QHD+ full vision display (LG Electronics)

 

    Developed a full vision display smartphone product (G6) through strategic collaboration with other LG Group companies

 

    Applied first 18:9 screen aspect ratio with 4-corner round display

 

  (2) Developed mobile LTPS 30Hz product (SH 5.1-inch FHD)

 

    Secured 30Hz low-frequency drive technology based on LTPS TFT-LCD

 

    Reduced logic power consumption through 30Hz low-frequency drive (reduced from 96mW to 69mW on 5.1-inch FHD)

 

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  (3) Developed and released the world’s first Crystal Sound OLED, or CSO, television product

 

    Released product with a new platform concept through development of OLED panel product with integrated speakers

 

    Delivered OLED television product that achieves differentiated value not only in picture quality and design, but also sound quality

 

  (4) Developed notebook oxide product (13.9-inch, Ultra HD)

 

    Achieved high definition/narrow bezel product through application of oxide BCE GIP technology

 

    Delivered low power consumption product through application of low refresh rate, or LRR, technology

 

  (5) Developed medical monitor product for surgical endoscope (27.0-inch, Ultra HD)

 

    Newly entered the medical devices market through development and production of medical monitor product for surgical endoscope

 

    Achieved high definition (3,840 x 2,160), high luminance (800 nit) and high contrast ratio (1,300:1)

 

    Implemented coverglass direct bonding applying our own manufacturing processes (M6 line)

 

  (6) Developed the world’s first four-side borderless monitor with a resolution of 8K4K (31.5-inch 8K4K oxide)

 

    Pioneered Ultra HD Premium MNT market through development of the world’s first four-side borderless monitor with a resolution of 8K4K

 

    Delivered Ultra HD based on oxide GIP (280 PPI with a resolution of 7680x4320)

 

    Delivered wide color gamut (Adobe RGB 100%/DCI 98%), four-side borderless

 

  (7) Developed the world’s largest automotive Center Information Display (“CID”) product (15.4-inch Widescreen Ultra Extended Graphics Array (“WUXGA”))

 

    Developed the world’s largest auto component display in the automotive industry

 

    Guaranteed the first 1000hr reliability in the automotive industry

 

  (8) Developed the world’s first 88-inch Ultra Stretch display product

 

    Strengthened competitiveness through application of smart (digital) stepper

 

  (9) Developed products utilizing U-IPS (75-inch/65-inch/55-inch/49-inch, Ultra HD)

 

    Utilized U-IPS technology to strengthen product competitiveness by improving panel transmittance rate and reflectivity

 

  (10) Developed the world’s first 65-inch UHD OLED television product utilizing GIP

 

    Strengthened product competitiveness through application of the world’s first oxide based UHD GIP technology

Achievements in 2018

 

  (1) Developed the world’s first glass-integrated LCD television product (Art Glass Series)

 

    Achieved LCD modular appearance and simplicity in design by using glass material throughout product (including the panel, light guide plate and back cover)

 

    Strengthened competitiveness of frameless design by decreasing bezel size from 7.8mm to 5.9mm

 

  (2) Developed our first 5.8-inch Ultra HD Mobile 4K product

 

    Developed our first Ultra HD mobile product

 

    Achieved high luminance, low power consumption and HD resolution by applying Ultra HD RGBW (M+) pixel structure

 

  (3) Developed the world’s first 5.8-inch mobile FHD product applying M+

 

    Our first product applying camera notch concept technology

 

10. Intellectual Property

As of March 31, 2018, our cumulative patent portfolio (including patents that have already expired) included a total of 35,195 patents, consisting of 16,394 in Korea and 18,801 in other countries.

 

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11. Environmental and Safety Matters

We are subject to a variety of environmental laws and regulations, and we may be subject to fines or restrictions that could cause our operations to be interrupted. Our manufacturing processes generate worksite waste, including water and air pollutants, at various stages in the manufacturing process, and we are subject to relevant laws and regulations in each area of the environment, including with respect to the treatment of chemical by-products. We have installed various types of anti-pollution equipment, consistent with environmental standards, for the treatment of chemical waste and equipment for the recycling of treated waste water at our various facilities. However, we cannot provide assurance that environmental claims will not be brought against us or that the local or national governments will not take steps toward adopting more stringent environmental standards. Any failure on our part to comply with any present or future environmental regulations could result in the assessment of damages or imposition of fines against us, suspension of production or a cessation of operations. In addition, environmental regulations could require us to acquire costly equipment or to incur other significant compliance expenses that may materially and negatively affect our financial condition and results of operations.

In accordance with the Framework Act on Low Carbon, Green Growth, we implemented the greenhouse gas emission and energy consumption target system from 2012 to 2014. In 2015, we implemented the greenhouse gas trading system, under which we are responsible to meet our emission targets based on the emission credits allocated to us by the Ministry of Environment of the Korean government. As a result, we have been investing in additional equipment and there may be other costs associated with meeting reduction targets, which may have a negative effect on our profitability or production activities.

In connection with the greenhouse gas emission and energy reduction target system, we submitted a statement of our domestic emissions and energy usage for 2017 to the Korean government in March 2018 after it was certified by BSI Korea, a government-designated certification agency. The table below sets forth yearly levels of our greenhouse gases emissions and energy usage in the statement submitted to the Korean government:

 

     (Unit: thousand tonnes of CO2 equivalent; Tetra Joules)  

Category

   2017      2016      2015  

Greenhouse gases

     6,303        5,851        7,348  

Energy

     63,451        60,423        60,146  

Operations at our manufacturing plants are subject to regulation and periodic scheduled and unscheduled on-site inspections by the Ministry of Environment and local environmental protection authorities. We believe that we have adopted adequate anti-pollution measures and have minimized our impact on the environment by improving existing and developing new technologies for the effective maintenance of environmental protection standards consistent with local industry practice. In addition, we have continually monitored, and we believe that we are in compliance in all material respects with, the applicable environmental laws and regulations in Korea. Expenditures related to such compliance may be substantial. Such expenditures are generally included in capital expenditures. As required by Korean law, we employ licensed environmental specialists to manage our water and air pollution, toxic materials and waste. In December 2013, to ensure safe water quality and reduce costs, we entered into a contract with a specialist company to operate our waste water treatment facilities. In stages beginning in November 1997, we have obtained environmental management system ISO 14001 certifications for our domestic panel and module production facilities and our overseas module production plants in Nanjing, Yantai and Guangzhou, China, and with respect to our domestic panel and module production plants, we received ISO 50001 certification in December 2013 for our energy management system.

 

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In addition, in August 2014, GP1, our newest eighth-generation panel fabrication facility located in Guangzhou, China, was the first electronics plant in China to receive the “Green Plant” designation under China’s Green China Policy, in addition to receiving ISO 14001, ISO 50001, OHSAS 18001, ISO 9001, PAS 2050 and ISO 14064-1 certifications. Furthermore, with respect to our production facilities in Gumi, we have been certified by the Ministry of Environment as a “Green Company” for P1 and our Gumi module production plant since 1997, P2 and P3 since 2006 and P4, P5 and P6 since 2008. In recognition of our efforts to reduce greenhouse gas emissions, we were awarded a commendation from the Minister of Environment in the efforts against climate change category in the 2013 Green Management Awards, which was jointly hosted by the Ministry of Environment and the Ministry of Trade, Industry & Energy. In addition, in recognition of our efforts to improve recycling and reduce waste, we received a citation in 2014 for being a leading recycling company from the Prime Minister of Korea and, in recognition of our continued water conservation activities (reuse system investments, etc.) and greenhouse gas emission reduction activities (process gas and energy reduction, etc.), we attained the highest level, Leadership A, and received the grand prize award at the CDP Water Korea Best Awards in 2016 from the Carbon Disclosure Project, which was presided over by the Carbon Disclosure Project Korea Committee. We also attained a Leadership A in the climate change information technology sector and received a carbon management honors award. Our continued efforts to reduce greenhouse gas emissions was recognized again in 2017 by becoming the only domestic information technology company to attain the Leadership A level and again receiving carbon management honors by ranking in the top five among all eligible companies. In May 2017, we were awarded a commendation from the Minister of Environment for having scored the highest grade among companies in the low- and medium-volume pollutant emitters category that had entered into voluntary agreements with the Metropolitan Air Quality Management Office, in recognition of having successfully met our voluntary targets for reduction of air pollutants as well as our overall efforts to enhance our relevant facilities and operational systems. In addition, in recognition of efficient control, management and operating systems implemented in our manufacturing facilities, we received the top-level certification, Level 1, in 2017 under the Factory Energy Management System evaluation presided by the Korea Energy Agency. Furthermore, in November 2017, we received the highest commendation, the Presidential Award, in the Korean Energy Efficiency Awards presided by the Ministry of Industry, Trade and Energy in recognition of our energy management practices and energy saving measures, and we also obtained a certificate of excellence in the Energy Management System Evaluation.

In the case of the European Union’s Restriction of Hazardous Substances (RoHS) Directive 2011/65/EU, with the adoption of Directive (EU) 2015/863 in 2016, four additional substances (four phthalate substances) will be added to the six already restricted substances and the additional restrictions are scheduled to come into effect on July 22, 2019. In order to address the latent risk elements of the four phthalate substances scheduled to be restricted in 2019 and to establish a more stable management system, we implemented in 2016 a preemptive response process with respect to such four phthalate substances. In implementing this process, we collaborated with external agencies to ascertain regulatory trends and establish our response strategy, and we formulated and applied effective management measures through the collaborative efforts of our development, procurement and quality teams. Beryllium (Be) was not designated internationally as a mandatorily restricted substance but has continued to be the subject of discussion for restriction, and certain of our customers have designated it as a restricted substance not to be used in products. Accordingly, we have completed verification of the parts used in products for customers who have banned the use of Beryllium. We have also conducted verification of the parts used in products for all customers who are expected to implement a ban and we have established a Beryllium verification process for parts in development. Through such efforts, we have established a voluntary hazardous substance response process that can be expanded to products for all customers, not only those who have requested a response.

In October 2005, we became the first display panel company to receive accreditation as an International Accredited Testing Laboratory by the Korea Laboratory Accreditation Scheme, which is operated by the Korean Ministry of Trade, Industry & Energy. In September 2006, we received international accreditation from TUV SUD, EU’s German accreditation agency, as a RoHS testing laboratory. Our efforts to keep pace with the increasingly stringent accreditation standards and to receive and maintain such accreditations are part of our on-going efforts to systematically monitor environmentally controlled substances in our component parts inventory. Moreover, we participated in reforming IEC 62321, an international testing standard published by the International Electrotechnical Commission and used by RoHS, and the commission adopted our halogen-free combustion ion chromatography method in as IEC 62321-3-2, which was published in June 2013. In 2017, in a joint effort with the global product testing/accreditation agency SGS, we became the first display panel company to develop Eco Label, an environmentally friendly accreditation program for television display modules, and received the SGS Eco Label accreditation for our OLED, IPS Nano Color and Art Glass television models. For the IPS Nano Color for LCD, we received the Quality & Performance Mark from Intertek, a global product testing/accreditation agency, by applying a technology to eliminate cadmium (Cd) and indium phosphide (InP).

In December 2016, we were assessed a fine of W0.2 million, which we subsequently paid, for failure to meet certain reporting obligations under the Industrial Safety and Health Act. To prevent such violations from occurring again, we have strengthened our monitoring process and management and employee education training initiatives.

 

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In June 2017, we were assessed a fine of W1 million, which we subsequently paid, for failure to meet certain waste disposal subcontractor requirements under the Waste Management Act. To prevent such violations from occurring again, we are strengthening the periodic evaluation process for our waste management subcontractors.

In June 2017, we were audited by the Ministry of Employment and Labor in connection with the occurrence of a safety accident and found to be in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine of W2.4 million. In addition, the trial court assessed a fine of W0.5 million on each of us and our chief production officer on the basis of certain other applicable provisions of the Industrial Safety and Health Act. Relevant authorities are currently conducting further investigations. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees.

In January 2018, we were audited by the Ministry of Employment and Labor in connection with the occurrence of another safety accident and found to be in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine of W14.4 million. Relevant authorities are currently conducting further investigations. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees.

Also in January 2018, the government of Gyeong-gi Province issued a warning and assessed a fine of W1 million on us, which we subsequently paid, for the failure to comply with certain requirements relating to air pollutant emission and prevention facilities under the Air Quality Management Act. To prevent such violations from occurring again, we have shortened the air pollutant emission maintenance reporting period and strengthened the verification process for relevant data.

In March 2018, we were audited by the Ministry of Employment and Labor in connection with our health and safety training practices, and we were found to have omitted requisite health and safety training sessions for certain employees in our P9 facilities in 2016 and 2017. As a result, we were assessed a fine of W6.95 million, which we subsequently paid, and have strengthened our efforts to promote health and safety training programs in advance as well as our management and supervision activities to ensure such programs are conducted.

 

12. Financial Information

 

  A. Financial highlights (Based on consolidated K-IFRS)

 

    (Unit: In millions of Won)  

Description

  As of March 31, 2018     As of December 31, 2017     As of December 31, 2016  

Current assets

    9,898,586       10,473,703       10,484,186  

Quick assets

    7,548,201       8,123,619       8,196,401  

Inventories

    2,350,385       2,350,084       2,287,785  

Non-current assets

    20,096,685       18,685,984       14,400,150  

Investments in equity accounted investees

    119,698       122,507       172,683  

Property, plant and equipment, net

    17,525,116       16,201,960       12,031,449  

Intangible assets

    912,202       912,821       894,937  

Other non-current assets

    1,539,669       1,448,696       1,301,081  
 

 

 

   

 

 

   

 

 

 

Total assets

    29,995,271       29,159,687       24,884,336  
 

 

 

   

 

 

   

 

 

 

Current liabilities

    9,548,591       8,978,682       7,058,219  

Non-current liabilities

    5,621,044       5,199,495       4,363,729  
 

 

 

   

 

 

   

 

 

 

Total liabilities

    15,169,635       14,178,177       11,421,948  
 

 

 

   

 

 

   

 

 

 

Share capital

    1,789,079       1,789,079       1,789,079  

Share premium

    2,251,113       2,251,113       2,251,113  

Retained earnings

    10,379,127       10,621,571       9,004,283  

Other equity

    (182,040     (288,280     (88,478

Non-controlling interest

    588,357       608,027       506,391  
 

 

 

   

 

 

   

 

 

 

Total equity

    14,825,636       14,981,510       13,462,388  
 

 

 

   

 

 

   

 

 

 

 

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     (Unit: In millions of Won, except for per share data and number of
consolidated entities)
 

Description

   For the three months ended
March 31, 2018
     For the year ended
December 31, 2017
     For the year ended
December 31, 2016
 

Revenue

     5,675,164        27,790,216        26,504,074  

Operating profit (loss)

     (98,323      2,461,618        1,311,416  

Operating profit (loss) from continuing operations

     (48,982      1,937,052        931,508  

Profit (loss) for the period

     (48,982      1,937,052        931,508  

Profit (loss) attributable to:

        

Owners of the Company

     (59,454      1,802,756        906,713  

Non-controlling interest

     10,472        134,296        24,795  

Basic earnings (loss) per share

     (166      5,038        2,534  

Diluted earnings (loss) per share

     (166      5,038        2,534  

Number of consolidated entities

     20        20        19  

 

  B. Financial highlights (Based on separate K-IFRS)

 

 

     (Unit: In millions of Won)  

Description

   As of March 31, 2018      As of December 31, 2017      As of December 31, 2016  

Current assets

     7,279,054        8,381,074        8,712,575  

Quick assets

     5,628,998        6,698,829        7,005,592  

Inventories

     1,650,056        1,682,245        1,706,983  

Non-current assets

     18,874,489        17,028,341        13,100,175  

Investments

     3,269,871        2,683,941        2,656,026  

Property, plant and equipment, net

     13,669,128        12,487,001        8,757,973  

Intangible assets

     738,473        731,373        673,966  

Other non-current assets

     1,197,017        1,126,026        1,012,210  
  

 

 

    

 

 

    

 

 

 

Total assets

     26,153,543        25,409,415        21,812,750  
  

 

 

    

 

 

    

 

 

 

Current liabilities

     7,825,127        7,394,605        6,176,344  

Non-current liabilities

     4,762,552        4,185,551        3,400,959  
  

 

 

    

 

 

    

 

 

 

Total liabilities

     12,587,679        11,580,156        9,577,303  
  

 

 

    

 

 

    

 

 

 

Share capital

     1,789,079        1,789,079        1,789,079  

Share premium

     2,251,113        2,251,113        2,251,113  

Retained earnings

     9,525,672        9,789,067        8,195,255  

Other equity

     0        0        0  
  

 

 

    

 

 

    

 

 

 

Total equity

     13,565,864        13,829,259        12,235,447  
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents
     (Unit: In millions of Won, except for per share data)  

Description

   For the three months ended
March 31, 2018
     For the year ended
December 31, 2017
     For the year ended
December 31, 2016
 

Revenue

     5,154,261        24,419,295        25,856,426  

Operating profit (loss)

     (253,621      709,138        770,856  

Operating profit (loss) from continuing operations

     (80,364      967,078        968,209  

Profit (loss) for the period

     (80,364      967,078        968,209  

Basic earnings (loss) per share

     (225      2,703        2,706  

Diluted earnings (loss) per share

     (225      2,703        2,706  

 

  C. Consolidated subsidiaries (as of March 31, 2018)

 

Company Interest

   Primary Business    Location    Equity  

LG Display America, Inc.

   Sales    U.S.A.      100

LG Display Japan Co., Ltd.

   Sales    Japan      100

LG Display Germany GmbH

   Sales    Germany      100

LG Display Taiwan Co., Ltd.

   Sales    Taiwan      100

LG Display Nanjing Co., Ltd.

   Manufacturing    China      100

LG Display Shanghai Co., Ltd.

   Sales    China      100

LG Display Poland Sp. zo.o.

   Manufacturing    Poland      100

LG Display Guangzhou Co., Ltd.

   Manufacturing    China      100

LG Display Shenzhen Co., Ltd.

   Sales    China      100

LG Display Singapore Pte. Ltd.

   Sales    Singapore      100

L&T Display Technology (Fujian) Limited

   Manufacturing and sales    China      51

LG Display Yantai Co., Ltd.

   Manufacturing    China      100

LG Display (China) Co., Ltd.

   Manufacturing and sales    China      70

Nanumnuri Co., Ltd.

   Workplace services    Korea      100

Unified Innovative Technology, LLC

   Managing intellectual property    U.S.A.      100

Global OLED Technology LLC

   Managing intellectual property    U.S.A.      100

LG Display Guangzhou Trading Co., Ltd.

   Sales    China      100

LG Display Vietnam Haiphong Co., Ltd.

   Manufacturing    Vietnam      100

Suzhou Lehui Display Co., Ltd.

   Manufacturing and sales    China      100

MMT (Money Market Trust)

   Money market trust    Korea      100

 

  D. Status of equity investments (as of March 31, 2018)

 

  (1) Consolidated subsidiaries

 

Company

   Investment Amount
(in millions)
     Initial Equity
Investment Date
     Equity
Interest
 

LG Display America, Inc.

   US$   411        September 24, 1999        100

LG Display Japan Co., Ltd.

   ¥   95        October 12, 1999        100

LG Display Germany GmbH

   EUR   1        November 5, 1999        100

LG Display Taiwan Co., Ltd.

   NT$   116        May 19, 2000        100

LG Display Nanjing Co., Ltd.

   CNY   3,020        July 15, 2002        100

LG Display Shanghai Co., Ltd.

   CNY   4        January 16, 2003        100

LG Display Poland Sp. zo.o.

   PLN   511        September 6, 2005        100

LG Display Guangzhou Co., Ltd.

   CNY   1,655        August 7, 2006        100

LG Display Shenzhen Co., Ltd.

   CNY   4        August 28, 2007        100

LG Display Singapore Pte. Ltd.

   US$   1.1        January 12, 2009        100

L&T Display Technology (Fujian) Limited

   CNY   116        January 5, 2010        51

LG Display Yantai Co., Ltd.

   CNY   1,008        April 19, 2010        100

Nanumnuri Co., Ltd.

   W   800        March 19, 2012        100

LG Display (China) Co., Ltd.

   CNY   8,232        December 27, 2012        70

Unified Innovative Technology, LLC

   US$   9        March 21, 2014        100

 

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Company

   Investment Amount
(in millions)
     Initial Equity
Investment Date
     Equity
Interest
 

LG Display Guangzhou Trading Co., Ltd.

   CNY 1.2        May 27, 2015        100

Global OLED Technology LLC

   US$ 138        May 7, 2015        100

LG Display Vietnam Haiphong Co., Ltd. (1)

   US$ 300        May 13, 2016        100

Suzhou Lehui Display Co., Ltd.

   CNY 637        July 1, 2016        100

MMT (Money Market Trust) (2)

   W 430,801        March 31, 2017        100

Changes since December 31, 2017:

 

(1) During the reporting period, we invested an additional W212,600 million in LG Display Vietnam Haiphong Co., Ltd.
(2) As a result of our money market trust acquisition and disposal transactions conducted during the reporting period, the amount outstanding in our money market trust accounts as of March 31, 2018 is W430,801 million.

 

  (2) Affiliated companies

 

Company

   Carrying Amount
(in millions)
     Date of
Incorporation
     Equity
Interest
 

Paju Electric Glass Co., Ltd.

   W 44,179        January 2005        40

Invenia Co., Ltd.

   W 3,125        January 2001        13

Wooree E&L Co., Ltd.

   W 3,506        June 2008        14

LB Gemini New Growth Fund No. 16(1)

   W 5,282        December 2009        31

YAS Co., Ltd.

   W 16,045        April 2002        15

Avatec Co., Ltd.

   W 23,252        August 2000        17

Arctic Sentinel, Inc.

     —          June 2008        10

CYNORA GmbH

   W 20,309        March 2003        14

Material Science Co., Ltd.(2)

   W 4,000        January 2014        10

Changes since December 31, 2017:

 

(1) We participate as a limited member in LB Gemini New Growth Fund No. 16. Upon a general meeting, the members have decided to dissolve the fund, which is currently under liquidation.
(2) In March 2018, we acquired 10,767 voting common shares of Material Science Co., Ltd. for W4,000 million. As of March 31, 2018, our percentage ownership interest in Material Science Co., Ltd. is 10%, and we are entitled to appoint one director of Material Science Co., Ltd.

 

13. Audit Information

 

  A. Audit service

 

 

     (Unit: In millions of Won, hours)

Description

   2018 Q1   2017   2016

Auditor

   KPMG Samjong   KPMG Samjong   KPMG Samjong

Activity

   Audit by independent
auditor
  Audit by independent
auditor
  Audit by independent
auditor

Compensation(1)

   1,170 (450)(2)   1,040 (450)(2)   1,020 (440)(2)

Time required

   1,710   17,909   18,291

 

(1) Compensation amount is the contracted amount for the full fiscal year.
(2) Compensation amount in ( ) is for Form 20-F filing and SOX 404 audit.

 

  B. Non-audit service

None.

 

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14. Board of Directors

 

  A. Members of the board of directors

As of March 31, 2018, our board of directors consisted of two non-outside directors, one non-standing director and four outside directors.

 

          (As of March 31, 2018)

Name

  

Position

  

Primary responsibility

Sang Beom Han(1)    Representative Director (non-outside), Chief Executive Officer and Vice Chairman    Chairman of the board of directors
Sang Don Kim    Director (non-outside), Chief Financial Officer and Senior Vice President    Overall head of finances
Hyun-Hwoi Ha(2)    Director (non-standing)    Related to the overall management
Joon Park(3)    Outside Director    Related to the overall management
Sung-Sik Hwang(4)    Outside Director    Related to the overall management
Kun Tai Han(5)    Outside Director    Related to the overall management
Byoung Ho Lee(6)    Outside Director    Related to the overall management

 

(1) Sang Beom Han was reappointed for another term as a non-outside director at the annual general meeting of shareholders held on March 15, 2018.
(2) Hyun Hwoi Ha is also a standing director of LG Corp., a non-standing director of LG Hausys, Ltd., a non-standing director of LG International Corp., a non-standing director of LG Uplus Corp., a non-standing director of LG Economic Research Institute and a non-standing director of LG CNS Co., Ltd.
(3) Joon Park is also an outside director of Green Cross Holdings Corp .
(4) Sung-Sik Hwang was reappointed for another term as an outside director at the annual general meeting of shareholders held on March 15, 2018. Mr. Hwang is also an outside director of Kyobo Life Insurance Co., Ltd.
(5) Kun Tai Han is also the chief executive officer of Hans Consulting.
(6) Byoung Ho Lee was appointed as an outside director at the annual general meeting of shareholders held on March 15, 2018.

 

  B. Committees of the board of directors

We have the following committees that serve under our board of directors: Audit Committee, Outside Director Nomination Committee and Management Committee. The Management Committee consists of two non-outside directors, Sang Beom Han and Sang Don Kim.

During the reporting period, one meeting of the Outside Director Nomination Committee was held and the composition of the Outside Director Nomination Committee was as follows:

 

     (As of January 22, 2018)

Committee

  

Composition

  

Member

Outside Director Nomination Committee(1)    1 non-standing director and 2 outside directors    Hyun-Hwoi Ha, Joon Park, Sung-Sik Hwang

 

(1) Each of Hyun-Hwoi Ha, Joon Park and Sung-Sik Hwang was appointed as a member of the outside director nomination committee of the board of directors by the board of directors on January 22, 2018.

As of the March 31, 2018, the composition of the Audit Committee is as follows.

 

     (As of March 31, 2018)

Committee

  

Composition

  

Member

Audit Committee    3 outside directors    Sung-Sik Hwang(1), Joon Park, Kun Tai Han

 

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(1) Sung-Sik Hwang is the audit committee chairman. He was reappointed for another term as an Audit Committee member at the annual general meeting of shareholders held on March 15, 2018.

 

  C. Independence of directors

Directors are appointed in accordance with the procedures of the Commercial Act and other relevant laws and regulations. Our board of directors is independent as four out of the seven directors that comprise the board are outside directors. Outside directors candidates are nominated for appointment at a shareholders’ meeting after undergoing rigorous review by the Outside Director Nomination Committee.

All of our current outside directors were nominated by the Outside Director Nomination Committee, and all of our current non-outside directors were nominated by the board of directors.

 

15. Information Regarding Shares

 

  A. Total number of shares

 

  (1) Total number of shares authorized to be issued (as of March 31, 2018): 500,000,000 shares.

 

  (2) Total shares issued and outstanding (as of March 31, 2018): 357,815,700 shares.

 

  B. Shareholder list

 

  (1) Largest shareholder and related parties as of March 31, 2018:

 

Name

   Relationship    Number of shares
of common stock
     Equity interest  

LG Electronics

   Largest Shareholder      135,625,000        37.9

Sang Beom Han

   Related Party      31,355        0.0

Sang Don Kim

   Related Party      4,000        0.0

 

  (2) Shareholders who are known to us to own 5% or more of our shares as of March 31, 2018:

 

Beneficial owner

   Number of shares
of common stock
     Equity
interest
 

LG Electronics

     135,625,000        37.9

National Pension Service

     31,075,124        8.68

 

16. Directors and Employees

 

  A. Directors

 

  (1) Remuneration for directors in 2018 Q1:

 

     (Unit: person, in millions of Won)  

Classification

   No. of
directors(1)
     Amount
paid(2)
    Per capita average
remuneration
paid(3)
 

Non-outside directors

     3        2,017       672  

Outside directors who are not audit committee members

     1        26       26  

Outside directors who are audit committee members

     3        59       20  
  

 

 

    

 

 

   

 

 

 

Total

     7        2,102 (4)      300  
  

 

 

    

 

 

   

 

 

 

 

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(1) Number of directors as at March 31, 2018.
(2) Amount paid is calculated on the basis of amount of cash actually paid.
(3) Per capita average remuneration paid is calculated by dividing total amount paid by the average number of directors for the three months ended March 31, 2018.
(4) As Jin Jang resigned as an outside director on March 14, 2018 and Byoung Ho Lee was appointed as an outside director at the annual general meeting of shareholders held on March 15, 2018, the total amount paid includes remuneration paid to both Mr. Jang and Mr. Lee.

 

  (2) Remuneration for individual directors and audit committee members

Not required for quarterly reports.

 

  (3) Stock options

Not applicable.

 

  B. Employees

As of March 31, 2018, we had 33,525 employees (excluding our directors). On average, our male employees have served 9.2 years and our female employees have served 7.8 years. The total amount of salary paid to our employees for the three months ended March 31, 2018 based on income tax statements submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act was W820,970 million for our male employees and W182,105 million for our female employees. The following table provides details of our employees as of March 31, 2018:

 

 

     (Unit: person, in millions of Won, year)  
     Number of
employees(1)
     Total salary in
2018 Q1 (2)(3)(4)
     Total salary
per capita(5)
     Average years
of service
 

Male

     25,373        820,970        32.6        9.2  

Female

     8,152        182,105        22.2        7.8  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     33,525        1,003,076        30.1        8.9  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Includes part-time employees hired for temporary needs or to serve as temporary replacements for employees on parental leave.
(2) Welfare benefits and retirement expenses have been excluded. Total welfare benefit provided to our employees for the three months ended March 31, 2018 was W106,892 million and the per capita welfare benefit provided was W3.2 million.
(3) Based on income tax statements, which are submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act.
(4) Includes incentive payments to employees who have transferred from our affiliated companies.
(5) Calculated using the average number of employees (male: 25,146 , female: 8,189) for the three months ended March 31, 2018.

In December 2017, we were audited by the Ministry of Employment and Labor regarding our human resource practices (including in relation to employment contracts, hours of work, outsourcing and employees in pregnancy), and we were found to be in violation of certain provisions of the Labor Standard Act relating to overtime, night and holiday work. As a result, we were issued a corrective order in January 2018 and paid additional overtime wages of W2,893 million to 16,106 administrative employees of our Paju facilities for their nighttime work between January 1, 2015 to December 31, 2017. In addition, we reviewed nighttime work records of our administrative employees outside of our Paju facilities during the same period and paid additional overtime wages of W2,166 million to eligible employees. In order to prevent such violation from occurring again, we are periodically monitoring the nighttime work records of our employees.

From December 2017 to January 2018, we were audited by the Ministry of Employment and Labor regarding our human resource practices relating to temporary and part-time employees, and we were found to have omitted certain required information (including the number of break hours and vacation days) in the employment contracts of 82 temporary employees. As a result, we were assessed a fine of W27 million, which we subsequently paid. In order to prevent such violation from occurring again, we have amended the relevant provisions of the applicable employment contracts.

 

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Table of Contents
17. Other Matters

 

  A. Material Events Subsequent to the Reporting Period

 

  (1) Advance Received Pursuant to Long-term Supply Agreement

In April 2018, we received an advance of US$300 million (equivalent to W320,670 million) from a major customer pursuant to the terms of a long-term supply agreement. Such advance will be offset in time by payments for applicable products after a certain initial period of deferral.

 

  (2) Credits Extended to Affiliated Parties

Subsequent to the reporting period, we provided guarantees relating to certain payment obligations of our subsidiary, LG Display Vietnam Haiphong Co., Ltd., in connection with its bank borrowings as further described below:

 

Lender

   Date of
Agreement
   Term of
Borrowing/Guarantee
   Interest Rate    Principal
Amount
   Guaranteed
Amount

Citibank Taiwan Limited

   March 12, 2018    April 13, 2018 ~

April 13, 2023

   3 month LIBOR
+ 1.20%
   US$ 100

million

   US$ 100

million

Sumitomo Mitsui Banking Corporation

   April 5, 2018    April 26, 2018 ~

April 26, 2025

   3 month LIBOR
+ 1.20%
   US$ 100

million

   US$ 100

million

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

March 31, 2018 and 2017

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

 

     Page  

Independent Auditors’ Review Report

     29  

Condensed Consolidated Interim Statements of Financial Position

     31  

Condensed Consolidated Interim Statements of Comprehensive Income

     32  

Condensed Consolidated Interim Statements of Changes in Equity

     33  

Condensed Consolidated Interim Statements of Cash Flows

     34  

Notes to the Condensed Consolidated Interim Financial Statements

     36  

 

28


Table of Contents

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Reviewed Financial Statements

We have reviewed the accompanying condensed consolidated interim financial statements of LG Display Co., Ltd. and subsidiaries (the “Group”) which comprise the condensed consolidated interim statement of financial position as of March 31, 2018, the condensed consolidated interim statements of comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2018 and 2017, and notes comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Condensed Consolidated Interim Financial Statements

Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standards No. 1034, Interim Financial Reporting, and for such internal controls as management determines necessary to enable the preparation of condensed consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to issue a report on these condensed consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Security and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial statements referred to above are not presented fairly, in all material respects, in accordance with Korean International Financial Reporting Standards No. 1034, Interim Financial Reporting.

Other Matters

The procedures and practices utilized in the Republic of Korea to review such condensed consolidated interim financial statements may differ from those generally accepted and applied in other countries.

We audited the consolidated statement of financial position as of December 31, 2017 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this review report, in accordance with Korean Standards on Auditing, and our report thereon, dated February 22, 2018, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Group as of December 31, 2017, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.

 

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Table of Contents

/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

May 14, 2018

 

This report is effective as of May 14, 2018 the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Financial Position

(Unaudited)

As of March 31, 2018 and December 31, 2017

 

(In millions of won)    Note    March 31, 2018     December 31, 2017  

Assets

       

Cash and cash equivalents

   4, 25    W 2,626,689     2,602,560

Deposits in banks

   4, 25      870,272     758,078

Trade accounts and notes receivable, net

   5, 14, 25, 27      3,496,163     4,325,120

Other accounts receivable, net

   5, 25      126,369     164,827

Other current financial assets

   6, 25      17,392     27,252

Inventories

   7      2,350,385     2,350,084

Prepaid income taxes

        6,281     3,854

Other current assets

   5      405,035     241,928
     

 

 

   

 

 

 

Total current assets

        9,898,586     10,473,703

Deposits in banks

   4, 25      11     11

Investments in equity accounted investees

   8      119,698     122,507

Other non-current financial assets

   6, 25      64,919     68,574

Property, plant and equipment, net

   9, 17      17,525,116     16,201,960

Intangible assets, net

   10, 17      912,202     912,821

Deferred tax assets

   23      1,082,835     985,352

Other non-current assets

   5      391,904     394,759
     

 

 

   

 

 

 

Total non-current assets

        20,096,685     18,685,984
     

 

 

   

 

 

 

Total assets

      W 29,995,271     29,159,687
     

 

 

   

 

 

 

Liabilities

       

Trade accounts and notes payable

   25, 27    W 2,802,837     2,875,090

Current financial liabilities

   11, 25      2,148,016     1,452,926

Other accounts payable

   25      3,273,185     3,169,937

Accrued expenses

        551,725     812,615

Income tax payable

        145,549     321,978

Provisions

   13      74,220     76,016

Advances received

   14, 28      249,765     194,129

Other current liabilities

   13      303,294     75,991
     

 

 

   

 

 

 

Total current liabilities

        9,548,591     8,978,682

Non-current financial liabilities

   11, 25      4,583,674     4,150,192

Non-current provisions

   13      22,635     28,312

Defined benefit liabilities, net

   12      150,979     95,447

Long-term advances received

   14, 28      759,881     830,335

Deferred tax liabilities

   23      23,657     24,646

Other non-current liabilities

   13      80,218     70,563
     

 

 

   

 

 

 

Total non-current liabilities

        5,621,044     5,199,495
     

 

 

   

 

 

 

Total liabilities

        15,169,635     14,178,177
     

 

 

   

 

 

 

Equity

       

Share capital

   15      1,789,079     1,789,079

Share premium

        2,251,113     2,251,113

Retained earnings

        10,379,127     10,621,571

Reserves

   15      (182,040     (288,280
     

 

 

   

 

 

 

Total equity attributable to owners of the Controlling Company

        14,237,279     14,373,483
     

 

 

   

 

 

 

Non-controlling interests

        588,357     608,027
     

 

 

   

 

 

 

Total equity

        14,825,636     14,981,510
     

 

 

   

 

 

 

Total liabilities and equity

      W 29,995,271     29,159,687
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

For the three-month periods ended March 31, 2018 and 2017

 

(In millions of won, except earnings per share)    Note    2018     2017  

Revenue

   16, 17, 27    W 5,675,164     7,062,162

Cost of sales

   7, 18, 27      (5,133,080     (5,342,882
     

 

 

   

 

 

 

Gross profit

        542,084     1,719,280

Selling expenses

   19      (172,958     (243,203

Administrative expenses

   19      (182,330     (164,950

Research and development expenses

        (285,119     (284,250
     

 

 

   

 

 

 

Operating profit (loss)

        (98,323     1,026,877
     

 

 

   

 

 

 

Finance income

   22      120,997     115,134

Finance costs

   22      (130,361     (88,037

Other non-operating income

   21      227,642     384,389

Other non-operating expenses

   21      (212,837     (580,493

Equity in income (loss) of equity accounted investees, net

        (2,893     250
     

 

 

   

 

 

 

Profit (loss) before income tax

        (95,775     858,120

Income tax expense(benefit)

   23      (46,793     178,623
     

 

 

   

 

 

 

Profit (loss) for the period

        (48,982     679,497
     

 

 

   

 

 

 

Other comprehensive income (loss)

       

Items that will never be reclassified to profit or loss

       

Remeasurements of net defined benefit liabilities

   12      (6,419     (4,725

Other comprehensive income (loss) from associates

        41     (243

Related income tax

   12      2,296     1,143
     

 

 

   

 

 

 
        (4,082     (3,825

Items that are or may be reclassified to profit or loss

       

Foreign currency translation differences for foreign operations

        127,890     (249,677

Other comprehensive income (loss) from associates

        1,315     (552

Related income tax

        —         —    
     

 

 

   

 

 

 
        129,205     (250,229
     

 

 

   

 

 

 

Other comprehensive income (loss) for the period, net of income tax

        125,123     (254,054
     

 

 

   

 

 

 

Total comprehensive income for the period

      W 76,141     425,443
     

 

 

   

 

 

 

Profit (loss) attributable to:

       

Owners of the Controlling Company

        (59,454     633,490

Non-controlling interests

        10,472     46,007
     

 

 

   

 

 

 

Profit (loss) for the period

      W (48,982     679,497
     

 

 

   

 

 

 

Total comprehensive income attributable to:

       

Owners of the Controlling Company

        42,704     412,932

Non-controlling interests

        33,437     12,511
     

 

 

   

 

 

 

Total comprehensive income for the period

      W 76,141     425,443
     

 

 

   

 

 

 

Earnings (loss) per share (In won)

       

Basic earnings (loss) per share

   24    W (166     1,770
     

 

 

   

 

 

 

Diluted earnings (loss) per share

   24    W (166     1,770
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

(Unaudited)

For the three-month periods ended March 31, 2018 and 2017

 

     Attributable to owners of the Controlling Company              
(In millions of won)    Share
capital
     Share
premium
     Retained
earnings
    Reserves     Sub-total     Non-controlling
interests
    Total equity  

Balances at January 1, 2017

   W 1,789,079      2,251,113      9,004,283     (88,478     12,955,997     506,391     13,462,388
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

                

Profit for the period

     —          —          633,490     —         633,490     46,007     679,497
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

                

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (3,582     —         (3,582     —         (3,582

Foreign currency translation differences for foreign operations, net of tax

     —          —          —         (216,181     (216,181     (33,496     (249,677

Other comprehensive loss from asssociates

     —          —          (243     (552     (795     —         (795
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

     —          —          (3,825     (216,733     (220,558     (33,496     (254,054
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

   W —          —          629,665     (216,733     412,932     12,511     425,443
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

                

Dividends to equity holders

     —          —          (178,908     —         (178,908     —         (178,908
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at March 31, 2017

   W 1,789,079      2,251,113      9,455,040     (305,211     13,190,021     518,902     13,708,923
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at January 1, 2018

   W 1,789,079      2,251,113      10,621,571     (288,280     14,373,483     608,027     14,981,510
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

                

Profit (loss) for the period

     —          —          (59,454     —         (59,454     10,472     (48,982
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

                

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (4,123     —         (4,123     —         (4,123

Foreign currency translation differences for foreign operations, net of tax

     —          —          —         104,925     104,925     22,965     127,890

Other comprehensive income from associates

     —          —          41     1,315     1,356     —         1,356
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —          —          (4,082     106,240     102,158     22,965     125,123
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the period

   W —          —          (63,536     106,240     42,704     33,437     76,141
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transaction with owners, recognized directly in equity

                

Dividends to equity holders

     —          —          (178,908     —         (178,908     —         (178,908

Subsidiaries’ dividends distributed to non-controlling interests

     —          —          —         —         —         (53,107     (53,107
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at March 31, 2018

   W 1,789,079      2,251,113      10,379,127     (182,040     14,237,279     588,357     14,825,636

See accompanying notes to the consolidated interim financial statements.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

For the three-month periods ended March 31, 2018 and 2017

 

(In millions of won)    Note      2018     2017  

Cash flows from operating activities:

       

Profit (loss) for the period

      W (48,982     679,497

Adjustments for:

       

Income tax expense (benefit)

     23        (46,793     178,623

Depreciation

     18        807,736     610,553

Amortization of intangible assets

     18        102,339     105,311

Gain on foreign currency translation

        (62,852     (79,725

Loss on foreign currency translation

        53,141     161,901

Expenses related to defined benefit plans

     12        51,801     49,349

Gain on disposal of property, plant and equipment

        (4,006     (11,560

Loss on disposal of property, plant and equipment

        8,405     2,231

Gain on disposal of intangible assets

        (239     —    

Impairment loss on intangible assets

        37     1,689

Reversal of impairment loss on intangible assets

        (130     —    

Warranty expense

        35,647     75,850

Finance income

        (35,238     (97,974

Finance costs

        23,395     49,057

Equity in loss (income) of equity method accounted investees, net

     8        2,893     (250

Other income

        (489     (261

Other expenses

        634     98
     

 

 

   

 

 

 
        936,281     1,044,892

Changes in

       

Trade accounts and notes receivable

        783,501     383,054

Other accounts receivable

        18,759     6,370

Inventories

        (114,588     4,350

Other current assets

        (131,364     (123,822

Other non-current assets

        (15,822     (20,980

Trade accounts and notes payable

        (46,042     (380,460

Other accounts payable

        (174,431     (44,954

Accrued expenses

        (262,999     (184,853

Provisions

        (52,910     (52,670

Other current liabilities

        (15,138     (37

Defined benefit liabilities, net

        (2,734     (1,740

Other non-current liabilities

        7,622     1,207
     

 

 

   

 

 

 
        (6,146     (414,535

Cash generated from operating activities

        881,153     1,309,854

Income taxes paid

        (55,851     (46,986

Interests received

        17,487     10,377

Interests paid

        (40,574     (31,204
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 802,215     1,242,041
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

(Unaudited)

For the three-month periods ended March 31, 2018 and 2017

 

(In millions of won)    Note      2018     2017  

Cash flows from investing activities:

       

Dividends received

      W 4,712     8,109

Proceeds from withdrawal of deposits in banks

        518,363     487,131

Increase in deposits in banks

        (630,913     (281,635

Acquisition of available-for-sale financial assets

        (39     —    

Acquisition of investments in equity accounted investees

        (4,000     —    

Proceeds from disposal of investments in equity accounted investees

        —         5,157

Acquisition of property, plant and equipment

        (1,815,515     (1,609,628

Proceeds from disposal of property, plant and equipment

        102,496     70,003

Acquisition of intangible assets

        (130,638     (113,878

Proceeds from disposal of intangible assets

        960     —    

Receipt from settlement of derivatives

        (2     (101

Proceeds from collection of short-term loans

        7,351     —    

Increase in long-term loans

        (12,300     —    

Decrease in deposits

        294     2,991

Increase in deposits

        (517     (933

Proceeds from disposal of emission rights

        4,160     —    
     

 

 

   

 

 

 

Net cash used in investing activities

        (1,955,588     (1,432,784
     

 

 

   

 

 

 

Cash flows from financing activities:

     26       

Proceeds from issuance of bonds

        388,447     —    

Proceeds from long-term borrowings

        907,850     119,741

Repayments of current portion of long-term borrowings and bonds

        (180,168     (63,216
     

 

 

   

 

 

 

Net cash provided by financing activities

        1,116,129     56,525
     

 

 

   

 

 

 

Net decrease in cash and cash equivalents

        (37,244     (134,218

Cash and cash equivalents at January 1

        2,602,560     1,558,696

Effect of exchange rate fluctuations on cash held

        61,373     (79,755
     

 

 

   

 

 

 

Cash and cash equivalents at March 31

      W 2,626,689     1,344,723
     

 

 

   

 

 

 

See accompanying notes to the consolidated interim financial statements.

 

35


Table of Contents
1. Reporting Entity

 

  (a) Description of the Controlling Company

LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 and the Controlling Company is a public corporation listed in Korea Exchange since 2004. The main business of the Controlling Company and its subsidiaries (the “Group”) is to manufacture and sell displays and its related products. As of March 31, 2018, the Group is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China, Poland and Vietnam. The Controlling Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of March 31, 2018, LG Electronics Inc., a major shareholder of the Controlling Company, owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of March 31, 2018, there are 357,815,700 shares of common stock outstanding. The Controlling Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of March 31, 2018, there are 23,730,762 ADSs outstanding.

 

 

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Table of Contents
1. Reporting Entity, Continued

 

  (b) Consolidated Subsidiaries as of March 31, 2018

 

(In millions)                                

Subsidiaries

 

Location

  Percentage of
ownership
    Fiscal year
end
   

Date of
incorporation

  Business     Capital stocks  

LG Display America, Inc.

 

San Jose,

U.S.A.

    100%       December 31     September 24, 1999     Sell Display products     USD 411  

LG Display Japan Co., Ltd.

  Tokyo, Japan     100%       December 31     October 12, 1999     Sell Display products     JPY 95  

LG Display Germany GmbH

  Eschborn, Germany     100     December 31     November 5, 1999     Sell Display products     EUR 1  

LG Display Taiwan Co., Ltd.

  Taipei, Taiwan     100%       December 31     April 12, 1999     Sell Display products     NTD 116  

LG Display Nanjing Co., Ltd.

  Nanjing, China     100%       December 31     July 15, 2002    
Manufacture Display
products
 
 
  CNY 3,020  

LG Display Shanghai Co., Ltd.

  Shanghai, China     100%       December 31     January 16, 2003     Sell Display products     CNY 4  

LG Display Poland Sp. z o.o.

  Wroclaw, Poland     100%       December 31     September 6, 2005    
Manufacture Display
products
 
 
  PLN 511  

LG Display Guangzhou Co., Ltd.

  Guangzhou, China     100%       December 31     June 30, 2006    
Manufacture Display
products
 
 
  CNY 1,655  

LG Display Shenzhen Co., Ltd.

  Shenzhen, China     100%       December 31     August 28, 2007     Sell Display products     CNY 4  

LG Display Singapore Pte. Ltd.

  Singapore     100%       December 31     January 12, 2009     Sell Display products     USD 1.1  

L&T Display Technology (Fujian) Limited

  Fujian, China     51%       December 31     January 5, 2010    

Manufacture and sell
LCD module and
LCD monitor sets
 
 
 
  CNY 116  

LG Display Yantai Co., Ltd.

  Yantai, China     100%       December 31     April 19, 2010    
Manufacture Display
products
 
 
  CNY 1,008  

Nanumnuri Co., Ltd.

 

Gumi,

South Korea

    100%       December 31     March 21, 2012     Janitorial services     KRW 800  

LG Display (China) Co., Ltd.

  Guangzhou, China     70%       December 31     December 10, 2012    
Manufacture and sell
Display products
 
 
  CNY 8,232  

Unified Innovative Technology, LLC

  Wilmington, U.S.A.     100%       December 31     March 12, 2014    
Manage intellectual
property
 
 
  USD 9  

LG Display Guangzhou Trading Co., Ltd.

  Guangzhou, China     100%       December 31     April 28, 2015     Sell Display products     CNY 1.2  

Global OLED Technology, LLC

  Herndon, U.S.A.     100%       December 31     December 18, 2009    
Manage OLED
intellectual property
 
 
  USD 138  

LG Display Vietnam Haiphong Co., Ltd. (*1)

 

Haiphong,

Vietnam

    100%       December 31     May 5, 2016    
Manufacture Display
products
 
 
  USD 300  

Suzhou Lehui Display Co., Ltd.

  Suzhou, China     100%       December 31     July 1, 2016    

Manufacture and sell
LCD module and
LCD monitor sets
 
 
 
  CNY 637  

Money Market Trust(*2)

 

Seoul,

South Korea

    100%       December 31     —       Money market trust     KRW  430,801  

 

(*1) For the three-month period ended March 31, 2018, the Controlling Company contributed W212,600 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”). There was no change in the Controlling Company’s ownership percentage in LGDVN as a result of this additional investment.

 

37


Table of Contents
1. Reporting Entity, Continued

 

  (*2) For the three-month period ended March 31, 2018, the Controlling Company acquired and disposed Money Market Trust (“MMT”) and the MMT amount as of March 31, 2018 is W430,801 million.

W90,281 million is attributable to the Controlling Company over the distributed dividends from consolidated subsidiaries for the three-month period ended March 31, 2018.

 

2. Basis of Presenting Financial Statements

 

  (a) Statement of Compliance

The condensed consolidated interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRSs”) No.1034, Interim Financial Reporting. They do not include all of the information required for full annual consolidated financial statements and should be read in conjunction with the consolidated financial statements of the Group as of and for the year ended December 31, 2017.

This is the first set of the Group’s financial statements where K-IFRS No. 1109, K-IFRS No. 1115, and K-IFRS No. 2122 have been applied. Changes to significant accounting policies are described in Note 3.

 

  (b) Basis of Measurement

The condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items in the statements of financial position:

 

    financial assets at fair value through profit or loss (“FVTPL) and financial asset at fair value through other comprehensive income (“FVOCI”) , and

 

    net defined benefit liabilities are recognized as the present value of defined benefit obligations less the fair value of plan assets

 

  (c) Functional and Presentation Currency

The condensed consolidated interim financial statements are presented in Korean won, which is the Controlling Company’s functional currency.

 

  (d) Use of Estimates and Judgments

The preparation of the condensed consolidated interim financial statements in conformity with K-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

38


Table of Contents
2. Basis of Presenting Financial Statements, Continued

 

  (d) Use of Estimates and Judgments, Continued

In result of the Group utilizing the past accumulated usage information to reassess the economic useful life of the Mask and Mold which has been classified as inventory, the Group expected the useful lives of Mask and Mold to exceed one year; therefore, the Group changed useful lives of Mask and Mold to two years and treated it as a change in accounting estimate. The Group also changed the classification of Mask and Mold to property, plant and equipment. As a result, W111,456 million of Inventory (supplies) at December 31, 2017 is classified as property, plant and equipment (tools) during the three-month period ended March 31, 2018..

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied in the last annual financial statements, except for new significant judgments and key sources of estimation uncertainty related to the application of K-IFRS No. 1109, K-IFRS No. 1115 in Note 3 and the change in useful life of Mask and Mold.

 

3. Summary of Significant Accounting Policies

The significant accounting policies followed by the Group in the preparation of its condensed consolidated interim financial statements are the same as those followed by the Group in its preparation of the consolidated financial statements as of and for the year ended December 31, 2017, except for the application of K-IFRS No. 1034, Interim Financial Reporting and the changes in accounting standards explained below. The changes in accounting policies are also expected to be reflected in the Group’s consolidated financial statements as at and for the year ending December 31, 2018.

 

  (a) Changes in Accounting Policies

The Group has initially adopted K-IFRS No. 1115, Revenue from Contracts with Customers, K-IFRS No. 1109, Financial Instruments, and K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration from January 1, 2018.

(i) K-IFRS No. 1109, Financial Instruments

K-IFRS No. 1109 set out requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standards replaces K-IFRS No. 1039 Financial Instruments: Recognition and Measurement. The Group adopted K-IFRS No. 1109, Financial Instruments, from January 1, 2018, and the Group has taken an exemption not to restate the financial statements for prior years with respects to transition requirements.

The details of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below. There is no impact on the opening balance of retained earnings at January 1, 2018.

 

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Table of Contents
3. Summary of Significant Accounting Policies, Continued

 

  (a) Changes in Accounting Policies, Continued

 

  i) Classification and measurement of financial assets and financial liabilities

K-IFRS No. 1109 largely retains the existing requirements in K-IFRS No. 1039 for the classification and measurement of financial liabilities. However, it eliminates the previous K-IFRS No. 1039 categories for financial assets of held to maturity, loans and receivables and available for sale.

The adoption K-IFRS No. 1109 has not had a significant effect on the Group’s accounting policies related to financial liabilities and derivative financial instruments. The impact of K-IFRS No. 1109 on the classification and measurement of financial assets is set out below.

Under K-IFRS No. 1109, on initial recognition, a financial asset is classified as measured at: amortized cost; FVOCI-debt investment; FVOCI-equity investment; or FVTPL. The classification of financial assets under K-IFRS 1109 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

 

    It is held within a business model whose objective is to hold assets to collect contractual cash flow; and

 

    its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

 

    It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

 

    its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.

 

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Table of Contents
3. Summary of Significant Accounting Policies, Continued

 

  (a) Changes in Accounting Policies, Continued

The following accounting policies apply to the subsequent measurement of financial assets.

 

 

Financial assets at FVTPL

   These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
 

Financial assets at amortized cost

   These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
 

Debt investments at FVOCI

   These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

The following table below explain the original measurement categories under K-IFRS No. 1039 and the changes in measurement categories under K-IFRS No. 1109 for each class of the Group’s financial assets as at January 1, 2018 are as below.

 

(In millions of won)                                   
     Original
classification
under
K-IFRS No. 1039
     New classification
under
K-IFRS No. 1109
     Original
carrying
amount
under
K-IFRS No.
1039
     New carrying
amount under
K-IFRS No.
1109
     Difference  

Financial Assets

              

Cash and cash equivalents

    

Loans and

receivables

 

 

     Amortized cost      W 2,602,560        2,602,560        —    

Deposits

    

Loans and

receivables

 

 

     Amortized cost        758,089        758,089        —    

Trade receivables

    

Loans and

receivables

 

 

     Amortized cost        4,325,120        4,325,120        —    

Other receivables

    

Loans and

receivables

 

 

     Amortized cost        164,827        164,827        —    

Debt instrument

     Available-for-sale       
FVOCI-debt
instrument
 
 
     162        162        —    

Equity instrument

     Available-for-sale       

Mandatorily at

FVTPL

 

 

     4,980        4,980        —    

Convertible bonds

    
Designated as at
FVTPL
 
 
    
Mandatorily at
FVTPL
 
 
     1,552        1,552        —    

Derivatives

    
Designated as at
FVTPL
 
 
    
Mandatorily at
FVTPL
 
 
     842        842        —    

Others

    

Loans and

receivables

 

 

     Amortized cost        88,290        88,290        —    
        

 

 

    

 

 

    

 

 

 

Total financial assets

         W 7,946,422        7,946,422        —    
        

 

 

    

 

 

    

 

 

 

As of January 1, 2018, there were no financial liabilities measured at FVTPL.

 

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3. Summary of Significant Accounting Policies, Continued

 

  (a) Changes in Accounting Policies, Continued

 

  ii) Impairment of financial assets

K-IFRS No. 1109 replaces the ‘incurred loss’ model in K-IFRS No. 1039 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under K-IFRS No. 1109, credit losses are recognized earlier than under K-IFRS No. 1039.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

At each reporting date, the Group assesses whether financial assets carried at amortized cost and debt instrument at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt instrument at FVOCI, the loss allowance is recognized in OCI, instead of reducing the carrying amount of the asset.

As a result of applying the loss allowances model under K-IFRS No. 1109, as of January 1, 2018, there are no additional loss allowances as compared with the loss allowances under K-IFRS No. 1039.

 

  iii) Hedge Accounting

When initially applying K-IFRS No. 1109, the Group elected as its accounting policy to continue to apply hedge accounting requirements under K-IFRS No. 1039 instead of the requirements in K-IFRS No. 1109. As of January 1, 2018, there is no impact on the consolidated financial statement of the Group resulting from the application of the requirements in K-IFRS No. 1109.

 

  (ii) K-IFRS No. 1115, Revenue from Contracts with Customers

K-IFRS No. 1115, Revenue from contracts with customers, establishes a comprehensive framework for determining whether, how much and when revenue is recognized. K-IFRS No. 1115 replaces existing revenue recognition guidance, including K-IFRS No. 1018 Revenue, K-IFRS No. 1011, Construction Contracts, K-IFRS No. 2031, Revenue: Barter Transactions Involving Advertising Services, K-IFRS No. 2113, Customer Loyalty Programmes, K-IFRS No. 2115, Agreements for the Construction of Real Estate and K-IFRS No. 2118, Transfers of Assets from Customers.

The Group has initially applied K-IFRS No. 1115, Revenue from contracts with customers, from January 1, 2018. Regarding transition to K-IFRS No.1115, the Group has decided to apply the cumulative effect method, i.e. recognizing the cumulative effect of applying K-IFRS No. 1115 at the date of initial application, which is January 1, 2018, without restatement of the comparative periods presented. The impact on its consolidated financial statements resulting from the application of the new standard is as follows.

 

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3. Summary of Significant Accounting Policies, Continued

 

  (a) Changes in Accounting Policies, Continued

Variable Consideration

The consideration received from customers may be variable as the Group allows its customers to return their products according to the contracts. For the year-ended December 31, 2017, the Group recognizes a provision measured at the gross profit for products sold which are expected to be returned. Under K-IFRS No. 1115, the Group shall estimate an amount of variable consideration by using the expected value or the most likely amount, depending on which method the entity expects to better predict the amount of consideration to which it will be entitled and include in the transaction price some or all of an amount of variable consideration estimated only to the extent that is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when return period expires. The Group shall recognize refund liability measured at the amount of consideration received (or receivable) to which the Group does not expect to be entitled and a new asset for the right to recover returned goods. As a result of this change, the refund liability and a new asset for the right to recover returned goods increased by W9,789 million, respectively, as of January 1, 2018. There is no impact on the opening balance of retained earnings at January 1, 2018. (Note 5(d), 13(a))

The effect of the application of K-IFRS No. 1115 on the Group’s consolidated interim statement of financial position as of March 31, 2018 is as follows. There is no impact on the consolidated interim statement of comprehensive income and the cash flows for the three-month period ended March 31, 2018.

 

(in millions won)                     

Categories

   Adoption of
K-IFRS No. 1115
     Adjustments      Adoption of
K-IFRS No. 1018
 

Current Assets Other current assets

   W 405,035        (6,923      398,112  

Current Liabilities Provisions

   W 74,220        (6,923      67,297  

 

  (iii) K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration

According to the new interpretation, K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration, the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration. There is no significant impact on the consolidated financial statements of the Group.

 

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Table of Contents
3. Summary of Significant Accounting Policies, Continued

 

  (b) New Standards and Amendments Not Yet Adopted

The following new standard is effective for annual periods beginning after January 1, 2018 and earlier application is permitted; however, the Group has not early adopted the following new standard in preparing these condensed consolidated interim financial statements.

 

  (i) K-IFRS No. 1116, Leases

The Group plans to adopt K-IFRS No. 1116, Leases, in its consolidated financial statements for annual period beginning on January 1, 2019, assess the financial impact of the adoption of K-IFRS No. 1116 and disclose the results in its consolidated financial statements for the year ending December 31, 2018. As of March 31, 2018, other than the potential impacts described in the consolidated financial statements as of and for the year ended December 31, 2017, there are no significant changes in relation to preparation for the adoption of this new standard.

 

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Table of Contents
4. Cash and Cash Equivalents and Deposits in Banks

 

Cash and cash equivalents and deposits in banks as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Current assets

     

Cash and cash equivalents

     

Demand deposits

   W 2,626,689        2,602,560  

Deposits in banks

     

Time deposits

   W 797,217        685,238  

Restricted cash (*)

     73,055        72,840  
  

 

 

    

 

 

 
   W 870,272        758,078  
  

 

 

    

 

 

 

Non-current assets

     

Deposits in banks

     

Restricted cash (*)

   W 11        11  
  

 

 

    

 

 

 
   W 3,496,972        3,360,649  
  

 

 

    

 

 

 

 

(*) Restricted cash includes mutual growth fund to aid LG Group’s second and third-tier suppliers, pledge to enforce investment plans according to the receipt of subsidies from Gumi city and Gyeongsangbuk-do and others.

 

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Table of Contents
5. Receivables and Other Assets

 

  (a) Trade accounts and notes receivable as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Trade, net

   W 2,631,374        3,275,902  

Due from related parties

     864,789        1,049,218  
  

 

 

    

 

 

 
   W 3,496,163        4,325,120  
  

 

 

    

 

 

 

 

  (b) Other accounts receivable as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Current assets

     

Non-trade receivable, net

   W 112,335        150,554  

Accrued income

     14,034        14,273  
  

 

 

    

 

 

 
   W 126,369        164,827  
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable, as of March 31, 2018 and December 31, 2017 are W9,945 million and W10,821 million, respectively.

 

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5. Receivables and Other Assets, Continued

 

  (c) The aging of trade accounts and note receivable, other accounts receivable and long-term non-trade receivable as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    March 31, 2018  
     Book value      Impairment loss  
     Trade accounts
and notes
receivable
     Other
accounts
receivable(*)
     Long-term
non-trade
receivable
     Trade accounts
and notes
receivable
    Other
accounts
receivable(*)
    Long-term
non-trade
receivable
 

Not past due

   W 3,487,064        119,671        185        (1,401     (539     (2

Past due 1-15 days

     9,529        478        —          (30     (3     —    

Past due 16-30 days

     995        707        —          —         (4     —    

Past due 31-60 days

     6        125        —          —         (1     —    

Past due more than 60 days

     —          6,412        —          —         (477     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 3,497,594        127,393        185        (1,431     (1,024     (2
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(*) Other accounts receivable includes non-trade receivable and accrued income.

 

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5. Receivables and Other Assets, Continued

 

 

(In millions of won)    December 31, 2017  
     Book value      Impairment loss  
     Trade accounts
and notes
receivable
     Other
accounts
receivable(*)
     Long-term
non-trade
receivable
     Trade accounts
and notes
receivable
    Other
accounts
receivable(*)
    Long-term
non-trade
receivable
 

Not past due

   W 4,323,465        164,755        8,738        (1,631     (905     —    

Past due 1-15 days

     2,652        488        —          (1     (3     —    

Past due 16-30 days

     631        65        —          —         (1     —    

Past due 31-60 days

     —          208        —          —         (2     —    

Past due more than 60 days

     4        622        —          —         (400     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 4,326,752        166,138        8,738        (1,632     (1,311     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

The movement in the allowance for impairment in respect of trade accounts and notes receivable, other accounts receivable and long-term non-trade receivable for the three-month period ended March 31, 2018 and the year ended December 31, 2017 are as follows:

 

(In millions of won)    2018      2017  
     Trade accounts
and notes
receivable
    Other
accounts
receivable
    Long-term
non-trade
receivable
     Trade accounts
and notes
receivable
     Other
accounts
receivable
     Long-term
non-trade
receivable
 

Balance at the beginning of the period

   W 1,632       1,311       —          1,488        1,093        23  

(Reversal of) bad debt expense

     (201     (287     2        144        218        (23
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Balance at the reporting date

   W 1,431       1,024       2        1,632        1,311        —    
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents
5. Receivables and Other Assets, Continued

 

  (d) Other assets as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    March 31, 2018      December 31, 2017  

Current assets

     

Advance payments

   W 12,372        7,973  

Prepaid expenses

     239,234        83,626  

Value added tax refundable

     146,506        148,351  

Emission rights

     —          1,978  

Right to recover returned goods(*)

     6,923        —    
  

 

 

    

 

 

 
   W 405,035        241,928  
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W 391,904        394,759  
  

 

 

    

 

 

 
   W 391,904        394,759  
  

 

 

    

 

 

 

 

(*) As a result from the initial application of K-IFRS No. 1115, the Group recognized an asset for right to recover returned goods returned by the customer.

 

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Table of Contents
6. Other Financial Assets

 

 

  (a) Other financial assets as of March 31, 2018 and December 31, 2017 are as follows:

 

  (i) As of March 31, 2018

 

(In millions of won)    March 31, 2018  

Current assets

  

Financial Asset at Fair Value through Other Comprehensive Income

  

Debt instrument

  

Government bonds

   W 6  

Financial Asset Carried at Amortized Cost

  

Deposits

   W 2,292  

Short-term loans

     15,094  
  

 

 

 

Total

   W 17,392  
  

 

 

 

Non-current assets

  

Financial Asset at Fair Value through Profit or Loss

  

Equity instrument

  

Intellectual Discovery, Ltd.

   W 729  

Kyulux, Inc

     1,968  

ARCH Venture Fund Vill, L.P.

     2,311  
  

 

 

 

Sub-Total

     5,008  

Convertible bonds

     1,552  

Derivatives(*)

     600  

Financial Asset at Fair Value through Other Comprehensive Income

  

Debt instrument

  

Government bonds

   W 157  

Financial Asset Carried at Amortized Cost

  

Deposits

   W 20,123  

Long-term loans

     37,296  

Long-term non-trade receivable

     183  
  

 

 

 

Total

   W 64,919  
  

 

 

 

 

(*) Represents interest rate swap contracts related to borrowings with variable interest rate.

 

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Table of Contents
6. Other Financial Assets, Continued

 

 

  (ii) As of December 31, 2017

 

(In millions of won)    December 31, 2017  

Current assets

  

Available-for-sale financial assets

  

Debt instrument

  

Government bonds

   W 6  

Deposits

     10,480  

Short-term loans

     16,766  
  

 

 

 

Total

   W 27,252  
  

 

 

 

Non-current assets

  

Financial Asset at Fair Value through Profit or Loss

   W 1,552  

Available-for-sale financial assets

  

Debt instrument

  

Government bonds

   W 156  

Equity instrument

  

Intellectual Discovery, Ltd.

   W 729  

Kyulux, Inc

     1,968  

ARCH Venture Fund Vill, LP.

     2,283  
  

 

 

 

Sub-Total

   W 4,980  

Deposits

   W 19,898  

Long-term loans

     32,408  

Long-term non-trade receivable

     8,738  

Derivatives(*)

     842  
  

 

 

 

Total

   W 68,574  
  

 

 

 

 

(*) Represents interest rate swap contracts related to borrowings with variable interest rate.

Other financial assets of related parties as of March 31, 2018 and December 31, 2017 are W2,500 million and W2,750 million, respectively.

 

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Table of Contents
7. Inventories

 

Inventories as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    March 31, 2018      December 31, 2017  

Finished goods

   W 1,041,615        965,643  

Work-in-process

     760,491        748,592  

Raw materials

     367,924        344,997  

Supplies

     180,355        290,852  
  

 

 

    

 

 

 
   W 2,350,385        2,350,084  
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2018 and 2017, the amount of inventories recognized as cost of sales, inventory write-downs and reversal and usage of inventory write-downs included in cost of sales are as follows:

 

(In millions of won)    2018      2017  

Inventories recognized as cost of sales

   W 5,133,080        5,342,882  

Including: inventory write-downs

     210,188        215,228  

Including: reversal and usage of inventory write-downs

     (206,127      (204,123

 

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Table of Contents
8. Investments in Equity Accounted Investees

 

Associates as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)                                    

Associates

   Location    Fiscal year
end
   Date of
incorporation
  

Business

   March 31, 2018      December 31, 2017  
               Percentage
of ownership
    Carrying
amount
     Percentage
of ownership
    Carrying
amount
 

Paju Electric Glass Co., Ltd.

   Paju,

South Korea

   December 31    January

2005

   Manufacture electric glass for FPDs      40   W 44,179        40   W 46,511  

INVENIA Co., Ltd.

   Seongnam,

South Korea

   December 31    January

2001

   Develop and manufacture equipment for FPDs      13     3,125        13     2,887  

WooRee E&L Co., Ltd.

   Ansan,

South Korea

   December 31    June

2008

   Manufacture LED back light unit packages      14     3,506        14     7,270  

LB Gemini New Growth Fund No. 16 (*1)

   Seoul,

South Korea

   December 31    December

2009

   Invest in small and middle sized companies and benefit from M&A opportunities      31     5,282        31     5,910  

YAS Co., Ltd.

   Paju,

South Korea

   December 31    April

2002

   Develop and manufacture deposition equipment for OLEDs      15     16,045        15     15,888  

AVATEC Co., Ltd.

   Daegu,

South Korea

   December 31    August

2000

   Process and sell electric glass for FPDs      17     23,252        17     23,732  

Arctic Sentinel, Inc.

   Los Angeles,
U.S.A.
   March 31    June

2008

  

Develop and manufacture

tablet for kids

     10     —          10     —    

 

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Table of Contents
8. Investments in Equity Accounted Investees, Continued

 

 

(In millions of won)                                                    

Associates

   Location      Fiscal
year end
     Date of
incorporation
    

Business

   2018      2017  
               Percentage
of

ownership
    Carrying
amount
     Percentage
of

ownership
    Carrying
amount
 

CYNORA GmbH

    

Bruchsal,

Germany

 

 

     December 31       

March

2003

 

 

   Develop organic emitting materials for displays and lighting devices      14   W 20,309        14   W 20,309  

Material Science (*2)

    


Seoul,

South
Korea

 

 
 

     December 31       

January

2014

 

 

   Develop, manufacture, and sales of OLED materials      10     4,000        —         —    
                

 

 

      

 

 

 
                 W 119,698        W 122,507  
                

 

 

      

 

 

 

Although the Controlling Company’s share interests in INVENIA Co., Ltd., WooRee E&L Co., Ltd., YAS Co., Ltd., AVATEC Co., Ltd., Arctic Sentinel, Inc., Cynora GmbH, and Material Science are below 20%, the Controlling Company is able to exercise significant influence through its right to appoint a director to the board of directors of each investee. Accordingly, the investments in these investees have been accounted for using the equity method.

 

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Table of Contents
8. Investments in Equity Accounted Investees, Continued

 

  (*1) The Controlling Company is a member of a limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). On the other hand, a resolution to dissolve the fund was approved at the general meeting and the fund is in process of liquidation as of March 31, 2018.

 

  (*2) In March 2018, the Controlling Company invested W4,000 million and acquired 10,767 shares of common stock with voting rights in Material Science. As of March 31, 2018, the Controlling Company‘s ownership percentage in Material Science is 10% and the Controlling Company has the right to appoint a director to the board of directors of the investee.

Dividends received from equity method investees for the three-month periods ended March 31, 2018 and 2017 amounted to W5,272 million and W8,639 million, respectively.

 

9. Property, Plant and Equipment

For the three-month periods ended March 31, 2018 and 2017, the Group purchased property, plant and equipment of W1,974,223 million and W1,767,834 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W19,912 million and 2.23%, and W6,260 million and 1.84% for the three-month periods ended March 31, 2018 and 2017, respectively. Also, for the three-month periods ended March 31, 2018 and 2017, the Group disposed of property, plant and equipment with carrying amounts of W61,868 million and W22,596 million, respectively, and recognized W4,006 million and W8,405 million, respectively, as gain and loss, on disposal of property, plant and equipment for the three-month period ended March 31, 2018 (gain and loss for the three-month period ended March 31, 2017: W11,560 million and W2,231 million, respectively).

 

10. Intangible Assets

 

  (a) The Group capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of March 31, 2018 and December 31, 2017 are W316,914 million and W296,760 million, respectively.

 

  (b) Development of new projects are divided into research activities and development activities. Expenditures on research activities are recognized in profit or loss and development expenditures are capitalized, respectively.

 

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Table of Contents
11. Financial Liabilities

 

  (a) Financial liabilities as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    March 31, 2018      December 31, 2017  

Current

     

Current portion of long-term borrowings and bonds

   W 2,148,016        1,452,926  

Non-current

     

Won denominated borrowings

   W 1,701,096        1,251,258  

Foreign currency denominated borrowings

     987,714        1,392,931  

Bonds

     1,894,864        1,506,003  
  

 

 

    

 

 

 
   W 4,583,674        4,150,192  
  

 

 

    

 

 

 

 

  (b) Won denominated long-term borrowings as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)                    

Lender

   Annual interest rate
as of
March 31, 2018 (%)
    March 31,
2018
     December 31,
2017
 

Woori Bank

    
3-year Korean Treasury
Bond rate - 1.25, 2.75
 
 
  W 1,753        1,922  

Shinhan Bank

     CD rate (91days) + 0.30       200,000        200,000  

Korea Development Bank and others

    

CD rate (91days) + 0.64~0.74

2.28~3.25

 

 

    2,050,000        1,250,000  

Less current portion of long-term borrowings

       (550,657      (200,664
    

 

 

    

 

 

 
     W 1,701,096        1,251,258  
    

 

 

    

 

 

 

 

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11. Financial Liabilities, Continued

 

  (c) Foreign currency denominated long-term borrowings as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won, USD and CNY)  

Lender

   Annual interest rate
as of
March 31, 2018 (%)(*)
     March 31,
2018
     December 31,
2017
 

The ExportImport Bank of Korea and others

     3ML+0.55~1.04      W 751,882        755,337  

China Construction Bank and others

    

USD: 3ML+0.80~2.00

CNY: 4.28

 

 

     1,508,289        1,385,097  

Foreign currency equivalent

      USD  1,600      USD  1,500  
      CNY 3,263      CNY  3,263  

Less current portion of long-term borrowings

        (1,272,457      (747,503
     

 

 

    

 

 

 
      W 987,714        1,392,931  
     

 

 

    

 

 

 

 

  (*) ML represents Month LIBOR (London Inter-Bank Offered Rates).

 

  (d) Details of bonds issued and outstanding as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)                            
     Maturity      Annual interest rate
as of
March 31, 2018 (%)
     March 31,
2018
     December 31,
2017
 

Won denominated bonds(*)

           

Publicly issued bonds

    

May 2018 ~

February 2023

 

 

     1.73~3.73      W 2,225,000        2,015,000  

Less discount on bonds

           (5,234      (4,238

Less current portion

           (324,902      (504,759
        

 

 

    

 

 

 
         W 1,894,864        1,506,003  
        

 

 

    

 

 

 

 

  (*) Principal of the won denominated bonds is to be repaid at maturity and interests are paid quarterly.

 

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12. Employee Benefits

The Controlling Company and certain subsidiaries’ defined benefit plans provide a lump-sum payment to an employee based on final salary rates and length of service at the time the employee leaves the Controlling Company or certain subsidiaries.

The defined benefit plans expose the Group to actuarial risks, such as the risk associated with expected periods of service, interest rate risk, market (investment) risk, and others.

 

  (a) Net defined benefit liabilities recognized as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    March 31, 2018      December 31, 2017  

Present value of partially funded defined benefit obligations

   W 1,595,490        1,562,424  

Fair value of plan assets

     (1,444,511      (1,466,977
  

 

 

    

 

 

 
   W 150,979        95,447  
  

 

 

    

 

 

 

 

  (b) Expenses recognized in profit or loss for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Current service cost

   W 51,559        48,751  

Net interest cost

     242        598  
  

 

 

    

 

 

 
   W 51,801        49,349  
  

 

 

    

 

 

 

 

  (c) Plan assets as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Guaranteed deposits in banks

   W 1,444,511        1,466,977  

As of March 31, 2018, the Controlling Company maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., Shinhan Bank and others.

 

  (d) Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)    2018      2017  

Remeasurements of the net defined benefit liabilities

   W (6,419      (4,725

Tax effect

     2,296        1,143  
  

 

 

    

 

 

 

Remeasurements of the net defined benefit liabilities, net of income tax

   W (4,123      (3,582
  

 

 

    

 

 

 

 

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13. Provisions and Other Liabilities

 

  (a) Changes in provisions for the three-month period ended March 31, 2018 are as follows:

 

(In millions of won)

                           
     Litigations
and claims
     Warranties (*)      Others      Total  

Balance at January 1, 2018

   W 43        102,450        1,835        104,328  

Adjustment from adoption of K-IFRS 1115

     —          —          9,789        9,789  

Additions (reversals)

     —          35,647        (3,834      31,813  

Usage

     —          (49,075      —          (49,075
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2018

   W 43        89,022        7,790        96,855  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 43        66,387        7,790        74,220  

Non-current

   W —          22,635        —          22,635  

 

  (*) The provision for warranties covers defective products and is normally applicable for 18 months from the date of purchase. The warranty liability is calculated by using historical and anticipated rates of warranty claims, and costs per claim to satisfy the Group’s warranty obligation.

 

  (b) Other liabilities as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Current liabilities

     

Withholdings

   W 57,920        63,766  

Unearned revenues

     10,536        12,225  

Security deposits

     3,230        —    

Dividends payable

     231,608        —    
  

 

 

    

 

 

 
   W 303,294        75,991  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term accrued expenses

   W 77,671        70,561  

Security deposits

     2,545        —    

Long-term other accounts payable

     2        2  
  

 

 

    

 

 

 
   W 80,218        70,563  
  

 

 

    

 

 

 

 

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14. Contingencies and Commitments

 

  (a) Legal Proceedings

Anti-trust Litigations

Argos Limited and affiliated companies (“Argos”) filed a Notice of Claim against the Controlling Company and LG Display Taiwan Co., Ltd. in the High Court of Justice in London alleging infringement of Treaty on the Functioning of the European Union and Agreement on the European Economic Area. Prior to Argos’ filing of Particulars of Claim and service, the Controlling Company and LG Display Taiwan Co., Ltd. reached a settlement in principle with Argos in December 2017. The parties expect to execute a settlement agreement in 2018.

Others

The Group is defending against various claims in addition to pending proceedings described above. The Group does not have a present obligation for these matters and has not recognized any provision at March 31, 2018.

 

  (b) Commitments

Factoring and securitization of accounts receivable

The Controlling Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,743 million (W1,859,421 million) in connection with the Controlling Company’s export sales transactions with its subsidiaries. As of March 31, 2018, no short-term borrowings were outstanding in connection with these agreements. In connection with all of the contracts in this paragraph, the Controlling Company has sold its accounts receivable with recourse.

 

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14. Contingencies and Commitments, Continued

 

The Controlling Company and oversea subsidiaries entered into agreements with financial institutions for accounts receivables sales negotiating facilities. The respective maximum amount of accounts receivables sales and the amount of sold accounts receivables before maturity by contract are as follows:

 

(In millions of USD and KRW)  

Classification

 

Financial institutions

  Maximum     Not yet due  
        Contractual
amount
    KRW
equivalent
    Contractual
amount
    KRW
equivalent
 

Controlling Company

  Shinhan Bank   KRW 90,000       90,000       —         —    
  Sumitomo Mitsui Banking Corporation   USD 20       21,330       —         —    
  Bank of Tokyo-Mitsubishi UFJ   USD 70       74,655       —         —    
  BNP Paribas   USD 150       159,975       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 
    USD 240         —      
    KRW 90,000       345,960       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Subsidiaries

         

LG Display Singapore Pte. Ltd.

  Standard Chartered Bank   USD 300       319,950       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

LG Display Taiwan Co., Ltd.

  BNP Paribas   USD 82       87,453       —         —    
  Hongkong & Shanghai Banking Corp.   USD 60       63,990       —         —    
  Taishin International Bank   USD 280       298,620       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

LG Display Germany GmbH

  Citibank   USD 160       170,640       —         —    
  BNP Paribas   USD 75       79,988       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

LG Display America, Inc.

  Hongkong & Shanghai Banking Corp.   USD 400       426,600     USD  150       159,975  
  Standard Chartered Bank   USD 400       426,600       —         —    
 

Sumitomo Mitsui

Banking Corporation

  USD 250       266,625       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

LG Display Japan Co., Ltd.

 

Sumitomo Mitsui

Banking Corporation

  USD 90       95,985       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

LG Display Guangzhou Trading Co., Ltd.

  Industrial and Commercial Bank of China   USD 64       68,256       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 
    USD 2,161       2,304,707     USD 150       159,975  
   

 

 

   

 

 

   

 

 

   

 

 

 
    USD 2,401       USD 150    
    KRW  90,000       2,650,667       —         159,975  
   

 

 

   

 

 

   

 

 

   

 

 

 

In connection with all of the contracts in the above table, the Controlling Company has sold its accounts receivable without recourse.

 

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14. Contingencies and Commitments, Continued

 

Letters of credit

As of March 31, 2018, the Controlling Company has agreements in relation to the opening of letters of credit up to USD 30 million (W31,995 million) with KEB Hana Bank, USD 80 million (W85,320 million) with Bank of China and USD 50 million (W53,325 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Controlling Company obtained payment guarantees amounting to USD 900 million (W959,850 million) from KEB Hana Bank and others for advance received related to the long-term supply agreements and USD 8.5 million (W9,065 million) from Shinhan Bank for value added tax payments in Poland.

LG Display (China) Co., Ltd. and other subsidiaries are provided with payment guarantees from the China Construction Bank Corporation and other various banks amounting to CNY 1,065 million (W180,709 million), JPY 900 million (W9,013million), EUR 2.5 million (W3,280 million), VND 41,902 million (W1,961 million), USD 0.5 million (W533 million), PLN 0.2 million (W62 million) and, respectively, for their local tax payments and utility payments.

Credit facility

LG Display Vietnam Co., Ltd. and other subsidiary have entered into long-term credit facility agreements of up to USD 650 million (W693,225 million) with Sumitomo Mitsui Banking Corporation and other various banks and borrowings as of March 31, 2018 amounting to USD 595 million (W634,568 million).

License agreements

As of March 31, 2018, in relation to its LCD business, the Group has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.

Long-term supply agreement

As of March 31, 2018, in connection with long-term supply agreements with customers, the Controlling Company recognized USD 900 million (W959,850 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter. The Controlling Company received payment guarantees amounting to USD 900 million (W959,850 million) from KEB Hana Bank and other various banks relating to advances received.

Pledged Assets

Regarding the secured bank borrowing amounting to USD 300 million (W320,089 million) and CNY 1,964 million (W333,218 million) from China Construction Bank, as of March 31, 2018, the Group provided its property, plant and equipment and others with carrying amount of W297,720 million as pledged assets.

 

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15. Capital and Reserves

 

  (a) Share capital

The Controlling Company is authorized to issue 500,000,000 shares of capital stock (par value W5,000), and as of March 31, 2018 and December 31, 2017, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2017 to March 31, 2018.

 

  (b) Reserves

Reserves consist mainly of the following:

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

Other comprehensive income (loss) from associates

The other comprehensive income (loss) from associates comprises the amount related to change in equity of investments in equity accounted investees.

Reserves as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)      
     March 31, 2018      December 31, 2017  

Foreign currency translation differences for foreign operations

   W (154,824      (259,749

Other comprehensive income (loss) from associates (excluding remeasurements)

     (27,216      (28,531
  

 

 

    

 

 

 
   W (182,040      (288,280
  

 

 

    

 

 

 

 

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16. Revenue

Details of revenue for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Sales of goods

   W 5,664,450        7,050,908  

Royalties

     5,408        6,544  

Others

     5,306        4,710  
  

 

 

    

 

 

 
   W 5,675,164        7,062,162  
  

 

 

    

 

 

 

 

17. Geographic and Other Information

The following is a summary of sales by region based on the location of the customers for the three-month periods ended March 31, 2018 and 2017.

 

  (a) Revenue by geography

 

(In millions of won)              
     Revenue  

Region

   2018      2017  

Domestic

   W 434,113        543,211  

Foreign

     

China

     3,596,291        4,649,492  

Asia (excluding China)

     402,274        577,719  

United States

     613,913        647,877  

Europe (excluding Poland) 685,232

     346,052        282,313  

Poland

     282,521        361,550  
  

 

 

    

 

 

 

Sub-total

   W 5,241,051        6,518,951  
  

 

 

    

 

 

 

Total

   W 5,675,164        7,062,162  
  

 

 

    

 

 

 

Sales to Company A and Company B amount to W1,746,536 million and W1,376,329 million, respectively, for the three-month period ended March 31, 2018 (the three-month period ended March 31, 2017: W2,192,166 million and W1,750,828 million). The Group’s top ten end-brand customers together accounted for 78% of sales for the three-month period ended March 31, 2018 (the three-month period ended March 31, 2017: 81%).

 

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17. Geographic and Other Information, Continued

 

  (b) Non-current assets by geography

 

(In millions of won)  
     March 31, 2018      December 31, 2017  

Region

   Property, plant
and equipment
     Intangible
assets
     Property, plant
and equipment
     Intangible
assets
 

Domestic

   W 13,669,229        738,473        12,487,111        731,373  

Foreign

           

China

     2,884,856        15,138        2,929,739        17,244  

Others

     971,031        158,591        785,110        164,204  
  

 

 

    

 

 

    

 

 

    

 

 

 

Sub-total

     3,855,887        173,729        3,714,849        181,448  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 17,525,116        912,202        16,201,960        912,821  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (c) Revenue by product and services

 

(In millions of won)       
     Revenue  

Product

   2018      2017  

Televisions

   W 2,413,750        2,999,624  

Desktop monitors

     936,031        1,073,092  

Tablet products

     476,129        584,843  

Notebook computers

     589,699        575,622  

Mobile and others

     1,259,555        1,828,981  
  

 

 

    

 

 

 
   W 5,675,164        7,062,162  
  

 

 

    

 

 

 

 

18. The Nature of Expenses and Others

The classification of expenses by nature for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Changes in inventories

   W (301      4,616  

Purchases of raw materials, merchandise and others

     2,748,830        3,333,784  

Depreciation and amortization

     910,075        715,864  

Outsourcing fees

     269,017        182,800  

Labor costs

     857,684        770,690  

Supplies and others

     244,164        251,715  

Utility

     221,269        200,501  

Fees and commissions

     191,706        161,733  

Shipping costs

     54,425        56,327  

Advertising

     14,944        44,489  

Warranty expenses

     35,647        75,850  

Travel

     26,130        18,939  

Taxes and dues

     28,687        21,100  

Others

     181,613        203,507  
  

 

 

    

 

 

 
   W 5,783,890        6,041,915  
  

 

 

    

 

 

 

Total expenses consist of cost of sales, selling, administrative, research and development expenses and other non-operating expenses, excluding foreign exchange differences.

 

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19. Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Salaries

   W 91,063        81,250  

Expenses related to defined benefit plans

     7,484        6,884  

Other employee benefits

     23,072        22,707  

Shipping costs

     45,871        48,589  

Fees and commissions

     48,697        46,984  

Depreciation

     39,795        34,769  

Taxes and dues

     13,107        8,961  

Advertising

     14,944        44,489  

Warranty expenses

     35,647        75,850  

Rent

     6,649        8,023  

Insurance

     2,883        2,895  

Travel

     6,178        6,485  

Training

     2,567        3,546  

Others

     17,331        16,721  
  

 

 

    

 

 

 
   W 355,288        408,153  
  

 

 

    

 

 

 

 

20. Personnel Expenses

Details of personnel expenses for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Salaries and wages

   W 713,434        630,335  

Other employee benefits

     138,184        119,744  

Contributions to National Pension plan

     18,807        17,917  

Expenses related to defined benefit plan

     51,801        49,349  
  

 

 

    

 

 

 
   W 922,226        817,345  
  

 

 

    

 

 

 

 

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21. Other Non-operating Income and Other Non-operating Expenses

 

  (a) Details of other non-operating income for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Foreign currency gain

   W 220,470        366,959  

Gain on disposal of property, plant and equipment

     4,006        11,560  

Gain on disposal of intangible assets

     239        —    

Reversal of impairment loss on intangible assets

     130        —    

Rental income

     333        1,413  

Others

     2,464        4,457  
  

 

 

    

 

 

 
   W 227,642        384,389  
  

 

 

    

 

 

 

 

  (b) Details of other non-operating expenses for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Foreign currency loss

   W 202,434        573,863  

Loss on disposal of property, plant and equipment

     8,405        2,231  

Impairment loss on intangible assets

     37        1,689  

Donations

     1,866        2,374  

Other bad debt expenses

     45        —    

Expenses related to legal proceedings or claims and others

     50        336  
  

 

 

    

 

 

 
   W 212,837        580,493  
  

 

 

    

 

 

 

 

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22. Finance Income and Finance Costs

 

  (a) Finance income and costs recognized in profit and loss for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Finance income

     

Interest income

   W 19,469        12,108  

Foreign currency gain

     101,492        102,228  

Gain on transaction of derivatives

     36        —    

Gain on valuation of derivatives

     —          798  
  

 

 

    

 

 

 
   W 120,997        115,134  
  

 

 

    

 

 

 

Finance costs

     

Interest expense

   W 22,759        25,757  

Foreign currency loss

     106,304        38,721  

Loss on disposal of investments in equity accounted investees

     —          23,200  

Loss on sale of trade accounts and notes receivable

     345        30  

Loss on transaction of derivatives

     38        101  

Loss on valuation of derivatives

     242        —    

Others

     673        228  
  

 

 

    

 

 

 
   W 130,361        88,037  
  

 

 

    

 

 

 

 

  (b) Finance income and costs recognized in other comprehensive income or loss for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Foreign currency translation differences for foreign operations

   W 127,890        (249,677
  

 

 

    

 

 

 

Finance income (costs) recognized in other comprehensive income or loss after tax

   W 127,890        (249,677
  

 

 

    

 

 

 

 

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23. Income Taxes

 

  (a) Details of income tax expense for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  
Current tax expense    W 49,384        123,970  

Deferred tax expense (benefit)

     (96,177      54,653  
  

 

 

    

 

 

 

Income tax expense (benefit)

   W (46,793      178,623  
  

 

 

    

 

 

 

 

(b) Deferred Tax Assets and Liabilities

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the deferred tax assets at the reporting date will be realized with the Group’s estimated future taxable income.

Deferred tax assets and liabilities as of March 31, 2018 and December 31, 2017 are attributable to the following:

 

(In millions of won)    Assets      Liabilities     Total  
     March, 31,
2018
     December, 31,
2017
     March, 31,
2018
    December, 31,
2017
    March, 31,
2018
    December, 31,
2017
 

Other accounts receivable, net

   W —          —          (827     (1,441     (827     (1,441

Inventories, net

     36,822        34,550        —         —         36,822       34,550  

Defined benefit liabilities, net

     18,232        2,375        —         —         18,232       2,375  

Investments in subsidiaries and associates

     21,389        29,061        —         —         21,389       29,061  

Accrued expenses

     110,888        183,903        —         —         110,888       183,903  

Property, plant and equipment

     410,560        409,928        —         —         410,560       409,928  

Intangible assets

     3,251        3,457        (23,656     (24,646     (20,405     (21,189

Provisions

     23,371        27,018        —         —         23,371       27,018  

Gain or loss on foreign currency translation, net

     13        13        —         —         13       13  

Others

     25,581        27,562        —         —         25,581       27,562  

Tax losses

     110,880        —          —         —         110,880       —    

Tax credit carryforwards

     322,674        268,926        —         —         322,674       268,926  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax assets (liabilities)

   W 1,083,661        986,793        (24,483     (26,087     1,059,178       960,706  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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23. Income Taxes, Continued

 

  (b) Deferred Tax Assets and Liabilities, Continued

Statutory tax rate applicable to the Controlling Company was 24.2% for the year ended December 31, 2017. During the year ended December 31, 2017, certain amendments to corporate income tax rules in Korea were enacted and effective on January 1, 2018 that resulted in application of 27.5% for taxable income in excess of W300,000 million. Deferred taxes as of December 31, 2017 and March 31, 2018 have been measured using the applicable tax rates from the amendment.

 

24. Earnings (loss) Per Share

 

  (a) Basic earnings (loss) per share for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In won and No. of shares)    2018      2017  

Profit (loss) attributable to owners of the Controlling Company

   W (59,453,887,501      633,489,694,225  

Weighted-average number of common stocks outstanding

     357,815,700        357,815,700  
  

 

 

    

 

 

 

Earnings (loss) per share

   W (166      1,770  
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2018 and 2017, there were no events or transactions that resulted in changes in the number of common stocks used for calculating earnings (loss) per share.

 

  (b) Diluted earnings (loss) per share for the three-month periods ended March 31, 2018 and 2017 are not calculated since there was no potential common stock.

 

25. Financial Risk Management

The Group is exposed to credit risk, liquidity risk and market risks. The Group identifies and analyzes such risks, and controls are implemented under a risk management system to monitor and manage these risks at below a threshold level.

 

  (a) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

 

  (i) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Group, Korean won (KRW). The currencies in which these transactions primarily are denominated are USD, CNY, JPY, etc.

 

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25. Financial Risk Management, Continued

 

  (i) Currency risk, Continued

Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group, primarily KRW and USD.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group adopts policies to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

i)    Exposure to currency risk

The Group’s exposure to foreign currency risk based on notional amounts as of March 31, 2018 and December 31, 2017 is as follows:

 

(In millions)    March 31, 2018  
     USD     JPY     CNY     TWD     EUR     PLN     VND  

Cash and cash equivalents

     347       697       7,892       85       2       170       2,054,324  

Deposits in banks

     —         —         2,900       —         —         —         —    

Trade accounts and notes receivable

     2,726       8       1,138       —         —         10       —    

Non-trade receivable

     101       791       3,412       3       2       —         3,291  

Other assets denominated in foreign currencies

     64       1,147       1,314       588       —         46       2,673  

Trade accounts and notes payable

     (1,076     (13,168     (2,626     —         —         —         (93,646

Other accounts payable

     (605     (15,269     (1,831     (5     (8     (3     (1,336,576

Debt

     (1,600     —         (3,263     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     (43     (25,794     8,936       671       (4     223       630,066  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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25. Financial Risk Management, Continued

 

(In millions)    December 31, 2017  
     USD     JPY     CNY     TWD     EUR     PLN     VND  

Cash and cash equivalents

     1,228       152       6,940       16       3       165       342,063  

Deposits in banks

     —         —         750       —         —         —         —    

Trade accounts and notes receivable

     3,316       11       1,453       —         —         —         —    

Non-trade receivable

     62       1,340       136       2       9       —         13,405  

Other assets denominated in foreign currencies

     1       206       596       7       —         —         1,882  

Trade accounts and notes payable

     (1,345     (14,898     (2,843     —         —         —         (102,398

Other accounts payable

     (285     (14,653     (2,403     (11     (8     (4     (2,138,370

Debt

     (1,500     —         (3,263     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     1,477       (27,842     1,366       14       4       161       (1,883,418
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average exchange rates applied for the three-month periods ended March 31, 2018 and 2017 and the exchange rates at March 31, 2018 and December 31, 2017 are as follows:

 

(In won)    Average rate        Reporting date spot rate  
     2018        2017        March 31,
2018
       December 31,
2017
 

USD

   W 1,072.66          1,154.65          1,066.50          1,071.40  

JPY

     9.90          10.15          10.01          9.49  

CNY

     168.62          168.15          169.68          163.65  

TWD

     36.59          37.11          36.63          35.92  

EUR

     1,317.33          1,230.16          1,311.95          1,279.25  

PLN

     315.20          284.48          311.79          306.07  

VND

     0.0472          0.0508          0.0468          0.0472  

 

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25. Financial Risk Management, Continued

 

  ii) Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Group’s assets or liabilities denominated in a foreign currency as of March 31, 2018 and 2017, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considers to be reasonably possible as of the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:

 

(In millions of won)    March 31, 2018      December 31, 2017  
     Equity      Profit
or loss
     Equity      Profit
or loss
 

USD (5 percent weakening)

   W (15,765      35,538        50,040        91,238  

JPY (5 percent weakening)

     (9,678      (8,535      (10,294      (9,141

CNY (5 percent weakening)

     64,386        30,140        13,212        (6,396

TWD (5 percent weakening)

     1,229        —          23        1  

EUR (5 percent weakening)

     (272      (47      16        594  

PLN (5 percent weakening)

     3,500        (74      2,515        (120

VND (5 percent weakening)

     1,474        —          (4,445      —    

A stronger won against the above currencies as of March 31, 2018 and December 31, 2017 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

 

  (ii) Interest rate risk

Interest rate risk arises principally from the Group’s debentures and borrowings. The Group establishes and applies its policy to reduce uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures.

 

  i) Profile

The interest rate profile of the Group’s interest-bearing financial instruments as of March 31, 2018 and December 31, 2017 is as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Fixed rate instruments

     

Financial assets

   W 3,497,125        3,360,800  

Financial liabilities

     (3,971,512      (2,962,671
  

 

 

    

 

 

 
   W (474,387      398,129  
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (2,760,178      (2,640,447

 

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25. Financial Risk Management, Continued

 

  ii) Equity and profit or loss sensitivity analysis for variable rate instruments

As of March 31, 2018 and December 31, 2017, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for each 12-month period following the reporting dates. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

(In millions of won)    Equity      Profit or loss  
     1%p
increase
     1%p
decrease
     1%p
increase
     1%p
decrease
 

March 31, 2018

           

Variable rate instruments(*)

   W   (17,474      17,474        (17,474      17,474  

December 31, 2017

           

Variable rate instruments(*)

   W   (17,362      17,362        (17,362      17,362  

 

  (*) Financial instruments subject to interest rate swap not qualified for hedging are excluded.

 

  (b) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.

The Group’s exposure to credit risk of trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management believes that the demographics of the Group’s customer base, including the default risk of the country in which customers operate, do not have a significant influence on credit risk since the majority of the customers are global electronic appliance manufacturers operating in global markets.

The Group establishes credit limits for each customer and each new customer is analyzed quantitatively and qualitatively before determining whether to utilize third party guarantees, insurance or factoring as appropriate.

In relation to the impairment of financial assets, the Group recognizes expected credit loss and its changes at each reporting date subsequent to initial recognition of financial asset according to an expected credit loss impairment model.

The Group does not establish allowances for receivables under insurance or receivables from customers with a high credit rating. Trade accounts and notes receivables are insured in order to manage credit risk and uninsured trade accounts and notes receivables are managed in accordance with the Group’s management policy.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of March 31, 2018 and December 31, 2017 are as follows:

 

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25. Financial Risk Management, Continued

 

  (b) Credit risk, Continued

 

  i) As of March 31, 2018

 

(In millions of won)       
     March 31, 2018  
     Carrying amounts  

Financial Assets Carried at Amortized Cost

  

Cash and cash equivalents

   W 2,626,689  

Deposits in banks

     870,283  

Trade accounts and notes receivable

     3,496,163  

Non-trade receivable

     112,335  

Accrued income

     14,034  

Deposits

     22,415  

Short-term loans

     15,094  

Long-term loans

     37,297  

Long-term non-trade receivable

     183  
  

 

 

 

Sub-Total

   W 7,194,493  

Financial Assets at Fair Value through Profit or Loss

  

Convertible bonds

   W 1,552  

Derivatives

     600  
  

 

 

 

Sub-Total

   W 2,152  

Financial Assets at Fair Value through Other Comprehensive Income

  

Debt instrument

   W 163  
  

 

 

 

Total

   W 7,196,808  
  

 

 

 

 

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Table of Contents
25. Financial Risk Management, Continued

 

  i) As of December 31, 2017

 

(In millions of won)       
     December 31, 2017  
     Carrying amounts  

Cash and cash equivalents

   W 2,602,560  

Deposits in banks

     758,089  

Trade accounts and notes receivable

     4,325,120  

Non-trade receivable

     150,554  

Accrued income

     14,273  

Available-for-sale financial assets

     162  

Financial assets at fair value through profit or loss

     1,552  

Deposits

     30,378  

Short-term loans

     16,766  

Long-term loans

     32,408  

Long-term non-trade receivable

     8,738  

Derivatives

     842  
  

 

 

 

Total

   W 7,941,442  
  

 

 

 

 

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Table of Contents
25. Financial Risk Management, Continued

 

  (c) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group has historically been able to satisfy its cash requirements from cash flows from operations and debt and equity financing. To the extent that the Group does not generate sufficient cash flows from operations to meet its capital requirements, the Group may rely on other financing activities, such as external long-term borrowings and offerings of debt instruments, equity-linked and other debt instruments. In addition, the Group maintains a line of credit with various banks.

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of March 31, 2018.

 

(In millions of won)           Contractual cash flows  
     Carrying
amount
     Total      6 months
or less
     6-12
months
     1-2 years      2-5 years      More than
5 years
 

Non-derivative financial liabilities :

                    

Secured bank borrowings

   W 653,307        665,734        295,300        370,434        —          —          —    

Unsecured bank borrowings

     3,858,617        4,125,262        375,091        897,570        546,001        2,174,856        131,744  

Unsecured bond issues

     2,219,766        2,365,526        236,301        139,176        599,441        1,390,608        —    

Trade accounts and notes payable

     2,802,837        2,802,837        2,802,837        —          —          —          —    

Other accounts payable

     3,273,185        3,273,185        3,273,185        —          —          —          —    

Long-term other accounts payable

     2        2        —          —          2        —          —    

Security deposits

     5,775        5,775        3,145        85        2,545        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 12,813,489        13,238,321        6,985,859        1,407,265        1,147,989        3,565,464        131,744  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

 

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25. Financial Risk Management, Continued

 

  (d) Capital management

Management’s policy is to maintain a capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowings to equity ratio and other financial ratios are used by management to achieve an optimal capital structure. Management also monitors the return on capital as well as the level of dividends to ordinary shareholders.

 

(In millions of won)             
     March 31, 2018     December 31, 2017  

Total liabilities

   W 15,169,635       14,178,177  

Total equity

     14,825,636       14,981,510  

Cash and deposits in banks (*1)

     3,496,961       3,360,638  

Borrowings (including bonds)

     6,731,690       5,603,118  

Total liabilities to equity ratio

     102     95

Net borrowings to equity ratio (*2)

     22     15

 

(*1) Cash and deposits in banks consist of cash and cash equivalents and current deposits in banks.
(*2) Net borrowings to equity ratio is calculated by dividing total borrowings (including bonds) less cash and current deposits in banks by total equity.

 

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Table of Contents
25. Financial Risk Management, Continued

 

  (e) Determination of fair value

 

  (i) Measurement of fair value

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

 

  i) Current Assets and Liabilities

The carrying amounts approximate fair value because of the short maturity of these instruments.

 

  ii) Trade Receivables and Other Receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes. The carrying amounts of short-term receivables approximate fair value.

 

  iii) Investments in Equity and Debt Instruments

Marketable financial assets at fair value through profit or loss and at fair value through other comprehensive income is determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable instruments is determined using valuation methods.

 

  iv) Non-derivative Financial Liabilities

Fair value, which is determined for disclosure purposes, except for the liabilities at FVTPL, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

 

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25. Financial Risk Management, Continued

 

  (ii) Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed consolidated interim statements of financial position, are as follows:

 

  i) As of March 31, 2018

 

(In millions of won)              
     March 31, 2018  
     Carrying amounts      Fair Values  

Financial Assets carried at amortized cost

     

Cash and cash equivalents

   W 2,626,689        (*)  

Deposits in banks

     870,283        (*)  

Trade accounts and notes receivable

     3,496,163        (*)  

Non-trade receivable

     112,335        (*)  

Accrued income

     14,034        (*)  

Deposits

     22,414        (*)  

Short-term loans

     15,094        (*)  

Long-term loans

     37,297        (*)  

Long-term non-trade receivable

     183        (*)  

Financial Assets at Fair Value through Profit or Loss

     

Equity instrument

   W 5,008        5,008  

Convertible bonds

     1,552        1,552  

Derivatives

     600        600  

Financial Assets at Fair Value through Other Comprehensive Income

     

Debt instrument

   W 163        163  

Liabilities carried at amortized cost

     

Secured bank borrowings

   W 653,307        653,307  

Unsecured bank borrowings

     3,858,617        3,869,834  

Unsecured bond issues

     2,219,766        2,225,927  

Trade accounts and notes payable

     2,802,837        (*)  

Other accounts payable

     3,273,185        3,273,318  

Long-term other accounts payable

     2        (*)  

Security deposits

     5,775        (*)  

 

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25. Financial Risk Management, Continued

 

  i) As of December 31, 2017

 

(In millions of won)              
     December 31, 2017  
     Carrying amounts      Fair Values  

Assets carried at fair value

     

Available-for-sale financial assets

   W 162        162  

Financial asset at fair value through profit or loss

     1,552        1,552  

Derivatives

     842        842  

Assets carried at amortized cost

     

Cash and cash equivalents

   W 2,602,560        (*)  

Deposits in banks

     758,089        (*)  

Trade accounts and notes receivable

     4,325,120        (*)  

Non-trade receivable

     150,554        (*)  

Accrued income

     14,273        (*)  

Deposits

     30,378        (*)  

Short-term loans

     16,766        (*)  

Long-term loans

     32,408        (*)  

Long-term non-trade receivable

     8,738        (*)  

Liabilities carried at amortized cost

     

Secured bank borrowings

   W 642,172        642,172  

Unsecured bank borrowings

     2,950,184        2,955,399  

Unsecured bond issues

     2,010,762        2,016,086  

Trade accounts and notes payable

     2,875,090        (*)  

Other accounts payable

     3,169,937        3,170,147  

Long-term other accounts payable

     2        (*)  

 

(*) Excluded from disclosures as the carrying amount approximates fair value.

 

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25. Financial Risk Management, Continued

 

  (iii) Fair values of financial assets and liabilities

 

  i) Fair value hierarchy

The table below analyzes financial instruments carried at fair value based on the input variables used in the valuation method to measure fair value of assets and liabilities. The different levels have been defined as follows:

 

    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 or indirectly

 

    Level 3: inputs for the asset or liability that are not based on observable market data

 

  ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    Level 1      Level 2      Level 3      Total  

March 31, 2018

           

Financial Asset at Fair Value through Profit or Loss

           

Equity instrument

   W —          —          5,008        5,008  

Convertible bonds

     —          —          1,552        1,552  

Derivatives

     —          —          600        600  

Financial Asset at Fair Value through Other Comprehensive Income

           

Debt instrument

   W 163        —          —          163  

 

(In millions of won)    Level 1      Level 2      Level 3      Total  

December 31, 2017

           

Available-for-sale financial assets

   W 162        —          —          162  

Financial assets at fair value through profit or loss

     —          —          1,552        1,552  

Derivatives

     —          —          842        842  

 

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Table of Contents
25. Financial Risk Management, Continued

 

  iii) Financial instruments not measured at fair value but for which the fair value is disclosed

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    March 31, 2018      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3        

Liabilities

              

Secured bank borrowings

   W —          —          653,307       
Discounted
cash flow
 
 
     Discount rate  

Unsecured bank borrowings

     —          —          3,869,834       
Discounted
cash flow
 
 
     Discount rate  

Unsecured bond issues

     —          —          2,225,927       
Discounted
cash flow
 
 
     Discount rate  

Other accounts payable

     —          —          3,273,318       
Discounted
cash flow
 
 
     Discount rate  

Long-term other accounts payable

     —          —          2       
Discounted
cash flow
 
 
     Discount rate  
(In millions of won)    December 31, 2017      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3        

Liabilities

              

Secured bank borrowings

   W —          —          642,172       
Discounted
cash flow
 
 
     Discount rate  

Unsecured bank borrowings

     —          —          2,955,399       
Discounted
cash flow
 
 
     Discount rate  

Unsecured bond issues

     —          —          2,016,086       
Discounted
cash flow
 
 
     Discount rate  

Other accounts payable

     —          —          3,170,147       
Discounted
cash flow
 
 
     Discount rate  

Long-term other accounts payable

     —          —          2       
Discounted
cash flow
 
 
     Discount rate  

 

  iv) The interest rates applied for determination of the above fair value as of March 31, 2018 and December 31, 2017 are as follows:

 

     March 31, 2018   December 31, 2017

Debentures, loans and others

   1.52~2.95%   1.57~2.92%

 

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26. Changes in liabilities arising from financing activities

 

Changes in liabilities arising from financing activities for the three-month period ended March 31, 2018 are as follows:

 

(In millions of won)                 Non-cash transactions         
     January 1,
2018
     Cash flows from
financing

activities
    Dividends
declared
     Reclassification     Gain or loss on
foreign currency
translation
    Others      March 31,
2018
 

Current portion of long-term borrowings and bonds

   W 1,452,926        (180,168     —          867,790       7,327       141        2,148,016  

Long-term borrowings

     2,644,189        907,850       —          (867,790     4,561       —          2,688,810  

Bonds

     1,506,003        388,447       —          —         —         414        1,894,864  

Dividends payable

     —          —         232,014        —         (406     —          231,608  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 
   W 5,603,118        1,116,129       232,014        —         11,482       555        6,963,298  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

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27. Related Parties and Others

 

  (a) Related parties

Related parties as of March 31, 2018 are as follows:

 

Classification

  

Description

Associates(*)    Paju Electric Glass Co., Ltd. and others

Subsidiaries of Associates

   AVATEC Electronics Yantai Co., Ltd. and others

Entity that has significant influence over the Controlling Company

   LG Electronics Inc.

Subsidiaries of the entity that has significant influence over the Controlling Company

   Subsidiaries of LG Electronics Inc.

 

(*) Details of associates are described in note 8.

 

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27. Related Parties and Others, Continued

 

  (b) Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)    2018  
                   Purchase and others  
     Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

INVENIA Co., Ltd.

     —          30        270        7,902        —          72  

AVATEC Co., Ltd.

     —          530        —          —          17,773        119  

Paju Electric Glass Co., Ltd.

     —          4,172        92,497        —          —          920  

WooRee E&L Co., Ltd.

     —          —          —          —          —          47  

YAS Co., Ltd.

     —          —          760        12,417        —          794  

LB Gemini New Growth Fund No. 16

     —          540        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          5,272        93,527        20,319        17,773        1,952  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 363,699        —          11,113        221,371        —          19,114  

Subsidiaries of the entity that has significant influence over the Controlling Company

                 

LG Electronics India Pvt. Ltd.

   W 8,355        —          —          —          —          13  

LG Electronics Vietnam Haiphong Co., Ltd.

     32,988        —          —          1,214        —          2  

LG Electronics Nanjing New Technology Co., Ltd.

     71,483        —          —          18        —          125  

 

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27. Related Parties and Others, Continued

 

(In millions of won)    2018  
                   Purchase and others  
     Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

LG Electronics RUS, LLC

   W 15,328        —          —          —          —          320  

LG Electronics do Brasil Ltda.

     86,005        —          —          —          —          104  

LG Innotek Co., Ltd.

     6,950        —          39,616        —          —          11,082  

Qingdao LG Inspur Digital Communication Co., Ltd.

     7,656        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     33,987        —          —          —          —          —    

LG Electronics Mexicalli S.A. DE C.V.

     55,028        —          —          —          —          54  

LG Electronics Mlawa Sp. z o.o.

     172,622        —          —          —          —          72  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          119,537        —          491  

LG Electronics Reynosa S.A. DE C.V.

     246,928        —          —          —          —          898  

HiEntech Co., Ltd.

     —          —          —          5,230        —          7,935  

HiEntech (Tianjin) Co., Ltd.

     —          —          —          7,541        —          10,243  

Others

     8,537        —          6        —          —          2,867  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 745,867        —          39,622        133,540        —          34,206  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,109,566        5,272        144,262        375,230        17,773        55,272  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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27. Related Parties and Others, Continued

 

(In millions of won)    2017  
                   Purchase and others  
     Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other
costs
 

Associates and their subsidiaries

                 

New Optics Ltd.(*)

   W 1        —          —          —          4        6  

INVENIA Co., Ltd.

     —          —          454        20,090        —          113  

AVACO Co., Ltd.(*)

     —          —          —          —          —          66  

AVATEC Co., Ltd.

     —          530        —          —          19,816        251  

Paju Electric Glass Co., Ltd.

     —          8,109        98,763        —          —          1,097  

Shinbo Electric Co., Ltd.(*)

     15,812        —          —          —          —          21  

Narenanotech Corporation(*)

     —          —          226        16,875        —          225  

WooRee E&L Co., Ltd.

     —          —          —          —          —          76  

YAS Co., Ltd.

     —          —          830        19,208        —          392  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 15,813        8,639        100,273        56,173        19,820        2,247  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 476,921        —          7,485        231,879        —          35,053  

Subsidiaries of the entity that has significant influence over the Controlling Company

                 

LG Innotek Co., Ltd.

   W 4,274        —          45,295        —          —          3,480  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          27,619        —          3,495  

 

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27. Related Parties and Others, Continued

 

(In millions of won)    2017  
                   Purchase and others  
     Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property, plant
and equipment
     Outsourcing
fees
     Other costs  

HiEntech Co., Ltd.

   W —          —          —          —          —          12,511  

HiEntech (Tianjin) Co., Ltd.

     —          —          —          4,682        —          6,600  

Qingdao LG Inspur Digital Communication Co., Ltd.

     15,963        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     71,964        —          —          —          —          —    

LG Electronics India Pvt. Ltd.

     22,276        —          —          —          —          29  

LG Electronics Vietnam Haiphong Co., Ltd.

     52,956        —          —          343        —          4,563  

LG Electronics Nanjing New Technology Co., Ltd.

     76,894        —          —          —          —          107  

LG Electronics RUS, LLC

     28,975        —          —          —          —          286  

LG Electronics do Brasil Ltda.

     62,616        —          —          —          —          91  

LG Electronics Mexicalli S.A. DE C.V.

     77,450        —          —          —          —          51  

LG Electronics Mlawa Sp. z o.o.

     290,737        —          —          —          —          302  

LG Electronics Taiwan Taipei Co., Ltd.

     3,598        —          —          —          —          23  

LG Electronics Reynosa S.A. DE C.V.

     304,510        —          —          —          —          325  

LG Electronics Almaty Kazakhstan

     4,043        —          —          —          —          —    

LG Electronics S.A. (Pty) Ltd.

     5,182        —          —          —          —          3  

Others

     898        —          —          509        —          1,666  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,022,336        —          45,295        33,153        —          33,532  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,515,070        8,639        153,053        321,205        19,820        70,832  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*) Represents transactions occurred prior to disposal of the entire investments.

 

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27. Related Parties and Others, Continued

 

  (c) Trade accounts and notes receivable and payable as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)       
     Trade accounts and notes receivable
and others
     Trade accounts and notes payable
and others
 
     March 31, 2018      December 31, 2017      March 31, 2018      December 31, 2017  

Associates

           

INVENIA Co., Ltd.

   W 2,280        2,375        8,972        18,662  

AVATEC Co., Ltd.

     530        —          4,682        2,949  

Paju Electric Glass Co., Ltd.

     —          —          64,375        60,141  

WooRee E&L Co., Ltd.

     —          —          52        61  

YAS Co., Ltd.

     250        375        16,700        6,474  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,060        2,750        94,781        88,287  
  

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

           

LG Electronics Inc.

   W 401,787        550,335        271,079        257,071  

Subsidiaries of the entity that has significant influence over the Controlling Company

           

LG Electronics India Pvt. Ltd.

   W 5,751        3,030        5        —    

LG Electronics Vietnam Haiphong Co., Ltd.

     25,033        36,017        1,597        3,917  

LG Electronics Nanjing New Technology Co., Ltd.

     48,471        46,373        332        699  

LG Electronics RUS, LLC

     13,496        25,102        —          80  

LG Electronics do Brasil Ltda.

     48,873        19,091        28        10  

LG Innotek Co., Ltd.

     4,266        407        61,441        62,675  

Qingdao LG Inspur Digital Communication Co., Ltd.

     5,140        13,061        —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     36,808        55,278        —          —    

 

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27. Related Parties and Others, Continued

 

(In millions of won)       
     Trade accounts and notes receivable
and others
     Trade accounts and notes payable
and others
 
     March 31, 2018      December 31, 2017      March 31, 2018      December 31, 2017  

LG Electronics Mexicalli S.A. DE C.V.

   W 29,350        29,440        —          —    

LG Electronics Mlawa Sp. z o.o.

     112,980        136,874        —          25  

LG Hitachi Water Solutions Co., Ltd.

     —          —          213,164        154,864  

LG Electronics Reynosa S.A. DE C.V.

     136,737        137,413        154        82  

HiEntech Co., Ltd.

     —          —          9,463        6,679  

HiEntech (Tianjin) Co., Ltd.

     —          —          14,033        5,600  

Others

     5,482        7,618        2,968        1,715  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 472,387        509,704        303,185        236,346  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 877,234        1,062,789        669,045        581,704  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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27. Related Parties and Others, Continued

 

  (d) Details of significant cash transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Associates

   Loans      Collection
of loans
     Loans      Collection
of loans
 

INVENIA Co., Ltd.

   W —          125        —          83  

YAS Co., Ltd.

     —          125        —          83  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W —          250        —          166  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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27. Related Parties and Others, Continued

 

  (e) Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Group and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the three-month periods ended March 31, 2018 and 2017 and as of March 31, 2018 and December 31, 2017 are as follows. These entities are not affiliates according to K-IFRS No. 1024, Related Party Disclosures.

 

(In millions of won)  
     For the three-month period ended
March 31, 2018
     March 31, 2018  
     Sales
and others
     Purchase and
others
     Trade accounts and
notes receivable

and others
     Trade accounts and
notes payable and
others
 

LG Chem Ltd. and its subsidiaries

   W 1,564        296,701        6,148        222,759  

LG Household & Health Care and its subsidiaries

     —          12        —          2  

LG Hausys Ltd.

     1,110        1        —          —    

Serveone Co., Ltd. and its subsidiaries

     104        475,968        21,677        645,714  

Silicon Works Co., Ltd.

     —          143,295        —          148,397  

LG CNS Co., Ltd. and its subsidiaries

     —          37,813        6        41,211  

LG Holdings Japan Co., Ltd.

     —          456        2,013        —    

LG International Corp. and its subsidiaries

     200,628        413,836        131,491        261,563  

LG Management Development Institute

     —          2,813        3,480        607  

G2R Inc. and its subsidiaries

     —          4,041        —          5,301  

LG Corp.

     —          12,791        6,794        6,951  

LG Uplus Corp.

     —          224        —          33  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 203,406        1,387,951        171,609        1,332,538  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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27. Related Parties and Others, Continued

 

(In millions of won)  
     For the three-month period ended
March 31, 2017
     December 31, 2017  
     Sales
and others
     Purchase and
others
     Trade accounts and
notes receivable

and others
     Trade accounts and
notes payable and
others
 

LG Chem Ltd. and its subsidiaries

   W 5        330,222        8,684        246,491  

LG Household & Health Care and its subsidiaries

     —          62        —          3  

LG Hausys Ltd.

     418        44        —          374  

Serveone Co., Ltd. and its subsidiaries

     115        371,400        21,568        645,847  

Silicon Works Co., Ltd.

     —          147,017        —          120,031  

SK Siltron Co., Ltd. (formerly, SIltron Co., Ltd.) (*)

     10        —          —          —    

LG CNS Co., Ltd. and its subsidiaries

     37        30,630        4        115,899  

LG Holdings Japan Co., Ltd.

     —          468        1,908        —    

LG International Corp. and its subsidiaries

     176,066        396,022        112,200        230,179  

LG Management Development Institute

     —          2,010        3,480        699  

G2R Inc. and its subsidiaries

     —          829        —          14,785  

LG Corp.

     —          15,699        4,700        1,523  

Lusem Co., Ltd. (*)

     6        499        1        53  

LG Uplus Corp.

     51        186        —          1,506  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 176,708        1,295,088        152,545        1,377,390  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*) Represents transactions occurred prior to disposal of the entire investments.

 

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27. Related Parties and Others, Continued

 

  (f) Key management personnel compensation

Compensation costs of key management for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Short-term benefits

   W 888        1,317  

Expenses related to the defined benefit plan

     273        93  
  

 

 

    

 

 

 
   W 1,161        1,410  
  

 

 

    

 

 

 

Key management refers to the registered directors who have significant control and responsibilities over the Controlling Company’s operations and business.

 

28. Subsequent Event

 

  (a) In April 2018, the Controlling Company received advances from a customer amounting to USD 300 million (W320,670 million) in aggregate in connection with long-term supply agreements. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the sale of products thereafter. The Controlling Company received a payment guarantee from the Export-Import Bank of Korea amounting to USD 300 million (W320,670 million) relating to advances received.

 

  (b) In April 2018, the Group obtained additional borrowings amounting to USD 200 million (W214,740 million).

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

March 31, 2018 and 2017

(With Independent Auditors’ Review Report Thereon)

 

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Table of Contents

 

     Page  

Independent Auditors’ Review Report

     98  

Condensed Separate Interim Statements of Financial Position

     100  

Condensed Separate Interim Statements of Comprehensive Income

     101  

Condensed Separate Interim Statements of Changes in Equity

     102  

Condensed Separate Interim Statements of Cash Flows

     103  

Notes to the Condensed Separate Interim Financial Statements

     105  

 

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Independent Auditors’ Review Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Reviewed Financial Statements

We have reviewed the accompanying condensed separate interim financial statements of LG Display Co., Ltd. (the “Company”) which comprise the condensed separate interim statement of financial position as of March 31, 2018, the condensed separate interim statements of comprehensive income, changes in equity and cash flows for the three-month periods ended March 31, 2018 and 2017, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Condensed Separate Interim Financial Statements

Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standards No. 1034, Interim Financial Reporting, and for such internal controls as management determines necessary to enable the preparation of condensed separate interim financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to issue a report on these condensed separate interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Security and Futures Commission of the Republic of Korea. A review of interim financial information consists principally of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the condensed separate interim financial statements referred to above are not presented fairly, in all material respects, in accordance with Korean International Financial Reporting Standards No. 1034, Interim Financial Reporting.

Other Matters

The procedures and practices utilized in the Republic of Korea to review such condensed separate interim financial statements may differ from those generally accepted and applied in other countries.

We audited the separate statement of financial position as of December 31, 2017, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this review report, in accordance with Korean Standards on Auditing, and our report thereon, dated February 22, 2018, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2017, presented for comparative purposes, is not different from that audited by us from which it was derived in all material respects.

 

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/s/ KPMG Samjong Accounting Corp.

Seoul, Korea

May 14, 2018

 

This report is effective as of May 14, 2018, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Financial Position

(Unaudited)

As of March 31, 2018 and December 31, 2017

 

(In millions of won)    Note      March 31, 2018      December 31, 2017  

Assets

        

Cash and cash equivalents

     4, 24      W 434,823      566,408

Deposits in banks

     4, 24        377,200      580,770

Trade accounts and notes receivable, net

     5, 14, 24, 26        3,769,860      4,673,570

Other accounts receivable, net

     5, 24        708,905      687,109

Other current financial assets

     6, 24        11,707      13,499

Inventories

     7        1,650,056      1,682,245

Other current assets

     5        326,503      177,473
     

 

 

    

 

 

 

Total current assets

        7,279,054      8,381,074

Deposits in banks

     4, 24        11      11

Investments

     8        3,269,871      2,683,941

Other non-current financial assets

     6, 24        63,316      64,772

Property, plant and equipment, net

     9        13,669,128      12,487,001

Intangible assets, net

     10        738,473      731,373

Deferred tax assets

     22        800,123      727,248

Other non-current assets

     5        333,567      333,995
     

 

 

    

 

 

 

Total non-current assets

        18,874,489      17,028,341
     

 

 

    

 

 

 

Total assets

      W 26,153,543      25,409,415
     

 

 

    

 

 

 

Liabilities

        

Trade accounts and notes payable

     24, 26      W 2,507,732      2,391,493

Current financial liabilities

     11, 24        1,480,285      1,060,735

Other accounts payable

     24        2,816,545      2,701,823

Accrued expenses

        472,280      755,062

Income tax payable

        51,053      235,593

Provisions

     13        71,701      73,685

Advances received

     14, 27        209,102      142,700

Other current liabilities

     13        216,429      33,514
     

 

 

    

 

 

 

Total current liabilities

        7,825,127      7,394,605

Non-current financial liabilities

     11, 24        3,752,343      3,165,413

Non-current provisions

     13        22,635      28,312

Defined benefit liabilities, net

     12        149,957      94,535

Long-term advances received

     14, 27        759,881      830,335

Other non-current liabilities

     13        77,736      66,956
     

 

 

    

 

 

 

Total non-current liabilities

        4,762,552      4,185,551
     

 

 

    

 

 

 

Total liabilities

        12,587,679      11,580,156
     

 

 

    

 

 

 

Equity

        

Share capital

     15        1,789,079      1,789,079

Share premium

        2,251,113      2,251,113

Retained earnings

        9,525,672      9,789,067
     

 

 

    

 

 

 

Total equity

        13,565,864      13,829,259
     

 

 

    

 

 

 

Total liabilities and equity

      W 26,153,543      25,409,415
     

 

 

    

 

 

 

See accompanying notes to the separate interim financial statements.    

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Comprehensive Income (Loss)

(Unaudited)    

For the three-month periods ended March 31, 2018 and 2017

 

(In millions of won, except earnings per share)    Note      2018     2017  

Revenue

     16, 26      W 5,154,261     6,542,947

Cost of sales

     7, 17, 26        (4,902,524     (5,218,933
     

 

 

   

 

 

 

Gross profit

        251,737     1,324,014

Selling expenses

     18        (99,213     (166,905

Administrative expenses

     18        (124,655     (117,802

Research and development expenses

        (281,490     (280,296
     

 

 

   

 

 

 

Operating profit (loss)

        (253,621     759,011
     

 

 

   

 

 

 

Finance income

     21        105,695     107,768

Finance costs

     21        (16,910     (32,843

Other non-operating income

     20        117,004     304,161

Other non-operating expenses

     20        (112,415     (489,551
     

 

 

   

 

 

 

Profit (loss) before income tax

        (160,247     648,546

Income tax expense (benefit)

     22        (79,883     134,434
     

 

 

   

 

 

 

Profit (loss) for the period

        (80,364     514,112
     

 

 

   

 

 

 

Other comprehensive loss

       

Items that will never be reclassified to profit or loss

       

Remeasurements of net defined benefit liabilities

     12        (6,419     (4,725

Related income tax

     12        2,296     1,143
     

 

 

   

 

 

 
        (4,123     (3,582
     

 

 

   

 

 

 

Other comprehensive loss for the period, net of income tax

        (4,123     (3,582
     

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      W (84,487     510,530
     

 

 

   

 

 

 

Earnings (loss) per share (In Won)

       

Basic earnings (loss) per share

     23      W (225     1,437
     

 

 

   

 

 

 

Diluted earnings (loss) per share

     23      W (225     1,437
     

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Changes in Equity

(Unaudited)

For the three-month periods ended March 31, 2018 and 2017

 

     Share      Share      Retained            Total  
(In millions of won)    capital      premium      earnings     Reserves      equity  

Balances at January 1, 2017

   W 1,789,079      2,251,113      8,195,255     —          12,235,447
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total comprehensive income for the period

             

Profit for the period

     —          —          514,112     —          514,112

Other comprehensive income (loss)

             

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (3,582     —          (3,582
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total other comprehensive loss

     —          —          (3,582     —          (3,582
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total comprehensive income for the period

   W —          —          510,530     —          510,530
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Transaction with owners, recognized directly in equity

             

Dividends to equity holders

     —          —          (178,908     —          (178,908
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Balances at March 31, 2017

   W 1,789,079      2,251,113      8,526,877     —          12,567,069
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Balances at January 1, 2018

   W 1,789,079      2,251,113      9,789,067     —          13,829,259
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total comprehensive loss for the period

             

Loss for the period

     —          —          (80,364     —          (80,364

Other comprehensive income (loss)

             

Remeasurements of net defined benefit liabilities, net of tax

     —          —          (4,123     —          (4,123
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total other comprehensive loss

     —          —          (4,123     —          (4,123
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total comprehensive loss for the period

   W —          —          (84,487     —          (84,487
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Transaction with owners, recognized directly in equity

             

Dividends to equity holders

     —          —          (178,908     —          (178,908
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Balances at March 31, 2018

   W 1,789,079      2,251,113      9,525,672     —          13,565,864
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

See accompanying notes to the separate interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows

(Unaudited)    

For the three-month periods ended March 31, 2018 and 2017 .

 

(In millions of won)    Note    2018     2017  

Cash flows from operating activities:

       

Profit (loss) for the period

      W (80,364     514,112

Adjustments for:

       

Income tax expense (benefit)

   22      (79,883     134,434

Depreciation

   17      479,483     392,838

Amortization of intangible assets

   17      93,967     97,781

Gain on foreign currency translation

        (39,949     (55,662

Loss on foreign currency translation

        38,035     139,210

Expenses related to defined benefit plans

   12      51,351     49,213

Gain on disposal of property, plant and equipment

        (13,715     (30,314

Loss on disposal of property, plant and equipment

        3,826     1,957

Gain on disposal of intangible assets

        (239     —    

Impairment loss on intangible assets

        37     1,689

Reversal of impairment loss on intangible assets

        (130     —    

Warranty expenses

        29,340     68,177

Finance income

        (104,342     (103,596

Finance costs

        11,621     16,023

Other income

        (364     (154

Other expenses

        592     46
     

 

 

   

 

 

 
        469,630     711,642

Changes in

       

Trade accounts and notes receivable

        872,945     250,322

Other accounts receivable

        60,025     (15,510

Inventories

        (58,766     100,076

Other current assets

        (125,476     (140,908

Other non-current assets

        (18,249     (25,413

Trade accounts and notes payable

        131,583     (590,469

Other accounts payable

        (153,854     (2,488

Accrued expenses

        (284,578     (160,928

Provisions

        (46,791     (45,195

Other current liabilities

        6,959     5,841

Defined benefit liabilities, net

        (2,348     (1,734

Other non-current liabilities

        8,747     1,366
     

 

 

   

 

 

 
        390,197     (625,040

Cash generated from operating activities

        779,463     600,714

Income taxes paid

        (2,955     (15,394

Interests received

        7,151     5,660

Interests paid

        (27,837     (21,636
     

 

 

   

 

 

 

Net cash provided by operating activities    

      W 755,822     569,344
     

 

 

   

 

 

 

 

See accompanying notes to the separate interim financial statements.

 

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LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows, Continued

(Unaudited)    

For the three-month periods ended March 31, 2018 and 2017

 

(In millions of won)    Note      2018     2017  

Cash flows from investing activities:

       

Dividends received

      W 23,576     315,939

Increase in deposits in banks

        (200,500     (200,500

Proceeds from withdrawal of deposits in banks

        403,715     400,501

Acquisition of investments

        (585,930     (46,500

Proceeds from disposal of investments

        —         5,157

Acquisition of property, plant and equipment

        (1,509,104     (1,036,604

Proceeds from disposal of property, plant and equipment

        102,923     87,220

Acquisition of intangible assets

        (129,298     (111,593

Proceeds from disposal of intangible assets

        960     —    

Receipt from settlement of derivatives

        (2     (101

Proceeds from collection of short-term loans

        5,714     —    

Increase in long-term loans

        (12,300     —    

Increase in deposits

        (118     (933

Decrease in deposits

        —         566

Proceeds from disposal of emission rights

        4,160     —    
     

 

 

   

 

 

 

Net cash used in investing activities

        (1,896,204     (586,848
     

 

 

   

 

 

 

Cash flows from financing activities:

     25       

Proceeds from issuance of bonds

        388,447     —    

Proceeds from long-term borrowings

        800,000     —    

Repayments of current portion of long-term borrowings and bonds

        (180,169     (63,216

Payment guarantee fee received

        519     —    
     

 

 

   

 

 

 

Net cash provided by (used in) financing activities

        1,008,797     (63,216
     

 

 

   

 

 

 

Net decrease in cash and cash equivalents

        (131,585     (80,720

Cash and cash equivalents at January 1

        566,408     259,467
     

 

 

   

 

 

 

Cash and cash equivalents at March 31

      W 434,823     178,747
     

 

 

   

 

 

 

See accompanying notes to the separate interim financial statements.

 

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1. Organization and Description of Business

LG Display Co., Ltd. (the “Company”) was incorporated in February 1985 and the Company is a public corporation listed in Korea Exchange since 2004. The main business of the Company is to manufacture and sell displays and its related products. As of March 31, 2018, the Company is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China, Poland and Vietnam. The Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of March 31, 2018, LG Electronics Inc., a major shareholder of the Company, owns 37.9% (135,625,000 shares) of the Company’s common stock.

The Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of March 31, 2018, there are 357,815,700 shares of common stock outstanding. The Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of March 31, 2018, there are 23,730,762 ADSs outstanding.

 

2. Basis of Presenting Financial Statements

 

  (a) Statement of Compliance

The condensed separate interim financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRSs”) No.1034, Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the separate financial statements of the Company as of and for the year ended December 31, 2017.

These condensed interim financial statements are separate interim financial statements prepared in accordance with K-IFRS No.1027, Separate Financial Statements, presented by a parent, an investor in an associate, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.

This is the first set of the Company’s financial statements where K-IFRS No. 1109, K-IFRS No. 1115, and K-IFRS No. 2122 have been applied. Changes to significant accounting policies are described in Note 3.

 

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2. Basis of Presenting Financial Statements, Continued

 

  (b) Basis of Measurement

The condensed separate interim financial statements have been prepared on the historical cost basis except for the following material items in the statements of financial position:

 

    financial assets at fair value through profit or loss (“FVTPL”) and financial asset at fair value through other comprehensive income (“FVOCI”) and

 

    net defined benefit liabilities are recognized as the present value of defined benefit obligations less the fair value of plan assets

 

  (c) Functional and Presentation Currency

The condensed separate interim financial statements are presented in Korean won, which is the Company’s functional currency.

 

  (d) Use of Estimates and Judgments

The preparation of the condensed separate interim financial statements in conformity with K-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

In result of the Company utilizing the past accumulated usage information to reassess the economic useful life of the Mask and Mold which has been classified as inventory, the Company expected the useful lives of Mask and Mold to exceed one year; therefore, the Company changed useful lives of Mask and Mold to two years and treated it as a change in accounting estimate. The Company also changed the classification of Mask and Mold to property, plant and equipment. As a result, W90,955 million of inventory (supplies) at December 31, 2017 is classified as property, plant and equipment (tools) during the three-month period ended March 31, 2018.

In preparing these condensed separate interim financial statements, the significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those applied in the last annual financial statements, except for new significant judgments and key sources of estimation uncertainty related to the application of K-IFRS No. 1109, K-IFRS No. 1115 in Note 3 and the change in useful life of Mask and Mold.

 

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3. Summary of Significant Accounting Policies

The significant accounting policies followed by the Company in the preparation of its condensed separate interim financial statements are the same as those followed by the Company in its preparation of the separate financial statements as of and for the year ended December 31, 2017, except for the application of K-IFRS No. 1034, Interim Financial Reporting and the changes in accounting standards explained below. The changes in accounting policies are also expected to be reflected in the Company’s separate financial statements as at and for the year ending December 31, 2018.

 

  (a) Changes in Accounting Policies

The Company has initially adopted K-IFRS No. 1115, Revenue from Contracts with Customers, K-IFRS No. 1109, Financial Instruments, and K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration, from January 1, 2018.

 

  (i) K-IFRS No. 1109, Financial Instruments

K-IFRS No. 1109 set out requirements for recognizing and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standards replaces K-IFRS No. 1039 Financial Instruments: Recognition and Measurement. The Company adopted K-IFRS No. 1109, Financial Instruments, from January 1, 2018, and the Company has taken an exemption not to restate the financial statements for prior years with respects to transition requirements.

The details of new significant accounting policies and the nature and effect of the changes to previous accounting policies are set out below. There is no impact on the opening balance of retained earnings at January 1, 2018.

 

  i) Classification and measurement of financial assets and financial liabilities

K-IFRS No. 1109 largely retains the existing requirements in K-IFRS No. 1039 for the classification and measurement of financial liabilities. However, it eliminates the previous K-IFRS No. 1039 categories for financial assets of held to maturity, loans and receivables and available for sale.

The adoption K-IFRS No. 1109 has not had a significant effect on the Company’s accounting policies related to financial liabilities and derivative financial instruments. The impact of K-IFRS No. 1109 on the classification and measurement of financial assets is set out below.

Under K-IFRS No. 1109, on initial recognition, a financial asset is classified as measured at: amortized cost; FVOCI-debt investment; FVOCI-equity investment; or FVTPL. The classification of financial assets under K-IFRS 1109 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

 

    It is held within a business model whose objective is to hold assets to collect contractual cash flow; and

 

    its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

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3. Summary of Significant Accounting Policies, Continued

 

  (a) Changes in Accounting Policies, Continued

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

 

    It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

 

    its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.

The following accounting policies apply to the subsequent measurement of financial assets.

 

 

Financial assets at FVTPL

   These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
 

Financial assets at amortized cost

   These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
 

Debt investments at FVOCI

   These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

 

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3. Summary of Significant Accounting Policies, Continued

 

  (a) Changes in Accounting Policies, Continued

The following table below explain the original measurement categories under K-IFRS No. 1039 and the changes in measurement categories under K-IFRS No. 1109 for each class of the Company’s financial assets as at January 1, 2018 are as below.

 

(In millions of won)    Original
classification under
K-IFRS No. 1039
     New
classification under
K-IFRS No. 1109
     Original
carrying
amount under
K-IFRS
No. 1039
     New carrying
amount under
K-IFRS No. 1109
     Difference  

Financial Assets

              

Cash and cash equivalents

    
Loans and
receivables
 
 
     Amortized cost      W 566,408        566,408        —    

Deposits

    
Loans and
receivables
 
 
     Amortized cost        580,781        580,781        —    

Trade receivables

    
Loans and
receivables
 
 
     Amortized cost        4,673,570        4,673,570        —    

Other receivables

    
Loans and
receivables
 
 
     Amortized cost        687,109        687,109        —    

Debt instrument

     Available-for-sale       
FVOCI-debt
instrument
 
 
     162        162        —    

Equity instrument

     Available-for-sale       
Mandatorily at
FVTPL
 
 
     2,697        2,697        —    

Convertible bonds

    
Designated as at
FVTPL
 
 
    
Mandatorily at
FVTPL
 
 
     1,552        1,552        —    

Derivatives

    
Designated as at
FVTPL
 
 
    
Mandatorily at
FVTPL
 
 
     842        842        —    

Others

    

Loans and

receivables

 

 

     Amortized cost        73,018        73,018        —    
        

 

 

    

 

 

    

 

 

 

Total financial assets

         W 6,586,139        6,586,139        —    
        

 

 

    

 

 

    

 

 

 

As of January 1, 2018, there was no financial liabilities measured at FVTPL.

 

  ii) Impairment of financial assets

K-IFRS No. 1109 replaces the ‘incurred loss’ model in K-IFRS No. 1039 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under K-IFRS No. 1109, credit losses are recognized earlier than under K-IFRS No. 1039.

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive).

At each reporting date, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

 

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3. Summary of Significant Accounting Policies, Continued

 

  (a) Changes in Accounting Policies, Continued

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is recognized in OCI, instead of reducing the carrying amount of the asset.

As a result of applying the loss allowances model under K-IFRS No. 1109, as of January 1, 2018, there are no additional loss allowances as compared with the loss allowances under K-IFRS No. 1039.

 

  iii) Hedge Accounting

When initially applying K-IFRS No. 1109, the Company elected as its accounting policy to continue to apply hedge accounting requirements under K-IFRS No. 1039 instead of the requirements in K-IFRS No. 1109. As of January 1, 2018, there is no impact on the separate financial statement of the Company resulting from the application of the requirements in K-IFRS No. 1109.

 

  (ii) K-IFRS No. 1115, Revenue from Contracts with Customers

K-IFRS No. 1115, Revenue from contracts with customers, establishes a comprehensive framework for determining whether, how much and when revenue is recognized. K-IFRS No. 1115 replaces existing revenue recognition guidance, including K-IFRS No. 1018 Revenue, K-IFRS No. 1011, Construction Contracts, K-IFRS No. 2031, Revenue: Barter Transactions Involving Advertising Services, K-IFRS No. 2113, Customer Loyalty Programmes, K-IFRS No. 2115, Agreements for the Construction of Real Estate and K-IFRS No. 2118, Transfers of Assets from Customers.

The Company has initially applied K-IFRS No. 1115, Revenue from contracts with customers, from January 1, 2018. Regarding transition to K-IFRS No.1115, the Company has decided to apply the cumulative effect method, i.e. recognizing the cumulative effect of applying K-IFRS No. 1115 at the date of initial application, which is January 1, 2018, without restatement of the comparative periods presented. The impact on its separate financial statements resulting from the application of the new standard is as follows.

Variable Consideration

The consideration received from customers may be variable as the Company allows its customers to return their products according to the contracts. For the year-ended December 31, 2017, the Company recognizes a provision measured at the gross profit for products sold which are expected to be returned. Under K-IFRS No. 1115, the Company shall estimate an amount of variable consideration by using the expected value or the most likely amount, depending on which method the entity expects to better predict the amount of consideration to which it will be entitled and include in the transaction price some or all of an amount of variable consideration estimated only to the extent that is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when return period expires. The Company shall recognize refund liability measured at the amount of consideration received (or receivable) to which the Company does not expect to be entitled and a new asset for the right to recover returned goods. As a result of this change, the refund liability and a new asset for the right to recover returned goods increased by W9,789 million, respectively, as of January 1, 2018. There is no impact on the opening balance of retained earnings at January 1, 2018. (Note 5(d), 13(a))

 

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3. Summary of Significant Accounting Policies, Continued

 

  (a) Changes in Accounting Policies, Continued

The effect of the application of K-IFRS No. 1115 on the Company’s separate interim statement of financial position as of March 31, 2018 is as follows. There is no impact on the separate interim statement of comprehensive income and the cash flows for the three-month period ended March 31, 2018.

 

(in millions won)                     

Categories

   Adoption of
K-IFRS No. 1115
     Adjustments      Adoption of
K-IFRS No. 1018
 

Current Assets

        

Other current assets

   W 326,503        (6,923      319,580  

Current Liabilities

        

Provisions

   W 71,701        (6,923      64,778  

 

  (iii) K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration

According to the new interpretation, K-IFRS No. 2122, Foreign Currency Transactions and Advance Consideration, the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognizes the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the entity shall determine a date of the transaction for each payment or receipt of advance consideration. There is no significant impact on the separate financial statements of the Company.

 

  (b) New Standards and Amendments Not Yet Adopted

The following new standard is effective for annual periods beginning after January 1, 2018 and earlier application is permitted; however, the Company has not early adopted the following new standard in preparing these condensed separate interim financial statements.

 

  (i) K-IFRS No. 1116, Leases

The Company plans to adopt K-IFRS No. 1116, Leases, in its separate financial statements for annual period beginning on January 1, 2019, assess the financial impact of the adoption of K-IFRS No. 1116 and disclose the results in its separate financial statements for the year ending December 31, 2018. As of March 31, 2018, other than the potential impacts described in the separate financial statements as of and for the year ended December 31, 2017, there are no significant changes in relation to preparation for the adoption of this new standard.

 

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4. Cash and Cash Equivalents and Deposits in Banks

Cash and cash equivalents and deposits in banks as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Current assets

     

Cash and cash equivalents

     

Demand deposits

   W 434,823        566,408  

Deposits in banks

     

Time deposits

   W 304,145        507,930  

Restricted cash (*)

     73,055        72,840  
  

 

 

    

 

 

 
   W 377,200        580,770  
  

 

 

    

 

 

 

Non-current assets

     

Deposits in banks

     

Restricted cash (*)

   W 11        11  
  

 

 

    

 

 

 
   W 812,034        1,147,189  
  

 

 

    

 

 

 

 

(*) Restricted cash includes mutual growth fund to aid LG Group’s second and third-tier suppliers, pledge to enforce investment plans according to the receipt of subsidies from Gumi city and Gyeongsangbuk-do and others.

 

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5. Receivables and Other Assets

 

  (a) Trade accounts and notes receivable as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Trade, net

   W 332,442        355,332  

Due from related parties

     3,437,418        4,318,238  
  

 

 

    

 

 

 
   W 3,769,860        4,673,570  
  

 

 

    

 

 

 

 

  (b) Other accounts receivable as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Current assets

     

Non-trade receivable, net

   W 704,604        678,454  

Accrued income

     4,301        8,655  
  

 

 

    

 

 

 
   W 708,905        687,109  
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable, as of March 31, 2018 and December 31, 2017 are W630,881 million and W567,996 million, respectively.

 

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5. Receivables and Other Assets, Continued

 

  (c) The aging of trade accounts and note receivable, other accounts receivable and long-term non-trade receivable as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    March 31, 2018  
     Book value      Impairment loss  
     Trade accounts
and notes
receivable
     Other
accounts
receivable(*)
     Long-term
non-trade
receivable
     Trade accounts
and notes
receivable
    Other
accounts
receivable(*)
    Long-term
non-trade
receivable
 

Not past due

   W 3,766,617        702,577        7,258        (601     (395     (2

Past due 1-15 days

     3,872        404        —          (28     (2     —    

Past due 16-30 days

     —          296        —          —         (2     —    

Past due 31-60 days

     —          92        —          —         —         —    

Past due more than 60 days

     —          6,412        —          —         (477     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 3,770,489        709,781        7,258        (629     (876     (2
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(*) Other accounts receivable includes non-trade receivable and accrued income.

 

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5. Receivables and Other Assets, Continued

 

 

(In millions of won)    December 31, 2017  
     Book value      Impairment loss  
     Trade accounts
and notes
receivable
     Other
accounts
receivable(*)
     Long-term
non-trade
receivable
     Trade accounts
and notes
receivable
    Other
accounts
receivable(*)
    Long-term
non-trade
receivable
 

Not past due

   W 4,673,660        686,837        15,115        (570     (686     —    

Past due 1-15 days

     341        482        —          —         (3     —    

Past due 16-30 days

     135        53        —          —         (1     —    

Past due 31-60 days

     —          207        —          —         (2     —    

Past due more than 60 days

     4        622        —          —         (400     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 4,674,140        688,201        15,115        (570     (1,092     —    
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

The movement in the allowance for impairment in respect of trade accounts and notes receivable, other accounts receivable and long-term non-trade receivable for the three-month periods ended March 31, 2018 and the year ended December 31, 2017 are as follows:

 

(In millions of won)    2018      2017  
     Trade accounts
and notes
receivable
     Other
accounts
receivable
    Long-term
non-trade

receivable
     Trade accounts
and notes
receivable
     Other
accounts
receivable
     Long-term
non-trade
receivable
 

Balance at the beginning of the period

   W 570        1,092       —          520        804        23  

(Reversal of) bad debt expense

     59        (216     2        50        288        (23
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Balance at the reporting date

   W 629        876       2        570        1,092        —    
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

 

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5. Receivables and Other Assets, Continued

 

  (d) Other assets as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Current assets

     

Advance payments

   W 5,211        3,597  

Prepaid expenses

     225,130        76,129  

Value added tax refundable

     89,239        95,769  

Emission rights

     —          1,978  

Right to recover returned goods(*)

     6,923        —    
  

 

 

    

 

 

 
   W 326,503        177,473  
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W 333,567        333,995  
  

 

 

    

 

 

 
   W 333,567        333,995  
  

 

 

    

 

 

 

 

(*) As a result from the initial application of K-IFRS No. 1115, the Company recognized an asset for right to recover returned goods returned by the customer.

 

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6. Other Financial Assets

 

  (a) Other financial assets as of March 31, 2018 and December 31, 2017 are as follows:

 

  (i) As of March 31, 2018

 

(In millions of won)    March 31, 2018  

Current assets

  

Financial Asset at Fair Value through Other Comprehensive Income

  

Debt instrument

  

Government bonds

   W 6  

Financial Asset Carried at Amortized Cost

  

Short-term loans

   W 11,701  
  

 

 

 

Total

   W 11,707  
  

 

 

 

Non-current assets

  

Financial Asset at Fair Value through Profit or Loss

  

Equity instrument

  

Intellectual Discovery, Ltd.

   W 729  

Kyulux, Inc

     1,968  
  

 

 

 

Sub-Total

     2,697  

Convertible bonds

     1,552  

Derivatives(*)

     600  

Financial Asset at Fair Value through Other Comprehensive Income

  

Debt instrument

  

Government bonds

   W 157  

Financial Asset Carried at Amortized Cost

  

Deposits

   W 13,757  

Long-term loans

     37,297  

Long-term non-trade receivable

     7,256  
  

 

 

 

Total

   W 63,316  
  

 

 

 

 

(*) Represents interest rate swap contracts related to borrowings with variable interest rate.

 

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6. Other Financial Assets, Continued

 

  (ii) As of December 31, 2017

 

(In millions of won)    December 31, 2017  

Current assets

  

Available-for-sale financial assets

  

Debt instrument

  

Government bonds

   W 6  

Short-term loans

     13,493  
  

 

 

 

Total

   W 13,499  
  

 

 

 

Non-current assets

  

Financial Asset at Fair Value through Profit or Loss

   W 1,552  

Available-for-sale financial assets

  

Debt instrument

  

Government bonds

   W 156  

Equity instrument

  

Intellectual Discovery, Ltd.

   W 729  

Kyulux, Inc

     1,968  
  

 

 

 

Sub-Total

   W 2,697  

Deposits

   W 13,638  

Long-term loans

     30,772  

Long-term non-trade receivable

     15,115  

Derivatives(*)

     842  
  

 

 

 

Total

   W 64,772  
  

 

 

 

 

(*) Represents interest rate swap contracts related to borrowings with variable interest rate.

Other financial assets of related parties as of March 31, 2018 and December 31, 2017 are W2,500 million and W2,750 million, respectively.

 

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7. Inventories

Inventories as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    March 31, 2018      December 31, 2017  

Finished goods

   W 525,081        491,330  

Work-in-process

     685,694        675,324  

Raw materials

     306,989        286,934  

Supplies

     132,292        228,657  
  

 

 

    

 

 

 
   W 1,650,056        1,682,245  
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2018 and 2017, the amount of inventories recognized as cost of sales, inventory write-downs and reversal and usage of inventory write-downs included in cost of sales are as follows:

 

(In millions of won)    2018      2017  

Inventories recognized as cost of sales

   W 4,902,524        5,218,933  

Including: inventory write-downs

     190,761        194,154  

Including: reversal and usage of inventory write-downs

     (184,139      (185,454

 

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8. Investments

 

  (a) Investments in subsidiaries consist of the following:

 

(In millions of won)             March 31, 2018     December 31, 2017  

Overseas Subsidiaries

  Location    

Business

  Percentage
of ownership
    Book
value
    Percentage
of ownership
    Book
Value
 

LG Display America, Inc.

   

San Jose,

U.S.A.

 

 

  Sell Display products     100   W 36,815       100   W 36,815  

LG Display Germany GmbH

   
Eschborn,
Germany
 
 
  Sell Display products     100     19,373       100     19,373  

LG Display Japan Co., Ltd.

    Tokyo, Japan     Sell Display products     100     15,686       100     15,686  

LG Display Taiwan Co., Ltd.

    Taipei, Taiwan     Sell Display products     100     35,230       100     35,230  

LG Display Nanjing Co., Ltd.

    Nanjing, China     Manufacture Display products     100     593,726       100     593,726  

LG Display Shanghai Co., Ltd.

    Shanghai, China     Sell Display products     100     9,093       100     9,093  

LG Display Poland Sp. z o.o.

    Wroclaw, Poland     Manufacture Display products     100     194,992       100     194,992  

LG Display Guangzhou Co., Ltd.

   
Guangzhou,
China
 
 
  Manufacture Display products     100     293,557       100     293,557  

LG Display Shenzhen Co., Ltd.

    Shenzhen, China     Sell Display products     100     3,467       100     3,467  

LG Display Singapore Pte. Ltd.

    Singapore     Sell Display products     100     1,250       100     1,250  

L&T Display Technology (Fujian) Limited

   

Fujian,

China

 

 

  Manufacture and sell LCD module and LCD monitor sets     51     10,123       51     10,123  

LG Display Yantai Co., Ltd.

   

Yantai,

China

 

 

  Manufacture Display products     100     169,195       100     169,195  

Nanumnuri Co., Ltd.

   
Gumi, South
Korea
 
 
  Janitorial services     100     800       100     800  

LG Display (China) Co., Ltd.

    Guangzhou,China     Manufacture and Sell Display products     51     723,086       51     723,086  

Unified Innovative Technology, LLC

   
Wilmington,
U.S.A.
 
 
  Manage intellectual property     100     9,489       100     9,489  

LG Display Guangzhou Trading Co., Ltd.

   
Guangzhou,
China
 
 
  Sell Display products     100     218       100     218  

Global OLED Technology LLC

   

Herndon,

U.S.A

 

 

  Manage OLED intellectual property     100     164,322       100     164,322  

LG Display Vietnam Haiphong Co., Ltd.(*1)

   

Haiphong,

Vietnam

 

 

  Manufacture Display Products     100     329,978       100     117,378  

Suzhou Lehui Display Co., Ltd.

   

Suzhou,

China

 

 

  Manufacture and sell LCD module and LCD monitor sets     100     121,640       100     121,640  

Money Market Trust(*2)

   

Seoul,

South Korea

 

 

  Money market trust     100     430,801       100     61,471  
       

 

 

     

 

 

 
        W 3,162,841       W 2,580,911  
       

 

 

     

 

 

 

 

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8. Investments, Continued

 

(*1) For the three-month period ended March 31, 2018, the Company contributed W212,600 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”). There was no change in the Company’s ownership percentage in LGDVN as a result of this additional investment.
(*2) For the three-month period ended March 31, 2018, the Company acquired and disposed Money Market Trust (“MMT”) and the MMT amount as of March 31, 2018 is W430,801 million.

 

  (b) Investments in associates consist of the following:

 

(In millions of won)                                    
               March 31, 2018      December 31, 2017  

Associates

  

Location

  

Business

   Percentage
of ownership
    Book
Value
     Percentage
of ownership
    Book
Value
 

Paju Electric Glass Co., Ltd.

   Paju, South Korea    Manufacture electric glass for FPDs      40   W 45,089        40   W 45,089  

INVENIA Co., Ltd.

   Seongnam, South Korea    Develop and manufacture the equipment for FPDs      13     6,330        13     6,330  

WooRee E&L Co., Ltd.

   Ansan, South Korea    Manufacture LED back light unit packages      14     10,268        14     10,268  

LB Gemini New
Growth Fund
No.16 (*1)

   Seoul, South Korea    Invest in small and middle sized companies and benefit from M&A opportunities      31     434        31     434  

YAS Co., Ltd.

   Paju, South Korea    Develop and manufacture deposition equipment for OLEDs      15     10,000        15     10,000  

AVATEC Co., Ltd.

   Daegu, South Korea    Process and sell electric glass for FPDs      17     10,600        17     10,600  

Arctic Sentinel, Inc.

   Los Angeles, U.S.A.    Develop and manufacture tablet for kids      10     —          10     —    

CYNORA Gmbh

   Bruchsal, Germany    Develop organic emitting materials for displays and lighting devices      14     20,309        14     20,309  

Material science(*2)

   Seoul, South Korea    Develop, manufacture and sales OLED material      10     4,000        —         —    
          

 

 

      

 

 

 
           W 107,030        W 103,030  
          

 

 

      

 

 

 

 

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8. Investments, Continued

 

(*1) The Company is a member of a limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). On the other hand, a resolution to dissolve the fund was approved at the general meeting and the fund is in process of liquidation as of March 31, 2018.
(*2) In March 2018, the Company invested W4,000 million and acquired 10,767 shares of common stock with voting rights in Material science. As of March 31, 2018, the Company‘s ownership percentage in Material science is 10% and the Company has the right to appoint a director to the board of directors of the investee.

For the three-month periods ended March 31, 2018 and 2017, the aggregate amount of received dividends from subsidiaries and associates are W95,553 million and W8,639 million, respectively.

 

9. Property, Plant and Equipment

For the three-month periods ended March 31, 2018 and 2017, the Company purchased property, plant and equipment of W1,656,048 million and W1,113,774 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W18,633 million and 2.23%, and W6,260 million and 1.84% for the three-month periods ended March 31, 2018 and 2017, respectively. Also, for the three-month periods ended March 31, 2018 and 2017, the Company disposed of property, plant and equipment with carrying amounts of W85,393 million and W20,785 million, respectively, and recognized W13,715 million and W3,826 million, respectively, as gain and loss on disposal of property, plant and equipment for the three-month period ended March 31, 2018 (gain and loss for the three-month period ended March 31, 2017: W30,314 million and W1,957 million, respectively).

 

10. Intangible Assets

 

  (a) The Company capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of March 31, 2018 and December 31, 2017, are W316,914 million and W296,760 million, respectively.

 

  (b) Development of new projects are divided into research activities and development activities. Expenditures on research activities are recognized in profit or loss and development expenditures are capitalized, respectively.

 

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11. Financial Liabilities

 

  (a) Financial liabilities as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    March 31, 2018      December 31, 2017  

Current

     

Current portion of long-term borrowings and bonds

   W 1,478,132        1,058,985  

Current portion of Payment guarantee liabilities

     2,153        1,750  
  

 

 

    

 

 

 
   W 1,480,285        1,060,735  
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   W 1,701,096        1,251,258  

Foreign currency denominated borrowings

     149,310        401,775  

Bonds

     1,894,864        1,506,003  

Payment guarantee liabilities

     7,073        6,377  
  

 

 

    

 

 

 
   W 3,752,343        3,165,413  
  

 

 

    

 

 

 

 

  (b) Won denominated long-term borrowings as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              

Lender

  

Annual interest rate as of

March 31, 2018 (%)

   March 31,
2018
     December 31,
2017
 

Woori Bank

  

3-year Korean Treasury Bond

rate - 1.25, 2.75

   W 1,753        1,922  

Shinhan Bank

   CD rate (91days) + 0.30      200,000        200,000  

Korea Development Bank and others

  

CD rate (91days) + 0.64~0.74,

2.28~3.25

     2,050,000        1,250,000  

Less current portion of long-term borrowings

        (550,657      (200,664
     

 

 

    

 

 

 
      W 1,701,096        1,251,258  
     

 

 

    

 

 

 

 

  (c) Foreign currency denominated long-term borrowings as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won and USD)              

Lender

  

Annual interest rate as of

March 31, 2018 (%)(*)

   March 31,
2018
     December 31,
2017
 

The Export-Import Bank of Korea and Others

   3ML+0.55 ~1.04    W 751,883        755,337  
     

 

 

    

 

 

 

Foreign currency equivalent

      USD  705      USD  705  
     

 

 

    

 

 

 

Less current portion of long-term borrowings

        (602,573      (353,562
     

 

 

    

 

 

 
      W 149,310        401,775  
     

 

 

    

 

 

 

 

(*) ML represents Month LIBOR (London Inter-Bank Offered Rates)

 

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11. Financial Liabilities, Continued

 

  (d) Details of bonds issued and outstanding as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)                     
    

Maturity

   Annual interest
rate as of
March 31, 2018 (%)
     March 31,
2018
     December 31,
2017
 

Won denominated bonds(*)

           

Publicly issued bonds

   May 2018 ~ February 2023      1.73~3.73      W 2,225,000        2,015,000  

Less discount on bonds

           (5,234      (4,238

Less current portion

           (324,902      (504,759
        

 

 

    

 

 

 
         W 1,894,864        1,506,003  
        

 

 

    

 

 

 

 

(*) Principal of the won denominated bonds is to be repaid at maturity and interests are paid quarterly.

 

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12. Employee Benefits

The Company’s defined benefit plans provide a lump-sum payment to an employee based on final salary rates and length of service at the time the employee leaves the Company.

The defined benefit plans expose the Company to actuarial risks, such as the risk associated with expected periods of service, interest rate risk, market (investment) risk, and others.

 

  (a) Net defined benefit liabilities recognized as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    March 31, 2018      December 31, 2017  

Present value of partially funded defined benefit obligations

   W 1,593,210        1,560,525  

Fair value of plan assets

     (1,443,253      (1,465,990
  

 

 

    

 

 

 
   W 149,957        94,535  
  

 

 

    

 

 

 

 

  (b) Expenses recognized in profit or loss for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Current service cost

   W 51,109        48,615  

Net interest cost

     242        598  
  

 

 

    

 

 

 
   W 51,351        49,213  
  

 

 

    

 

 

 

 

  (c) Plan assets as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Guaranteed deposits in banks

   W 1,443,253        1,465,990  

As of March 31, 2018, the Company maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., Shinhan Bank and others.

 

  (d) Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)    2018      2017  

Remeasurements of the net defined benefit liabilities

   W (6,419      (4,725

Tax effect

     2,296        1,143  
  

 

 

    

 

 

 

Remeasurements of the net defined benefit liabilities, net of income tax

   W (4,123      (3,582
  

 

 

    

 

 

 

 

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13. Provisions and Other Liabilities

 

  (a) Changes in provisions for the three-month period ended March 31, 2018 are as follows:

 

(In millions of won)                            
     Litigations and
claims
     Warranties (*)      Others      Total  

Balance at January 1, 2018

   W 43        100,119        1,835        101,997  

Adjustment from adoption of K-IFRS 1115

     —          —          9,789        9,789  

Additions (reversals)

     —          29,340        (3,834      25,506  

Usage

     —          (42,956      —          (42,956
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2018

   W 43        86,503        7,790        94,336  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 43        63,868        7,790        71,701  

Non-current

   W —          22,635        —          22,635  

 

(*) The provision for warranties covers defective products and is normally applicable for 18 months from the date of purchase. The warranty liability is calculated by using historical and anticipated rates of warranty claims, and costs per claim to satisfy the Company’s warranty obligation.

 

  (b) Other liabilities as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     March 31, 2018      December 31, 2017  

Current liabilities

     

Withholdings

   W 26,375        23,948  

Unearned revenues

     7,916        9,566  

Security deposits

     3,230        —    

Dividends payable

     178,908        —    
  

 

 

    

 

 

 
   W 216,429        33,514  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term accrued expenses

   W 75,191        66,956  

Security deposits

     2,545        —    
  

 

 

    

 

 

 
   W 77,736        66,956  
  

 

 

    

 

 

 

 

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14. Contingencies and Commitments

 

  (a) Legal Proceedings

Anti-trust litigations

Argos Limited and affiliated companies (“Argos”) filed a Notice of Claim against the Company and LG Display Taiwan Co., Ltd. in the High Court of Justice in London alleging infringement of Treaty on the Functioning of the European Union and Agreement on the European Economic Area. Prior to Argos’ filing of Particulars of Claim and service, the Company and LG Display Taiwan Co., Ltd. reached a settlement in principle with Argos in December 2017. The parties expect to execute a settlement agreement in 2018.

Others

The Company is defending against various claims in addition to pending proceedings described above. The Company does not have a present obligation for these matters and has not recognized any provision at March 31, 2018.

 

  (b) Commitments

Factoring and securitization of accounts receivable

The Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,743 million (W1,859,421 million) in connection with the Company’s export sales transactions with its subsidiaries. As of March 31, 2018, no short-term borrowings were outstanding in connection with these agreements. In connection with all of the contracts in this paragraph, the Company has sold its accounts receivable with recourse.

The Company has a credit facility agreement with Shinhan Bank and several other banks pursuant to which the Company could sell its accounts receivables up to an aggregate of W345,960 million in connection with its domestic and export sales transactions and, as of March 31, 2018, no accounts and notes receivable sold to Shinhan Bank were outstanding in connection with the agreement. In connection with the contract above, the Company has sold its accounts receivable without recourse.

Letters of credit

As of March 31, 2018, the Company has agreements in relation to the opening of letters of credit up to USD 30 million (W31,995 million) with KEB Hana Bank, USD 80 million (W85,320 million) with Bank of China and USD 50 million (W53,325 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Company provides a payment guarantee in connection with the term loan credit facilities of LG Display Vietnam Haiphong, Co., Ltd. amounting to USD 595 million (W634,568 million) for principals.

In addition, the Company obtained payment guarantees amounting to USD 900 million (W959,850 million) from KEB Hana Bank and others for advances received related to the long-term supply agreements and USD 8.5 million (W9,065 million) from Shinhan bank for value added tax payments in Poland.

 

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14. Contingencies and Commitments, Continued

License agreements

As of March 31, 2018, in relation to its LCD business, the Company has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.

Long-term supply agreement

As of March 31, 2018, in connection with long-term supply agreements with customers, the Company recognized USD 900 million (W959,850 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter. The Company received payment guarantees amounting to USD 900 million (W959,850 million) from KEB Hana Bank and other various banks relating to advances received.

 

15. Share capital

The Company is authorized to issue 500,000,000 shares of capital stock (par value W 5,000), and as of March 31, 2018 and December 31, 2017, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2017 to March 31, 2018.

 

16. Revenue

Details of revenue for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Sales of goods

   W 5,144,426        6,528,896  

Royalties

     3,726        4,600  

Others

     6,109        9,451  
  

 

 

    

 

 

 
   W 5,154,261        6,542,947  
  

 

 

    

 

 

 

 

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17. The Nature of Expenses and Others

The classification of expenses by nature for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Changes in inventories

   W 32,189        100,076  

Purchases of raw materials, merchandise and others

     1,986,586        2,362,566  

Depreciation and amortization

     573,450        490,619  

Outsourcing fees

     1,338,767        1,363,182  

Labor costs

     696,245        633,135  

Supplies and others

     191,168        208,206  

Utility

     179,812        169,395  

Fees and commissions

     140,527        117,361  

Shipping costs

     27,308        27,174  

Advertising

     14,929        44,489  

Warranty expenses

     29,340        68,177  

Travel

     24,024        16,487  

Taxes and dues

     15,772        12,396  

Others

     163,529        176,967  
  

 

 

    

 

 

 
   W 5,413,646        5,790,230  
  

 

 

    

 

 

 

Total expenses consist of cost of sales, selling, administrative, research and development expenses and other non-operating expenses, excluding foreign exchange differences.

 

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18. Selling and Administrative Expenses

 

  Details of selling and administrative expenses for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Salaries

   W 62,795        53,096  

Expenses related to defined benefit plans

     7,034        6,555  

Other employee benefits

     12,081        14,648  

Shipping costs

     20,554        21,626  

Fees and commissions

     27,365        30,973  

Depreciation

     26,424        22,725  

Taxes and dues

     793        314  

Advertising

     14,929        44,489  

Warranty expenses

     29,340        68,177  

Rent

     2,638        2,507  

Insurance

     1,535        1,361  

Travel

     4,550        4,559  

Training

     2,201        3,167  

Others

     11,629        10,510  
  

 

 

    

 

 

 
   W 223,868        284,707  
  

 

 

    

 

 

 

 

19. Personnel Expenses

 

  Details of personnel expenses for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Salaries and wages

   W 598,556        535,368  

Other employee benefits

     92,072        77,293  

Contributions to National Pension plan

     18,807        17,917  

Expenses related to defined benefit plan

     51,351        49,213  
  

 

 

    

 

 

 
   W 760,786        679,791  
  

 

 

    

 

 

 

 

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20. Other Non-operating Income and Other Non-operating Expenses

 

  (a) Details of other non-operating income for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Foreign currency gain

   W 100,719        269,086  

Gain on disposal of property, plant and equipment

     13,715        30,314  

Gain on disposal of intangible assets

     239        —    

Reversal of impairment loss on intangible assets

     130        —    

Rental income

     448        869  

Others

     1,753        3,892  
  

 

 

    

 

 

 
   W 117,004        304,161  
  

 

 

    

 

 

 

 

  (b) Details of other non-operating expenses for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Foreign currency loss

   W 106,651        483,257  

Loss on disposal of property, plant and equipment

     3,826        1,957  

Impairment loss on intangible assets

     37        1,689  

Donations

     1,850        2,364  

Other bad debt expense

     4        46  

Expenses related to legal proceedings or claims and others

     47        238  
  

 

 

    

 

 

 
   W 112,415        489,551  
  

 

 

    

 

 

 

 

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21. Finance Income and Finance Costs

 

  (a) Finance income and costs recognized in profit and loss for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Finance income

     

Interest income

   W 4,783        6,038  

Dividend income

     95,553        8,639  

Foreign currency gain

     4,807        87,210  

Gain on disposal of investments

     —          5,083  

Gain on transaction of derivatives

     36        —    

Gain on valuation of derivatives

     —          798  

Others

     516        —    
  

 

 

    

 

 

 
   W 105,695        107,768  
  

 

 

    

 

 

 

Finance costs

     

Interest expense

   W 10,987        15,922  

Foreign currency loss

     4,966        16,470  

Loss on transaction of derivatives

     38        101  

Loss on valuation of derivatives

     242        —    

Others

     677        350  
  

 

 

    

 

 

 
   W 16,910        32,843  
  

 

 

    

 

 

 

 

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22. Income Taxes

 

  (a) Details of income tax expense for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Current tax expense

   W (9,304      96,105  

Deferred tax expense (benefit)

     (70,579      38,329  
  

 

 

    

 

 

 

Income tax expense (benefit)

   W (79,883      134,434  
  

 

 

    

 

 

 

 

  (b) Deferred Tax Assets and Liabilities

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the deferred tax assets at the reporting date will be realized with the Company’s estimated future taxable income.

Deferred tax assets and liabilities as of March 31, 2018 and December 31, 2017 are attributable to the following:

 

(In millions of won)    Assets      Liabilities     Total  
     March 31,
2018
     December 31,
2017
     March 31,
2018
    December 31,
2017
    March 31,
2018
    December 31,
2017
 

Other accounts receivable, net

   W —          —          (816     (1,378     (816     (1,378

Inventories, net

     33,282        30,688        —         —         33,282       30,688  

Defined benefit liabilities, net

     18,232        2,375        —         —         18,232       2,375  

Accrued expenses

     106,786        179,112        —         —         106,786       179,112  

Property, plant and equipment

     179,672        206,900        —         —         179,672       206,900  

Intangible assets

     856        1,249        —         —         856       1,249  

Provisions

     23,371        27,018        —         —         23,371       27,018  

Gain or loss on foreign currency translation, net

     13        13        —         —         13       13  

Others

     11,714        12,345        —         —         11,714       12,345  

Tax losses

     104,339        —          —         —         104,339       —    

Tax credit carryforwards

     322,674        268,926        —         —         322,674       268,926  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax assets (liabilities)

   W 800,939        728,626        (816     (1,378     800,123       727,248  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Statutory tax rate applicable to the Company was 24.2% for the year ended December 31, 2017. During the year-ended December 31, 2017, certain amendments to income tax rules in Korea were enacted and effective on January 1, 2018 that resulted in application of 27.5% for taxable income in excess of W300,000 million. Deferred taxes as of December 31, 2017 and March 31, 2018 have been measured using the applicable tax rates from the amendment.

 

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23. Earnings (Loss) Per Share

 

  (a) Basic earnings (loss) per share for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In won and No. of shares)    2018      2017  

Profit (Loss) for the period

   W (80,364,446,331      514,111,732,552  

Weighted-average number of common stocks outstanding

     357,815,700        357,815,700  
  

 

 

    

 

 

 

Earnings (Loss) per share

   W (225      1,437  
  

 

 

    

 

 

 

For the three-month periods ended March 31, 2018 and 2017, there were no events or transactions that resulted in changes in the number of common stocks used for calculating earnings (loss) per share.

 

  (b) Diluted earnings (loss) per share for the three-month periods ended March 31, 2018 and 2017 are not calculated since there was no potential common stock.

 

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24. Financial Risk Management

The Company is exposed to credit risk, liquidity risk and market risks. The Company identifies and analyzes such risks, and controls are implemented under a risk management system to monitor and manage these risks at below a threshold level.

 

  (a) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

 

  (i) Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Company, Korean won (KRW). The currencies in which these transactions primarily are denominated are USD, JPY, etc.

Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company, primarily KRW and USD.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company adopts policies to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

 

  i) Exposure to currency risk

The Company’s exposure to foreign currency risk based on notional amounts as of March 31, 2018 and December 31, 2017 is as follows:

 

(In millions)    March 31, 2018  
     USD     JPY     CNY     PLN     EUR  

Cash and cash equivalents

     118       658       —         2       —    

Trade accounts and notes receivable

     3,138       3,050       —         —         —    

Non-trade receivable

     80       788       3,358       —         1  

Trade accounts and notes payable

     (1,196     (12,162     —         —         —    

Other accounts payable

     (97     (14,768     (733     (10     (1

Debt

     (705     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     1,338       (22,434     2,625       (8     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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24. Financial Risk Management, Continued

 

(In millions)    December 31, 2017  
     USD     JPY     CNY     PLN     EUR  

Cash and cash equivalents

     482       77       —         2       —    

Trade accounts and notes receivable

     3,840       1,960       —         —         —    

Non-trade receivable

     73       1,674       1,085       —         9  

Trade accounts and notes payable

     (1,337     (13,659     —         —         —    

Other accounts payable

     (170     (12,582     (1,059     (10     (2

Debt

     (705     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     2,183       (22,530     26       (8     7  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average exchange rates applied for the three-month periods ended March 31, 2018 and 2017 and the exchange rates at March 31, 2018 and December 31, 2017 are as follows:

 

(In won)    Average rate      Reporting date spot rate  
     2018      2017      March 31,
2018
     December 31,
2017
 

USD

   W 1,072.66        1,154.65        1,066.50        1,071.40  

JPY

     9.90        10.15        10.01        9.49  

CNY

     168.62        168.15        169.68        163.65  

PLN

     315.20        284.48        311.79        306.07  

EUR

     1,317.33        1,230.16        1,311.95        1,279.25  

 

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24. Financial Risk Management, Continued

 

  ii) Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Company’s assets or liabilities denominated in foreign currency as of March 31, 2018 and December 31, 2017, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company considers to be reasonably possible as of the end of reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:

 

(In millions of won)    March 31, 2018      December 31, 2017  
     Equity      Profit
or loss
     Equity      Profit
or loss
 

USD (5 percent weakening)

   W 51,728        51,728        88,643        88,643  

JPY (5 percent weakening)

     (8,144      (8,144      (8,104      (8,104

CNY (5 percent weakening)

     16,146        16,146        161        161  

PLN (5 percent weakening)

     (90      (90      (93      (93

EUR (5 percent weakening)

     —          —          339        339  

A stronger won against the above currencies as of March 31, 2018 and December 31, 2017 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

 

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24. Financial Risk Management, Continued

 

  (ii) Interest rate risk

Interest rate risk arises principally from the Company’s debentures and borrowings. The Company establishes and applies its policy to reduce uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures.

 

  i) Profile

The interest rate profile of the Company’s interest-bearing financial instruments as of March 31, 2018 and December 31, 2017 is as follows:

 

(In millions of won)    March 31, 2018      December 31, 2017  

Fixed rate instruments

     

Financial assets

   W 812,186        1,147,340  

Financial liabilities

     (3,971,512      (2,962,671
  

 

 

    

 

 

 
   W (3,159,326      (1,815,331
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (1,251,890      (1,255,350

 

  ii) Equity and profit or loss sensitivity analysis for variable rate instruments

As of March 31, 2018 and December 31, 2017, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for each 12-month period following the reporting dates. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

(In millions of won)                            
     Equity      Profit or loss  
     1%p
increase
     1%p
decrease
     1%p
increase
     1%p
decrease
 

March 31, 2018

           

Variable rate instruments(*)

   W (6,539      6,539        (6,539      6,539  

December 31, 2017

           

Variable rate instruments(*)

   W (6,863      6,863        (6,863      6,863  

 

(*) Financial instruments subject to interest rate swap not qualified for hedging are excluded.

 

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24. Financial Risk Management, Continued

 

  (b) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers.

The Company’s exposure to credit risk of trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management believes that the demographics of the Company’s customer base, including the default risk of the country in which customers operate, do not have a significant influence on credit risk since the majority of the customers are global electronic appliance manufacturers operating in global markets.

The Company establishes credit limits for each customer and each new customer is analyzed quantitatively and qualitatively before determining whether to utilize third party guarantees, insurance or factoring as appropriate.

In relation to the impairment of financial assets, the Company recognizes expected credit loss and its changes at each reporting date subsequent to initial recognition of financial asset according to an expected credit loss impairment model.

The Company does not establish allowances for receivables under insurance or receivables from customers with a high credit rating. Trade accounts and notes receivables are insured in order to manage credit risk and uninsured trade accounts and notes receivables are managed in accordance with the Company’s management policy.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of March 31, 2018 and December 31, 2017 are as follows:

 

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24. Financial Risk Management, Continued

 

  i) As of March 31, 2018

 

(In millions of won)   March 31, 2018  
    Carrying amounts  

Financial Assets Carried at Amortized Cost

 

Cash and cash equivalents

  W 434,823  

Deposits in banks

    377,211  

Trade accounts and notes receivable

    3,769,860  

Non-trade receivable

    704,604  

Accrued income

    4,301  

Deposits

    13,757  

Short-term loans

    11,701  

Long-term loans

    37,297  

Long-term non-trade receivable

    7,256  
 

 

 

 

Sub-Total

    5,360,810  

Financial Assets at Fair Value through Profit or Loss

 

Convertible bonds

    1,552  

Derivatives

    600  
 

 

 

 

Sub-Total

    2,152  

Financial Assets at Fair Value through Other Comprehensive Income

 

Debt instrument

    163  
 

 

 

 

Total

    5,363,125  
 

 

 

 

 

(*) Excluded from disclosures as the carrying amount approximates fair value.

 

  ii) As of December 31, 2017

 

(In millions of won)    December 31, 2017  
     Carrying amounts  

Cash and cash equivalents

   W 566,408  

Deposits in banks

     580,781  

Trade accounts and notes receivable

     4,673,570  

Non-trade receivable

     678,454  

Accrued income

     8,655  

Available-for-sale financial assets

     162  

Financial assets at fair value through profit or loss

     1,552  

Deposits

     13,638  

Short-term loans

     13,493  

Long-term loans

     30,772  

Long-term non-trade receivable

     15,115  

Derivatives

     842  
  

 

 

 

Total

     6,583,442  
  

 

 

 

In addition to the financial assets above, as of March 31, 2018, the Company provides a payment guarantee of USD 595 million (W634,568 million), for its subsidiary.

 

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24. Financial Risk Management, Continued

 

  (c) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company has historically been able to satisfy its cash requirements from cash flows from operations and debt and equity financing. To the extent that the Company does not generate sufficient cash flows from operations to meet its capital requirements, the Company may rely on other financing activities, such as external long-term borrowings and offerings of debt instruments, equity-linked and other debt instruments. In addition, the Company maintains a line of credit with various banks.

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of March 31, 2018.

 

(In millions of won)           Contractual cash flows  
     Carrying
amount
     Total      6 months
or less
     6-12
months
     1-2
years
     2-5
years
     More than
5 years
 

Non-derivative financial liabilities

              

Unsecured bank borrowings

   W 3,003,636        3,187,977        361,140        867,529        271,090        1,659,716        28,502  

Unsecured bond issues

     2,219,766        2,365,526        236,301        139,176        599,441        1,390,608        —    

Trade accounts and notes payable

     2,507,732        2,507,732        2,507,732        —          —          —          —    

Other accounts payable

     2,816,545        2,816,545        2,816,545        —          —          —          —    

Payment guarantee(*)

     9,226        702,639        8,991        25,281        49,985        515,140        103,242  

Security deposits

     5,775        5,775        3,145        85        2,545        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 10,562,680        11,586,194        5,933,854        1,032,071        923,061        3,565,464        131,744  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*) Contractual cash flows of payment guarantee is identical to timing of principal payment and represent the maximum amount that the Company could be required to pay the guarantee amount.

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

 

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24. Financial Risk Management, Continued

 

  (d) Capital management

Management’s policy is to maintain a capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowings to equity ratio and other financial ratios are used by management to achieve an optimal capital structure. Management also monitors the return on capital as well as the level of dividends to ordinary shareholders.

 

(In millions of won)             
     March 31, 2018     December 31, 2017  

Total liabilities

   W 12,587,679       11,580,156  

Total equity

     13,565,864       13,829,259  

Cash and deposits in banks (*1)

     812,023       1,147,178  

Borrowings (including bonds)

     5,223,402       4,218,021  

Total liabilities to equity ratio

     93     84

Net borrowings to equity ratio (*2)

     33     22

 

(*1) Cash and deposits in banks consist of cash and cash equivalents and current deposits in banks.
(*2) Net borrowings to equity ratio is calculated by dividing total borrowings (including bonds) less cash and current deposits in banks by total equity.

 

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24. Financial Risk Management, Continued

 

  (e) Determination of fair value

 

  (i) Measurement of fair value

A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

 

  i) Current Assets and Liabilities

The carrying amounts approximate fair value because of the short maturity of these instruments.

 

  ii) Trade Receivables and Other Receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes. The carrying amounts of short-term receivables approximate fair value.

 

  iii) Investments in Equity and Debt Instruments

Marketable financial assets at fair value through profit or loss and at fair value through other comprehensive income are determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable instruments is determined using valuation methods.

 

  iv) Non-derivative Financial Liabilities

Fair value, which is determined for disclosure purposes, except for the liabilities at FVTPL, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

 

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24. Financial Risk Management, Continued

 

  (ii) Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed separate interim statements of financial position as of March 31, 2018 and December 31, 2017 are as follows:

 

  i) As of March 31, 2018

 

(In millions of won)              
     March 31, 2018  
     Carrying
amounts
     Fair
Values
 

Financial Assets Carried at Amortized Cost

     

Cash and cash equivalents

   W 434,823        (*

Deposits in banks

     377,211        (*

Trade accounts and notes receivable

     3,769,860        (*

Non-trade receivable

     704,604        (*

Accrued income

     4,301        (*

Deposits

     13,757        (*

Short-term loans

     11,701        (*

Long-term loans

     37,297        (*

Long-term non-trade receivable

     7,256        (*

Financial Assets at Fair Value through Profit or Loss

     

Equity instrument

   W 2,697        2,697  

Convertible bonds

     1,552        1,552  

Derivatives

     600        600  

Financial Assets at Fair Value through Other Comprehensive Income

     

Debt instrument

   W 163        163  

Liabilities carried at amortized cost

     

Unsecured bank borrowings

     3,003,636        3,014,852  

Unsecured bond issues

     2,219,766        2,225,927  

Trade accounts and notes payable

     2,507,732        (*

Other accounts payable

     2,816,545        2,816,678  

Long-term other accounts payable

     9,226        (*

Security deposits

     5,775        (*

 

(*) Excluded from disclosures as the carrying amount approximates fair value.

 

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24. Financial Risk Management, Continued

 

  ii) As of December 31, 2017

 

(In millions of won)              
     December 31, 2017  
     Carrying
amounts
     Fair
Values
 

Assets carried at fair value

     

Available-for-sale financial assets

   W 162        162  

Financial asset at fair value through profit or loss

     1,552        1,552  

Derivatives

     842        842  

Assets carried at amortized cost

     

Cash and cash equivalents

   W 566,408        (*

Deposits in banks

     580,781        (*

Trade accounts and notes receivable

     4,673,570        (*

Non-trade receivable

     678,454        (*

Accrued income

     8,655        (*

Deposits

     13,638        (*

Short-term loans

     13,493        (*

Long-term loans

     30,772        (*

Long-term non-trade receivable

     15,115        (*

Liabilities carried at amortized cost

     

Unsecured bank borrowings

   W 2,207,259        2,212,474  

Unsecured bond issues

     2,010,762        2,016,086  

Trade accounts and notes payable

     2,391,493        (*

Other accounts payable

     2,701,823        2,702,033  

Long-term other accounts payable

     8,127        (*

 

(*) Excluded from disclosures as the carrying amount approximates fair value.

 

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24. Financial Risk Management, Continued

 

  (iii) Fair values of financial assets and liabilities

 

  i) Fair value hierarchy

The table below analyzes financial instruments carried at fair value based on the input variables used in the valuation method to measure fair value of assets and liabilities. The different levels have been defined as follows:

 

    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 or indirectly

 

    Level 3: inputs for the asset or liability that are not based on observable market data

 

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24. Financial Risk Management, Continued

 

  ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    Level 1      Level 2      Level 3      Total  

March 31, 2018

           

Financial Asset at Fair Value through Profit or Loss

           

Equity instrument

   W —          —          2,697        2,697  

Convertible bonds

     —          —          1,552        1,552  

Derivatives

     —          —          600        600  

Financial Asset at Fair Value through Other Comprehensive Income

           

Debt instrument

     163        —          —          163  
(In millions of won)    Level 1      Level 2      Level 3      Total  

December 31, 2017

           

Available-for-sale financial assets

   W 162        —          —          162  

Financial assets at fair value through profit or loss

     —          —          1,552        1,552  

Derivatives

     —          —          842        842  

 

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24. Financial Risk Management, Continued

 

  iii) Financial instruments not measured at fair value but for which the fair value is disclosed

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)    March 31, 2018      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3        

Liabilities

              

Unsecured bank borrowings

   W —          —          3,014,852       
Discounted
cash flow
 
 
     Discount rate  

Unsecured bond issues

     —          —          2,225,927       
Discounted
cash flow
 
 
     Discount rate  

Other accounts payable

     —          —          2,816,678       
Discounted
cash flow
 
 
     Discount rate  
(In millions of won)    December 31, 2017      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3        

Liabilities

              

Unsecured bank borrowings

   W —          —          2,212,474       
Discounted
cash flow
 
 
     Discount rate  

Unsecured bond issues

     —          —          2,016,086       
Discounted
cash flow
 
 
     Discount rate  

Other accounts payable

     —          —          2,702,033       
Discounted
cash flow
 
 
     Discount rate  

 

  iv) The interest rates applied for determination of the above fair value as of March 31, 2018 and December 31, 2017 are as follows:

 

     March 31, 2018   December 31, 2017
Debentures, loans and others    1.52~2.95%   1.57~2.92%

 

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25. Changes in liabilities arising from financing activities

Changes in liabilities arising from financing activities for the three-month period ended March 31, 2018 are as follows:

 

(In millions of won)                 Non-cash transactions         
     January 1,
2018
     Cash flows from
financing activities
    Dividends
declared
     Reclassification     Exchange
rate effect
    Effective
interest
adjustment
     Others      March 31,
2018
 

Current portion of long-term borrowings and bonds

   W 1,058,985        (180,169     —          601,942       (2,769     143        —          1,478,132  

Payment Guarantee

     8,127        519       —          —         —         —          580        9,226  

Long-term borrowings

     1,653,033        800,000       —          (601,942     (685     —          —          1,850,406  

Bonds

     1,506,003        388,447       —          —         —         414        —          1,894,864  

Dividends payable

     —          —         178,908        —         —         —          —          178,908  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
   W 4,226,148        1,008,797       178,908        —         (3,454     557        580        5,411,536  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

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26. Related Parties and Others

 

  (a) Related parties

Related parties as of March 31, 2018 are as follows:

 

Classification

  

Description

Subsidiaries(*)    LG Display America, Inc. and others
Associates(*)    Paju Electric Glass Co., Ltd. and others
Subsidiaries of Associates    AVATEC Electronics Yantai Co., Ltd. and others
Entity that has significant influence over the Company    LG Electronics Inc.

Subsidiaries of the entity that has significant influence over the Company

   Subsidiaries of LG Electronics Inc.

 

(*) Details of subsidiaries and associates are described in note 8.

 

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26. Related Parties and Others, Continued

 

  (b) Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)    2018  
                   Purchase and others  
     Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property,
plant and
equipment
     Outsourcing
fees
     Other costs  

Subsidiaries

                 

LG Display America, Inc.

   W 2,148,447        —          —          —          —          —    

LG Display Japan Co., Ltd.

     436,684        —          —          —          —          2,151  

LG Display Germany GmbH

     425,156        —          —          —          —          329  

LG Display Taiwan Co., Ltd.

     341,212        —          —          —          —          171  

LG Display Nanjing Co., Ltd.

     4,865        —          268        —          262,288        1,385  

LG Display Shanghai Co., Ltd.

     223,520        —          —          —          —          10  

LG Display Poland Sp. z o.o.

     141        —          —          —          9,589        2  

LG Display Guangzhou Co., Ltd.

     5,449        —          2,579        —          441,631        3,468  

LG Display Shenzhen Co., Ltd.

     388,276        —          —          —          —          —    

LG Display Yantai Co., Ltd.

     7,659        —          5,480        —          395,945        5,543  

LG Display (China) Co., Ltd.

     —          90,281        359,221        —          —          424  

LG Display Singapore Pte. Ltd.

     194,264        —          —          —          —          13  

L&T Display Technology (Fujian) Limited

     82,017        —          —          —          8        5  

Nanumnuri Co., Ltd.

     45        —          —          —          —          6,123  

Global OLED Technology LLC

     —          —          —          —          —          1,494  

LG Display Guangzhou Trading Co., Ltd.

     89,520        —          —          —          —          —    

LG Display Vietnam Haiphong Co., Ltd.

     35,740        —          4,165        —          111,669        69  

Suzhou Lehui Display Co., Ltd.

     35,723        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,418,718        90,281        371,713        —          1,221,130        21,187  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26. Related Parties and Others, Continued

 

(In millions of won)    2018  
                   Purchase and others  
     Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property,
plant and
equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

WooRee E&L Co., Ltd.

     —          —          —          —          —          47  

INVENIA Co., Ltd.

     —          30        270        7,749        —          72  

AVATEC Co., Ltd.

     —          530        —          —          17,773        119  

Paju Electric Glass Co., Ltd.

     —          4,172        92,497        —          —          920  

LB Gemini New Growth Fund No.16

     —          540        —          —          —          —    

YAS Co., Ltd.

     —          —          760        12,417        —          794  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W —          5,272        93,527        20,166        17,773        1,952  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 361,044        —          10,186        152,490        —          17,466  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 8,355        —          —          —          —          13  

LG Electronics Vietnam Haiphong Co., Ltd.

     32,988        —          —          —          —          2  

LG Electronics Reynosa S.A. DE C.V.

     4,843        —          —          —          —          898  

LG Electronics Almaty Kazakhstan

     2,425        —          —          —          —          8  

LG Electronics S.A. (Pty) Ltd

     2,397        —          —          —          —          2  

LG Electronics Mexicalli S.A.DE C.V.

     1,281        —          —          —          —          54  

LG Electronics RUS, LLC

     603        —          —          —          —          320  

 

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26. Related Parties and Others, Continued

 

(In millions of won)    2018  
                   Purchase and others  
     Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property,
plant and
equipment
     Outsourcing
fees
     Other costs  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Innotek Co., Ltd.

   W 6,950        —          34,626        —          —          11,082  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          117,814        —          491  

Inspur LG Digital Mobile Communications Co., Ltd.

     12,177        —          —          —          —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     7,656        —          —          —          —          —    

HiEntech Co., Ltd.

     —          —          —          —          —          7,935  

Others

     730        —          —          —          —          1,913  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 80,405        —          34,626        117,814        —          22,718  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,860,167        95,553        510,052        290,470        1,238,903        63,323  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26. Related Parties and Others, Continued

 

(In millions of won)    2017  
                   Purchase and others  
     Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property,
plant and
equipment
     Outsourcing
fees
     Other costs  

Subsidiaries

                 

LG Display America, Inc.

   W 2,771,857        —          —          —          —          —    

LG Display Japan Co., Ltd.

     564,061        —          —          —          —          12  

LG Display Germany GmbH

     518,689        —          —          —          —          8,913  

LG Display Taiwan Co., Ltd.

     410,048        —          —          —          —          351  

LG Display Nanjing Co., Ltd.

     3,509        —          —          —          116,663        —    

LG Display Shanghai Co., Ltd.

     335,235        —          —          —          —          25  

LG Display Poland Sp. z o.o.

     1,746        —          —          —          8,408        31  

LG Display Guangzhou Co., Ltd.

     18,436        —          1,831        —          599,453        2,803  

LG Display Shenzhen Co., Ltd.

     427,984        —          —          —          —          1  

LG Display Yantai Co., Ltd.

     6,292        —          4,594        —          528,656        9,099  

LG Display (China) Co., Ltd.

     11,823        —          —          —          216,106        —    

LG Display Singapore Pte. Ltd.

     293,412        —          —          —          —          3  

L&T Display Technology (Fujian) Limited

     103,199        —          —          —          12        295  

Nanumnuri Co., Ltd.

     24        —          —          —          —          4,620  

Global OLED Technology LLC

     —          —          —          —          —          1,477  

LG Display Guangzhou Trading Co., Ltd.

     140,155        —          —          —          —          —    

LG Display Vietnam Haiphong Co., Ltd.

     112        —          —          —          —          —    

Suzhou Lehui Display Co., Ltd.

     51,214        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,657,796        —          6,425        —          1,469,298        27,630  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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26. Related Parties and Others, Continued

 

(In millions of won)    2017  
                   Purchase and others  
     Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property,
plant and
equipment
     Outsourcing
fees
     Other costs  

Associates and their subsidiaries

                 

New Optics Ltd.(*)

   W 1        —          —          —          4        6  

WooRee E&L Co., Ltd.

     —          —          —          —          —          76  

INVENIA Co., Ltd.

     —          —          454        2,758        —          111  

AVATEC Co., Ltd.

     —          530        —          —          19,816        251  

Paju Electric Glass Co., Ltd.

     —          8,109        98,763        —          —          1,097  

Narenanotech Corporation(*)

     —          —          226        10,453        —          169  

YAS Co., Ltd.

     —          —          829        19,208        —          392  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1        8,639        100,272        32,419        19,820        2,102  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

                 

LG Electronics Inc.

   W 472,705        —          7,046        186,346        —          35,053  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Electronics India Pvt. Ltd.

   W 22,276        —          —          —          —          29  

LG Electronics Vietnam Haiphong Co., Ltd.

     52,956        —          —          —          —          37  

LG Electronics Reynosa S.A. DE C.V.

     36,801        —          —          —          —          325  

LG Electronics Almaty Kazakhstan

     4,043        —          —          —          —          —    

LG Electronics S.A. (Pty) Ltd

     5,182        —          —          —          —          3  

LG Electronics Mexicalli S.A.DE C.V.

     14,190        —          —          —          —          51  

LG Electronics RUS, LLC

     1,283        —          —          —          —          286  

 

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26. Related Parties and Others, Continued

 

(In millions of won)    2017  
                   Purchase and others  
     Sales
and others
     Dividend
income
     Purchase of raw
material and
others
     Acquisition of
property,
plant and
equipment
     Outsourcing
fees
     Other costs  

Subsidiaries of the entity that has significant influence over the Company

                 

LG Innotek Co., Ltd.

   W 4,274        —          41,118        —          —          3,143  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          26,898        —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     39,544        —          —          —          —          —    

Qingdao LG Inspur Digital Communication Co., Ltd.

     15,634        —          —          —          —          —    

HiEntech Co., Ltd.

     —          —          —          —          —          6,982  

Others

     1,589        —          3        —          —          1,713  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 197,772        —          41,121        26,898        —          12,569  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,328,274        8,639        154,864        245,663        1,489,118        77,354  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*) Represents transactions occurred prior to disposal of the entire investments.

 

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26. Related Parties and Others, Continued

 

  (c) Trade accounts and notes receivable and payable as of March 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)       
     Trade accounts and notes receivable
and others
     Trade accounts and notes payable and
others
 
     March 31, 2018      December 31, 2017      March 31, 2018      December 31, 2017  

Subsidiaries

           

LG Display America, Inc.

   W 1,264,899        1,795,757        —          —    

LG Display Japan Co., Ltd.

     232,634        230,804        4        2  

LG Display Germany GmbH

     358,991        497,677        3        —    

LG Display Taiwan Co., Ltd.

     493,476        436,943        98        106  

LG Display Nanjing Co., Ltd.

     4,792        176        164,908        85,646  

LG Display Shanghai Co., Ltd.

     149,239        176,816        1        74  

LG Display Poland Sp. z o.o.

     136        73        6,375        5,480  

LG Display Guangzhou Co., Ltd.

     358,089        345,212        63,987        189,996  

LG Display Guangzhou Trading Co., Ltd.

     111,195        88,876        —          —    

LG Display Shenzhen Co., Ltd.

     97,444        217,542        —          —    

LG Display Yantai Co., Ltd.

     127,269        123,059        216,296        30,397  

LG Display (China) Co., Ltd.

     85,149        55,309        133,109        150,933  

LG Display Singapore Pte. Ltd.

     200,285        187,420        5        1  

L&T Display Technology (Fujian) Limited

     53,716        57,545        164,976        177,487  

Nanumnuri Co., Ltd.

     —          —          2,397        2,453  

LG Display Vietnam Haiphong Co., Ltd.

     44,482        9,119        138,042        58,666  

Suzhou Lehui Display Co., Ltd.

     22,608        21,110        27,783        36,919  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,604,404        4,243,438        917,984        738,160  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26. Related Parties and Others, Continued

 

(In millions of won)       
     Trade accounts and notes receivable
and others
     Trade accounts and notes payable and
others
 
     March 31, 2018      December 31, 2017      March 31, 2018      December 31, 2017  

Associates and their subsidiaries

           

WooRee E&L Co., Ltd.

     —          —          52        61  

INVENIA Co., Ltd.

     2,280        2,375        8,817        18,523  

AVATEC Co., Ltd.

     530        —          4,682        2,949  

Paju Electric Glass Co., Ltd.

     —          —          64,375        60,141  

YAS Co., Ltd.

     250        375        16,700        6,474  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,060        2,750        94,626        88,148  
  

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Company

           

LG Electronics Inc.

   W 400,849        550,101        202,405        206,616  

 

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26. Related Parties and Others, Continued

 

(In millions of won)       
     Trade accounts and notes receivable
and others
     Trade accounts and notes payable and
others
 
     March 31, 2018      December 31, 2017      March 31, 2018      December 31, 2017  

Subsidiaries of the entity that has significant influence over the Company

           

LG Innotek Co., Ltd.

   W 4,266        407        55,586        58,741  

LG Hitachi Water Solutions Co., Ltd.

     —          —          210,998        154,079  

HiEntech Co., Ltd.

     —          —          5,672        4,854  

Inspur LG Digital Mobile Communications Co., Ltd.

     12,111        20,953        —          —    

LG Electronics Reynosa S.A. DE C.V.

     3,948        11,494        154        82  

LG Electronics India Pvt. Ltd.

     5,751        3,030        5        —    

LG Electronics Vietnam Haiphong Co., Ltd.

     25,033        36,017        1        1  

LG Electronics S.A. (Pty) Ltd

     2,326        2,400        2        4  

Qingdao LG Inspur Digital Communication Co., Ltd.

     5,140        9        —          80  

Others

     3,911        18,385        1,139        1,309  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 62,486        92,695        273,557        219,150  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,070,799        4,888,984        1,488,572        1,252,074  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26. Related Parties and Others, Continued

 

  (d) Details of significant cash transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)  
     2018      2017  

Associates

   Loans      Collection
of loans
     Loans      Collection
of loans
 

INVENIA Co., Ltd.

   W         —          125                —          83  

YAS Co., Ltd.

     —          125        —          83  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W —          250        —          166  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26. Related Parties and Others, Continued

 

  (e) Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Company and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the three-month periods ended March 31, 2018 and 2017 and as of March 31, 2018 and December 31, 2017 are as follows. These entities are not affiliates according to K-IFRS No. 1024, Related Party Disclosures.

 

(In millions of won)    For the three-month period ended
March 31, 2018
     March 31, 2018  
     Sales
and others
     Purchase and
others
     Trade accounts and
notes receivable

and others
     Trade accounts and
notes payable and
others
 

LG International Corp.and its subsidiaries

   W 184,257        264,777        131,321        191,030  

LG Uplus Corp.

     —          223        —          33  

LG Chem Ltd. and its subsidiaries

     1,564        193,552        6,067        114,821  

Serveone Co., Ltd. and its subsidiaries

     97        336,299        21,543        497,437  

Silicon Works Co., Ltd.

     —          143,295        —          148,397  

LG Corp.

     —          12,791        6,794        6,951  

LG Management Development Institute

     —          2,813        3,480        607  

LG CNS Co., Ltd. and its subsidiaries

     —          30,771        —          34,145  

LG Hausys Ltd.

     1,110        1        —          —    

G2R Inc. and its subsidiaries

     —          4,041        —          5,301  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 187,028        988,563        169,205        998,722  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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26. Related Parties and Others, Continued

 

(In millions of won)    For the three-month period ended
March 31, 2017
     December 31, 2017  
     Sales
and others
     Purchase and
others
     Trade accounts and
notes receivable
and others
     Trade accounts and
notes payable and
others
 

LG International Corp.and its subsidiaries

   W 130,914        277,908        110,786        186,799  

LG Household & Health Care, Ltd. and its subsidiaries

     1        1        —          —    

LG Uplus Corp.

     51        185        —          1,505  

LG Chem Ltd. and its subsidiaries

     5        205,512        8,659        127,416  

SK Siltron Co., Ltd. ( formerly, Siltron Co., Ltd.)(*)

     10        —          —          —    

Lusem Co., Ltd.(*)

     5        499        1        53  

Serveone Co., Ltd. and its subsidiaries

     115        281,368        21,565        491,719  

Silicon Works Co., Ltd.

     —          147,017        —          120,031  

LG Corp.

     —          15,699        4,700        1,523  

LG Management Development Institute

     —          2,009        3,480        699  

LG CNS Co., Ltd. and its subsidiaries

     37        22,183        —          90,374  

LG Hausys Ltd.

     418        44        —          374  

G2R Inc. and its subsidiaries

     —          829        —          14,275  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 131,556        953,254        149,191        1,034,768  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*) Represents transactions occurred prior to disposal of the entire investments.

 

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26. Related Parties and Others, Continued

 

  (f) Key management personnel compensation

Compensation costs of key management for the three-month periods ended March 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Short-term benefits

   W 888        1,317  

Expenses related to the defined benefit plan

     273        93  
  

 

 

    

 

 

 
   W 1,161        1,410  
  

 

 

    

 

 

 

Key management refers to the registered directors who have significant control and responsibilities over the Company’s operations and business.

 

27. Subsequent Event

 

  (a) In April 2018, the Company received advances from a customer amounting to USD 300 million (W320,670 million) in aggregate in connection with long-term supply agreements. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the sale of products thereafter. The Company received a payment guarantee from the Export-Import Bank of Korea amounting to USD 300 million (W320,670 million) relating to advances received.

 

  (b) In April 2018, LG Display Vietnam Haiphong, Co., Ltd. take out the term loan credit facilities, and the Company provides a payment guarantee in connection with that term loan amounting to USD 200 million (W214,740 million) for principals.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  LG Display Co., Ltd.
  (Registrant)  
Date: May 15, 2018   By:  

/s/ Heeyeon Kim

    (Signature)
  Name:  

Heeyeon Kim

  Title:   Head of IR / Vice President