Hyundai Mobis : 2024 Annual Consolidated Financial Statements Audit Report

HYUNDAI MOBIS CO., LTD. AND ITS SUBSIDIARIES

Consolidated financial statements

for each of the two years in the period ended December 31, 2024 with the independent auditor's report

Table of contents

Page

Independent Auditor's Report Consolidated Financial Statements

Consolidated Statements of Financial Position 1

Consolidated Statements of Profit or Loss 3

Consolidated Statements of Comprehensive Income 4

Consolidated Statements of Changes in Equity 5

Consolidated Statements of Cash Flows 7

Notes to the Consolidated Financial Statements 9

Audit opinion on internal control over financial reporting

Independent auditor's report on internal control over financial reporting ("ICFR")

Management's Report on the Effectiveness of Consolidated Internal Control over Financial Reporting

Ernst & Young Han Young

2-3F, 7-8F, Taeyoung Building, 111, Yeouigongwon-ro, Yeongdeungpo-gu, Seoul 07241 Korea

Tel: [phone]

Fax: + 82 2 783 5890

ey.com/kr

Independent Auditor's Report

(English translation of a report originally issued in Korean)

The Shareholders and Board of Directors HYUNDAI MOBIS CO., LTD.

Opinion

We have audited the consolidated financial statements of HYUNDAI MOBIS CO., LTD. and its subsidiaries (collectively referred to as the "Group"), which comprise the consolidated statements of financial position as of December 31, 2024 and 2023, and the consolidated statements of profit or loss, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for each of the two years in the period ended December 31, 2024, and the notes to the consolidated financial statements, including material accounting policy information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2024 and 2023, and its consolidated financial performance and its consolidated cash flows for each of the two years in the period ended December 31, 2024 in accordance with International Financial Reporting Standards as adopted by the Republic of Korea ("KIFRS").

We have audited the Group's internal control over financial reporting ("ICFR") as of December 31, 2024 based on the Conceptual Framework for Design and Operation of ICFR established by the Operating Committee of ICFR in Korea in accordance with Korean Standards on Auditing ("KSA"), and our report dated March 5, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

We conducted our audit in accordance with KSA. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matter

A key audit matter is the matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements of the current period. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

Appropriate cut-off of revenue recognition of parts for after sales service

As described in Notes 3-(20) and 29 to the consolidated financial statements, the Group is engaged in the parts business for after sales service in significant scale and recognizes the related consideration as revenue when the control of goods is transferred in a contract with a customer. The Group's sales of parts for after sales service are transacted with various customers, and the timing of revenue recognition may differ depending on the contract with the customer, and thus, the inherent risk of cut-off of revenue recognition is high. Therefore, we identified the appropriateness of sales cut-off of parts for after sales service as a key audit matter in consideration of the significance of sales of parts for after sales service in the Group's revenues and the significant risk of misstatement in the cut-off of revenue recognition, which may occur depending on the terms of contracts with various customers.

Our procedures performed with regard to the key audit matter are as follows:

• Review the time when the control is transferred on the basis of revenue recognition under KIFRS by reviewing the Group's major contract terms and conditions.

• Obtain an understanding of the Group's policies, processes and the Group's internal control over revenue

  recognition of parts for after sales service.

• Evaluate the effectiveness of the design and operation of the Group's internal control over cut-off of sales of parts for after sales service.

• Compare the accounting records with supporting documents of sales transactions of parts for after sales

  service occurring on and around the year end, on a sample basis.

  Responsibilities of management and those charged with governance for the consolidated financial statements

  Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with KIFRS, and for such internal control as management determines is necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.

  In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

  Those charged with governance are responsible for overseeing the Group's financial reporting process.

  Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

  Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with KSA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

  As part of an audit in accordance with KSA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are

  appropriate in the circumstances.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based

  on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including

  the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business

activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Hee-Yeong Kim.

March 5, 2025

This audit report is effective as of March 5, 2025, the independent auditor's report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the date of the independent auditor's report to the time this report is used. Such events and circumstances could significantly affect the accompanying consolidated financial statements and may result in modifications to this report.

HYUNDAI MOBIS CO., LTD. AND ITS SUBSIDIARIES

Consolidated Financial Statements

For each of the two years in the period ended December 31, 2024

"The accompanying consolidated financial statements, including all footnotes and disclosures, have been prepared by, and are the responsibility of, the Group."

Gyusuk Lee

Chief Executive Officer HYUNDAI MOBIS Co., Ltd.

Assets
Cash and cash equivalents	5,40	W4,788,492	W5,079,414
Other financial assets	6,7,40	5,851,738	4,123,326
Trade and other receivables, net	8,22,29,36,40	10,284,362	10,134,237
Inventories, net	4,9	6,762,941	5,511,638
Other current assets	10,40	730,099	716,539
Non-current Assets Held for Sale	41	6,441	-
Total current assets		28,424,073	25,565,154
Property, plant and equipment, net	4,11,22,37	12,003,452	10,480,920
Intangible assets, net	4,12	1,167,190	1,034,350
Investment property, net	13	39,539	53,094
Right-of-use assets, net	14	560,951	529,805
Investments in associates and joint ventures	15	22,410,344	18,984,841
Non-current financial assets	16,40	1,024,599	911,165
Deferred tax assets	34	233,410	237,519
Other non-current assets	6,8,17,23,40	733,347	788,997
Total non-current assets		38,172,832	33,020,691
Total assets		W 66,596,905	W 58,585,845

(continued)

Liabilities Trade and other payables	18,36,40	W	8,089,243	W	7,742,151
Current portion of long-term debt and short-term borrowings	22,39,40		1,071,184		1,540,144
Current lease liabilities	39,40	145,865		124,981
Income taxes payable	34	524,594		226,196
Current provisions for warranties	21	1,344,842		1,205,747
Other current liabilities	19,40	1,569,454		1,213,607
Total current liabilities		12,745,182		12,052,826
Bonds and long-term borrowings	22,39,40	1,927,485		692,062
Defined benefit obligations	23	16,671		14,543
Non-current lease liabilities	39,40	409,912		393,427
Non-current provision for warranties	21	380,585		372,460
Deferred tax liabilities	34	4,521,376		3,849,502
Other non-current liabilities	20,40	477,462		555,726
Total non-current liabilities		7,733,491		5,877,720
Total liabilities		20,478,673		17,930,546
Equity Capital stock	24	491,096		491,096
Capital surplus	24	1,367,293		1,363,146
Treasury stock	25	(571,878)		(681,939)
Other equity	26	1,883,219		(177,414)
Retained earnings	27	42,911,192		39,639,529
Equity attributable to owners of the Company		46,080,922		40,634,418
Non-controlling interests	1	37,310		20,881
Total equity		46,118,232		40,655,299
Total liabilities and equity		W 66,596,905		W 58,585,845

The accompanying notes are an integral part of the consolidated financial statements.

Revenue	4,29,36	W	57,236,995		W	59,254,361
Cost of sales	30,36		(49,174,367)			(52,492,187)
Gross profit			8,062,628			6,762,174
Selling, general and administrative expenses	30,31,33	(4,989,172)			(4,466,890)
Operating profit	4	3,073,456			2,295,284
Other income	32,33	518,144			350,832
Other expenses	32,33	(440,551)			(265,580)
Finance income	33	812,053			824,814
Finance costs	33	(486,348)			(605,237)
Share of profit of associates and joint ventures	15	1,787,722			1,844,741
Profit before income taxes		5,264,476			4,444,854
Income tax expense	34	(1,204,315)			(1,021,545)
Profit for the year		W 4,060,161			W 3,423,309
Profit attributable to: Owners of the Company	35	W4,055,642			W3,422,616
Non-controlling interests	1	4,519			693
Earnings per share
Basic earnings per share in won	35	W 44,939			W 37,639

The accompanying notes are an integral part of the consolidated financial statements.

(In millions of won)		Note	2024	2023
Profit for the year			W4,060,161	W3,423,309
Other comprehensive income			1,857,773	38,206
Items that will not be reclassified subsequently	to
profit or loss:
Remeasurements of defined benefit plan, net of tax		23	(73,687)	(68,271)
Change in retained earnings of equity method
investments	15		(141,150)		(180,685)
Gain on financial assets at FVOCI, net of tax	16,26		67,256		620
Change in equity of equity method investments	15,26		140,706		6,498
			(6,875)		(241,838)
Items that may be reclassified to profit or loss:
Translation of foreign operations	26		619,548		87,667
Change in equity of equity method investments	15,26		1,245,100		192,377
			1,864,648		280,044
Total comprehensive income for the year			W 5,917,934		W 3,461,515
Total comprehensive income attributable to:
Owners of the Company			W5,912,894		W3,461,326

Non-controlling interests 5,040 189

The accompanying notes are an integral part of the consolidated financial statements.

(In millions of won)	Capital Stock		Capital surplus		Treasury stock		Other equity		Retained earnings		controlling interests		Total equity
Balance as of January 1, 2023	W 491,096		W 1,362,200		W (568,475)		W (464,875)		W 36,979,291		W 8,395		W 37,807,632
Total comprehensive income (loss):
Profit for the year Gain (Loss) on financial assets at	-		-		-		-		3,422,616		693		3,423,309
FVOCI, net of tax	-		-		-		644		-		(24)		620
Translation of foreign operations, net
of tax	-		-		-		87,942		-		(275)		87,667
Net change of equity method
accounted investments, net of tax	-		-		-		198,875		(180,685)		-		18,190
Remeasurements of defined benefit
plan, net of tax	-		-		-		-		(68,066)		(205)		(68,271)
Total comprehensive income for the
year	-		-		-		287,461		3,173,865		189		3,461,515

Transactions with owners of the Company, recognized directly in equity:

Dividends	-	-	-	-	(367,157)		(367,157)
Change in Treasury stock	-	860	(113,464)	-	(146,470)	-	(259,074)
Change in equity in subsidiaries Total transactions with owners of the Company, recognized directly in equity	- -	86 946	- (113,464)	- -	- (513,627)	12,297 12,297	12,383 (613,848)

Balance as of December 31, 2023 W 491,096 W 1,363,146 W (681,939) W (177,414) W 39,639,529 W 20,881 W 40,655,299

(continued)

Capital

Capital

Treasury

Other

Retained

controlling

Total

(In millions of won)

Stock surplus stock equity earnings interests equity

Balance as of January 1, 2024	W 491,096 W 1,363,146		W (681,939)	W (177,414)	W 39,639,529	W 20,881	W 40,655,299
Total comprehensive income (loss):
Profit for the year Gain (Loss) on financial assets at	-	-	-	-	4,055,642	4,519	4,060,161
FVOCI, net of tax	-	-	-	67,343	(87)	-	67,256
Translation of foreign operations, net of tax	-	-	-	618,873	-	675	619,548
Net change of equity method
accounted investments, net of tax Remeasurements of defined benefit	-	-	-	1,385,806	(141,150)	-	1,244,656
plan, net of tax	-	-	-	-	(73,533)	(154)	(73,687)
Total comprehensive income for the year	-	-	-	2,072,022	3,840,872	5,040	5,917,934

Transactions with owners of the Company, recognized directly in equity:

Dividends	-	-	-	-	(406,219)		(406,219)
Change in Treasury stock	-	4,147	110,061	-	(162,990)	-	(48,782)
Change in equity in subsidiaries	-	-	-	(11,389)	-	11,389	-
Total transactions with owners of
the Company, recognized directly in equity	-	4,147	110,061	(11,389)	(569,209)	11,389	(455,001)
Balance as of December 31, 2024	W 491,096 W 1,367,293 W (571,878)			W 1,883,219 W 42,911,192		W 37,310	W 46,118,232

The accompanying notes are an integral part of the consolidated financial statements.

(In millions of won)	Note	2024		2023
Cash flows from operating activities
Cash flows generated from operations	38	W 3,863,053		W5,376,499
Interest received		416,356		366,175
Interest paid		(114,390)		(121,697)
Dividends received		759,648		488,630
Income tax paid		(671,973)		(766,976)
Net cash flows provided by operating activities		4,252,694		5,342,631
Cash flows from investing activities Net increase in financial assets at amortized cost		(1,882,465)		(188,169)
Disposal of financial assets at FVPL		711		320
Acquisition of financial assets at FVPL		(11,493)		(1000)
Disposal of financial assets at FVOCI		3,938		5,898
Acquisition of financial assets at FVOCI		(10,493)		(100)
Disposal of investments in associates		19,300		313
Acquisition of investments in associates		(858,550)		(487,847)
Decrease in short-term loans		124,174		15,926
Net Decrease (Increase) in long-term loans		1,417		(106)
Disposal of property, plant and equipment		116,453		37,937
Acquisition of property, plant and equipment		(2,204,080)		(1,801,887)
Disposal of intangible assets		3,662		476
Acquisition of intangible assets		(160,979)		(111,329)
Net Decrease (Increase) in deposits provided		6,233		(11,817)
Business transfer		244,315		-
Receipt of government grants		18,765		-
Net cash flows used in investing activities		(4,589,092)		(2,541,385)
Cash flows from financing activities Payment of lease liabilities		(184,985)		(159,655)

Proceeds from current portion of long-term debt and short-term borrowings

Repayment of current portion of long-term debt and short-term borrowings

821,099 3,680,534

(1,575,691) (4,929,952)

Change in equity in subsidiaries	-		12,383
Proceeds from long-term borrowings	1,362,920		255,503
Repayment of long-term borrowings	(109,118)		(78,085)
Dividends paid	(406,219)		(367,157)
Acquisition of treasury stock	(162,990)		(302,972)
Net cash flows used in financing activities	(254,984)		(1,889,401)

Effect of changes in foreign exchange rates on cash and cash equivalents

300,460 79,321

Net increase (decrease) in cash and cash equivalents		(290,922)			991,166
Cash and cash equivalents at the beginning of year		5,079,414			4,088,248
Cash and cash equivalents at the end of year	W	4,788,492		W	5,079,414

The accompanying notes are an integral part of the consolidated financial statements.

1. General Description of the Company and its Subsidiaries

1. General description of the Company

   HYUNDAI MOBIS Co., Ltd. (the "Company") engages in the auto parts business, mainly manufacturing parts and modules, for car production, after-sales services, and others. The shares of the Company have been listed on the Korea Stock Exchange since September 5, 1989.

   The main office is located in Yeok-Sam, Gangnam-gu, Seoul, and its module factories are located in Ul-San, Kyoung-In and Chung-Cheong, Republic of Korea. The Company also has a R&D lab located in Yong-In, Republic of Korea.

   The Company's common stockholders as of December 31, 2024 and 2023 are as follows:

   (In shares) December 31, 2024 December 31, 2023

   Stockholders	Number of shares	Percentage of ownership	Number of shares	Percentage of ownership
   KIA CORPORATION	16,427,074	17.66%	16,427,074	17.54%
   Mong-Ku Chung	6,778,966	7.29%	6,778,966	7.24%
   Hyundai Steel Company	5,504,846	5.92%	5,504,846	5.88%
   KT Corporation	1,383,893	1.49%	1,383,893	1.48%
   Hyundai Glovis Co., Ltd.	656,293	0.71%	656,293	0.70%
   Eui-Sun Chung	303,759	0.33%	303,759	0.32%
   Treasury stock	2,504,454	2.69%	2,986,451	3.19%
   Others	59,435,809	63.91%	59,613,812	63.65%
   Total	92,995,094	100.00%	93,655,094	100.00%

   The consolidated financial statements comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interest in associates and joint ventures.

   1. General Description of the Company and its Subsidiaries, Continued

2. Details of subsidiaries

   Details of subsidiaries included in consolidation as of December 31, 2024 and 2023 are as follows:

   Ownership

   Company	Location	Business	Reporting date	2024	2023
   Hyundai IHL Co., Ltd.	Korea	Manufacturing the auto lighting and electric apparatus	31-Dec	99.38%	99.38%
   Global Information Technology Co., Ltd.	Korea	Manufacturing diagnostic System	31-Dec	80.54%	80.54%
   H Green Power Inc.	Korea	Manufacturing of storage battery	31-Dec	100.00%	100.00%
   MOTRAS	Korea	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   UNITUS	Korea	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis America, Inc.	USA	Holding company	31-Dec	100.00%	100.00%
   Mobis Alabama, LLC(*1)	USA	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis Parts America, LLC(*1)	USA	Sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis Parts Miami, LLC(*1)	USA	Sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis North America electrified Powertrain, LLC(*1)	USA	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   American Autoparts, Inc.	USA	Holding company	31-Dec	100.00%	100.00%
   Mobis North America, LLC(*2)	USA	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis US Alabama, LLC(*2)	USA	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis US Electrified Powertrain, LLC(*2)	USA	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   GIT America., Inc.(*3)	USA	Sales of diagnostic System	31-Dec	100.00%	100.00%
   Mobis Parts Canada Corporation	Canada	Sales of auto-parts	31-Dec	100.00%	100.00%
   Hyundai Mobis Mexico, S. De R.L. De C.V.(*4)	Mexico	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis Brasil Fabricacao De Auto Pecas Ltda.	Brazil	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis Parts Europe N.V.	Belgium	Sales of auto-parts	31-Dec	100.00%	100.00%
   GIT Europe GmbH(*3)	Germany	Sales of diagnostic System	31-Dec	100.00%	100.00%
   Mobis Parts CIS, LLC(*5)	Russia	Sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis Module CIS, LLC(*6)	Russia	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis Automotive Czech s.r.o.	Czech	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis Automotive System Czech s.r.o.	Czech	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis Slovakia s.r.o.	Slovakia	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis Automotive and Module Industry Trade Co. - Joint Stock Company	Turkey	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis Spain Electrified Powertrain S.L(*10)	Spain	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Hyundai Motor (Shanghai) Co., Ltd.	China	Sales of auto-parts	31-Dec	100.00%	100.00%
   Shanghai Hyundai Mobis Automotive Parts Co., Ltd.	China	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Wuxi Mobis Automotive Parts Co., Ltd.(*7)	China	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Jiangsu Mobis Automotive Parts Co., Ltd.	China	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Beijing Hyundai Mobis Automotive Parts Co., Ltd.	China	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Tianjin Mobis Automotive Parts Co., Ltd.	China	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Cangzhou Hyundai Mobis Automotive Parts Co., Ltd.	China	Manufacturing and sales of auto-parts	31-Dec	90.00%	90.00%
   ChongQing Hyundai Mobis Automotive Parts Co., Ltd. (*9)	China	Manufacturing and sales of auto-parts	31-Dec	100.00%	90.00%
   GIT Beijing Automotive Technology Inc.(*3)	China	Sales of diagnostic system	31-Dec	100.00%	100.00%
   Mobis Parts Middle East FZE	UAE	Sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis Auto Parts Middle East Egypt(*8)	Egypt	Sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis India, Ltd.	India	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   Mobis India Module Private Limited	India	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%
   GIT India Corporation Private Limited(*3,*11)	India	Sales of diagnostic system	31-Dec	100.00%	-
   Mobis Parts Australia PTY., Ltd.	Australia	Sales of auto-parts	31-Dec	100.00%	100.00%
   PT Hyundai Energy Indonesia	Indonesia	Manufacturing and sales of auto-parts	31-Dec	60.00%	60.00%
   Mobis Hungary kft.	Hungary	Manufacturing and sales of auto-parts	31-Dec	100.00%	100.00%

   1. General Description of the Company and its Subsidiaries, Continued

   (*1) Mobis America, Inc. owns 100.00% of its shares.

   (*2) American Autoparts, Inc. owns 100.00% of its shares.

   (*3) Global Information Technology Co., Ltd. holds the ownership interests, and the ownership ratio of GIT is presented above.

   (*4) The Group and Mobis America, Inc. own 98.37% and 1.63% of its shares, respectively. (*5) Mobis Parts Europe N.V. owns 100.00% of its shares.

   (*6) The Group and Mobis Parts CIS, LLC own 99.00% and 1.00% of its shares, respectively.

   (*7) The Group and Shanghai Hyundai Mobis Automotive Parts Co., Ltd. own 33.75% and 66.25% of its shares, respectively.

   (*8) Mobis Parts Middle East FZE owns 100.00% of its shares.

   (*9) For the year ended December 31, 2024, the Group acquired 10% of its shares from Hyundai Motor Group (China)Ltd.

   (*10) For the year ended December 31, 2024, the name has changed from Mobis Automotive Solutions Spain, S.L.U. to MOBIS Spain Electrified Powertrain S.L.

   (*11) For the year ended December 31, 2024, GIT India Corporation Private Limited was established as a subsidiary of Global Information Technology Co., Ltd.

3. Changes in subsidiaries

   Subsidiaries included in or excluded from the consolidated financial statements for the year ended December 31, 2024 are as follows:

   Subsidiaries Details

   GIT India Corporation Private Limited Newly established

   1. General Description of the Company and its Subsidiaries, Continued

4. Financial information on subsidiaries

   ① The financial information on subsidiaries as of and for the year ended December 31, 2024 is summarized as follows:

   (In millions of won)

   Company Assets Liabilities Revenue Profit (loss)

   Mobis America Inc.(*1)	W	6,886,336	W	4,061,865	W	10,103,183	W	191,700
   Beijing Hyundai Mobis Automotive Parts Co.,
   Ltd.		1,335,270		426,221		997,034		(9,728)
   Jiangsu Mobis Automotive Parts Co., Ltd.		1,451,588		693,081		1,328,429		47,742
   Mobis Parts Europe N.V.		1,621,587		420,960		2,084,257		227,670
   Hyundai Mobis Mexico, S. De R.L. De C.V.		1,842,341		1,345,962		2,538,753		(2,944)
   Mobis India, Ltd.		1,447,483		447,748		2,733,175		256,414
   Mobis Slovakia s.r.o.		1,069,783		502,162		2,953,104		113,800
   Mobis Automotive Czech s.r.o.		784,308		511,833		2,859,684		65,120
   American Autoparts Inc.(*2)		666,250		341,972		1,716,982		31,461

   (*1) The consolidated financial statements of Mobis America, Inc. include the financial information of Mobis Alabama, LLC, Mobis Parts Miami LLC, Mobis Parts America, LLC and Mobis North America electrified Powertrain.

   (*2) The consolidated financial statements of American Auto Parts Inc. include the financial information of Mobis North America, LLC, Mobis US Alabama, LLC and Mobis US Electrified Powertrain, LLC.

   ② The financial information on subsidiaries as of and for the year ended December 31, 2023 is summarized as follows:

   Assets Liabilities Revenue Profit (loss)

   Mobis America Inc.(*1) Beijing Hyundai Mobis Automotive Parts Co., Ltd.	W	4,651,971 1,360,489	W	2,355,431 534,416	W	8,905,659 1,157,663	W	194,444 (6,627)
   Jiangsu Mobis Automotive Parts Co., Ltd.		1,160,050		524,169		783,303		6,512
   Mobis Parts Europe N.V.		1,199,091		298,865		1,827,797		180,501
   Hyundai Mobis Mexico, S. De R.L. De C.V.		1,363,114		924,998		1,872,152		102,686
   Mobis India, Ltd.		1,030,169		374,352		2,480,696		208,380
   Mobis Slovakia s.r.o.		919,636		442,936		2,802,847		86,954
   Mobis Automotive Czech s.r.o.		619,231		427,942		3,149,707		40,296
   American Autoparts Inc.(*2)		635,053		380,355		2,056,167		(10,072)

   (*1) The consolidated financial statements of Mobis America, Inc. include the financial information of Mobis Alabama, LLC, Mobis Parts Miami, LLC, and Mobis Parts America, LLC and Mobis North America electrified Powertrain.

   (*2) The consolidated financial statements of American Auto Parts Inc. include the financial information of Mobis North America, LLC, and Mobis US Alabama, LLC and Mobis US Electrified Powertrain, LLC.

   1. General Description of the Company and its Subsidiaries, Continued

5. The financial information on non-controlling interests (before intercompany transaction eliminations) as of December 31, 2024 and 2023 and for each of the two years in the period ended December 31, 2024 is summarized as follows:

① As of and for the year ended December 31, 2024

(In millions of won)

Hyundai IHL Co., Ltd.

Global Information Technology Co., Ltd.

Cangzhou Hyundai Mobis Automotive Parts Co., Ltd.

ChongQing Hyundai MOBIS

Automotive Parts Co. Ltd.(*2)

PT

Hyundai Energy Indonesia

Total

Accumulated non-controlling interests(*1)	W	21		27,944		(3,405)		-		12,750	37,310
Profit (loss) allocated to non-controlling
interests(*1)		52		7,451		(2,641)		(505)		162	4,519
Cash flows from operating activities		9,970		35,577		5,572		(8,604)		16,836	59,351
Cash flows from investing activities		(12,107)		(34,902)		(85)		(23)		(28,220)	(75,337)
Cash flows from financing activities before
dividends to non-controlling interests		(5,897)		(509)		(30)		-		-	(6,436)
Effect of changes in foreign exchange rates
on cash and cash equivalents		-		2,429		2,677		1,887		1,733	8,726
Net increase (decrease) in cash and cash
equivalents		(8,034)		2,595		8,134		(6,740)		(9,651)	(13,696)

(*1) Accumulated non-controlling interests and profit or loss allocated to non-controlling interests are presented as the amounts after consolidation adjustments.

(*2) For the year ended December 31, 2024, The Group acquired a 10% stake in ChongQing Hyundai Mobis Automotive Parts Co., from Ltd.Hyundai Motor Group (China) Ltd.

② As of December 31, 2023
						Cangzhou		ChongQing
				Global		Hyundai		Hyundai		PT
				Information		Mobis		MOBIS		Hyundai
		Hyundai IHL		Technology		Automotive		Automotive		Energy
(In millions of won)		Co., Ltd.		Co., Ltd.		Parts Co., Ltd.		Parts Co. Ltd.		Indonesia(*2)	Total
Accumulated non-controlling interests(*1)	W	(18)		20,205		(535)		(10,325)		11,554	20,881
Profit (loss) allocated to non-controlling
interests(*1)		17		3,860		(1,831)		(1,054)		(299)	693
Cash flows from operating activities		31,457		25,594		21,757		3,361		(4,222)	77,947
Cash flows from investing activities		(12,757)		(3,118)		402		1,192		(23,981)	(38,262)
Cash flows from financing activities before
dividends to non-controlling interests		(10,789)		(387)		(25,743)		(43,274)		35,036	(45,157)
Effect of changes in foreign exchange rates
on cash and cash equivalents		-		(405)		(14)		513		264	358
Net increase (decrease) in cash and cash
equivalents		7,911		21,684		(3,598)		(38,208)		7,097	(5,114)

(*1) Accumulated non-controlling interests and profit or loss allocated to non-controlling interests are presented as the amounts after consolidation adjustments.

(*2) The effect of changes in non-controlling interests due to the paid-in capital increase of PT Hyundai Energy Indonesia during the prior period are included in the cumulative non-controlling interests.

1. Basis of Preparation

   1. Statement of compliance

      The Group prepares statutory financial statements in Korean in accordance with International Financial Reporting Standards as adopted by the Republic of Korea ("KIFRS"), enacted by the Act on External Audit of Stock Companies. The accompanying consolidated financial statements have been translated into English from Korean financial statements. In the event of any differences in interpreting the financial statements or the independent auditor's report thereon, Korean version, which is used for regulatory reporting purposes, shall prevail.

   2. Basis of measurement

      The consolidated financial statements have been prepared on the historical cost basis, except as described in notes herein.

   3. Functional and presentation currency

      The Group presents each account in functional currency (currency of economic environment) with which the Group carries out its operating activities. These consolidated financial statements are presented in Korean won, which is the Company's functional currency and the currency of the primary economic environment in which the Group operates.

   4. Use of estimates and judgments

   The preparation of the consolidated financial statements in conformity with KIFRS 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. Information about critical assumptions and estimates is included in Note 3-(25).

2. Material Accounting Policies

The material accounting policies applied by the Group in preparation of its consolidated financial statements are included below and have been applied consistently to all periods presented in these consolidated financial statements.

(1) Basis of consolidation

① Subsidiaries

Subsidiaries are entities controlled by the Group. The Group exercises control over the investee when it has exposure to variable interests due to its involvement in the investee or has a right to a variable interest and the ability of the investee to influence those interests on its own initiative. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which the parent obtains control of the subsidiary until the parent ceases to have control.

The Group uses acquisition method to account for business combination. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, liabilities incurred and equity interests issued by the Company, together with the cost which is imputed to acquisition cost. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values of the acquisition date, regardless of non-controlling interests. Goodwill is the excess of the consideration transferred over the net assets recognized, imputed to the Group's interest.

3. Material Accounting Policies, Continued

1. Basis of consolidation, continued

   ① Subsidiaries, continued

   In case that the fair value of the net assets exceeds the acquisition cost, the difference is recognized in the consolidated statement of profit or loss.

   Intra-group balances and transactions, and any unrealized gains and losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. If a member of the Group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in preparing the consolidated financial statements.

   ② Non-controlling interests

   Non-controlling interests in a subsidiary are accounted for separately from the parent's ownership interests in a subsidiary. Each component of net profit or loss and other comprehensive income is attributed to the owners of the parent and non-controlling interest holders, even when the allocation reduces the non-controlling interest balance below zero. In addition, changes in ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions with owners in their capacity as owners.

   ③ Associates

   Associates are all entities over which the Group has significant influence but does not control or joint control. If the Group holds, directly or indirectly, 20% or more of the voting power of the investee, it is presumed that the Group has significant influence. Although the Group holds less than 20% of the voting power of the investee, it is classified as associates if significant influence can be clearly demonstrated. Investments in associates are accounted for by using the equity method of accounting and are initially recognized at acquisition cost. The Group's investments in associates include goodwill identified on acquisition, net of any accumulated impairment loss.

   The Group's share of its associates' post-acquisition profits or losses is recognized in the consolidated statement of profit or loss, and its share of post-acquisition movements in reserves is recognized in reserves. Changes in shareholders' equity of associates attributable to changes in other equity are recognized as the changes in other equity of the Group. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate.

   Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group's interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed when necessary to ensure consistency with policies adopted by the Group.

   ➃ Joint venture

   A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. As with associates, investments in joint ventures are accounted for by using the equity method of accounting and are initially recognized at cost. The Group's investment in jointly controlled entities includes goodwill identified on acquisition, net of any accumulated impairment loss.

   3. Material Accounting Policies, Continued

2. Operating segment

   In order to make decision on the distribution of resources on each segment and to evaluate the performance of each segment, the Group divides segment according to the internal report that are periodically reviewed by chief operating decision maker.

3. Foreign currencies

   ① Foreign currency transactions and balances

   Foreign currency transactions are translated into the functional currency using the foreign exchange rates prevailing at the date of the transactions or that of valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end foreign exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statement of profit or loss.

   Foreign exchange gains and losses related to borrowings and cash and cash equivalents are presented in the consolidated statement of profit or loss within financial income or expenses. All other foreign exchange gains and losses are presented in the consolidated statement of profit or loss within other income or expenses.

   ② Translations of financial statements of consolidated companies

   The results and financial position of all the consolidated entities that have a functional currency different from the presentation currency are translated as follows:

   • assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

   • income and expenses for each statement of income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

   • all resulting exchange differences are recognized in other comprehensive income.

4. Cash and cash equivalents

   Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and are used by the Group in management of its short-term commitments.

5. Non-derivative financial instruments

① Recognition and initial measurement

Trade receivables and debt securities are recognized for the first time at the time of issue. Other financial instruments and financial liabilities are recognized only when the Group becomes a party to the financial instruments.

Except for trade receivables that do not include significant financial assets, are measured at fair value at the time of initial recognition and financial assets at fair value through profit or loss or financial liabilities at fair value through profit or loss transaction costs directly related to the acquisition of the financial asset or the issuance of the financial liability are added to or subtracted from the fair value. Trade receivables that do not include significant financial elements are initially measured at transaction prices.

3. Material Accounting Policies, Continued

(5) Non-derivative financial instruments, continued

② Classification and subsequent measurements

Financial assets

At initial recognition, financial assets are amortized cost, other comprehensive income - fair value debt instruments, other comprehensive income - fair value equity instruments or profit or loss - classified as measured at fair value.

Financial assets are not reclassified after initial recognition, unless the entity modifies the financial asset management model, in which case all of the financial assets impacted are reclassified on the first day of the first reporting period after the change in the business model.

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

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; 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 FVPL:

• 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 FVPL. 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 FVPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. However, once a financial asset is designated as FVPL, it shall be canceled.

3. Material Accounting Policies, Continued

(5) Non-derivative financial instruments, continued

② Classification and subsequent measurements, continued

Financial assets - Business model

The Group assess the purpose of the business model held at the portfolio level of the financial asset because it best reflects how the business is managed and how information is provided to management. Such information considers the following:

• the accounting policies and objectives and the actual implementation of these policies for the portfolio.

  It focuses on acquiring contractual interest, maintaining a certain level of interest rates, aligning the duration of the debt with the duration of the financial assets and the duration of the financial asset, or leaking or realizing the expected cash flow through the sale of the asset includes executive strategy.

• evaluation of the performance of the financial assets held by the business model and report of the evaluation to key management personnel;

• the risks that affect the performance of the business model (and the financial assets held in the business model) and the way in which they are managed;

• the manner of compensation to management (e.g. compensation based on the fair value of the assets under management or contractual cash flows received); and

• the frequency, amount, timing and reasons for the sale of financial assets in the past and the forecasts of future selling activities.

For this purpose, transfers of financial assets to third parties in transactions that do not meet the derecognizing requirements are not considered for sale. A portfolio of financial assets that meets the definition of trading or whose performance is valued at fair value through profit or loss is measured at fair value through profit or loss.

Financial assets - An assessment of whether contractual cash flows consist solely of principal and interest

The principal is defined as the fair value at the initial recognition of the financial assets.

Interest is comprised in time value of money, value for the credit risk associated with principal and another cost of basic rental risk and margin.

When assessing whether contractual cash flows consist solely of payments for principal and interest, the Group takes into account conditions of contract. If the financial assets include contractual terms that change the timing or amount of cash flows in the contract, it is necessary to determine whether the cash flows that may occur during the period of the financial assets consist solely of principal payments.

The Group considers the following:

• conditional circumstances that change the amount or timing of cash flows;

• provisions that adjust the contractual face-to-face interest rate, including variable interest rate characteristics;

• medium prepayment and maturity extension characteristics; and

• terms and conditions that limit claims on cash flows arising from specific assets (e.g. non-recourse features)

The amount of the medium prepayment represents the interest on the principal and remnant money, and if it includes reasonable additional compensation for the early liquidation of the contract, early prepayment characteristics are consistent with the conditions under which principal and interest that paid on a particular day.

3. Material Accounting Policies, Continued

1. Non-derivative financial instruments, continued

   ② Classification and subsequent measurements, continued

   Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

   Financial assets - Subsequent measurement and profit and loss

   Financial assets at FVPL	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.
   Equity investments at FVOCI	These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.

   ③ Elimination

   In the event that the contractual rights to cash flows of financial assets have ceased, the Group transfers the contractual rights to receive the cash flows of the financial assets and substantially transfers the risks and rewards of ownership of the transferred financial assets. Or if the Group does not control or control the financial assets without retaining or transferring substantially all the risks and rewards of ownership.

   If the Group transacts a recognized asset in its statement of financial position but holds most of the risks and rewards of ownership of the transferred asset, the transferred asset is not removed.

   ➃ Offsetting

   Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when the Group currently has a legally enforceable right to set off the recognized amounts and there is the intention to settle on a net basis or to realize the asset and settle the liability simultaneously.

   3. Material Accounting Policies, Continued

2. Impairment of financial assets

   The Group recognize a loss reserve for expected credit losses on the following assets:

   • financial assets measured at amortized cost;

   • debt instruments measured at fair value through other comprehensive income; and

   • contractual assets as defined in KIFRS 1115.

     ① Credit-impaired financial assets

     At each reporting date, the Group 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.

     The evidence that the credit of a financial asset is impaired includes the following observable information:

   • significant financial difficulties of issuer or borrower;

   • default;

   • inevitable mitigation of initial borrowing conditions for economic or contractual reasons related to the borrower's financial difficulties;

   • borrowers are likely to go bankrupt or other financial restructuring becomes more likely; and

   • termination of active market for financial assets due to financial difficulties.

     The Group measures recoverable amount of trade receivables individually when evidence of impairment has been found and an impairment loss is the difference between the recoverable amount and its carrying amount. Collateral and guaranteed values are taken into consideration when estimating the recoverable amount.

     The recognition of collective impairment losses on trade receivables is calculated by applying the collective loss experience rate over the past fixed period to collectively classified bonds in consideration of similar credit risk characteristics.

     ② Write-off

     If an entity does not reasonably expect to recover all or part of the contractual cash flows of a financial asset, the asset is derecognized. For individual customers, on the basis of their past experience with the recovery of similar assets, the Group removes the carrying amount if the financial asset is determined to be impaired, evaluates whether there is a reasonable expectation for the recovery of the entity's customers, and evaluates the timing and amount individually. The Group has no expectation that the proceeds will be recovered significantly. However, any financial assets that are derecognized may be subject to recovery activities in accordance with the Group's procedures for recovering the amount due.

     ③ Presentation of impairment

     The expected credit loss on financial assets at amortized cost is recognized in profit or loss, and the allowance for losses on financial assets at amortized cost is deducted from the carrying amount of the asset. For debt instruments measured at FVOCI, changes in credit risk are included in profit or loss and changes in non-credit risk are recognized in other comprehensive income.

     3. Material Accounting Policies, Continued

3. Derivative financial instruments

Derivatives are initially recognized at fair value at the date the derivative contract is entered into and are subsequently re-measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately, unless the derivative is designated and effective as a hedging instrument; in which case the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

① Hedge accounting

On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on a quarterly basis, whether the hedging instruments are expected to be "highly effective" in offsetting the changes in the cash flows of the respective hedged items during the period for which the hedge is designated

• Fair value hedge

  Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in profit or loss. The gain or loss from re-measuring the hedging instrument at fair value for a derivative hedging instrument and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the consolidated statement of comprehensive income. The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.

• Cash flow hedge

When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

② Separable embedded derivatives

Embedded derivatives are separated from the host contract and accounted for separately only if the following criteria have been met:

1. the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract;

2. a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and

3. the hybrid instrument is not measured at fair value with changes in fair value recognized in profit or loss.

Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.

3. Material Accounting Policies, Continued

1. Derivative financial instruments, continued

   ③ Other derivative financial instruments

   Changes in the fair value of other derivative financial instrument not designated as a hedging instrument are recognized immediately in profit or loss.

2. Inventories

   The cost of inventories is determined by the monthly weighted-average method for merchandise, finished goods, work-in-progress, raw material and supplies, and by the moving-average method for auto parts for after-sales service, and by the specific identification method for materials in transit. Inventories are measured at the lower of cost and net realizable value. The Group periodically reviews signs of impairment of inventories, and if impairment is identified due to excess, obsolescence, and inutility, the losses on valuation of inventories are recognized reduction to inventories in consolidated statement of financial position, and are charged to cost of sales. The amount of any reversal of any write-down of inventories, arising from an increase in net realizable value, are recognized as a reduction in the amount of inventories recognized as an expense in the period in which the reversal occurs. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

3. Property, plant and equipment

   Property, plant and equipment are initially measured at cost. The cost of property, plant and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. Some land among property, plant and equipment was measured at fair value as pursuant to KIFRS 1101, First-time Adoption of KIFRS at the date of transition to KIFRS, thereby being used as the deemed cost for subsequent accounting.

   Subsequent to initial recognition, property, plant and equipment, except for land, are carried at its cost less any accumulated depreciation and any accumulated impairment losses. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the consolidated statement of profit or loss during the financial period in which they are incurred.

   Property, plant and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset's future economic benefits are expected to be consumed.

   The estimated useful lives of the Group's property, plant and equipment are as follows:

   Useful lives (years)

   Buildings and structures 20 ~ 40

   Machinery 5 ~ 15

   Tools 3 ~ 5

   Furniture and fixtures 5

   Others 5 ~ 15

   Useful lives, depreciation method and residual values are reviewed at the end of each reporting period and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate. An asset's carrying amount is written down immediately to its recoverable amount if the asset's estimated recoverable amount is smaller than its carrying amount. Gains or losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within "other income or expenses" in the consolidated statement of profit or loss.

   3. Material Accounting Policies, Continued
4. Borrowing costs

   The Group capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale. Financial assets and inventories that are manufactured or otherwise produced over a short period of time are not qualifying assets. Assets that are ready for their intended use or sale when acquired are not qualifying assets.

   To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group shall determine the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset.

   The capitalization rate shall be the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Group capitalizes during a period shall not exceed the amount of borrowing costs incurred during that period.

5. Government grants

   Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognized in the statement of income over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to property, plant and equipment are presented as a deduction to related assets and are credited to depreciation over the estimated useful lives of the related assets.

6. Intangible assets

Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.

Amortization of intangible assets except for goodwill is calculated on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. As there are no foreseeable limits to the periods over which certain intangible assets are expected to be available for use, those intangible assets are determined as having indefinite useful lives and not amortized.

Useful lives (years)

Development costs 5

Software 5

Other intangible assets 5 ~ 10

Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes are accounted for as changes in accounting estimates.

3. Material Accounting Policies, Continued

(12) Intangible assets, continued

① Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the identifiable net assets acquired. When the excess is negative, bargain purchase gain is recognized immediately in profit or loss. Goodwill is not amortized and stated at book value less accumulated impairment loss.

② Development costs

Costs that are identifiable, controllable and directly attributable to development projects are recognized as intangible assets when the following criteria are met:

• it is technically feasible to complete the development project so that it will be available for use or sale;

• management intends to complete the development project and use or sell it;

• there is an ability to use or sell the development project;

• it can be demonstrated how the development project will generate probable future economic benefits;

• adequate technical, financial and other resources to complete the development and to use or sell the development project are available; and

• the expenditure attributable to the development project during its development can be reliably measured.

Direct imputed costs capitalized as development costs include new products, employee benefits for the development of new technologies, and related expenses. Capitalized development costs that are recognized as intangible assets are amortized using the straight-line method over their estimated useful lives from the date that they are available for use or sale.

Other development expenditures that do not meet these criteria are recognized in profit or loss as incurred. Development costs previously recognized as an expense cannot be recognized as an asset in a subsequent period.

③ Membership rights

Membership rights are regarded as intangible assets with indefinite useful lives and not amortized as there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity. All membership rights are tested annually for impairment and stated at cost less accumulated impairment losses.

➃ Other intangible assets

Other intangible assets consist of industrial property and business rights, etc.

(13) Investment property

Property held for the purpose of earning rentals or benefiting from capital appreciation or for both is classified as investment property. If some portion of property is held for the purpose of owner-occupation, and cannot be separated by portions to dispose and the owner-occupied portion is immaterial, it is classified as investment property. Investment property is measured initially at its cost. Transaction costs are included in the initial measurement. Subsequently, investment property is carried at cost less accumulated depreciation and accumulated impairment losses.

Land is not depreciated. Depreciation on the investment property except for land is calculated using the straight-line method to allocate their cost less residual values over 20 ~30 years.

Useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change of useful lives and residual values is accounted for as a change in an accounting estimate.