Hyundai Mobis : 2024 Annual Separate Financial Statements Audit Report

HYUNDAI MOBIS CO., LTD.

Separate 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 Separate Financial Statements

Separate Statements of Financial Position 1

Separate Statements of Profit or Loss 3

Separate Statements of Comprehensive Income 4

Separate Statements of Changes in Equity 5

Separate Statements of Cash Flows 6

Notes to the Separate Financial Statements 7

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

In our opinion, the accompanying separate financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and its financial performance and its 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 Company'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 separate financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the separate 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 separate financial statements of the current period. This matter was addressed in the context of our audit of the separate 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 28 to the separate financial statements, the Company is engaged in the part 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 Company'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 Company'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 Company's major contract terms and conditions.

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

  revenue recognition of parts for after sales service.

• Evaluate the effectiveness of the design and operation of the Company'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 the 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 separate financial statements

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

  In preparing the separate financial statements, management is responsible for assessing the Company'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 Company or to cease operations, or has no realistic alternative but to do so.

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

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

  Our objectives are to obtain reasonable assurance about whether the separate 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 separate 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 separate 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 Company'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 separate 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 Company to cease to continue as a going concern.

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

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

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 separate 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 separate financial statements and may result in modifications to this report.

HYUNDAI MOBIS CO., LTD.

Separate Financial Statements

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

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

Gyusuk Lee

Chief Executive Officer HYUNDAI MOBIS Co., Ltd.

As of December 31, 2024 and 2023

(In millions of won)	Note		2024			2023
Assets Cash and cash equivalents	4, 39	W	985,305		W	1,435,435
Other financial assets	5,6,39		4,500,669			3,713,895
Trade and other receivables, net	7,18,28,35,39		8,202,117			7,980,808
Inventories, net	8		2,985,617			2,703,313
Other current assets	9,39		236,497			250,660
Non-current Assets Held for Sale	40	-		11,861
Total current assets		16,910,205		16,095,972

Property, plant and equipment, net	10	7,213,217	7,146,617
Intangible assets, net	11	1,016,031	905,649
Investment property, net	12	27,590	28,063
Right-of-use assets, net	13	103,291	121,346
Investment in associates, joint ventures and subsidiaries	14,35	10,710,372	9,745,899
Non-current financial assets	15,39	988,138	879,183
Other non-current assets	5,7,16,22,39	555,369	654,373
Total non-current assets		20,614,008	19,481,130
Total assets		W 37,524,213	W 35,577,102

(continued)

As of December 31, 2024 and 2023

(In millions of won)	Note	2024	2023
Liabilities Trade and other payables	17,35,39	W4,990,240	W5,271,758
Short-term borrowings	18,38,39	4,325	153,100
Current lease liabilities	13,38,39	48,843	45,150
Income taxes payable	33	422,853	144,943
Current provisions for warranties	21	1,077,885	965,294
Other current liabilities	19,39	379,130	341,780
Total current liabilities		6,923,276	6,922,025
Bonds	18,38,39	199,795	199,686
Non-current lease liabilities	13,38,39	53,423	74,183
Non-current provision for warranties	21	301,784	289,794
Deferred tax liabilities	33	251,900	351,645
Other non-current liabilities	20,36,39	433,882	527,816
Total non-current liabilities		1,240,784	1,443,124
Total liabilities		8,164,060	8,365,149
Equity
Capital stock	23	491,096	491,096
Capital surplus	23	1,367,614	1,363,467
Treasury stock	24	(571,878)	(681,939)
Other equity	25	(96,855)	(164,198)
Retained earnings	26	28,170,176	26,203,527
Total equity		29,360,153	27,211,953
Total liabilities and equity		W 37,524,213	W 35,577,102

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

(In millions of won, except earnings per share) Note 2024 2023

Revenue	28,35	W	36,604,026	W	38,970,304
Cost of sales	29,35	(31,384,907)		(34,719,201)
Gross profit		5,219,119		4,251,103
Selling, general and administrative expenses	29,30,32,35	(3,416,266)		(3,089,416)
Operating profit		1,802,853		1,161,687
Other income	31,32	383,229		285,711
Other expenses	31,32	(260,004)		(196,905)
Finance income	32,35	1,427,784		1,296,241
Finance costs	32	(226,261)		(361,201)
Gain (loss) on Investment in associates, joint ventures and subsidiaries	14	1,688		313
Profit before income taxes		3,129,289		2,185,846
Income tax expense	33	(535,068)		(370,947)
Profit for the year		W 2,594,221		W 1,814,899
Earnings per share
Basic earnings per share in won	34	W 28,745		W 19,959

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

(In millions of won)	Note			2024			2023
Profit for the year			W	2,594,221		W	1,814,899
Other comprehensive income (loss) Items that will not be reclassified subsequently to profit or loss:				8,980			(65,142)
Remeasurements of defined benefit plan, net of tax	22,26,33	(58,726)			(65,187)
Gain (Loss) on financial assets at FVOCI, net of tax	15,25,32,33	67,256			45
		8,980			(65,142)
Total comprehensive income for the year		W 2,603,201			W 1,749,757

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

Capital

Other

Retained

Total

(In millions of won)

stock Capital surplus Treasury stock

equity earnings

equity

Balance as of January 1, 2023	W 491,096	W 1,362,608	W (568,475)	W (164,243)	W 24,967,441	W 26,088,427
Total comprehensive income (loss):
Profit for the year Gain on financial assets at FVOCI, net of	-	-	-	-	1,814,899	1,814,899
tax	-	-	-	45	-	45
Remeasurements of defined benefit plan, net of tax	-	-	-	-	(65,187)	(65,187)
Total comprehensive income for the year	-	-	-	45	1,749,712	1,749,757

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

Dividends	-	-	-	-	(367,157)	(367,157)
Change in treasury stock	-	859	(113,464)	-	(146,469)	(259,074)
Total transactions with owners of the Company, recognized directly in equity	-	859	(113,464)	-	(513,626)	(626,231)
Balance As of December 31, 2023	W 491,096	W 1,363,467	W (681,939)	W (164,198)	W 26,203,527	W 27,211,953
Balance as of January 1, 2024	W 491,096	W 1,363,467	W (681,939)	W (164,198)	W 26,203,527	W 27,211,953
Total comprehensive income (loss):
Profit for the year	-	-	-	-	2,594,221	2,594,221
Gain on financial assets at FVOCI, net of tax	-	-	-	67,343	(87)	67,256
Remeasurements of defined benefit
plan, net of tax Total comprehensive income for the	-	-	-	-	(58,276)	(58,276)
year	-	-	-	67,343	2,535,858	2,603,201

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

Dividends	-	-	-	-	(406,219)	(406,219)
Change in treasury stock Total transactions with owners of the Company, recognized directly in	-	4,147	110,061	-	(162,990)	(48,782)
equity	-	4,147	110,061	-	(569,209)	(455,001)
Balance as of December 31, 2024	W 491,096	W 1,367,614	W (571,878)	W (96,855)	W 28,170,176	W 29,360,153

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

(In millions of won)	Note	2024	2023
Cash flows from operating activities Cash flows generated from operations	37	W2,063,202	W3,334,588
Interest received		220,681	233,279
Interest paid		(2,599)	(32,135)
Dividends received		903,555	748,085
Income tax paid		(353,472)	(467,212)
Net cash flows provided by operating activities		2,831,367	3,816,605
Cash flows from investing activities
Increase in financial assets at amortized cost, net		(1,028,231)	(69,962)
Decrease in short-term loans		1,400	1,000
Disposal of financial assets at FVPL		711	320
Acquisition of financial assets at FVPL		(11,493)	(1,000)
Disposal of financial assets at FVOCI		3,938	5,625
Acquisition of financial assets at FVOCI		(10,493)	(100)
Disposal of investments in associates, joint ventures and subsidiaries		19,300	313
Acquisition of investments in associates, joint ventures and subsidiaries		(977,645)	(853,943)
Cash inflows from disposal of business		244,315	-
Disposal of property, plant and equipment		29,352	69,036
Acquisition of property, plant and equipment		(672,952)	(678,767)
Disposal of intangible assets		2,021	3,374
Acquisition of intangible assets		(145,611)	(100,650)
Proceeds from sales of non-current assets held for sale		21,286	-
Increase in deposits provided		15,164	(6,896)
Net cash flows used in investing activities		(2,508,938)	(1,631,650)
Cash flows from financing activities
Proceed from short-term borrowings		213,688	3,333,197
Repayment of short-term borrowings		(212,557)	(4,382,247)
Redemption of current portion of longterm borrowings		(150,000)	-
Acquisition of treasury stock		(162,990)	(302,971)
Dividends paid		(406,219)	(367,157)
Payment of lease liabilities		(54,941)	(51,072)
Net cash flows used in financing activities		(773,019)	(1,770,250)
Effect of changes in foreign exchange rates on cash and cash equivalents		460	(4,030)
Net increase (decrease) in cash and cash equivalents		(450,130)	410,675
Cash and cash equivalents at the beginning of year		1,435,435	1,024,760
Cash and cash equivalents at the end of year		W 985,305	W 1,435,435

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

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

   Number of Percentage Number of Percentage

   Stockholders

   shares of ownership

   shares

   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%

2. Basis of Preparation

1. Statement of compliance

   The Company 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.

   These financial statements are separate financial statements prepared in accordance with KIFRS 1027, 'Separate Financial Statements. Pursuant to KIFRS 1027, the accompanying separate financial statements are accounted for, by a parent, investor in an associate or a joint venturer on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.

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

3. Functional and presentation currency

   The Company presents each account in functional currency (currency of economic environment) with which the Company carries out its operating activities. These separate 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 Company operates.

   2. Basis of Preparation, Continued
4. Use of estimates and judgments

The preparation of the separate 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-(24).

3. Material Accounting Policies

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

1. Investments in subsidiaries and associates

   The Company's separate financial statements are prepared in accordance with KIFRS 1027. The Company applied the cost method to account for investment in associates, joint ventures and subsidiaries in accordance with KIFRS 1027. The Company applied KIFRS 1101 First-time Adoption of KIFRS. and the carrying amount was used as deemed cost based on the previous accounting standard at the date of transition to KIFRS. Dividends from a subsidiary or associate are recognized in profit or loss when the right to receive the dividend is established.

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 Company divides segment according to the internal report that are periodically reviewed by chief operating decision maker. The Company discloses information related to operating segment in accordance with KIFRS 1108 'Operating Segment' in its separate financial statements.

3. Foreign currencies

   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 remeasured. 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 separate statement of profit of loss.

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

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 Company in management of its short-term commitments.

   3. Material Accounting Policies, Continued
5. Non-derivative financial assets

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 Company 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.

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 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 FVPL. 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 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 assets, continued

② Classification and subsequent measurements, continued

Financial assets - Business model

The Company 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, 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 Company 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 Company 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-claim 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 repayment characteristics are consistent with the conditions under which principal and interest that paid on a particular day.

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.

3. Material Accounting Policies, Continued

1. Non-derivative financial assets, continued

   ② Classification and subsequent measurements, continued

   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 Company 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 Company does not control or control the financial assets without retaining or transferring substantially all the risks and rewards of ownership.

   If the Company 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 Company 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.

2. Impairment of financial assets

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

   • financial assets 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 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.

3. Material Accounting Policies, Continued

1. Impairment of financial assets, continued

   ① Credit-impaired financial assets, continued

   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 individual impairment review of trade receivables recognizes the difference between the recoverable value and the carrying amount as an impairment loss by estimating the recoverable value of the bond for which the impairment was found. The recoverable value is estimated by considering the collateral value and the guarantee price taking into account the evaluation amount.

     Recognition of collective impairment loss for trade receivables is calculated by applying the credit risk ratio for each set of a certain period of time to bonds collectively classified 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 derecognised. For individual customers, on the basis of their past experience with the recovery of similar assets, the Company 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 Company has no expectation that the proceeds will be recovered significantly. However, any financial assets that are derecognised may be subject to recovery activities in accordance with the Company'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 at FVOCI, changes in credit risk are included in profit or loss and changes in non-credit risk are recognized in other comprehensive income.

2. 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 Company 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 Company 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.

3. Material Accounting Policies, Continued

1. Derivative financial instruments, continued

   ① Hedge accounting, continued

   • 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 separate statement of comprehensive income. The Company 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 separated 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 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, workin-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 Company 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 separate 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. Material Accounting Policies, Continued
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 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 Company 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 separate 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 Company's property, plant and equipment are as follows:

   Useful lives (years)

   Buildings and structures 30

   Machinery and equipment 5 ~ 15

   Tools 3 ~ 5

   Furniture and fixtures 5

   Vehicles 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 separate statement of profit or loss.

4. Borrowing costs

   The Company 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 Company borrows funds specifically for the purpose of obtaining a qualifying asset, the Company 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 Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company 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 Company 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 Company capitalizes during a period shall not exceed the amount of borrowing costs incurred during that period.

   3. Material Accounting Policies, Continued
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 Company 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

Industrial property rights 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.

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;

• 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 are not recognized as an asset in a subsequent period.

3. Material Accounting Policies, Continued

1. Intangible assets, continued

   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 Customer Relationships and patents, etc.

2. 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 30 years.

   Useful lives, depreciation method 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.

3. Right-of-use asset and lease liabilities

At contract inception, the Company assesses whether a contract is or contains a lease. A contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. When assessing whether the contract conveys a right to control the use of an identified asset, definition of a lease under KIFRS 1116 has been applied.

- As a lessee

At commencement or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices.

However, for the leases of property, the Company has elected not to separate non-lease components and to account for the lease and non-lease components as a single lease component.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term unless the lease transfers ownership of the underlying asset to the Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company will exercise a purchase option, in which case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

3. Material Accounting Policies, Continued

1. Right-of-use asset and lease liabilities, continued

   The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate. The Company adjusts interest rates from various external financial information to reflect the terms of the lease and the characteristics of the leased asset and calculates the incremental borrowing rate.

   Lease payments included in the measurement of the lease liability comprise the following.

   • fixed payments, including in-substance fixed payments;

   • variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

   • amounts expected to be payable under a residual value guarantee; and.

   • the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

     The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company's estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.

     When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or it is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

     The Company elected to the recognition exemptions for lease contracts that have a lease term of 12 months or less and for which the underlying asset is of low value. The lease payments thereof are recognized on a straight-line basis over the lease term.

2. Impairment of non-financial assets

   Assets that have an indefinite useful life, such as goodwill, are not subject to amortization and are tested for impairment annually. Assets that are subject to amortization or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

   The recoverable amount is determined for each asset, and if the recoverable amount of an individual asset cannot be estimated, it determines the recoverable amount of the lowest level Company (cash generating unit) that creates a separately identifiable cash flow to which the asset belongs. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is determined as the greater of its net fair value and its value in use. The value in use is estimated as the appropriate discount rate that reflects the current market's assessment of the asset's specific risks that have not been adjusted when estimating the time value of money and future cash flows.

   If the recoverable amount of an asset or cash-generating unit is less than the carrying amount, the carrying amount of the asset is reduced and recognized in profit or loss immediately. An impairment loss on a cash-generating unit first reduces the carrying amount of goodwill allocated to the cash-generating unit, and then reduces the carrying amount of the asset in proportion to the carrying amount of each other asset belonging to the cash-generating unit.

   Impairment losses recognized for goodwill cannot be reversed in subsequent periods.

   Non-financial assets other than goodwill that have recognized the impairment loss are reviewed for reversal of the impairment loss at the end of each reporting period. The carrying amount increased by the reversal of an impairment loss cannot exceed the balance after depreciation or amortization of the carrying amount before the impairment loss is recognized in the past.

   3. Material Accounting Policies, Continued
3. Employee benefits

   ① Short-term employee benefits

   Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render the related service. When an employee has rendered service to the Company during an accounting period, the Company recognizes the benefits in the separate statement of profit or loss.

   ② Retirement benefits: defined contribution plans

   A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate fund. The Company has no legal or constructive obligations to pay further contributions even if the fund does not hold sufficient assets to pay all employees the benefits related to employee service in the current and prior periods. The contributions are recognized as employee benefit expense when they are due.

   ③ Retirement benefits: defined benefit plans

   The Company's net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of plan assets is deducted. The calculation is performed annually by an independent actuary using the projected unit credit method. The discount rate is the yield at the reporting date on the high-quality corporate bonds that have maturity dates approximating the terms of the Company's obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Company recognizes all actuarial gains and losses arising from actuarial assumption changes and experiential adjustments in other comprehensive income when incurred.

   ➃ Other long-term employee benefits

   Other long-term employee benefits include employee benefits that are not expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service. The amounts of future benefit that employees have earned in return for their service in the current and prior periods are recognized as liabilities with discounted value. Changes from re-measurements are recognized in profit or loss in the period.

4. Provisions and contingent liabilities

   Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

   Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

   Where some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement is recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is presented as a separate asset.

   Contingent liabilities are:

   • a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity;

   • a present obligation that arises from past events but is not recognized because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

   • the amount of the obligation cannot be measured with sufficient reliability.

   3. Material Accounting Policies, Continued
5. Emission rights

   The Company accounts for greenhouse gases emission right and the relevant liability as below pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission.

   ① Greenhouse gases emission right

   Greenhouse gases emission rights consist of emission allowances that are allocated from the government free of charge or purchased from the market. The costs include those directly attributable to bringing the asset and condition necessary for them to be capable of operating in the manner intended by management.

   Emission rights held for the purpose of performing the obligation are classified intangible assets. The intangible assets are initially measured at cost and after initial recognition, are carried at cost, less accumulated impairment losses. To the extent that the portion to be submitted to the government within one year from the end of reporting period, the emissions rights are classified as current assets.

   Emission rights held for short-term trading gains are classified as current assets and measured at fair value at the end of each reporting period, and any changes in fair value are recognized in profit or loss.

   The Company derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government in which the future economic benefits are no longer expected to be probable.

   ② Emission liability

   Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. Emission liability is recognized when it is probable that outflows of resources will be required to settle the obligation and the costs required to perform the obligation are reliably estimable. Emissions obligations are measured as the sum of the carrying amount of the allocated rights that will be submitted to the government and the best estimate of expenditure required to settle the obligation at the end of the reporting period for any excess emission. The Company derecognizes emission liability when it submits emission rights to the government.

6. Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it is related to a business combination, or items recognized directly in equity or in other comprehensive income.

① Current tax

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period and any adjustment to tax payable in respect of previous years. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.

② Deferred tax

Deferred tax is recognized, using the asset-liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. A deferred tax liability is recognized for all taxable temporary differences. A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which they can be utilized. However, deferred tax is not recognized for the following temporary differences: taxable temporary differences arising on the initial recognition of goodwill, or the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting profit or loss nor taxable income.

3. Material Accounting Policies, Continued (19) Income taxes, continued

② Deferred tax, continued

The Company recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not be reversed in the foreseeable future.

The Company recognizes a deferred tax asset for all deductible temporary differences arising from investments in subsidiaries and associates, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period, the amount is reduced if it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets, and they relate to income taxes levied by the same tax authority and they intend to settle current tax liabilities and assets on a net basis.

③ Pillar 2 Model Rules

The comprehensive implementation framework of the Organisation for Economic Co-operation and Development (OECD) and the Group of Twenty (G20) addresses tax challenges that have arisen from the digitalization of the global economy. The Global Anti-Base Erosion (GloBE) rules, also known as Pillar Two Model Rules, apply to multinational enterprises with revenues of more than 750 million euros. Under the newly introduced three taxation mechanisms of Pillar Two Model Rules, multinational enterprises must pay a minimum amount of tax (hereinafter referred to as "minimum tax'):

• Qualified Domestic Minimum Top-up Tax (QDMTT);

• Income Inclusion Rule (IIR); and

• Undertaxed Payments Rule (UTPR).

The Subject to Tax Rule is a treaty-based rule that generally applies the minimum tax to cross-border intra-group transactions that would not have been subject to minimum tax if the Subject to Tax Rule had not been applied. These new taxation mechanisms impose a minimum tax on the income generated in each country where the multinational enterprises operate. The Income Inclusion Rule, Undertaxed Payments Rule, and Qualified Domestic Minimum Top-up Tax are applied in a manner that imposes additional tax in countries where the effective tax rate determined on a country-by-country basis is below the minimum tax rate of 15%, according to the Pillar Two Model Rules.

(20) Revenue from contracts with customers

The Company is engaged in automobile module and parts manufacturing business and parts business for after sales service. The Company's main revenue is sales of goods. In a contract with a customer, the Company recognizes revenue when the control of the goods or services is transferred to the customer, at an amount that reflects the consideration expected to be paid for the goods or services.

There are other commitments other than the provision of goods on the sales contract of the module and parts with the customer by the Company, and the Company considers whether the obligations under these other commitments are separate performance obligations that requires certain portion of the transaction amount to be allocated. Accordingly, the Company is required to separately identify the provision of service type warranties that exists in the sales contract of the modules and parts from the provision of the modules and parts as separate performance obligations.

The major performance obligations of the Company for contracts with customers are as follows:

① Provision of modules and parts for after sales service

Revenue from the modules and parts is recognized at the time of delivery of the asset, at which control of the asset is transferred to the customer, the general collecting terms being within 90 days of delivery except for related parties.

When calculating the transaction price allocated to the obligation to provide modules and parts, the Company considers the following:

1. Variable consideration

   If the contract contains a variable consideration, the Company estimates the amount to be received in exchange for transferring the promised goods to the customer. When the uncertainty associated with variable consideration is resolved later, the variable consideration is estimated at the inception of the contract and included in the transaction price to the extent that it is highly probable that a significant reversal of the cumulative amount of revenue recognized will not occur.

2. Significant financial component

   The Company receives short-term advances from certain customers, depending on the terms in the contract with customers. Applying the simplified approach of KIFRS 1115, if it is expected that the duration between the transfer of the goods to the customer and the payment of the consideration by the customer will be within one year at the time the contract is initiated, the Company does not reflect the impact of significant financing components in calculating the transaction price.

3. Provision of assurance type warranties

The Company provides warranties for repairs of defective products at the point of sale of vehicles and its parts in accordance with relevant laws and regulations. The Company determines that the majority of these guarantees are assurance type warranties as per KIFRS 1115, and accordingly, it accounts for the warranties in accordance with KIFRS 1037: Provisions, contingent liabilities and contingent assets (Note 21).

3. Material Accounting Policies, Continued

1. Revenue from contracts with customers, continued

   ② Provision of service type warranties

   In addition to the defects repair warranty at the time of the sale of the modules and its parts, the Company provides different additional warranties depending on the type of goods. The Company distinguishes these additional warranties as separate performance obligations under KIFRS 1115 and allocates a portion of the transaction price received in providing the goods to the performance obligations, and revenues are recognized over the period when the performance obligation is fulfilled.

   When the Company calculates the transaction price allocated to the obligation to provide the service type warranty, the Company considers the following:

   1. Estimating selling price of each service

      In the case of a service type warranty provided by the Company, the individual selling price is not directly observed, and the Company considers all available information to a reasonable extent and estimates its individual selling prices in a consistent manner.

   2. Significant financing component

      The Company generally receives the total transaction amount from the customer, including the consideration of the service type warranty, within 90 days from the delivery of modules and its parts. In general, as there is a significant difference between the point at which the Company receives the consideration for the provision of the service type warranty and the time at which the obligation is actually fulfilled, the Company reviews whether significant financing components exist. The Company determines that the difference arises due to a reason other than providing financial services to the customer or the Company, and therefore, there is no significant financing component in the transaction price.

      3. Material Accounting Policies, Continued
2. Financial and other revenue

   The Company recognizes revenue when the amount of revenue can be reliably measured, the future economic benefits are likely to flow into the Company, and certain specific requirements for each of the activities described below are met.

   ① Interest income

   Interest income is classified as financial income and is recognized using the effective interest rate method over time. In the event of a bond damage, the Company reduces the carrying amount of the bond amount up to the recoverable amount (the amount obtained by discounting the estimated future cash flows to the initial effective interest rate of the financial asset), and the interest income on the damaged bond is recognized by the initial effective interest rate.

   ② Dividend income

   Dividend income is classified as financial income and is recognized when the right to receive dividends is established.

   ③ Rental income

   Rental income from investment property is classified as other income and is recognized on a straight-line basis over the rental period.

3. Dividend

   Dividend liability is recognized in the separate statement of financial position when the dividends are approved by the Company's shareholders.

4. Earnings per share

   The Company presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.

5. Events After the Reporting Period

If a company obtains information about conditions that existed at the end of the reporting period after the reporting period but before the authorization date of the issuance, it evaluates whether this information affects the amounts recognized in the separate financial statements. The Company adjusts the amounts recognized in the financial statements to reflect events after the reporting period that require adjustment and amends the related disclosures to reflect the new information. For events after the reporting period that do not require adjustment, the Company does not change the amounts recognized in the separate financial statements but discloses the nature and an estimate of the financial effect of the non-adjusting events after the reporting period, or if such an estimate cannot be made, a description thereof.