Hyundai Capital Services, Inc. andSubsidiaries
Interim Consolidated Financial Statements
June 30, 2011 and 2010
Hyundai Capital Services, Inc. and SubsidiariesIndexJune 30, 2011
Report on Review of Interim Financial Statements ..........................................................................1-2
Interim Consolidated Financial Statements
Interim Consolidated Statements of Financial Position .........................................................................3-5
Interim Consolidated Statements of Comprehensive Income................................................................6-8
Interim Consolidated Statements of Changes in Shareholders’ Equity .............................................. 9-10
Interim Consolidated Statements of Cash Flows ....................................................................................11
Notes to the Interim Consolidated Financial Statements.................................................................. 12-72
1
Report on Review of Interim Financial Statements
To the Shareholders and Board of Directors of
Hyundai Capital Services, Inc.
Reviewed Financial Statements
We have reviewed the accompanying interim consolidated financial statements of Hyundai
Capital Services, Inc. and subsidiaries. These financial statements consist of consolidated
statements of financial position of the Company and subsidiaries as of June 30, 2011 and
December 31, 2010, and the related consolidated statements of comprehensive income for
the three-month and the six-month periods ended June 30, 2011 and 2010, and statements of
changes in equity and cash flows for the six-month periods ended June 30, 2011 and 2010,
and a summary of significant accounting policies and other explanatory notes, expressed in
Korean won.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these interim
consolidated financial statements in accordance with the International Financial Reporting
Standards as adopted by the Republic of Korea (Korean IFRS) 1034, Interim Financial
Reporting, and for such internal control as management determines is necessary to enable
the preparation of interim consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to issue a report on these interim consolidated financial statements based
on our reviews.
We conducted our reviews in accordance with the quarterly and semi-annual review
standards established by the Securities and Futures Commission of the Republic of Korea. A
review of interim financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance with
auditing standards generally accepted in the Republic of Korea and consequently does not
enable us to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit opinion.
2
Conclusion
Based on our reviews, nothing has come to our attention that causes us to believe the
accompanying interim consolidated financial statements do not present fairly, in all material
respects, in accordance with the Korean IFRS 1034, Interim Financial Reporting.
Emphasis of Matter
Without qualifying our opinion, as mentioned in Note 2, we draw attention to the fact that
these interim consolidated financial statements are prepared in accordance with Korean IFRS
and the interpretations which are effective as of this report date. Therefore, there may be
changes in the Korean IFRS and related interpretations adopted in the preparation of these
consolidated financial statements when Company prepares its first full Korean IFRS financial
statements.
Review standards and their application in practice vary among countries. The procedures and
practices used in the Republic of Korea to review such interim consolidated financial
statements may differ from those generally accepted and applied in other countries.
Accordingly, this report is for use by those who are informed about Korean review standards
and their application in practice.
Seoul, Korea
August 12, 2011
This report is effective as of August 12, 2011, the review report date. Certain subsequent
events or circumstances, which may occur between the review report date and the time of
reading this report, could have a material impact on the accompanying consolidated interim
financial statements and notes thereto. Accordingly, the readers of the review report should
understand that there is a possibility that the above review report may have to be revised to
reflect the impact of such subsequent events or circumstances, if any.
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Financial PositionJune 30, 2011 and December 31, 2010
3
(In millions of Korean won)
2011 2010
Assets
Cash and deposits
Cash and cash equivalents (Note 25) \ 1,382,779 \ 1,224,866
Deposits (Note 4) 23 25
1,382,802 1,224,891
Securities (Note 5)
Available-for-sale securities 20,598 20,577
Equity method investments 52,573 48,483
73,171 69,060
Loans receivable (Notes 6 and 7) 11,108,709 10,434,141
Allowances for doubtful accounts (255,690) (215,703)
10,853,019 10,218,438
Installment financial assets (Notes 6 and 7)
Auto installment financing receivables 4,917,092 5,023,945
Allowances for doubtful accounts (29,470) (27,489)
Durable goods installment financing receivables 3,222 6,801
Allowances for doubtful accounts (161) (633)
Mortgage installment financing receivables 31,573 40,025
Allowances for doubtful accounts (259) (403)
Machinery installment financing receivables 5,247 14,653
Allowances for doubtful accounts (46) (117)
4,927,198 5,056,782
Lease receivables (Notes 6 and 7)
Finance lease receivables (Note 9) 2,096,875 1,777,477
Cancelled lease receivables 1,115 961
2,097,990 1,778,438
Leased assets (Note 10)
Operating leased assets 1,171,873 1,282,845
Cancelled leased assets 4,134 3,192
1,176,007 1,286,037
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Financial PositionJune 30, 2011 and December 31, 2010
4
(In millions of Korean won)
2011 2010
Property and equipment (Note 11) 251,360 242,369
Other assetsIntangible assets (Note 12) 60,998 52,612
Non-trade receivables 40,867 40,833
Allowances for doubtful accounts (977) (964)
Accrued revenues 111,891 115,278
Allowances for doubtful accounts (4,027) (3,472)
Advance payments 98,017 99,842
Allowances for doubtful accounts (1,538) (3,212)
Prepaid expenses 25,628 18,186
Leasehold deposits 34,474 31,954
Derivative assets (Note 18) 426,616 521,530
791,949 872,587
Total assets \ 21,553,496 \ 20,748,602
Liabilities and Shareholders’ Equity
Borrowings
Borrowings (Note 13) \ 1,930,000 \ 2,646,945
Debentures (Note 14) 15,457,222 14,396,741
17,387,222 17,043,686
Other liabilities
Non-trade payables 317,615 362,539
Accrued expenses 139,937 110,225
Unearned revenue 65,363 69,338
Withholdings 26,882 21,939
Defined benefit liability (Note 15) 13,205 11,687
Leasehold deposits received 762,124 746,532
Deferred income tax liabilities (Note 16) 83,497 2,617
Provisions (Note 17) 13,111 46,624
Derivative liabilities (Note 18) 230,905 96,568
1,652,639 1,468,069
Total liabilities 19,039,861 18,511,755
Commitments and contingencies (Note 26)
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Financial PositionJune 30, 2011 and December 31, 2010
5
(In millions of Korean won)
2011 2010
Shareholders' equity
Common stock (Notes 1 and 19) 496,537 496,537
Capital surplus
Paid-in capital in excess of par value 369,339 369,339
Other capital surplus 38,200 38,200
407,539 407,539
Accumulated other comprehensive income andexpenses (Note 24)
Gain on valuation of available-for-salesecurities
105 512
Accumulated comprehensive income of equitymethod investees
9 24
Loss on valuation of derivatives (40,315) (67,924)
Cumulative effect of overseas operationtranslation
(159) 17
(40,360) (67,371)
Retained earnings (Note 19) 1,649,790 1,400,013
Non-controlling interests 129 129
Total shareholders' equity 2,513,635 2,236,847
Total liabilities and shareholders' equity \ 21,553,496 \ 20,748,602
The accompanying notes are an integral part of these interim consolidated financial statements.
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Six-Month Periods ended June 30, 2011 and 2010
6
(In millions of Korean won, except per share amounts)
Three months Six months
2011 2010 2011 2010
Operating revenue
Interest income (Note 20)
Interest on bank deposits \ 9,760 \ 5,926 \ 18,848 \ 12,280
Other interest income 124 343 254 682
9,884 6,269 19,102 12,962
Gain on valuation and disposal ofsecuritiesGain on disposal of available-for-
sale securities480 489 2,084 1,268
Reversal of impairment loss onavailable-for-sale securities
- - - 1,078
480 489 2,084 2,346
Income on loans (Notes 20 and 21) 392,318 337,039 773,337 657,123
Income on installment financialreceivables (Notes 20 and 21)
109,696 124,841 224,289 254,412
Income on leases (Notes 20 and 21) 215,548 217,346 438,066 431,607
Gain on disposal of loans 72,075 - 72,075 -
Gain on foreign currency transactions
Gain on foreign exchangestranslation
98,261 - 244,804 134,851
Gain on foreign currencytransactions
27,800 1,472 29,822 8,766
126,061 1,472 274,626 143,617
Dividend income 13 168 3,251 3,680
Other operating income
Gain on valuation of derivatives 40,344 341,757 73,016 240,487
Gain on derivatives transactions - 7,185 715 19,702
Others 56,401 13,474 81,077 28,889
96,745 362,416 154,808 289,078
Total operating revenue 1,022,820 1,050,040 1,961,638 1,794,825
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Six-Month Periods ended June 30, 2011 and 2010
7
(In millions of Korean won, except per share amounts)
Three months Six months
2011 2010 2011 2010
Operating expenses
Interest expenses (Note 20) \ 237,999 \ 219,215 \ 477,921 \ 439,251
Lease expenses (Note 21) 123,787 137,449 255,356 287,000
Bad debts expense (Note 7) 79,709 27,525 139,425 34,374
Loss on foreign transactions
Loss on foreign exchange translation 40,349 341,553 73,025 239,378
Loss on foreign currency transactions - 7,185 715 18,944
40,349 348,738 73,740 258,322
General and administrative expenses(Note 22)
127,991 139,421 261,177 242,214
Other operating expenses
Loss on valuation of derivatives 98,273 - 244,821 134,468
Loss on derivatives transactions 27,810 1,485 29,837 10,625
Others 10,974 12,772 21,558 28,234
137,057 14,257 296,216 173,327
Total operating expenses 746,892 886,605 1,503,835 1,434,488
Operating income 275,928 163,435 457,803 360,337
Non-operating income
Gain on equity method valuation(Note 5)
1,894 1,982 4,749 6,505
1,894 1,982 4,749 6,505
Non-operating expenses
Loss on equity method valuation(Note 5)
- - - 243
- - - 243
Income before income taxes 277,822 165,417 462,552 366,599
Income tax expense (Note 16) 68,897 44,572 108,503 90,948
Net income \ 208,925 \ 120,845 \ 354,049 \ 275,651
Net income attributable to:
Owners of the parent 208,925 120,845 354,049 275,651
Non-controlling interests - - - -
208,925 120,845 354,049 275,651
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Six-Month Periods ended June 30, 2011 and 2010
8
(In millions of Korean won, except per share amounts)
Three months Six months
2011 2010 2011 2010
Other comprehensive income,net of income taxes (Note 24)
Gain(Loss) on valuation of available-for-sale financial securities \ (441) \ 732 \ (407) \ 1,024
Other comprehensive income ofequity method investees
(118) (80) (15) (65)
Gain (Loss) on valuation ofderivatives
(34,712) (45,795) 27,609 (49,205)
Effect of overseas operationtranslation
8 22 (176) 22
(35,263) (45,121) 27,011 (48,224)
Total comprehensive income \ 173,662 \ 75,724 \ 381,060 \ 227,427
Total comprehensive income attributableto:
Owners of the parent 173,662 75,724 381,060 227,427
Non-controlling interests - - - -
173,662 75,724 381,060 227,427
Earnings per share attributable to theordinary equity holders of thecompany (Note 23)
Basic earnings pershare (Note 23) \ 2,104 \ 1,217 \ 3,565 \ 2,776
The accompanying notes are an integral part of these interim consolidated financial statements.
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Changes in Shareholders’ EquitySix-Month Periods ended June 30, 2011 and 2010
9
(In millions of Korean won)Capitalstock
Capitalsurplus
Accumulatedother
comprehensiveincome andexpenses
Retainedearnings
Totalattributableto owners ofthe parent
Non-controllinginterests Total equity
Balances as of January 1, 2010 \ 496,537 \ 407,539 \ (5,470) \ 1,318,186 \ 2,216,792 \ 129 \ 2,216,921
Total comprehensive incomeNet income - - - 275,651 275,651 - 275,651Other comprehensive income
Gain on valuation of available-for-sale securities
- - 1,024 - 1,024 - 1,024
Other comprehensive income ofequity method investees
- - (65) - (65) - (65)
Loss on valuation of derivatives - - (49,205) - (49,205) - (49,205)Effect of overseas operation
translation- - 22 - 22 - 22
Total comprehensive income - - (48,224) 275,651 227,427 - 227,427
Transactions with ownersTransfer from dividends payable - - - 3 3 - 3Dividends - - - (203,580) (203,580) - (203,580)
Total transactions with owners - - - (203,577) (203,577) - (203,577)
Balances as of June 30, 2010 \ 496,537 \ 407,539 \ (53,694) \ 1,390,260 \ 2,240,642 \ 129 \ 2,240,771
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Changes in Shareholders’ EquitySix-Month Periods ended June 30, 2011 and 2010
10
(In millions of Korean won)Capitalstock
Capitalsurplus
Accumulatedother
comprehensiveincome andexpenses
Retainedearnings
Totalattributableto owners ofthe parent
Non-controllinginterests Total equity
Balances as of January 1, 2011 \ 496,537 \ 407,539 \ (67,371) \ 1,400,013 \ 2,236,718 \ 129 \ 2,236,847
Total comprehensive incomeNet income - - - 354,049 354,049 - 354,049Other comprehensive income
Loss on valuation of available-for-sale securities
- - (407) - (407) - (407)
Other comprehensive income ofequity method investees
- - (15) - (15) - (15)
Gain on valuation of derivatives - - 27,609 - 27,609 - 27,609Effect of overseas operation
translation- - (176) - (176) - (176)
Total comprehensive income - - 27,011 354,049 381,060 - 381,060
Transactions with ownersDividends - - - (104,272) (104,272) - (104,272)
Balances as of June 30, 2011 \ 496,537 \ 407,539 \ (40,360) \ 1,649,790 \ 2,513,506 \ 129 \ 2,513,635
The accompanying notes are an integral part of these interim consolidated financial statements.
Hyundai Capital Services, Inc. and SubsidiariesInterim Consolidated Statements of Cash FlowsSix-Month Periods ended June 30, 2011 and 2010
11
(In millions of Korean won)
2011 2010
Cash flows from operating activities
Cash generated from operations (Note 25) \ 181,944 \ 351,117
Interest received 17,935 11,111Interest paid (412,390) (414,018)Dividends received 3,251 3,680Income taxes paid (87,925) (98,803)
(297,185) (146,913)
Cash flows from investing activitiesDecrease in deposits 3 1,913Dividends from equity method investments 707 1,226Acquisition of land (1,853) -Acquisition of building (5,243) (1,408)Disposal of vehicles 37 -Acquisition of vehicles (166) (46)Disposal of fixtures and furniture 14 -Acquisition of fixtures and furniture (15,955) (3,453)Acquisition of other tangible assets (496) -Increase in construction in progress (2,604) (5,234)Disposal of intangible assets 71 29Acquisition of intangible assets (5,910) (581)Decrease in leasehold deposits 1,912 1,180Increase in leasehold deposits (4,183) -
(33,666) (6,374)
Cash flows from financing activitiesProceeds from borrowings 1,300,000 1,665,650Repayments of borrowings (2,016,945) (2,086,549)Issuance of debentures 3,152,196 2,557,179Repayments of debentures (1,842,033) (1,750,312)Payments of dividends (104,273) (203,578)
488,945 182,390
Exchange losses on cash and cash equivalents (5) (14)
Increase(decrease) in other cash and cash equivalents (176) 23
Net increase in cash and cash equivalents 157,913 29,112
Cash and cash equivalentsBeginning of period 1,224,866 990,835
End of period \ 1,382,779 \ 1,019,947
The accompanying notes are an integral part of these interim consolidated financial statements.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
12
1. General Information
Hyundai Capital Services, Inc. was established on December 22, 1993, to engage in installment
financing, facilities lease and new technology financing. The Company changed its trade name
from Hyundai Auto Finance Co., Ltd. to Hyundai Financial Services Co. on April 21, 1995, and
changed its trade name once again to Hyundai Capital Services, Inc. on December 31, 1998. In
accordance with the Monopoly Regulation and Fair Trade Act, the Company is incorporated into
Hyundai Motor Company Group. As of June 30, 2011, the Company’s operations are
headquartered in Yeouido, Seoul. Its major shareholders are Hyundai Motor Company and GE
International Holdings Corporation with 56.47% and 43.30% ownership, respectively.
2. Summary of Significant Accounting Policies
The consolidated financial statements have been prepared and presented which included the
accounts of Hyundai Capital Services, Inc. (the “Company”), as the parent company according to
Korean IFRS 1027, and Autopia Thirty-third trust and SPC and other subsidiaries(collectively the
“Group”), while HK Mutual Saving Bank and six other entities are accounted for using the equity
method.
Subsidiaries as of June 30, 2011 and December 31, 2010, are as follows. The Company has the
substantial power over the subsidiaries established as special purpose entities for asset
securitization even though its ownership interests over the subsidiaries do not exceed 50%.
2011 2010
Special
Purpose
Entities
Autopia Thirty-third trust and SPC Autopia Thirty-third trust and SPC
Autopia Thirty-fifth trust and SPC Autopia Thirty-fourth trust and SPC
Autopia Thirty-sixth trust and SPC Autopia Thirty-fifth trust and SPC
Autopia Thirty-seventh trust and SPC Autopia Thirty-sixth trust and SPC
Autopia Thirty-eighth trust and SPC Autopia Thirty-seventh trust and SPC
Autopia Thirty-ninth trust and SPC Autopia Thirty-eighth trust and SPC
Autopia Fortieth trust and SPC Autopia Thirty-ninth trust and SPC
Autopia Forty-first trust and SPC Autopia Fortieth trust and SPC
Autopia Forty-second trust and SPC Autopia Forty-first trust and SPC
Autopia Forty-third trust and SPC Autopia Forty-second trust and SPC
Autopia Forty-fourth trust and SPC Autopia Forty-third trust and SPC
Autopia Forty-fifth trust and SPC Autopia Forty-fourth trust and SPC
Autopia Forty-sixth trust and SPC Autopia Forty-fifth trust and SPC
Stock
CompanyHyundai Capital Europe GmbH
1Hyundai Capital Europe GmbH
1It holds 100% shares of Hyundai Capital Services Limited Liability Company established duringthe first half of 2011.
The Group financial statements are prepared in the Korean language (Hangul) in conformity with
International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”).
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
13
The Group’s Korean IFRS transition date is January 1, 2010, and the adoption date is January 1,
2011.
The interim consolidated financial statements are stated at historical cost unless otherwise stated
in the notes.
The reconciliations and descriptions of the effect of the transition from the consolidated financial
statements of the Group prepared in accordance with accounting principles generally accepted in
the Republic of Korea (“K-GAAP”) before the adoption date to Korean IFRS on the Group’s equity
as of January 1, 2010, June 30, 2010, and December 31, 2010, its comprehensive income and
cash flows for the six-month period ended June 30, 2010 and year ended December 31, 2010, are
provided in Note 3.
The interim consolidated financial statements for the six-month periods ended June 30, 2011 and
2010, have been prepared in accordance with Korean IFRS 1034. Because these interim
consolidated financial statements are a part of financial statements prepared by Korean IFRS as of
December 31, 2011, these are subject to Korean IFRS 1101, ‘First-time Adoption of Korean IFRS’.
These interim consolidated financial statements have been prepared in accordance with the
Korean IFRS standards and interpretations issued and effective at the reporting date. The Korean
IFRS standards and interpretations that will be applicable at December 31, 2011, including those
that will be applicable on an optional basis, are not known with certainty at the time of preparing
these interim consolidated financial statements.
The legislative and amended standards and interpretations the Group has not adopted earlier,
which have been promulgated but are not yet effective for the fiscal year starting from January 1,
2011, are as follows.
- Amendments to Korean IFRS 1101, ‘Deletion of Hyperinflation and the particular date’
(announced in December, 2010)
The date of prospective application, the exceptions to retrospective application in derecognition of
financial assets, has been changed from the particular date(January 1, 2004) to Korean IFRS
transition date according to the amendment above. Therefore, derecognition transactions occurred
before the transition date are not restated in accordance with Korean IFRS. The modification is
required to be adopted from July 1, 2011.
- Amendments to Korean IFRS 1012, ‘Income Taxes’
If there is no disproof, investment property measured at fair value when measuring deferred
income tax assets and liabilities should be measured in consideration of recovered tax effects by
selling. This will be effective on January 1, 2011.
- Amendments to Korean IFRS 1107, ‘Financial Instruments: Disclosures’
The financial assets transferred to counterparts but still remained in the financial statements are
required to be disclosed in terms of the nature of the assets, the book value, the risks and rewards.
If an entity is exposed to the particular risks and rewards on the derecognized financial assets,
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
14
additional disclosures are required to the understand effects of the risks. The amendments are
applicable from July 1, 2011.
The following is a summary of significant accounting policies followed by the Group in the
preparation of its consolidated financial statements. These policies have been consistently applied
to all the periods presented, unless otherwise stated.
2.1 Consolidation
a. Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has the power
to govern the financial and operating policies generally accompanying a shareholding of more than
one half of the voting rights. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls another
entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.
The Group uses the acquisition method to account for business combinations. The consideration
transferred is measured as the fair values of the assets transferred, equity interests issued and
liabilities incurred or assumed at the acquisition date. Acquisition-related costs are expensed as
incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date. On an acquisition-by-
acquisition basis, the Group recognizes any non-controlling interest in the acquiree at the non-
controlling interest’s proportionate share of the acquiree’s net assets.
The excess of the consideration transferred and the amount of any non-controlling interest in the
acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the
fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this
is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain
purchase, the difference is recognized directly in the statement of comprehensive income.
Inter-company transactions, balances and unrealized gains on transactions between Group
companies are eliminated.
b. Special purpose entities
The Group established several SPEs for the purpose of asset-backed securitization, but owns none
of the shares directly or indirectly. The Group consolidates the SPEs when the risks, rewards and
substance of the relationship indicated that the Group consolidates the SPEs. SPEs controlled by
the Group are created with conditions that impose strict limits on the decision-making power over
the operations therefore the Group obtains all benefits from the SPEs’ operation and net assets,
and that the Group may be exposed to risks incident to the activities of the SPEs or the Group
retains the majority of the residual or ownership risks related to the SPEs’ assets.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
15
c. Transactions with non-controlling interests
The Group treats transactions with non-controlling interests as transactions with equity owners of
the Group. For purchases from non-controlling interests, the difference between any consideration
paid and the relevant share acquired of the carrying value of net assets of the subsidiary is
recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in
equity.
d. Associates and joint ventures
Associates are all entities over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting and are initially recognized at
cost. The Group’s investment in associates includes 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 income
statement, and its share of post-acquisition movements in other comprehensive income is
recognized in other comprehensive income. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. 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.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent
of the Group’s interest in the associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency with the policies adopted by
the Group.
2.2 Foreign currency translation
a. Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which the entity operates (the “functional
currency”). The consolidated financial statements are presented in Korean won, which is the
Group’s functional currency.
b. Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions or valuation where items are remeasured. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
16
currencies are recognized in the income statement, except when deferred in other comprehensive
income as qualifying cash flow hedges.
2.3 Critical accounting estimates and assumptions
Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances. The resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are
addressed below.
a. Allowance for doubtful accounts
The Group presents the allowance for doubtful accounts calculated based on the best estimates
that are necessary to reflect the impairment incurred at each reporting date. Allowance for doubtful
accounts is recognized as individual and collective units considering the financial circumstances of
customers, net realizable value, credit quality, size of portfolio, concentrativeness, economic factors
and others. According to the change in these factors, the allowance for doubtful accounts will be
changed in a future period.
b. Fair value of financial instruments
Fair value of financial assets and liabilities is based on quoted market prices, exchange-broker
prices of financial instruments traded in an active market. If there is no quoted price for a financial
instrument, the Group establishes fair value by using valuation techniques and advanced self-
valuation techniques.
Valuation techniques include the Discount Cash Flow method using variables observable in market,
comparison method with similar instruments that have observable market transactions, and option
pricing model. For more complicated financial instruments, the Group uses advanced self-valuation
techniques. Parts of or all the variables used in this valuation technique may not be observable in
market, or may be derived from quoted prices and market ratio, or may be measured based on
specific assumption.
At initial recognition if the difference between the fair value of valuation technique and transaction
price occurs, then the transaction price as the best estimate of fair value is recognized as fair value.
This fair value difference presents in profit immediately on any available observable market data
according to individual factors and changes of environment.
2.4 Revenue recognition
The Group recognizes capital lent to customers as loans receivable, when installment payments or
deferred payments on services and goods are made. While installment financial capital paid by the
Group to manufacturers or sellers on behalf of customers is recognized as installment financial
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
17
assets. Financial lease receivables classified as financial leases are recognized as lease
receivables.
The expected future cash flows from loans receivable, installment financial assets and lease
receivables (“Financial receivables”) described above are amortized under the effective interest
method over the period of the financial receivables being used by customers.
2.5 Statements of cash flows
The Group prepares statements of cash flows using indirect method.
2.6 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term
highly liquid investments with original maturities of six months or less and bank overdrafts.
2.7 Financial assets
a. Classification
The Group classifies its financial assets as financial assets at fair value through profit or loss, loans
and receivables and available-for-sale financial assets. Management determines the classification
of its financial assets at initial recognition.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial
asset is classified in this category if acquired principally for the purpose of selling in the short term.
Derivatives are also categorized as held for trading unless they are designated as hedges.
Meanwhile, the Group has no financial asset at fair value through profit or loss other than financial
assets held for trading.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or
not classified in any of the other categories.
b. Recognition and measurement
Regular purchases and sales of financial assets are recognized on the trade-date (the date on
which the Group commits to purchase or sell the asset). Investments are initially recognized at fair
value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Financial assets carried at fair value through profit or loss are initially recognized at fair value, and
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
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transaction costs are expensed in the income statement. Available-for-sale financial assets and
financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and
receivables are subsequently carried at amortized cost using the effective interest method.
Changes in the fair value of financial assets at fair value through profit or loss are recognized in
income statement as profit and loss.
When securities classified as available-for-sale are sold or impaired, the accumulated fair value
adjustments recognized in equity are transferred to the income statement as gain or loss on
disposal of securities. Interest on available-for-sale securities calculated using the effective interest
method is recognized in the income statement as part of interest income. Dividends on available-for
sale equity instruments are recognized in the income statement as dividend income when the
Group’s right to receive payments is established.
c. Derecognition of financial assets
A financial asset is derecognized only if the contractual rights on cash flow of the financial asset
terminate or all the risks and rewards of ownership of the financial asset are substantially
transferred.
The Group can transfer an asset in statement of financial position but retains parts of or all the risks
and rewards of ownership of the transferred asset substantially. To the extent that a transfer of a
financial asset retains rights and obligations, the Group accounts both asset and liability at the
same time. After the Group transfers a financial asset and still retains control, it shall continue to
recognize the asset to the extent of its continuing involvement in the asset.
d. Impairment of financial assets
(1) Assets carried at amortized cost
The Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset is impaired. Impairment losses are incurred only if there is objective evidence of
impairment and that loss event has an impact on the estimated future cash flows of the financial
asset. The amount of the loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows discounted at the financial asset’s original
effective interest rate.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the reversal of the
previously recognized impairment loss is recognized in the income statement.
(2) Available-for-sale financial assets
The Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset or a group of financial assets is impaired. For equity securities classified as
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
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available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is
also evidence that the assets are impaired. If any such evidence exists for available-for-sale
financial assets, the difference between carrying amount and current fair value is recognized in
profit or loss. Impairment losses recognized in profit or loss for an investment in an equity
instrument classified as available for sale are not be reversed through profit or loss. If, in a
subsequent period, the fair value of a debt instrument classified as available-for-sale increases and
the increase can be objectively related to an event occurring after the impairment loss was
recognized in profit or loss, the impairment loss is reversed.
2.8 Deferral of loan origination fee and loan origination cost
Loan origination fee, which is a processing fee in relation to the loan origination process such as
upfront fee, is deferred and deducted from the loan account, adjusted over the life of the loan based
on the effective interest rate method. Loan origination cost, which relates to activities performed by
the lender such as soliciting potential borrowers, is deferred and added to the loan account,
adjusted over the life of the loan based on the effective interest rate method when the future
economic benefit in connection with the cost incurred can be identified on a per loan basis.
2.9 Allowances for financial receivables
a. Calculation of allowances for doubtful accounts
The Group recognizes the impairment of receivables as an allowance for doubtful accounts. It is
based on the impairment estimates made through impairment assessment of receivables carried at
amortized cost. Allowance for doubtful accounts consists of impairments related to individually
material financial receivables and allowances of collective assessment for impairment incurred in
homogeneous assets.
Individually material receivables undertake the individual assessment of the difference between the
assets’ carrying amount and the present value of estimated future cash flows. Unimpaired assets
from individual assessments and individually immaterial assets undertake the collective assessment
classified by asset groups that have analogous risk attributes. The Group uses statistical model in
the collective assessment based on the expected probability of default, periodic collect amounts,
loss-given default based on the past losses, loss emergency period, and management’s decision
about the current economy and credit circumstances. The material factors used in statistical model
for the collective assessment are evaluated to compare with actual data regularly.
The amount of impairment loss is reflected in allowance for doubtful accounts as profit or loss.
b. Write-off policy
The Group writes off the doubtful receivables when the assets are deemed unrecoverable. This
decision considers the information about significant changes of financial position such that a
borrower or an obligor is in default, or the amount recoverable from security is not enough. Write-off
decision of standard small loan is generally made based on the delinquent status of loan.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
20
2.10 Leases
a. Classification
The Group classifies leases based on the extent to which risks and rewards incidental to ownership
of a leased asset lie with the lesser or the lessee.
The lease arrangement classified as a financial lease is where: ①the lease transfers ownership of
the asset to the lessee by the end of the lease term, ②the lessee has the option to purchase the
asset at a price that is expected to be sufficiently lower than the fair value at the date the option
becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will
be exercised, ③the lease term is for the major part of the economic life of the asset even if title is
not transferred, ④at the inception of the lease the present value of the minimum lease payments
amounts to at least substantially all of the fair value of the leased asset, and ⑤the leased assets
are of such a specialized nature that only the lessee can use them without major modifications.
Minimum lease payments include that part of the residual value that is guaranteed by the lessee,
by a party related to the lessee or by a third party unrelated to the Group that is financially capable
of discharging the obligations under the guarantee.
b. Finance leases
Where the Group has substantially all the risks and rewards of ownership, leases of property, plant
and equipment are classified as finance lease. An amount equal to the net investment in the lease
is presented as a receivable. Expenses that are incurred with regard to the lease contract made but
not executed at the date of the statement of financial position are accounted for as prepaid leased
assets and are reclassified as finance lease receivables at the inception of the lease. Lease
receivables include amounts such as commissions, legal fees and internal costs that are
incremental and directly attributable to negotiating and arranging a lease. Each lease payment is
allocated between principal and finance income. Financial income on an uncollected part of net
investment shall be allocated to each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability.
If a lease agreement is cancelled in the middle of lease term, the Group reclassifies the amount of
financial lease receivables into cancelled leased receivables, while the amount of financial lease
receivables not yet due is reclassified as cancelled leased assets.
c. Operating leases
The property on operating leases is stated at acquisition cost, net of accumulated depreciation.
Expenditures that are incurred for the lease contract made but not executed at the date of the
statement of financial position are accounted for as prepaid leased assets and are reclassified as
operating leased assets at the inception of the lease term. Rentals from operating lease other than
any guaranteed residual value are reported as revenues on a straight-line basis over the lease
term. Initial direct costs incurred during the period of preparing the lease contract are recognized as
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
21
operating leased assets and are amortized over the lease term in proportion to the recognition of
income on leased assets.
If a lease agreement is cancelled in the middle of lease term, the balance of operating leased
assets is substituted for cancelled leased assets. The cancelled leased assets are depreciated over
its residual useful life, but are mostly disposed of in the month of cancellation.
2.11 Property and equipment
Property and equipment are stated at historical cost less accumulated depreciation and
accumulated impairment losses. Historical cost includes expenditure that is directly attributable to
the acquisition of the items. 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.
Depreciation method and estimated useful lives used by the Group are as follows:
Depreciation Method Useful life
Buildings Straight-line 40 years
Structures Straight-line 40 years
Fixtures and furniture Straight-line 3-4 years
Vehicles Straight-line 4 years
Others - Indefinite useful life
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of
each reporting period. An asset’s carrying amount is written down immediately to its recoverable
amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and
losses on disposals are determined by comparing the proceeds with the carrying amount and are
recognised within other operating income (expenses) in the income statement.
2.12 Intangible assets
Intangible assets are stated at cost, which includes acquisition cost and directly related costs
required to prepare the asset for its intended use. Intangible assets are stated net of accumulated
amortization calculated based on using the following amortization method and estimated useful
lives:
Amortization Method Useful life
Development costs Straight-line 5 years
Rights of trademark Straight-line 5 years
Other intangible assets Straight-line 5 years
Memberships classified under other intangible assets are not amortized over their indefinite useful
life.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
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2.13 Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortization and are tested annually for
impairment. Assets that are subject to amortization are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating units). Non-financial
assets that are subject to amortization suffered impairment are reviewed for possible reversal of the
impairment at each reporting date.
2.14 Pension obligations
The Group operates a defined benefit plan. The liability recognized in the statement of financial
position in respect of defined benefit pension plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan assets, together with
adjustments for unrecognized past-service costs. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity approximating to the terms of the related
pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are recognized in profits or losses in the period in which they arise.
2.15 Provisions and contingent liabilities
When there is a probability that an outflow of economic benefits will occur due to a present
obligation resulting from a present legal or as a result of past events, and whose amount is
reasonably estimable, a corresponding amount of provision is recognized in the financial
statements. 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 the best estimate of the expenditure required to settle the present obligation that
consider the risks and uncertainties inevitably surround many events and circumstances at the
reporting date. Where the effect of the time value of money is material, the amount of a provision is
the present value of the expenditures expected to be required to settle the obligation.
A possible obligation that arises from past events and whose existence will be confirmed only by
the occurrence or non-occurrence of uncertain future events, or a present obligation that arises
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
23
from past events but is not certain to occur, or cannot be reliably estimated, a disclosure regarding
the contingent liability is made in the notes to the financial statements.
2.16 Derivative financial instruments
The Group has applied hedging policies using derivatives to deal with the risk of changes in foreign
currency exchange rates and interest rates arising from liabilities. The Group has contracted
currency swap and interest swap derivative financial instruments to deal with the risk of changes in
foreign currency exchange rates arising from foreign currency liabilities and the risk of changes in
interest rates arising from floating-rate liabilities.
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and
are subsequently re-measured at their fair value. The method of recognizing the resulting gain or
loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged. The Group applies cash flow hedge, which are hedges of a particular risk
associated with a recognized asset or liability or a highly probable forecast transaction.
The Group documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for
undertaking various hedging transactions to apply hedging accounting. The Group also documents
its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
are used in hedging transactions are highly effective in offsetting changes in fair values or cash
flows of hedged items.
The effective portion of changes in the fair value of derivatives that are designated and qualify as
cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the
ineffective portion is recognized immediately in profits or losses. The cumulative gain or loss that
was reported in equity is recognized when the hedged items affect profits and losses.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and
is recognized when the forecast transaction is ultimately recognized in the income statement. When
a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported
in equity is immediately transferred to profits or losses.
2.17 Current and deferred income tax
Interim period income tax expense is calculated by applying to an interim period’s pre-tax income
the tax rate that would be applicable to expected total annual earnings.
Deferred income tax is recognized, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. However, deferred tax assets and liabilities are not accounted for if they arise
from the initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
24
income tax is determined using tax rates and laws that have been enacted or substantially enacted
by the date of the statement of financial position and are expected to apply when the related
deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilized.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries
and associates, except for deferred income tax liability where the timing of the reversal of the
temporary difference is controlled by the Group and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities which intend either to settle current tax liabilities and
assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax liabilities or assets are expected to be settled or
recovered.
2.18 Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the
Group by the weighted average number of ordinary shares in issue during the period excluding
ordinary shares purchased by the Group and held as treasury shares.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive potential ordinary shares. Only dilutive
potential ordinary shares are dilutive, they are added to the number of ordinary shares outstanding
in the calculation of diluted earnings per share.
2.19 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker. The chief operating decision-maker is responsible for allocating
resources and assessing performance of the operating segments.
3. Transition to Korean IFRS
The interim consolidated financial statements as of June 30, 2011, are prepared according to
Korean IFRS at the adoption date of January 1, 2011. The statements of financial position as of
December 31, 2010 and as of June 30, 2010, which were prepared previously under K-GAAP are
restated in accordance with Korean IFRS 1101, “First-time adoption of Korean IFRS”, for the
comparative purposes at the transition date of January 1, 2010.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
25
a. Exemptions of Korean IFRS 1101 elected by the Group
The Group has elected to apply the following optional exemptions from full retrospective
application.
(1) Business combination
The Group has not retrospectively applied Korean IFRS 1103 (Business combination) to the
business combinations that took place prior to the transition date.
(2) Deemed cost of property and equipment
The Group has elected to use carrying amount of property and equipment under K-GAAP as
deemed cost at the date of transition to Korean IFRS.
b. Explanation on the reconciliation of K-GAAP and Korean IFRS
Major reconciliations of the transition between K-GAAP and Korean IFRS are as follows:
(1) Impairment of financial assets (allowance for financial assets)
Under K-GAAP, allowances for financial receivables are calculated based on the long-term
average expected loss. In case the allowance calculated based on the expected loss is smaller
than the allowance calculated in accordance to the guidelines provided in the Act on the
Specialized Credit Financial Business, the Group recognizes an allowance in accordance to the
guidelines provided in the Act on the Specialized Credit Financial Business. Under Korean IFRS,
impairment losses are recognized where there is evidence that impairment occurred. Allowance for
financial receivables is measured individually for assets that are individually significant and on a
collective basis for portfolios with similar risk characteristics.
(2) Provision for unused loan commitment
Under K-GAAP, provision for unused loan commitment is not recognised. Under Korean IFRS, the
expected losses of unused loan commitment are recognized as provision for unused credit lines.
(3) Accrued revenue for overdue receivables
Under K-GAAP, accrued revenue for receivables which are overdue is not recognized. Under
Korean IFRS, accrued revenue for past due and impaired receivables and the interests on
impaired receivable are recognized using expected cash flow after impairments.
(4) Measurement of financial assets carried at amortized cost
Under K-GAAP, non-marketable loan and receivables are measured at nominal value if the
difference between nominal value and discounted value is not substantial. Under Korean IFRS,
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
26
loan and receivables are initially measured at fair value and subsequently carried at amortized cost
using the effective interest method.
(5) Recognition of unused compensated absences
According to K-GAAP, unused compensated absences given to employees are recognized as
liabilities at the end of the reporting period only when the right to be paid has been established.
Under Korean IFRS, the Group recognizes liabilities when an employee has provided service in
exchange for compensated absences.
(6) Depreciation method for property and equipment
Under K-GAAP, depreciation method for certain property and equipment was declining-balance
method. Under Korean IFRS, the Group uses the straight-line method to reflect properly the
matching of the future economic benefits.
(7) Retirement benefit obligations
Under K-GAAP, the Group recognizes the amount which would be payable assuming all eligible
employees and directors were to terminate their employment as of the statement of financial
position date as accrued severance benefits represent. Under Korean IFRS, the Group recognizes
the estimated amount using the projected unit credit method which is on an actuarial basis as the
defined benefit obligation.
(8) Reclassification of memberships as intangible assets
Under K-GAAP, memberships are classified as investments. Under Korean IFRS, the Group
reclassifies memberships held for operating purposes as an intangible asset with an infinite useful
life.
(9) Consolidation
Under K-GAAP, Autopia Thirty-third SPC, trust and other subsidiaries were previously excluded
from consolidation in accordance with Article 1.3, Clause 1 of Enforcement Decree of the Act on
External Audit of Stock Companies. Under Korean IFRS, they are consolidated (Note 2).
(10) Income tax effects
The Group recognized changes in deferred tax representing the impact of deferred taxes on the
adjustments for the transition to Korean IFRS.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
27
c. Effects on the consolidated financial position and comprehensive income
(1) Reconciliation of financial position as of January 1, 2010
(in millions of Korean won)
Assets LiabilitiesShareholders’
equity
K-GAAP \ 15,854,426 \ 13,698,696 \ 2,155,730
Conversion effects to Korean IFRS
Allowance for doubtful accounts 220,443 - 220,443
Provision for unused loan commitments - 26,416 (26,416)
Accrued revenues 21,259 - 21,259
Measurement of amortized cost (6,395) - (6,395)
Recognition of unused compensatedabsences
- 2,267 (2,267)
Depreciation 11,748 - 11,748
Retirement benefit obligations - 91 (91)
Others (3,945) 3,335 (7,280)
Scope of consolidation 2,903,721 2,998,859 (95,138)
Deferred income taxes - 54,672 (54,672)
Total effect of transition 3,146,831 3,085,640 61,191
Korean IFRS \ 19,001,257 \ 16,784,336 \ 2,216,921
(2) Reconciliation of financial position as of June 30, 2010
(in millions of Korean won)
Assets LiabilitiesShareholders’
equity
K-GAAP \ 16,366,363 \ 14,160,619 \ 2,205,744
Conversion effects to Korean IFRS
Allowance for doubtful accounts 215,735 - 215,735
Provision for unused loan commitments - 32,589 (32,589)
Accrued revenues 21,398 - 21,398
Measurement of amortized cost (443) - (443)
Recognition of unused compensatedabsences
- 3,341 (3,341)
Depreciation 464 - 464
Retirement benefit obligations 991 - 991
Others (1,266) (916) (350)
Scope of consolidation 2,682,383 2,818,663 (136,280)
Deferred income taxes - 30,559 (30,559)
Total effect of transition 2,919,262 2,884,236 35,026
Korean IFRS \ 19,285,625 \ 17,044,855 \ 2,240,770
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
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(3) Reconciliation of results of operations for the three-month and the six-month periods ended June
30, 2010
(in millions of Korean won)
Three months Six months
Totalcomprehensive
incomeNet Income
Totalcomprehensive
incomeNet Income
K-GAAP \ 93,071 \ 119,000 \ 253,591 \ 288,022
Conversion effects to Korean IFRS
Allowance for doubtfulaccounts
(5,913) (5,913) (4,708) (4,708)
Provision for unused loancommitments
(2,925) (2,925) (6,173) (6,173)
Accrued revenues 2,233 2,233 139 139
Measurement of amortizedcost
3,260 3,260 5,952 5,952
Recognition of unusedcompensated absences
(270) (270) (1,074) (1,074)
Depreciation (542) (542) (11,284) (11,284)
Retirement benefit obligations 374 374 1,082 1,082
Others 58 5,466 6,930 6,930
Scope of consolidation (38,355) (24,571) (41,141) (27,348)
Deferred income taxes 24,733 24,733 24,113 24,113
Total effect of transition (17,347) 1,845 (26,164) (12,371)
Korean IFRS \ 75,724 \ 120,845 \ 227,427 \ 275,651
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
29
(4) Reconciliation of financial position and results of operations as of and for the year ended
December 31, 2010
(in millions of Korean won)
Assets Liabilities Total equityTotal
comprehensiveincome
Net Income
K-GAAP \17,931,200 \15,727,686 \ 2,203,514 \ 454,942 \ 511,545
Conversion effects to Korean IFRS
Allowance for doubtfulaccounts
208,187 - 208,187 (12,256) (12,256)
Provision for unused loancommitments
- 46,624 (46,624) (20,208) (20,208)
Accrued revenues 22,471 - 22,471 1,212 1,212
Measurement ofamortized cost
2,443 - 2,443 8,838 8,838
Recognition of unusedcompensated absences
- 2,524 (2,524) (257) (257)
Depreciation 1,113 - 1,113 (10,636) (10,636)
Retirement benefitobligations
- 3,823 (3,823) (2,299) (2,299)
Others 39,865 39,926 (61) 8,645 8,645
Scope of consolidation 2,543,323 2,604,768 (61,445) (15,673) (10,375)
Deferred income taxes - 86,404 (86,404) 14,776 14,776
Total effect of transition 2,817,402 2,784,069 33,333 (27,858) (22,560)
Korean IFRS \20,748,602 \18,511,755 \ 2,236,847 \ 427,084 \ 488,985
d. Adjustments of cash flows in 2010
According to Korean IFRS, cash flows of the related income (expenses) and assets (liabilities) are
adjusted to separately disclose the cash flows from interest received, interest paid and cash
payments of income taxes that were not presented separately under K-GAAP. And the effects of
the change in exchange rate on cash and cash equivalents held or due in a foreign currency are
presented separately from cash flows from operating, investing and financing activities. There are
no other significant differences between cash flows under Korean IFRS and K-GAAP.
e. Adjustments of operating income and expenses
The Group reclassified certain non-operating income and expenses under K-GAAP to other
operating income and expenses according to Korean IFRS.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
30
Adjustments for the three-month and the six-month periods ended June 30, 2011 and 2010, are as
follows:
(in millions of Korean won) 2011 2010
TypeThree
monthsSix
monthsThree
monthsSix
months
Other operating income \ 35 \ 6,963 \ 5,133 \ 12,488
Other operating expenses 126 2,700 4,522 10,946
4. Restricted Financial Instruments
Restricted financial instruments as of June 30, 2011 and December 31, 2010, are as follows:
(in millions of Korean won) Amount
Type Entities 2011 2010 Restriction
DepositsKookmin Bankand 5 others \ 23 \ 25
Maintaining depositsfor opening account
5. Securities
Securities as of June 30, 2011 and December 31, 2010, are as follows:
(in millions of Korean won)
Type 2011 2010
Available-for-sale securities
Equity securities
Marketable equitysecurities \ 6,526 \ 7,318
Unlisted equitysecurities
10,128 9,887
16,654 17,205
Debt securitiesGovernment andpublic bonds
3,944 3,372
Sub-total 20,598 20,577
Equity method investments 52,573 48,483
\ 73,171 \ 69,060
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
31
Available-for-sale securities
Available-for-sale securities as of June 30, 2011 and December 31, 2010, are as follows:
(1) Equity securities
(in millions of Korean won)
Book value
Number ofshares
Ownership(%)
Acquisitioncost
2011 2010
Marketable equity securities
NICE InformationService
136,593 2.25 \ 3,312 \ 3,797 \ 4,221
NICE Holdings 49,162 1.42 3,491 2,729 3,097
Unlisted equity securities
Hyundai FinanceCorp.
1 1,700,000 9.29 9,888 10,128 9,887
\ 16,691 \ 16,654 \ 17,205
1The fair value for Hyundai Finance Corp. was valued as the average of valuation prices
provided by two external appraisers, KIS Pricing Inc. and Korea Asset Pricing, using the
discounted cash flow model. The five-year financial statements, projected based on past
performance, were used in measuring the fair value assuming that the operational structure will
remain as is for the next five years. Operating income and expenses were estimated based on
the past performance, business plan and expected market conditions.
(2) Debt securities
(in millions of Korean won)
Book value
IssuerInterestrate (%)
Acquisitioncost 2011 2010
Government andpublic bonds
Metropolitan RapidTransit and others
2.50 \ 3,766 \ 3,944 \ 3,372
Equity method investments
Equity method investments as of June 30, 2011 and December 31, 2010, are as follows:
(in millions of Korean won)
2011Number of
sharesOwnership
(%)Acquisition
costNet asset
valueBook value
HK Mutual SavingBank
1 4,990,438 20.00 \ 45,719 \ 34,953 \ 47,201
HI Network, Inc.1
13,332 19.99 76 542 542
Korea Credit Bureau1
140,000 7.00 3,800 2,728 3,765Hyundai Capital
Germany GmbH600,200 30.01 1,065 966 1,065
\ 50,660 \ 39,189 \ 52,573
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
32
(in millions of Korean won)
2010Number of
sharesOwnership
(%)Acquisition
costNet asset
valueBook value
HK Mutual SavingBank
1 4,990,438 20.00 \ 45,719 \ 30,601 \ 42,849
HI Network, Inc.1
13,332 19.99 76 1,055 1,055
Korea Credit Bureau1
140,000 7.00 3,800 2,477 3,514Hyundai Capital
Germany GmbH600,200 30.01 1,065 908 1,065
\ 50,660 \ 35,041 \ 48,483
1The Group’s shareholdings in HK Mutual Saving Bank, HI Network, Inc. and Korea Credit
Bureau are less than 20%. However, the Group is able to significantly influence such
involvement in the financial and operating processes, and thus the equity method is applied.
Valuations of equity method investments for the six-month periods ended June 30, 2011 and 2010,
are as follows:
(in millions of Korean won)
2011
BeginningBalance
AcquisitionGain (loss)
on valuation
Changes inaccumulated
othercomprehensive
income
DividendsEndingBalance
HK Mutual SavingBank \ 42,849 \ - \ 4,305 \ 47 \ - \ 47,201
HI Network, Inc. 1,055 - 193 - (706) 542
Korea CreditBureau
3,514 - 251 - - 3,765
Hyundai CapitalGermany GmbH
1,065 - - - - 1,065
\ 48,483 \ - \ 4,749 \ 47 \ (706) \ 52,573
(in millions of Korean won)
2010
BeginningBalance
AcquisitionGain (loss)
on valuation
Changes inaccumulated
othercomprehensive
income
DividendsEndingBalance
HK Mutual SavingBank \ 35,799 \ - \ 4,629 \ 19 \ - \ 40,447
HI Network, Inc. - 76 1,755 - (1,227) 604
Korea CreditBureau
3,191 - (121) - - 3,070
Hyundai CapitalGermany GmbH
1,065 - - - - 1,065
\ 40,055 \ 76 \ 6,263 \ 19 \ (1,227) \ 45,186
The difference between the acquired amounts of equity method investments and their
corresponding net asset value as of June 30, 2011 and December 31, 2010, follow:
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
33
(in millions of Korean won)
2011 2010
HK Mutual Saving Bank \ 12,248 \ 12,248
Korea Credit Bureau 1,037 1,037
\ 13,285 \ 13,285
Summary of financial information of investees as of June 30, 2011 and December 31, 2010,
follows:
(in millions of Korean won)
2011
Assets LiabilitiesOperatingrevenue
Net income(loss)
HK Mutual Saving Bank \ 2,488,211 \ 2,313,445 \ 180,413 \ 21,527
HI Network, Inc. 5,675 2,967 9,854 1,007
Korea Credit Bureau 46,335 7,368 18,066 3,513
Hyundai CapitalGermany GmbH
3,384 165 316 58
(in millions of Korean won)
2010
Assets LiabilitiesOperatingrevenue
Net income(loss)
HK Mutual Saving Bank \ 2,439,109 \ 2,286,106 \ 158,559 \ 23,455
HI Network, Inc. 8,734 3,458 10,101 2,476
Korea Credit Bureau 45,301 9,914 11,874 (2,010)
Hyundai CapitalGermany GmbH
3,145 117 - -
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
34
6. Financial Receivables
Financial receivables as of June 30, 2011 and December 31, 2010, are as follows:
(in millions of Korean won)
2011
Principal
Deferred loanorigination fees and
costs(Initial direct costsfor lease assets)
Present valuediscounts
Allowancefor doubtful
accountsBook value
Loan receivables
Loans \ 11,220,286 \ (110,726) \ (851) \ (255,690) \ 10,853,019
Installment financial assets
Auto 5,000,809 (83,717) - (29,470) 4,887,622
Durable goods 3,208 14 - (161) 3,061
Mortgage 31,490 83 - (259) 31,314
Machinery 5,228 - 19 (46) 5,201
5,040,735 (83,620) 19 (29,936) 4,927,198
Lease receivables
Finance leasereceivables
2,117,538 (690) - (19,974) 2,096,874
Cancelled leasereceivables
3,620 - - (2,504) 1,116
2,121,158 (690) - (22,478) 2,097,990
\ 18,382,179 \ (195,036) \ (832) \ (308,104) \ 17,878,207
(in millions of Korean won)
2010
Principal
Deferred loanorigination fees and
costs(Initial direct costsfor lease assets)
Present valuediscounts
Allowancefor doubtful
accountsBook value
Loan receivables
Loans \ 10,545,431 \ (110,263) \ (1,027) \ (215,703) \ 10,218,438
Installment financial assets
Auto 5,123,218 (99,271) (2) (27,489) 4,996,456
Durable goods 6,762 39 - (633) 6,168
Mortgage 39,915 111 - (404) 39,622
Machinery 14,595 - 58 (117) 14,536
5,184,490 (99,121) 56 (28,643) 5,056,782
Lease receivables
Finance leasereceivables
1,797,372 (622) - (19,273) 1,777,477
Cancelled leasereceivables
2,719 - - (1,758) 961
1,800,091 (622) - (21,031) 1,778,438
\ 17,530,012 \ (210,006) \ (971) \ (265,377) \ 17,053,658
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
35
7. Allowance for Doubtful Accounts
Changes in allowance for doubtful accounts for the six-month periods ended June 30, 2011 and
2010, are as follows:
(in millions of Korean won)
2011
TypeLoan
receivablesInstallment
financial assetsLease
receivablesOther assets Total
Beginning balance \ 215,703 \ 28,643 \ 21,031 \ 7,649 \ 273,026
Amounts written off (137,115) (13,816) (11) (2,415) (153,357)
Recoveries of amountspreviously written off
48,063 6,726 62 4,010 58,861
Discount unwind (3,091) (156) (62) - (3,309)
Additional(reversed)allowance
132,130 8,539 1,458 (2,702) 139,425
Ending balance \ 255,690 \ 29,936 \ 22,478 \ 6,542 \ 314,646
(in millions of Korean won)
2010
TypeLoan
receivablesInstallment
financial assetsLease
receivablesOther assets Total
Beginning balance \ 175,934 \ 32,517 \ 12,529 \ 6,997 \ 227,977
Amounts written off (94,787) (16,763) (80) (1,770) (113,400)
Recoveries of amountspreviously written off
51,523 7,651 178 4,393 63,745
Discount unwind (2,462) (210) (24) - (2,696)
Additional(reversed)allowance
33,977 3,276 979 (3,856) 34,376
Ending balance \ 164,185 \ 26,471 \ 13,582 \ 5,764 \ 210,002
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
36
8. Financial Instruments
a. Fair value of financial instruments
The fair values of financial instruments as of June 30, 2011 and December 31, 2010, are as follows:
(in millions of Korean won)
Type
2011 2010
Bookvalue
Fairvalue
Bookvalue
Fairvalue
Assets
Financial assets
Cash and deposits \ 1,382,802 \ 1,382,802 \ 1,224,891 \ 1,224,891
Available-for-salesecurities
20,598 20,598 20,577 20,577
Loans receivable 10,853,019 11,101,278 10,218,438 10,571,397
Installment financialassets
4,927,198 5,042,517 5,056,782 5,218,322
Derivative assets 426,616 426,616 521,530 521,530
Non-trade receivables 39,890 39,887 39,869 39,869
Accrued revenues 107,864 107,864 111,806 111,806
Advance payments1
36,783 36,783 34,092 34,092
Leasehold deposits 34,474 34,394 31,955 31,872
\ 17,829,244 \ 18,192,739 \ 17,259,940 \ 17,774,356
Liabilities
Financial liabilities
Borrowings \ 1,930,000 \ 1,932,840 \ 2,646,945 \ 2,652,759
Debentures 15,457,222 15,832,084 14,396,741 14,795,749
Derivative liabilities 230,905 230,905 96,568 96,568
Non-trade payables2
240,668 240,668 240,414 240,414
Accrued expenses 139,937 139,937 110,225 109,943
Withholdings2
14,310 14,316 10,791 10,791
Leasehold depositsreceived
762,124 768,073 746,531 763,718
\ 18,775,166 \ 19,158,823 \ 18,248,215 \ 18,669,942
1Certain portion of advance payments for customers.
2Excluding taxes.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
37
b. Fair value hierarchy
The fair value hierarchy of financial assets and liabilities carried at fair value as of June 30, 2011
and December 31, 2010, are as follows:
(in millions of Korean won)
2011
TypeBookvalue
Fairvalue
Fair value hierarchy1
level 1 level 2 level 3
Financial assets
Financial assets at fairvalueAvailable-for-salesecurities \ 20,598 \ 20,598 \ 6,526 \ 3,944 \ 10,128
Derivative assets 426,616 426,616 - 426,616 -
447,214 447,214 6,526 430,560 10,128
Financial liabilities
Derivative liabilities \ 230,905 \ 230,905 \ - \ 230,905 \ -
1The levels of fair value hierarchy have been defined as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities. Listed stocks and
derivatives
Level 2: Inputs for the asset or liability included within valuation techniques that are observable
market data. Most bonds issued in Korean won and foreign currency, general unlisted
derivatives like swap, forward, option
Level 3: Inputs for the asset or the liability that are not based on observable market data.
Unlisted stocks, complicated structured bonds, complicated unlisted derivatives and others.
(in millions of Korean won)
2010
TypeBookvalue
Fairvalue
Fair value hierarchy(*)
level 1 level 2 level 3
Financial assets
Financial assets at fairvalueAvailable-for-salesecurities \ 20,577 \ 20,577 \ 7,318 \ 3,372 \ 9,887
Derivative assets 521,530 521,530 - 521,530 -
542,107 542,107 7,318 524,902 9,887
Financial liabilities
Derivative liabilities \ 96,568 \ 96,568 \ - \ 96,568 \ -
c. Changes in financial instruments of level 3
The changes in financial instruments of level 3 for the six-month periods ended June 30, 2011 and
2010 are as follows:
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
38
(in millions of Korean won)
TypeAvailable-for-sale securities
2011 2010
Beginning balance \ 9,887 \ 8,802
Gains on valuation(Other comprehensive income)
241 673
Disposal - (76)
Ending balance \ 10,128 \ 9,399
d. Financial instruments by categories
The book value of financial instruments by categories as of June 30, 2011 and December 31, 2010,
are as follows:
(in millions of Korean won)
2011
Type
Financialassets at fairvalue throughprofit or loss
Loans andreceivables
Available-for-sale financial
assets
Hedgingderivative
instrumentsTotal
Financial assets
Cash and deposits \ - \ 1,382,802 \ - \ - \ 1,382,802
Available-for- salesecurities
- - 20,598 - 20,598
Loans receivable - 10,853,019 - - 10,853,019
Installmentfinancial assets
- 4,927,198 - - 4,927,198
Derivative assets 37 - - 426,579 426,616
Non-tradereceivables
- 39,890 - - 39,890
Accrued revenues - 107,864 - - 107,864
Advance payments - 36,783 - - 36,783
Leaseholddeposits
- 34,474 - - 34,474
\ 37 \ 17,382,030 \ 20,598 \ 426,579 \ 17,829,244
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
39
(in millions of Korean won)
2010
Type
Financialassets at fairvalue throughprofit or loss
Loans andreceivables
Available-for-sale financial
assets
Hedgingderivative
instrumentsTotal
Financial assets
Cash and deposits \ - \ 1,224,891 \ - \ - \ 1,224,891
Available-for- salesecurities
- - 20,577 - 20,577
Loans receivable - 10,218,438 - - 10,218,438
Installmentfinancial assets
- 5,056,782 - - 5,056,782
Derivative assets 72 - - 521,458 521,530
Non-tradereceivables
- 39,869 - - 39,869
Accrued revenues - 111,806 - - 111,806
Advance payments - 34,092 - - 34,092
Leaseholddeposits
- 31,955 - - 31,955
\ 72 \ 16,717,833 \ 20,577 \ 521,458 \ 17,259,940
(in millions of Korean won)
2011 2010
Type
Financialliabilities
at fair valuethrough
profit or loss
Financialliabilities atamortized
cost
Hedgingderivative
instrumentsTotal
Financialliabilities at
amortized cost
Hedgingderivative
instrumentsTotal
Financial liabilities
Borrowings \ - \ 1,930,000 \ - \ 1,930,000 \ 2,646,945 \ - \ 2,646,945
Debentures - 15,457,222 - 15,457,222 14,396,741 - 14,396,741
Derivativeliabilities
2 - 230,903 230,905 - 96,568 96,568
Non-tradepayables
- 240,668 - 240,668 240,414 - 240,414
Accruedexpenses
- 139,937 - 139,937 110,225 - 110,225
Withholdings - 14,130 - 14,130 10,791 - 10,791
Leaseholddepositsreceived
- 762,124 - 762,124 746,531 - 746,531
\ 2 \18,544,261 \ 230,903 \ 18,775,166 \ 18,151,647 \ 96,568 \ 18,248,215
9. Finance Lease Receivables
a. Total lease investments and present value of minimum lease receipts
Details of total lease investments and present value of minimum lease receipts as of June 30, 2011
and December 31, 2010, are as follows:
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
40
(in millions of Korean won)
Type
2011 2010
Total leaseinvestments
Present value ofminimum lease
receipts
Total leaseinvestments
Present value ofminimum lease
receipts
Less than 1 year \ 895,912 \ 544,436 \ 765,722 \ 457,513
1 to 5 years 1,504,034 583,785 1,272,610 504,344
Over 5 years 40 1 - -
\ 2,399,986 \ 1,128,222 \ 2,038,332 \ 961,857
b. Unearned interest income
Details of unearned interest income as of June 30, 2011 and December 31, 2010, are as follows:
(in millions of Korean won)
2011 2010
Total leaseinvestments
Net lease investments
Unearnedinterestincome
Total leaseinvestments
Net lease investments
Unearnedinterestincome
Minimumlease
receipts(presentvalue)
Unguaranteedresidual value
(presentvalue)
Total
Minimumlease
receipts(presentvalue)
Unguaranteedresidual value
(presentvalue)
Total
\ 2,399,986 \ 1,128,222 \ 988,626 \2,116,848 \ 283,138 \ 2,038,332 \ 961,857 \ 834,893 \1,796,750 \ 241,582
c. The amounts of doubtful finance lease receivables and related allowance as of June 30, 2011
and December 31, 2010, are as follows:
(in millions of Korean won)
Type 2011 2010
Finance lease receivables \ 4,773 \ 3,889
Allowance (4,773) (3,889)
10. Leased Assets
All operating leased assets consist of vehicles as of June 30, 2011 and December 31, 2010, and
the details are as follows:
(in millions of Korean won)2011 2010
Acquisitioncost
Accumulateddepreciation
Carryingamount
Acquisitioncost
Accumulateddepreciation
Carryingamount
Operatingleased assets \1,792,032 \ (620,159) \ 1,171,873 \1,991,961 \ (709,116) \ 1,282,845
Cancelledleased assets
4,176 (42) 4,134 3,234 (42) 3,192
\1,796,208 \ (620,201) \ 1,176,007 \1,995,195 \ (709,158) \ 1,286,037
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
41
Future minimum lease receipts under operating lease as of June 30, 2011 and December 31,
2010, are as follows:
(in millions of Korean won)
Type 2011 2010
Less than 1 year \ 414,370 \ 423,307
1 to 5 years 380,050 414,181
Over 5 years 2 -
\ 794,422 \ 837,488
11. Property and Equipment
a. Details of property and equipment
Property and equipment as of June 30, 2011 and December 31, 2010, consist of:
(in millions of Korean won)
Type2011 2010
Acquisitioncost
Accumulateddepreciation
Book valueAcquisition
costAccumulateddepreciation
Book value
Land \ 103,697 \ - \ 103,697 \ 101,844 \ - \ 101,844
Buildings 117,548 (21,303) 96,245 112,305 (19,762) 92,543
Structures 2,466 (251) 2,215 2,466 (220) 2,246
Vehicles 1,699 (909) 790 1,608 (770) 838
Fixture andfurniture
132,918 (90,719) 42,199 116,971 (81,650) 35,321
Others 1,951 - 1,951 1,200 - 1,200
Construction inprogress
4,263 - 4,263 8,377 - 8,377
\ 364,542 \ (113,182) \ 251,360 \ 344,771 \ (102,402) \ 242,369
The value of land based on the published prices announced by the Korean government as of June
30, 2011, is \ 94,262 million (2010: \ 91,633 million).
b. Changes in property and equipment
Changes in property and equipment for the six-month periods ended June 30, 2011 and 2010, are
as follows:
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
42
(in millions of Korean won)
2011
TypeBeginning
balanceAcquisition Replacement Disposal Depreciation
Endingbalance
Land \ 101,844 \ 1,853 \ - \ - \ - \ 103,697
Buildings 92,543 5,243 - - (1,541) 96,245
Structures 2,246 - - - (31) 2,215
Vehicles 838 166 - (30) (184) 790
Fixture andfurniture
35,321 15,956 19 (14) (9,083) 42,199
Others 1,200 496 259 - (4) 1,951
Construction inprogress
8,377 2,604 (6,718) - - 4,263
\ 242,369 \ 26,318 \ (6,440) \ (44) \ (10,843) \ 251,360
(in millions of Korean won)
2010
TypeBeginning
balanceAcquisition Replacement Disposal Depreciation
Endingbalance
Land \ 98,778 \ - \ - \ - \ - \ 98,778
Buildings 92,374 1,408 - - (1,384) 92,398
Structures 2,134 - - - (29) 2,105
Vehicles 960 46 - - (172) 834
Fixture andfurniture
32,281 3,453 - - (8,095) 27,639
Others 1,087 - - - - 1,087
Construction inprogress
11,070 5,234 (7,250) - - 9,054
\ 238,684 \ 10,141 \ (7,250) \ - \ (9,680) \ 231,895
As of June 30, 2011, the Company carries comprehensive asset insurance for its buildings for up to
₩211,916 million (2010: ₩209,783 million). Comprehensive movable property insurance for
fixture and furniture covers up to ₩21,000 million (2010: ₩18,812 million). Other leased office
buildings and vehicles are covered with liability and general insurance.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
43
12. Intangible Assets
a. Details of Intangible assets
Intangible assets as of June 30, 2011 and December 31, 2010, consist of:
(in millions of Korean won)
Type2011 2010
Acquisitioncost
Accumulateddepreciation
Bookvalue
Acquisitioncost
Accumulateddepreciation
Bookvalue
Development costs \ 63,114 \ (39,131) \ 23,983 \ 56,142 \ (36,138) \ 20,004
Rights of trademark 69 (32) 37 69 (25) 44
Other intangibleassets
52,852 (15,874) 36,978 47,545 (14,981) 32,564
\ 116,035 \ (55,037) \ 60,998 \ 103,756 \ (51,144) \ 52,612
b. Changes in intangible assets
Changes in intangible assets for the six-month periods ended June 30, 2011 and 2010, are as
follows:
(in millions of Korean won)
2011
Type Beginning balance Increase1 Disposal Amortization Ending balance
Development costs \ 20,004 \ 7,021 \ (50) \ (2,992) \ 23,983
Rights of trademark 44 - - (7) 37
Other intangible assets 32,564 5,328 (21) (893) 36,978
\ 52,612 \ 12,349 \ (71) \ (3,892) \ 60,998
1Inclusive of transfer from construction in progress
(in millions of Korean won)
2010
Type Beginning balance Increase1
Disposal Amortization Ending balance
Development costs \ 7,691 \ 6,879 \ - \ (2,851) \ 11,719
Rights of trademark 57 - - (7) 50
Other intangible assets 31,186 952 (29) (1,004) 31,105
\ 38,934 \ 7,831 \ (29) \ (3,862) \ 42,874
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
44
13. Borrowings
Borrowings as of June 30, 2011 and December 31, 2010, consist of:
(in millions of Korean won)
Types LenderAnnual
interest rate (%)2011 2010
Borrowings in won
Commercial paperSK Securities
and 6 others3.22 ~ 4.97 \ 660,000 \ 1,420,000
General loansKookmin Bank
and 11 others4.18 ~ 7.74 1,270,000 1,170,000
1,930,000 2,590,000
Borrowings in foreign currency
General loans - - - 56,945
\ 1,930,000 \ 2,646,945
As of December 31, 2010, above borrowings included securitized borrowings of ₩ 10,000 million
issued based on loan receivables and installment financial assets. There are no securitized
borrowings as of June 30, 2011.
14. Debentures
Debentures issued by the Group and outstanding as of June 30, 2011 and December 31, 2010,
are as follows:
(in millions of Korean won)
TypeAnnualinterest
rates (%)
2011 2010
Par value Issue price Par value Issue price
Short-term debenture
Debenture 3.22 ~ 5.19 \ 454,306 \ 454,306 \ 659,397 \ 659,397
Less: Discount ondebentures
(57) (253)
454,249 659,144
Current portion of debenture
Debenture 0.33 ~ 8.75 4,321,020 4,321,020 3,384,553 3,384,553
Less: Discount ondebentures
(4,029) (6,163)
4,316,991 3,378,390
Long-term debenture
Debenture 0.33 ~ 7.47 10,715,017 10,715,017 10,381,923 10,381,923
Less: Discount ondebentures
(29,035) (22,716)
10,685,982 10,359,207
\ 15,490,343 \ 15,457,222 \ 14,425,873 \ 14,396,741
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
45
As of June 30, 2011, above debentures include securitized borrowings of ₩ 2,401,666 million,
(2010: ₩ 2,936,654 million) issued based on loan receivables and installment financial assets.
15. Defined Benefit Liability
a. The amounts of defined benefit plans recognized in the statements of financial position as of
June 30, 2011 and December 31, 2010, are as follows:
(in millions of Korean won)
Type 2011 2010
Present value of funded obligations \ 42,730 \ 38,732
Fair value of plan assets (29,525) (27,045)
Defined benefit liability \ 13,205 \ 11,687
b. Changes in present value of defined benefit obligations for the six-month periods ended June
30, 2011 and 2010:
(in millions of Korean won)
Type 2011 2010
Beginning balance \ 38,732 \ 37,337
Current service cost 4,697 4,130
Interest cost 885 1,003
Actuarial losses 1,127 -
Transfer of severance benefits from
related parties
1,405 1,109
Transfer of severance benefits to related
parties
(1,193) (1,067)
Benefits paid (2,923) (3,598)
Ending balance \ 42,730 \ 38,914
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
46
c. Changes in the fair value of plan assets for the six-month periods ended June 30, 2011 and
2010:
(in millions of Korean won)
Type 2011 2010
Beginning balance \ 27,045 \ 28,019
Contributions by plan participants 3,500 -
Expected return on plan assets 525 663
Actuarial (losses)/gains 71 (216)
Transfer of severance benefits from
related parties
845 288
Transfer of severance benefits to
related parties
(1,019) (644)
Benefits paid (1,442) (1,612)
Ending balance \ 29,525 \ 26,498
d. Details of the amounts recognized in the income statement for the six-month periods ended
June 30, 2011 and 2010:
(in millions of Korean won)
Type 2011 2010
Current service cost \ 4,697 \ 4,130
Interest cost 885 1,003
Expected return on plan assets (525) (663)
Actuarial losses 1,056 216
\ 6,113 \ 4,686
e. Actual return on plan assets for the six-month periods ended June 30, 2011 and 2010:
(in millions of Korean won)
Type 2011 2010
Actual return on plan assets \ 596 \ 447
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
47
f. Details of plan assets as of June 30, 2011 and December 31, 2010:
(in millions of Korean won)
Type2011 2010
Amount Ratio(%) Amount Ratio(%)
Cash \ 63 0.21 \ 96 0.36
Deposits 11,175 37.85 12,053 44.56
Interest rate guaranteedasset for 1-year
18,287 61.94 14,896 55.08
\ 29,525 100.00 \ 27,045 100.00
g. Actuarial assumptions
Actuarial assumptions required to recognize defined benefit liability as of June 30, 2011 and
December 31, 2010, are as follows:
Type 2011 2010
Discount rate 4.85% 4.90%
Expected return on plan assets 3.97% 4.20%
Future salary increases 5.64% 5.39%
Assumptions regarding future mortality experience are set based on actuarial advice published by
Korea Insurance Development Institute.
16. Income Tax
a. Income tax expense for the six-month periods ended June 30, 2011 and 2010, consists of:
(in millions of Korean won)
Type 2011 2010
Current tax1
\ 35,714 \ 79,777
Changes in deferred tax assets(liabilities) 80,880 (1,330)
Deferred tax credited directly to equity (8,091) 12,501
Income tax \ 108,503 \ 90,9481
Income tax for the six-month period ended June 30, 2011, includes changes in tax reconciliation
of the previous year.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
48
b. Deferred tax credited directly to equity
(in millions of Korean won)
Type 2011 2010
Gain on valuation of available-for-salefinancial securities
\ 114 \ (285)
Accumulated comprehensive income ofequity method investees
(62) (84)
Loss on valuation of derivatives (8,143) 12,870
\ (8,091) \ 12,501
c. Reconciliation between income before income tax and income tax expense
(in millions of Korean won)
Type 2011 2010
Profit before tax \ 462,552 \ 366,599
Current tax (24.2%) 111,911 88,717
Adjustments:
Income not subject to tax (51) (4)
Expenses not deductible for taxpurposes
82 110
Others (SPC consolidation, others) (3,439) 2,125
Income tax \ 108,503 \ 90,948
Effective tax rate
(Income tax over net income before tax)23.46% 24.80%
d. Changes in temporary differences and deferred assets (liabilities)
(in millions of Korean won)
2011
TypeTemporary differences Deferred assets (liabilities)
Beginning Changes Ending Beginning Ending
Allowances for doubtfulaccounts \ (35,003) \ (173,184) \ (208,187) \ (8,471) \ (50,381)
Derivatives (264,264) 131,964 (132,300) (59,619) (28,801)
Deferred fees (192,524) 46,571 (145,953) (45,647) (32,110)
Initial direct costs forlease assets
(84,109) (6,331) (90,440) (19,057) (19,897)
Gain on foreignexchanges translation
227,514 (140,369) 87,145 55,058 18,832
Non-trade payables 132,116 (115,891) 16,225 31,770 3,926
Unearned revenue 43,532 (43,532) - 10,658 -
Present value discounts (66,457) 66,337 (120) (16,081) (26)
Others 63,997 (39,771) 24,226 15,272 5,985
Consolidation effects 125,064 (47,778) 77,286 33,500 18,975
\ (50,134) \ (321,984) \ (372,118) \ (2,617) \ (83,497)
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
49
(in millions of Korean won)
2010
TypeTemporary differences Deferred assets (liabilities)
Beginning Changes Ending Beginning Ending
Allowances for doubtfulaccounts \ (79,850) \ 15,247 \ (64,603) \ (19,324) \ (15,634)
Derivatives (988,057) 254,531 (733,526) (230,538) (171,403)
Deferred fees (105,075) (5,710) (110,785) (25,071) (26,363)
Initial direct costs forlease assets
(65,368) (11,417) (76,785) (14,932) (17,515)
Gain on foreignexchanges translation
863,000 (235,155) 627,845 200,985 146,298
Non-trade payables 79,135 (61,567) 17,568 19,151 4,251
Unearned revenue 52,001 (72,250) (20,249) 12,362 (4,819)
Present value discounts (65,053) 64,928 (125) (15,495) (29)
Others 13,468 4,850 18,318 2,368 3,625
Consolidation effects 124,541 29,444 153,985 30,760 43,185
\ (171,258) \ (17,099) \ (188,357) \ (39,734) \ (38,404)
e. Realization of the deferred tax assets and basic judgment
Realization of the future tax benefits related to the deferred tax assets is dependent on many
factors, including the Group’s ability to generate taxable income within the period during which the
temporary differences reverse, the outlook of the Korean economic environment, and the overall
future industry outlook. Management periodically considers these factors in reaching its conclusion
and recognized the deferred income tax asset based on future realization.
As of June 30, 2011, the Group recognizes deferred income tax assets excluding certain
temporary differences which may not be realized. The amount above may change if the estimation
of future taxable income changes.
17. Provisions for Unused Loan Commitments
The Group has loan commitments. Changes in provisions for unused loan commitments for the six-
month periods ended June 30, 2011 and 2010, are as follows:
(in millions of Korean won)
Type 2011 2010
Beginning balance \ 46,624 \ 26,416
Additional (Reversal) (33,513) 6,172
Ending balance \ 13,111 \ 32,588
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
50
18. Derivative Financial Instruments and Hedge Accounting
a. Trading derivatives
Trading derivatives as of June 30, 2011 and December 31, 2010, are as follows:
(in millions of Korean won)
Type
2011 2010Notionalprincipalamounts
1Assets Liabilities
Notionalprincipalamounts
1Assets Liabilities
Forward foreignexchange
\ 465 \ 37 \ 2 \ 578 \ 72 \ -
1Notional principal amounts are the amounts of foreign currency contracts for the Korean won
against foreign currency transaction, and the amount of foreign currency purchase contracts for
the foreign currency against the foreign currency transaction translated in the exchange rate as
of June 30, 2010 and December 31, 2010.
The Group recognized loss on trading derivatives of \ 37 million during the six-month period
ended June 30, 2011.
b. Derivatives designated as cash flow hedges
Derivatives designated as cash flow hedges as of June 30, 2011 and December 31, 2010, are as
follows:
(in millions of Korean won)
Type
2011 2010
Notionalprincipalamounts
Assets LiabilitiesNotionalprincipalamounts
Assets Liabilities
Interest rate swaps \ 140,000 \ 132 \ 333 \ 280,000 \ 9 \ 2,073
Currency swaps 7,019,343 426,447 230,570 6,616,568 521,449 94,495
\ 7,159,343 \ 426,579 \ 230,903 \ 6,896,568 \ 521,458 \ 96,568
There is no ineffective portion recognized related to cash flow hedge for the six-months periods
ended June 30, 2011 and 2010.
19. Shareholders’ Equity
a. Capital stock
The Company is authorized to issue 500,000,000 shares. As of June 30, 2011, the Company has
99,307,435 shares issued and outstanding with a par value of \ 5,000 per share.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
51
b. Legal reserve
The Korean Commercial Law requires the Company to appropriate, as a legal reserve, an amount
equal to a minimum of 10% of annual cash dividends declared, until the reserve equals 50% of its
issued capital stock. This reserve is not available for the payment of cash dividends, but may be
transferred to capital stock or used to reduce accumulated deficit, if any.
c. Discretionary reserve
The Company appropriates a reserve in accordance with Electronic Financial Transactions Act and
a reserve for business rationalization in accordance with Restriction of Special Taxation Act.
d. Legal reserve and discretionary reserve
Legal reserve and discretionary reserve as of June 30, 2011 and December 31, 2010 are as
follows:
(in millions of Korean won)
Type 2011 2010
Legal reserve Revenue reserve \ 79,700 \ 48,914
Discretionaryreserve
Reserve for electronic financialtransactions
100 100
Reserve for business rationalization 74 74
174 174
Unappropriated retained earnings
(Expected reserve for bad loans 2011: \ 203,339million
2010: \ 208,187million)
1,569,916 1,350,925
\ 1,649,790 \ 1,400,013
e. Reserve for bad loans
If allowances for doubtful accounts do not meet the minimum amount calculated in accordance
with allowance reserve standards of Regulation on Supervision under the Specialized Credit
Financial Business Law Article 11, the Group appropriates a reserve for bad loans in an amount
more than the difference between the allowance and the requirement.
(1) Appropriated and expected reserves for bad loans as of June 30, 2011 and year ended
December 31, 2010, are as follows:
(in millions of Korean won)
Type 2011 2010
Appropriated reserve for bad loans \ - \ -
Expected reserve for bad loans 203,339 208,187
\ 203,339 \ 208,187
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
52
(2) Reversal of reserve for bad loans and net income in consideration of effect of changes in
reserve for bad loan for the six-month period ended June 30, 2011, are as follows:
(in millions of Korean won)
Type Amount
Net income \ 354,049
Reversal of reserve for bad loans1
4,848
Net income in consideration of changes in reservefor bad loans
2 \ 358,897
Net income per share in consideration of changesin reserve for bad loans (In won) \ 3,614
1Reversal of reserve for bad loans amounts are subtracted from balance of reserve for bad loans
in 2011 to balance in 2011.2
Net income in consideration of changes in reserve for bad loans is not accordance with K-IFRS,
and the amount is the sum of the reversal of reserve for bad loans before income tax and net
income.
20. Net Interest Income
Net interest income for the six-month periods ended June 30, 2011 and 2010, are as follows:
(in millions of Korean won)
Type 2011 2010
Interest income
Cash and deposits \ 18,848 \ 12,279
Loans receivable 746,382 636,055
Installment financial assets 220,978 250,813
Lease receivables 77,926 61,063
Other 254 682
1,064,388 960,892
Interest expenses
Borrowings 51,680 54,315
Debentures 399,567 363,736
Other 26,661 20,981
477,908 439,032
\ 586,480 \ 521,860
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
53
21. Net Commission Income
Net commission income for the six-month periods ended June 30, 2011 and 2010, are as follows:
(in millions of Korean won)
Type 2011 2010
Commission income
Loans receivable \ 26,955 \ 21,068
Installment financial assets 3,311 3,599
Lease receivables 56,563 37,076
86,829 61,743
Commission expenses
Lease expenses 27,916 19,354
Other 7,360 8,041
35,276 27,395
\ 51,553 \ 34,348
22. General and Administrative Expenses
General and administrative expenses for the three-month and the six-month periods ended June
30, 2011 and 2010, are as follows:
(in millions of Korean won)
Type2011 2010
Three months Six months Three months Six months
Payroll \ 25,888 \ 52,097 \ 25,540 \ 45,636
Severance benefits 3,597 6,119 2,360 4,728
Fringe benefits 7,790 16,524 7,762 16,040
Depreciation 5,604 10,843 4,882 9,680
Advertising 9,068 18,150 24,051 32,789
Travel and transportation 1,055 2,026 1,096 1,794
Communication 3,180 6,461 3,125 6,043
Water, lighting and heating 2,110 4,390 1,826 4,287
Commission 4,866 8,576 4,497 7,650
Sales commission 14,088 38,841 19,628 33,695
Amortization 2,035 3,892 2,025 3,862
Outsourcing service charges 16,585 32,499 15,728 30,819
Rent 9,630 17,927 8,372 16,172
Other expenses 22,495 42,832 18,529 29,019
\ 127,991 \ 261,177 \ 139,421 \ 242,214
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
54
23. Earnings Per Share
a. Basic earnings per share
Basic earnings per share attributable to common stock for the three-month and the six-month
periods ended June 30, 2011 and 2010, follows:
Type
2011 2010
Three months Six months Three months Six months(1) Net income attributable
to common stock(In won)
\ 208,924,894,050 \ 354,048,916,718 \ 120,845,015,793 \ 275,651,441,186
(2) Weighted average ofnumber of outstandingcommon shares
99,307,435 99,307,435 99,307,435 99,307,435
(3) Basic earnings pershare (In won) (1)÷(2) \ 2,104 \ 3,565 \ 1,217 \ 2,776
b. Diluted earnings per share
As there was no discontinued operation during the six-month periods ended June 30, 2011 and
2010, basic earnings per share is the same as basic earnings per share from continuing
operations. There are no potential common stocks as of June 30, 2011 and 2010. Therefore, the
diluted earnings per share is the same as basic earnings per share for six-month periods ended
June 30, 2011 and 2010.
24. Other Comprehensive Income
Other comprehensive income for the six-month periods ended June 30, 2011 and 2010, consists
of:
(in millions of Korean won)2011
TypeBeginning
balance
ChangesIncome
taxeffects
Endingbalance
Reclassifi-cation ofprofit or
loss
Otherchanges
Gain on valuation ofavailable-for-salefinancial assets
\ 512 \ (661) \ 140 \ 114 \ 105
Accumulatedcomprehensiveexpense of equitymethod investees
24 - 47 (62) 9
Loss on valuation ofderivatives
(67,924) 5,919 29,833 (8,143) (40,315)
Loss on exchangedifferences of foreignoperations
17 - (176) - (159)
\ (67,371) \ 5,258 \ 29,844 \ (8,091) \ (40,360)
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
55
(in millions of Korean won)
2010
TypeBeginning
balance
ChangesIncome
taxeffects
Endingbalance
Reclassifi-cation ofprofit or
loss
Otherchanges
Gain(Loss) on valuationof available-for-salefinancial assets
\ (1,835) \ - \ 1,309 \ (285) \ (811)
Accumulatedcomprehensiveexpense of equitymethod investees
(69) - 19 (84) (134)
Loss on valuation ofderivatives
(3,566) (2,183) (59,892) 12,870 (52,771)
Loss on exchangedifferences of foreignoperations
- - 22 - 22
\ (5,470) \ (2,183) \(58,542) \ 12,501 \ (53,694)
25. Cash Flow Statement
a. Cash and cash equivalents
Cash and cash equivalents in cash flow statements consisting of cash in hand, deposits and short-
term money-market instruments as of June 30, 2011 and December 31, 2010, follows:
(in millions of Korean won)
Type 2011 2010
Cash \ 4 \ 4
Ordinary deposits 169,369 182,321
Current deposits 2,606 3,241
Short-term financial instruments 1,210,800 1,039,300
\ 1,382,779 \ 1,224,866
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
56
b. Cash generated from operations
Cash generated from operations for the six-month periods ended June 30, 2011 and 2010, are as
follows:
(in millions of Korean won)
Type 2011 2010
Net income \ 354,049 \ 275,651
Adjustments
Net interest expenses 458,819 426,290
Income tax 108,503 90,948
Gain on disposal of available-for-sale financialassets
(2,084) (908)
Gain on loan receivables (21,784) (31,641)
Gain on installment financing (48,436) (50,928)
Gain on leased assets (609) (385)
Gain on foreign exchange translations (244,804) (134,851)
Dividends (3,251) (3,680)
Gain on valuation of derivatives (73,016) (240,487)
Other operating income (33,519) (18)
Gain on equity method valuation (4,749) (6,506)
Lease expenses 187,616 252,731
Bad debts expense 139,425 34,374
Loss on foreign exchange translations 73,024 239,378
Severance benefits 6,113 4,686
Depreciation 10,843 9,680
Amortization of intangible assets 3,892 3,862
Loss on valuation of derivatives 244,820 134,468
Other operating expenses 16 6,173
Loss on equity method valuation - 243
800,819 733,429
Changes in operating assets and liabilities
Decrease (Increase) in available-for-sale financialassets
1,543 (345)
(Increase) in loan receivables (811,970) (532,173)
Decrease in installment financing receivables 129,938 185,133
(Increase) in finance lease receivables (437,699) (383,676)
Decrease in canceled leased receivables 3,710 2,562
(Increase) in operating leased assets (76,644) (201,845)
Decrease in canceled leased assets 111,970 72,478
Decrease in deferred loan origination fees and costs 52,277 74,602
Increase in present value discounts (22,398) (24,501)
Increase in allowance for bad debts 58,860 63,722
Decrease(increase) in non-trade receivables (34) 12,405
Decrease in accrued revenues 4,306 1,292
(Increase) in advance payments (590) (14,890)
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
57
(Increase) in prepaid expenses (7,442) (6,419)
Decrease in derivative assets 21,192 45,547
Increase in non-trade payables 7,288 11,061
(Decrease) in accrued expenses (277) (1,023)
Increase(decrease) in unearned revenue (3,976) 4,082
Increase in withholdings 4,943 4,721
Increase in leasehold deposits received 11,463 55,905
Payment of severance benefits (2,923) (3,598)
Decrease(increase) in plan assets (1,884) 1,969
Transfer of severance benefits from related parties 1,405 1,110
Transfer of severance benefits to related parties (1,193) (1,067)
(Decrease) in derivative liabilities (14,789) (25,015)
(972,924) (657,963)
\ 181,944 \ 351,117
c. Investing and financing activities not affecting cash flows
Significant investing and financing activities not affecting cash flows for the six-month periods
ended June 30, 2011 and 2010, are as follows:
(in millions of Korean won)
Type 2011 2010
Transferred from construction in progress tointangible assets \ 6,440 \ 7,250
Transferred from construction in progress tofixture and furniture
19 -
Transferred from construction in progress toother tangible assets
259 -
Transferred to legal reserve 30,785 20,358
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
58
26. Commitments and Contingencies
a. Credit Line Agreement
Details of credit line agreements of the Group as of June 30, 2011, and December 31, 2010, are
as follows:
(in millions of Korean won)
Type Financial institutions 2011 2010
Limit of overdraft Shinhan Bank and 3 other banks \ 51,500 \ 51,500
Limit of daily loan SC Jeil Bank and 2 other banks 45,000 49,400
Limit of purchasingcommercial paper
Woori Bank and 2 other banks 300,000 310,000
Limit of credit line (SPC) Korea Development Bank 10,000 61,200
\ 406,500 \ 472,100
b. Credit Facility Agreement
The Group has revolving credit facility agreements with several financial institutions as of June 30,
2011 and December 31, 2010. Details of credit facility agreements are as follows:
(in millions of Korean won)
Financial institutions 2011 2010
GE Capital Corporation1 Euro currency for
a USD 1 billion
Euro currency for
a USD 1 billion
Mizuho Corporate Bank, Seoul Branch \ 65,000 \ 65,000
JPMorgan, Seoul Branch 80,000 34,000
Citibank, Seoul2 50,000 50,000
Standard Chartered, Seoul Branch 50,000 50,000
Societe Generale, Seoul Branch 55,000 -
Bank of China, Seoul Branch 30,000 -
DBS Bank, Seoul Branch 50,000 -
1GE Capital Corporation (the “GECC”) and Hyundai Motor Company entered into a support
agreement which includes the provision of debt-to-equity swap for the unredeemed amount and
the put/call option of the converted stocks.2
Comprehensive limit including overdraft of ₩ 10 billion.
There has been no usage of the above credit facility agreements as of June 30, 2011 and
December 31, 2010.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
59
c. Guarantees
Details of guarantees involving third parties as of June 30, 2011, and December 31, 2010, are as
follows:
(in millions of Korean won)
Guarantor Details 2011 2010
Hyundai Motor
Company
Joint liabilities on finance lease
receivables1 \ 1,278 \ 3,092
Hyundai WiaJoint liabilities on machinery
installment financing receivables1 5,228 14,730
Seoul GuaranteeInsurance Co., Ltd.
Guarantee for debt collection deposit,others
197,367 204,560
1The amounts represent the guaranteed balances as of June 30, 2011 and December 31, 2010,
as defined under the joint liability agreement.
The Group carries residual value guarantee insurance with Hyundai Marine & Fire Insurance Co., Ltd.
against loss in case unredeemed mortgage loans exceed recoverable amount from the collateral of the
loans. The receivables balance carried insurance and residual value guaranteed by insurance as of
June 30, 2011 and December 31, 2010, are as follows:
(in millions of Korean won)
Type 2011 2010
Receivables balance \ 941,925 \ 1,102,921
The amount of residual value guaranteed byinsurance
300,609 369,321
d. Pending significant litigations
Details of pending significant litigations involving the Group as of June 30, 2011, are as follows:
(in millions of Korean won)
Type Number of litigations Amount of litigations
Plaintiff 3 \ 1,140
Defendant - -
In addition, the Group has filed lawsuits against a number of debtors to collect receivables. As of
report date, the outcome of these cases cannot be reasonably determined and no adjustments are
reflected on the financial statements of the Group as of June 30, 2011.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
60
27. Related Party Transactions
a. Relationships between parents and subsidiaries
The parent company is Hyundai Motor Company. Related parties include associates, joint
ventures, post-employment benefit plans, members of key management personnel and entities
which the Group controls directly or indirectly, has joint control or significant influence over them.
b. Transaction between related parties
Significant transactions, which occurred in the normal course of business with related companies
for the six-month periods ended June 30, 2011 and 2010, are as follows:
(in millions of Korean won) 2011 2010Purchases Disposal Purchases Disposal
Parent Company
Hyundai Motor Company \ 503,170 \ - \ 474,155 \ -
Others
Kia Motors Corp. 118,152 - 149,750 -
Hyundai Card Co., Ltd. 61,859 - 30,020 -
Hyundai Commercial 10,729 - 3,333 -
Other related parties 666 35,720 2,735 30,374
191,406 35,720 185,838 30,374
\ 694,576 \ 35,720 \ 659,993 \ 30,374
Revenues and expenses arising from transactions with related parties for the three-month and the
six-month periods ended June 30, 2011 and 2010, and receivables and payables as of June 30,
2011 and December 31, 2010, are as follows:
(in millions of Korean won) 2011 2010Receivables Payables Receivables Payables
Parent Company
Hyundai Motor Company \ 4,881 \ 5,816 \ 5,188 \ 9,662
Others
Kia Motors Corp. 309 8,252 422 10,643
Hyundai Card Co., Ltd. 1,815 151,280 1,681 106,061
Hyundai Commercial 161 4,293 24 2,346
Other related parties 3,534 - 2,939 10
5,819 163,825 5,066 119,060
\ 10,700 \ 169,641 \ 10,254 \ 128,722
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
61
(in millions of Korean won) 2011
Revenues Expensesthree months six months three months six months
Parent Company
Hyundai Motor Company \ 4,964 \ 10,168 \ 291 \ 1,155
Others
Kia Motors Corp. - - 1,151 1,284Hyundai Card Co., Ltd. 5,775 12,005 3,946 6,358Hyundai Commercial 263 490 164 273Other related parties 1,453 2,387 9,309 17,572
7,491 14,882 14,570 25,487
\ 12,455 \ 25,050 \ 14,861 \ 26,642
(in millions of Korean won) 2010
Revenues Expensesthree months six months three months Six months
Parent Company
Hyundai Motor Company \ 7,230 \ 15,786 \ 217 \ 1,513
Others
Kia Motors Corp. 1,048 3,323 167 224Hyundai Card Co., Ltd. 2,882 9,153 3,188 9,282Hyundai Commercial 157 318 83 461Other related parties 835 1,598 11,739 20,639
4,922 14,392 15,177 30,606
\ 12,152 \ 30,178 \ 15,394 \ 32,119
The Group has been provided with a credit facility by GECC (Note 26).
c. Key management compensation
Compensation for key management for the six-month periods ended June 30, 2011 and 2010,
consists of:
(in millions of Korean won)
Type 2011 2010
Short-term employee benefits \ 3,824 \ 1,794
Severance benefits 1,206 495
The key management above consists of directors (including nonpermanent directors), who have
significant authority and responsibilities for planning, operating and controlling the Group.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
62
28. Financial Risk Management
The Group is exposed to credit risk, liquidity risk and market risk (exchange and rate risk). In order
to manage these factors, the Group operates risk management policies and programs that monitor
closely and respond to each of the risk factors. The Group uses derivatives to manage specific
risks.
28.1 Credit risk
a. Exposure to credit risk
Exposures to credit risk as of June 30, 2011 and December 31, 2010, are as follows:
(in millions of Korean won)
Type 2011 2010
Cash and deposits \ 1,382,798 \ 1,224,887
Available-for-sale securities 3,944 3,372
Loans receivable 10,853,019 10,218,438
Installment financial assets 4,927,198 5,056,782
Non-trade receivables 39,890 39,869
Accrued revenue 107,864 111,806
Advance payments1
36,783 34,092
Leasehold deposits 34,474 31,955
Derivative assets 426,616 521,530
Unused loan commitments 1,052,779 1,071,419
\ 20,963,355 \ 20,092,588
1Some parts of advance payments for customers
b. Credit quality of financial assets
Credit quality of financial assets exposed to credit risk as of June 30, 2011 and December 31,
2010, follows:
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
63
(in millions of Korean won)
Type2011 2010
Normal Past due Impaired Normal Past due Impaired
Cash and deposits \ 1,382,798 \ - \ - \ 1,224,887 \ - \ -
Available-for- salesecurities
3,944 - - 3,372 - -
Financial receivables
Loans receivable 10,056,565 713,746 82,708 9,638,971 499,519 79,948
Installmentfinancial assets
4,711,431 211,741 4,026 4,881,495 168,567 6,720
Leasereceivables
2,024,066 68,109 5,815 1,724,271 51,037 3,130
16,792,062 993,596 92,549 16,244,737 719,123 89,798
Non-tradereceivables
39,890 - - 39,869 - -
Accrued revenue 107,864 - - 111,806 - -
Advancepayments
36,783 - - 34,092 - -
Leaseholddeposits
34,474 - - 31,955 - -
Derivative assets 426,616 - - 521,530 - -
Unused loancommitments
1,052,779 - - 1,071,419 - -
\ 19,877,210 \ 993,596 \ 92,549 \19,283,667 \ 719,123 \ 89,798
(1) Financial receivables neither past due nor impaired
Credit quality according to internal credit rating of financial receivables which are neither past due
nor impaired as of June 30, 2011 and December 31, 2010, are as follows:
(in millions of Korean won)
Type2011 2010
Gross amount Allowance Book value Gross amount Allowance Book value
First-rate \ 2,489,791 \ (1,521) \ 2,488,270 \ 1,398,614 \ (598) \ 1,398,016
Second-rate 5,046,286 (9,442) 5,036,844 4,973,898 (7,823) 4,966,075
Third-rate 5,808,910 (36,174) 5,772,736 6,200,694 (32,099) 6,168,595
Fourth-rate 927,422 (16,307) 911,115 1,002,305 (16,129) 986,176
Fifth-rate 1,038,643 (36,730) 1,001,913 986,277 (32,422) 953,835
Sixth-rate 522,031 (55,014) 467,017 485,733 (51,885) 433,848
No rating 1,135,921 (21,754) 1,114,167 1,360,428 (22,236) 1,338,192
\ 16,969,004 \ (176,942) \ 16,792,062 \16,407,949 \ (163,212) \ 16,244,737
The Group classifies financial receivables into six internal credit rating based on the rating criteria
and the characteristic of receivables. Some financial receivables have no rating due to lack of
analytical data or are being managed separately.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
64
(2) Financial receivables past due but not impaired
Financial receivables past due but not impaired as of June 30, 2011 and December 31, 2010, are
as follows:
(in millions of Korean won)
2011
TypesLess than1 month
Between1 ~ 2 months
Between2~3 months
Total
Loans receivable \ 615,440 \ 84,712 \ 47,467 \ 747,619
Installment financial assets 200,310 11,326 3,938 215,574
Lease receivables 64,026 4,312 1,468 69,806
879,776 100,350 52,873 1,032,999
Allowance (19,164) (7,174) (13,065) (39,403)
Carrying amount \ 860,612 \ 93,176 \ 39,808 \ 993,596
(in millions of Korean won)
2010
TypesLess than1 month
Between1 ~ 2 months
Between2~3 months
Total
Loans receivable \ 426,165 \ 62,167 \ 35,782 \ 524,114
Installment financial assets 158,040 10,620 3,179 171,839
Lease receivables 47,422 2,978 1,877 52,277
631,627 75,765 40,838 748,230
Allowance (14,104) (5,427) (9,576) (29,107)
Carrying amount \ 617,523 \ 70,338 \ 31,262 \ 719,123
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
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(3) Impaired financial receivables
(in millions of Korean won)
2011 2010
Type Gross amount Allowance Book value Gross amount Allowance Book value
Loans receivable \ 160,117 \ (77,409) \ 82,708 \ 138,877 \ (58,929) \ 79,948
Installmentfinancial assets
10,911 (6,885) 4,026 12,623 (5,903) 6,720
Lease receivables 13,280 (7,465) 5,815 11,355 (8,225) 3,130
\ 184,308 \ (91,759) \ 92,549 \ 162,855 \ (73,057) \ 89,798
(4) Credit quality of other assets
Credit quality according to external credit rating of other assets except for financial receivables
which are neither past due nor impaired as of June 30, 2011 and December 31, 2010, are as
follows:
(in millions of Korean won)
Cash and deposits1
2011 2010
AAA \ 775,632 \ 767,370
AA+ 30,799 11,384
AA 280,000 140,000
AA- 60,000 95,000
A+ 205,328 190,257
A 30,534 462
A- - 20,000
No rating 505 414
\ 1,382,798 \ 1,224,887
1The average external credit rating of three domestic credit rating agencies is used.
(in millions of Korean won)
Derivative assets2
2011 2010
AA \ 13,995 \ 19,326
AA- 85,956 93,379
A+ 220,316 267,891
A 93,895 123,027
BBB+ 12,454 17,907
\ 426,616 \ 521,530
2Derivative assets are classified based on S&P credit rating.
Credit quality of other assets except for financial receivables according to borrowers’ past due
information as of June 30, 2011 and December 31, 2010, are as follows:
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
66
(in millions of Korean won)
Accrued revenue 2011 2010
Group 13
\ 98,606 \ 102,482
Group 24
9,258 9,324
\ 107,864 \ 111,806
3Group 1: The borrowers have not experienced impairments in the past.
4Group 2: The borrowers have experienced impairments in the past.
(in millions of Korean won)
Unused loan commitments 2011 2010
Group 1 \ 1,052,776 \ 1,071,419
Group 2 3 -
\ 1,052,779 \ 1,071,419
c. Assets pledges as collateral
The assets pledged as collateral for financial receivables as of June 30, 2011 and December 31,
2010, are as follows:
(in millions of Korean won)
2011
Type ImpairedUnimpaired
TotalDelinquent Non-delinquent
Total financialreceivables \ 92,549 \ 993,596 \ 16,792,062 \ 17,878,207
Collateralized assets
Collateralizedvehicles
39,208 443,972 4,623,554 5,106,734
Collateralized realestate
747 6,341 129,634 136,722
\ 39,955 \ 450,313 \ 4,753,188 \ 5,243,456
(in millions of Korean won)
2010
Type ImpairedUnimpaired
TotalDelinquent Non-delinquent
Total financialreceivables \ 89,798 \ 719,123 \ 16,244,737 \ 17,053,658
Collateralized assets
Collateralizedvehicles
25,585 335,539 4,577,950 4,939,074
Collateralizedreal estate
328 2,739 127,709 130,776
\ 25,913 \ 338,278 \ 4,705,659 \ 5,069,850
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
67
d. Credit risk concentration
Credit risk concentration of financial receivables by debtors as of June 30, 2011 and December 31,
2010, are as follows:
(in millions of Korean won)
Type
2011 2010
Includingallowance
Ratio Allowance Book valueIncludingallowance
Ratio Allowance Book value
Individual \ 15,449,118 84.9% \ (277,342) \15,171,776 \ 14,902,141 86.0% \ (236,824) \ 14,665,317
Corporate
Finance 41,784 0.2% (290) 41,494 38,098 0.2% (296) 37,802
Manufac-turing
838,215 4.6% (9,973) 828,242 737,970 4.3% (10,444) 727,526
Service 826,858 4.6% (8,226) 818,632 721,722 4.2% (6,854) 714,868
Public 8,304 0.1% (26) 8,278 6,270 0.1% (54) 6,216
Others 1,022,031 5.6% (12,246) 1,009,785 912,833 5.2% (10,904) 901,929
2,737,192 15.1% (30,761) 2,706,431 2,416,893 14.0% (28,552) 2,388,341
\ 18,186,310 100.0% \ (308,103) \17,878,207 \ 17,319,034 100.0% \ (265,376) \ 17,053,658
28.2 Liquidity risk
Cash flows of financial liabilities based on remaining contractual maturities as of June 30, 2011 and
December 31, 2010, are as follows:
(in millions of Korean won)2011
TypeImmediatepayment
Up to 1 year 1 to 5 years Over 5 years Total1
Borrowings \ - \ 1,507,950 \ 490,452 \ - \ 1,998,402
Debentures - 5,397,129 10,338,734 1,560,765 17,296,628
Other liabilities 5,133 435,358 640,539 8 1,081,038
Net settlement
derivative
liabilities
- 484 (13) - 471
Gross settlement
derivative
liabilities
Cash inflow - (949,210) (2,535,126) (771,178) (4,255,514)
Cash outflow 2 1,058,393 2,727,040 810,031 4,595,466
\ 5,135 \ 7,450,104 \ 11,661,626 \ 1,599,626 \ 20,716,491
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
68
(in millions of Korean won)2010
TypeImmediatepayment
Up to 1 year 1 to 5 years Over 5 years Total1
Borrowings \ - \ 2,154,878 \ 557,869 \ - \ 2,712,747
Debentures - 4,687,022 10,882,286 408,872 15,978,180
Other liabilities 4,545 513,232 548,020 - 1,065,797
Net settlement
derivative
liabilities
- 2,564 (68) - 2,496
Gross settlement
derivative
liabilities
Cash inflow - (410,299) (1,565,978) - (1,976,277)
Cash outflow - 440,274 1,644,488 - 2,084,762
\ 4,545 \ 7,387,671 \ 12,066,617 \ 408,872 \ 19,867,705
The above amounts including the principal and future interest payments are contractual
undiscounted cash flows and are not equal to the amounts of statement of financial position based
on the discounted cash flows.
The unused agreement of limited loan products amounts to maximum of \ 1,052,779 million as of
June 30, 2011 (2010: \ 1,071,419 million). The unused loan agreement above might be paid
immediately on customers’ request.
28.3 Market risk
a. Interest rate risk
The Group manages the interest rate risk through Value at Risk(VaR), Earning at Risk(EaR)
measurement and Interest Rate Gap Analysis that analyze the maturity between the interest
revenue-generating assets and the interest-bearing liabilities.
VaR is calculated using the standard framework of the Bank for International Settlements(BIS). The
VaR model uses the proxy of modified duration per expiration interval proposed by the BIS and
expected interest rate volatility of expiration interval by reason of interest rate fluctuation of 100bp.
The interest rate risk using VaR as of June 30, 2011 and December 31, 2010, follows:
(in millions of Korean won)
Type 2011 2010
Interest rate VaR \ 121,077 \ 78,614
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
69
VaR is a commonly used market risk measurement techniques but has some limitations. VaR
estimates the expected loss under the specific reliability based on the historical changes in the
market data. However, the past changes in market cannot reflect all conditions and environments
that may occur in the future. Therefore, in the process of calculating, the timing and size of the
actual loss may vary according to changes in assumptions.
b. Foreign exchange risk
The Group holds borrowings and debentures that are denominated in foreign currencies and is
exposed to foreign exchange risk arising from various currency exposures. The Group undertakes
hedging strategies with hedge accounting being applied to manage these foreign exchange risks.
Foreign exchange position exposures of the Group as of June 30, 2011 and December 31, 2010,
are as follows:
The Group’s exposure to foreign exchange risk is hedged by derivatives. Therefore, foreign
exchange risk of the Group is not significant.
28.4 Capital risk management
The objective of the Group’s capital management is to maintain sound capital structure. The Group
uses adjusted capital adequacy ratio under the regulation on Supervision of Specialized Credit
Financial Business Law as a capital management indicator. This ratio is calculated as adjusted total
asset divided by adjusted equity.
(in millions of Korean won)
Currency 2011 2010
USD \ 3,926,619 \ 3,802,170
EUR 1,023,774 991,452
MYR 708,899 497,145
JPY 467,492 514,125
CHF 840,600 426,304
Others 53,703 150,709
\ 7,021,087 \ 6,381,905
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
70
Adjusted capital adequacy ratio of the Group as of June 30, 2011 and December 31, 2010, are as
follows:
The above adjusted capital adequacy ratio is calculated according to Supervision of Specialized
Credit Financial Business Law.
29. Segment Information
Management has determined the operating segments based on the management’s reports in
conformity with nature of goods and services. Operating segments are segregated into auto
financing service and other service.
Segments’ assets and profits or losses are measured by management accounting policies of the
Group. Non-operating and nonrecurring incomes/expenses are not classified into segments, but
only financial receivables are allocated into operating segments.
(in millions of Korean won)
Type 2011 2010
Adjusted total asset (1) \ 19,943,394 \ 19,295,545
Adjusted equity (2) 2,515,509 2,227,114
Adjusted capital adequacy ratio (2)÷(1) 12.61% 11.54%
Operating segments Description
Auto financing servicesegment
Assets, liabilities, incomes and expenses from auto installmentfinancing and auto leasing
Other service segmentAssets, liabilities, incomes and expenses from personal loanand mortgage installment financing other than auto relatedproducts.
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
71
Segment information for the six-month periods ended June 30, 2011 and 2010, follows:
(in millions of Korean won)
2011
Type Auto Others TotalUnallocated
othersFinancial
statements
Operating revenue
Interest income \ 752,929 \ 309,749 \ 1,062,678
Non-interestincome
476,270 49,836 526,106
1,229,199 359,585 1,588,784 \ 372,854 \ 1,961,638
Operating expenses
Interest expenses (334,405) (74,438) (408,843)
Non-interestexpenses
(648,440) (172,283) (820,723)
(982,845) (246,721) (1,229,566) (274,269) (1,503,835)
Segment operatingprofits(pre-tax)
246,354 112,864 359,218 98,585 457,803
Segment assets2
Loans receivable 7,942,281 2,415,085 10,357,366 862,069 11,219,435
Installmentfinancial assets
4,999,710 898,609 5,898,319 (857,565) 5,040,754
LeaseReceivables
2,041,079 8,525 2,049,604 71,533 2,121,137
\ 14,983,070 \ 3,322,219 \ 18,305,289 \ 76,037 \ 18,381,326
1Unallocated and reclassification
•Income and expense unallocated – Income/expenses related to interest income on bank
deposits, foreign exchange translation, derivatives and others.
•Assets unallocated – Initial direct cost for finance lease receivables, cancelled lease receivables
and others2Loan principal and present value discounts
Hyundai Capital Services, Inc. and SubsidiariesNotes to the Interim Consolidated Financial StatementsJune 30, 2011 and 2010, and December 31, 2010
72
(in millions of Korean won)
2010
Type Auto Others TotalUnallocated
othersFinancial
statements
Operating revenue
Interest income \ 697,138 \ 252,451 \ 949,589
Non-interestincome
432,750 45,129 477,879
1,129,888 297,580 1,427,468 \ 367,356 \ 1,794,824
Operating expenses
Interest expenses (353,595) (80,789) (434,384)
Non-interestexpenses
(534,701) (119,424) (654,125)
(888,296) (200,213) (1,088,509) (345,979) (1,434,488)
Segment operatingprofits(pre-tax)
241,592 97,367 338,959 21,377 360,336
Segment assets2
Loans receivable 6,373,299 1,845,264 8,218,563 1,194,807 9,413,370
Installmentfinancial assets
4,602,887 1,290,692 5,893,579 (1,198,554) 4,695,025
LeaseReceivables
1,479,514 24,606 1,504,120 59,575 1,563,695
\ 12,455,700 \ 3,160,562 \ 15,616,262 \ 55,828 \ 15,672,090
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