Edgar Filing: LG Display Co., Ltd.

Form 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of February 2017

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

LG Twin Towers, 128 Yeoui-dearo, Youngdungpo-gu, Seoul 07336, The Republic of Korea

(Address of principal executive offices)

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

Form 20-F ☒ Form 40-F ☐

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

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

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

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

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

Yes ☐ No ☒

Submission of Audit Report

1.	Name of external auditor: Samjong Accounting Corporation (KPMG)

2.	Date of receiving external audit report: February 27, 2017

3.	Auditor’s opinion


	FY 2016		FY 2015
Audit Report on Consolidated Financial Statements		Unqualified		Unqualified

4.	Financial Highlights of Consolidated Financial Statements


Items	FY 2016			FY 2015
Total Assets		24,884,336,178,373			22,577,160,382,698
Total Liabilities		11,421,947,749,091			9,872,205,188,475
Total Shareholders’ Equity		13,462,388,429,269			12,704,955,194,226
Capital Stock		1,789,078,500,000			1,789,078,500,000
Revenues		26,504,073,995,307			28,383,883,974,604
Operating Income		1,311,415,548,952			1,625,566,151,157
Ordinary Income		1,316,234,427,423			1,433,981,627,738
Net Income		931,508,969,394			1,023,455,615,045
Total Shareholders’ Equity / Capital Stock		752.0	%		710.1	%

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

For the Years Ended December 31, 2016 and 2015

(With Independent Auditors’ Report Thereon)

Contents


	Page

Independent Auditors’ Report		1

Consolidated Statements of Financial Position		3

Consolidated Statements of Comprehensive Income		4

Consolidated Statements of Changes in Equity		5

Consolidated Statements of Cash Flows		6

Notes to the Consolidated Financial Statements		8

Independent Auditors’ Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

We have audited the accompanying consolidated financial statements of LG Display Co., Ltd. and its subsidiaries (the “Group”) which comprise the consolidated statements of financial position of the Group as of December 31, 2016 and 2015, the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”), and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Korean Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with K-IFRS.

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

KPMG Samjong Accounting Corp.

Seoul, Korea

February 21, 2017

This report is effective as of February 21, 2017, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Financial Position

As of December 31, 2016 and 2015


(In millions of won)	Note		December 31, 2016			December 31, 2015

Assets
Cash and cash equivalents		6, 13	W	1,558,696			751,662
Deposits in banks		6, 13		1,163,750			1,772,337
Trade accounts and notes receivable, net		7, 13, 17, 19		4,957,993			4,097,836
Other accounts receivable, net		7, 13		143,592			105,815
Other current financial assets		8, 13		28,016			4,904
Inventories		9		2,287,785			2,351,669
Prepaid income taxes				592			3,469
Other current assets		7		343,762			443,942

Total current assets				10,484,186			9,531,634

Deposits in banks		6, 13		13			13
Investments in equity accounted investees		10		172,683			384,755
Other non-current financial assets		8, 13		74,633			49,732
Property, plant and equipment, net		11, 20		12,031,449			10,546,020
Intangible assets, net		12, 20		894,937			838,730
Deferred tax assets		28		867,011			930,629
Other non-current assets		7		359,424			295,647

Total non-current assets				14,400,150			13,045,526

Total assets			W	24,884,336			22,577,160


Liabilities
Trade accounts and notes payable		13, 19	W	2,877,326			2,764,694
Current financial liabilities		13, 14		667,909			1,416,112
Other accounts payable		13		2,449,517			1,499,722
Accrued expenses				639,629			633,113
Income tax payable				257,082			91,726
Provisions		16		55,972			109,897
Advances received				61,818			51,127
Other current liabilities		16		48,966			40,321

Total current liabilities				7,058,219			6,606,712

Non-current financial liabilities		13, 14		4,111,333			2,808,204
Non-current provisions		16		8,155			11,817
Defined benefit liabilities, net		15		142,987			353,798
Deferred tax liabilities		28		32,108			34,663
Other non-current liabilities		16		69,146			57,010

Total non-current liabilities				4,363,729			3,265,492

Total liabilities				11,421,948			9,872,204


Equity
Share capital		18		1,789,079			1,789,079
Share premium				2,251,113			2,251,113
Retained earnings				9,004,283			8,158,526
Reserves		18		(88,478	)		(5,766	)


Total equity attributable to owners of the Controlling Company				12,955,997			12,192,952


Non-controlling interests				506,391			512,004

Total equity				13,462,388			12,704,956

Total liabilities and equity			W	24,884,336			22,577,160

See accompanying notes to the consolidated financial statements.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2016 and 2015


(In millions of won, except earnings per share)	Note	2016			2015

Revenue	19, 20, 21	W	26,504,074			28,383,884
Cost of sales	9, 19		(22,754,270	)		(24,069,572	)

Gross profit			3,749,804			4,314,312

Selling expenses	23		(693,937	)		(878,300	)
Administrative expenses	23		(610,479	)		(592,517	)
Research and development expenses			(1,133,972	)		(1,217,929	)

Operating profit			1,311,416			1,625,566


Finance income	26		139,671			158,829
Finance costs	26		(266,186	)		(316,229	)
Other non-operating income	25		1,590,824			1,273,833
Other non-operating expenses	25		(1,467,831	)		(1,326,782	)
Equity in income of equity accounted investees, net	10		8,339			18,765


Profit before income tax			1,316,233			1,433,982
Income tax expense	27		(384,725	)		(410,526	)


Profit for the year			931,508			1,023,456


Other comprehensive income (loss)
Items that will never be reclassified to profit or loss
Remeasurements of net defined benefit liabilities	15,27		155,346			(110,257	)
Other comprehensive income (loss) from associates and joint ventrues			200			(607	)
Related income tax	15,27		(37,594	)		26,682

			117,952			(84,182	)
Items that are or may be reclassified to profit or loss
Net change in fair value of available-for-sale financial assets	26, 27		(77	)		(288	)
Foreign currency translation differences for foreign operations	26, 27		(90,503	)		44,913
Other comprehensive income (loss) from associates and joint ventures	27		(5,416	)		19,176
Related income tax	27		19			214

			(95,977	)		64,015

Other comprehensive income (loss) for the year, net of income tax			21,975			(20,167	)

Total comprehensive income for the year		W	953,483			1,003,289


Profit attributable to:
Owners of the Controlling Company			906,713			966,553
Non-controlling interests			24,795			56,903

Profit for the year		W	931,508			1,023,456


Total comprehensive income attributable to:
Owners of the Controlling Company			941,953			940,448
Non-controlling interests			11,530			62,841

Total comprehensive income for the year		W	953,483			1,003,289


Earnings per share (In won)
Basic earnings per share	29	W	2,534			2,701

Diluted earnings per share	29	W	2,534			2,701

See accompanying notes to the consolidated financial statements.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2016 and 2015


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

Balances at January 1, 2015	W	1,789,079		2,251,113		7,455,063			(63,843	)		11,431,412			351,998			11,783,410

Total comprehensive income (loss) for the year
Profit for the year		—		—		966,553			—			966,553			56,903			1,023,456

Other comprehensive income (loss)
Net change in fair value of available-for-sale financial assets, net of tax		—		—		—			(218	)		(218	)		—			(218	)
Remeasurements of net defined benefit liabilities, net of tax		—		—		(83,575	)		—			(83,575	)		—			(83,575	)
Foreign currency translation differences for foreign operations, net of tax		—		—		—			39,119			39,119			5,938			45,057
Other comprehensive income (loss) from associates and joint ventures		—		—		(607	)		19,176			18,569			—			18,569

Total other comprehensive income (loss)		—		—		(84,182	)		58,077			(26,105	)		5,938			(20,167	)

Total comprehensive income for the year	W	—		—		882,371			58,077			940,448			62,841			1,003,289

Transaction with owners, recognized directly in equity
Dividends to equity holders		—		—		(178,908	)		—			(178,908	)		—			(178,908	)
Subsidiaries’ dividends distributed to non-controlling interests		—		—		—			—			—			(5,743	)		(5,743	)
Capital contribution from non-controlling interests		—		—		—			—			—			102,908			102,908

Balances at December 31, 2015	W	1,789,079		2,251,113		8,158,526			(5,766	)		12,192,952			512,004			12,704,956


Balances at January 1, 2016	W	1,789,079		2,251,113		8,158,526			(5,766	)		12,192,952			512,004			12,704,956

Total comprehensive income (loss) for the year
Profit for the year		—		—		906,713			—			906,713			24,795			931,508

Other comprehensive income (loss)
Net change in fair value of available-for-sale financial assets, net of tax		—		—		—			(58	)		(58	)		—			(58	)
Remeasurements of net defined benefit liabilities, net of tax		—		—		117,752			—			117,752			—			117,752
Foreign currency translation differences for foreign operations, net of tax		—		—		—			(77,238	)		(77,238	)		(13,265	)		(90,503	)
Other comprehensive income (loss) from associates and joint ventures		—		—		200			(5,416	)		(5,216	)		—			(5,216	)

Total other comprehensive income (loss)		—		—		117,952			(82,712	)		35,240			(13,265	)		21,975

Total comprehensive income (loss) for the year	W	—		—		1,024,665			(82,712	)		941,953			11,530			953,483

Transaction with owners, recognized directly in equity
Dividends to equity holders		—		—		(178,908	)		—			(178,908	)		—			(178,908	)
Subsidiaries’ dividends distributed to non-controlling interests		—		—		—			—			—			(17,143	)		(17,143	)

Balances at December 31, 2016	W	1,789,079		2,251,113		9,004,283			(88,478	)		12,955,997			506,391			13,462,388

See accompanying notes to the consolidated financial statements.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2016 and 2015


(In millions of won)	Note		2016			2015

Cash flows from operating activities:
Profit for the year			W	931,508			1,023,456
Adjustments for:
Income tax expense		27		384,725			410,526
Depreciation		11, 22		2,643,445			2,969,394
Amortization of intangible assets		12, 22		378,126			406,462
Gain on foreign currency translation				(250,508	)		(73,057	)
Loss on foreign currency translation				161,897			80,084
Expenses related to defined benefit plans		15, 24		220,962			199,033
Gain on disposal of property, plant and equipment				(14,637	)		(18,179	)
Loss on disposal of property, plant and equipment				7,466			4,037
Impairment loss on property, plant and equipment				1,610			3,027
Loss on disposal of intangible assets				75			29
Impairment loss on intangible assets				138			239
Reversal of impairment loss on intangible assets				—			(80	)
Finance income				(58,748	)		(81,572	)
Finance costs				187,931			222,699
Equity in income of equity method accounted investees, net		10		(8,339	)		(18,765	)
Other income				(15,546	)		(12,454	)
Other expenses				182,468			269,995

				3,821,065			4,361,418

Change in trade accounts and notes receivable				(553,775	)		(1,060,718	)
Change in other accounts receivable				62,981			38,411
Change in other current assets				126,616			87,130
Change in inventories				105,688			404,862
Change in other non-current assets				(126,256	)		(78,859	)
Change in trade accounts and notes payable				(114,977	)		(670,565	)
Change in other accounts payable				66,930			(459,730	)
Change in accrued expenses				(16,431	)		(66,071	)
Change in other current liabilities				17,272			14,015
Change in other non-current liabilities				21,641			48,240
Change in provisions				(160,462	)		(143,228	)
Change in defined benefit liabilities, net				(276,459	)		(279,672	)

				(847,232	)		(2,166,185	)

Cash generated from operating activities				3,905,341			3,218,689
Income taxes paid				(187,816	)		(414,007	)
Interests received				48,911			58,860
Interests paid				(125,530	)		(136,965	)


Net cash provided by operating activities			W	3,640,906			2,726,577

See accompanying notes to the consolidated financial statements.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2016 and 2015


(In millions of won)	Note	2016			2015

Cash flows from investing activities:
Dividends received		W	59,820			25,577
Proceeds from withdrawal of deposits in banks			3,293,398			2,306,672
Increase in deposits in banks			(2,684,810	)		(2,544,114	)
Acquisition of available-for-sale financial assets			(859	)		(4,550	)
Proceeds from disposal of available-for-sale financial assets			507			2,263
Acquisition of financial assets at fair value through profit or loss			(1,500	)		—
Acquisition of investments in equity accounted investees			—			(30,647	)
Proceeds from disposal of investments in equity accounted investees			29,745			7,263
Acquisition of property, plant and equipment			(3,735,948	)		(2,364,988	)
Proceeds from disposal of property, plant and equipment			278,067			447,320
Acquisition of intangible assets			(405,167	)		(294,638	)
Proceeds from disposal of intangible assets			261			1,135
Government grants received			6,393			5,017
Proceeds from settlement of derivatives			4,008			(35	)
Increase in short-term loans			(2,132	)		—
Proceeds from collection of short-term loans			8,202			—
Increase in long-term loans			(32,498	)		(16,516	)
Decrease in deposits			2,436			—
Increase in deposits			(9,105	)		(1,595	)
Acquisition of businesses, net of cash acquired			—			(270,093	)


Net cash used in investing activities			(3,189,182	)		(2,731,929	)


Cash flows from financing activities:
Proceeds from short-term borrowings			107,345			—
Repayments of short-term borrowings			—			(223,626	)
Proceeds from issuance of debentures			597,573			298,778
Proceeds from long-term debt			1,667,060			901,451
Repayments of long-term debt			(347,693	)		(324,570	)
Repayments of current portion of long-term debt and debentures			(1,520,287	)		(744,788	)
Subsidiaries’ dividends distributed to non-controlling interests			(17,143	)		(5,743	)
Capital contribution from non-controlling interests			—			102,908
Dividends paid			(178,908	)		(178,908	)


Net cash provided by (used in) financing activities			307,947			(174,498	)


Net increase (decrease) in cash and cash equivalents			759,671			(179,850	)
Cash and cash equivalents at January 1			751,662			889,839
Effect of exchange rate fluctuations on cash held			47,363			41,673

Cash and cash equivalents at December 31		W	1,558,696			751,662

See accompanying notes to the consolidated financial statements.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

1.	Reporting Entity

(a)

Description of the Controlling Company

LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 and the Controlling Company is a public corporation listed in the Korea Exchange since 2004. The main business of the Controlling Company and its subsidiaries (the “Group”) is to manufacture and sell displays and its related products. As of December 31, 2016, the Group is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China and Poland. The Controlling Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of December 31, 2016, LG Electronics Inc., a major shareholder of the Controlling Company, owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of December 31, 2016, there are 357,815,700 shares of common stock outstanding. The Controlling Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of December 31, 2016, there are 27,797,140 ADSs outstanding.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

1.	Reporting Entity, Continued

(b)

Consolidated Subsidiaries as of December 31, 2016

(In millions)

Subsidiaries

Location

Percentage of
ownership

Fiscal
year end

Date of
incorporation

Business

Capital stocks

LG Display America, Inc.

San Jose,

U.S.A.

100

December 31

September 24,
1999

Sell Display products

USD 411

LG Display Japan Co., Ltd.

Tokyo,
Japan

100

December 31

October 12,
1999

Sell Display products

JPY 95

LG Display Germany GmbH

Ratingen,
Germany

100

December 31

November 5,
1999

Sell Display products

EUR 1

LG Display Taiwan Co., Ltd.

Taipei,
Taiwan

100

December 31

April 12,
1999

Sell Display products

NTD 116

LG Display Nanjing Co., Ltd.(*1)

Nanjing,
China

100

December 31

July 15, 2002

Manufacture Display products

CNY 3,020

LG Display Shanghai Co., Ltd.

Shanghai,
China

100

December 31

January 16,
2003

Sell Display products

CNY 4

LG Display Poland Sp. z o.o.

Wroclaw,
Poland

100

December 31

September 6,
2005

Manufacture Display products

PLN 511

LG Display Guangzhou Co., Ltd.

Guangzhou,
China

100

December 31

June 30, 2006

Manufacture Display products

CNY 1,655

LG Display Shenzhen Co., Ltd.

Shenzhen,
China

100

December 31

August 28,
2007

Sell Display products

CNY 4

LG Display Singapore Pte. Ltd.

Singapore

100

December 31

January 12,
2009

Sell Display products

USD 1.1

L&T Display Technology (Fujian) Limited

Fujian,

China

December 31

January 5,
2010

Manufacture and sell LCD module and LCD monitor sets

CNY 116

LG Display Yantai Co., Ltd.

Yantai,

China

100

December 31

April 19,
2010

Manufacture Display products

CNY 1,008

Nanumnuri Co., Ltd.

Gumi,

South Korea

100

December 31

March 21,
2012

Janitorial services

KRW 800

LG Display (China) Co., Ltd.(*2)

Guangzhou,
China

December 31

December 10,
2012

Manufacture and sell Display products

CNY 8,156

Unified Innovative Technology, LLC

Wilmington,
U.S.A.

100

December 31

March 12,
2014

Manage intellectual property

USD 9

LG Display Guangzhou Trading Co., Ltd.

Guangzhou,
China

100

December 31

April 28,
2015

Sell Display products

CNY 1.2

Global OLED Technology, LLC

Herndon,
U.S.A.

100

December 31

December 18,
2009

Manage OLED intellectual property

USD 138

LG Display Vietnam Haiphong Co., Ltd.(*3)

Haiphong,
Vietnam

100

December 31

May 5, 2016

Manufacture Display products

VND 2,187,870

Suzhou Lehui Display Co., Ltd.(*4)

Suzhou,
China

100

December 31

July 1, 2016

Manufacture and sell LCD module and LCD monitor sets

CNY 637

(*1)	In December 2016, the Controlling Company contributed W13,979 million in cash for the capital increase of LG Display Nanjing Co., Ltd. (“LGDNJ”). There was no change in the Controlling Company’s ownership percentage in LGDNJ as a result of this additional investment.

(*2)	In October 2016, LG Display Guangzhou Co., Ltd. (“LGDGZ”) contributed W1,465 million in cash for the capital increase of LG Display (China) Co., Ltd. (“LGDCA”). The Group’s ownership percentage in LGDCA increased from 70.00% to 70.03% as a result.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

1.	Reporting Entity, Continued

(b)

Consolidated Subsidiaries as of December 31, 2016, Continued

(*3)	In May 2016, the Controlling Company established LG Display Vietnam Haiphong Co., Ltd. to manufacture Display products. As of December 31, 2016, the Controlling Company has a 100% equity interest of this subsidiary and its capital stock amounts to W117,378 million.

(*4)

In July 2016, Suzhou Raken Technology Co., Ltd., a joint venture of the Controlling Company and AmTRAN Technology Co., Ltd. (“AmTRAN”), split into Suzhou Raken Technology Co., Ltd. and Suzhou Lehui Display Co., Ltd. The Controlling Company acquired 100% equity interest in Suzhou Lehui Display Co., Ltd. and AmTRAN acquired 100% equity interest in Suzhou Raken Technology Co., Ltd., respectively, by exchanging equity interests (note 31).

As of December 31, 2016, LG Display U.S.A., Inc., a subsidiary of the Controlling Company, completed its voluntary liquidation.

W349,977 million and W531,304 million, respectively, are attributable to the Controlling Company over the distributed dividends from consolidated subsidiaries for the years ended December 31, 2016 and 2015.

(c)

Summary of financial information of subsidiaries at the reporting date is as follows:


(In millions of won)	December 31, 2016						2016
Subsidiaries	Total assets		Total liabilities		Total shareholders’ equity		Sales		Net income (loss)
LG Display America, Inc.	W	1,956,963		1,939,225		17,738		10,616,003		8,888
LG Display Japan Co., Ltd.		275,902		271,356		4,546		1,841,304		2,148
LG Display Germany GmbH		635,597		630,225		5,372		1,956,743		2,060
LG Display Taiwan Co., Ltd.		603,406		591,555		11,851		1,683,349		3,350
LG Display Nanjing Co., Ltd.		729,928		90,116		639,812		447,544		43,068
LG Display Shanghai Co., Ltd.		778,951		764,890		14,061		1,543,986		5,881
LG Display Poland Sp. z o.o.		162,117		8,579		153,538		47,821		3,070
LG Display Guangzhou Co., Ltd.		2,094,388		1,282,653		811,735		2,517,322		211,874
LG Display Shenzhen Co., Ltd.		257,262		250,895		6,367		1,886,790		2,509
LG Display Singapore Pte. Ltd.		434,194		432,260		1,934		981,219		1,807
L&T Display Technology (Fujian) Limited		374,698		300,695		74,003		1,327,560		18,289
LG Display Yantai Co., Ltd.		1,622,688		1,278,088		344,600		2,402,669		75,010
Nanumnuri Co., Ltd.		4,612		3,602		1,010		16,047		(355	)
LG Display (China) Co., Ltd.		3,121,451		1,554,529		1,566,922		1,912,569		52,778
Unified Innovative Technology, LLC		7,497		18		7,479		—		(1,184	)
LG Display Guangzhou Trading Co., Ltd.		158,183		157,588		595		424,919		206
Global OLED Technology, LLC		91,062		11,678		79,384		8,480		(6,446	)
LG Display Vietnam Haiphong Co., Ltd.		163,535		46,156		117,379		—		(1,018	)
Suzhou Lehui Display Co., Ltd.(*)		227,464		115,486		111,978		203,738		(8,236	)

	W	13,699,898		9,729,594		3,970,304		29,818,063		413,699

(*)	Revenue and profit of Suzhou Lehui Display Co., Ltd. for the year ended December 31, 2016 represents financial information subsequent to its acquisition date, July 1, 2016.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

1.	Reporting Entity, Continued


(In millions of won)	December 31, 2015						2015
Subsidiaries	Total assets		Total liabilities		Total shareholders’ equity		Sales		Net income (loss)
LG Display America, Inc.	W	1,530,639		1,479,935		50,704		11,508,652		3,046
LG Display Japan Co., Ltd.		174,686		154,090		20,596		1,590,675		1,682
LG Display Germany GmbH		511,703		503,726		7,977		2,123,368		2,459
LG Display Taiwan Co., Ltd.		670,674		660,241		10,433		1,995,216		2,483
LG Display Nanjing Co., Ltd.		695,623		64,864		630,759		403,552		41,017
LG Display Shanghai Co., Ltd.		926,503		911,682		14,821		1,518,461		6,791
LG Display Poland Sp. z o.o.		167,491		10,117		157,374		64,228		4,405
LG Display Guangzhou Co., Ltd.		1,908,061		1,134,064		773,997		2,453,655		237,369
LG Display Shenzhen Co., Ltd.		266,804		261,145		5,659		1,829,569		2,897
LG Display Singapore Pte. Ltd.		169,790		169,668		122		1,111,372		1,994
L&T Display Technology (Fujian) Limited		355,249		283,643		71,606		1,280,286		20,010
LG Display Yantai Co., Ltd.		1,441,411		1,091,911		349,500		2,273,020		88,604
LG Display U.S.A., Inc.		333		22		311		235		2,993
Nanumnuri Co., Ltd.		3,199		1,834		1,365		11,360		103
LG Display (China) Co., Ltd.		2,678,341		1,090,259		1,588,082		1,654,680		127,654
Unified Innovative Technology, LLC		8,447		1		8,446		—		(1,225	)
LG Display Guangzhou Trading Co., Ltd.		93,246		92,854		392		187,630		170
Global OLED Technology, LLC		89,329		5,753		83,576		4,882		(5,017	)

	W	11,691,529		7,915,809		3,775,720		30,010,841		537,435

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

1.	Reporting Entity, Continued

(d)

Associates as of December 31, 2016


(In millions of won)
Associates	Location	Percentage of ownership						Fiscal year end	Date of incorporation	Business	Carrying amount
		2016			2015

Paju Electric Glass Co., Ltd.	Paju, South Korea		40	%		40	%	December 31	January 2005	Manufacture electric glass for FPDs	W	52,750

New Optics Ltd.	Yangju, South Korea		46	%		46	%	December 31	August 2005	Manufacture back light parts for TFT-LCDs		40,045

INVENIA Co., Ltd. (LIG INVENIA Co., Ltd.)(*1)	Seongnam, South Korea		13	%		13	%	December 31	January 2001	Develop and manufacture equipment for FPDs		2,450

WooRee E&L Co., Ltd.(1) (2)	Ansan, South Korea		14	%		21	%	December 31	June 2008	Manufacture LED back light unit packages		8,627

LB Gemini New Growth Fund No. 16(*3)	Seoul, South Korea		31	%		31	%	December 31	December 2009	Invest in small and middle sized companies and benefit from M&A opportunities		8,647

Can Yang Investments Limited (*1)	Hong Kong		9	%		9	%	December 31	January 2010	Develop, manufacture and sell LED parts		5,580

YAS Co., Ltd.(1) (4)	Paju, South Korea		18	%		19	%	December 31	April 2002	Develop and manufacture deposition equipment for OLEDs		9,883

Narenanotech Corporation	Yongin, South Korea		23	%		23	%	December 31	December 1995	Manufacture and sell FPD manufacturing equipment		23,717

AVATEC Co., Ltd.(1)(5)	Daegu, South Korea		17	%		16	%	December 31	August 2000	Process and sell electric glass for FPDs		20,984

Arctic Sentinel, Inc. (Fuhu, Inc.)(*1)	Los Angenles USA		10	%		10	%	March 31	June 2008	Develop and manufacture tablet for kids		—

											W	172,683

(*1)

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

(*2)

In 2016, the Controlling Company’s ownership percentage in WooRee E&L Co., Ltd. (“WooRee E&L”) decreased from 21% to 14% as the Controlling Company did not participate in the capital increase of WooRee E&L. The Controlling Company recognized an impairment loss of W6,137 million as finance cost for the difference between the carrying amount and the recoverable amount of investment in WooRee E&L.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

1.	Reporting Entity, Continued

(*3)

The Controlling Company is a member of limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). In February and June 2016, the Controlling Company received W2,820 million, W2,330 million, respectively, from the Fund as capital distribution. There was no change in the Controlling Company’s ownership percentage in the Fund and the Controlling Company is committed to making future investments of up to an aggregate of W30,000 million.

(*4)	The Controlling Company’s ownership percentage in YAS Co., Ltd. decreased from 19% to 18% as the Controlling Company did not participate in the capital increase of YAS Co., Ltd.

(*5)	In 2016, AVATEC Co., Ltd. retired its treasury stock and the Controlling Company’s ownership percentage in AVATEC Co., Ltd. increased from 16% to 17% as a result.

In 2016, the Controlling Company disposed of the entire investments in TLI Inc. and AVACO Co., Ltd. for W7,839 million W16,756 million, respectively, and recognized W3,064 million W4,290 million, respectively, for the difference between the disposal amount and the carrying amount as finance income.

2.	Basis of Presenting Financial Statements

(a)

Statement of Compliance

In accordance with the Act on External Audits of Stock Companies, these consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

The consolidated financial statements were authorized for issuance by the Board of Directors on January 23, 2017, which will be submitted for approval to the shareholders’ meeting to be held on March 16, 2017.

(b)

Basis of Measurement

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

•

derivative instruments, financial assets at fair value through profit or loss and available-for-sale financial assets are measured at fair value, and

•

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

(c)

Functional and Presentation Currency

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

2.	Basis of Presenting Financial Statements, Continued

(d)

Use of Estimates and Judgments

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

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:

•

Classification of financial instruments (note 3.(d))

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next 12 months is included in the following notes:

•

Recognition and measurement of provisions (note 3.(j), 16 and 17)

•

Net realizable value of inventories (note 9)

•

Measurement of defined benefit obligations (note 15)

•

Deferred tax assets and liabilities (note 28)

3.	Summary of Significant Accounting Policies

The significant accounting policies followed by the Group in preparation of its consolidated financial statements are as follows:

(a)

Consolidation

(i)

Business Combinations

The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities in accordance with K-IFRS No. 1032 and K-IFRS No. 1039. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(a)

Consolidation, Continued

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

(iii) Non-controlling interests

Non-controlling interests (“NCI”) are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Changes in the Group’s interest in subsidiaries that do not result in a loss of control are accounted for as equity transactions.

(iv) Loss of Control

If the Controlling Company loses control of subsidiaries, the Controlling Company derecognizes the assets and liabilities of the former subsidiaries from the consolidated statement of financial position and recognizes the gain or loss associated with the loss of control attributable to the former controlling interest. Meanwhile, the Controlling Company recognizes any investment retained in the former subsidiaries at its fair value when control is lost.

(v) Associates and joint ventures (equity method investees)

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Investments in associates and joint ventures are initially recognized at cost and subsequently accounted for using the equity method of accounting. The carrying amount of investments in associates and joint ventures is increased or decreased to recognize the Group’s share of the profits or losses and changes in the Group’s proportionate interest of the investee after the date of acquisition. Distributions received from an investee reduce the carrying amount of the investment.

If an associate or joint ventures uses accounting policies different from those of the Controlling Company for like transactions and events in similar circumstances, appropriate adjustments are made to the consolidated financial statements. As of and during the periods presented in the consolidated financial statements, no adjustments were made in applying the equity method.

When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(a)

Consolidation, Continued

(vi) Transactions eliminated on consolidation

Intra-group balances and transactions, including income and expenses and any unrealized income and expenses and balance of trade accounts and notes receivable and payable arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

(b)

Foreign Currency Transactions and Translation

Transactions in foreign currencies are translated to the respective functional currencies of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the exchange rate on the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was originally determined. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on available-for-sale equity instruments and a financial asset and liability designated as a cash flow hedge, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the original transaction. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition are recognized in profit or loss in the period in which they arise. Foreign currency differences arising from assets and liabilities in relation to the investing and financing activities including loans, bonds and cash and cash equivalents are recognized in finance income (costs) in the consolidated statement of comprehensive income and foreign currency differences arising from assets and liabilities in relation to activities other than investing and financing activities are recognized in other non-operating income (expense) in the consolidated statement of comprehensive income. Relevant foreign currency differences are presented in gross amounts in the consolidated statement of comprehensive income.

If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial position and financial performance of the foreign operation are translated into the presentation currency using the following methods. The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, including goodwill and fair value adjustments arising on acquisition, are translated to the Group’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to the Group’s functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(b)

Foreign Currency Transactions and Translation, Continued

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the at each reporting date’s exchange rate.

(c)

Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling expenses. In the case of manufactured inventories and work-in-process, cost includes an appropriate share of production overheads based on the actual capacity of production facilities. However, the normal capacity is used for the allocation of fixed production overheads if the actual level of production is lower than the normal capacity.

(d)

Financial Instruments

(i) Non-derivative financial assets

The Group initially recognizes loans and receivables and deposits on the date they are originated. All other non-derivative financial assets, including financial assets at fair value through profit or loss (“FVTPL”), are recognized in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows of the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability. If a transfer does not result in derecognition because the Group has retained substantially all the risks and rewards of ownership of the transferred asset, the Group continues to recognize the transferred asset and recognizes a financial liability for the consideration received. In subsequent periods, the Group recognizes any income on the transferred assets and any expense incurred on the financial liability.

Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

The Group has the following non-derivative financial assets: financial assets at FVTPL, loans and receivables and available-for-sale financial assets.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(d)

Financial Instruments, Continued

(i) Non-derivative financial assets, Continued

Financial assets at fair value through profit or loss

A financial asset is classified at FVTPL if it is classified as held for trading or is designated as such upon initial recognition. If a contract contains one or more embedded derivatives, the Group designates the entire hybrid (combined) contract as a financial asset at FVTPL unless: the embedded derivative(s) does not significantly modify the cash flows that otherwise would be required by the contract; or it is clear with little or no analysis when a similar hybrid (combined) instrument is first considered that separation of the embedded derivative(s) is prohibited. Upon initial recognition, attributable transaction costs are recognized in profit or loss as incurred. Financial assets at FVTPL are measured at fair value, and changes therein are recognized in profit or loss.

Cash and cash equivalents

Cash and cash equivalents include all cash balances and short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash.

Deposits in banks

Deposits in banks are those with maturity of more than three months and less than one year and are held for cash management purposes.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. When loans and receivables are recognized initially, the Group measures them at their fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective interest method, less any impairment losses. Loans and receivables comprise trade accounts and notes receivable and other accounts receivable.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or that are not classified as financial assets at FVTPL, held-to-maturity financial assets or loans and receivables. The Group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale equity instruments, are recognized in other comprehensive income and presented within equity in the fair value reserve. When an investment in available-for-sale financial assets is derecognized, the cumulative gain or loss in other comprehensive income is transferred to profit or loss.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and whose derivatives are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(d)

Financial Instruments, Continued

(ii) Non-derivative financial liabilities

The Group classifies financial liabilities into two categories, financial liabilities at FVTPL and other financial liabilities, in accordance with the substance of the contractual arrangement and the definitions of financial liabilities, and recognizes them in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Financial liabilities at FVTPL include financial liabilities held for trading or designated as such upon initial recognition at FVTPL. After initial recognition, financial liabilities at FVTPL are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issuance of financial liabilities are recognized in profit or loss as incurred.

Non-derivative financial liabilities other than financial liabilities classified as FVTPL are classified as other financial liabilities and measured initially at fair value minus transaction costs that are directly attributable to the issuance of financial liabilities. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. As of December 31, 2016, non-derivative financial liabilities comprise borrowings, bonds and others.

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

(iii) Share Capital

The Group only issued common stocks and they are classified as equity. Incremental costs directly attributable to the issuance of common stocks are recognized as a deduction from equity, net of tax effects. Capital contributed in excess of par value upon issuance of common stocks is classified as share premium within equity.

(iv) Derivative financial instruments

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Hedge Accounting

If necessary, the Group designates derivatives as hedging items to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge).

On initial designation of the hedge, the Group’s management formally designates and documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship, both at the inception of the hedge relationship as well as on an ongoing basis.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(d)

Financial Instruments, Continued

(iv) Derivative financial instruments, Continued

i) Fair value hedges

Change in the fair value of a derivative hedging instrument designated as a fair value hedge and the hedged item is recognized in profit or loss, respectively. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the statement of comprehensive income. The Group discontinues fair value hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship between them anymore or if the hedging instrument expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. Any adjustment arising from gain or loss on the hedged item attributable to the hedged risk is amortized to profit or loss from the date the hedge accounting is discontinued.

ii) Cash flow hedges

When a derivative designated as a cash flow hedging instrument meets the criteria of cash flow hedge accounting, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and the ineffective portion of changes in the fair value of the derivative is recognized in profit or loss. The Group discontinues cash flow hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship between them any more or if the hedging instruments expires or is sold, terminated or exercised, or if the hedge no longer meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

Embedded derivative

Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at FVTPL. Changes in the fair value of separable embedded derivatives are recognized immediately in profit or loss.

Other derivative financial instruments

Derivative financial instruments are measured at fair value and changes of them not designated as a hedging instrument or not effective for hedging are recognized in profit or loss.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(e)

Property, Plant and Equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes an expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing costs on qualifying assets.

The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and recognized in other non-operating income or other non-operating expenses.

(ii) Subsequent costs

Subsequent expenditure on an item of property, plant and equipment is recognized as part of its cost only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

(iii) Depreciation

Depreciation is recognized in profit or loss on a straight-line basis method, reflecting the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. The residual value of property, plant and equipment is zero. Land is not depreciated.

Estimated useful lives of the assets are as follows:


		Useful lives (years)
Buildings and structures		20, 40
Machinery		4, 5
Furniture and fixtures		4
Equipment, tools and vehicles		4, 12

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate and any changes are accounted for as changes in accounting estimates. There were no such changes for all periods presented.

(f)

Borrowing Costs

The Group capitalizes borrowing costs, which includes interests and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs, directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. The Group immediately recognizes other borrowing costs as an expense.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(g)

Government Grants

In case there is reasonable assurance that the Group will comply with the conditions attached to a government grant, the government grant is recognized as follows:

(i) Grants related to the purchase or construction of assets

A government grant related to the purchase or construction of assets is deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduced depreciation expense and cash related to grant received is presented in investing activities in the statement of cash flows.

(ii) Grants for compensating the Group’s expenses incurred

A government grant that compensates the Group for expenses incurred is recognized in profit or loss as a deduction from relevant expenses on a systematic basis in the periods in which the expenses are recognized.

(iii) Other government grants

A government grant that becomes receivable for the purpose of giving immediate financial support to the Group with no compensation for expenses or losses already incurred or no future related costs is recognized as income of the period in which it becomes receivable.

(h)

Intangible Assets

Intangible assets are initially measured at cost. Subsequently, intangible assets are measured at cost less accumulated amortization and accumulated impairment losses.

(i) Goodwill

Goodwill arising from business combinations is recognized as the excess of the acquisition cost of investments in subsidiaries, associates and joint ventures over the Group’s share of the net fair value of the identifiable assets acquired and liabilities assumed. Any deficit is a bargain purchase that is recognized in profit or loss. Goodwill is measured at cost less accumulated impairment losses.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(h)

Intangible Assets, Continued

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.

Development activities involve a plan or design of the production of new or substantially improved products and processes. Development expenditure is capitalized only if the Group can demonstrate all of the following:

•

the technical feasibility of completing the intangible asset so that it will be available for use or sale,

•

its intention to complete the intangible asset and use or sell it,

•

its ability to use or sell the intangible asset,

•

how the intangible asset will generate probable future economic benefits. Among other things, the Group can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset,

•

the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and

•

its ability to measure reliably the expenditure attributable to the intangible asset during its development.

The expenditure capitalized includes the cost of materials, direct labor, overhead costs that are directly attributable to preparing the asset for its intended use, and borrowing costs on qualifying assets.

(iii) Other intangible assets

Other intangible assets include intellectual property rights, software, customer relationships, technology, memberships and others.

(iv) Subsequent costs

Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific intangible asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognized in profit or loss as incurred.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(h)

Intangible Assets, Continued

(v) Amortization

Amortization is calculated on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which condominium and golf club memberships are expected to be available for use, these intangible assets are regarded as having indefinite useful lives and not amortized.


		Estimated useful lives (years)
Intellectual property rights		5, 10
Rights to use electricity, water and gas supply facilities		10
Software		4
Customer relationships		7, 10
Technology		10
Development costs		(*)
Condominium and golf club memberships		Not amortized

(*)	Capitalized development costs are amortized over the useful life considering the life cycle of the developed products. Amortization of capitalized development costs is recognized in research and development expenses in the consolidated statement of comprehensive income.

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

(i)

Impairment

(i) Financial assets

A financial asset not carried at FVTPL is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency in interest or principal payments by an issuer or a debtor, for economic reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the Group would not otherwise consider, or the disappearance of an active market for that financial asset. In addition, for an investment in an equity security, objective evidence of impairment includes significant financial difficulty of the issuer and a significant or prolonged decline in its fair value below its cost.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(i)

Impairment, Continued

(i) Financial assets, Continued

Management considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

If there is objective evidence that an impairment loss has been incurred on financial assets carried at amortized cost, the amount of the impairment loss is measured as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Impairment losses are recognized in profit or loss and reflected in an allowance account against loans and receivables.

The amount of the impairment loss on financial assets including equity securities carried at cost is measured as the difference between the carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed.

When a decline in the fair value of an available-for-sale financial asset has been recognized in other comprehensive income the amount of the cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that financial asset previously recognized in profit or loss.

In a subsequent period, for the financial assets recorded at fair value, if the fair value increases and the increase can be objectively related to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed. The amount of the reversal in financial assets carried at amortized cost and a debt instrument classified as available for sale is recognized in profit or loss. However, impairment loss recognized for an investment in an equity instrument classified as available-for-sale is reversed through other comprehensive income.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(i)

Impairment, Continued

(ii) Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than assets arising from employee benefits, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, the recoverable amount is estimated each year at the same time.

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”, or “CGU”). The recoverable amount of an asset or cash-generating unit is determined as the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Fair value less costs to sell is based on the best information available to reflect the amount that the Group could obtain from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Goodwill acquired in a business combination is allocated to CGUs that are expected to benefit from the synergies of the combination. Impairment losses recognized in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the unit, and then to reduce the carrying amounts of the other assets in the unit on a pro rata basis.

In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of accumulated depreciation or amortization, if no impairment loss had been recognized. An impairment loss in respect of goodwill is not reversed.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(j)

Provisions

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

The risks and uncertainties that inevitably surround events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows. The unwinding of the discount is recognized as finance cost.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

The Group recognizes a liability for warranty obligations based on the estimated costs expected to be incurred under its basic limited warranty. This warranty covers defective products and is normally applicable for eighteen months from the date of purchase. These liabilities are accrued when product revenues are recognized. Factors that affect the Group’s warranty liability include historical and anticipated rates of warranty claims on those repairs and cost per claim to satisfy the Group’s warranty obligation. Warranty costs primarily include raw materials and labor costs. As these factors are impacted by actual experience and future expectations, management periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Accrued warranty obligations are included in the current and non-current provisions.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources, are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

(k)

Employee Benefits

(i) Short-term employee benefits

Short-term employee benefits that are due to be settled within twelve months after the end of the period in which the employees render the related service are recognized in profit or loss on an undiscounted basis. The expected cost of profit-sharing and bonus plans and others are recognized when the Group has a present legal or constructive obligation to make payments as a result of past events and a reliable estimate of the obligation can be made.

(ii) Other long-term employee benefits

The Group’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(k)

Employee Benefits, Continued

(iii) Defined contribution plan

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.

(iv) Defined benefit plan

A defined benefit plan is a post-employment benefit plan other than defined contribution plans. The Group’s net obligation in respect of its defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted.

The calculation is performed annually by an independent actuary using the projected unit credit method. The discount rate is the yield at the reporting date on high quality corporate bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Group recognizes all actuarial gains and losses arising from defined benefit plans in retained earnings immediately.

The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Consequently, the net interest on the net defined benefit liability (asset) now comprises: interest cost on the defined benefit obligation, interest income on plan assets, and interest on the effect on the asset ceiling.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(l)

Revenue

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of estimated returns, earned trade discounts, volume rebates and other cash incentives paid to customers. Revenue is recognized when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the buyer, generally on delivery and acceptance at the customers’ premises, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of revenue when the sales are recognized. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the consolidated statements of comprehensive income.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(m)

Operating Segments

An operating segment is a component of the Group that: 1) engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with other components of the group, 2) whose operating results are reviewed regularly by the Group’s chief operating decision maker (“CODM”) in order to allocate resources and assess its performance, and 3) for which discrete financial information is available. Management has determined that the CODM of the Group is the Board of Directors. The CODM does not receive and therefore does not review discrete financial information for any component of the Group. Consequently, no operating segment information is included in these consolidated financial statements. Entity wide disclosures of geographic and product revenue information are provided in note 23 to these consolidated financial statements.

(n)

Finance Income and Finance Costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Group’s right to receive payment is established.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes in the fair value of financial assets at FVTPL, impairment losses recognized on financial assets, and losses on hedging instruments that are recognized in profit or loss. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset.

(o)

Income Tax

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

(i) Current tax

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(o)

Income Tax, Continued

(ii) Deferred tax

Deferred tax is recognized, using the liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. However, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill.

The Group recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that the differences relating to investments in subsidiaries, associates and joint ventures will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

The Group offsets deferred tax assets and deferred tax liabilities if, and only if the Group has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax 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.

(p)

Earnings Per Share

The Group presents basic and diluted earnings per share (“EPS”) data for its common stocks. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Controlling Company by the weighted average number of common stocks outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of common stocks outstanding, adjusted for the effects of all dilutive potential common stocks such as convertible bonds and others.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(q)

Change in Accounting Policies

The Group has consistently applied the accounting policies to the consolidated financial statements for 2016 and 2015 except for the new amendment effective for annual periods beginning on or after January 1, 2016 as mentioned below.

(i)

K-IFRS No. 1001, Presentation of Financial Statements

The Group has adopted the amendment to K-IFRS No. 1001, Presentation of Financial Statements, since January 1, 2016. The amendment clarifies that the disclosed line items can be omitted, added, or aggregated based on materiality. In addition, the amendment clarifies that the share in the other comprehensive income of associates and joint ventures should be presented separately in the financial statements based on whether they will or will not subsequently be reclassified to profit or loss. Also, additional requirements for disclosures in the notes and others are provided.

The Group has adopted the amendment to K-IFRS No. 1001 and separated the share of other comprehensive income of associates and joint ventures into the share of items that (i) will be reclassified subsequently to profit or loss or (ii) will not be reclassified subsequently to profit or loss.

The Group retrospectively adopted this change in accounting policy and restated the comparative consolidated statements of comprehensive income (loss) and changes in equity for the year ended December 31, 2015.

(r)

New Standards and Amendments Not Yet Adopted

The following new standards and amendments to existing standards have been published and are mandatory for the Group for annual periods beginning on or after January 1, 2016, and the Group has not early adopted them.

(i)

K-IFRS No. 1109, Financial Instruments

K-IFRS No. 1109, Financial Instruments, published on September 25, 2015 which will replace the K-IFRS No. 1039, Financial Instruments: Recognition and Measurement, is effective for annual periods January 1, 2018, with early adoption permitted. The Group plans to adopt K-IFRS No. 1109 in its consolidated financial statements for annual periods beginning on January 1, 2018.

Adoption of K-IFRS No. 1109 will generally be applied retrospectively, except as described below.

•

Advantage of exemption allowing the Group not to restate comparative information for prior periods with respect to classification, measurement and impairment changes.

•

Prospective application of new hedge accounting except for those specified in K-IFRS No. 1109 for retrospective application such as accounting for the time value of options and others.

Key features of K-IFRS No. 1109 are a) new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics, b) impairment model based on changes in expected credit losses, and c) new approach to hedge qualification and methods for assessing hedge effectiveness.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(r)

New Standards and Amendments Not Yet Adopted, Continued

Adoption of K-IFRS No. 1109 necessitates the assessment on the potential impact on the Group’s consolidated financial statements resulting from the application of new standards, revision of its accounting process and internal controls related to reporting financial instruments. The quantitative impact of adopting K-IFRS No. 1109 on the Group’s consolidated financial statements in 2018 is not known and cannot be reliably estimated because it will be dependent on the financial instruments that the Group holds and economic conditions at that time as well as accounting elections and judgments that it will make in the future.

The Group plans to assess the impacts of adoption of K-IFRS No. 1109 on its consolidated financial statements, the accounting system and the internal controls in 2017. The Group plans to finalize assessing the financial impact of the adoption of K-IFRS No. 1109 by September 30, 2017 and disclose the results in its consolidated financial statements for the year ending December 31, 2017. The potential general impact on its consolidated financial statements resulting from the application of new standards are as follows:

Classification and Measurement of Financial Assets

K-IFRS No. 1109 contains three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit or loss (“FVTPL”), based on the business model in which assets are managed and their cash flow characteristics. However, derivatives embedded in contracts where the host is a financial assets in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification.


Business model assessment	Contractual cash flow characteristics
Business model assessment	Solely payments of principal and interest	Others
Hold to collect contractual cash flows	Amortized cost (*1)	FVTPL (*2)
Hold to collect contractual cash flows and sell financial assets	FVOCI
Hold to sell financial assets and others	FVTPL

(*1)	The Group may irrevocably designate a financial asset as measured at FVTPL using the fair value option at initial recognition if doing so eliminates or significantly reduces accounting mismatch.

(*2)	The Group may irrevocably designate an equity investment that is not held for trading as measured at FVOCI using the fair value option.

The requirements to classify financial assets as amortized cost or FVOCI under K-IFRS No. 1109 are more restrictive than them under K-IFRS No. 1039. Accordingly, increase in proportion of financial assets classified as FVTPL may result in increase of volatility in profit or loss of the Group. As of December 31, 2016, the Group recognized W7,917,073 million of loans and receivable, W7,993 million of available-for-sale financial assets and W1,382 million of financial assets at fair value through profit or loss.

A debt investment is measured at amortized cost if it meets both of the following conditions:

•

The asset is held within a business model whose objective is achieved by collecting contractual cash flows; and

•

The contractual terms of the financial asset give rise on specified dates to cash flow that are solely payments of principal and interest on the principal amount outstanding.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(r)

New Standards and Amendments Not Yet Adopted, Continued

As of December 31, 2016, the Group recognized W7,917,073 million of loans and receivables and W154 million of debt instruments classified as available-for-sale financial assets and measured at amortized cost.

A debt investment is measured at FVOCI if it meets both of the following conditions:

•

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

•

The contractual terms of the financial asset give rise on specified dates to cash flow that are solely payments of principal and interest on the principal amount outstanding.

Equity investment that are not held for trading may be irrevocably designated as FVOCI on initial recognition and they are not subsequently recycled to profit or loss. As of December 31, 2016, the Group recognized W7,839 million of equity investment classified as available-for-sale financial assets.

A financial asset is measured at FVTPL, if:

•

The asset’s contractual cash flows do not represent solely payments of principal and interest on the principal amount outstanding;

•

Debt instrument is held for trading; or

•

Equity instrument is not designated as FVOCI.

As of December 31, 2016, the Group recognized W1,382 million of debt instrument classified as FVTPL.

Classification and Measurement of Financial Liabilities

Under K-IFRS No. 1109, the amount of change in the fair value of liabilities designated as at FVTPL that is attributable to changes in the credit risk of the liability is not presented in the item of profit or loss, but in OCI and they are not subsequently recycled to profit or loss. However, if accounting mismatch is created or enlarged as a result of this accounting treatment, the amount of change in the credit risk of the financial liabilities is also recognized as profit or loss.

Adoption of K-IFRS No. 1109 may result in decrease of profit or loss in relation to evaluation of financial liabilities as some of change in the fair value of financial liabilities designated as at FVTPL is presented in OCI.

Impairment: Financial assets and contract assets

Impairment loss is recognized if there is any objective evidence that a financial asset or group of financial asset is impaired according to ‘incurred loss model’ under K-IFRS No. 1039. However, K-IFRS No. 1109 replaces the incurred loss model in K-IFRS No. 1039 with an ‘expected credit loss impairment model’ which applies to debt instruments measured at amortized cost or at fair value through other comprehensive income, lease receivable, loan commitments and financial guarantee contracts.

Under K-IFRS No. 1109, loss allowance is classified into three stages below in accordance with increase of credit risk after initial recognition of financial assets and measured on the 12-month expected credit loss (“ECL”) or lifetime ECL basis. Under K-IFRS No. 1109, credit losses are recognized earlier than that under K-IFRS 1039.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(r)

New Standards and Amendments Not Yet Adopted, Continued


Classification		Loss allowances
Stage 1	No significant increase in credit risk since initial recognition	12-month expected credit losses: the expected credit losses that result from default events that are possible within 12 months after the reporting date.
Stage 2	Significant increase in credit risk since initial recognition	Lifetime expected credit losses: the expected credit losses that result from all possible default events over the expected life of the financial instrument.
Stage 3	Objective evidence of credit risk impairment

Under K-IFRS No. 1109, cumulative change in lifetime expected credit loss since initial recognition is recognized as a loss allowance for financial asset, if it was credit-impaired at initial recognition. As of December 31, 2016, the Group recognized W2,604 million of loss allowances for W7,919,831 million of debt instrument measured at amortized cost such as loans, receivables and debt instrument classified available-for-sale financial asset.

Hedge accounting

K-IFRS No. 1109 maintains mechanics of hedge accounting including fair value hedges, cash flow hedges and hedges of a net investment in a foreign operation while replacing complex and regulation based requirements of hedge accounting in K-IFRS No. 1039 with principle based method for assessing hedge effectiveness by focusing on the risk management strategy of the Group. K-IFRS No. 1109 enlarges the risk management objectives and strategy and mitigates hedge accounting requirements including elimination of assessment to determine if it actually to have been highly effective throughout the financial reporting periods for which the hedge was designated and quantified guidance (80-125 percent).

By complying with the hedging rules in K-IFRS 1109, the Group can apply hedge accounting for transactions that do not meet the hedging criteria under K-IFRS 1039 thereby reducing volatility in the profit or loss.

When initially applying K-IFRS 1109, the Group may choose as its accounting policy to continue to apply hedge accounting requirements under K-IFRS 1039 instead of the requirements in K-IFRS 1109.

(ii)

K-IFRS No. 1115, Revenue from contracts with customers

K-IFRS No. 1115, Revenue from contracts with customers, published on November 6, 2015 is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. K-IFRS No. 1115 replaces existing revenue recognition guidance, including K-IFRS No. 1018 Revenue, K-IFRS No. 1011, Construction Contracts, K-IFRS No. 2031, Revenue: Barter Transactions Involving Advertising Services, K-IFRS No. 2113, Customer Loyalty Programmes, K-IFRS No. 2115, Agreements for the Construction of Real Estate and K-IFRS No. 2118, Transfers of Assets from Customers. The Group plans to adopt K-IFRS No. 1115 in its consolidated financial statements for annual periods beginning on January 1, 2018, using the retrospective approach. As a result, the Group also will apply retrospective approach for the comparative periods presented in its consolidated financial statements in accordance with K-IFRS No. 1008, Accounting Policies, Changes in Accounting Estimates and Errors. The Group plans to use the practical expedients for completed contracts as of January 1, 2017 and accordingly the revenue in connection with those contracts will not be restated.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(r)

New Standards and Amendments Not Yet Adopted, Continued

Revenue recognition criteria in K-IFRS No. 1018 are applied separately to each transaction including sale of goods, rendering of services, interest, royalties, dividends and construction contracts. However, K-IFRS No. 1115 establishes a single new revenue recognition standard for contracts with customers and introduces a five-step model for determining whether, how much and when revenue is recognized.

The steps in five-step model are as follows:

a) Identify the contract with a customer.

b) Identify the performance obligations in the contract.

c) Determine the transaction price.

d) Allocate the transaction price to the performance obligations in the contract.

e) Recognize revenue when (or as) the entity satisfies a performance obligation.

The Group plans to assess the impacts of adoption of K-IFRS No. 1115 on its consolidated financial statements, the accounting system and the internal controls in 2017. The Group plans to finalize assessing the financial impact of the adoption of K-IFRS No. 1115 by September 2017 and disclose the results in its consolidated financial statements for the year ended December 31, 2017. The potential general impact on its consolidated financial statements resulting from the application of the new standard is as follows:

Variable Consideration

The consideration received from customers may be variable as the Group allows its customers to return their products, if any fault, according to the contracts. The Group shall estimate an amount of variable consideration by using the expected value or the most likely amount, depending on which method the entity expects to better predict the amount of consideration to which it will be entitled and include in the transaction price some or all of an amount of variable consideration estimated only to the extent that is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when return period expires. The Group shall recognize refund liability measured at the amount of consideration received (or receivable) to which the Group does not expect to be entitled. Management believes that the adoption of the amendment is expected to have no significant impact on the consolidated statement of financial position of the Group.

(iii)

K-IFRS No. 1007, Statement of Cash Flows

The amendment to K-IFRS No. 1007, Statement of Cash Flows, is part of the disclosure initiative to improve presentation and disclosure in financial statements and requires an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities including both changes due to cash flows and non-cash changes such as changes from financing cash flows, changes arising from obtaining or losing control of subsidiaries or other businesses, the effect of changes in foreign exchange rates and changes in fair value and other changes. On initial application of the amendment, entities are not required to provide comparative information for preceding periods. These amendments are effective for annual periods beginning on or after January 1, 2017, with early application permitted. Management plans to include additional required disclosures in its consolidated financial statements for the year ending December 31, 2017 in accordance with the amendment to K-IFRS No. 1007.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

3.	Summary of Significant Accounting Policies, Continued

(r)

New Standards and Amendments Not Yet Adopted, Continued

(iv)

K-IFRS No. 1012, Income Taxes

The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount.

Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognized in the opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact. These amendments are effective for annual periods beginning on or after January 1, 2017 with early application permitted. Management believes that the adoption of the amendment is expected to have no significant impact on the consolidated statement of financial position of the Group.

4.	Determination of Fair Value

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

(a)

Current Assets and Liabilities

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

(b)

Trade Receivables and Other Receivables

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

(c)

Investments in Equity and Debt Securities

The fair value of marketable available-for-sale financial assets is determined by reference to their quoted closing bid price at the reporting date. The fair value of non-marketable securities is determined using valuation methods.

(d)

Non-derivative Financial Liabilities

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

5.	Risk Management

(a)

Financial Risk Management

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

(i) Credit risk

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

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

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

The Group does not establish allowances for receivables under insurance or receivables from customers with a high credit rating. For the rest of the receivables, the Group establishes an allowance for impairment of trade and other receivables that have been individually or collectively evaluated for impairment and estimated on the basis of historical loss experience for assets.

(ii) Liquidity risk

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

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

(iii) Market risk

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

5.	Risk Management

(a)

Financial Risk Management

Currency risk

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

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

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

Interest rate risk

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

5.	Risk Management, Continued

(b)

Capital Management

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


(In millions of won)
	December 31, 2016			December 31, 2015
Total liabilities	W	11,421,948			9,872,204
Total equity		13,462,388			12,704,956
Cash and deposits in banks (*1)		2,722,446			2,523,999
Borrowings (including bonds)		4,778,770			4,224,231
Total liabilities to equity ratio		85	%		78	%
Net borrowings to equity ratio (*2)		15	%		13	%

(*1)	Cash and deposits in banks consist of cash and cash equivalents and current deposit in banks.

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

6.	Cash and Cash Equivalents and Deposits in Banks

Cash and cash equivalents and deposits in banks at the reporting date are as follows:


(In millions of won)
	December 31, 2016		December 31, 2015
Current assets
Cash and cash equivalents
Demand deposits	W	1,558,696		751,662
Deposits in banks
Time deposits	W	1,091,364		1,701,837
Restricted cash (*)		72,386		70,500

	W	1,163,750		1,772,337

Non-current assets
Deposits in banks
Restricted cash (*)	W	13		13

	W	2,722,459		2,524,012

(*)	Restricted cash includes mutual growth fund amounting to W70,500 million to aid LG Group’s second and third-tier suppliers, pledge amounting to W1,886 million to enforce investment plans according to the receipt of subsidies from Gumi city and Gyeongsangbuk-do and others.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

7.	Receivables and Other Current Assets

(a)

Trade accounts and notes receivable at the reporting date are as follows:


(In millions of won)
	December 31, 2016		December 31, 2015
Trade, net	W	3,916,171		3,008,123
Due from related parties		1,041,822		1,089,713

	W	4,957,993		4,097,836

(b)

Other accounts receivable at the reporting date are as follows:


(In millions of won)	December 31, 2016		December 31, 2015
Current assets
Non-trade receivable, net	W	134,161		89,792
Accrued income		9,431		16,023

	W	143,592		105,815

Due from related parties included in other accounts receivable, as of December 31, 2016 and 2015 are W5,231 million and W2,526 million, respectively.

(c)

Other assets at the reporting date are as follows:


(In millions of won)	December 31, 2016		December 31, 2015
Current assets
Advance payments	W	9,297		11,465
Prepaid expenses		74,657		59,962
Value added tax refundable		259,808		372,515

	W	343,762		443,942

Non-current assets
Long-term prepaid expenses	W	358,424		293,847
Long-term advanced payment		1,000		1,800

	W	359,424		295,647

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

8.	Other Financial Assets

(a)

Other financial assets at the reporting date are as follows:


(In millions of won)	December 31, 2016		December 31, 2015
Current assets
Available-for-sale financial assets	W	—		558
Deposits		20,320		1,295
Short-term loans		7,696		3,051

	W	28,016		4,904

Non-current assets
Financial asset at fair value through profit or loss	W	1,382		—
Available-for-sale financial assets		7,993		10,840
Deposits		27,635		20,939
Long-term loans		34,760		12,805
Long-term non-trade receivable		2,619		5,148
Derivatives		244		—

	W	74,633		49,732

Other financial assets of related parties as of December 31, 2016 and 2015 are W3,488 million and W2,683 million, respectively.

(b)

Available-for-sale financial assets at the reporting date are as follows:


(In millions of won)	December 31, 2016		December 31, 2015
Current assets
Debt securities
Government bonds	W	—		558
Non-current assets
Debt securities
Government bonds	W	154		151
Equity securities
Intellectual Discovery, Ltd.	W	729		2,673
Kyulux, Inc.		3,266		3,266
Henghao Technology Co., Ltd.		1,559		3,372
ARCH Venture Fund Vill, L.P.		2,285		1,378

	W	7,839		10,689

	W	7,993		11,398

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

9.	Inventories

Inventories at the reporting date are as follows:


(In millions of won)	December 31, 2016		December 31, 2015
Finished goods	W	930,818		910,844
Work-in-process		685,913		720,221
Raw materials		354,791		389,442
Supplies		316,263		331,162

	W	2,287,785		2,351,669

For the years ended December 31, 2016 and 2015, the amount of inventories recognized as cost of sales, inventory write-downs and reversal and usage of inventory write-downs included in cost of sales are as follows:


(In millions of won)	2016			2015
Inventories recognized as cost of sales	W	22,754,270			24,069,572
Including: inventory write-downs		204,123			363,755
Including: reversal and usage of inventory write downs		(363,755	)		(332,699	)

There were no significant reversals of inventory write-downs recognized during 2016 and 2015.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

10.	Investments in Equity Accounted Investees

(a)

Investments in equity accounted investees consist of the following:


(in millions of won)
	Carrying value
Company	December 31, 2016		December 31, 2015
Suzhou Raken Technology Co., Ltd.(*1)	W	—		145,731
Paju Electric Glass Co., Ltd.		52,750		58,852
TLI Inc.		—		5,351
AVACO Co., Ltd.		—		12,758
New Optics Ltd.		40,045		48,491
INVENIA Co., Ltd. (Formerly, LIG INVENIA Co., Ltd.)(*2)		2,450		1,827
WooRee E&L Co. Ltd (*2)		8,627		25,021
LB Gemini New Growth Fund No.16		8,647		24,268
Can Yang Investments Limited		5,580		7,384
YAS Co., Ltd.		9,883		10,607
Narenanotech Corporation		23,717		24,661
AVATEC Co., Ltd.(*2)		20,984		19,804
Arctic Sentinel, Inc. (Formerly, Fuhu, Inc.)		—		—

	W	172,683		384,755

(*1)

In July 2016, Suzhou Raken Technology Co., Ltd., a joint venture of the Controlling Company and AmTRAN Technology Co., Ltd. (“AmTRAN”), split into Suzhou Raken Technology Co., Ltd. and Suzhou Lehui Display Co., Ltd. The Controlling Company acquired 100% equity interest in Suzhou Lehui Display Co., Ltd. and recognized gain on disposal of its investments in the investee at the time of acquisition (note 31).

(*2)

Based on quoted market prices at December 31, 2016, the fair values of the investments in INVENIA Co., Ltd., WooRee E&L Co., Ltd. and AVATEC Co., Ltd., which are listed companies on the Korea Securities Dealers Automated Quotations, are W17,040 million, W10,064 million and W17,490 million, respectively.

Dividends received from equity accounted investees for the years ended December 31, 2016 and 2015 amounted to W59,820 million and W25,577 million, respectively.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

10.	Investments in Equity Accounted Investees, Continued

(b)

Summary of financial information of a significant joint venture as of and for the years ended December 31, 2016 and 2015 are as follows:

(i)

Summary of financial information

Suzhou Raken Technology Co., Ltd.


(In millions of won)	December 31, 2015
Total assets	W	540,241
Current assets		442,130
Non-current assets		98,111
Total liabilities		250,318
Current liabilities		250,318

(*)	Financial information as of December 31, 2016 is not disclosed as the Controlling Company does not hold interest in Suzhou Raken Technology Co., Ltd. as a result of exchange of equity interests.


(In millions of won)	*2016()**			2015
Revenue	W	578,885			993,298
Profit for the year		4,811			10,682
Other comprehensive income (loss)		(4,641	)		2,533
Total comprehensive income		170			13,215

(*)	Represents transactions occurred prior to exchange of equity interests.

(ii)

Additional financial information

Suzhou Raken Technology Co., Ltd.


(In millions of won)	December 31, 2015
Cash and cash equivalents	W	44,376

(*)	Financial information as of December 31, 2016 is not disclosed as the Controlling Company does not hold interest in Suzhou Raken Technology Co., Ltd. as a result of exchange of equity interests.


(In millions of won)	*2016()**		2015
Depreciation	W	3,457		7,858
Amortization of intangible assets		275		527
Interest income		666		1,010
Interest expense		87		17
Income tax expense		1,712		3,608

(*)	Represents transactions occurred prior to exchange of equity interests

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

10.	Investments in Equity Accounted Investees, Continued

(c)

Reconciliation from financial information of a significant joint venture to its carrying value in the consolidated financial statements as of December 31, 2015 is as follows:

(i)

As of December 31, 2015


(In millions of won)
Company	Net asset		Ownership interest			Net asset (applying ownership interest)		Intra-group transaction			Book value
Suzhou Raken Technology Co., Ltd.	W	289,923		51	%		147,861		(2,130	)		145,731

(*)	Financial information as of December 31, 2016 is not disclosed as the Controlling Company does not hold interest in Suzhou Raken Technology Co., Ltd. as a result of exchange of equity interests.

(d)

Summary of financial information as of and for the years ended December 31, 2016 and 2015 of a major associate is as follows:

(i)

Paju Electric Glass Co., Ltd.


(In millions of won)	December 31, 2016		December 31, 2015
Total assets	W	225,086		239,231
Current assets		182,656		193,110
Non-current assets		42,430		46,121
Total liabilities		91,364		90,494
Current liabilities		87,116		86,298
Non-current liabilities		4,248		4,196

(In millions of won)	2016		2015
Revenue	W	549,559		491,329
Profit for the year		21,082		14,729
Other comprehensive income (loss)		16,477		(51	)
Total comprehensive income		37,559		14,678

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

10.	Investments in Equity Accounted Investees, Continued

(e)

Reconciliation from financial information of a major associate to their carrying value in the consolidated financial statements as of December 31, 2016 and 2015 is as follows:

(i)

As of December 31, 2016


(In millions of won)
Company	Net asset		Ownership interest			Net asset (applying ownership interest)		Goodwill		Intra-group transaction			Book value
Paju Electric Glass Co., Ltd.	W	133,722		40	%		53,489		—		(739	)		52,750

(ii)

As of December 31, 2015


(In millions of won)
Company	Net asset		Ownership interest			Net asset (applying ownership interest)		Goodwill		Intra-group transaction			Book value
Paju Electric Glass Co., Ltd.	W	148,737		40	%		59,494		—		(642	)		58,852

(f)

Book value of other joint venture and associates, in aggregate, as of December 31, 2016 and 2015 is as follows:

(i)

As of December 31, 2016


(In millions of won)
	Book value		Net profit (loss) of joint ventures and associates (applying ownership interest)
	Book value		Profit (loss) for the year			Other comprehensive income (loss)			Total comprehensive income (loss)
Other associates	W	119,933		(2,983	)		(14,197	)		(17,180	)

(ii)

As of December 31, 2015


(In millions of won)
	Book value		Net profit (loss) of joint ventures and associates (applying ownership interest)
	Book value		Profit (loss) for the year			Other comprehensive income (loss)		Total comprehensive income (loss)
Other joint venture	W	—		(991	)		3,948		2,957
Other associates		180,172		8,461			13,349		21,810

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

10.	Investments in Equity Accounted Investees, Continued

(g) Reconciliation from financial information of significant joint venture and associates to their carrying value in the consolidated financial statements for the years ended December 31, 2016 and 2015 is as follows:


(In millions of won)
		2016
	Company	January 1		Acquisition/ Disposal			Dividends received			Equity income (loss) on investments			Other comprehensive income (loss)			Other gain (loss)			December 31
Joint venture	Suzhou Raken Technology Co., Ltd.	W	145,731		(121,204	)		(29,902	)		2,985			2,390			—			—
Associates	Paju Electric Glass Co., Ltd.		58,852		—			(21,030	)		8,337			6,591			—			52,750
Associates	Others		180,172		(28,034	)		(8,888	)		(2,983	)		(14,197	)		(6,137	)		119,933

		W	384,755		(149,238	)		(59,820	)		8,339			(5,216	)		(6,137	)		172,683


(In millions of won)
		2015
	Company	January 1		Acquisition/ Disposal			Dividends received			Equity income (loss) on investments			Other comprehensive income (loss)			Other gain (loss)			December 31
Joint ventures	Suzhou Raken Technology Co., Ltd.	W	138,912		—			—			5,527			1,292			—			145,731
Joint ventures	Others		28,733		(31,690	)		—			(991	)		3,948			—			—
Associates	Paju Electric Glass Co., Ltd.		77,162		—			(24,058	)		5,768			(20	)		—			58,852
Associates	Others		162,837		23,835			(1,519	)		8,461			13,349			(26,791	)		180,172

		W	407,644		(7,855	)		(25,577	)		18,765			18,569			(26,791	)		384,755

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

11.	Property, Plant and Equipment

Changes in property, plant and equipment for the year ended December 31, 2016 are as follows:


(In millions of won)
	Land			Buildings and structures			Machinery and equipment			Furniture and fixtures			Construction- in-progress *(1)**			Others			Total
Acquisition cost as of January 1, 2016	W	462,787			5,998,384			36,450,747			794,894			1,268,946			216,044			45,191,802
Accumulated depreciation as of January 1, 2016		—			(2,117,951	)		(31,694,483	)		(663,331	)		—			(164,257	)		(34,640,022	)
Accumulated impairment loss as of January 1, 2016		—			—			(5,760	)		—			—			—			(5,760	)

Book value as of January 1, 2016	W	462,787			3,880,433			4,750,504			131,563			1,268,946			51,787			10,546,020
Additions		—			—			—			—			4,562,263			—			4,562,263
Business combinations (*2)		—			16,023			655			449			—			663			17,790
Depreciation		—			(288,891	)		(2,283,482	)		(57,130	)		—			(13,942	)		(2,643,445	)
Impairment loss		—			(1,610	)		—			—			—			—			(1,610	)
Disposals		(1,303	)		(3,204	)		(284,855	)		(1,746	)		—			(862	)		(291,970	)
Others (*3)		—			313,404			2,461,635			52,471			(2,846,180	)		18,670			—
Effect of movements in exchange rates		—			(30,357	)		(118,060	)		(1,349	)		(1,179	)		(261	)		(151,206	)
Government grants received		—			(638	)		(3,869	)		—			(1,886	)		—			(6,393	)

Book value as of December 31, 2016	W	461,484			3,885,160			4,522,528			124,258			2,981,964			56,055			12,031,449

Acquisition cost as of December 31, 2016	W	461,484			6,284,778			37,472,177			775,682			2,981,964			202,306			48,178,391

Accumulated depreciation as of December 31, 2016	W	—			(2,397,967	)		(32,947,359	)		(651,424	)		—			(146,251	)		(36,143,001	)

Accumulated impairment loss as of December 31, 2016	W	—			(1,651	)		(2,290	)		—			—			—			(3,941	)

(*1)	As of December 31, 2016, construction-in-progress mainly relates to construction of manufacturing facilities.

(*2)	Business combinations include property, plant and equipment related to Suzhou Lehui Display Co., Ltd. as its control was transferred to the Controlling Company by exchanging equity interests.

(*3)	Others are mainly amounts transferred from construction-in-progress.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

11.	Property, Plant and Equipment, Continued

Changes in property, plant and equipment for the year ended December 31, 2015 are as follows:


(In millions of won)
	Land			Buildings and structures			Machinery and equipment			Furniture and fixtures			Construction- in-progress *(1)**			Others			Total
Acquisition cost as of January 1, 2015	W	434,601			5,952,542			35,359,577			833,458			1,122,749			236,323			43,939,250
Accumulated depreciation as of January 1, 2015		—			(1,838,043	)		(29,782,076	)		(724,340	)		—			(183,744	)		(32,528,203	)
Accumulated impairment loss as of January 1, 2015		—			—			(8,167	)		(1	)		—			(13	)		(8,181	)

Book value as of January 1, 2015	W	434,601			4,114,499			5,569,334			109,117			1,122,749			52,566			11,402,866
Additions		—			—			—			—			2,561,108			—			2,561,108
Business combinations (*2)		—			—			24,466			490			—			2,054			27,010
Depreciation		—			(278,225	)		(2,618,820	)		(56,353	)		—			(15,996	)		(2,969,394	)
Impairment loss		—			—			(3,027	)		—			—			—			(3,027	)
Disposals		(2,092	)		(5,651	)		(437,515	)		(913	)		—			(9,992	)		(456,163	)
Others (*3)		30,210			48,824			2,232,756			79,910			(2,415,227	)		23,527			—
Effect of movements in exchange rates		68			986			(11,673	)		(688	)		316			(372	)		(11,363	)
Government grants received		—			—			(5,017	)		—			—			—			(5,017	)

Book value as of December 31, 2015	W	462,787			3,880,433			4,750,504			131,563			1,268,946			51,787			10,546,020

Acquisition cost as of December 31, 2015	W	462,787			5,998,384			36,450,747			794,894			1,268,946			216,044			45,191,802

Accumulated depreciation as of December 31, 2015	W	—			(2,117,951	)		(31.694.483	)		(663,331	)		—			(164,257	)		(34,640,022	)

Accumulated impairment loss as of December 31, 2015	W	—			—			(5,760	)		—			—			—			(5,760	)

(*1)	As of December 31, 2015, construction-in-progress mainly relates to construction of manufacturing facilities.

(*2)	Business combinations include property, plant and equipment related to OLED Lighting business and Global OLED Technology LLC as the Controlling Company acquired OLED Lighting business from LG Chem Ltd. and made additional investment in Global OLED Technology and its control was transferred.

(*3)	Others are mainly amounts transferred from construction-in-progress.

The

capitalized borrowing costs and capitalization rate for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016			2015
Capitalized borrowing costs	W	16,909			13,696
Capitalization rate		2.91	%		3.73	%

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

12.	Intangible Assets

Changes in intangible assets for the year ended December 31, 2016 are as follows:


(In millions of won)	Intellectual property rights			Software			Member- ships			Development costs			Construction -in-progress (software)			Customer relationships			Technology			Good- will		Others *(3)**			Total
Acquisition cost as of January 1, 2016	W	817,359			698,844			51,092			1,111,503			2,986			59,176			11,074			104,455		13,089			2,869,578
Accumulated amortization as of January 1, 2016		(516,421	)		(541,212	)		—			(924,273	)		—			(19,731	)		(6,275	)		—		(13,063	)		(2,020,975	)
Accumulated impairment loss as of January 1, 2016		—			—			(9,873	)		—			—			—			—			—		—			(9,873	)

Book value as of January 1, 2016	W	300,938			157,632			41,219			187,230			2,986			39,445			4,799			104,455		26			838,730
Additions - internally developed		—			—			—			322,288			—			—			—			—		—			322,288
Additions - external purchases		21,160			—			800			—			80,481			—			—			—		—			102,441
Business combinations (*1)		—			365			—			—			—			—			—			4,623		—			4,988
Amortization (*2)		(41,088	)		(75,786	)		—			(253,178	)		—			(6,947	)		(1,107	)		—		(20	)		(378,126	)
Disposals		—			—			(336	)		—			—			—			—			—		—			(336	)
Impairment loss		—			—			(138	)		—			—			—			—			—		—			(138	)
Transfer from construction-in-progress		—			65,327			—			—			(65,327	)		—			—			—		—			—
Effect of movements in exchange rates		5,256			(1,766	)		8			—			598			—			—			994		—			5,090

Book value as of December 31, 2016	W	286,266			145,772			41,553			256,340			18,738			32,498			3,692			110,072		6			894,937

Acquisition cost as of December 31, 2016	W	904,664			806,835			51,564			1,433,791			18,738			59,176			11,074			110,072		13,077			3,408,991

Accumulated amortization as of December 31, 2016	W	(618,398	)		(661,063	)		—			(1,177,451	)		—			(26,678	)		(7,382	)		—		(13,071	)		(2,504,043	)

Accumulated impairment loss as of December 31, 2016	W	—			—			(10,011	)		—			—			—			—			—		—			(10,011	)

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

12.	Intangible Assets, Continued

(*1)	Business combinations include intangible assets related to Suzhou Lehui Display Co., Ltd. as its control was transferred to the Controlling Company by exchanging equity interests.

(*2)	The Group has classified the amortization as manufacturing overhead costs, selling expenses, administrative expenses and research and development expenses.

(*3)	Others mainly consist of rights to use electricity and gas supply facilities.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

12.	Intangible Assets, Continued

Changes in intangible assets for the year ended December 31, 2015 are as follows:


(In millions of won)
	Intellectual property rights			Software			Member- ships			Development costs			Construction- in-progress (software)			Customer relationships			Technology			Good- will		Others *(3)**			Total
Acquisition cost as of January 1, 2015	W	587,068			611,149			50,258			884,436			5,247			24,011			11,074			14,593		13,089			2,200,925
Accumulated amortization as of January 1, 2015		(485,641	)		(463,853	)		—			(630,812	)		—			(16,019	)		(5,171	)		—		(13,017	)		(1,614,513	)
Accumulated impairment loss as of January 1, 2015		—			—			(9,742	)		—			—			—			—			—		—			(9,742	)

Book value as of January 1, 2015	W	101,427			147,296			40,516			253,624			5,247			7,992			5,903			14,593		72			576,670
Additions - internally developed		—			—			—			227,067			—			—			—			—		—			227,067
Additions - external purchases		28,504			—			1,930			—			73,098			—			—			—		—			103,532
Business combinations (*1)		197,454			144			—			—			—			35,165			—			88,932		—			321,695
Amortization (*2)		(30,780	)		(77,359	)		—			(293,461	)		—			(3,712	)		(1,104	)		—		(46	)		(406,462	)
Disposals		—			(11	)		(1,153	)		—			—			—			—			—		—			(1,164	)
Impairment loss		—			—			(239	)		—			—			—			—			—		—			(239	)
Reversal of impairment loss		—			—			80			—			—			—			—			—		—			80
Transfer from construction-in-progress		—			75,401			—			—			(75,401	)		—			—			—		—			—
Effect of movements in exchange rates		4,333			12,161			85			—			42			—			—			930		—			17,551

Book value as of December 31, 2015	W	300,938			157,632			41,219			187,230			2,986			39,445			4,799			104,455		26			838,730

Acquisition cost as of December 31, 2015	W	817,359			698,844			51,092			1,111,503			2,986			59,176			11,074			104,455		13,089			2,869,578

Accumulated amortization as of December 31, 2015	W	(516,421	)		(541,212	)		—			(924,273	)		—			(19,731	)		(6,275	)		—		(13,063	)		(2,020,975	)

Accumulated impairment loss as of December 31, 2015	W	—			—			(9,873	)		—			—			—			—			—		—			(9,873	)

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

12.	Intangible Assets, Continued

(*1)	Business combinations include intangible assets related to OLED Lighting business and Global OLED Technology LLC as the Controlling Company acquired OLED Lighting business from LG Chem Ltd. and made additional investment in Global OLED Technology and its control was transferred.

(*2)	The Group has classified the amortization as manufacturing overhead costs, selling expenses, administrative expenses and research and development expenses.

(*3)	Others mainly consist of rights to use electricity and gas supply facilities.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

13.	Financial Instruments

(a)

Credit Risk

(i)

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is as follows:


(In millions of won)
	December 31, 2016		December 31, 2015
Cash and cash equivalents	W	1,558,696		751,662
Deposits in banks		1,163,763		1,772,350
Trade accounts and notes receivable, net		4,957,993		4,097,836
Non-trade receivable, net		134,161		89,792
Accrued income		9,431		16,023
Available-for-sale financial assets		154		709
Financial assets at fair value through profit or loss		1,382		—
Deposits		47,954		22,234
Short-term loans		7,696		3,051
Long-term loans		34,760		12,805
Long-term non-trade receivable		2,619		5,148
Derivatives		244		—

	W	7,918,853		6,771,610

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises primarily from the sales and investing activities. Trade accounts and notes receivables are insured in order to manage credit risk and uninsured trade accounts and notes receivables are managed in accordance with the Group’s management policy.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

13.	Financial Instruments, Continued

(a)

Credit Risk, Continued

(ii)

Impairment loss

The aging of trade accounts and note receivable, other accounts receivable and long-term non-trade receivable as of December 31, 2016 and 2015 are as follows:


(In millions of won)	December 31, 2016
	Book value						Impairment loss
	Trade accounts and notes receivable		Other accounts *receivable()**		Long-term non-trade receivable		Trade accounts and notes receivable			Other accounts *receivable()**			Long-term non-trade receivable
Not past due	W	4,958,591		140,893		2,643		(1,488	)		(669	)		(23	)
Past due 1-15 days		386		2,298		—		—			(20	)		—
Past due 16-30 days		417		309		—		—			—			—
Past due 31-60 days		65		640		—		—			(6	)		—
Past due more than 60 days		22		545		—		—			(398			—

	W	4,959,481		144,685		2,643		(1,488	)		(1,093	)		(23	)

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

13.	Financial Instruments, Continued


(In millions of won)	December 31, 2015
	Book value						Impairment loss
	Trade accounts and notes receivable		Other accounts *receivable()**		Long-term non-trade receivable		Trade accounts and notes receivable			Other accounts *receivable()**			Long-term non-trade receivable
Not past due	W	4,076,022		102,431		5,200		(1,339	)		(535	)		(52	)
Past due 1-15 days		6,555		1,280		—		(2	)		(13	)		—
Past due 16-30 days		201		1,775		—		—			(12	)		—
Past due 31-60 days		—		45		—		—			—			—
Past due more than 60 days		16,565		850		—		(166	)		(6	)		—

	W	4,099,343		106,381		5,200		(1,507	)		(566	)		(52	)

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

The movement in the allowance for impairment in respect of trade accounts and notes receivable, other accounts receivable and long-term non-trade receivable for the years ended December 31, 2016 and 2015 is as follows:


(In millions of won)	2016								2015
	Trade accounts and notes receivable			Other accounts receivable		Long-term non-trade receivable			Trade accounts and notes receivable		Other accounts receivable			Long-term non-trade receivable
Balance at the beginning of the period	W	1,507			566		52			825		794			79
(Reversal of) bad debt expense		(19	)		527		(29	)		682		(228	)		(27	)

Balance at the reporting date	W	1,488			1,093		23			1,507		566			52

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

13.	Financial Instruments, Continued

(b)

Liquidity Risk

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of December 31, 2016.


(In millions of won)			Contractual cash flows
	Carrying amount		Total		6 months or less		6-12 months		1-2years		2-5 years		More than 5 years
Non-derivative financial liabilities
Secured bank loans	W	700,820		744,323		12,447		12,653		430,698		288,525		—
Unsecured bank loans		2,197,132		2,307,718		322,139		21,451		639,176		1,263,210		61,742
Unsecured bond issues		1,880,818		1,999,660		204,327		211,498		536,350		966,390		81,095
Trade accounts and notes payable		2,877,326		2,877,326		2,877,326		—		—		—		—
Other accounts payable		2,449,517		2,449,981		2,447,321		2,660		—		—		—
Long-term other accounts payable		3,530		3,992		—		—		3,992		—		—
Derivative financial liabilities
Derivatives		472		478		134		164		180		—		—

	W	10,109,615		10,383,478		5,863,694		248,426		1,610,396		2,518,125		142,837

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

13.	Financial Instruments, Continued

(c)

Currency Risk

(i)

Exposure to currency risk

The Group’s exposure to foreign currency risk based on notional amounts at the reporting date is as follows:


(In millions)	December 31, 2016
	USD			JPY			CNY			TWD			EUR			PLN			VND
Cash and cash equivalents		518			308			3,785			36			1			77			338,770
Deposits in banks		—			—			500			—			—			—			—
Trade accounts and notes receivable		3,558			10			1,776			—			—			—			—
Non-trade receivable		52			2,434			199			12			—			2			—
Long-term non-trade receivable		2			—			—			—			—			—			—
Other assets denominated in foreign currencies		1			259			210			6			—			—			506
Trade accounts and notes payable		(1,204	)		(14,940	)		(2,567	)		—			—			—			—
Other accounts payable		(397	)		(9,836	)		(771	)		(7	)		(2	)		(5	)		(665,869	)
Debt		(1,251	)		—			(3,264	)		—			—			—			—

Net exposure		1,279			(21,765	)		(132	)		47			(1	)		74			(326,593	)


(In millions)	December 31, 2015
	USD			JPY			CNY			TWD			EUR			PLN
Cash and cash equivalents		578			1,005			866			12			—			45
Deposits in banks		—			—			1,200			—			—			—
Trade accounts and notes receivable		2,935			12			1,465			—			—			—
Non-trade receivable		20			2			101			13			—			—
Long-term no-trade receivable		4			—			—			—			—			—
Other assets denominated in foreign currencies		1			254			27			6			—			—
Trade accounts and notes payable		(1,207	)		(17,016	)		(1,267	)		—			—			—
Other accounts payable		(541	)		(13,821	)		(1,352	)		(7	)		(2	)		(11	)
Debt		(1,185	)		—			(1,964	)		—			—			—

Net exposure		605			(29,564	)		(924	)		24			(2	)		34

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

13.	Financial Instruments, Continued

Significant exchange rates applied during the reporting periods are as follows:


(In won)	Average rate				Reporting date spot rate
	2016		2015		December 31, 2016		December 31, 2015
USD	W	1,159.83		1,131.30		1,208.50		1,172.00
JPY		10.67		9.35		10.37		9.72
CNY		174.4		179.47		173.26		178.48
TWD		35.97		35.64		37.41		35.51
EUR		1,283.95		1,256.17		1,267.60		1,280.53
PLN		294.41		300.22		287.62		300.79
VND		0.0518		0.0516		0.0531		0.0522

(ii)

Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Group’s assets or liabilities denominated in a foreign currency as of December 31, 2016 and 2015, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considers to be reasonably possible as of the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:


(In millions of won)	December 31, 2016						December 31, 2015
	Equity			Profit or loss			Equity			Profit or loss
USD (5 percent weakening)	W	57,111			63,337			24,838			33,152
JPY (5 percent weakening)		(8,972	)		(7,237	)		(11,340	)		(9,486	)
CNY (5 percent weakening)		(3,410	)		7,077			(8,582	)		1,069
TWD (5 percent weakening)		88			—			42			—
EUR (5 percent weakening)		(40	)		(79	)		(214	)		270
PLN (5 percent weakening)		1,129			(167	)		575			(208	)
VND (5 percent weakening)		(867	)		—			—			—

A stronger won against the above currencies as of December 31, 2016 and 2015 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

13.	Financial Instruments, Continued

(d)

Interest Rate Risk

(i)

Profile

The interest rate profile of the Group’s interest-bearing financial instruments at the reporting date is as follows:


(In millions of won)
	December 31, 2016			December 31, 2015
Fixed rate instruments
Financial assets	W	2,722,600			2,524,708
Financial liabilities		(2,203,378	)		(2,289,336	)

	W	519,222			235,372

Variable rate instruments
Financial liabilities	W	(2,575,392	)		(1,934,895	)

(ii)

Equity and profit or loss sensitivity analysis for variable rate instruments

For the years ended December 31, 2016 and 2015 a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for the respective following years. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.


(In millions of won)	Equity					Profit or loss
	1% increase			1% decrease		1% increase			1% decrease
December 31, 2016
Variable rate instruments(*)	W	(16,868	)		16,868		(16,868	)		16,868
December 31, 2015
Variable rate instruments(*)	W	(14,667	)		14,667		(14,667	)		14,667

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

13.	Financial Instruments, Continued

(e)

Fair Values

(i)

Fair values versus carrying amounts

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


(In millions of won)	December 31, 2016					December 31, 2015
	Carrying amounts		Fair values			Carrying amounts		Fair values
Assets carried at fair value
Available-for-sale financial assets	W	154		154			709		709
Financial asset at fair value through profit or loss		1,382		1,382			—		—
Derivatives		244		244			—		—
Assets carried at amortized cost
Cash and cash equivalents	W	1,558,696		(	*)		751,662		(	*)
Deposits in banks		1,163,763		(	*)		1,772,350		(	*)
Trade accounts and notes receivable		4,957,993		(	*)		4,097,836		(	*)
Non-trade receivable		134,161		(	*)		89,792		(	*)
Accrued income		9,431		(	*)		16,023		(	*)
Deposits		47,954		(	*)		22,234		(	*)
Short-term loans		7,696		(	*)		3,051		(	*)
Long-term loans		34,760		(	*)		12,805		(	*)
Long-term non-trade receivable		2,619		(	*)		5,148		(	*)
Liabilities carried at fair value
Derivatives	W	472		472			85		85
Liabilities carried at amortized cost
Secured bank loans	W	700,820		700,820			698,192		698,192
Unsecured bank loans		2,197,132		2,200,522			1,239,914		1,239,969
Unsecured bond issues		1,880,818		1,903,863			2,286,125		2,337,835
Trade accounts and notes payable		2,877,326		(	*)		2,764,694		(	*)
Other accounts payable		2,449,517		2,449,938			1,499,722		1,499,963
Long-term other accounts payable		3,530		3,891			8,402		9,005

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

The basis for determining fair values is disclosed in note 4.

(ii)

Financial Instruments measured at cost

Available-for-sale financial assets measured at cost as of December 31, 2016 and 2015 is as follows:


(In millions of won)
	December 31, 2016		December 31, 2015
Intellectual Discovery Co., Ltd.	W	729		2,673
Kyulux, Inc.		3,266		3,266
Henghao Technology Co., Ltd.		1,559		3,372
ARCH Venture Fund Vill, L.P.		2,285		1,378

	W	7,839		10,689

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

13.	Financial Instruments, Continued

(e)

Fair Values, Continued

(ii)

Financial Instruments measured at cost

The movement in the available-for-sale financial assets for the years ended December 31, 2016 and 2015 is as follows:


(In millions of won)	December 31, 2016
	January 1, 2016		Acquisition		Disposal and others			Impairment			Effect of movements in exchange rates		December 31, 2016
Intellectual Discovery Co., Ltd.	W	2,673		—		—			(1,944	)		—		729
Kyulux Inc.		3,266		—		—			—			—		3,266
Henghao Technology Co., Ltd.		3,372		—		—			(1,813	)		—		1,559
ARCH Venture Fund Vill, L.P		1,378		859		(48	)		—			96		2,285

	W	10,689		859		(48	)		(3,757	)		96		7,839


(In millions of won)	December 31, 2015
	January 1, 2015		Acquisition		Disposal and others		Impairment		Effect of movements in exchange rates		December 31, 2015
Intellectual Discovery Co., Ltd.	W	2,673		—		—		—		—		2,673
Kyulux Inc.		—		3,266		—		—		—		3,266
Henghao Technology Co., Ltd.		3,372		—		—		—		—		3,372
ARCH Venture Fund Vill, L.P		118		792		—		—		468		1,378

	W	6,163		4,058		—		—		468		10,689

Available-for-sale-financial assets consist of investments in equity securities and the fair value of some investments in equity securities are measured at cost because the range of reasonable fair value measurements is significant and the probabilities of the various estimates cannot be reasonably assessed since they do not have a quoted price in an active market for an identical instruments.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

13.	Financial Instruments, Continued

(e)

Fair Values, Continued

(iii)

Fair values of financial assets and liabilities

i) Fair value hierarchy

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

•

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

•

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

•

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

ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of December 31, 2016 and 2015 are as follows:


(In millions of won)
	Level 1		Level 2		Level 3		Total
December 31, 2016
Assets
Available-for-sale financial assets	W	154		—		—		154
Financial asset at fair value through profit or loss		—		—		1,382		1,382
Derivatives		—		—		244		244
Liabilities
Derivatives	W	—		—		472		472


(In millions of won)
	Level 1		Level 2		Level 3		Total
December 31, 2015
Assets
Available-for-sale financial assets	W	709		—		—		709
Liabilities
Derivatives	W	—		—		85		85

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

13.	Financial Instruments, Continued

(e)

Fair Values, Continued

iii)

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

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of December 31, 2016 and December 31, 2015 are as follows:

(In millions of won)

December 31, 2016

Valuation
technique

Input

Classification

Level 1

Level 2

Level 3

Liabilities

Secured bank loans

—

700,820

Discounted
cash flow

Discount
rate

Unsecured bank loans

—

2,200,522

Discounted
cash flow

Discount
rate

Unsecured bond issues

—

1,903,863

Discounted
cash flow

Discount
rate

Other accounts payable

—

2,449,938

Discounted
cash flow

Discount
rate

Long-term other accounts payable

—

3,891

Discounted
cash flow

Discount
rate

(In millions of won)

December 31, 2015

Valuation
technique

Input

Classification

Level 1

Level 2

Level 3

Liabilities

Secured bank loans

—

698,192

Discounted
cash flow

Discount
rate

Unsecured bank loans

—

1,239,969

Discounted
cash flow

Discount
rate

Unsecured bond issues

—

2,337,835

Discounted
cash flow

Discount
rate

Other accounts payable

—

1,499,963

Discounted
cash flow

Discount
rate

Long-term other accounts payable

—

9,005

Discounted
cash flow

Discount
rate

The interest rates applied for determination of the above fair value at the reporting date are as follows:


	December 31, 2016			December 31, 2015
Debentures, loans and others		1.48~2.68	%		1.52~2.48	%

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

14.	Financial Liabilities

(a)

Financial liabilities at the reporting date are as follows:


(In millions of won)
	December 31, 2016		December 31, 2015
Current
Short-term borrowings	W	113,209		—
Current portion of long-term debt		554,700		1,416,112

	W	667,909		1,416,112

Non-current
Won denominated borrowings	W	821,922		202,992
Foreign currency denominated borrowings		1,777,877		1,323,454
Bonds		1,511,062		1,281,673
Derivatives(*)		472		85

	W	4,111,333		2,808,204

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

(b)

Short-term borrowings as of December 31, 2016 and 2015 are as follows:


(In millions of won, USD)
Lender	Annual interest rate as of *December 31, 2016 (%)()**	December 31, 2016		December 31, 2015
Standard Chartered Bank Korea Limited	6ML + 0.62	W	113,209		—

Foreign currency equivalent			USD 94		—

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

14.	Financial Liabilities, Continued

(c)

Won denominated long-term borrowings at the reporting date is as follows:


(In millions of won)
Lender	Annual interest rate as of December 31, 2016 (%)	December 31, 2016			December 31, 2015
Woori Bank	3-year Korean Treasury Bond rate - 1.25, 2.75	W	2,991			4,452
Shinhan Bank	CD rate (91 days) + 0.30		200,000			200,000
Korea Development Bank and others	3-year Industrial Financial Debenture rate + 0.55, 5-year Industrial Financial Debenture rate + 0.60, CD rate (91 days) + 0.64, CD rate (91 days) + 0.74		620,000			—
Less current portion of long-term borrowings			(1,069	)		(1,460	)

		W	821,922			202,992

(d)

Foreign currency denominated long-term borrowings at the reporting date is as follows:


(In millions of won and USD, CNY)
Lender	Annual interest rate as of *December 31, 2016 (%)()**	December 31, 2016			December 31, 2015
The Export-Import Bank of Korea	3ML+0.55~1.40	W	1,027,225			879,000
Standard Chartered Bank Korea Limited	6ML+0.62		8,469			—
China Construction Bank and others	USD: 3ML+0.2.00 CNY: 4.28		926,058			854,654

Foreign currency equivalent			USD 1,157			USD 1,185
Foreign currency equivalent			CNY 3,264			CNY 1,964
Less current portion of long-term borrowings		W	(183,875	)		(410,200	)

		W	1,777,877			1,323,454

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

14.	Financial Liabilities, Continued

(e)

Details of bonds issued and outstanding at the reporting date are as follows:


(In millions of won)
	Maturity	Annual interest rate as of December 31, 2016 (%)	December 31, 2016			December 31, 2015

*Won denominated bonds ()**
Publicly issued bonds	April 2017 ~ May 2022	1.73~3.73	W	1,885,000			2,290,000
Less discount on bonds				(4,182	)		(3,875	)
Less current portion				(369,756	)		(1,004,452	)

			W	1,511,062			1,281,673

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

15.	Employee Benefits

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

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

(a)

Net defined benefit liabilities recognized at the reporting date are as follows:


(In millions of won)
	December 31, 2016			December 31, 2015
	December 31, 2016			December 31, 2015
Present value of partially funded defined benefit obligations	W	1,401,396			1,381,648
Fair value of plan assets		(1,258,409	)		(1,027,850	)

	W	142,987			353,798

(b)

Changes in the present value of the defined benefit obligations for the years ended December 31, 2016 and 2015 are as follows :


(In millions of won)
	2016			2015
Opening defined benefit obligations	W	1,381,648			1,114,689
Current service cost		210,682			187,768
Interest cost		39,420			38,776
Remeasurements (before tax)		(161,082	)		104,817
Benefit payments		(65,099	)		(66,755	)
Transfers from (to) related parties		(4,205	)		2,353
Others		32			—

Closing defined benefit obligations	W	1,401,396			1,381,648

Weighted average remaining maturity of defined benefit obligations as of December 31, 2016 and 2015 are 14.3 years and 14.5 years, respectively.

(c)

Changes in fair value of plan assets for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016			2015
Opening fair value of plan assets	W	1,027,850			790,509
Expected return on plan assets		29,140			27,511
Remeasurements (before tax)		(5,736	)		(5,440	)
Contributions by employer directly to plan assets		265,000			270,000
Benefit payments		(57,845	)		(54,809	)
Transfers from (to) related parties		—			79

Closing fair value of plan assets	W	1,258,409			1,027,850

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

15.	Employee Benefits, Continued

(d)

Plan assets at the reporting date are as follows:


(In millions of won)
	December 31, 2016		December 31, 2015
Guaranteed deposits in banks	W	1,258,409		1,027,850

As of December 31, 2016, the Controlling Company maintains the plan assets with Mirae Asset Securities Co., Ltd., Shinhan Bank and others.

The Group’s estimated additional contribution to the plan assets for the year ending December 31, 2017 is nil under the assumption that the Controlling Company continues to maintain the plan assets at 80% of the amount payable and all the employees of the Controlling Company would leave the Controlling Company on December 31, 2017.

(e)

Expenses recognized in profit or loss for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)	2016		2015
Current service cost	W	210,682		187,768
Net interest cost		10,280		11,265

	W	220,962		199,033

Expenses are recognized in the following line items in the consolidated statements of comprehensive income:


(In millions of won)	2016		2015
Cost of sales	W	177,652		159,348
Selling expenses		12,513		11,567
Administrative expenses		16,486		14,809
Research and development expenses		14,311		13,309

	W	220,962		199,033

(f)

Remeasurements of net defined benefit liabilities (assets) included in other comprehensive income (loss) for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)	2016			2015
Balance at January 1	W	(281,902	)		(197,720	)
Remeasurements
Actuarial profit or loss arising from:
Experience adjustment		70,258			15,567
Demographic assumptions		(4,605	)		(22,267	)
Financial assumptions		95,429			(98,117	)
Return on plan assets		(5,736	)		(5,440	)
Share of associates regarding remeasurements		200			(607	)

	W	155,546			(110,864	)

Income tax	W	(37,594	)		26,682

Balance at December 31	W	(163,950	)		(281,902	)

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

15.	Employee Benefits, Continued

(g)

Principal actuarial assumptions at the reporting date (expressed as weighted averages) are as follows:


	December 31, 2016			December 31, 2015
Expected rate of salary increase		4.7	%		5.1	%
Discount rate for defined benefit obligations		3.0	%		2.9	%

Assumptions regarding future mortality are based on published statistics and mortality tables. The current mortality underlying the values of the liabilities in the defined benefit plans are as follows:


		December 31, 2016			December 31, 2015
Teens	Males		0.01	%		0.01	%
Teens	Females		0.00	%		0.00	%
Twenties	Males		0.01	%		0.01	%
Twenties	Females		0.00	%		0.00	%
Thirties	Males		0.01	%		0.01	%
Thirties	Females		0.01	%		0.01	%
Forties	Males		0.03	%		0.03	%
Forties	Females		0.02	%		0.02	%
Fifties	Males		0.05	%		0.05	%
Fifties	Females		0.02	%		0.02	%

(h)

Reasonably possible changes to respective relevant actuarial assumptions would have affected the defined benefit obligations by the amounts as of December 31, 2016 are as follows:


	Defined benefit obligation
	1% increase			1% decrease
Discount rate for defined benefit obligations	W	(174,724	)		212,383
Expected rate of salary increase		206,250			(173,543	)

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

16.	Provisions and Other Liabilities

(a)

Changes in provisions for the year ended December 31, 2016 are as follows:


(In millions of won)
	Litigations and claims			Warranties (*1)			Others			Total
Balance at January 1, 2016	W	61,245			56,429			4,040			121,714
Additions		12,471			166,322			873			180,666
Reversal		(14,887	)		(631	)		(3,248	)		(18,766	)
Usage and reclassification		(58,829	)		(161,335	)		—			(220,164	)
Business combination(*2)		—			677			—			677

Balance at December 31, 2016	W	—			62,462			1,665			64,127

Current	W	—			54,307			1,665			55,972
Non-current	W	—			8,155			—			8,155

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

(*2)	Business combination includes warranty liability related to Suzhou Lehui Display Co., Ltd. as its control was transferred to the Controlling Company by exchanging equity interests.

(b)

Other liabilities at the reporting date are as follows:


(In millions of won)
	December 31, 2016		December 31, 2015
Current liabilities
Withholdings	W	40,190		30,477
Unearned revenues		8,776		9,844

	W	48,966		40,321

Non-current liabilities
Long-term accrued expenses	W	65,616		48,609
Long-term other accounts payable		3,530		8,401

	W	69,146		57,010

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

17.	Contingent Liabilities and Commitments

(a)

Legal Proceedings

Delaware Display Group LLC and Innovative Display Technologies LLC (“DDG” and “IDT”)

In December 2013, Delaware Display Group LLC and Innovative Display Technologies LLC filed a patent infringement case (“First Case”) against the Controlling Company and LG Display America, Inc. in the United States District Court for the District of Delaware and “DDG” and “IDT” filed a new patent infringement case against the Controlling Company and LG Display America, Inc. over the three patents that were dismissed without prejudice from the First Case in December 2015. In May 2016, the case has been stayed by the United States District Court for the District of Delaware pending Inter Partes Review. Additionally, in August 2016, Innovative Display Technologies LLC filed a new patent infringement case against the Controlling Company and LG Display America, Inc. in the United States District Court for the Eastern District of Texas with respect to two new patents. The Group does not have a present obligation for these matters and has not recognized any provision at December 31, 2016. It is not possible to reasonably estimate an amount of potential loss, if any, because the information plaintiffs have provided regarding damages are unreliable and may substantially change as litigation proceeds or the plaintiffs have not provided any information regarding damages.

Surpass Tech Innovation LLC

In March 2014, Surpass Tech Innovation LLC filed a complaint in the United States District Court for the District of Delaware against the Controlling Company and LG Display America, Inc. for alleged patent infringement. As of December 31, 2016, the case which has been stayed by the United States District Court for the District of Delaware pending Inter Partes Review (“IPR”) is still stayed although IPR has been completed. The Group does not have a present obligation for this matter and has not recognized any provision at December 31, 2016. It is not possible to reasonably estimate an amount of potential loss, if any, because the plaintiffs have not provided any information regarding damages.

Anti-trust litigations

The Controlling Company reached agreements on individual lawsuit and class actions in the United States and Canada, respectively, in connection with alleged violation of the antitrust laws during the year ended December 31, 2016.

Others

The Group is defending against various claims related to intellectual property and others in addition to pending proceedings described above. The Group does not have a present obligation for these matters and has not recognized any provision at December 31, 2016.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

17.	Contingent Liabilities and Commitments, Continued

(b)

Commitments

Factoring and securitization of accounts receivable

The Controlling Company has agreements with KEB Hana Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 2,023 million (W2,445,376 million) in connection with the Controlling Company’s export sales transactions with its subsidiaries. As of December 31, 2016, no short-term borrowings were outstanding in connection with these agreements. In connection with all of the contracts in this paragraph, the Controlling Company has sold its accounts receivable with recourse.

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


(In millions of USD and KRW)
Classification	Financial institutions	Maximum				Not yet due
		Contractual amount		KRW equivalent		Contractual amount		KRW equivalent
Controlling Company	Shinhan Bank		KRW 90,000		90,000		—		—
	Sumitomo Mitsui Banking Corporation		USD 20		24,170		—		—
	Bank of Tokyo-Mitsubishi UFJ		USD 70		84,595		—		—

			USD 90				—		—
			KRW 90,000		198,765		—		—

Subsidiaries
LG Display Singapore Pte. Ltd.	Standard Chartered Bank		USD 300		362,550		—		—

LG Display Taiwan Co., Ltd.	BNP Paribas		USD 82		99,097		—		—
	Hongkong & Shanghai Banking Corp.		USD 150		181,275		—		—
	Taishin International Bank		USD 320		386,270		—		—
	Sumitomo Mitsui Banking Corporation		USD 100		120,850		—		—

LG Display Shanghai Co., Ltd.	BNP Paribas		USD 125		151,063		—		—

LG Display Germany GmbH	Citibank		USD 160		193,360		—		—
LG Display Germany GmbH	BNP Paribas		USD 107		129,310		—		—

LG Display America, Inc.	Hongkong & Shanghai Banking Corp.		USD 600		725,100		—		—
	Sumitomo Mitsui Banking Corporation		USD 250		302,125		—		—

LG Display Japan Co., Ltd.	Sumitomo Mitsui Banking Corporation		USD 90		108,765		—		—

LG Display Guangzhou Trading Co., Ltd.	Industrial and Commercial Bank of China		USD 64		77,344		—		—

			USD 2,348		2,837,559		—		—

			USD 2,438				—
			KRW 90,000		3,036,324		—		—

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

17.	Contingent Liabilities and Commitments, Continued

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

Letters of credit

As of December 31, 2016, the Controlling Company has agreements in relation to the opening of letters of credit up to USD 40 million (W48,340 million) with KEB Hana Bank, USD 80 million (W96,680 million) with Bank of China and USD 50 million (W60,425 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Controlling Company obtained payment guarantees amounting to USD 8.5 million (W10,272 million) from Shinhan bank for value added tax payments in Poland and amounting to USD 75 million (W90,638 million) from Westchester Fire Insurance Company for the settlement of an litigation.

LG Display Japan Co., Ltd. and other subsidiaries are provided with payment guarantees from the Bank of Tokyo-Mitsubishi UFJ and other various banks amounting to JPY 700 million (W7,258 million), CNY 3,641 million (W630,840 million), USD 0.5 million (W604 million), EUR 2.5 million (W3,169 million) and PLN 0.2 million (W58 million), respectively, for their local tax payments.

Credit facility

LG Display Japan Co., Ltd. and other subsidiaries have entered into short-term credit facility agreements of up to USD 23 million (W27,796 million) and JPY 8,000 million (W82,945 million) in total, with Mizuho Corporate Bank and other various banks.

License agreements

As of December 31, 2016, in relation to its LCD business, the Group has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.

Pledged Assets

Regarding the secured bank loan amounting to USD 300 million (W360,572 million) and CNY 1,964 million (W340,248 million) from China Construction Bank, as of December 31, 2016, the Group provided its property, plant and equipment and others with carrying amount of W804,534 million as pledged assets.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

18.	Capital and Reserves

(a)

Share capital

The Controlling Company is authorized to issue 500,000,000 shares of capital stock (par value W5,000), and as of December 31, 2016 and December 31, 2015, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2015 to December 31, 2016.

(b)

Reserves

Reserves consist mainly of the following:

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets until the investments are derecognized or impaired.

Translation reserve

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

Other comprehensive income (loss) from associates and joint venture

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

Reserves as of December 31, 2016 and 2015 are as follows:


(In millions of won)
	December 31, 2016			December 31, 2015
Net change in fair value of available-for-sale financial assets	W	—			58
Foreign currency translation differences for foreign operations		(59,042	)		18,196
Other comprehensive income (loss) from associates and joint venture (excluding remeasurements)		(29,436	)		(24,020	)

	W	(88,478	)		(5,766	)

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

18.	Capital and Reserves

The movement in reserves for the years ended December 31, 2016 and 2015 is as follows:


(In millions of won)
	Net change in fair value of available-for-sale financial assets			Foreign currency translation differences for foreign operations			Other comprehensive income (loss) from associates and joint ventures (excluding remeasurements)			Total
January 1, 2015	W	276			(20,923	)		(43,196	)		(63,843	)
Change in reserves		(218	)		39,119			19,176			58,077
December 31, 2015		58			18,196			(24,020	)		(5,766	)
January 1, 2016		58			18,196			(24,020	)		(5,766	)
Change in reserves		(58	)		(77,238	)		(5,416	)		(82,712	)
December 31, 2016		—			(59,042	)		(29,436	)		(88,478	)

(c)

Dividends

The dividends of W178,908 million (W500 won per share) are determined by the board of directors of the Controlling Company in 2017 but have not been paid yet. There are no income tax consequences.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others

(a)

Related parties

Related parties for the year ended December 31, 2016 are as follows:


Classification		Description
Associates(*)		Paju Electric Glass Co., Ltd. and others
Subsidiaries of Associates		Shinbo Electric Co., Ltd. and others
Entity that has significant influence over the Controlling Company		LG Electronics Inc.
Subsidiaries of the entity that has significant influence over the Controlling Company		Subsidiaries of LG Electronics Inc.

(*)	Details of associates are described in note 1 and 10.

Related parties other than associates and joint ventures that have transactions such as sales or balance of trade accounts and notes receivable and payable with the Group for the years ended December 31, 2016 and 2015 are as follows:


Classification	December 31, 2016	December 31, 2015
Subsidiaries of associates	-	ADP System Co., Ltd.
	Shinbo Electric Co., Ltd.	Shinbo Electric Co., Ltd.
	-	AVATEC Electronics Yantai Co., Ltd.
	New Optics USA, Inc.	New Optics USA, Inc.
	NEWOPTIX RS. SA DE CV	-

Entity that has significant influence over the Controlling Company	LG Electronics Inc.	LG Electronics Inc.

Subsidiaries of the entity that has significant influence over the Controlling Company	-	Hi Logistics Co., Ltd.
	Hiplaza Co., Ltd.	Hiplaza Co., Ltd.
	Hi Entech Co., Ltd.	Hi Entech Co., Ltd.
	LG Hitachi Water Solutions Co., Ltd.	LG Hitachi Water Solutions Co., Ltd.
	LG Innotek Co., Ltd.	LG Innotek Co., Ltd.
	Hanuri Co., Ltd.	Hanuri Co., Ltd.
	Qingdao LG Inspur Digital Communication Co., Ltd.	Qingdao LG Inspur Digital Communication Co., Ltd.
	-	LG Innotek USA, Inc.
	LG Electronics Wroclaw Sp. z o.o.	LG Electronics Wroclaw Sp. z o.o.
	LG Electronics Reynosa, S.A. DE C.V.	LG Electronics Reynosa, S.A. DE C.V.
	LG Electronics Thailand Co., Ltd.	LG Electronics Thailand Co., Ltd.
	LG Electronics Taiwan Taipei Co., Ltd.	LG Electronics Taiwan Taipei Co., Ltd.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued



Classification	December 31, 2016	December 31, 2015
	LG Electronics Shenyang Inc.	LG Electronics Shenyang Inc.
	LG Electronics RUS, LLC	LG Electronics RUS, LLC
	LG Electronics Nanjing New Technology Co., LTD.	LG Electronics Nanjing New Technology Co., LTD.
	LG Electronics Mlawa Sp. z o.o.	LG Electronics Mlawa Sp. z o.o.
	LG Electronics Mexicalli, S.A. DE C.V.	LG Electronics Mexicalli, S.A. DE C.V.
	LG Electronics India Pvt. Ltd.	LG Electronics India Pvt. Ltd.
	LG Electronics do Brasil Ltda.	LG Electronics do Brasil Ltda.
	LG Electronics Air-Conditioning (Shandong) Co., Ltd.	LG Electronics Air-Conditioning (Shandong) Co., Ltd.
	LG Electronics Almaty Kazakhstan	LG Electronics Almaty Kazakhstan
	LG Electronics S.A. (Pty) Ltd.	LG Electronics S.A. (Pty) Ltd
	-	LG Electronics (Kunshan) Computer Co., Ltd.
	LG Electronics Singapore PTE LTD.	LG Electronics Singapore PTE LTD.
	Inspur LG Digital Mobile Communications Co., Ltd.	Inspur LG Digital Mobile Communications Co., Ltd.
	-	Hi Logistics Europe B.V.
	-	Hi Logistics (China) Co., Ltd.
	LG Electronics Japan, Inc.	LG Electronics Japan, Inc.
	LG Electronics U.S.A., Inc.	LG Electronics U.S.A., Inc.
	LG Electronics Vietnam Haiphong Co., Ltd.	LG Electronics Vietnam Haiphong Co., Ltd.
	P.T. LG Electronics Indonesia	P.T. LG Electronics Indonesia
	Hientech (Tianjin) Co., Ltd.	Hientech (Tianjin) Co., Ltd.
	Hi M Solutek	Hi M Solutek
	LG Electronics Deutschland GmbH	LG Electronics Deutschland GmbH
	LG Electronics Egypt S.A.E.	-
	LG Innotek Yantai Co., Ltd.	-
	LG Electronics Alabama Inc.	-

(b)

Key management personnel compensation

Compensation costs of key management for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016		2015
Short-term benefits	W	2,323		2,940
Expenses related to the defined benefit plan		897		378

	W	3,220		3,318

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued

(c)

Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)	2016
					Purchase and others
	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Joint Venture
Suzhou Raken Technology Co., Ltd.(*1)	W	59,388		29,902		—		—		—		543

Associates and their subsidiaries
New Optics Ltd.	W	2,469		—		50,372		—		7,569		255
New Optics USA, Inc.		—		—		—		—		509		—
NEWOPTIX RS. SA DE CV		33		—		—		—		—		—
INVENIA Co., Ltd. (LIG INVENIA Co., Ltd.)		54		—		1,429		48,398		—		261
TLI Inc.(*2)		—		101		57,429		—		—		2,238
AVACO Co., Ltd.(*2)		—		128		703		31,299		—		1,373
AVATEC Co., Ltd.		—		265		—		—		70,196		1,027
Paju Electric Glass Co., Ltd.		—		21,030		453,463		—		—		3,674
Shinbo Electric Co., Ltd.		204,637		—		355,607		—		2,449		1,097
Narenanotech Corporation		17		—		513		24,821		—		909
WooRee E&L Co., Ltd.		—		—		—		—		—		32
YAS Co., Ltd.		44		—		2,076		80,836		—		1,758
LB Gemini New Growth Fund No. 16		—		8,394		—		—		—		—

	W	207,254		29,918		921,592		185,354		80,723		12,624

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued


(In millions of won)	2016
					Purchase and others
	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Entity that has significant influence over the Controlling Company
LG Electronics Inc.	W	1,580,279		—		23,047		538,175		—		103,158

Subsidiaries of the entity that has significant influence over the Controlling Company
LG Electronics India Pvt. Ltd.	W	75,591		—		—		—		—		69
LG Electronics Vietnam Haiphong Co., Ltd.		162,893		—		—		—		—		141
LG Electronics Nanjing New Technology Co., Ltd.		229,773		—		—		293		—		1,876
LG Electronics RUS, LLC		127,316		—		—		—		—		2,993
LG Electronics do Brasil Ltda.		133,903		—		—		—		—		3,430
LG Innotek Co., Ltd.		11,503		—		209,878		—		—		9,873
Qingdao LG Inspur Digital Communication Co., Ltd.		47,804		—		—		—		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		370,966		—		—		—		—		5
LG Electronics Mexicalli, S.A. DE C.V.		210,021		—		—		—		—		77
LG Electronics Mlawa Sp. z o.o.		709,558		—		—		—		—		895
LG Electronics Taiwan Taipei Co., Ltd.		11,919		—		—		—		—		27

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued


(In millions of won)	2016
					Purchase and others
	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
LG Electronics Wroclaw Sp. z o.o.	W	290,785		—		—		—		—		99
LG Hitachi Water Solutions Co., Ltd.		—		—		—		167,987		—		2,782
LG Electronics Reynosa, S.A. DE C.V.		1,074,790		—		—		—		—		1,907
LG Electronics Almaty Kazakhstan		15,953		—		—		—		—		33
LG Electronics Air-Conditioning (Shandong) Co., Ltd.		—		—		—		4,994		—		259
Hi Entech Co., Ltd.		—		—		—		—		—		25,365
Hientech (Tianjin) Co., Ltd.		—		—		—		28,587		—		10,613
LG Electronics S.A. (Pty) Ltd		21,236		—		—		—		—		39
Others		2,289		—		—		—		—		4,094

	W	3,496,300		—		209,878		201,861		—		64,577

	W	5,343,221		59,820		1,154,517		925,390		80,723		180,902

(*1)	Represents transactions occurred prior to exchange of equity interests. Details of its transactions are described in note 1(b).

(*2)	Represents transactions occurred prior to disposal of the entire investments in TLI Inc. and AVACO Co., Ltd.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued


(In millions of won)	2015
					Purchase and others
	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Joint Venture
Suzhou Raken Technology Co., Ltd.	W	143,125		—		—		—		—		361

Associates and their subsidiaries
New Optics Ltd.	W	92		—		47,404		—		5,880		441
New Optics USA, Inc.		—		—		—		—		29,475		—
INVENIA Co., Ltd. (LIG INVENIA Co., Ltd.)		9		—		49		42,007		—		122
TLI Inc.		—		101		84,732		—		—		929
AVACO Co., Ltd.		—		128		1,826		82,797		—		6,223
AVATEC Co., Ltd.		—		530		278		—		52,097		1,599
AVATEC Electronics Yantai Co., Ltd.		—		—		—		—		—		761
Paju Electric Glass Co., Ltd.		—		24,058		425,314		—		—		2,772
Shinbo Electric Co., Ltd.		284,255		—		473,484		—		97,736		83
Narenanotech Corporation		3		—		634		20,515		—		643
Glonix Co., Ltd.		8		—		4,581		—		—		227
ADP System Co., Ltd.		—		—		2,465		2,853		—		629
YAS Co., Ltd.		9		—		810		20,324		—		974
LB Gemini New Growth Fund No. 16		—		760		—		—		—		—

	W	284,376		25,577		1,041,577		168,496		185,188		15,403


Entity that has significant influence over the Controlling Company
LG Electronics Inc.	W	1,694,039		—		39,791		255,046		—		133,536

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued


(In millions of won)	2015
					Purchase and others
	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries of the entity that has significant influence over the Controlling Company
LG Electronics India Pvt. Ltd.	W	156,428		—		—		—		—		131
LG Electronics Vietnam Haiphong Co., Ltd.		95,626		—		—		—		—		—
LG Electronics Thailand Co., Ltd.		12,902		—		—		—		—		188
LG Electronics Nanjing Display Co., Ltd.		182,302		—		—		—		—		2,200
LG Electronics RUS, LLC		198,897		—		—		—		—		420
LG Electronics do Brasil Ltda.		298,679		—		—		—		—		490
LG Electronics (Kunshan) Computer Co., Ltd.		9,282		—		—		—		—		—
LG Innotek Co., Ltd.		5,647		—		299,033		—		—		44,691
Qingdao LG Inspur Digital Communication Co., Ltd.		271,405		—		—		—		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		286,420		—		—		—		—		—
LG Electronics Mexicalli, S.A. DE C.V.		160,842		—		—		—		—		—
LG Electronics Mlawa Sp. z o.o.		448,468		—		—		—		—		1,371
LG Electronics Shenyang Inc.		109,844		—		—		—		—		4
LG Electronics Taiwan Taipei Co., Ltd.		13,050		—		—		—		—		—
LG Electronics Wroclaw Sp. z o.o.		523,623		—		—		—		—		298
LG Hitachi Water Solutions Co., Ltd.		—		—		—		40,436		—		5,664
LG Electronics Reynosa, S.A. DE C.V.		1,020,471		—		—		—		—		9

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued


(In millions of won)	2015
					Purchase and others
	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Hi Entech Co., Ltd.	W	—		—		—		—		—		24,963
Hi Logistics Co., Ltd.		34		—		—		—		—		24,832
Hi Logistics (China) Co., Ltd.		—		—		—		—		—		7,183
Hientech (Tianjin) Co., Ltd.		—		—		—		—		—		19,149
LG Electronics U.S.A., Inc.		5,305		—		—		—		—		868
Others		12		—		2		—		—		8,567

	W	3,799,237		—		299,035		40,436		—		141,028

	W	5,920,777		25,577		1,380,403		463,978		185,188		290,328

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued

(d)

Trade accounts and notes receivable and payable as of December 31, 2016 and 2015 are as follows:


(In millions of won)
	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
	December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015
Joint Venture
Suzhou Raken Technology Co., Ltd.	W	—		14,657		—		182

Associates and their subsidiaries
New Optics Ltd.	W	1,000		—		8,616		8,584
New Optics USA, Inc.		—		—		—		5,313
INVENIA Co., Ltd. (LIG INVENIA Co., Ltd.)		833		956		6,515		6,349
TLI Inc.		—		—		—		15,232
AVACO Co., Ltd.		—		—		—		20,064
AVATEC Co., Ltd.		—		—		5,190		5,493
Paju Electric Glass Co., Ltd.		—		—		71,685		68,066
Shinbo Electric Co., Ltd.		85,011		73,549		64,693		71,231
Narenanotech Corporation		300		283		2,826		2,242
ADP System Co., Ltd.		—		—		—		615
YAS Co., Ltd.		833		956		3,531		5,248

	W	87,977		75,744		163,056		208,437


Entity that has significant influence over the Controlling Company
LG Electronics Inc.	W	357,577		407,498		160,309		118,073

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued


(In millions of won)
	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
	December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015
Subsidiaries of the entity that has significant influence over the Controlling Company
LG Electronics India Pvt. Ltd.	W	4,651		12,736		—		—
LG Electronics do Brasil Ltda.		14,299		5,835		27		—
LG Electronics RUS, LLC		47,686		43,342		—		—
LG Innotek Co., Ltd.		1,070		311		50,919		76,240
Qingdao LG Inspur Digital Communication Co., Ltd.		7,007		30,038		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		72,963		107,450		5		—
LG Electronics Mexicalli, S.A. DE C.V.		11,959		14,626		13		—
LG Electronics Mlawa Sp. z o.o.		222,480		69,879		27		—
LG Electronics Nanjing New Technology Co., Ltd.		51,794		25,195		78		87
LG Electronics Taiwan Taipei Co., Ltd.		3,510		847		—		—
LG Electronics Reynosa, S.A. DE C.V.		93,873		120,940		259		—
LG Electronics Wroclaw Sp. z o.o.		27,907		126,898		17		4
LG Electronics Vietnam Haiphong Co., Ltd.		35,121		20,296		7		—
LG Electronics Almaty Kazakhstan		4,200		1,532		—		—
LG Electronics S.A. (Pty) Ltd		5,941		1,406		3		—
LG Electronics Air-Conditioning (Shandong) Co., Ltd.		—		—		1,304		2,244
LG Hitachi Water Solutions Co., Ltd.		—		—		108,119		13,811
Hientech (Tianjin) Co., Ltd.		—		—		3,746		966
Hi Entech Co., Ltd.		—		—		4,080		3,695
Others		526		15,692		1,638		484

	W	604,987		597,023		170,242		97,531

	W	1,050,541		1,094,922		493,607		424,223

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued

(e)

Details of significant cash transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	*Loans()**
Associates	January 1, 2016		Increase		Decrease		December 31, 2016
New Optics Ltd.	W	—		1,000		—		1,000
INVENIA Co., Ltd. (LIG INVENIA Co., Ltd.)		1,000		—		167		833
Narenanotech Corporation		300		—		—		300
YAS Co., Ltd.		1,000		—		167		833

	W	2,300		1,000		334		2,966

(*)	Loans are presented based on nominal amounts.


(In millions of won)
	*Loans()**
Associates	January 1, 2015		Increase		Decrease		December 31, 2015
INVENIA Co., Ltd. (LIG INVENIA Co., Ltd.)	W	—		1,000		—		1,000
Narenanotech Corporation		—		300		—		300
YAS Co., Ltd.		—		1,000		—		1,000

	W	—		2,300		—		2,300

(*)	Loans are presented based on nominal amounts.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued

(f)

Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Group and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the years ended December 31, 2016 and 2015 are as follows. These entities are not affiliates according to K-IFRS No. 1024, Related Party Disclosures.


(In millions of won)
	For the year ended December 31, 2016				December 31, 2016
	Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
LG Chem Ltd.	W	65		941,355		30		106,790
LG Chem (Nanjing) Information & Electronics Materials Co., Ltd.		—		384,480		—		79,117
Serveone Co., Ltd.		3,476		1,092,483		20,157		398,671
Serveone (Nanjing) Co., Ltd.		—		104,743		—		47,485
Serveone Construction Co., Ltd.		—		50,204		—		8,951
Serveone (Guangzhou) Co., Ltd.		—		90,973		—		19,719
Serveone Vietnam Co., Ltd.		—		4,562		—		587
Silicon Works Co., Ltd.		409		583,508		13		106,313
Hi Logistics (China) Co., Ltd.		—		12,882		—		1,535
LG CNS Co., Ltd.		550		183,181		—		89,152
LG CNS China Inc.		5		39,730		—		8,597
LG N-Sys Inc.		—		13,618		—		9,259
LG International Corp.		17,706		86,008		16,951		16,930
LG International (America) Inc.		20,940		48,551		3,594		20,449
LG International (Japan) Ltd.		139,324		842,483		14,603		125,689
LG International (HongKong) Ltd.		12,500		157		346		—

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties and Others, Continued


(In millions of won)
	For the year ended December 31, 2016				December 31, 2016
	Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
LG International (Singapore) Pte., Ltd.	W	425,025		1,810		31,071		—
LG International (Deutschland) GmbH		509		8,848		—		4,935
Pantos Logistics Co., Ltd.		20		72,722		—		8,183
Pantos Logistics (China) Co., Ltd.		—		12,841		—		1,045
Pantos Logistics (Shanghai) Co., Ltd.		—		21,249		—		2,251
Pantos Logistics (Shenzhen) Co., Ltd.		—		94,972		—		8,577
LG Management Development Institute		—		9,720		3,480		376
HS Ad Inc.		—		5,219		—		1,465
LG Corp.		—		59,038		7,937		—
Hi Logistics Co., Ltd.		24		16,356		—		—
Others		1,862		15,466		2,732		2,491

	W	622,415		4,797,159		100,914		1,068,567

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties Others, Continued


(In millions of won)
	For the year ended December 31, 2015				December 31, 2015
	Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
LG Chem Ltd.	W	—		1,327,266		—		123,386
LG Chem (Nanjing) Information & Electronics Materials Co., Ltd.		—		341,631		—		69,799
Serveone Co., Ltd.		529		673,235		19,662		153,624
Serveone (Nanjing) Co., Ltd.		—		88,374		—		37,376
Serveone Construction Co., Ltd.		—		49,059		—		16,770
Serveone (Guangzhou) Co., Ltd.		—		77,633		—		20,252
Silicon Works Co., Ltd.		—		491,640		—		107,683
LG CNS Co., Ltd.		297		189,549		—		96,395
LG CNS China Inc.		—		43,084		—		16,292
LG N-Sys Inc.		—		18,503		—		15,103
LG International Corp.		50,113		94,331		2,205		8,456
LG International (America) Inc.		28,932		40,733		3,161		4,270
LG International (Japan) Ltd.		231,142		765,907		22,018		150,152
LG International (HongKong) Ltd.		4,513		321		—		—
LG International (Singapore) Pte. Ltd.		690,022		155		133,161		39
LG International (Deutschland) GmbH		—		5,289		—		1,741
Pantos Logistics Co., Ltd.		—		26,107		—		5,283
Pantos Logistics (China) Co., Ltd.		—		7,187		—		1,127
Pantos Logistics (Shanghai) Co., Ltd.		—		10,193		—		2,677
Pantos Logistics (Shenzhen) Co., Ltd.		—		31,227		—		6,379
LG Management Development Institute		—		8,774		3,480		317

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

19.	Related Parties Others, Continued


(In millions of won)
	For the year ended December 31, 2015				December 31, 2015
	Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
HS Ad Inc.	W	—		43,801		—		25,447
LG Corp.		—		62,146		4,540		3,487
Lusem Co., Ltd.		66		63,616		60		1,327
Hi Logistics Co., Ltd.		7		4,612		—		2,552
Others		1,878		13,104		2,118		2,118

	W	1,007,499		4,477,477		190,405		872,052

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

20.	Geographic and Other Information

The following is a summary of sales by region based on the location of the customers for the years ended December 31, 2016 and 2015.

(a)

Revenue by geography


(In millions of won)
Region	2016		2015
Domestic	W	1,825,191		2,217,516
Foreign
China		18,367,767		19,375,401
Asia (excluding China)		2,148,676		2,605,753
United States		2,053,317		1,981,021
Europe (excluding Poland)		983,672		1,064,122
Poland		1,125,451		1,140,071

	W	24,678,883		26,166,368

	W	26,504,074		28,383,884

Sales to Company A and Company B amount to W9,122,385 million and W5,808,630 million, respectively, for the year ended December 31, 2016 (2015: W9,900,220 million and W6,682,226 million). The Group’s top 10 end-brand customers together accounted for 82% of sales for the year ended December 31, 2016 (2015: 82%).

(b)

Non-current assets by geography


(In millions of won)
Region	December 31, 2016				December 31, 2015
Region	Property, plant and equipment		Intangible assets		Property, plant and equipment		Intangible assets
Domestic	W	8,758,171		673,966		7,719,079		607,402
Foreign
China		3,079,724		23,298		2,728,047		19,946
Others		193,554		197,673		98,894		211,382

	W	3,273,278		220,971		2,826,941		231,328

	W	12,031,449		894,937		10,546,020		838,730

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

20.	Geographic and Other Information, Continued

(c)

Revenue by product and services


(In millions of won)	2016		2015
Televisions	W	10,132,520		10,853,598
Desktop monitors		4,035,195		4,553,138
Tablet products		2,695,808		2,509,911
Notebook computers		2,383,532		2,508,878
Mobile and others		7,257,019		7,958,359

	W	26,504,074		28,383,884

21.

Revenue

Details of revenue for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016		2015

Sales of goods	W	26,463,563		28,344,700
Royalties		17,122		18,674
Others		23,389		20,510

	W	26,504,074		28,383,884

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

22.	The Nature of Expenses and Others

The classification of expenses by nature for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016		2015
Changes in inventories	W	63,884		402,429
Purchases of raw materials, merchandise and others		14,244,942		14,705,757
Depreciation and amortization		3,021,571		3,375,856
Outsourcing fees		819,742		1,011,084
Labor costs		3,022,607		3,104,043
Supplies and others		1,053,245		1,062,820
Utility		840,664		836,600
Fees and commissions		638,732		580,235
Shipping costs		224,742		231,830
Advertising		67,636		265,755
Warranty expenses		166,691		146,829
Travel		73,807		71,457
Taxes and dues		74,506		76,640
Others		927,218		1,036,131

	W	25,239,987		26,907,466

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

23.	Selling and Administrative Expenses

Details of selling and administrative expenses for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016		2015
Salaries	W	276,824		268,182
Expenses related to defined benefit plans		28,999		26,967
Other employee benefits		89,717		88,191
Shipping costs		191,442		199,774
Fees and commissions		192,786		191,106
Depreciation		129,225		118,719
Taxes and dues		30,523		30,958
Advertising		67,636		265,755
Warranty expenses		166,691		146,829
Rent		25,840		24,184
Insurance		11,561		10,826
Travel		23,343		24,411
Training		14,464		15,515
Others		55,365		59,400

	W	1,304,416		1,470,817

24.	Personnel Expenses

Details of personnel expenses for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016		2015

Salaries and wages	W	2,418,869		2,468,767
Other employee benefits		459,730		450,651
Contributions to National Pension plan		69,588		66,191
Expenses related to defined benefit plan		220,962		199,033

	W	3,169,149		3,184,642

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

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

(a)

Details of other non-operating income for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016		2015

Foreign currency gain	W	1,543,909		1,221,066
Gain on disposal of property, plant and equipment		14,637		18,179
Reversal of impairment loss on intangible assets		—		80
Rental income		5,152		4,858
Others		27,126		29,650

	W	1,590,824		1,273,833

(b)

Details of other non-operating expenses for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016		2015
Foreign currency loss	W	1,420,502		1,177,634
Loss on disposal of property, plant and equipment		7,466		4,037
Impairment loss on property, plant, and equipment		1,610		3,027
Loss on disposal of intangible assets		75		29
Impairment loss on intangible assets		138		239
Donations		22,221		14,114
Expenses related to legal proceedings or claims and others		15,819		127,702

	W	1,467,831		1,326,782

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

26.	Finance Income and Finance Costs

(a)

Finance income and costs recognized in profit or loss for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016		2015

Finance income
Interest income	W	42,079		57,080
Foreign currency gain		81,554		77,879
Gain on disposal of investments in equity accounted investees		11,367		23,268
Gain on transaction of derivatives		4,427		602
Gain on valuation of derivatives		244		—

	W	139,671		158,829


Finance costs
Interest expense	W	114,519		127,598
Foreign currency loss		132,320		155,728
Loss on valuation of Financial asset at fair value through profit or loss		118		—
Loss on impairment of available-for-sale financial assets		3,757		—
Loss on disposal of investments in equity accounted investees		5,643		481
Loss on impairment of investments in equity accounted investees		6,137		26,791
Loss on sale of trade accounts and notes receivable		2,886		4,909
Loss on transaction of derivatives		334		722
Loss on valuation of derivatives		472		—

	W	266,186		316,229

(b)

Finance income and costs recognized in other comprehensive income or loss for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016			2015
Foreign currency translation differences for foreign operations	W	(90,503	)		44,913
Net change in fair value of available-for-sale financial assets		(77	)		(288	)
Tax effect		19			214

Finance income (costs) recognized in other comprehensive income or loss after tax	W	(90,561	)		44,839

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

27.	Income Taxes

(a)

Details of income tax expense for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)
	2016			2015
Current tax expense
Current year	W	361,237			277,264
Deferred tax expense (benefit)
Origination and reversal of temporary differences		(49,190	)		123,458
Change in unrecognized deferred tax assets		72,678			9,804

	W	23,488			133,262

Income tax expense	W	384,725			410,526

(b)

Income taxes recognized directly in other comprehensive income or loss for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)	2016									2015
	Before tax			Tax benefit (expense)			Net of tax			Before tax			Tax benefit		Net of tax
Net change in fair value of available-for-sale financial assets	W	(77	)		19			(58	)		(288	)		70		(218	)
Remeasurements of net defined benefit liabilities (assets)		155,346			(37,594	)		117,752			(110,257	)		26,682		(83,575	)
Foreign currency translation differences for foreign operations		(90,503	)		—			(90,503	)		44,913			144		45,057
Change in equity of equity method investee		(5,216	)		—			(5,216	)		18,569			—		18,569

	W	59,550			(37,575	)		21,975			(47,063	)		26,896		(20,167	)

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

27.	Income Taxes, Continued

(c)

Reconciliation of the actual effective tax rate for the years ended December 31, 2016 and 2015 is as follows:


(In millions of won)	2016						2015
Profit for the year				W	931,058					1,023,456
Income tax expense					384,725					410,526

Profit before income tax					1,316,233					1,433,982


Income tax expense using the statutory tax rate of each country		33.49	%		440,753			32.56	%	466,848
Non-deductible expenses		3.39	%		44,606			2.66	%	38,208
Tax credits		(11.45	%)		(150,663	)		(8.12	%)	(116,439	)
Change in unrecognized deferred tax assets		5.52	%		72,678			0.68	%	9,804
Others		(1.72	%)		(22,649	)		0.85	%	12,105

Actual income tax expense				W	384,725					410,526

Actual effective tax rate					29.23	%				28.63	%

28.	Deferred Tax Assets and Liabilities

(a)

Unrecognized deferred tax liabilities

As of December 31, 2016, in relation to the temporary differences on investments in subsidiaries amounting to W149,616 million, the Controlling Company did not recognize deferred tax liabilities since the Controlling Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary differences will not reverse in the foreseeable future.

(b)

Unused tax credit carryforwards for which no deferred tax asset is recognized

Realization of deferred tax assets related to tax credit carryforwards is dependent on whether sufficient taxable income will be generated prior to their expiration. As of December 31, 2016, the Controlling Company recognized deferred tax assets of W287,400 million, in relation to tax credit carryforwards, to the extent that management believes the realization is probable. The amount of unused tax credit carryforwards for which no deferred tax asset is recognized and their expiration dates are as follows:

(In millions of won)

December 31,
2017

December 31,
2018

December 31,
2019

December 31,
2020

December 31,
2021

Tax credit carryforwards

14,074

35,500

—

58,391

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

28.	Deferred Tax Assets and Liabilities, Continued

(c)

Deferred tax assets and liabilities are attributable to the following:


(In millions of won)	Assets				Liabilities						Total
	December, 31, 2016		December, 31, 2015		December, 31, 2016			December, 31, 2015			December, 31, 2016			December 31, 2015
Other accounts receivable, net	W	—		—		(1,190	)		(2,388	)		(1,190	)		(2,388	)
Inventories, net		35,771		46,449		—			—			35,771			46,449
Available-for-sale financial assets		—		—		—			(19	)		—			(19	)
Defined benefit liabilities, net		10,817		58,962		—			—			10,817			58,962
Investments in equity accounted investees and subsidiaries		34,777		9,121		—			—			34,777			9,121
Accrued expenses		122,998		122,002		—			—			122,998			122,002
Property, plant and equipment		338,860		271,252		—			—			338,860			271,252
Intangible assets		744		817		(31,771	)		(34,663	)		(31,027	)		(33,846	)
Provisions		15,051		14,152		—			—			15,051			14,152
Gain or loss on foreign currency translation, net		11		11		—			—			11			11
Others		21,435		25,253		—			—			21,435			25,253
Tax credit carryforwards		287,400		385,017		—			—			287,400			385,017

Deferred tax assets (liabilities)	W	867,864		933,036		(32,961	)		(37,070	)		834,903			895,966

100

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

28.	Deferred Tax Assets and Liabilities, Continued

(d)

Changes in deferred tax assets and liabilities for the years ended December 31, 2016 and 2015 are as follows:


(In millions of won)	January 1, 2015			Profit or loss			Other compre- hensive income		Business combi- nation			December 31, 2015			Profit or loss			Other compre- hensive income			December 31, 2016
Other accounts receivable, net	W	(3,440	)		1,052			—		—			(2,388	)		1,198			—			(1,190	)
Inventories, net		46,377			72			—		—			46,449			(10,678	)		—			35,771
Available-for-sale financial assets		(88	)		(1	)		70		—			(19	)		—			19			—
Defined benefit liabilities, net		112,213			(79,933	)		26,682		—			58,962			(10,551	)		(37,594	)		10,817
Investments in equity accounted investees and subsidiaries		29,839			(20,718	)		—		—			9,121			25,656			—			34,777
Accrued expenses		177,163			(55,161	)		—		—			122,002			996			—			122,998
Property, plant and equipment		236,848			34,404			—		—			271,252			67,608			—			338,860
Intangible assets		1,423			(1,339	)		—		(33,930	)		(33,846	)		2,819			—			(31,027	)
Provisions		12,710			1,442			—		—			14,152			899			—			15,051
Gain or loss on foreign currency translation, net		168			(157	)		—		—			11			—			—			11
Others		25,944			(835	)		144		—			25,253			(3,818	)		—			21,435
Tax credit carryforwards		397,105			(12,088	)		—		—			385,017			(97,617	)		—			287,400

Deferred tax assets (liabilities)	W	1,036,262			(133,262	)		26,896		(33,930	)		895,966			(23,488	)		(37,575	)		834,903

Statutory tax rate applicable to the Controlling Company to calculate tax base and deferred tax expense is 24.2% as of December 31, 2016.

101

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

29.	Earnings per Share

(a)

Basic earnings per share for the years ended December 31, 2016 and 2015 are as follows:


(In won and No. of shares)	2016		2015

Profit attributable to owners of the Controlling Company	W	906,714,278,688		966,553,061,333
Weighted-average number of common stocks outstanding		357,815,700		357,815,700

Earnings per share	W	2,534		2,701

For the years ended December 31, 2016 and 2015, there were no events or transactions that resulted in changes in the number of common stocks used for calculating earnings per share.

(b)

Diluted earnings per share for the years ended December 31, 2016 and 2015 are not calculated since there was no potential common stock.

30.	Supplemental Cash Flow Information

Supplemental cash flow information for the years ended December 31, 2016 and 2015 is as follows:


(In millions of won)
	2016		2015
Non-cash investing and financing activities:
Changes in other accounts payable arising from the purchase of property, plant and equipment	W	809,406		182,424

During the year ended December 31, 2016, the Controlling Company acquired Suzhou Lehui Display Co., Ltd. through the exchange of equity interests (note 31).

102

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2016 and 2015

31.	Business Combinations

In July 2016, Suzhou Raken Technology Co., Ltd., a joint venture of the Controlling Company and AmTRAN Technology Co., Ltd. (“AmTRAN”), split into Suzhou Raken Technology Co., Ltd. which is engaged in manufacturing TV sets and Suzhou Lehui Display Co., Ltd. which is engaged in manufacturing LCD monitor sets. The Controlling Company acquired 100% equity interest in Suzhou Lehui Display Co., Ltd. and AmTRAN acquired 100% equity interest in Suzhou Raken Technology Co., Ltd., respectively, by exchanging equity interests.

The fair value of the consideration transferred, assets acquired and liabilities assumed are as follows:


(In millions of won)	Amount
Consideration transferred (*1)	W	125,217
Identifiable assets acquired and liabilities assumed:
Trade accounts and notes receivable		73,653
Inventories		41,804
Other current assets		77,950
Property, plant and equipment		17,790
Other non-current assets		4,968
Trade accounts and notes payable		(89,493	)
Other current liabilities		(6,078	)

Identifiable net assets		120,594
Goodwill (*2)		4,623

(*1)	Consideration transferred presents the fair value of the Controlling Company’s interest in Suzhou Lehui Display Co., Ltd., which was measured using Discounted Cash Flow method.

(*2)	Goodwill amounting to W4,623 million arose from specialized knowledge and experience.

The Controlling Company recognized W4,013 million for the difference between the carrying amount and the fair value as finance income in the consolidated statements of comprehensive income for the year ended December 31, 2016 regarding the previously held 51% ownership in Suzhou Raken Technology Co., Ltd.

See note 1(c) for the financial information of Suzhou Lehui Display Co., Ltd. included in the consolidated financial statements since acquisition. The revenue and profit or loss of the Group for the year ended December 31, 2016, as though the acquisition date for the business combination occurred in July 2016 had been as of the beginning of the annual reporting period, were not disclosed as they are not estimated reliably since the revenue and profit or loss of Suzhou Lehui Display Co., Ltd. from the beginning of 2016 to acquisition date are not available and the costs to develop such information would be excessive.

103

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	LG Display Co., Ltd.
	(Registrant)

Date: February 27, 2017	By:	/s/ Heeyeon Kim
	(Signature)

	Name:	Heeyeon Kim
	Title:	Head of IR / Vice President