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 November 2018

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

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

(Address of principal executive offices)

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

Form 20-F ☒ Form 40-F ☐

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

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

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

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

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

Yes ☐ No ☒ a

QUARTERLY REPORT

(From January 1, 2018 to September 30, 2018)

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

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

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

Contents


1.	Company		4
	A.	Name and contact information	4
	B.	Domestic credit rating	4
	C.	Capitalization	6
	D.	Voting rights	6
	E.	Dividends	6

2.	Business		7
	A.	Business overview	7
	B.	Industry	7
	C.	New businesses	9

3.	Major Products and Raw Materials		9
	A.	Major products	9
	B.	Average selling price trend of major products	10
	C.	Major raw materials	10

4.	Production and Equipment		11
	A.	Production capacity and output	11
	B.	Production performance and utilization ratio	11
	C.	Investment plan	12

5.	Sales		12
	A.	Sales performance	12
	B.	Sales route and sales method	12

6.	Market Risks and Risk Management		14
	A.	Market risks	14
	B.	Risk management	14



7.	Derivative Contracts		14
	A.	Currency risks	14
	B.	Interest rate risks	15

8.	Major Contracts		15

9.	Research & Development		16
	A.	Summary of R&D-related expenditures	16
	B.	R&D achievements	16

10.	Intellectual Property		19

11.	Environmental and Safety Matters		19

12.	Financial Information		22
	A.	Financial highlights (Based on consolidated K-IFRS)	22
	B.	Financial highlights (Based on separate K-IFRS)	23
	C.	Consolidated subsidiaries	23
	D.	Status of equity investment	24

13.	Audit Information		25
	A.	Audit service	25
	B.	Non-audit service	25

14.	Board of Directors		25
	A.	Members of the board of directors	25
	B.	Committees of the board of directors	26
	C.	Independence of directors	26

15.	Information Regarding Shares		27
	A.	Total number of shares	27
	B.	Shareholder list	27

16.	Directors and Employees		27
	A.	Directors	27
	B.	Employees	28

Attachment: 1. Financial Statements in accordance with K-IFRS

1.	Company

Name and contact information

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

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

Domestic credit rating

(1)

Corporate bonds


Subject instrument	Month of rating	Credit rating⁽¹⁾	Rating agency (Rating range)
Corporate bonds	June 2016	AA	NICE Information Service Co., Ltd. (AAA ~ D)
	September 2016
	May 2017
	February 2018
	May 2018
	April 2016	AA	Korea Investors Service, Inc. (AAA ~ D)
	May 2017
	October 2017
	May 2018
	April 2016	AA	Korea Ratings Corporation (AAA ~ D)
	September 2016
	May 2017
	October 2017
	February 2018
	April 2018

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


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

(2)

Commercial paper


Subject instrument	Month of rating	Credit rating⁽¹⁾	Rating agency (Rating range)
Commercial paper	June 2016	A1	Korea Ratings Corporation (A1 ~ D)
	June 2016	A1	NICE Information Service Co., Ltd. (A1 ~ D)
	September 2016	A1	NICE Information Service Co., Ltd. (A1 ~ D)
	September 2016	A1	Korea Ratings Corporation (A1 ~ D)
	May 2017	A1	Korea Investors Service, Inc. (A1 ~ D)
	May 2017	A1	Korea Ratings Corporation (A1 ~ D)
	October 2017	A1	Korea Investors Service, Inc. (A1 ~ D)
	December 2017	A1	Korea Ratings Corporation (A1 ~ D)
	May 2018	A1	Korea Investors Service, Inc. (A1 ~ D)
	May 2018	A1	NICE Information Service Co., Ltd. (A1 ~ D)

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


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

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

Capitalization

(1)

Change in capital stock (as of September 30, 2018)

There were no changes to our issued capital stock during the reporting period ended September 30, 2018.

(2)

Convertible bonds

Not applicable.

Voting rights (as of September 30, 2018)


		(Unit: share)
Description		Number of shares
A. Total number of shares issued⁽¹⁾:	Common shares⁽¹⁾		357,815,700
	Preferred shares		—
B. Shares without voting rights:	Common shares		—
	Preferred shares		—
C. Shares subject to restrictions on voting rights pursuant to our articles of incorporation:	Common shares		—
	Preferred shares		—
D. Shares subject to restrictions on voting rights pursuant to regulations:	Common shares		—
	Preferred shares		—
E. Shares with restored voting rights:	Common shares		—
	Preferred shares		—

Total number of issued shares with voting rights (=A – B – C – D + E):	Common shares		357,815,700

	Preferred shares		—

(1)	Authorized: 500,000,000 shares

Dividends

Dividends for the three most recent fiscal years


Description (unit)		2018 Q1~Q3			2017			2016
Par value (Won)			5,000			5,000			5,000
Profit (loss) for the year (million Won)⁽¹⁾			(353,418	)		1,802,756			906,713
Earnings (loss) per share (Won)⁽²⁾			(988	)		5,038			2,534

Total cash dividend amount for the period (million Won)			—			178,908			178,908

Total stock dividend amount for the period (million Won)			—			—			—

Cash dividend payout ratio (%)⁽³⁾			—			9.92	%		19.73	%
Cash dividend yield (%)⁽⁴⁾	Common shares		—			1.69	%		1.58	%
	Preferred shares		—			—			—
Stock dividend yield (%)	Common shares		—			—			—
	Preferred shares		—			—			—
Cash dividend per share (Won)	Common shares		—			500			500
	Preferred shares		—			—			—
Stock dividend per share (share)	Common shares		—			—			—
	Preferred shares		—			—			—

(1)	Based on profit for the year attributable to the owners of the controlling company.

(2)	Earnings per share is based on par value of W5,000 per share and is calculated by dividing net income by weighted average number of common shares.

(3)	Cash dividend payout ratio is the percentage that is derived by dividing total cash dividend by profit for the year attributable to the owners of the controlling company.

(4)

Cash dividend yield is the percentage that is derived by dividing cash dividend by the arithmetic average of the daily closing prices of our common shares during the one-week period ending two trading days prior to the closing of the register of shareholders for the purpose of determining the shareholders entitled to receive annual dividends.

2.	Business

Business overview

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

As of September 30, 2018, in order to support our business activities, we operated TFT-LCD and OLED production and research facilities in Paju and Gumi in Korea, and we have also established subsidiaries in the Americas, Europe and Asia.

As of September 30, 2018, our business consisted of the manufacture and sale of display and display related products utilizing TFT-LCD, OLED and other technologies under a single reporting business segment.

2018 Q1~Q3 consolidated operating results highlights


	(Unit: In billions of Won)
2018 Q1~Q3	Display business
Sales Revenue		17,389
Gross Profit		1,898
Operating Profit (loss)		(186	)
Total Assets		32,120
Total Liabilities		17,428

Industry

(1)

Industry characteristics

•

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

•

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

(2)

Growth Potential

•

We are focusing on securing profitability through differentiated products such as Crystal Sound OLED and Wallpapers, pursuant to our strategic plan to transition into the OLED business, which has strong future growth potential. In the television sector, we are expanding our premium products such as OLED and UHD products. In addition, we are continuing to secure additional production capacity of 8.5th generation OLED television displays and are planning to further strengthen the fundamentals of our OLED business through a successful line-up of new products and investments in the 8.5th and 10.5th generation OLED. In the IT sector, we are expanding the proportion of premium products such as high resolution and wide screen products, based on IPS and Oxide technologies. In the mobile sector, we are continuously striving to secure mass production capabilities for 6th generation OLED smartphones through additional investments. We are also strengthening the foundation for the expansion of small- and medium-sized OLED business.

(3)

Cyclicality

•

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

•

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

(4)

Market conditions

•

Most display panel manufacturers are located in Asia as set forth below. There is a concern over continued increases in the structural oversupply of the LCD industry led by continued investments in new fabrication facilities and additional supplies by Chinese panel manufacturers, which have been driven by the Chinese government.

Korea: LG Display, Samsung Display, etc.

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

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

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

•

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


	2018 Q1~Q3			2017			2016
Panels for Televisions⁽¹⁾⁽²⁾		29.5	%		28.1	%		28.2	%
Panels for Monitors⁽¹⁾		33.4	%		36.3	%		36.6	%
Panels for Notebook Computers⁽¹⁾		22.2	%		21.3	%		27.8	%
Panels for Tablet Computers⁽¹⁾		26.7	%		29.1	%		24.1	%

Total⁽¹⁾		29.2	%		29.2	%		29.4	%

(1)	Source: Large-Area Display Market Tracker (IHS Technology). The relevant amounts for the second quarter of 2018 are estimates only, as the actual results for such period are not yet released.

(2)	Includes panels for public displays.

(5)

Competitiveness

•

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

•

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

•

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

•

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

•

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

•

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

New businesses

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

3.	Major Products and Raw Materials

Major products

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


						(Unit: In billions of Won, except percentages)


								2018 Q1~Q3
Business area	Sales type	Items (By product)		Usage		Major trademark		Sales Revenue		Percentages
Display	Goods/Products/ Services/Other sales		Televisions		Panels for televisions		LG Display		7,216		41.5	%
			Desktop monitors		Panels for monitors		LG Display		3,052		17.6	%
			Tablet products		Panels for tablets		LG Display		1,349		7.8	%
			Notebook computers		Panels for notebook computers		LG Display		1,952		11.2	%
			Mobile, etc.		Panels for smartphones, etc.		LG Display		3,820		22.0	%

Total									17,389		100.0	%

Average selling price trend of major products

While average selling prices of LCD panels exhibited varying trends according to demand by product category, the average selling price of LCD panels per square meter of net display area shipped in the third quarter of 2018 decreased by approximately 0.2% compared to the second quarter of 2018 due to a continued decline in the overall average selling prices of our panels. There is no assurance that the average selling prices of LCD panels will not fluctuate in the future due to changes in market conditions.


Period		Average Selling Price⁽¹⁾⁽²⁾(in US$ / m²)
2018 Q3		500
2018 Q2		501
2018 Q1		522
2017 Q4		589
2017 Q3		600
2017 Q2		574
2017 Q1		608
2016 Q4		642
2016 Q3		555
2016 Q2		504
2016 Q1		525

(1)	Quarterly average selling price per square meter of net display area shipped.

(2)	Excludes semi-finished products in the cell process.

Major raw materials

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


				(Unit: In billions of Won, except percentages)
Business area	Purchase type		Items	Usage		Cost⁽¹⁾		Ratio (%)			Suppliers
Display		Raw materials	Backlights		Display panel manufacturing		1,589		16.7	%	HeeSung Electronics, etc.
			Polarizers				1,587		16.7	%	LG Chem, etc.
			Printed circuit boards				1,509		15.9	%	Korea SMT, etc.
			Glass				944		9.9	%	Paju Electric Glass Co., Ltd., Asahi Electric Glass Co., Ltd.
			Drive IC				691		7.3	%	Silicon Works Co., Ltd.. etc.
			Others				3,181		33.5	%	—

Total							9,501		100.0	%

- Period: January 1, 2018 ~ September 30, 2018.

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

(2)	Among major suppliers, LG Chem and Silicon Works Co., Ltd. are member companies of the LG Group and Paju Electric Glass Co., Ltd. is our affiliate.

•

The average price of EGI (Electrolytic Galvanized Iron), the main raw material for BLU components, increased by 24% from 2016 to 2017 and further increased by 0.4% from 2017 to the third quarter of 2018 due to decreased production caused by the closure of China’s outdated steel production lines and strengthened environmental regulations. The average price of resin increased by 18% from 2016 to 2017 and further increased by 17% from 2017 to the third quarter of 2018 due to the rise in petroleum prices. The average price of copper, the main raw material for PCB components, increased by 27% from 2016 to 2017 but decreased by 1.0% from 2017 to the third quarter of 2018 due to concerns over a potential global economic downturn arising from the intensification of trade disputes between the United States and China.

4.	Production and Equipment

Production capacity and output

(1)

Production capacity

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

(Unit: 1,000 glass sheets)

Business area

Items

Location of facilities

2018 Q1~Q3⁽¹⁾

2017⁽²⁾

2016⁽²⁾

Display

Display panel

Gumi, Paju, Guangzhou

7,536

10,538

9,906

(1)	Calculated based on the maximum monthly input capacity (based on glass input substrate size for eighth-generation glass sheets) during the period multiplied by the number of months in the period (i.e., 6 months).

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

(2)

Production output

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

(Unit: 1,000 glass sheets)

Business area

Items

Location of facilities

2018 Q1~Q3

2017

2016

Display

Display panel

Gumi, Paju, Guangzhou

6,998

9,262

8,996

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

Production performance and utilization ratio


		(Unit: Hours, except percentages)
Production facilities	Available working hours in 2018 Q1~Q3	Actual working hours in 2018 Q1~Q3	Average utilization ratio
Gumi	6,552⁽¹⁾(273 days)⁽²⁾	6,552⁽¹⁾(273 days)⁽²⁾		100.0	%
Paju	6,552⁽¹⁾(273 days)⁽²⁾	6,552⁽¹⁾(273 days)⁽²⁾		100.0	%
Guangzhou	6,552⁽¹⁾(273days)⁽²⁾	6,552⁽¹⁾(273 days)⁽²⁾		100.0	%

(1)	Based on the assumption that all 24 hours in a day have been fully utilized.

(2)	Number of days is calculated by averaging the number of working days for each facility.

Investment plan

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

Sales

Sales performance


							(Unit: In billions of Won)
Business area	Sales types		Items (Market)			2018 Q1~Q3		2017		2016
Display		Products		Display panel	Overseas⁽¹⁾		16,165		25,763		24,648
					Korea⁽¹⁾		1,193		1,982		1,815

					Total		17,358		27,745		26,464

		Royalty		LCD, OLED technology patent	Overseas⁽¹⁾		14		20		17
					Korea⁽¹⁾		—		—		—

					Total		14		20		17

		Others		Raw materials, components, etc.	Overseas⁽¹⁾		8		11		14
					Korea⁽¹⁾		9		14		10

					Total		17		25		23

				Total	Overseas⁽¹⁾		16,187		25,794		24,679
					Korea⁽¹⁾		1,202		1,996		1,825

					Total		17,389		27,790		26,504

(1)	Based on ship-to-party.

(2)	Sales for 2017 and 2016 were recorded based on previously applicable accounting standards of K-IFRS 1018, “Revenue.”

Sales organization and sales route

•

As of September 30, 2018, each of our television, IT, mobile and OLED businesses had individual sales and customer support functions.

•

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

•

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

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

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

•

Sales performance by sales route


Sales Performance	Sales route	Ratio
Overseas	Overseas subsidiaries		93.4	%
	Headquarters		6.6	%
Overseas sales portion (overseas sales / total sales)			93.1	%
Korea	Overseas subsidiaries		1.7	%
	Headquarters		98.3	%
Korea sales portion (Korea sales / total sales)			6.9	%

(1)

Sales methods and sales terms

•

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

(2)

Sales strategy

•

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

•

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

(3)

Major customers

•

Customers “A” and “B” each accounted for more than 10% of our sales revenue for the third quarter of 2018, and our sales revenue derived from our top ten customers comprised 76% of our total sales revenue.

(4)

Purchase orders

•

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

•

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

6.	Market Risks and Risk Management

Market risks

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

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

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

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

Risk management

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

7.	Derivative Contracts

Currency risks

•

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

•

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

•

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

•

In the first nine months of 2018, in order to avoid risks of interest rate fluctuations and exchange rate fluctuations on foreign currency denominated borrowings with floating interest rates, we entered into an aggregate of $200 million in Won/US dollar cross currency swap agreement with Standard Chartered Bank and KEB Hana Bank, for which we have not applied hedge accounting.

•

Any rights or obligations arising from derivative contracts that do not apply hedge accounting are measured at fair value and are accounted for as assets and liabilities, whereas any resulting valuation gain or loss is recognized as profit or loss at the time such valuation gain or loss is incurred.

We recognized a loss on valuation of derivative instruments in the amount of W4,580 million with respect to our foreign exchange derivative instruments held during the first nine months of 2018.

Interest rate risks

•

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

•

As of September 30, 2018, we have entered into an aggregate of W350 billion in interest rate swap agreements with Shinhan Bank and NongHyup Bank, for which we have not applied hedge accounting.

We recognized a loss on valuation of derivative instruments in the amount of W660 million with respect to interest rate derivative instruments held during the first nine months of 2018.

8.	Major contracts

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


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

9.	Research & Development

Summary of R&D-related expenditures


		(Unit: In millions of Won, except percentages)
Items⁽¹⁾		2018 Q1~Q3			2017			2016
Material Cost			474,994			646,622			677,423
Labor Cost			547,153			668,429			479,650
Depreciation Expense			310,479			298,383			136,826
Others			239,144			298,256			129,348

Total R&D-Related Expenditures			1,571,770			1,911,690			1,423,247

Accounting Treatment⁽²⁾	Selling & Administrative Expenses		685,746			917,645			880,794
	Manufacturing Cost		560,393			786,494			220,165
	Development Cost (Intangible Assets)		325,631			207,551			322,288

R&D-Related Expenditures / Revenue Ratio (Total R&D-Related Expenditures ÷ Revenue for the period × 100)			9.0	%		6.9	%		5.4	%

(1)	Calculated based on the total R&D-related expenditures before subtracting government subsidies (state subsidies).

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

R&D achievements

Achievements in 2016

(1)

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

•

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

(2)

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

•

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

•

Applied next-generation stain (per pixel) offset technology

(3)

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

•

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

(4)

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

•

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

•

Simplified customer software configuration management by providing touch total solution

(5)

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

•

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

•

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

(6)

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

•

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

•

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

•

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

(7)

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

•

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

•

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

(8)

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

•

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

(9)

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

•

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

(10)

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

•

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

•

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

•

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

(11)

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

•

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

(12)

Developed a transparent 32-inch FHD product

•

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

(13)

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

•

Developed differentiated wide color gamut solution

(14)

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

•

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

(15)

Developed a 5.7-inch QHD flexible display product

•

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

•

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

(16)

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

•

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

•

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

Achievements in 2017

(1)

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

•

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

•

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

(2)

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

•

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

•

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

(3)

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

•

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

•

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

(4)

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

•

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

•

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

(5)

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

•

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

•

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

•

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

(6)

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

•

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

•

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

•

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

(7)

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

•

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

•

Guaranteed the first 1000hr reliability in the automotive industry

(8)

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

•

Strengthened competitiveness through application of smart (digital) stepper

(9)

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

•

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

(10)

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

•

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

Achievements in 2018

(1)

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

•

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

•

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

(2)

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

•

Developed our first Ultra HD mobile product

•

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

(3)

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

•

Our first product applying camera notch concept technology

(4)

Developed the world’s first four-side borderless curved monitor with 1900R curvature radius

•

Our first product applying glass 0.25T (etching) bezel printing/reverse bonding process technology

•

Strengthened product competitiveness with our first shared design applying three-side/four-side borderless TFT Mask

•

Achieved high-speed driving at 144Hz, high color recall (DCI 98%) and HDR (peak luminance 550nit)

(5)

Developed the world’s first 34-inch large-screen monitor/high-resolution four-sided borderless HDR

•

Pioneered HD Premium 21:9 monitor market through development of the world’s first WUHD(5K2K), four-side borderless monitor

•

Delivered Ultra HD (DCI 98Z%, sRGB 135%) by applying Adv. KSF LED PKG technology

•

Achieved high luminance (HDR 600); typ. 450 nit, maximum 600nit

(6)

Developed LGD 6.01QHD+M+ Full Screen Display (LG Electronics)

•

Developed a full screen display concept smartphone product (G7) through strategic collaboration with other LG Group companies

•

Implemented a full screen display product concept through achievement of our first 19.5:9 screen aspect ratio and lower bezel of 2.7mm

(7)

Developed the world’s narrowest bezel videowall product (0.44mm bezel, 55-inch FHD)

•

Achieved product competitiveness by developing the world’s narrowest bezel (originally 0.9mm g 0.44mm, Even Bezel)

(8)

Developed the world’s first automotive glassless 3D cluster product

•

Developed FHD glassless barrier type 3D model (12.3 inches, 167 ppi level)

•

Achieved customers’ eye-tracking movement by applying a top moving barrier panel at the top of the panel

•

Improved adhesion accuracy of image panel and barrier panel by using OCA bonding technology

•

Improved barrier contrast ratio by applying a copper-based metal barrier panel

10.

Intellectual Property

As of September 30, 2018, our cumulative patent portfolio (including patents that have already expired) included a total of 36,931 patents, consisting of 17,113 in Korea and 19,818 in other countries.

11.

Environmental and Safety Matters

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

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

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


	(Unit: thousand tonnes of CO₂ equivalent; Tetra Joules)
Category	2017		2016		2015
Greenhouse gases		6,303		5,851		7,348
Energy		63,451		60,423		60,146

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

In addition, in August 2014, GP1, our newest eighth-generation panel fabrication facility located in Guangzhou, China, was the first electronics plant in China to receive the “Green Plant” designation under China’s Green China Policy, in addition to receiving ISO 14001, ISO 50001, OHSAS 18001, ISO 9001, PAS 2050 and ISO 14064-1 certifications. Furthermore, with respect to our production facilities in Gumi, we were first certified by the Ministry of Environment as a “Green Company” for P1 in 1997, and such certification has since been renewed on a timely basis, most recently in May 2018. In recognition of our efforts to reduce greenhouse gas emissions, we were awarded a commendation from the Minister of Environment in the efforts against climate change category in the 2013 Green Management Awards, which was jointly hosted by the Ministry of Environment and the Ministry of Trade, Industry & Energy. In addition, in recognition of our efforts to improve recycling and reduce waste, we received a citation in 2014 for being a leading recycling company from the Prime Minister of Korea and, in recognition of our continued water conservation activities (reuse system investments, etc.) and greenhouse gas emission reduction activities (process gas and energy reduction, etc.), we attained the highest level, Leadership A, and received the grand prize award at the CDP Water Korea Best Awards in 2016 from the Carbon Disclosure Project, which was presided over by the Carbon Disclosure Project Korea Committee. We also attained a Leadership A in the climate change information technology sector and received a carbon management honors award. Our continued efforts to reduce greenhouse gas emissions was recognized again in 2017 by becoming the only domestic information technology company to attain the Leadership A level and again receiving carbon management honors by ranking in the top five among all eligible companies. In May 2017, we were awarded a commendation from the Minister of Environment for having scored the highest grade among companies in the low- and medium-volume pollutant emitters category that had entered into voluntary agreements with the Metropolitan Air Quality Management Office, in recognition of having successfully met our voluntary targets for reduction of air pollutants as well as our overall efforts to enhance our relevant facilities and operational systems. In addition, in recognition of efficient control, management and operating systems implemented in our manufacturing facilities, we received the top-level certification, Level 1, in 2017 under the Factory Energy Management System evaluation presided by the Korea Energy Agency. Furthermore, in November 2017, we received the highest commendation, the Presidential Award, in the Korean Energy Efficiency Awards presided by the Ministry of Industry, Trade and Energy in recognition of our energy management practices and energy saving measures, and we also obtained a certificate of excellence in the Energy Management System Evaluation.

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

In October 2005, we became the first display panel company to receive accreditation as an International Accredited Testing Laboratory by the Korea Laboratory Accreditation Scheme, which is operated by the Korean Ministry of Trade, Industry & Energy. In September 2006, we received international accreditation from TUV SUD, EU’s German accreditation agency, as a RoHS testing laboratory. Our efforts to keep pace with the increasingly stringent accreditation standards and to receive and maintain such accreditations are part of our on-going efforts to systematically monitor environmentally controlled substances in our component parts inventory. Moreover, we participated in reforming IEC 62321, an international testing standard published by the International Electrotechnical Commission and used by RoHS, and the commission adopted our halogen-free combustion ion chromatography method in as IEC 62321-3-2, which was published in June 2013. In 2017, in a joint effort with the global product testing/accreditation agency SGS, we became the first display panel company to develop Eco Label, an environmentally friendly accreditation program for television display modules, and received the SGS Eco Label accreditation for our OLED, IPS Nano Color and Art Glass television models. For the IPS Nano Color for LCD, we received the Quality & Performance Mark from Intertek, a global product testing/accreditation agency, by applying a technology to eliminate cadmium (Cd) and indium phosphide (InP). In 2018, we became the first display panel company to receive the “Green Technology Certification” from the Korean Ministry of Science and ICT for improving the light efficiency technology of OLED to promote energy use reduction.

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

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

In June 2017, we were audited by the Ministry of Employment and Labor in connection with the occurrence of a safety accident and found to be in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine of W2.4 million. In addition, the trial court assessed a fine of W0.5 million on each of us and our chief production officer on the basis of certain other applicable provisions of the Industrial Safety and Health Act. In relation to the same matter, in May 2018, the Prosecutor’s Office sought a fine of W3.0 million on each of us and our chief production officer on the basis of certain other applicable provisions of the Industrial Safety and Health Act, and the case is currently pending before the trial court. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees.

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

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

In February 2018, we were assessed a fine of W0.04 million by Paju City for stopping a vehicle in front of a day care center in violation of certain provisions of the Road Traffic Law. We have since paid the fine and are in the process of strengthening our parking guidance procedures to prevent such recurrence.

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

In April 2018, we were assessed a fine of W0.24 million by Yeongdeungpo-gu Office for our failure to keep one of our rescue vehicles current with its statutory inspection requirements, which we subsequently paid. In order to prevent recurrence, we are continually monitoring the compliance of inspection requirements for our vehicles.

12.

Financial Information

Financial highlights (Based on consolidated K-IFRS). Figures for 2016 and 2017 are based on previously applicable accounting standards of K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.”


	(Unit: In millions of Won)
Description	As of September 30, 2018			As of December 31, 2017			As of December 31, 2016
Current assets		9,245,299			10,473,703			10,484,186
Quick assets		6,657,896			8,123,619			8,196,401
Inventories		2,587,403			2,350,084			2,287,785
Non-current assets		22,874,328			18,685,984			14,400,150
Investments in equity accounted investees		133,267			122,507			172,683
Property, plant and equipment, net		20,133,254			16,201,960			12,031,449
Intangible assets		992,026			912,821			894,937
Other non-current assets		1,615,781			1,448,696			1,301,081
Total assets		32,119,627			29,159,687			24,884,336
Current liabilities		10,143,749			8,978,682			7,058,219
Non-current liabilities		7,283,799			5,199,495			4,363,729
Total liabilities		17,427,548			14,178,177			11,421,948
Share capital		1,789,079			1,789,079			1,789,079
Share premium		2,251,113			2,251,113			2,251,113
Retained earnings		10,078,039			10,621,571			9,004,283
Other equity		(321,391	)		(288,280	)		(88,478	)
Non-controlling interest		895,239			608,027			506,391

Total equity		14,692,079			14,981,510			13,462,388


(Unit: In millions of Won, except for per share data and number of consolidated entities)
Description	For the nine months ended September 30, 2018			For the year ended December 31, 2017		For the year ended December 31, 2016
Revenue		17,388,775			27,790,216		26,504,074
Operating profit (loss)		(186,360	)		2,461,618		1,311,416
Operating profit (loss) from continuing operations		(332,017	)		1,937,052		931,508
Profit (loss) for the period		(332,017	)		1,937,052		931,508
Profit (loss) attributable to:
Owners of the Company		(353,418	)		1,802,756		906,713
Non-controlling interest		21,401			134,296		24,795
Basic earnings (loss) per share		(988	)		5,038		2,534
Diluted earnings (loss) per share		(988	)		5,038		2,534
Number of consolidated entities		22			20		19

Financial highlights (Based on separate K-IFRS). Figures for 2016 and 2017 are based on previously applicable accounting standards of K-IFRS 1018, “Revenue” and K-IFRS 1039, “Financial Instruments.”


	(Unit: In millions of Won)
Description	As of September 30, 2018		As of December 31, 2017		As of December 31, 2016
Current assets		6,993,446		8,381,074		8,712,575
Quick assets		5,052,601		6,698,829		7,005,592
Inventories		1,940,845		1,682,245		1,706,983
Non-current assets		20,814,547		17,028,341		13,100,175
Investments		3,995,757		2,683,941		2,656,026
Property, plant and equipment, net		14,732,617		12,487,001		8,757,973
Intangible assets		822,341		731,373		673,966
Other non-current assets		1,263,832		1,126,026		1,012,210
Total assets		27,807,993		25,409,415		21,812,750
Current liabilities		8,626,532		7,394,605		6,176,344
Non-current liabilities		6,016,676		4,185,551		3,400,959
Total liabilities		14,643,208		11,580,156		9,577,303
Share capital		1,789,079		1,789,079		1,789,079
Share premium		2,251,113		2,251,113		2,251,113
Retained earnings		9,124,593		9,789,067		8,195,255
Other equity		0		0		0
Total equity		13,164,785		13,829,259		12,235,447


(Unit: In millions of Won, except for per share data)
Description	For the nine months ended September 30, 2018			For the year ended December 31, 2017		For the year ended December 31, 2016
Revenue		15,850,273			25,591,082		24,419,295
Operating profit (loss)		(541,736	)		1,536,730		709,138
Operating profit (loss) from continuing operations		(474,330	)		1,779,721		967,078
Profit (loss) for the period		(474,330	)		1,779,721		967,078
Basic earnings (loss) per share		(1,326	)		4,974		2,703
Diluted earnings (loss) per share		(1,326	)		4,974		2,703

Consolidated subsidiaries (as of September 30, 2018)


Company Interest	Primary Business	Location	Equity
LG Display America, Inc.	Sales	U.S.A.		100	%
LG Display Japan Co., Ltd.	Sales	Japan		100	%
LG Display Germany GmbH	Sales	Germany		100	%
LG Display Taiwan Co., Ltd.	Sales	Taiwan		100	%
LG Display Nanjing Co., Ltd.	Manufacturing	China		100	%
LG Display Shanghai Co., Ltd.	Sales	China		100	%
LG Display Poland Sp. zo.o.	Manufacturing	Poland		100	%
LG Display Guangzhou Co., Ltd.	Manufacturing	China		100	%
LG Display Shenzhen Co., Ltd.	Sales	China		100	%
LG Display Singapore Pte. Ltd.	Sales	Singapore		100	%
L&T Display Technology (Fujian) Limited	Manufacturing and sales	China		51	%
LG Display Yantai Co., Ltd.	Manufacturing	China		100	%
LG Display (China) Co., Ltd.	Manufacturing and sales	China		70	%
Nanumnuri Co., Ltd.	Workplace services	Korea		100	%
Unified Innovative Technology, LLC	Managing intellectual property	U.S.A.		100	%
Global OLED Technology LLC	Managing intellectual property	U.S.A.		100	%
LG Display Guangzhou Trading Co., Ltd.	Sales	China		100	%
LG Display Vietnam Haiphong Co., Ltd.	Manufacturing	Vietnam		100	%
Suzhou Lehui Display Co., Ltd.	Manufacturing and sales	China		100	%
LG Display Fund I LLC	Investing in new emerging companies	U.S.A		100	%
LG Display High-tech (China) Co., Ltd. ⁽³⁾	Manufacturing	China		69	%
MMT (Money Market Trust)	Money market trust	Korea		100	%

Status of equity investments (as of September 30, 2018)

(1)

Consolidated subsidiaries


Company	Investment Amount (in millions)		Initial Equity Investment Date		Equity Interest
LG Display America, Inc.	US$	411		September 24, 1999		100	%
LG Display Japan Co., Ltd.	¥	95		October 12, 1999		100	%
LG Display Germany GmbH	EUR	1		November 5, 1999		100	%
LG Display Taiwan Co., Ltd.	NT$	116		May 19, 2000		100	%
LG Display Nanjing Co., Ltd.	CNY	3,020		July 15, 2002		100	%
LG Display Shanghai Co., Ltd.	CNY	4		January 16, 2003		100	%
LG Display Poland Sp. zo.o.	PLN	511		September 6, 2005		100	%
LG Display Guangzhou Co., Ltd.	CNY	1,655		August 7, 2006		100	%
LG Display Shenzhen Co., Ltd.	CNY	4		August 28, 2007		100	%
LG Display Singapore Pte. Ltd.	US$	1.1		January 12, 2009		100	%
L&T Display Technology (Fujian) Limited	CNY	116		January 5, 2010		51	%
LG Display Yantai Co., Ltd.	CNY	1,008		April 19, 2010		100	%
Nanumnuri Co., Ltd.	W	800		March 19, 2012		100	%
LG Display (China) Co., Ltd.	CNY	8,232		December 27, 2012		70	%
Unified Innovative Technology, LLC	US$	9		March 21, 2014		100	%
LG Display Guangzhou Trading Co., Ltd.	CNY	1.2		May 27, 2015		100	%
Global OLED Technology LLC	US$	138		May 7, 2015		100	%
LG Display Vietnam Haiphong Co., Ltd.⁽¹⁾	US$	300		May 13, 2016		100	%
Suzhou Lehui Display Co., Ltd.	CNY	637		July 1, 2016		100	%
LG Display Fund I LLC ⁽²⁾	USD$	1.2		May 1, 2018		100	%
LG Display High-tech (China) Co., Ltd. ⁽³⁾	CNY	6,517		July 11, 2018		69	%
MMT (Money Market Trust) ⁽⁴⁾	W	395,400		March 31, 2017		100	%

Changes since December 31, 2017:

(1)	During the reporting period, we invested an additional W212,600 million in LG Display Vietnam Haiphong Co., Ltd.

(2)	During the reporting period, we established LG Display Fund I LLC in Wilmington, North Carolina, U.S.A. for the purpose of investing in new emerging companies and our percentage ownership interest in LG Display Fund I LLC is 100%.

(3)	During the reporting period, we established LG Display (China) High-tech Co., Ltd. in Guangzhou, China for the purpose of manufacturing display products, and our percentage ownership interest in LG Display (China) High-tech Co., Ltd is 69%.

(4)	As a result of our money market trust acquisition and disposal transactions conducted during the reporting period, the amount outstanding in our money market trust accounts as of September 30, 2018 is W395,401 million.

(2)

Affiliated companies


Company	Carrying Amount (in millions)		Date of Incorporation		Equity Interest
Paju Electric Glass Co., Ltd.	W	46,808		January 2005		40	%
Invenia Co., Ltd.	W	3,137		January 2001		13	%
Wooree E&L Co., Ltd.	W	3,650		June 2008		14	%
LB Gemini New Growth Fund No. 16⁽¹⁾	W	3,526		December 2009		31	%
YAS Co., Ltd.	W	18,362		April 2002		15	%
Avatec Co., Ltd.	W	22,985		August 2000		17	%
Arctic Sentinel, Inc.		—		June 2008		10	%
CYNORA GmbH	W	20,308		March 2003		14	%
Material Science Co., Ltd.⁽²⁾	W	4,030		January 2014		10	%
Nanosys Inc.⁽³⁾	W	10,461		July 2001		4	%

Changes since December 31, 2017:

(1)	We participate as a limited member in LB Gemini New Growth Fund No. 16. Upon a general meeting, the members have decided to dissolve the fund, which is currently under liquidation.

(2)	In March 2018, we acquired 10,767 voting common shares of Material Science Co., Ltd. for W4,000 million. As of September 30, 2018, our percentage ownership interest in Material Science Co., Ltd. is 10%, and we are entitled to appoint one director of Material Science Co., Ltd.

(3)	In May 2018, we acquired 5,699,954 voting common shares of Nanosys Inc. for W10,732 million. As of September 30, 2018, our percentage ownership interest in Nanosys Inc. is 4%, and we are entitled to appoint one director of Nanosys Inc.

13.

Audit Information

Audit service


(Unit: In millions of Won, hours)
Description	2018 Q1~Q3	2017	2016
Auditor	KPMG Samjong	KPMG Samjong	KPMG Samjong
Activity	Audit by independent auditor	Audit by independent auditor	Audit by independent auditor
Compensation⁽¹⁾	1,170 (450)⁽²⁾	1,040 (450)⁽²⁾	1,020 (440)⁽²⁾
Time required	10,100	17,909	18,291

(1)	Compensation amount is the contracted amount for the full fiscal year.

(2)	Compensation amount in ( ) is for Form 20-F filing and SOX 404 audit.

Non-audit service

None.

14.

Board of Directors

Members of the board of directors

As of September 30, 2018, our board of directors consisted of two non-outside directors, one non-standing director and four outside directors.


(As of September 30, 2018)
Name	Position	Primary responsibility
Sang Beom Han⁽¹⁾	Representative Director (non-outside), Chief Executive Officer and Vice Chairman	Chairman of the board of directors
Sang Don Kim	Director (non-outside), Chief Financial Officer and Senior Vice President	Overall head of finances
Hyun-Hwoi Ha⁽²⁾	Director (non-standing)	Related to the overall management
Joon Park⁽³⁾	Outside Director	Related to the overall management
Sung-Sik Hwang⁽⁴⁾	Outside Director	Related to the overall management
Kun Tai Han⁽⁵⁾	Outside Director	Related to the overall management
Byoung Ho Lee⁽⁶⁾	Outside Director	Related to the overall management

(1)	Sang Beom Han was reappointed for another term as a non-outside director at the annual general meeting of shareholders held on March 15, 2018.

(2)	Hyun Hwoi Ha is also a standing director of LG Uplus Corp., a non-standing director of LG Hausys, Ltd., a non-standing director of LG International Corp., a non-standing director of LG Economic Research Institute and a non-standing director of LG CNS Co., Ltd.

(3)	Joon Park is also an outside director of Green Cross Holdings Corp.

(4)	Sung-Sik Hwang was reappointed for another term as an outside director at the annual general meeting of shareholders held on March 15, 2018. Mr. Hwang is also an outside director of Kyobo Life Insurance Co., Ltd.

(5)	Kun Tai Han is also the chief executive officer of Hans Consulting.

(6)	Byoung Ho Lee was appointed as an outside director at the annual general meeting of shareholders held on March 15, 2018.

Committees of the board of directors

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

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


(As of January 22, 2018)
Committee	Composition	Member
Outside Director Nomination Committee⁽¹⁾	1 non-standing director and 2 outside directors	Hyun-Hwoi Ha,Joon Park, Sung-Sik Hwang

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

As of the September 30, 2018, the composition of the Audit Committee is as follows.


(As of September 30, 2018)
Committee	Composition	Member
Audit Committee	3 outside directors	Sung-Sik Hwang⁽¹⁾, Joon Park, Kun Tai Han

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

Independence of directors

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

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

15.

Information Regarding Shares

Total number of shares

(1)

Total number of shares authorized to be issued (as of September 30, 2018): 500,000,000 shares.

(2)

Total shares issued and outstanding (as of September 30, 2018): 357,815,700 shares.

Shareholder list

(1)

Largest shareholder and related parties as of September 30, 2018:


Name	Relationship	Number of shares of common stock		Equity interest
LG Electronics	Largest Shareholder		135,625,000		37.9	%
Sang Beom Han	Related Party		48,355		0.0	%
Sang Don Kim	Related Party		6,000		0.0	%

(2)

Shareholders who are known to us to own 5% or more of our shares as of September 30, 2018:


Beneficial owner	Number of shares of common stock		Equity interest
LG Electronics		135,625,000		37.9	%
National Pension Service		29,275,136		8.18	%

16.

Directors and Employees

Directors

(1)

Remuneration for directors in 2018 Q1~Q3:


(Unit: person, in millions of Won)
Classification	No. of directors⁽¹⁾		Amount paid⁽²⁾			Per capita average remuneration paid⁽³⁾
Non-outside directors		3		3,013			1,004
Outside directors who are not audit committee members		1		65			65
Outside directors who are audit committee members		3		176			59

Total		7		3,254	⁽⁴⁾		1,128

(1)	Number of directors as at September 30, 2018.

(2)	Amount paid is calculated on the basis of amount of cash actually paid.

(3)	Per capita average remuneration paid is calculated by dividing total amount paid by the average number of directors for the nine months ended September 30, 2018.

(4)	As Jin Jang resigned as an outside director on March 14, 2018 and Byoung Ho Lee was appointed as an outside director at the annual general meeting of shareholders held on March 15, 2018, the total amount paid includes remuneration paid to both Mr. Jang and Mr. Lee.

(2)

Remuneration for individual directors and audit committee members

•

Not required for quarterly reports

(3)

Stock options

Not applicable.

Employees

As of September 30, 2018, we had 33,007 employees (excluding our directors). On average, our male employees have served 9.7 years and our female employees have served 8.3 years. The total amount of salary paid to our employees for the nine months ended September 30, 2018 based on income tax statements submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act was W1,626,284 million for our male employees and W366,105 million for our female employees. The following table provides details of our employees as of September 30, 2018:


(Unit: person, in millions of Won, year)
	Number of employees⁽¹⁾		Total salary in 2018 Q1~Q3^(2)(3)(4)		Average salary per capita⁽⁵⁾		Average years of service
Male		25,000		1,626,284		66.0		9.7
Female		7,986		366,105		46.0		8.3
Total		33,434		1,992,389		61.0		9.4

(1)	Includes part-time employees hired for temporary needs or to serve as temporary replacements for employees on parental leave.

(2)	Welfare benefits and retirement expenses have been excluded. Total welfare benefit provided to our employees for the nine months ended September 30, 2018 was W292,222 million and the per capita welfare benefit provided was W8.9 million.

(3)	Based on income tax statements, which are submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act.

(4)	Includes incentive payments to employees who have transferred from our affiliated companies.

(5)	Calculated using the average number of employees (male: 24,534, female: 7,981) for the nine months ended September 30, 2018.

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

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

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

(Unaudited)

September 30, 2018 and 2017

(With Independent Auditors’ Review Report Thereon)

Table of Contents


	Page

Independent Auditors’ Review Report		31

Condensed Consolidated Interim Statements of Financial Position		33

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)		34

Condensed Consolidated Interim Statements of Changes in Equity		35

Condensed Consolidated Interim Statements of Cash Flows		36

Notes to the Condensed Consolidated Interim Financial Statements		38

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Reviewed Financial Statements

We have reviewed the accompanying condensed consolidated interim financial statements of LG Display Co., Ltd. and subsidiaries (the “Group”) which comprise the condensed consolidated interim statement of financial position as of September 30, 2018, the condensed consolidated interim statements of comprehensive income (loss) for each of the three-month and nine-month periods ended September 30, 2018 and 2017, and statements of changes in equity and cash flows for the nine-month periods ended September 30, 2018 and 2017, and notes comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Condensed Consolidated Interim Financial Statements

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

Auditors’ Responsibility

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

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

Conclusion

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

Other Matters

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

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

KPMG Samjong Accounting Corp.

Seoul, Korea

November 9, 2018

This report is effective as of November 9, 2018 the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Financial Position

(Unaudited)

As of September 30, 2018 and December 31, 2017


(In millions of won)	Note		September 30, 2018			December 31, 2017
Assets
Cash and cash equivalents		4, 25	W	2,760,240			2,602,560
Deposits in banks		4, 25		78,400			758,078
Trade accounts and notes receivable, net		5, 14, 25, 27		3,301,596			4,325,120
Other accounts receivable, net		5, 25		82,090			164,827
Other current financial assets		6, 25		18,286			27,252
Inventories		7		2,587,403			2,350,084
Prepaid income taxes				14,772			3,854
Other current assets		5		402,512			241,928

Total current assets				9,245,299			10,473,703

Deposits in banks		4, 25		11			11
Investments in equity accounted investees		8		133,267			122,507
Other non-current accounts receivable, net		5, 25		—			8,738
Other non-current financial assets		6, 25		92,986			59,836
Property, plant and equipment, net		9, 17		20,133,254			16,201,960
Intangible assets, net		10, 17		992,026			912,821
Deferred tax assets		23		1,144,381			985,352
Other non-current assets		5		378,403			394,759

Total non-current assets				22,874,328			18,685,984

Total assets			W	32,119,627			29,159,687

Liabilities
Trade accounts and notes payable		25, 27	W	3,176,696			2,875,090
Current financial liabilities		11, 25		2,048,754			1,452,926
Other accounts payable		25		3,146,185			3,169,937
Accrued expenses				796,895			812,615
Income tax payable				156,535			321,978
Provisions		13		91,559			76,016
Advances received		14		677,094			194,129
Other current liabilities		13		50,031			75,991

Total current liabilities				10,143,749			8,978,682

Non-current financial liabilities		11, 25		5,671,711			4,150,192
Non-current provisions		13		28,095			28,312
Defined benefit liabilities, net		12		259,294			95,447
Long-term advances received		14		1,218,791			830,335
Deferred tax liabilities		23		15,122			24,646
Other non-current liabilities		13		90,786			70,563

Total non-current liabilities				7,283,799			5,199,495

Total liabilities				17,427,548			14,178,177

Equity
Share capital		15		1,789,079			1,789,079
Share premium				2,251,113			2,251,113
Retained earnings				10,078,039			10,621,571
Reserves		15		(321,391	)		(288,280	)

Total equity attributable to owners of the Controlling Company				13,796,840			14,373,483

Non-controlling interests				895,239			608,027

Total equity				14,692,079			14,981,510

Total liabilities and equity			W	32,119,627			29,159,687

See accompanying notes to the condensed consolidated interim financial statements.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Comprehensive Income (Loss)

(Unaudited)

For the three-month and nine-month periods ended September 30, 2018 and 2017


(In millions of won, except earnings per share)	Note		For the three-month period ended September 30						For the nine-month period ended September 30
			2018			2017			2018			2017
Revenue		16, 17, 27	W	6,102,363			6,973,095		W	17,388,775			20,664,143
Cost of sales		7, 18, 27		(5,213,629	)		(5,717,586	)		(15,491,214	)		(16,175,486	)

Gross profit				888,734			1,255,509			1,897,561			4,488,657

Selling expenses		19		(220,736	)		(212,817	)		(597,547	)		(678,546	)
Administrative expenses		19		(199,732	)		(170,625	)		(578,145	)		(511,032	)
Research and development expenses				(328,195	)		(286,074	)		(908,229	)		(881,937	)

Operating profit (loss)				140,071			585,993			(186,360	)		2,417,142

Finance income		22		48,421			35,752			202,304			164,176
Finance costs		22		(49,177	)		(45,954	)		(241,504	)		(192,961	)
Other non-operating income		21		218,147			226,800			816,198			767,282
Other non-operating expenses		21		(249,417	)		(205,871	)		(917,205	)		(873,892	)
Equity in income of equity accounted investees, net				2,218			2,003			1,035			6,915

Profit (loss) before income tax				110,263			598,723			(325,532	)		2,288,662
Income tax expense		23		92,755			121,479			6,485			395,253

Profit (loss) for the period				17,508			477,244			(332,017	)		1,893,409

Other comprehensive income (loss)
Items that will never be reclassified to profit or loss
Remeasurements of net defined benefit liabilities		12		(4,737	)		(3,639	)		(16,129	)		(11,963	)
Other comprehensive income (loss) from associates				7			(45	)		30			448
Related income tax		12		1,267			881			4,893			2,895

				(3,463	)		(2,803	)		(11,206	)		(8,620	)

Items that are or may be reclassified to profit or loss
Foreign currency translation differences for foreign operations		22		(186,146	)		109,892			(46,214	)		(895	)
Other comprehensive income (loss) from associates				(271	)		204			418			2,367

				(186,417	)		110,096			(45,796	)		1,472

Other comprehensive income (loss) for the period, net of income tax				(189,880	)		107,293			(57,002	)		(7,148	)

Total comprehensive income (loss) for the period			W	(172,372	)		584,537			(389,019	)		1,886,261

Profit (loss) attributable to:
Owners of the Controlling Company				3,421			441,982			(353,418	)		1,765,772
Non-controlling interests				14,087			35,262			21,401			127,637

Profit (loss) for the period			W	17,508			477,244			(332,017	)		1,893,409

Total comprehensive income (loss) attributable to:
Owners of the Controlling Company				(151,747	)		532,860			(397,735	)		1,757,226
Non-controlling interests				(20,625	)		51,677			8,716			129,035

Total comprehensive income (loss) for the period			W	(172,372	)		584,537			(389,019	)		1,886,261

Earnings (loss) per share (In won)
Basic earnings (loss) per share		24	W	10			1,235			(988	)		4,935

Diluted earnings (loss) per share		24	W	10			1,235			(988	)		4,935

See accompanying notes to the condensed consolidated interim financial statements.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Changes in Equity

(Unaudited)

For the nine-month periods ended September 30, 2018 and 2017


	Attributable to owners of the Controlling Company
(In millions of won)	Share capital		Share premium		Retained earnings			Reserves			Sub-total			Non-controlling interests			Total equity
Balances at January 1, 2017	W	1,789,079		2,251,113		9,004,283			(88,478	)		12,955,997			506,391			13,462,388

Total comprehensive income (loss) for the period
Profit for the period		—		—		1,765,772			—			1,765,772			127,637			1,893,409

Other comprehensive income (loss)
Remeasurements of net defined benefit liabilities, net of tax		—		—		(9,068	)		—			(9,068	)		—			(9,068	)
Foreign currency translation differences for foreign operations, net of tax		—		—		—			(2,293	)		(2,293	)		1,398			(895	)
Other comprehensive income from asssociates		—		—		448			2,367			2,815			—			2,815

Total other comprehensive income (loss)		—		—		(8,620	)		74			(8,546	)		1,398			(7,148	)

Total comprehensive income for the period	W	—		—		1,757,152			74			1,757,226			129,035			1,886,261

Transaction with owners, recognized directly in equity
Dividends to equity holders		—		—		(178,908	)		—			(178,908	)		—			(178,908	)
Subsidiaries’ dividends distributed to non-controlling interests		—		—		—			—			—			(5,929	)		(5,929	)
Capital contribution from non-controlling interests		—		—		—			—			—			4,300			4,300

Balances at September 30, 2017	W	1,789,079		2,251,113		10,582,527			(88,404	)		14,534,315			633,797			15,168,112

Balances at January 1, 2018	W	1,789,079		2,251,113		10,621,571			(288,280	)		14,373,483			608,027			14,981,510

Total comprehensive income (loss) for the period
Profit (loss) for the period		—		—		(353,418	)		—			(353,418	)		21,401			(332,017	)

Other comprehensive income (loss)
Remeasurements of net defined benefit liabilities, net of tax		—		—		(11,236	)		—			(11,236	)		—			(11,236	)
Foreign currency translation differences for foreign operations, net of tax		—		—		—			(33,529	)		(33,529	)		(12,685	)		(46,214	)
Other comprehensive income from associates		—		—		30			418			448			—			448

Total other comprehensive loss		—		—		(11,206	)		(33,111	)		(44,317	)		(12,685	)		(57,002	)

Total comprehensive income (loss) for the period	W	—		—		(364,624	)		(33,111	)		(397,735	)		8,716			(389,019	)

Transaction with owners, recognized directly in equity
Dividends to equity holders		—		—		(178,908	)		—			(178,908	)		—			(178,908	)
Subsidiaries’ dividends distributed to non-controlling interests		—		—		—			—			—			(53,107	)		(53,107	)
Capital contribution from non-controlling interests		—		—		—			—			—			331,603			331,603

Balances at September 30, 2018	W	1,789,079		2,251,113		10,078,039			(321,391	)		13,796,840			895,239			14,692,079

See accompanying notes to the condensed consolidated interim financial statements.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows

(Unaudited)

For the nine-month periods ended September 30, 2018 and 2017


(In millions of won)	Note		2018			2017
Cash flows from operating activities:
Profit (loss) for the period			W	(332,017	)		1,893,409
Adjustments for:
Income tax expense		23		6,485			395,253
Depreciation		18		2,374,975			2,013,067
Amortization of intangible assets		18		324,563			316,036
Gain on foreign currency translation				(73,426	)		(128,321	)
Loss on foreign currency translation				136,914			85,638
Expenses related to defined benefit plans		12		155,228			148,679
Gain on disposal of property, plant and equipment				(5,125	)		(14,259	)
Loss on disposal of property, plant and equipment				13,362			9,340
Impairment loss on property, plant and equipment				25,715			—
Gain on disposal of intangible assets				(239	)		(308	)
Loss on disposal of intangible assets				—			9
Impairment loss on intangible assets				353			1,717
Reversal of impairment loss on intangible assets				(26	)		—
Warranty expense				154,676			164,109
Finance income				(61,814	)		(103,672	)
Finance costs				116,252			118,544
Equity in income of equity method accounted investees		8		(1,035	)		(6,915	)
Other income				(3,344	)		(16,505	)
Other expenses				593			1,259

				3,164,107			2,983,671
Changes in
Trade accounts and notes receivable				946,803			223,256
Other accounts receivable				(6,969	)		35,132
Other current assets				(102,441	)		9,105
Inventories				(344,614	)		(370,064	)
Other non-current assets				(39,400	)		(115,894	)
Trade accounts and notes payable				303,604			45,297
Other accounts payable				(178,400	)		(66,742	)
Accrued expenses				(24,311	)		20,974
Other current liabilities				105,308			(4,228	)
Other non-current liabilities				19,123			5,178
Long-term advances received				819,646			1,020,470
Provisions				(149,139	)		(130,380	)
Defined benefit liabilities, net				(7,536	)		(6,311	)

				1,341,674			665,793

Cash generated from operating activities				4,173,764			5,542,873
Income taxes paid				(371,198	)		(358,096	)
Interests received				59,699			36,855
Interests paid				(150,666	)		(99,246	)

Net cash provided by operating activities			W	3,711,599			5,122,386

See accompanying notes to the condensed consolidated interim financial statements.

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Condensed Consolidated Interim Statements of Cash Flows, Continued

(Unaudited)

For the nine-month periods ended September 30, 2018 and 2017


(In millions of won)	Note		2018			2017
Cash flows from investing activities:
Dividends received			W	5,272			8,639
Increase in deposits in banks				(772,219	)		(1,522,890	)
Proceeds from withdrawal of deposits in banks				1,451,541			1,358,632
Acquisition of available-for-sale financial assets				—			(195	)
Acquisition of financial assets at fair value through profit or loss				(432	)		—
Proceeds from disposal of financial assets at fair value through other comprehensive income				6			—
Acquisition of investments in equity accounted investees				(14,732	)		(20,308	)
Proceeds from disposal of investments in equity accounted investees				2,382			6,697
Acquisition of property, plant and equipment				(6,053,560	)		(4,798,574	)
Proceeds from disposal of property, plant and equipment				140,093			114,624
Acquisition of intangible assets				(405,293	)		(335,803	)
Proceeds from disposal of intangible assets				960			874
Government grants received				1,210			1,505
Receipt from settlement of derivatives				314			2,745
Proceeds from collection of short-term loans				11,755			693
Increase in short-term loans				(5,000	)		—
Increase in long-term loans				(31,180	)		(300	)
Increase in deposits				(14,373	)		(2,534	)
Decrease in deposits				3,562			3,639
Proceeds from disposal of emission rights				10,200			—

Net cash used in investing activities				(5,669,494	)		(5,182,556	)

Cash flows from financing activities:		26
Proceeds from short-term borrowings				109,446			—
Repayments of short-term borrowings				(109,712	)		(113,209	)
Proceeds from issuance of bonds				498,170			298,780
Proceeds from long-term borrowings				2,532,019			847,702
Repayments of current portion of long-term borrowings and bonds				(1,015,802	)		(364,774	)
Subsidiaries’ dividends distributed to non-controlling interests				(51,085	)		(5,929	)
Capital contribution from non-controlling interests				331,603			4,300
Dividends paid				(178,908	)		(178,908	)

Net cash provided by financing activities				2,115,731			487,962

Net increase in cash and cash equivalents				157,836			427,792
Cash and cash equivalents at January 1				2,602,560			1,558,696
Effect of exchange rate fluctuations on cash held				(156	)		(12,452	)

Cash and cash equivalents at September 30			W	2,760,240			1,974,036

See accompanying notes to the condensed consolidated interim financial statements.

1.	Reporting Entity

(a)

Description of the Controlling Company

LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 and the Controlling Company is a public corporation listed in Korea Exchange since 2004. The main business of the Controlling Company and its subsidiaries (the “Group”) is to manufacture and sell displays and its related products. As of September 30, 2018, the Group is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China, Poland and Vietnam. The Controlling Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of September 30, 2018, LG Electronics Inc., a major shareholder of the Controlling Company, owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of September 30, 2018, there are 357,815,700 shares of common stock outstanding. The Controlling Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of September 30, 2018, there are 19,660,196 ADSs outstanding.

1.	Reporting Entity, Continued

(b)

Consolidated Subsidiaries as of September 30, 2018

(In millions)

Subsidiaries

Location

Percentage of
ownership

Fiscal year
end

Date of incorporation

Business

Capital stocks

LG Display America, Inc.

San Jose, U.S.A.

100

December 31

September 24, 1999

Sell Display products

USD 411

LG Display Japan Co., Ltd.

Tokyo, Japan

100

December 31

October 12, 1999

Sell Display products

JPY 95

LG Display Germany GmbH

Eschborn, Germany

100

December 31

November 5, 1999

Sell Display products

EUR 1

LG Display Taiwan Co., Ltd.

Taipei, Taiwan

100

December 31

April 12, 1999

Sell Display products

NTD 116

LG Display Nanjing Co., Ltd.

Nanjing, China

100

December 31

July 15, 2002

Manufacture Display products

CNY 3,020

LG Display Shanghai Co., Ltd.

Shanghai, China

100

December 31

January 16, 2003

Sell Display products

CNY 4

LG Display Poland Sp. z o.o.

Wroclaw, Poland

100

December 31

September 6, 2005

Manufacture Display products

PLN 511

LG Display Guangzhou Co., Ltd.

Guangzhou, China

100

December 31

June 30, 2006

Manufacture Display products

CNY 1,655

LG Display Shenzhen Co., Ltd.

Shenzhen, China

100

December 31

August 28, 2007

Sell Display products

CNY 4

LG Display Singapore Pte. Ltd.

Singapore

100

December 31

January 12, 2009

Sell Display products

USD 1.1

L&T Display Technology (Fujian) Limited

Fujian, China

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.(*1)

Guangzhou, China

December 31

December 10, 2012

Manufacture and sell Display
products

CNY 8,232

Unified Innovative Technology, LLC

Wilmington, U.S.A.

100

December 31

March 12, 2014

Manage intellectual property

USD 9

LG Display Guangzhou Trading Co., Ltd.

Guangzhou, China

100

December 31

April 28, 2015

Sell Display products

CNY 1.2

Global OLED Technology, LLC

Herndon, U.S.A.

100

December 31

December 18, 2009

Manage OLED intellectual
property

USD 138

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

Haiphong Vietnam

100

December 31

May 5, 2016

Manufacture Display products

USD 300

Suzhou Lehui Display Co., Ltd.

Suzhou, China

100

December 31

July 1, 2016

Manufacture and sell LCD
module and LCD monitor sets

CNY 637

LG DISPLAY FUND I LLC(*2)

Wilmington, U.S.A.

100

December 31

May 1, 2018

Invest in venture business and
obtain technologies

USD 1.2 -

LG Display High-Tech (China) Co., Ltd. (*3)

Guangzhou, China

December 31

July 11, 2018

Manufacture Display products

CNY 6,517

Money Market
Trust(*4)

Seoul, South Korea

100

December 31

—

Money market trust

KRW 395,401

1.	Reporting Entity, Continued

(*1)

For the nine-month period ended September 30, 2018, the Controlling Company contributed W212,600 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”). There was no change in the Controlling Company’s ownership percentage in LGDVN as a result of this additional investment.

(*2)

For the nine-month period ended September 30, 2018, the Controlling Company established LG DISPLAY FUND I LLC in Wilmington, U.S.A. to invest in venture business and the Controlling Company has a 100% equity interest of this subsidiary.

(*3)

For the nine-month period ended September 30, 2018, the Controlling Company established LG Display High-Tech (China) Co., Ltd. in Guangzhou China to manufacture Display products and the Group has a 69% equity interest of this subsidiary.

(*4)

For the nine-month period ended September 30, 2018, the Controlling Company acquired and disposed interests in Money Market Trust (“MMT”) and the MMT amount as of September 30, 2018 is W395,401 million.

W90,281 million is attributable to the Controlling Company over the distributed dividends from consolidated subsidiaries for the nine-month period ended September 30, 2018.

2.	Basis of Presenting Financial Statements

(a)

Statement of Compliance

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

K-IFRS No. 1109, K-IFRS No. 1115, and K-IFRS No. 2122 have been applied in the condensed consolidated interim financial statements as of and for the nine-month period ended September 30, 2018. Changes to significant accounting policies are described in Note 3.

(b)

Basis of Measurement

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

•

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

•

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

(c)

Functional and Presentation Currency

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

2.	Basis of Presenting Financial Statements, Continued

(d)

Use of Estimates and Judgments

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

During the nine-month period ended September 30, 2018, based on the review of the past accumulated usage information that became available, the Group management reassessed the economic useful life of the Mask and Mold which had previously been classified as inventory. The balances of such Mask and Mold inventories amounted to W111,456 million as of December 31, 2017. Based on the results of the reassessment, the Group changed useful lives of Mask and Mold to two years and accounted for the change as a change in accounting estimate. The Group also changed the classification of Mask and Mold to property, plant and equipment.

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

3.	Summary of Significant Accounting Policies

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

(a)

Changes in Accounting Policies

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

(i)

K-IFRS No. 1109, Financial Instruments

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

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

3.	Summary of Significant Accounting Policies, Continued

(a)

Changes in Accounting Policies, Continued

Classification and measurement of financial assets and financial liabilities

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

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

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

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

•

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

•

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

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

•

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

•

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

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

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

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

3.	Summary of Significant Accounting Policies, Continued

(a)

Changes in Accounting Policies, Continued

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


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

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

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

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


(In millions of won)	Classification under K-IFRS No. 1039	Classification under K-IFRS No. 1109		Carrying amount under K-IFRS No. 1039		Carrying amount under K-IFRS No. 1109		Difference
Financial assets
Cash and cash equivalents	Loans and receivables		Amortized cost	W	2,602,560		2,602,560		—
Deposits	Loans and receivables		Amortized cost		758,089		758,089		—
Trade receivables	Loans and receivables		Amortized cost		4,325,120		4,325,120		—
Other receivables	Loans and receivables		Amortized cost		173,565		173,565		—
Debt instrument	Available-for-sale		FVOCI-debt instrument		162		162		—
Equity instrument	Available-for-sale		Mandatorily at FVTPL		4,980		4,980		—
Convertible bonds	Designated as at FVTPL		Mandatorily at FVTPL		1,552		1,552		—
Derivatives	Designated as at FVTPL		Mandatorily at FVTPL		842		842		—
Others	Loans and receivables		Amortized cost		79,552		79,552		—

Total financial assets				W	7,946,422		7,946,422		—

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

3.	Summary of Significant Accounting Policies, Continued

(a)

Changes in Accounting Policies, Continued

ii)

Impairment of financial assets

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

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

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

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

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

iii)

Hedge Accounting

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

(ii)

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

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

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

3.	Summary of Significant Accounting Policies, Continued

(a)

Changes in Accounting Policies, Continued

(i)

Variable Consideration

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

The effect of the application of K-IFRS No. 1115 on the Group’s consolidated interim statement of financial position as of September 30, 2018 is as follows. There is no impact on the condensed consolidated interim statement of comprehensive income and the cash flows for the nine-month period ended September 30, 2018.


(in millions won)
Categories	Adoption of K-IFRS No. 1115		Adjustments			Adoption of K-IFRS No. 1018
Current Assets
Other current assets	W	402,512		(4,834	)		397,678
Current Liabilities
Provisions	W	91,559		(4,834	)		86,725

(ii)

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

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

3.	Summary of Significant Accounting Policies, Continued

(b)

New Standards and Amendments Not Yet Adopted

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

(i)

K-IFRS No. 1116, Leases

The Group plans to adopt K-IFRS No. 1116, Leases, in its consolidated financial statements for annual period beginning on January 1, 2019, assess the financial impact of the adoption of K-IFRS No. 1116 and disclose the results in its consolidated financial statements for the year ending December 31, 2018. As of September 30, 2018, other than the potential impacts described in the consolidated financial statements as of and for the year ended December 31, 2017, there are no significant changes in relation to preparation for the adoption of this new standard.

4.	Cash and Cash Equivalents and Deposits in Banks

Cash and cash equivalents and deposits in banks as of September 30, 2018 and December 31, 2017 are as follows:



(In millions of won)	September 30, 2018		December 31, 2017
Current assets
Cash and cash equivalents
Demand deposits	W	2,760,240		2,602,560
Deposits in banks
Time deposits	W	4,318		685,238
Restricted cash (*)		74,082		72,840

	W	78,400		758,078

Non-current assets
Deposits in banks
Restricted cash (*)	W	11		11

	W	2,838,651		3,360,649

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

5.	Receivables and Other Assets

(a)

Trade accounts and notes receivable as of September 30, 2018 and December 31, 2017 are as follows:



(In millions of won)	September 30, 2018		December 31, 2017
Trade, net	W	2,729,038		3,275,902
Due from related parties		572,558		1,049,218

	W	3,301,596		4,325,120

(b)

Other accounts receivable as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Current assets
Non-trade receivable, net	W	73,013		150,554
Accrued income		9,077		14,273

	W	82,090		164,827

Non-current assets
Long-term non-trade receivable		—		8,738

	W	82,090		173,565

Due from related parties included in other accounts receivable, as of September 30, 2018 and December 31, 2017 are W1,018 million and W10,821 million, respectively.

5.	Receivables and Other Assets, Continued

(c)

The aging of trade accounts and notes receivable and other accounts receivable as of September 30, 2018 and December 31, 2017 are as follows:


	September 30, 2018
	Book value				Impairment loss
(In millions of won)	Trade accounts and notes receivable		Other accounts *receivable()**		Trade accounts and notes receivable			Other accounts *receivable()**
Not past due	W	3,288,257		74,047		(528	)		(364	)
Past due 1-15 days		8,336		6,619		(2	)		(62	)
Past due 16-30 days		5,529		934		—			(2	)
Past due 31-60 days		4		543		—			(3	)
Past due more than 60 days		—		779		—			(401	)

	W	3,302,126		82,922		(530	)		(832	)

(*)

Other accounts receivable includes non-trade receivable and accrued income.


	December 31, 2017
	Book value				Impairment loss
(In millions of won)	Trade accounts and notes receivable		Other accounts receivable		Trade accounts and notes receivable			Other accounts receivable
Not past due	W	4,323,465		173,493		(1,631	)		(905	)
Past due 1-15 days		2,652		488		(1	)		(3	)
Past due 16-30 days		631		65		—			(1	)
Past due 31-60 days		—		208		—			(2	)
Past due more than 60 days		4		622		—			(400	)

	W	4,326,752		174,876		(1,632	)		(1,311	)

5.	Receivables and Other Assets, Continued

The movement in the allowance for impairment in respect of trade accounts and notes receivable and other accounts receivable for the nine-month periods ended September 30, 2018 and the year ended December 31, 2017 are as follows:


	2018						2017
(In millions of won)	Trade accounts and notes receivable			Other accounts receivable			Trade accounts and notes receivable		Other accounts receivable
Balance at the beginning of the period	W	1,632			1,311			1,488		1,116
(Reversal of) bad debt expense		(1,102	)		(479	)		144		195

Balance at the reporting date	W	530			832			1,632		1,311

5.	Receivables and Other Assets, Continued

(d)

Other assets as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Current assets
Advance payments	W	17,212		7,973
Prepaid expenses		165,458		83,626
Value added tax refundable		215,008		148,351
Emission rights		—		1,978
Right to recover returned goods(*)		4,834		—

	W	402,512		241,928

Non-current assets
Long-term prepaid expenses	W	378,403		394,759

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

6.	Other Financial Assets

(a)

Other financial assets as of September 30, 2018 are as follows:


(In millions of won)	September 30, 2018
Current assets
Financial asset at fair value through profit or loss
Derivatives(*1)	W	2,500
Financial asset at fair value through other comprehensive income
Debt instrument
Government bonds	W	97
Financial asset carried at amortized cost
Deposits	W	3,080
Short-term loans		12,609

	W	18,286

Non-current assets
Financial asset at fair value through profit or loss
Equity instrument
Intellectual Discovery, Ltd.	W	729
Kyulux, Inc.		1,968
Fineeva Co., Ltd.		285
ARCH Venture Fund Vill, L.P.		2,518

	W	5,500

Convertible bonds	W	1,552
Derivatives(*2)		182

Financial asset at fair value through other comprehensive income
Debt instrument
Government bonds	W	62

Financial asset carried at amortized cost
Deposits	W	30,255
Long-term loans		55,435

	W	92,986

(*1)	Represents exchange rate swap contracts related to foreign currency denominated borrowings.

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

6.	Other Financial Assets, Continued

(b)

Other financial assets as of December 31, 2017 are as follows:


(In millions of won)	December 31, 2017
Current assets
Available-for-sale financial assets
Debt instrument
Government bonds	W	6
Deposits		10,480
Short-term loans		16,766

	W	27,252

Non-current assets
Financial asset at fair value through profit or loss	W	1,552
Available-for-sale financial assets
Debt instrument
Government bonds	W	156
Equity instrument
Intellectual Discovery, Ltd.	W	729
Kyulux, Inc.		1,968
ARCH Venture Fund Vill, LP.		2,283

	W	4,980

Deposits	W	19,898
Long-term loans		32,408
Derivatives(*)		842

	W	59,836

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

Other financial assets of related parties as of September 30, 2018 and December 31, 2017 are W2,000 million and W2,750 million, respectively.

7.	Inventories

Inventories as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Finished goods	W	955,747		965,643
Work-in-process		899,859		748,592
Raw materials		548,651		344,997
Supplies		183,146		290,852

	W	2,587,403		2,350,084

For the nine-month periods ended September 30, 2018 and 2017, the amount of inventories recognized as cost of sales, inventory write-downs and reversal and usage of inventory write-downs included in cost of sales are as follows:


(In millions of won)	2018			2017
Inventories recognized as cost of sales	W	15,491,214			16,175,486
Including: inventory write-downs		274,874			253,311
Including: reversal and usage of inventory write-downs		(206,127	)		(204,123	)

8.	Investments in Equity Accounted Investees

Associates as of September 30, 2018 and December 31, 2017 are as follows:

(In millions of won)

Associates

Location

Fiscal year
end

Date of
incorporation

Business

2018

2017

Percentage
of ownership

Carrying
amount

Percentage
of ownership

Carrying
amount

Paju Electric Glass Co., Ltd.

Paju,

South Korea

December 31

January

2005

Manufacture electric glass for FPDs

40%

46,808

40%

46,511

INVENIA Co., Ltd.

Seongnam,

South Korea

December 31

January

2001

Develop and manufacture equipment for FPDs

13%

3,137

13%

2,887

WooRee E&L Co., Ltd.

Ansan,

South Korea

December 31

June

2008

Manufacture LED back light unit packages

14%

3,650

14%

7,270

LB Gemini New Growth Fund No. 16 (*1)

Seoul,

South Korea

December 31

December

2009

Invest in small and middle sized companies and benefit from M&A opportunities

31%

3,526

31%

5,910

YAS Co., Ltd.

Paju,

South Korea

December 31

April

2002

Develop and manufacture deposition equipment for OLEDs

15%

18,362

15%

15,888

AVATEC Co., Ltd.

Daegu,

South Korea

December 31

August

2000

Process and sell electric glass for FPDs

17%

22,985

17%

23,732

Arctic Sentinel, Inc.

Los Angeles, U.S.A.

March 31

June

2008

Develop and manufacture

tablet for kids

10%

—

10%

—

CYNORA GmbH

Bruchsal,

Germany

December 31

March

2003

Develop organic emitting materials for displays and lighting devices

14%

20,309

14%

20,309

8.	Investments in Equity Accounted Investees, Continued

(In millions of won)

Associates

Location

Fiscal
year end

Date of
incorporation

Business

2018

2017

Percentage
of
ownership

Carrying
amount

Percentage
of
ownership

Carrying
amount

Material Science Co., Ltd. (*2)

Seoul,

South Korea

December 31

January

2014

Develop, manufacture, and sell materials for display

10%

4,030

—

Nanosys Inc. (*3)

Milpitas,

U.S.A.

December 31

July

2001

Develop, manufacture, and sell materials for display

10,460

—

133,267

122,507

Although the Controlling Company’s share interests in INVENIA Co., Ltd., WooRee E&L Co., Ltd., YAS Co., Ltd., AVATEC Co., Ltd., Arctic Sentinel, Inc., Cynora GmbH, Material Science and Nanosys 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. Accordingly, the investments in these investees have been accounted for using the equity method.

(*1)	The Controlling Company is a member of a limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). On the other hand, a resolution to dissolve the fund was approved at the general meeting and the fund is in process of liquidation as of September 30, 2018.

(*2)

In March 2018, the Controlling Company invested W4,000 million and acquired 10,767 shares of common stock with voting rights in Material Science Co., Ltd. As of September 30, 2018, the Controlling Company‘s ownership percentage in Material Science Co., Ltd. is 10% and the Controlling Company has the right to appoint a director to the board of directors of the investee.

(*3)

In May 2018, the Controlling Company invested W10,732 million and acquired 5,699,954 shares of preferred stock with voting rights in Nanosys Inc. As of September 30, 2018, the Controlling Company‘s ownership percentage in Nanosys Inc. is 4% and the Controlling Company has the right to appoint a director to the board of directors of the investee.

Dividends received from equity method investees for the nine-month periods ended September 30, 2018 and 2017 amounted to W5,272 million and W8,639 million, respectively.

9.	Property, Plant and Equipment

For the nine-month periods ended September 30, 2018 and 2017, the Group purchased property, plant and equipment of W6,323,537 million and W5,036,458 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W96,530 million and 2.72%, and W29,963 million and 1.89% for the nine-month periods ended September 30, 2018 and 2017, respectively. Also, for the nine-month periods ended September 30, 2018 and 2017, the Group disposed of property, plant and equipment with carrying amounts of W103,573 million and W71,627 million, respectively, and recognized W5,125 million and W13,362 million as gain and loss, respectively, on disposal of property, plant and equipment for the nine-month period ended September 30, 2018 (gain and loss for the nine-month period ended September 30, 2017: W14,259 million and W9,340 million, respectively).

10.	Intangible Assets

(a)

The Group capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of September 30, 2018 and December 31, 2017 are W399,909 million and W296,760 million, respectively.

(b)

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

11.	Financial Liabilities

(a)

Financial liabilities as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Current
Current portion of long-term borrowings and bonds	W	2,048,754		1,452,926
Non-current
Won denominated borrowings	W	2,300,770		1,251,258
Foreign currency denominated borrowings		1,618,123		1,392,931
Bonds		1,745,738		1,506,003
Derivatives (*)		7,080		—

	W	5,671,711		4,150,192

(*)	Represents exchange rate swap contracts related to foreign currency denominated borrowings.

(b)

Won denominated long-term borrowings as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won) Lender	Annual interest rate as of September 30, 2018 (%)	September 30, 2018			December 31, 2017
Woori Bank	2.75	W	1,421			1,922
Shinhan Bank	CD rate (91days) + 0.30		200,000			200,000
Korea Development Bank and others	CD rate (91days) + 0.64~0.74, 2.28~3.25		2,800,000			1,250,000
Less current portion of long-term borrowings			(700,651	)		(200,664	)

		W	2,300,770			1,251,258

11.	Financial Liabilities, Continued

(c)

Foreign currency denominated long-term borrowings as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won, USD and CNY) Lender	Annual interest rate as of *September 30, 2018 (%)()**	September 30, 2018			December 31, 2017
The Export-Import Bank of Korea	3ML+0.86~1.70	W	673,184			755,337
China Construction Bank and others	USD : 3ML+0.80~2.00 CNY: PBOC X 0.90		1,918,232			1,385,097

Foreign currency equivalent		USD	2,045		USD	1,500
		CNY	1,953		CNY	3,263
Less current portion of long-term borrowings		W	(973,293	)		(747,503	)

		W	1,618,123			1,392,931

(*)	ML represents Month LIBOR (London Inter-Bank Offered Rates) and PBOC represents People’s Bank of China.

(d)

Details of bonds issued and outstanding as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	Maturity		Annual interest rate as of September 30, 2018 (%)		September 30, 2018			December 31, 2017
*Won denominated bonds ()**
Publicly issued bonds		2018.11~ 2023.02		1.80~3.73	W	2,015,000			2,015,000
Privately placed bonds		2025.05~ 2033.05		3.25~4.25		110,000			—
Less discount on bonds						(4,452	)		(4,238	)
Less current portion						(374,810	)		(504,759	)

					W	1,745,738			1,506,003

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

12.	Employee Benefits

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

(a)

Net defined benefit liabilities recognized as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018			December 31, 2017
Present value of partially funded defined benefit obligations	W	1,677,604			1,562,424
Fair value of plan assets		(1,418,310	)		(1,466,977	)

	W	259,294			95,447

(b)

Expenses recognized in profit or loss for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30,				For the nine-month periods ended September 30,
(In millions of won)	2018		2017		2018		2017
Current service cost	W	51,314		49,034		154,502		146,885
Net interest cost		242		598		726		1,794

	W	51,556		49,632		155,228		148,679

(c)	Plan assets as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Guaranteed deposits in banks	W	1,418,310		1,466,977

As of September 30, 2018, the Controlling Company maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., Shinhan Bank and others.

(d)

Remeasurements of the net defined benefit liabilities (assets) included in other comprehensive income (loss) for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30,						For the nine-month periods ended September 30,
(In millions of won)	2018			2017			2018			2017
Remeasurements of net defined benefit liabilities	W	(4,737	)		(3,639	)		(16,129	)		(11,963	)
Tax effect		1,267			881			4,893			2,895

Remeasurements of net defined benefit liabilities, net of income tax	W	(3,470	)		(2,758	)		(11,236	)		(9,068	)

13.	Provisions and Other Liabilities

(a)

Changes in provisions for the nine-month period ended September 30, 2018 are as follows:


(In millions of won)	Litigations and claims		*Warranties ()**			Others			Total
Balance at January 1, 2018	W	43		102,450			1,835			104,328

Adjustment from adoption of K-IFRS No. 1115		—		—			9,789			9,789
Additions (reversals)		—		154,676			(5,978	)		148,698
Usage		—		(143,161	)		—			(143,161	)

Balance at September 30, 2018	W	43		113,965			5,646			119,654

Current	W	43		85,870			5,646			91,559
Non-current	W	—		28,095			—			28,095

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

(b)

Other liabilities as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Current liabilities
Withholdings	W	42,005		63,766
Unearned revenues		7,856		12,225
Security deposits		170		—

	W	50,031		75,991

Non-current liabilities
Long-term accrued expenses	W	82,487		70,561
Security deposits		8,270		—
Long-term other accounts payable		29		2

	W	90,786		70,563

14.	Contingencies and Commitments

(a)

Legal Proceedings

Anti-trust litigations

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

Others

The Group is defending against various claims in addition to pending proceedings described above. The Group does not have a present obligation for these matters and has not recognized any provision at September 30, 2018.

(b)

Commitments

Factoring and securitization of accounts receivable

The Controlling Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,715 million (W1,908,281 million) in connection with the Controlling Company’s export sales transactions with its subsidiaries. As of September 30, 2018, no short-term borrowings were outstanding in connection with these agreements. In connection with all of the contracts in this paragraph, the Controlling Company has sold its accounts receivable with recourse.

14.	Contingencies and Commitments, Continued

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


(In millions of USD and KRW) Classification		Maximum				Not yet due
(In millions of USD and KRW) Classification	Financial institutions	Contractual amount		KRW equivalent		Contractual amount		KRW equivalent
Controlling Company	Shinhan Bank	KRW	90,000		90,000		—		—
	Sumitomo Mitsui Banking Corporation	USD	20		22,254		—		—
	Bank of Tokyo-Mitsubishi UFJ	USD	70		77,889	USD	26		28,749
	BNP Paribas	USD	200		222,540	USD	39		43,290
	ING Bank	USD	150		166,905		—		—

		USD	440			USD	65
		KRW	90,000		579,588		—		72,039

Subsidiaries
LG Display Singapore Pte. Ltd.	Standard Chartered Bank	USD	300		338,810	USD	205		228,576

LG Display Taiwan Co., Ltd.	BNP Paribas	USD	70		77,889	USD	10		11,127
	Hongkong & Shanghai Banking Corp.	USD	50		55,635		—		—
	Taishin International Bank	USD	289		321,570	USD	20		22,254

LG Display Germany GmbH	Citibank	USD	160		178,032		—		—
	BNP Paribas	USD	75		83,453	USD	25		27,891

LG Display America, Inc.	Hongkong & Shanghai Banking Corp.	USD	400		445,080		—		—
	Standard Chartered Bank	USD	400		445,080	USD	341		379,431
	Sumitomo Mitsui Banking Corporation	USD	250		278,175	USD	63		70,103

LG Display Japan Co., Ltd.	Sumitomo Mitsui Banking Corporation	USD	20		22,254		—		—

LG Display Guangzhou Trading Co., Ltd.	Industrial and Commercial Bank of China	USD	64		71,213		—		—

		USD	2,078		2,317,191	USD	664		739,382

		USD	2,518			USD	729
		KRW	90,000		2,896,779		—		811,421

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

14.	Contingencies and Commitments, Continued

Letters of credit

As of September 30, 2018, the Controlling Company has agreements in relation to the opening of letters of credit up to USD 30 million (W33,381 million) with KEB Hana Bank, USD 80 million (W89,016 million) with Bank of China and USD 50 million (W55,635 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Controlling Company obtained payment guarantees amounting to USD 1,538 million (W1,710,776 million) from KEB Hana Bank and others for advances received related to the long-term supply agreements and USD 8.5 million (W9,458 million) from Shinhan Bank for value added tax payments in Poland.

LG Display (China) Co., Ltd. and other subsidiaries are provided with payment guarantees from the China Construction Bank Corporation and other various banks amounting to CNY 1,150 million (W186,047 million), JPY 900 million (W8,831 million), EUR 2.5 million (W3,236 million), VND 38,167 million (W1,821 million), USD 0.5 million (W556 million), PLN 0.1 million (W30 million) and, respectively, for their local tax payments and utility payments.

License agreements

As of September 30, 2018, in relation to its LCD business, the Group has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.

Long-term supply agreement

As of September 30, 2018, in connection with long-term supply agreements with customers, the Controlling Company recognized USD 1,538 million (W1,710,776 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter.

The Controlling Company received payment guarantees amounting to USD 1,538 million (W1,710,776 million) from KEB Hana Bank and other various banks relating to advances received.

Pledged assets

Regarding the secured bank borrowing amounting to USD 240 million (W267,100 million) and CNY 655 million (W105,901 million) from China Construction Bank, as of September 30, 2018, the Group provided its property, plant and equipment and others with carrying amount of W166,031 million as pledged assets.

15.	Capital and Reserves

(a)

Share capital

The Controlling Company is authorized to issue 500,000,000 shares of capital stock (par value W5,000), and as of September 30, 2018 and December 31, 2017, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2017 to September 30, 2018.

(b)

Reserves

Reserves consist mainly of the following:

Translation reserve

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

Other comprehensive income (loss) from associates

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

Reserves as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018			December 31, 2017
Foreign currency translation differences for foreign operations	W	(293,278	)		(259,749	)
Other comprehensive loss from associates (excluding remeasurements)		(28,113	)		(28,531	)

	W	(321,391	)		(288,280	)

16.

Revenue

Details of revenue for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(In millions of won)	2018		2017		2018		2017
Sales of goods	W	6,091,633		6,962,663		17,357,832		20,627,084
Royalties		4,016		4,584		13,591		15,799
Others		6,714		5,848		17,352		21,260

	W	6,102,363		6,973,095		17,388,775		20,664,143

17.	Geographic and Other Information

The following is a summary of sales by region based on the location of the customers for the three-month and nine-month periods ended September 30, 2018 and 2017.

(a)

Revenue by geography



(In millions of won)	For the three-month periods ended September 30,				For the nine-month periods ended September 30,
Region	2018		2017		2018		2017
Domestic	W	330,653		420,259		1,202,043		1,425,205
Foreign
China		3,725,909		4,534,031		10,753,323		13,466,122
Asia (excluding China)		789,131		662,844		1,768,846		1,881,814
United States		664,993		757,264		1,858,873		2,050,958
Europe (excluding Poland)		401,978		383,288		1,095,354		1,009,403
Poland		189,699		215,409		710,336		830,641

Sub total	W	5,771,710		6,552,836		16,186,732		19,238,938

Total	W	6,102,363		6,973,095		17,388,775		20,664,143

Sales to Company A and Company B amount to W4,775,823 million and W3,866,931 million, respectively, for the nine-month period ended September 30, 2018 (the nine-month period ended September 30, 2017: W6,458,984 million and W4,784,436 million). The Group’s top ten end-brand customers together accounted for 76% of sales for the nine-month period ended September 30, 2018 (the nine-month period ended September 30, 2017: 80%).

17.	Geographic and Other Information, Continued

(b)

Non-current assets by geography



	September 30, 2018				December 31, 2017
(In millions of won) Region	Property, plant and equipment		Intangible assets		Property, plant and equipment		Intangible assets
Domestic	W	14,732,740		822,341		12,487,111		731,373
Foreign
China		3,954,825		12,810		2,929,739		17,244
Others		1,445,689		156,875		785,110		164,204

Sub total		5,400,514		169,685		3,714,849		181,448

Total	W	20,133,254		992,026		16,201,960		912,821

(c)

Revenue by product and services



(In millions of won)	For the three-month periods ended September 30,				For the nine-month periods ended September 30,
Product	2018		2017		2018		2017
Televisions	W	2,470,289		2,828,842		7,215,558		8,871,495
Desktop monitors		1,132,831		1,144,986		3,051,733		3,355,549
Tablet products		461,422		630,351		1,349,134		1,702,224
Notebook computers		733,088		513,477		1,952,219		1,627,822
Mobile and others		1,304,733		1,855,439		3,820,131		5,107,053

	W	6,102,363		6,973,095		17,388,775		20,664,143

18.	The Nature of Expenses and Others

The classification of expenses by nature for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30,						For the nine-month periods ended September 30,
(In millions of won)	2018			2017			2018			2017
Changes in inventories	W	(157,096	)		(320,648	)		(237,320	)		(376,247	)
Purchases of raw materials, merchandise and others		3,172,444			3,730,920			8,982,723			10,131,999
Depreciation and amortization		880,427			834,107			2,699,538			2,329,103
Outsourcing fees		194,441			205,591			576,214			559,830
Labor costs		825,119			789,156			2,517,311			2,318,758
Supplies and others		238,035			334,926			731,288			887,204
Utility		240,126			235,905			672,443			636,247
Fees and commissions		181,962			170,389			551,289			507,608
Shipping costs		60,771			60,732			174,074			183,161
Advertising		33,927			51,400			72,455			140,858
Warranty expenses		62,614			37,858			154,676			164,110
Taxes and dues		27,713			18,199			94,342			69,059
Travel		26,626			23,543			78,796			65,274
Others		177,692			222,625			557,134			655,465

	W	5,964,801			6,394,703			17,624,963			18,272,429

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

19.	Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30,				For the nine-month periods ended September 30,
(In millions of won)	2018		2017		2018		2017
Salaries and wages	W	87,314		78,565		267,906		237,005
Expenses related to defined benefit plans		7,543		6,826		22,605		20,627
Other employee benefits		22,892		25,825		69,612		70,832
Shipping costs		50,189		50,956		144,855		157,296
Fees and commissions		62,223		49,501		162,058		144,775
Depreciation		45,966		34,971		126,790		103,670
Taxes and dues		14,041		7,314		51,936		35,445
Advertising		33,927		51,400		72,455		140,858
Warranty expenses		62,614		37,858		154,676		164,110
Rent		6,653		6,384		19,843		20,243
Insurance		2,833		3,131		8,710		9,365
Travel		6,248		7,047		17,971		20,704
Training		3,164		5,003		9,717		13,459
Others		14,861		18,661		46,558		51,189

	W	420,468		383,442		1,175,692		1,189,578

20.	Personnel Expenses

Details of personnel expenses for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30,				For the nine-month periods ended September 30,
(In millions of won)	2018		2017		2018		2017
Salaries and wages	W	695,482		651,558		2,119,641		1,920,447
Other employee benefits		124,623		119,113		383,781		346,674
Contributions to National Pension plan		19,336		18,572		56,816		54,324
Expenses related to defined benefit plan		51,556		49,632		155,228		148,679

	W	890,997		838,875		2,715,466		2,470,124

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

(a)

Details of other non-operating income for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30,				For the nine-month periods ended September 30,
(In millions of won)	2018		2017		2018		2017
Foreign currency gain	W	214,298		223,696		804,181		744,635
Gain on disposal of property, plant and equipment		794		907		5,125		14,259
Gain on disposal of intangible assets		—		—		239		308
Reversal of impairment loss on intangible assets		—		—		26		—
Rental income		1,995		612		2,581		1,490
Others		1,060		1,585		4,046		6,590

	W	218,147		226,800		816,198		767,282

(b)

Details of other non-operating expenses for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30,				For the nine-month periods ended September 30,
(In millions of won)	2018		2017		2018		2017
Foreign currency loss	W	246,908		198,270		867,377		848,464
Loss on disposal of property, plant and equipment		1,017		3,970		13,362		9,340
Impairment loss on property, plant and equipment		—		—		25,715		—
Loss on disposal of intangible assets		—		9		—		9
Impairment loss on intangible assets		61		40		353		1,717
Donations		202		2,301		3,275		12,753
Others		1,229		1,281		7,123		1,609

	W	249,417		205,871		917,205		873,892

22.	Finance Income and Finance Costs

(a)

Finance income and costs recognized in profit and loss for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


(In millions of won)	For the three-month periods ended September 30,				For the nine-month periods ended September 30,
(In millions of won)	2018		2017		2018		2017
Finance income
Interest income	W	16,736		16,953		56,303		41,246
Foreign currency gain		28,936		18,462		143,138		119,232
Gain on transaction of derivatives		249		—		363		3,106
Gain on valuation of derivatives		2,500		337		2,500		592

	W	48,421		35,752		202,304		164,176

Finance costs
Interest expense	W	18,222		23,342		62,510		70,628
Foreign currency loss		18,664		21,860		162,846		73,074
Loss on disposal of investments in equity accounted investees		183		—		183		42,023
Loss on impairment of investments in equity accounted investees		—		—		—		4,234
Loss on impairment of available-for-sale financial assets		—		—		—		1,298
Loss on sale of trade accounts and notes receivable		3,709		272		5,445		421
Loss on transaction of derivatives		5		150		48		361
Loss on valuation of derivatives		7,239		—		7,740		—
Other		1,155		330		2,732		922

	W	49,177		45,954		241,504		192,961

(b)

Finance income and costs recognized in other comprehensive income or loss for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30,					For the nine-month periods ended September 30,
(In millions of won)	2018			2017		2018			2017
Foreign currency translation differences for foreign operations	W	(186,146	)		109,892		(46,214	)		(895	)

Finance income (costs) recognized in other comprehensive income or loss after tax	W	(186,146	)		109,892		(46,214	)		(895	)

23.	Income Taxes

(a)

Details of income tax expense (benefit) for the three-month and nine month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30,					For the nine-month periods ended September 30,
(In millions of won)	2018		2017			2018			2017
Current tax expense	W	77,972		188,966			170,145			502,952
Deferred tax expense (benefit)		14,783		(67,487	)		(163,660	)		(107,699	)

Income tax expense	W	92,755		121,479			6,485			395,253

(b)

Deferred Tax Assets and Liabilities

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

Deferred tax assets and liabilities as of September 30, 2018 and December 31, 2017 are attributable to the following:


	Assets				Liabilities						Total
(In millions of won)	September 30, 2018		December, 31, 2017		September 30, 2018			December, 31, 2017			September 30, 2018			December, 31, 2017
Other accounts receivable, net	W	—		—		(463	)		(1,441	)		(463	)		(1,441	)
Inventories, net		45,942		34,550		—			—			45,942			34,550
Defined benefit liabilities, net		48,315		2,375		—			—			48,315			2,375
Investments in subsidiaries and associates		22,366		29,061		—			—			22,366			29,061
Accrued expenses		164,112		183,903		—			—			164,112			183,903
Property, plant and equipment		435,053		409,928		—			—			435,053			409,928
Intangible assets		3,372		3,457		(15,122	)		(24,646	)		(11,750	)		(21,189	)
Provisions		30,141		27,018		—			—			30,141			27,018
Gain or loss on foreign currency translation, net		13		13		—			—			13			13
Others		23,491		27,562		—			—			23,491			27,562
Tax loss carryforwards		100,839		—		—			—			100,839			—
Tax credit carryforwards		271,200		268,926		—			—			271,200			268,926

Deferred tax assets (liabilities)	W	1,144,844		986,793		(15,585	)		(26,087	)		1,129,259			960,706

23.	Income Taxes, Continued

Statutory tax rate applicable to the Controlling Company was 24.2% for the year ended December 31, 2017. During the year ended December 31 2017, certain amendments to corporate income tax rules in the Republic of Korea were enacted and effective on January 1, 2018 that resulted in application of 27.5% for taxable income in excess of W300,000 million. Deferred taxes as of September 30, 2018 and December 31, 2017 have been measured using the applicable tax rates from the amendment.

Meanwhile, effective tax rate for the nine-month period ended September 30, 2018 differs from statutory tax rate primarily due to change of the probability of utilizing deferred tax assets including tax credit carryforwards.

24.	Earnings (Loss) Per Share Attributable to Owners of the Controlling Company

(a)

Basic earnings (loss) per share for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30,				For the nine-month periods ended September 30,
(In won and number of shares)	2018		2017		2018			2017
Profit (loss) attributable to owners of the Controlling Company	W	3,420,651,372		441,981,942,670		(353,418,396,893	)		1,765,772,319,875
Weighted-average number of common stocks outstanding		357,815,700		357,815,700		357,815,700			357,815,700

Earnings (loss) per share	W	10		1,235		(988	)		4,935

For the three-month and nine-month periods ended September 30, 2018 and 2017, there were no events or transactions that resulted in changes in the number of common stocks used for calculating earnings (loss) per share.

(b)

Diluted earnings (loss) per share for the three-month and nine-month periods ended September 30, 2018 and 2017 are not calculated since there was no potential common stock.

25.	Financial Risk Management

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

(a)

Market risk

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

(i)

Currency risk

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

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.

25.	Financial Risk Management, Continued

i) Exposure to currency risk

The Group’s exposure to foreign currency risk based on notional amounts as of September 30, 2018 and December 31, 2017 is as follows:


	September 30, 2018
(In millions)	USD			JPY			CNY			TWD			EUR			PLN			VND
Cash and cash equivalents		739			1,434			5,565			107			3			199			1,178,372
Trade accounts and notes receivable		2,700			4			724			—			—			—			—
Non-trade receivable		11			937			90			4			3			—			16,535
Other assets denominated in foreign currencies		89			344			6,954			6			26			25			2,740
Trade accounts and notes payable		(815	)		(14,265	)		(2,814	)		—			(1	)		—			(404,938	)
Other accounts payable		(426	)		(18,640	)		(3,555	)		(5	)		(3	)		(3	)		(651,748	)
Borrowings		(2,045	)		—			(1,953	)		—			—			—			—

Aggregate notional amounts in financial position		253			(30,186	)		5,011			112			28			221			140,961

Currency swap contracts		200			—			—			—			—			—			—

Net exposure		453			(30,186	)		5,011			112			28			221			140,961


	December 31, 2017
(In millions)	USD			JPY			CNY			TWD			EUR			PLN			VND
Cash and cash equivalents		1,228			152			6,940			16			3			165			342,063
Deposits in banks		—			—			750			—			—			—			—
Trade accounts and notes receivable		3,316			11			1,453			—			—			—			—
Non-trade receivable		62			1,340			136			2			9			—			13,405
Other assets denominated in foreign currencies		1			206			596			7			—			—			1,882
Trade accounts and notes payable		(1,345	)		(14,898	)		(2,843	)		—			—			—			(102,398	)
Other accounts payable		(285	)		(14,653	)		(2,403	)		(11	)		(8	)		(4	)		(2,138,370	)
Borrowings		(1,500	)		—			(3,263	)		—			—			—			—

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

25.	Financial Risk Management, Continued

Average exchange rates applied for the nine-month periods ended September 30, 2018 and 2017 and the exchange rates at September 30, 2018 and December 31, 2017 are as follows:


	Average rate				Reporting date spot rate
(In won)	2018		2017		September 30, 2018		December 31, 2017
USD	W	1,090.96		1,138.67	W	1,112.70		1,071.40
JPY		9.95		10.18		9.81		9.49
CNY		167.56		167.49		161.78		163.65
TWD		36.48		37.28		36.49		35.92
EUR		1,302.36		1,267.31		1,294.57		1,279.25
PLN		306.68		297.15		303.13		306.07
VND		0.0476		0.0501		0.0477		0.0472

ii) Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Group’s assets or liabilities denominated in foreign currency as of September 30, 2018 and December 31, 2017, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the 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:


	September 30, 2018						December 31, 2017
(In millions of won)	Equity			Profit or loss			Equity			Profit or loss
USD (5 percent weakening)	W	(558)			68,041			50,040			91,238
JPY (5 percent weakening)		(11,122	)		(9,722	)		(10,294	)		(9,141	)
CNY (5 percent weakening)		40,545			—			13,212			(6,396	)
TWD (5 percent weakening)		205			—			23			1
EUR (5 percent weakening)		1,796			158			16			594
PLN (5 percent weakening)		3,393			(146	)		2,515			(120	)
VND (5 percent weakening)		244			244			(4,445	)		—

A stronger won against the above currencies as of September 30, 2018 and December 31, 2017 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

25.	Financial Risk Management, Continued

(ii)

Interest rate risk

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

i) Profile

The interest rate profile of the Group’s interest-bearing financial instruments as of September 30, 2018 and December 31, 2017 is as follows:


(In millions of won)	September 30, 2018			December 31, 2017
Fixed rate instruments
Financial assets	W	2,838,799			3,360,800
Financial liabilities		(4,621,970	)		(2,962,671	)

	W	(1,783,171	)		398,129

Variable rate instruments
Financial liabilities	W	(3,091,415	)		(2,640,447	)

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

As of September 30, 2018 and December 31, 2017, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for each 12-month period following the reporting dates. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.


	Equity					Profit or loss
(In millions of won)	1%p increase			1%p decrease		1%p increase			1%p decrease
September 30, 2018
Variable rate instruments(*)	W	(19,875	)		19,875		(19,875	)		19,875
December 31, 2017
Variable rate instruments(*)	W	(17,362	)		17,362		(17,362	)		17,362

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

25.	Financial Risk Management, Continued

(b)

Credit risk

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

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

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

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

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of September 30, 2018 and December 31, 2017 are as follows:

As of September 30, 2018


(In millions of won)	September 30, 2018
Financial assets carried at amortized cost
Cash and cash equivalents	W	2,760,240
Deposits in banks		78,411
Trade accounts and notes receivable		3,301,596
Non-trade receivable		73,013
Accrued income		9,077
Deposits		33,335
Short-term loans		12,609
Long-term loans		55,435

	W	6,323,716

Financial assets at fair value through profit or loss
Convertible bonds	W	1,552
Derivatives		2,682

	W	4,234

Financial assets at fair value through other comprehensive income
Debt instrument	W	159

	W	6,328,109

25.	Financial Risk Management, Continued

ii)

As of December 31, 2017


(In millions of won)	December 31, 2017
Cash and cash equivalents	W	2,602,560
Deposits in banks		758,089
Trade accounts and notes receivable		4,325,120
Non-trade receivable		150,554
Accrued income		14,273
Available-for-sale financial assets		162
Financial assets at fair value through profit or loss		1,552
Deposits		30,378
Short-term loans		16,766
Long-term loans		32,408
Long-term non-trade receivable		8,738
Derivatives		842

	W	7,941,442

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.

25.	Financial Risk Management, Continued

(c)

Liquidity risk

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

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

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of September 30, 2018.


			Contractual cash flows
(In millions of won)	Carrying amount		Total			6 months or less			6-12 months			1-2 years			2-5 years			More than 5 years
Non-derivative financial liabilities
Secured bank borrowings	W	373,001		380,609			380,609			—			—			—			—
Unsecured bank borrowings		5,219,836		5,608,863			964,923			482,629			693,905			3,020,506			446,900
Unsecured bond issues		2,120,548		2,291,821			141,311			283,570			597,137			1,128,558			141,245
Trade accounts and notes payable		3,176,696		3,176,696			3,176,696			—			—			—			—
Other accounts payable		3,146,185		3,146,185			3,146,185			—			—			—			—
Long-term other accounts payable		29		29			—			—			29			—			—
Security deposits		8,440		8,440			85			85			8,270			—			—
Derivative financial liabilities
Derivatives	W	7,080		(13,052	)		(1,100	)		(1,488	)		(3,608	)		(6,856	)		—

	W	14,051,815		14,599,591			7,808,709			764,796			1,295,733			4,142,208			588,145

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

25.	Financial Risk Management, Continued

(d)

Capital management

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


(In millions of won)	September 30, 2018			December 31, 2017
Total liabilities	W	17,427,548			14,178,177
Total equity		14,692,079			14,981,510
Cash and deposits in banks (*1)		2,838,640			3,360,638
Borrowings (including bonds)		7,713,385			5,603,118
Total liabilities to equity ratio		119	%		95	%
Net borrowings to equity ratio (*2)		33	%		15	%

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

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

25.	Financial Risk Management, Continued

(e)

Determination of fair value

(i)

Measurement of fair value

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

Current Assets and Liabilities

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

ii)

Trade Receivables and Other Receivables

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

iii)

Investments in Equity and Debt Instruments

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

iv)

Non-derivative Financial Liabilities

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

25.	Financial Risk Management, Continued

(ii)

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed consolidated interim statements of financial position as of September 30, 2018 and December 31, 2017 are as follows:

As of September 30, 2018


	September 30, 2018
(In millions of won)	Carrying amounts		Fair values
Financial assets carried at amortized cost
Cash and cash equivalents	W	2,760,240		(*	)
Deposits in banks		78,411		(*	)
Trade accounts and notes receivable		3,301,596		(*	)
Non-trade receivable		73,013		(*	)
Accrued income		9,077		(*	)
Deposits		33,335		(*	)
Short-term loans		12,609		(*	)
Long-term loans		55,435		(*	)
Financial assets at fair value through profit or loss
Equity instrument	W	5,500		5,500
Convertible bonds		1,552		1,552
Derivatives		2,682		2,682
Financial assets at fair value through other comprehensive income
Debt instrument	W	159		159
Financial liabilities at fair value through profit or loss
Derivatives	W	7,080		7,080
Liabilities carried at amortized cost
Secured bank borrowings	W	373,001		373,001
Unsecured bank borrowings		5,219,836		5,230,491
Unsecured bond issues		2,120,548		2,144,526
Trade accounts and notes payable		3,176,696		(*	)
Other accounts payable		3,146,185		3,146,185
Long-term other accounts payable		29		(*	)
Security deposits		8,440		(*	)

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

25.	Financial Risk Management, Continued

ii)

As of December 31, 2017


	December 31, 2017
(In millions of won)	Carrying amounts		Fair values
Assets carried at fair value
Available-for-sale financial assets	W	162		162
Financial asset at fair value through profit or loss		1,552		1,552
Derivatives		842		842
Assets carried at amortized cost
Cash and cash equivalents	W	2,602,560		(*	)
Deposits in banks		758,089		(*	)
Trade accounts and notes receivable		4,325,120		(*	)
Non-trade receivable		150,554		(*	)
Accrued income		14,273		(*	)
Deposits		30,378		(*	)
Short-term loans		16,766		(*	)
Long-term loans		32,408		(*	)
Long-term non-trade receivable		8,738		(*	)
Liabilities carried at amortized cost
Secured bank borrowings	W	642,172		642,172
Unsecured bank borrowings		2,950,184		2,955,399
Unsecured bond issues		2,010,762		2,016,086
Trade accounts and notes payable		2,875,090		(*	)
Other accounts payable		3,169,937		3,170,147
Long-term other accounts payable		2		(*	)

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

25.	Financial Risk Management, Continued

(iii)

Fair values of financial assets and liabilities

i) Fair value hierarchy

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

•

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

•

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

•

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

ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	Level 1		Level 2		Level 3		Total
September 30, 2018
Financial assets at fair value through profit or loss
Equity instrument	W	—		—		5,500		5,500
Convertible bonds		—		—		1,552		1,552
Derivatives		—		—		2,682		2,682
Financial asset at fair value through other comprehensive income
Debt instrument	W	159		—		—		159
Financial liabilities at fair value through profit or loss
Derivatives	W	—		—		7,080		7,080


(In millions of won)	Level 1		Level 2		Level 3		Total
December 31, 2017
Available-for-sale financial assets	W	162		—		—		162
Financial assets at fair value through profit or loss		—		—		1,552		1,552
Derivatives		—		—		842		842

25.	Financial Risk Management, Continued

iii)

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

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of September 30, 2018 and December 31, 2017 are as follows:

(In millions of won)

September 30, 2018

Valuation
technique

Input

Classification

Level 1

Level 2

Level 3

Liabilities

Secured bank borrowings

—

373,001

Discounted cash
flow

Discount
rate

Unsecured bank borrowings

—

5,230,491

Discounted cash
flow

Discount
rate

Unsecured bond issues

—

2,144,526

Discounted cash
flow

Discount
rate

Other accounts payable

—

3,146,185

Discounted cash
flow

Discount
rate

(In millions of won)

December 31, 2017

Valuation
technique

Input

Classification

Level 1

Level 2

Level 3

Liabilities

Secured bank borrowings

—

642,172

Discounted cash
flow

Discount
rate

Unsecured bank borrowings

—

2,955,399

Discounted cash
flow

Discount
rate

Unsecured bond issues

—

2,016,086

Discounted cash
flow

Discount
rate

Other accounts payable

—

3,170,147

Discounted cash
flow

Discount
rate

iv)

The interest rates applied for determination of the above fair value as of September 30, 2018 and December 31, 2017 are as follows:


	September 30, 2018			December 31, 2017
Borrowings, bonds and others		1.70~3.67	%		1.57~2.92	%

26.	Changes in liabilities arising from financing activities

Changes in liabilities arising from financing activities for the nine-month period ended September 30, 2018 are as follows:



						Non-cash transactions
(In millions of won)	January 1, 2018		Cash flows from financing activities			Reclassification			Exchange rate effect		Effective interest adjustment		September 30, 2018
Short-term borrowings	W	—		(266	)		—			266		—		—
Current portion of long-term borrowings and bonds		1,452,926		(1,015,802	)		1,564,659			46,605		366		2,048,754
Long-term borrowings		2,644,189		2,532,019			(1,304,974	)		47,659		—		3,918,893
Bonds		1,506,003		498,170			(259,685	)		—		1,250		1,745,738

	W	5,603,118		2,014,121			—			94,530		1,616		7,713,385

27.	Related Parties and Others

(a)

Related parties

Related parties as of September 30, 2018 are as follows:


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

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

27.	Related Parties and Others, Continued

(b)

Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month period ended September 30, 2018
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
INVENIA Co., Ltd.	W	—		—		585		5,446		—		245
AVATEC Co., Ltd.		—		—		—		—		16,650		243
Paju Electric Glass Co., Ltd.		—		—		90,642		—		—		1,503
WooRee E&L Co., Ltd.		—		—		3		—		—		45
YAS Co., Ltd.		—		—		1,011		102,340		—		667
LB Gemini New Growth Fund No. 16		—		—		—		—		—		—

	W	—		—		92,241		107,786		16,650		2,703

Entity that has significant influence over the Controlling Company
LG Electronics Inc.	W	224,579				5,387		176,237		—		25,054
Subsidiaries of the entity that has significant influence over the Controlling Company
LG Electronics India Pvt. Ltd.	W	27,537		—		—		—		—		15
LG Electronics Vietnam Haiphong Co., Ltd.		49,740		—		—		—		—		3,070

27.	Related Parties and Others, Continued


	For the three-month period ended September 30, 2018
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
LG Electronics Nanjing New Technology Co., Ltd.	W	47,520		—		—		94		—		70
LG Electronics RUS, LLC		29,226		—		—		—		—		1,438
LG Electronics do Brasil Ltda.		30,401		—		—		—		—		113
LG Innotek Co., Ltd.		7,696		—		33,546		—		—		6,640
Qingdao LG Inspur Digital Communication Co., Ltd.		12,162		—		—		—		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		44,914		—		—		—		—		—
LG Electronics Mexicali, S.A. DE C.V.		39,938		—		—		—		—		107
LG Electronics Mlawa Sp. z o.o.		133,918		—		—		—		—		212
LG Hitachi Water Solutions Co., Ltd.		—		—		—		68,422		—		987
LG Electronics Reynosa, S.A. DE C.V.		300,482		—		—		—		—		332
HiEntech Co., Ltd.		—		—		—		1,444		—		6,936
HiEntech (Tianjin) Co., Ltd.		—		—		—		61,557		—		4,249
LG Electronics Air-Conditioning (Shandong) Co., Ltd.		—		—		159		11,846		—		2
LG Electronics Almaty Kazakhstan		501		—		—		—		—		14
LG Electronics Egypt S.A.E.		275		—		—		—		—		—
LG Electronics S.A. (Pty) Ltd.		1,369		—		—		—		—		8
LG Electronics Taiwan Taipei Co., Ltd.		1,742		—		—		—		—		65
Others		1,856		—		17		—		—		2,863

	W	729,277		—		33,722		143,363		—		27,121

	W	953,856		—		131,350		427,386		16,650		54,878

27.	Related Parties and Others, Continued


	For the nine-month period ended September 30, 2018
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
INVENIA Co., Ltd.	W	—		30		1,354		27,320		—		523
AVATEC Co., Ltd.		—		530		—		—		51,729		466
Paju Electric Glass Co., Ltd.		—		4,172		274,440		—		—		3,346
WooRee E&L Co., Ltd.		—		—		41		—		—		131
YAS Co., Ltd.		—		—		3,192		119,892		—		2,183
LB Gemini New Growth Fund No. 16		—		540		—		—		—		—

	W	—		5,272		279,027		147,212		51,729		6,649

Entity that has significant influence over the Controlling Company
LG Electronics Inc.	W	924,915		—		28,927		733,261		—		73,722
Subsidiaries of the entity that has significant influence over the Controlling Company
LG Electronics India Pvt. Ltd.	W	51,311		—		—		—		—		41
LG Electronics Vietnam Haiphong Co., Ltd.		119,976		—		—		1,415		—		3,075
LG Electronics Nanjing New Technology Co., Ltd.		169,104		—		—		112		—		1,416
LG Electronics RUS, LLC		68,606		—		—		—		—		2,537
LG Electronics do Brasil Ltda.		155,100		—		—		—		—		277

27.	Related Parties and Others, Continued


	For the nine-month period ended September 30, 2018
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
LG Innotek Co., Ltd.	W	24,744		—		106,184		—		—		34,692
Qingdao LG Inspur Digital Communication Co., Ltd.		32,248		—		—		—		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		119,960		—		—		—		—		—
LG Electronics Mexicali, S.A. DE C.V.		140,151		—		—		—		—		172
LG Electronics Mlawa Sp. z o.o.		495,955		—		—		—		—		526
LG Hitachi Water Solutions Co., Ltd.		—		—		—		274,206		—		7,248
LG Electronics Reynosa, S.A. DE C.V.		793,912		—		—		—		—		1,628
HiEntech Co., Ltd.		—		—		—		7,806		—		21,802
HiEntech (Tianjin) Co., Ltd.		—		—		—		74,717		—		18,786
LG Electronics Air-Conditioning (Shandong) Co., Ltd.		—		—		287		13,756		—		19,311
LG Electronics Almaty Kazakhstan		3,708		—		—		—		—		35
LG Electronics Egypt S.A.E.		15,156		—		—		—		—		16
LG Electronics S.A. (Pty) Ltd.		5,804		—		—		—		—		14
LG Electronics Taiwan Taipei Co., Ltd.		8,480		—		—		—		—		257
Others		2,646		—		26		1		—		6,589

	W	2,206,861		—		106,497		372,013		—		118,422

	W	3,131,776		5,272		414,451		1,252,486		51,729		198,793

27.	Related Parties and Others, Continued


	For the three-month period ended September 30, 2017
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
INVENIA Co., Ltd.	W	—		—		691		2,188		—		24
AVATEC Co., Ltd.		—		—		—		—		24,685		40
Paju Electric Glass Co., Ltd.		—		—		94,966		—		—		1,025
WooRee E&L Co., Ltd.		—		—		—		—		—		22
YAS Co., Ltd.		—		—		1,141		20,059		—		650

	W	—		—		96,798		22,247		24,685		1,761

Entity that has significant influence over the Controlling Company
LG Electronics Inc.	W	325,287		—		12,627		176,092		—		26,041

Subsidiaries of the entity that has significant influence over the Controlling Company
LG Electronics India Pvt. Ltd.	W	25,127		—		—		—		—		22
LG Electronics Vietnam Haiphong Co., Ltd.		50,073		—		—		—		—		29

27.	Related Parties and Others, Continued


	For the three-month period ended September 30, 2017
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
LG Electronics Nanjing New Technology Co., Ltd.	W	82,025		—		—		47		—		19
LG Electronics RUS, LLC		27,693		—		—		—		—		279
LG Electronics do Brasil Ltda.		54,085		—		—		—		—		131
LG Innotek Co., Ltd.		4,406		—		52,007		—		—		470
Qingdao LG Inspur Digital Communication Co., Ltd.		22,170		—		—		—		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		53,016		—		—		—		—		—
LG Electronics Mexicali, S.A. DE C.V.		99,798		—		—		—		—		106
LG Electronics Mlawa Sp. z o.o.		131,698		—		—		—		—		358
LG Electronics Taiwan Taipei Co., Ltd.		3,134		—		—		—		—		75
LG Hitachi Water Solutions Co., Ltd.		—		—		—		78,854		—		—
LG Electronics Reynosa, S.A. DE C.V.		344,094		—		—		—		—		551
LG Electronics Almaty Kazakhstan		3,363		—		—		—		—		—
HiEntech Co., Ltd.		—		—		—		3,261		—		7,320
HiEntech (Tianjin) Co., Ltd.		—		—		—		4,432		—		2,276
LG Electronics S.A. (Pty) Ltd.		2,227		—		—		—		—		4
LG Electronics Air-Conditioning (Shandong) Co., Ltd.		—		—		2		24		—		121
Hi M Solutek		—		—		1		—		—		413
Others		840		—		—		14		—		1,583

	W	903,749		—		52,010		86,632		—		13,757

	W	1,229,036		—		161,435		284,971		24,685		41,559

27.	Related Parties and Others, Continued

(In millions of won)


	For the nine-month period ended September 30, 2017
					Purchase and others
	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
New Optics Ltd.(*)	W	1		—		—		—		4		6
INVENIA Co., Ltd.		10		—		1,304		49,576		—		175
AVATEC Co., Ltd.		—		530		—		—		65,899		538
Paju Electric Glass Co., Ltd.		—		8,109		289,760		—		—		3,218
Shinbo Electric Co., Ltd.(*)		15,812		—		—		—		—		21
Narenanotech Corporation(*)		—		—		279		21,727		—		244
WooRee E&L Co., Ltd.		—		—		—		—		—		110
YAS Co., Ltd.		—		—		2,871		64,337		—		2,132

	W	15,823		8,639		294,214		135,640		65,903		6,444

Entity that has significant influence over the Controlling Company
LG Electronics Inc.	W	1,179,201		—		28,583		672,789		—		86,303

Subsidiaries of the entity that has significant influence over the Controlling Company
LG Electronics India Pvt. Ltd.	W	63,346		—		—		—		—		75
LG Electronics Vietnam Haiphong Co., Ltd.		149,796		—		—		4,799		—		167
LG Electronics Nanjing New Technology Co., Ltd.		231,352		—		—		89		—		390

27.	Related Parties and Others, Continued


	For the nine-month period ended September 30, 2017
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
LG Electronics RUS, LLC	W	71,976		—		—		—		—		730
LG Electronics do Brasil Ltda.		174,348		—		—		—		—		364
LG Innotek Co., Ltd.		10,919		—		147,955		—		—		4,445
Qingdao LG Inspur Digital Communication Co., Ltd.		56,855		—		—		—		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		175,352		—		—		—		—		—
LG Electronics Mexicali, S.A. DE C.V.		263,418		—		—		—		—		175
LG Electronics Mlawa Sp. z o.o.		624,133		—		—		—		—		798
LG Electronics Taiwan Taipei Co., Ltd.		10,187		—		—		—		—		114
LG Hitachi Water Solutions Co., Ltd.		—		—		—		156,163		—		1,531
LG Electronics Reynosa, S.A. DE C.V.		938,543		—		—		—		—		1,391
LG Electronics Almaty Kazakhstan		10,642		—		—		—		—		12
HiEntech Co., Ltd.		—		—		—		5,061		—		26,146
HiEntech (Tianjin) Co., Ltd.		—		—		—		13,509		—		12,735
LG Electronics S.A. (Pty) Ltd.		11,760		—		—		—		—		18
LG Electronics Air-Conditioning (Shandong) Co., Ltd.		—		—		254		3,700		—		1,207
Hi M Solutek		—		—		3		—		—		1,943
Others		866		—		—		14		—		3,025

	W	2,793,493		—		148,212		183,335		—		55,266

	W	3,988,517		8,639		471,009		991,764		65,903		148,013

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

27.	Related Parties and Others, Continued


	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
(In millions of won)	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Associates
INVENIA Co., Ltd.	W	2,000		2,375		8,665		18,662
AVATEC Co., Ltd.		—		—		4,870		2,949
Paju Electric Glass Co., Ltd.		—		—		61,707		60,141
WooRee E&L Co., Ltd.		—		—		53		61
YAS Co., Ltd.		—		375		101,479		6,474

	W	2,000		2,750		176,774		88,287

Entity that has significant influence over the Controlling Company
LG Electronics Inc.	W	175,500		550,335		181,600		257,071

Subsidiaries of the entity that has significant influence over the Controlling Company
LG Electronics India Pvt. Ltd.	W	17,429		3,030		3		—
LG Electronics Vietnam Haiphong Co., Ltd.		34,176		36,017		124		3,917
LG Electronics Nanjing New Technology Co., Ltd.		32,227		46,373		101		699
LG Electronics RUS, LLC		20,191		25,102		340		80
LG Electronics do Brasil Ltda.		18,744		19,091		8		10

27.	Related Parties and Others, Continued


	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
(In millions of won)	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
LG Innotek Co., Ltd.	W	2,872		407		26,529		62,675
Qingdao LG Inspur Digital Communication Co., Ltd.		6,052		13,061		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		47,220		55,278		—		—
LG Electronics Mexicali, S.A. DE C.V.		17,837		29,440		—		—
LG Electronics Mlawa Sp. z o.o.		56,445		136,874		31		25
LG Hitachi Water Solutions Co., Ltd.		—		—		111,928		154,864
LG Electronics Reynosa, S.A. DE C.V.		138,862		137,413		29		82
HiEntech Co., Ltd.		—		—		7,333		6,679
HiEntech (Tianjin) Co., Ltd.		—		—		31,841		5,600
LG Electronics Egypt S.A.E.		2,787		—		—		1
Others		3,234		7,618		15,878		1,714

	W	398,076		509,704		194,145		236,346

	W	575,576		1,062,789		552,519		581,704

27.	Related Parties and Others, Continued

(d)

Details of significant cash transactions such as loans and collection of loans, which occurred in the normal course of business with related parties for the nine-month periods ended September 30, 2018 and 2017 are as follows:


(In millions of won)	2018				2017
Associates	Loans		Collection of loans		Loans		Collection of loans
INVENIA Co., Ltd.	W	—		375		—		333
YAS Co., Ltd.		—		375		—		333

	W	—		750		—		666

27.	Related Parties and Others, Continued

(e)

Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Group and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the three-month and nine-month periods ended September 30, 2018 and 2017 and as of September 30, 2018 and December 31, 2017 are as follows. These entities are not related parties according to K-IFRS No. 1024, Related Party Disclosures.


	For the three-month period ended September 30, 2018				For the nine-month period ended September 30, 2018				September 30, 2018
(In millions of won)	Sales and others		Purchase and others		Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
LG Chem Ltd. and its subsidiaries	W	70		328,388		1,634		904,594		245		218,618
LG Household & Health Care and its subsidiaries		1		90		1		115		—		87
LG Hausys Ltd		1		—		1,111		1		—		—
Serveone and its subsidiaries		97		465,055		305		1,462,429		21,307		559,867
Silicon Works Co., Ltd		—		195,615		—		499,456		—		197,320
LG CNS Co., Ltd. and its subsidiaries		—		48,835		—		134,800		1		41,472
LG Holdings Japan Co., Ltd.		—		463		—		1,375		1,973		—
LG International Corp. and its subsidiaries(*)		171,456		98,477		559,214		418,950		149,001		190,630
LG Management Development Institute		—		2,366		—		7,484		3,480		470
G2R Inc. and its subsidiaries		—		2,015		—		42,227		—		2,337
LG Corp.		—		13,634		—		39,003		11,401		5,583
LG Uplus Corp.		—		555		21		1,175		—		216

	W	171,625		1,155,493		562,286		3,511,609		187,408		1,216,600

100

27.	Related Parties and Others, Continued

(*)

For transactions which LG International and its subsidiaries act as an agent of the Group and receive commission revenue from the Group, above transaction amount only include commission revenue recognized by LG International and its subsidiaries. For prior year comparative purpose, gross sales and others for the three-month and nine-month periods ended September 30, 2018 amount to W184,489 million and W598,971 million, respectively, and gross purchase and others for the three-month and nine-month periods ended September 30, 2018 amount to W462,475 million and W1,138,240 million, respectively.


	For the three-month period ended September 30, 2017				For the nine-month period ended September 30, 2017				December 31, 2017
(In millions of won)	Sales and others		Purchase and others		Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
LG Chem Ltd. and its subsidiaries	W	8,243		345,458		8,255		995,398		8,684		246,491
LG Household & Health Care and its subsidiaries		—		31		—		126		—		3
LG Hausys Ltd		419		3		1,255		47		—		374
Serveone and its subsidiaries		97		493,645		346		1,284,524		21,568		645,847
Silicon Works Co., Ltd		—		163,019		—		448,486		—		120,031
SK Siltron Co., Ltd. (formerly, Siltron Co., Ltd.)(*)		—		—		10		—		—		—
LG CNS Co., Ltd. and its subsidiaries		184		75,748		323		161,533		4		115,899
LG Holdings Japan Co., Ltd.		—		471		—		1,407		1,908		—
LG International Corp. and its subsidiaries		185,882		500,637		547,258		1,382,661		112,200		230,179
LG Management Development Institute		—		3,237		—		7,619		3,480		699
G2R Inc. and its subsidiaries		—		4,235		—		11,811		—		14,785
LG Corp.		—		15,804		—		46,762		4,700		1,523
Lusem Co., Ltd.(*)		2		10		10		641		1		53
LG Uplus Corp.		54		137		152		457		—		1,506

	W	194,881		1,602,435		557,609		4,341,472		152,545		1,377,390

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

101

27.	Related Parties and Others, Continued

(f)

Key management personnel compensation

Compensation costs of key management for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30,				For the nine-month periods ended September 30,
(In millions of won)	2018		2017		2018		2017
Short-term benefits	W	918		858		2,734		2,866
Expenses related to the defined benefit plan		103		95		690		392

	W	1,021		953		3,424		3,258

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

102

LG DISPLAY CO., LTD.

Condensed Separate Interim Financial Statements

(Unaudited)

September 30, 2018 and 2017

(With Independent Auditors’ Review Report Thereon)

103

Table of Contents


	Page

Independent Auditors’ Review Report		105

Condensed Separate Interim Statements of Financial Position		107

Condensed Separate Interim Statements of Comprehensive Income (Loss)		108

Condensed Separate Interim Statements of Changes in Equity		109

Condensed Separate Interim Statements of Cash Flows		110

Notes to the Condensed Separate Interim Financial Statements		112

104

Independent Auditors’ Review Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Reviewed Financial Statements

We have reviewed the accompanying condensed separate interim financial statements of LG Display Co., Ltd. (the “Company”) which comprise the condensed separate interim statement of financial position as of September 30, 2018, the condensed separate interim statements of comprehensive income (loss) for each of the three-month and nine-month periods ended September 30, 2018 and 2017, and statements of changes in equity and cash flows for the nine-month periods ended September 30, 2018 and 2017, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Condensed Separate Interim Financial Statements

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

Auditors’ Responsibility

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

Conclusion

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

Other Matters

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

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

105

KPMG Samjong Accounting Corp.

Seoul, Korea

November 9, 2018

This report is effective as of November 9, 2018, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

106

LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Financial Position

(Unaudited)

As of September 30, 2018 and December 31, 2017


(In millions of won)	Note		September 30, 2018		December 31, 2017
Assets
Cash and cash equivalents		4, 24	W	826,619		566,408
Deposits in banks		4, 24		77,200		580,770
Trade accounts and notes receivable, net		5, 14, 24, 26		3,684,471		4,673,570
Other accounts receivable, net		5, 24		238,082		687,109
Other current financial assets		6, 24		15,206		13,499
Inventories		7		1,940,845		1,682,245
Other current assets		5		211,023		177,473

Total current assets				6,993,446		8,381,074

Deposits in banks		4, 24		11		11
Investments		8		3,995,757		2,683,941
Other non-current accounts receivable, net		5, 24		15,513		15,115
Other non-current financial assets		6, 24		73,837		49,657
Property, plant and equipment, net		9		14,732,617		12,487,001
Intangible assets, net		10		822,341		731,373
Deferred tax assets		22		852,515		727,248
Other non-current assets		5		321,956		333,995

Total non-current assets				20,814,547		17,028,341

Total assets			W	27,807,993		25,409,415

Liabilities
Trade accounts and notes payable		24, 26	W	3,510,947		2,391,493
Current financial liabilities		11, 24		1,408,487		1,060,735
Other accounts payable		24		2,155,584		2,701,823
Accrued expenses				689,349		755,062
Income tax payable				107,536		235,593
Provisions		13		89,459		73,685
Advances received		14		633,398		142,700
Other current liabilities		13		31,772		33,514

Total current liabilities				8,626,532		7,394,605

Non-current financial liabilities		11, 24		4,414,038		3,165,413
Non-current provisions		13		28,095		28,312
Defined benefit liabilities, net		12		258,225		94,535
Long-term advances received		14		1,227,995		830,335
Other non-current liabilities		13		88,323		66,956

Total non-current liabilities				6,016,676		4,185,551

Total liabilities				14,643,208		11,580,156

Equity
Share capital		15		1,789,079		1,789,079
Share premium				2,251,113		2,251,113
Retained earnings				9,124,593		9,789,067

Total equity				13,164,785		13,829,259

Total liabilities and equity			W	27,807,993		25,409,415

See accompanying notes to the condensed separate interim financial statements.

107

LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Comprehensive Income (Loss)

(Unaudited)

For the three-month and nine-month periods ended September 30, 2018 and 2017


(In millions of won, except earnings per share)	Note	For the three-month period ended September 30						For the nine-month period ended September 30
		2018			2017			2018			2017
Revenue	16, 26	W	5,661,046			6,594,290		W	15,850,273			19,160,088
Cost of sales	7, 17, 26		(4,941,650	)		(5,725,300	)		(14,740,881	)		(15,872,104	)

Gross profit			719,396			868,990			1,109,392			3,287,984

Selling expenses	18		(140,644	)		(132,116	)		(370,218	)		(435,567	)
Administrative expenses	18		(132,797	)		(118,676	)		(383,714	)		(351,676	)
Research and development expenses			(325,002	)		(281,501	)		(897,196	)		(868,803	)

Operating profit (loss)			120,953			336,697			(541,736	)		1,631,938

Finance income	21		13,564			21,710			121,121			112,861
Finance costs	21		(14,029	)		(21,712	)		(70,218	)		(83,180	)
Other non-operating income	20		61,929			115,957			424,721			502,681
Other non-operating expenses	20		(61,178	)		(102,181	)		(448,101	)		(617,011	)

Profit (loss) before income tax			121,239			350,471			(514,213	)		1,547,289
Income tax expense (benefit)	22		97,966			69,130			(39,883	)		273,981

Profit (loss) for the period			23,273			281,341			(474,330	)		1,273,308

Other comprehensive income (loss)
Items that will never be reclassified to profit or loss
Remeasurements of net defined benefit liabilities	12		(4,737	)		(3,639	)		(16,129	)		(11,963	)
Related income tax	12		1,267			881			4,893			2,895

Other comprehensive loss for the period, net of income tax			(3,470	)		(2,758	)		(11,236	)		(9,068	)

Total comprehensive income (loss) for the period		W	19,803			278,583		W	(485,566	)		1,264,240

Earnings (loss) per share (In Won)
Basic earnings (loss) per share	23	W	65			786		W	(1,326	)		3,559

Diluted earnings (loss) per share	23	W	65			786		W	(1,326	)		3,559

See accompanying notes to the condensed separate interim financial statements.

108

LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Changes in Equity

(Unaudited)

For the nine-month periods ended September 30, 2018 and 2017


(In millions of won)	Share capital		Share premium		Retained earnings			Total equity
Balances at January 1, 2017	W	1,789,079		2,251,113		8,195,255			12,235,447

Total comprehensive income for the period
Profit for the period		—		—		1,273,308			1,273,308

Other comprehensive loss
Remeasurements of net defined benefit liabilities, net of tax		—		—		(9,068	)		(9,068	)

Total other comprehensive loss		—		—		(9,068	)		(9,068	)

Total comprehensive income for the period	W	—		—		1,264,240			1,264,240

Transaction with owners, recognized directly in equity
Dividends to equity holders		—		—		(178,908	)		(178,908	)

Balances at September 30, 2017	W	1,789,079		2,251,113		9,280,587			13,320,779

Balances at January 1, 2018	W	1,789,079		2,251,113		9,789,067			13,829,259

Total comprehensive loss for the period
Loss for the period		—		—		(474,330	)		(474,330	)

Other comprehensive loss
Remeasurements of net defined benefit liabilities, net of tax		—		—		(11,236	)		(11,236	)

Total other comprehensive loss		—		—		(11,236	)		(11,236	)

Total comprehensive loss for the period	W	—		—		(485,566	)		(485,566	)

Transaction with owners, recognized directly in equity
Dividends to equity holders		—		—		(178,908	)		(178,908	)

Balances at September 30, 2018	W	1,789,079		2,251,113		9,124,593			13,164,785

See accompanying notes to the condensed separate interim financial statements.

109

LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows

(Unaudited)

For the nine-month periods ended September 30, 2018 and 2017


(In millions of won)	Note		2018			2017
Cash flows from operating activities:
Profit (loss) for the period			W	(474,330	)		1,273,308
Adjustments for:
Income tax expense (benefit)		22		(39,883	)		273,981
Depreciation		17		1,486,308			1,259,107
Amortization of intangible assets		17		300,008			292,144
Gain on foreign currency translation				(40,060	)		(85,878	)
Loss on foreign currency translation				91,399			55,743
Expenses related to defined benefit plans		12		154,052			147,640
Gain on disposal of property, plant and equipment				(33,788	)		(50,733	)
Loss on disposal of property, plant and equipment				7,375			4,628
Impairment loss on disposal of property, plant and equipment				25,715			—
Gain on disposal of intangible assets				(239	)		(308	)
Loss on disposal of intangible assets				—			9
Impairment loss on intangible assets				353			1,717
Reversal of impairment loss on intangible assets				(26	)		—
Warranty expenses				135,395			140,923
Finance income				(116,813	)		(89,249	)
Finance costs				65,529			69,281
Other income				(3,269	)		(16,884	)
Other expenses				612			1,841

				2,032,668			2,003,962

Changes in
Trade accounts and notes receivable				887,513			(89,765	)
Other accounts receivable				51,381			8,870
Inventories				(345,548	)		(164,507	)
Other current assets				17,190			(44,036	)
Other non-current assets				(43,718	)		(103,977	)
Trade accounts and notes payable				1,152,050			55,915
Other accounts payable				(166,994	)		4,361
Accrued expenses				(70,563	)		17,622
Provisions				(129,627	)		(107,179	)
Other current liabilities				119,686			6,372
Defined benefit liabilities, net				(6,491	)		(5,447	)
Long-term advances received				829,088			1,020,470
Other non-current liabilities				20,267			5,113

				2,314,234			603,812

Cash generated from operating activities				3,872,572			3,881,082
Income taxes paid				(228,055	)		(197,373	)
Interests received				17,740			18,176
Interests paid				(103,761	)		(68,601	)

Net cash provided by operating activities			W	3,558,496			3,633,284

See accompanying notes to the separate interim financial statements.

110

LG DISPLAY CO., LTD.

Condensed Separate Interim Statements of Cash Flows, Continued

(Unaudited)

For the nine-month periods ended September 30, 2018 and 2017


(In millions of won)	Note		2018			2017
Cash flows from investing activities:
Dividends received			W	24,136			316,469
Increase in deposits in banks				(272,680	)		(1,229,495	)
Proceeds from withdrawal of deposits in banks				775,895			1,272,002
Acquisition of available-for-sale financial assets				—			(7	)
Acquisition of financial asset at fair value through profit or loss				(285	)		—
Proceeds from disposal of financial assets at fair value through other comprehensive income				6			—
Acquisition of investments				(562,662	)		(177,643	)
Proceeds from disposal of investments				2,382			6,697
Acquisition of property, plant and equipment				(4,410,924	)		(3,408,598	)
Proceeds from disposal of property, plant and equipment				192,098			152,123
Acquisition of intangible assets				(398,107	)		(329,051	)
Proceeds from disposal of intangible assets				960			874
Government grants received				1,210			1,505
Receipt from settlement of derivatives				314			2,745
Proceeds from collection of short-term loans				6,847			693
Increase in short-term loans				(5,000	)		—
Increase in long-term loans				(31,180	)		(300	)
Increase in deposits				(349	)		(1,378	)
Decrease in deposits				364			1,161
Proceeds from disposal of emission rights				10,200			—

Net cash used in investing activities				(4,666,775	)		(3,392,203	)

Cash flows from financing activities:		25
Proceeds from short-term borrowings				109,446			—
Repayments of short-term borrowings				(109,712	)		(113,209	)
Proceeds from issuance of debentures				498,170			298,780
Proceeds from long-term borrowings				1,774,180			400,000
Repayments of current portion of long-term borrowings and bonds				(726,014	)		(364,601	)
Payment guarantee fee received				1,328			—
Dividends paid				(178,908	)		(178,908	)

Net cash provided by financing activities				1,368,490			42,062

Net increase in cash and cash equivalents				260,211			283,143
Cash and cash equivalents at January 1				566,408			259,467

Cash and cash equivalents at September 30			W	826,619			542,610

See accompanying notes to the separate interim financial statements.

111

1.	Organization and Description of Business

LG Display Co., Ltd. (the “Company”) was incorporated in February 1985 and the Company is a public corporation listed in Korea Exchange since 2004. The main business of the Company is to manufacture and sell displays and its related products. As of September 30, 2018, the Company is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China and TFT-LCD and OLED module manufacturing plants in Gumi, Paju, China, Poland and Vietnam. The Company is domiciled in the Republic of Korea with its address at 128 Yeouidae-ro, Yeongdeungpo-gu, Seoul, the Republic of Korea. As of September 30, 2018, LG Electronics Inc., a major shareholder of the Company, owns 37.9% (135,625,000 shares) of the Company’s common stock.

The Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of September 30, 2018, there are 357,815,700 shares of common stock outstanding. The Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS represents one-half of one share of common stock. As of September 30, 2018, there are 19,660,196 ADSs outstanding.

2.	Basis of Presenting Financial Statements

(a)

Statement of Compliance

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

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

K-IFRS No. 1109, K-IFRS No. 1115, and K-IFRS No. 2122 have been applied in the condensed separate interim financial statements as of and for the nine-month period ended September 30, 2018. Changes to significant accounting policies are described in Note 3.

(b)

Basis of Measurement

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

•

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

•

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

112

2.	Basis of Presenting Financial Statements, Continued

(c)

Functional and Presentation Currency

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

(d)

Use of Estimates and Judgments

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

During the nine-month period ended September 30, 2018, based on the review of the past accumulated usage information that became available, the Company management reassessed the economic useful life of the Mask and Mold which had previously been classified as inventory. The balances of such Mask and Mold inventories amounted to W90,955 million as of December 31, 2017. Based on the results of the reassessment, the Company changed useful lives of Mask and Mold to two years and accounted for the change as a change in accounting estimate. The Company also changed the classification of Mask and Mold to property, plant and equipment.

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

113

3.	Summary of Significant Accounting Policies

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

(a)

Changes in Accounting Policies

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

(i)

K-IFRS No. 1109, Financial Instruments

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

i) Classification and measurement of financial assets and financial liabilities

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

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

•

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

•

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

114

3.	Summary of Significant Accounting Policies, Continued

(a)

Changes in Accounting Policies, Continued

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

•

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

•

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

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

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

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


		Financial assets at FVTPL		These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
		Financial assets at amortized cost		These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
		Debt investments at FVOCI		These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

115

3.	Summary of Significant Accounting Policies, Continued

(a)

Changes in Accounting Policies, Continued

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


(In millions of won)	Classification under K-IFRS No. 1039	Classification under K-IFRS No. 1109	Carrying amount under K-IFRS No. 1039		Carrying amount under K-IFRS No. 1109		Difference
Financial assets
Cash and cash equivalents	Loans and receivables	Amortized cost	W	566,408		566,408		—
Deposits	Loans and receivables	Amortized cost		580,781		580,781		—
Trade receivables	Loans and receivables	Amortized cost		4,673,570		4,673,570		—
Other receivables	Loans and receivables	Amortized cost		702,224		702,224		—
Debt instrument	Available-for-sale	FVOCI-debt instrument		162		162		—
Equity instrument	Available-for-sale	Mandatorily at FVTPL		2,697		2,697		—
Convertible bonds	Designated as at FVTPL	Mandatorily at FVTPL		1,552		1,552		—
Derivatives	Designated as at FVTPL	Mandatorily at FVTPL		842		842		—
Others	Loans and receivables	Amortized cost		57,903		57,903		—

Total financial assets			W	6,586,139		6,586,139		—

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

ii) Impairment of financial assets

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

116

3.	Summary of Significant Accounting Policies, Continued

(a)

Changes in Accounting Policies, Continued

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

iii) Hedge Accounting

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

(ii)

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

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

Variable Consideration

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

117

3.	Summary of Significant Accounting Policies, Continued

(a)

Changes in Accounting Policies, Continued

The effect of the application of K-IFRS No. 1115 on the Company’s separate interim statement of financial position as of September 30, 2018 is as follows. There is no impact on the condensed separate interim statement of comprehensive income and the cash flows for the nine-month period ended September 30, 2018.


(In millions of won)
Categories	Adoption of K-IFRS No. 1115		Adjustments			Adoption of K-IFRS No. 1018
Current Assets
Other current assets	W	211,023		(4,834	)		206,189
Current Liabilities
Provisions	W	89,459		(4,834	)		84,625

(iii)

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

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

(b)

New Standards and Amendments Not Yet Adopted

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

(i)

K-IFRS No. 1116, Leases

The Company plans to adopt K-IFRS No. 1116, Leases, in its separate financial statements for annual period beginning on January 1, 2019, assess the financial impact of the adoption of K-IFRS No. 1116 and disclose the results in its separate financial statements for the year ending December 31, 2018. As of September 30, 2018, other than the potential impacts described in the separate financial statements as of and for the year ended December 31, 2017, there are no significant changes in relation to preparation for the adoption of this new standard.

118

4.	Cash and Cash Equivalents and Deposits in Banks

Cash and cash equivalents and deposits in banks as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Current assets
Cash and cash equivalents
Demand deposits	W	826,619		566,408
Deposits in banks
Time deposits	W	3,118		507,930
Restricted cash(*)		74,082		72,840

	W	77,200		580,770

Non-current assets
Deposits in banks
Restricted cash(*)	W	11		11

	W	903,830		1,147,189

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

119

5.	Receivables and Other Assets

(a)

Trade accounts and notes receivable as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Trade, net	W	332,354		355,332
Due from related parties		3,352,117		4,318,238

	W	3,684,471		4,673,570

(b)

Other accounts receivable as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Current assets
Non-trade receivable, net	W	235,185		678,454
Accrued income		2,897		8,655

	W	238,082		687,109

Non-current assets
Long-term non-trade receivable		15,513		15,115

	W	253,595		702,224

Due from related parties included in other accounts receivable, as of September 30, 2018 and December 31, 2017 are W195,018 million and W567,996 million, respectively.

120

5.	Receivables and Other Assets, Continued

(c)

The aging of trade accounts and notes receivable and other accounts receivable as of September 30, 2018 and December 31, 2017 are as follows:


	September 30, 2018
	Book value				Impairment loss
(In millions of won)	Trade accounts and notes receivable		Other accounts *receivable()**		Trade accounts and notes receivable			Other accounts *receivable()**
Not past due	W	3,680,734		246,343		(8	)		(242	)
Past due 1-15 days		60		6,107		—			(60	)
Past due 16-30 days		3,680		533		—			—
Past due 31-60 days		5		539		—			(3	)
Past due more than 60 days		—		779		—			(401	)

	W	3,684,479		254,301		(8	)		(706	)

(*)

Other accounts receivable includes non-trade receivable and accrued income.

121

5.	Receivables and Other Assets, Continued


	December 31, 2017
	Book value				Impairment loss
(In millions of won)	Trade accounts and notes receivable		Other accounts *receivable()**		Trade accounts and notes receivable			Other accounts *receivable()**
Not past due	W	4,673,660		701,952		(570	)		(686	)
Past due 1-15 days		341		482		—			(3	)
Past due 16-30 days		135		53		—			(1	)
Past due 31-60 days		—		207		—			(2	)
Past due more than 60 days		4		622		—			(400	)

	W	4,674,140		703,316		(570	)		(1,092	)


	2018						2017
(In millions of won)	Trade accounts and notes receivable			Other accounts receivable			Trade accounts and notes receivable		Other accounts receivable
Balance at the beginning of the period	W	570			1,092			520		827
(Reversal of) bad debt expense		(562	)		(386	)		50		265

Balance at the reporting date	W	8			706			570		1,092

122

5.	Receivables and Other Assets, Continued

(d)

Other assets as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)
	September 30, 2018		December 31, 2017
Current assets
Advance payments	W	6,927		3,597
Prepaid expenses		149,135		76,129
Value added tax refundable		50,127		95,769
Emission rights		—		1,978
Right to recover returned goods(*)		4,834		—

	W	211,023		177,473

Non-current assets
Long-term prepaid expenses	W	321,956		333,995

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

123

6.	Other Financial Assets

(a)

Other financial assets as of September 30, 2018 are as follows:


(In millions of won)	September 30, 2018
Current assets
Financial asset at fair value through profit or loss
Derivatives(*1)	W	2,500
Financial asset at fair value through other comprehensive income
Debt instrument
Government bonds	W	97
Financial asset carried at amortized cost
Short-term loans	W	12,609

	W	15,206

Non-current assets
Financial asset at fair value through profit or loss
Equity instrument
Intellectual Discovery, Ltd.	W	729
Kyulux, Inc.		1,968
Fineeva Co., Ltd.		285

	W	2,982

Convertible bonds	W	1,552
Derivatives(*2)		182

Financial asset at fair value through other comprehensive income
Debt instrument
Government bonds	W	62

Financial asset carried at amortized cost
Deposits	W	13,624
Long-term loans		55,435

	W	73,837

(*1)	Represents exchange rate swap contracts related to foreign currency denominated borrowings

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

124

6.	Other Financial Assets, Continued

(b)

Other financial assets as of December 31, 2017 are as follows:


(In millions of won)	December 31, 2017
Current assets
Available-for-sale financial assets
Debt instrument
Government bonds	W	6
Short-term loans		13,493

	W	13,499

Non-current assets
Financial asset at fair value through profit or loss	W	1,552
Available-for-sale financial assets
Debt instrument
Government bonds	W	156
Equity instrument
Intellectual Discovery, Ltd.	W	729
Kyulux, Inc.		1,968

	W	2,697

Deposits	W	13,638
Long-term loans		30,772
Derivatives(*)		842

	W	49,657

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

Other financial assets of related parties as of September 30, 2018 and December 31, 2017 are W2,000 million and W2,750 million, respectively.

125

7.	Inventories

Inventories as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Finished goods	W	493,152		491,330
Work-in-process		830,469		675,324
Raw materials		489,333		286,934
Supplies		127,891		228,657

	W	1,940,845		1,682,245


(In millions of won)	2018			2017
Inventories recognized as cost of sales	W	14,740,881			15,872,104
Including: inventory write-downs		235,218			225,390
Including: reversal and usage of inventory write-downs		(184,139	)		(185,454	)

126

8.	Investments

(a)

Investments in subsidiaries consist of the following:


(In millions of won)					September 30, 2018					December 31, 2017
Overseas Subsidiaries	Location		Business		Percentage of ownership			Book value		Percentage of ownership			Book Value
LG Display America, Inc.		San Jose, U.S.A.		Sell Display products		100	%	W	36,815		100	%	W	36,815
LG Display Germany GmbH		Eschborn, Germany		Sell Display products		100	%		19,373		100	%		19,373
LG Display Japan Co., Ltd.		Tokyo, Japan		Sell Display products		100	%		15,686		100	%		15,686
LG Display Taiwan Co., Ltd.		Taipei, Taiwan		Sell Display products		100	%		35,230		100	%		35,230
LG Display Nanjing Co., Ltd.		Nanjing, China		Manufacture Display products		100	%		593,726		100	%		593,726
LG Display Shanghai Co., Ltd.		Shanghai, China		Sell Display products		100	%		9,093		100	%		9,093
LG Display Poland Sp. z o.o.		Wroclaw, Poland		Manufacture Display products		100	%		194,992		100	%		194,992
LG Display Guangzhou Co., Ltd.		Guangzhou, China		Manufacture Display products		100	%		293,557		100	%		293,557
LG Display Shenzhen Co., Ltd.		Shenzhen, China		Sell Display products		100	%		3,467		100	%		3,467
LG Display Singapore Pte. Ltd.		Singapore		Sell Display products		100	%		1,250		100	%		1,250
L&T Display Technology (Fujian) Limited		Fujian, China		Manufacture and sell LCD module and LCD monitor sets		51	%		10,123		51	%		10,123
LG Display Yantai Co., Ltd.		Yantai, China		Manufacture Display products		100	%		169,195		100	%		169,195
Nanumnuri Co., Ltd.		Gumi, South Korea		Janitorial services		100	%		800		100	%		800
LG Display (China) Co., Ltd.		Guangzhou, China		Manufacture and Sell Display products		51	%		723,086		51	%		723,086
Unified Innovative Technology, LLC		Wilmington, U.S.A.		Manage intellectual property		100	%		9,489		100	%		9,489
LG Display Guangzhou Trading Co., Ltd.		Guangzhou, China		Sell Display products		100	%		218		100	%		218
Global OLED Technology LLC		Herndon, U.S.A		Manage OLED intellectual property		100	%		164,322		100	%		164,322
LG Display Vietnam Haiphong Co., Ltd.(*1)		Haiphong, Vietnam		Manufacture Display Products		100	%		329,978		100	%		117,378
Suzhou Lehui Display Co., Ltd.		Suzhou, China		Manufacture and sell LCD module and LCD monitor sets		100	%		121,640		100	%		121,640
LG DISPLAY FUND I LLC(*2)		Wilmington, U.S.A.		Invest in venture business and obtain technologies		100	%		1,400		—			—
LG Display High-Tech (China) Co., Ltd.(*3)		Guangzhou, China		Manufacture Display products		69	%		749,154		—			—
Money Market Trust(*4)		Seoul, South Korea		Money market trust		100	%		395,401		100	%		61,471

								W	3,877,995				W	2,580,911

127

8.	Investments, Continued

(*1)

For the nine-month period ended September 30, 2018, the Company contributed W212,600 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”). There was no change in the Company’s ownership percentage in LGDVN as a result of this additional investment.

(*2)

For the nine-month period ended September 30, 2018, the Company established LG DISPLAY FUND I LLC in Wilmington, U.S.A. to invest in venture business and the Company has a 100% equity interest of this subsidiary.

(*3)

For the nine-month period ended September 30, 2018, the Company established LG Display High-Tech (China) Co., Ltd. in Guangzhou China to manufacture Display products and the Company has a 69% equity interest of this subsidiary.

(*4)

For the nine-month period ended September 30, 2018, the Company acquired and disposed interests in Money Market Trust (“MMT”) and the MMT amount as of September 30, 2018 is W395,401 million.

(b)

Investments in associates consist of the following:



(In millions of won)			September 30, 2018					December 31, 2017
Associates	Location	Business	Percentage of ownership			Book Value		Percentage of ownership			Book Value
Paju Electric Glass Co., Ltd.	Paju, South Korea	Manufacture electric glass for FPDs		40	%	W	45,089		40	%	W	45,089
INVENIA Co., Ltd.	Seongnam, South Korea	Develop and manufacture the equipment for FPDs		13	%		6,330		13	%		6,330
WooRee E&L Co., Ltd.	Ansan, South Korea	Manufacture LED back light unit packages		14	%		10,268		14	%		10,268
LB Gemini New Growth Fund No.16(*1)	Seoul, South Korea	Invest in small and middle sized companies and benefit from M&A opportunities		31	%		434		31	%		434
YAS Co., Ltd.	Paju, South Korea	Develop and manufacture deposition equipment for OLEDs		15	%		10,000		15	%		10,000
AVATEC Co., Ltd.	Daegu, South Korea	Process and sell electric glass for FPDs		17	%		10,600		17	%		10,600
Arctic Sentinel, Inc.	Los Angeles, U.S.A.	Develop and manufacture tablet for kids		10	%		—		10	%		—
CYNORA GmbH	Bruchsal, Germany	Develop organic emitting materials for displays and lighting devices		14	%		20,309		14	%		20,309
Material Science Co., Ltd.(*2)	Seoul, South Korea	Develop, manufacture and sell material for display		10	%		4,000		—			—
Nanosys Inc.(*3)	Milpitas, U.S.A.	Develop, manufacture and sell material for display		4	%		10,732		—			—

						W	117,762				W	103,030

128

8.	Investments, Continued

(*1)

The Company is a member of a limited partnership in the LB Gemini New Growth Fund No.16 (“the Fund”). On the other hand, a resolution to dissolve the fund was approved at the general meeting and the fund is in process of liquidation as of September 30, 2018.

(*2)

In March 2018, the Company invested W4,000 million and acquired 10,767 shares of common stock with voting rights in Material Science Co., Ltd. As of September 30, 2018, the Company‘s ownership percentage in Material Science Co., Ltd. is 10% and the Company has the right to appoint a director to the board of directors of the investee.

(*3)

In May 2018, the Company invested W10,732 million and acquired 5,699,954 shares of preferred stock with voting rights in Nanosys Inc. As of September 30, 2018, the Company‘s ownership percentage in Nanosys Inc. is 4% and the Company has the right to appoint a director to the board of directors of the investee.

For the nine-month periods ended September 30, 2018 and 2017, the aggregate amount of received dividends from subsidiaries and associates are W95,553 million and W18,718 million, respectively.

9.	Property, Plant and Equipment

For the nine-month periods ended September 30, 2018 and 2017, the Company purchased property, plant and equipment of W4,318,561 million and W3,709,525 million, respectively. The capitalized borrowing costs and the annualized capitalization rate were W82,092 million and 2.68%, and W28,463 million and 1.87% for the nine-month periods ended September 30, 2018 and 2017, respectively. Also, for the nine-month periods ended September 30, 2018 and 2017, the Company disposed of property, plant and equipment with carrying amounts of W126,210 million and W67,940 million, respectively, and recognized W33,788 million and W7,375 million, respectively, as gain and loss on disposal of property, plant and equipment for the nine-month period ended September 30, 2018 (gain and loss for the nine-month period ended September 30, 2017: W50,733 million and W4,628 million, respectively).

10.	Intangible Assets

(a)

The Company capitalizes expenditures related to development activities, such as expenditures incurred on designing, manufacturing and testing of products after those related activities meet the capitalization criteria of development costs including technical feasibility, future economic benefits and others. The balances of capitalized development costs as of September 30, 2018 and December 31, 2017, are W399,909 million and W296,760 million, respectively.

(b)

129

11.	Financial Liabilities

(a)

Financial liabilities as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Current
Current portion of long-term borrowings and bonds	W	1,403,708		1,058,985
Current portion of payment guarantee liabilities		4,779		1,750

	W	1,408,487		1,060,735

Non-current
Won denominated borrowings	W	2,300,770		1,251,258
Foreign currency denominated borrowings		344,937		401,775
Bonds		1,745,738		1,506,003
Payment guarantee liabilities		15,513		6,377
Derivatives(*)		7,080		—

	W	4,414,038		3,165,413

(*)	Represents exchange rate swap contracts related to foreign currency denominated borrowings.

(b)	Won denominated long-term borrowings as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won) Lender	Annual interest rate as of September 30, 2018 (%)		September 30, 2018			December 31, 2017
Woori Bank		2.75	W	1,421			1,922
Shinhan Bank		CD rate (91days) + 0.30		200,000			200,000
Korea Development Bank and others		CD rate (91days) + 0.64~0.74, 2.28~3.25		2,800,000			1,250,000
Less current portion of long-term borrowings				(700,651	)		(200,664	)

			W	2,300,770			1,251,258

130

11.	Financial Liabilities, Continued

(c)

Foreign currency denominated long-term borrowings as of September 30, 2018 and December 31, 2017 are as follows:

(In millions of won and USD)

Lender

Annual interest rate as of
September 30, 2018 (%)(*)

September 30,
2018

December 31,
2017

The Export-Import Bank of Korea and Others

3ML+0.86~1.70

673,184

755,337

Foreign currency equivalent

USD 605

USD 705

Less current portion of long-term borrowings

(328,247

)

(353,562

)

344,937

401,775

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

(d)	Details of bonds issued and outstanding as of September 30, 2018 and December 31, 2017 are as follows:



(In millions of won)	Maturity		Annual interest rate as of September 30, 2018 (%)		September 30, 2018			December 31, 2017
*Won denominated bonds()**
Publicly issued bonds		2018.11~ 2023.02		1.80~3.73	W	2,015,000			2,015,000
Privately placed bonds		2025.05~ 2033.05		3.25~4.25		110,000			—
Less discount on bonds						(4,452	)		(4,238	)
Less current portion						(374,810	)		(504,759	)

					W	1,745,738			1,506,003

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

131

12.	Employee Benefits

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

(a)

Net defined benefit liabilities recognized as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018			December 31, 2017
Present value of partially funded defined benefit obligations	W	1,674,938			1,560,525
Fair value of plan assets		(1,416,713	)		(1,465,990	)

	W	258,225			94,535

(b)

Expenses recognized in profit or loss for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(In millions of won)	2018		2017		2018		2017
Current service cost	W	51,108		48,615		153,326		145,846
Net interest cost		242		598		726		1,794

	W	51,350		49,213		154,052		147,640

(c)

Plan assets as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Guaranteed deposits in banks	W	1,416,713		1,465,990

As of September 30, 2018, the Company maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., Shinhan Bank and others.

(d)


	For the three-month periods ended September 30						For the nine-month periods ended September 30
(In millions of won)	2018			2017			2018			2017
Remeasurements of net defined benefit liabilities	W	(4,737	)		(3,639	)		(16,129	)		(11,963	)
Tax effect		1,267			881			4,893			2,895

Remeasurements of net defined benefit liabilities, net of income tax	W	(3,470	)		(2,758	)		(11,236	)		(9,068	)

132

13.	Provisions and Other Liabilities

(a)

Changes in provisions for the nine-month period ended September 30, 2018 are as follows:


(In millions of won)	Litigations and claims		*Warranties()**			Others			Total
Balance at January 1, 2018	W	43		100,119			1,835			101,997
Adjustment from adoption of K-IFRS No. 1115		—		—			9,789			9,789
Additions (reversals)		—		135,395			(5,978	)		129,417
Usage		—		(123,649	)		—			(123,649	)

Balance at September 30, 2018	W	43		111,865			5,646			117,554

Current	W	43		83,770			5,646			89,459
Non-current	W	—		28,095			—			28,095

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

(b)

Other liabilities as of September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	September 30, 2018		December 31, 2017
Current liabilities
Withholdings	W	27,349		23,948
Unearned revenues		4,253		9,566
Security deposits		170		—

	W	31,772		33,514

Non-current liabilities
Long-term accrued expenses	W	80,053		66,956
Security deposits		8,270		—

	W	88,323		66,956

133

14.	Contingencies and Commitments

(a)

Legal Proceedings

Anti-trust litigations

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

Others

The Company is defending against various claims in addition to pending proceedings described above. The Company does not have a present obligation for these matters and has not recognized any provision at September 30, 2018.

(b)

Commitments

Factoring and securitization of accounts receivable

The Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,715 million (W1,908,281 million) in connection with the Company’s export sales transactions with its subsidiaries. As of September 30, 2018, no short-term borrowings were outstanding in connection with these agreements. In connection with all of the contracts in this paragraph, the Company has sold its accounts receivable with recourse.

The Company has a credit facility agreement with Shinhan Bank and several other banks pursuant to which the Company could sell its accounts receivables up to an aggregate of W579,588 million in connection with its domestic and export sales transactions and, as of September 30, 2018, W72,039 million were outstanding in connection with the agreement. In connection with the contract above, the Company has sold its accounts receivable without recourse.

Letters of credit

As of September 30, 2018, the Company has agreements in relation to the opening of letters of credit up to USD 30 million (W33,381 million) with KEB Hana Bank, USD 80 million (W89,016 million) with Bank of China and USD 50 million (W55,635 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Company provides a payment guarantee in connection with the term loan credit facilities of LG Display Vietnam Haiphong, Co., Ltd. amounting to USD 1,200 million (W1,355,240 million) for principals.

In addition, the Company obtained payment guarantees amounting to USD 1,538 million (W1,710,776 million) from KEB Hana Bank and others for advances received related to the long-term supply agreements and USD 8.5 million (W9,458 million) from Shinhan Bank for value added tax payments in Poland.

134

14.	Contingencies and Commitments, Continued

License agreements

As of September 30, 2018, in relation to its LCD business, the Company has technical license agreements with Hitachi Display, Ltd. and others and has a trademark license agreement with LG Corp.

Long-term supply agreement

As of September 30, 2018, in connection with long-term supply agreements with customers, the Company recognized USD 1,538 million (W1,710,776 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter.

The Company received payment guarantees amounting to USD 1,538 million (W1,710,776 million) from KEB Hana Bank and other various banks relating to advances received.

15.	Share capital

The Company is authorized to issue 500,000,000 shares of capital stock (par value W 5,000), and as of September 30, 2018 and December 31, 2017, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2017 to September 30, 2018.

16.

Revenue

Details of revenue for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


(In millions of won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
(In millions of won)	2018		2017		2018		2017
Sales of goods	W	5,650,848		6,582,101		15,818,884		19,117,997
Royalties		3,491		4,504		11,356		13,360
Others		6,707		7,685		20,033		28,731

	W	5,661,046		6,594,290		15,850,273		19,160,088

135

17.	The Nature of Expenses and Others

The classification of expenses by nature for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


(In millions of won)	For the three-month periods ended September 30						For the nine-month periods ended September 30
(In millions of won)	2018			2017			2018			2017
Changes in inventories	W	(200,754	)		(184,627	)		(258,600	)		(164,506	)
Purchases of raw materials, merchandise and others		2,250,888			2,849,969			6,138,450			7,553,067
Depreciation and amortization		615,599			539,468			1,786,316			1,551,251
Outsourcing fees		1,383,154			1,483,811			4,292,740			4,049,078
Labor costs		667,704			647,908			2,041,913			1,914,120
Supplies and others		182,420			272,180			571,924			727,126
Utility		194,949			195,947			543,100			530,283
Fees and commissions		132,822			117,812			411,347			348,267
Shipping costs		25,557			33,221			76,077			89,463
Advertising		33,731			51,201			72,146			140,655
Warranty expenses		54,984			27,749			135,395			140,923
Travel		24,388			21,061			72,255			57,900
Taxes and dues		13,237			11,164			42,251			34,795
Others		163,798			196,156			510,440			576,883

	W	5,542,477			6,263,020			16,435,754			17,549,305

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

136

18.	Selling and Administrative Expenses

Details of selling and administrative expenses for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


(In millions of won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
(In millions of won)	2018		2017		2018		2017
Salaries and wages	W	59,913		53,152		185,484		159,191
Expenses related to defined benefit plans		7,339		6,480		21,431		19,592
Other employee benefits		10,897		12,523		33,546		38,084
Shipping costs		17,460		26,005		53,612		70,504
Fees and commissions		39,867		25,513		104,200		79,860
Depreciation		28,652		22,169		82,628		66,782
Taxes and dues		417		481		1,909		1,485
Advertising		33,731		51,201		72,146		140,655
Warranty expenses		54,984		27,749		135,395		140,923
Rent		2,636		2,484		7,952		7,491
Insurance		1,477		1,710		4,597		4,924
Travel		4,718		5,031		13,202		14,764
Training		2,515		4,450		8,072		11,808
Others		8,835		11,844		29,758		31,180

	W	273,441		250,792		753,932		787,243

19.	Personnel Expenses

Details of personnel expenses for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


(In millions of won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
(In millions of won)	2018		2017		2018		2017
Salaries and wages	W	584,592		553,390		1,783,405		1,638,911
Other employee benefits		78,302		76,451		245,793		224,611
Contributions to National Pension plan		19,336		18,573		56,816		54,325
Expenses related to defined benefit plan		51,350		49,213		154,052		147,640

	W	733,580		697,627		2,240,066		2,065,487

137

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

(a)

Details of other non-operating income for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(In millions of won)	2018		2017		2018		2017
Foreign currency gain	W	54,638		108,750		387,075		443,399
Gain on disposal of property, plant and equipment		6,769		4,916		33,788		50,733
Gain on disposal of intangible assets		—		—		239		308
Reversal of impairment loss on intangible assets		—		—		26		—
Rental income		442		867		1,319		2,631
Others		80		1,424		2,274		5,610

	W	61,929		115,957		424,721		502,681

(b)

Details of other non-operating expenses for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(In millions of won)	2018		2017		2018		2017
Foreign currency loss	W	58,794		96,754		404,356		595,856
Loss on disposal of property, plant and equipment		1,002		1,420		7,375		4,628
Impairment loss on property, plant and equipment		—		—		25,715		—
Loss on disposal of intangible assets		—		9		—		9
Impairment loss on intangible assets		62		40		353		1,717
Donations		139		2,267		3,159		12,610
Other bad debt expenses		—		1,576		23		1,826
Others		1,181		115		7,120		365

	W	61,178		102,181		448,101		617,011

138

21.	Finance Income and Finance Costs

Finance income and costs recognized in profit and loss for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(In millions of won)	2018		2017		2018		2017
Finance income
Interest income	W	5,094		8,031		14,015		19,061
Dividend income		—		10,079		95,553		18,718
Foreign currency gain		4,460		3,263		5,948		67,181
Gain on disposal of investments		—		—		—		4,203
Gain on transaction of derivatives		249		—		362		3,106
Gain on valuation of derivatives		2,500		337		2,500		592
Other		1,261		—		2,743		—

	W	13,564		21,710		121,121		112,861

Finance costs
Interest expense	W	5,390		11,349		26,300		39,716
Foreign currency loss		—		9,678		33,054		12,453
Loss on disposal of investments		—		—		—		22,401
Loss on impairment of investments		—		—		—		5,504
Loss on sale of trade accounts and notes receivable		255		21		322		46
Loss on impairment of available-for-sale financial assets		—		—		—		1,298
Loss on transaction of derivatives		5		150		48		361
Loss on valuation of derivatives		7,239		—		7,740		—
Other		1,140		514		2,754		1,401

	W	14,029		21,712		70,218		83,180

139

22.	Income Taxes

(a)

Details of income tax expense (benefit) for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30					For the nine-month periods ended September 30
(In millions of won)	2018		2017			2018			2017
Current tax expense	W	88,683		111,480			80,491			341,257
Deferred tax expense (benefit)		9,283		(42,350	)		(120,374	)		(67,276	)

Income tax expense (benefit)	W	97,966		69,130			(39,883	)		273,981

(b)

Deferred Tax Assets and Liabilities

Deferred tax assets and liabilities as of September 30, 2018 and December 31, 2017 are attributable to the following:


	Assets				Liabilities						Total
(In millions of won)	September 30, 2018		December 31, 2017		September 30, 2018			December 31, 2017			September 30, 2018			December 31, 2017
Other accounts receivable, net	W	—		—		(447	)		(1,378	)		(447	)		(1,378	)
Inventories, net		41,599		30,688		—			—			41,599			30,688
Defined benefit liabilities, net		48,315		2,375		—			—			48,315			2,375
Accrued expenses		159,878		179,112		—			—			159,878			179,112
Property, plant and equipment		195,720		206,900		—			—			195,720			206,900
Intangible assets		805		1,249		—			—			805			1,249
Provisions		30,141		27,018		—			—			30,141			27,018
Gain or loss on foreign currency translation, net		13		13		—			—			13			13
Others		10,443		12,345		—			—			10,443			12,345
Tax loss carryforwards		94,848		—		—			—			94,848			—
Tax credit carryforwards		271,200		268,926		—			—			271,200			268,926

Deferred tax assets (liabilities)	W	852,962		728,626		(447	)		(1,378	)		852,515			727,248

Statutory tax rate applicable to the Company was 24.2% for the year ended December 31, 2017. During the year-ended December 31, 2017, certain amendments to corporate income tax rules in the Republic of Korea were enacted and effective on January 1, 2018 that resulted in application of 27.5% for taxable income in excess of W300,000 million. Deferred taxes as of September 30, 2018 and December 31, 2017 have been measured using the applicable tax rates from the amendment.

140

23.	Earnings (Loss) Per Share

(a)

Basic earnings (loss) per share for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(In won and number of shares)	2018		2017		2018			2017
Profit (loss) for the period	W	23,272,424,699		281,340,302,457		(474,330,116,040	)		1,273,307,737,914
Weighted-average number of common stocks outstanding		357,815,700		357,815,700		357,815,700			357,815,700

Earnings (loss) per share	W	65		786		(1,326	)		3,559

(b)

Diluted earnings (loss) per share for the three-month and nine-month periods ended September 30, 2018 and 2017 are not calculated since there was no potential common stock.

141

24.	Financial Risk Management

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

(a)

Market risk

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

(i)

Currency risk

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

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

i) Exposure to currency risk

The Company’s exposure to foreign currency risk based on notional amounts as of September 30, 2018 and December 31, 2017 is as follows:


	September 30, 2018
(In millions)	USD			JPY			CNY		PLN			EUR
Cash and cash equivalents		279			1,408			—		1			—
Trade accounts and notes receivable		3,128			2,776			—		—			—
Non-trade receivable		24			935			1,018		—			—
Trade accounts and notes payable		(1,557	)		(13,027	)		—		—			(1	)
Other accounts payable		(111	)		(15,436	)		—		(10	)		(1	)
Borrowings		(605	)		—			—		—			—

Aggregate notional amounts in financial position		1,158			(23,344	)		1,018		(9	)		(2	)

Currency swap contracts		200			—			—		—			—

Net exposure		1,358			(23,344	)		1,018		(9	)		(2	)

142

24.	Financial Risk Management, Continued


	December 31, 2017
(In millions)	USD			JPY			CNY			PLN			EUR
Cash and cash equivalents		482			77			—			2			—
Trade accounts and notes receivable		3,840			1,960			—			—			—
Non-trade receivable		73			1,674			1,085			—			9
Trade accounts and notes payable		(1,337	)		(13,659	)		—			—			—
Other accounts payable		(170	)		(12,582	)		(1,059	)		(10	)		(2	)
Borrowings		(705	)		—			—			—			—

Net exposure		2,183			(22,530	)		26			(8	)		7

Average exchange rates applied for the nine-month periods ended September 30, 2018 and 2017 and the exchange rates at September 30, 2018 and December 31, 2017 are as follows:


	Average rate				Reporting date spot rate
(In won)	2018		2017		September 30, 2018		December 31, 2017
USD	W	1,090.96		1,138.67		1,112.70		1,071.40
JPY		9.95		10.18		9.81		9.49
CNY		167.56		167.49		161.78		163.65
PLN		306.68		297.15		303.13		306.07
EUR		1,302.36		1,267.31		1,294.57		1,279.25

143

24.	Financial Risk Management, Continued

ii)

Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Company’s assets or liabilities denominated in foreign currency as of September 30, 2018 and December 31, 2017, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company considers to be reasonably possible as of the end of 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:


	September 30, 2018						December 31, 2017
(In millions of won)	Equity			Profit or loss			Equity			Profit or loss
USD (5 percent weakening)	W	54,775			54,775			88,643			88,643
JPY (5 percent weakening)		(8,303	)		(8,303	)		(8,104	)		(8,104	)
CNY (5 percent weakening)		5,970			5,970			161			161
PLN (5 percent weakening)		(99	)		(99	)		(93	)		(93	)
EUR (5 percent weakening)		(94	)		(94	)		339			339

144

24.	Financial Risk Management, Continued

(ii)

Interest rate risk

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

Profile

The interest rate profile of the Company’s interest-bearing financial instruments as of September 30, 2018 and December 31, 2017 is as follows:


(In millions of won)	September 30, 2018			December 31, 2017
Fixed rate instruments
Financial assets	W	903,978			1,147,340
Financial liabilities		(4,621,969	)		(2,962,671	)

	W	(3,717,991	)		(1,815,331	)

Variable rate instruments
Financial liabilities	W	(1,173,184	)		(1,255,350	)

ii)

Equity and profit or loss sensitivity analysis for variable rate instruments


	Equity					Profit or loss
(In millions of won)	1%p increase			1%p decrease		1%p increase			1%p decrease
September 30, 2018
Variable rate instruments(*)	W	(5,968	)		5,968		(5,968	)		5,968

December 31, 2017
Variable rate instruments(*)	W	(6,863	)		6,863		(6,863	)		6,863

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

145

24.	Financial Risk Management, Continued

(b)

Credit risk

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

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

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

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

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of September 30, 2018 and December 31, 2017 are as follows:

As of September 30, 2018


(In millions of won)	September 30, 2018
Financial assets carried at amortized cost
Cash and cash equivalents	W	826,619
Deposits in banks		77,211
Trade accounts and notes receivable		3,684,471
Non-trade receivable		235,185
Accrued income		2,897
Deposits		13,624
Short-term loans		12,609
Long-term loans		55,435
Long-term non-trade receivable		15,513

	W	4,923,564

Financial assets at fair value through profit or loss
Convertible bonds	W	1,552
Derivatives		2,682

	W	4,234

Financial assets at fair value through other comprehensive income
Debt instrument	W	159

	W	4,927,957

146

24.	Financial Risk Management, Continued

ii)

As of December 31, 2017


(In millions of won)	December 31, 2017
Cash and cash equivalents	W	566,408
Deposits in banks		580,781
Trade accounts and notes receivable		4,673,570
Non-trade receivable		678,454
Accrued income		8,655
Available-for-sale financial assets		162
Financial assets at fair value through profit or loss		1,552
Deposits		13,638
Short-term loans		13,493
Long-term loans		30,772
Long-term non-trade receivable		15,115
Derivatives		842

	W	6,583,442

In addition to the financial assets above, as of September 30, 2018, the Company provides a payment guarantee of USD 1,200 million (W1,335,240 million), for its subsidiary.

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises 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 Company’s management policy.

147

24.	Financial Risk Management, Continued

(c)

Liquidity risk

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

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

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of September 30, 2018.


			Contractual cash flows
(In millions of won)	Carrying amount		Total			6 months or less			6-12 months			1-2 years			2-5 years			More than 5 years
Non-derivative financial liabilities
Unsecured bank borrowings	W	3,674,605		3,904,728			892,162			220,829			563,915			2,108,258			119,564
Unsecured bond issues		2,120,548		2,291,821			141,311			283,570			597,137			1,128,558			141,245
Trade accounts and notes payable		3,510,947		3,510,947			3,510,947			—			—			—			—
Other accounts payable		2,155,584		2,155,584			2,155,584			—			—			—			—
Payment guarantee(*)		20,292		1,518,574			67,785			39,747			133,926			939,869			337,247
Security deposits		8,440		8,440			85			85			8,270			—			—
Derivatives financial liabilities
Derivatives	W	7,080		(13,052	)		(1,100	)		(1,488	)		(3,608	)		(6,856	)		—

	W11,497,496		13,377,042			6,766,774			542,743			1,299,640			4,169,829			598,056

(*)	Contractual cash flows of payment guarantee is identical to timing of principal payment and represent the maximum amount that the Company could be required to pay the guarantee amount.

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

148

24.	Financial Risk Management, Continued

(d)

Capital management


(In millions of won)	September 30, 2018			December 31, 2017
Total liabilities	W	14,643,208			11,580,156
Total equity		13,164,785			13,829,259
Cash and deposits in banks(*1)		903,819			1,147,178
Borrowings (including bonds)		5,795,153			4,218,021
Total liabilities to equity ratio		111	%		84	%
Net borrowings to equity ratio(*2)		37	%		22	%

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

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

149

24.	Financial Risk Management, Continued

(e)

Determination of fair value

(i) Measurement of fair value

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

i) Current Assets and Liabilities

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

ii) Trade Receivables and Other Receivables

iii) Investments in Equity and Debt Instruments

iv) Non-derivative Financial Liabilities

150

24.	Financial Risk Management, Continued

(ii)

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the condensed separate interim statements of financial position as of September 30, 2018 and December 31, 2017 are as follows:

As of September 30, 2018


	September 30, 2018
(In millions of won)	Carrying amounts		Fair values
Financial assets carried at amortized cost
Cash and cash equivalents	W	826,619		(*)
Deposits in banks		77,211		(*)
Trade accounts and notes receivable		3,684,471		(*)
Non-trade receivable		235,185		(*)
Accrued income		2,897		(*)
Deposits		13,624		(*)
Short-term loans		12,609		(*)
Long-term loans		55,435		(*)
Long-term non-trade receivable		15,513		(*)
Financial assets at fair value through profit or loss
Equity instrument	W	2,982		2,982
Convertible bonds		1,552		1,552
Derivatives		2,682		2,682
Financial assets at fair value through other comprehensive income
Debt instrument	W	159		159
Financial liabilities at fair value through profit or loss
Derivatives	W	7,080		7,080
Financial liabilities carried at amortized cost
Unsecured bank borrowings	W	3,674,605		3,685,260
Unsecured bond issues		2,120,548		2,144,526
Trade accounts and notes payable		3,510,947		(*)
Other accounts payable		2,155,584		2,155,584
Payment guarantee liabilities		20,292		(*)
Security deposits		8,440		(*)

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

151

24.	Financial Risk Management, Continued

ii)

As of December 31, 2017


	December 31, 2017
(In millions of won)	Carrying amounts		Fair values
Assets carried at fair value
Available-for-sale financial assets	W	162		162
Financial asset at fair value through profit or loss		1,552		1,552
Derivatives		842		842
Assets carried at amortized cost
Cash and cash equivalents	W	566,408		(*)
Deposits in banks		580,781		(*)
Trade accounts and notes receivable		4,673,570		(*)
Non-trade receivable		678,454		(*)
Accrued income		8,655		(*)
Deposits		13,638		(*)
Short-term loans		13,493		(*)
Long-term loans		30,772		(*)
Long-term non-trade receivable		15,115		(*)
Liabilities carried at amortized cost
Unsecured bank borrowings	W	2,207,259		2,212,474
Unsecured bond issues		2,010,762		2,016,086
Trade accounts and notes payable		2,391,493		(*)
Other accounts payable		2,701,823		2,702,033
Payment guarantee liabilities		8,127		(*)

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

152

24.	Financial Risk Management, Continued

(iii)

Fair values of financial assets and liabilities

i) Fair value hierarchy

•

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 September 30, 2018 and December 31, 2017 are as follows:


(In millions of won)	Level 1		Level 2		Level 3		Total
September 30, 2018
Financial assets at fair value through profit or loss
Equity instrument	W	—		—		2,982		2,982
Convertible bonds		—		—		1,552		1,552
Derivatives		—		—		2,682		2,682
Financial asset at fair value through other comprehensive income
Debt instrument		159		—		—		159
Financial liabilities at fair value through profit or loss
Derivatives		—		—		7,080		7,080

(In millions of won)	Level 1		Level 2		Level 3		Total
December 31, 2017
Available-for-sale financial assets	W	162		—		—		162
Financial assets at fair value through profit or loss		—		—		1,552		1,552
Derivatives		—		—		842		842

153

24.	Financial Risk Management, Continued

iii)

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

(In millions of won)

September 30, 2018

Valuation
technique

Input

Classification

Level 1

Level 2

Level 3

Liabilities

Unsecured bank borrowings

—

3,685,260

Discounted
cash flow

Discount
rate

Unsecured bond issues

—

2,144,526

Discounted
cash flow

Discount
rate

Other accounts payable

—

2,155,584

Discounted
cash flow

Discount
rate

(In millions of won)

December 31, 2017

Valuation
technique

Input

Classification

Level 1

Level 2

Level 3

Liabilities

Unsecured bank borrowings

—

2,212,474

Discounted
cash flow

Discount
rate

Unsecured bond issues

—

2,016,086

Discounted
cash flow

Discount
rate

Other accounts payable

—

2,702,033

Discounted
cash flow

Discount
rate

iv)

The interest rates applied for determination of the above fair value as of September 30, 2018 and December 31, 2017 are as follows:


	September 30, 2018			December 31, 2017
Borrowings, bonds and others		1.70~3.67	%		1.57~2.92	%

154

25.	Changes in liabilities arising from financing activities

Changes in liabilities arising from financing activities for the nine-month period ended September 30, 2018 are as follows:


						Non-cash transactions
(In millions of won)	January 1, 2018		Cash flows from financing activities			Reclassification			Exchange rate effect		Effective interest adjustment		Others		September 30, 2018
Short-term borrowings	W	—		(266	)		—			266		—		—		—
Current portion of long-term borrowings and bonds		1,058,985		(726,014	)		1,044,094			26,277		366		—		1,403,708
Payment Guarantee		8,127		1,328			—			—		—		10,837		20,292
Long-term borrowings		1,653,033		1,774,180			(784,409	)		2,903		—		—		2,645,707
Bonds		1,506,003		498,170			(259,685	)		—		1,250		—		1,745,738

	W	4,226,148		1,547,398			—			29,446		1,616		10,837		5,815,445

155

26.	Related Parties and Others

(a)

Related parties

Related parties as of September 30, 2018 are as follows:


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

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

156

26.	Related Parties and Others, Continued

(b)


	For the three-month period ended September 30, 2018
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries
LG Display America, Inc.	W	1,947,098		—		—		—		—		7
LG Display Japan Co., Ltd.		788,408		—		—		—		—		6
LG Display Germany GmbH		435,550		—		—		—		—		74
LG Display Taiwan Co., Ltd.		424,876		—		—		—		—		109
LG Display Nanjing Co., Ltd.		533		—		3,093		—		312,979		10,583
LG Display Shanghai Co., Ltd.		271,183		—		—		—		—		9
LG Display Poland Sp. z o.o.		70		—		—		—		8,970		6
LG Display Guangzhou Co., Ltd.		17,279		—		3,904		—		502,223		3,600
LG Display Shenzhen Co., Ltd.		390,859		—		—		—		—		—
LG Display Yantai Co., Ltd.		7,085		—		6,363		—		129,026		3,463
LG Display (China) Co., Ltd.		—		—		446,462		—		—		266
LG Display Singapore Pte. Ltd.		339,124		—		—		—		—		4
L&T Display Technology (Fujian) Limited		112,109		—		—		—		—		—
Nanumnuri Co., Ltd.		45		—		—		—		—		5,760
Global OLED Technology LLC		—		—		—		—		—		—
LG Display Guangzhou Trading Co., Ltd.		206,246		—		—		—		—		—
LG Display Vietnam Haiphong Co., Ltd.		1,262		—		12,753		—		300,671		2,465
Suzhou Lehui Display Co., Ltd.		53,179		—		—		—		—		—

	W	4,994,906		—		472,575		—		1,253,869		26,352

157

26.	Related Parties and Others, Continued


	For the three-month period ended September 30, 2018
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
WooRee E&L Co., Ltd.	W	—		—		—		—		—		45
INVENIA Co., Ltd.		—		—		585		5,369		—		211
AVATEC Co., Ltd.		—		—		—		—		16,650		243
Paju Electric Glass Co., Ltd.		—		—		90,642		—		—		1,503
LB Gemini New Growth Fund No.16		—		—		—		—		—		—
YAS Co., Ltd.		—		—		1,011		7,484		—		667

	W	—		—		92,238		12,853		16,650		2,669

Entity that has significant influence over the Company
LG Electronics Inc.	W	222,952		—		4,238		100,234		—		25,849
Subsidiaries of the entity that has significant influence over the Company
LG Electronics India Pvt. Ltd.	W	27,537		—		—		—		—		15
LG Electronics Vietnam Haiphong Co., Ltd.		49,740		—		—		—		—		6
LG Electronics Reynosa S.A. DE C.V.		6,017		—		—		—		—		332
LG Electronics Almaty Kazakhstan		501		—		—		—		—		14
LG Electronics S.A. (Pty) Ltd		1,369		—		—		—		—		8
LG Electronics Mexicali S.A.DE C.V.		521		—		—		—		—		107
LG Electronics RUS, LLC		8		—		—		—		—		617

158

26.	Related Parties and Others, Continued


	For the three-month period ended September 30, 2018
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries of the entity that has significant influence over the Company
LG Electronics Egypt S.A.E.	W	275		—		—		—		—		—
LG Innotek Co., Ltd.		7,653		—		32,714		—		—		6,640
LG Hitachi Water Solutions Co., Ltd.		—		—		—		59,080		—		987
Inspur LG Digital Mobile Communications Co., Ltd.		26,953		—		—		—		—		—
Qingdao LG Inspur Digital Communication Co., Ltd.		12,162		—		—		—		—		—
HiEntech Co., Ltd.		—		—		—		—		—		6,936
Others		2,333		—		18		—		—		3,176

	W	135,069		—		32,732		59,080		—		18,838

	W	5,352,927		—		601,783		172,167		1,270,519		73,708

159

26.	Related Parties and Others, Continued


	For the nine-month period ended September 30, 2018
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries
LG Display America, Inc.	W	5,905,631		—		—		—		—		8
LG Display Japan Co., Ltd.		1,781,914		—		—		—		—		2,158
LG Display Germany GmbH		1,261,511		—		—		—		—		892
LG Display Taiwan Co., Ltd.		1,088,959		—		—		—		—		459
LG Display Nanjing Co., Ltd.		10,693		—		4,845		—		956,316		18,806
LG Display Shanghai Co., Ltd.		713,664		—		—		—		—		52
LG Display Poland Sp. z o.o.		274		—		—		—		27,489		12
LG Display Guangzhou Co., Ltd.		40,227		—		9,781		—		1,457,260		10,748
LG Display Shenzhen Co., Ltd.		1,146,447		—		—		—		—		4
LG Display Yantai Co., Ltd.		21,415		—		14,965		—		900,549		12,035
LG Display (China) Co., Ltd.		328		90,281		1,122,101		—		—		1,008
LG Display Singapore Pte. Ltd.		774,083		—		—		—		—		23
L&T Display Technology (Fujian) Limited		298,712		—		—		—		8		36
Nanumnuri Co., Ltd.		134		—		—		—		—		16,931
Global OLED Technology LLC		—		—		—		—		—		3,002
LG Display Guangzhou Trading Co., Ltd.		439,646		—		—		—		—		—
LG Display Vietnam Haiphong Co., Ltd.		37,772		—		23,608		—		586,153		3,082
Suzhou Lehui Display Co., Ltd.		131,142		—		—		—		—		—

	W	13,652,552		90,281		1,175,300		—		3,927,775		69,256

160

26.	Related Parties and Others, Continued


	For the nine-month period ended September 30, 2018
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
WooRee E&L Co., Ltd.	W	—		—		34		—		—		131
INVENIA Co., Ltd.		—		30		1,354		26,956		—		467
AVATEC Co., Ltd.		—		530		—		—		51,729		466
Paju Electric Glass Co., Ltd.		—		4,172		274,440		—		—		3,346
LB Gemini New Growth Fund No.16				540		—		—		—		—
YAS Co., Ltd.		—		—		3,192		25,036		—		2,183

	W	—		5,272		279,020		51,992		51,729		6,593

Entity that has significant influence over the Company
LG Electronics Inc.	W	919,008		—		25,818		406,187		—		73,656
Subsidiaries of the entity that has significant influence over the Company
LG Electronics India Pvt. Ltd.	W	51,311		—		—		—		—		41
LG Electronics Vietnam Haiphong Co., Ltd.		119,976		—		—		—		—		11
LG Electronics Reynosa S.A. DE C.V.		23,517		—		—		—		—		1,628
LG Electronics Almaty Kazakhstan		3,708		—		—		—		—		35
LG Electronics S.A. (Pty) Ltd		5,804		—		—		—		—		14
LG Electronics Mexicali S.A.DE C.V.		2,022		—		—		—		—		172
LG Electronics RUS, LLC		2,170		—		—		—		—		1,716

161

26. Related Parties and Others, Continued


	For the nine-month period ended September 30, 2018
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries of the entity that has significant influence over the Company
LG Electronics Egypt S.A.E.	W	15,156		—		—		—		—		16
LG Innotek Co., Ltd.		24,701		—		97,846		—		—		34,692
LG Hitachi Water Solutions Co., Ltd.		—		—		—		256,036		—		7,248
Inspur LG Digital Mobile Communications Co., Ltd.		63,570		—		—		—		—		—
Qingdao LG Inspur Digital Communication Co., Ltd.		32,248		—		—		—		—		—
HiEntech Co., Ltd.		—		—		—		—		—		21,802
Others		4,068		—		27		—		—		7,205

	W	348,251		—		97,873		256,036		—		74,580

	W	14,919,811		95,553		1,578,011		714,215		3,979,504		224,085

162

26.	Related Parties and Others, Continued


	For the three-month period ended September 30, 2017
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries
LG Display America, Inc.	W	3,019,271		—		—		—		—		8
LG Display Japan Co., Ltd.		726,449		—		—		—		—		10
LG Display Germany GmbH		426,024		—		—		—		—		423
LG Display Taiwan Co., Ltd.		322,899		—		—		—		—		334
LG Display Nanjing Co., Ltd.		4,454		—		—		—		136,328		—
LG Display Shanghai Co., Ltd.		311,912		—		—		—		—		58
LG Display Poland Sp. z o.o.		70		—		—		—		8,636		—
LG Display Guangzhou Co., Ltd.		3,057		—		2,105		—		507,848		2,644
LG Display Shenzhen Co., Ltd.		402,008		—		—		—		—		4
LG Display Yantai Co., Ltd.		9,967		—		4,041		373		663,341		3,566
LG Display (China) Co., Ltd.		26		9,575		509,452		—		—		—
LG Display Singapore Pte. Ltd.		235,069		—		—		—		—		2
L&T Display Technology (Fujian) Limited		135,927		—		—		—		—		3
Nanumnuri Co., Ltd.		24		—		—		—		—		4,324
Global OLED Technology LLC		—		—		—		—		—		1,526
LG Display Guangzhou Trading Co., Ltd.		180,841		—		—		—		—		—
LG Display Vietnam Haiphong Co., Ltd.		971		—		—		—		39,731		—
Suzhou Lehui Display Co., Ltd.		60,627		—		—		—		—		—

	W	5,839,596		9,575		515,598		373		1,355,884		12,902

163

26.	Related Parties and Others, Continued


	For the three-month period ended September 30, 2017
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
WooRee E&L Co., Ltd.	W	—		—		—		—		—		22
INVENIA Co., Ltd.		—		—		691		1,872		—		23
AVATEC Co., Ltd.		—		—		—		—		24,685		40
Paju Electric Glass Co., Ltd.		—		—		94,966		—		—		1,025
YAS Co., Ltd.		—		—		1,142		20,059		—		650

	W	—		—		96,799		21,931		24,685		1,760

Entity that has significant influence over the Company
LG Electronics Inc.	W	320,503		—		11,738		159,052		—		26,836
Subsidiaries of the entity that has significant influence over the Company
LG Electronics India Pvt. Ltd.	W	25,127		—		—		—		—		22
LG Electronics Vietnam Haiphong Co., Ltd.		50,073		—		—		—		—		43
LG Electronics Reynosa S.A. DE C.V.		11,204		—		—		—		—		551
LG Electronics Almaty Kazakhstan		3,363		—		—		—		—		—
LG Electronics S.A. (Pty) Ltd.		2,227		—		—		—		—		4
LG Electronics Mexicali S.A.DE C.V.		7,916		—		—		—		—		106
LG Electronics RUS, LLC		448		—		—		—		—		279

164

26.	Related Parties and Others, Continued


	For the three-month period ended September 30, 2017
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries of the entity that has significant influence over the Company
LG Innotek Co., Ltd.	W	4,406		—		48,422		—		—		627
LG Hitachi Water Solutions Co., Ltd.		—		—		—		78,853		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		20,539		—		—		—		—		—
Qingdao LG Inspur Digital Communication Co., Ltd.		22,167		—		—		—		—		—
Hi Entech Co., Ltd.		—		—		—		—		—		6,650
Others		1,403		—		—		—		—		2,454

	W	148,873		—		48,422		78,853		—		10,736

	W	6,308,972		9,575		672,557		260,209		1,380,569		52,234

165

26.	Related Parties and Others, Continued


	For the nine-month period ended September 30, 2017
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries
LG Display America, Inc.	W	8,056,946		—		—		—		—		15
LG Display Japan Co., Ltd.		2,002,614		—		—		—		—		50
LG Display Germany GmbH		1,351,506		—		—		—		—		6,736
LG Display Taiwan Co., Ltd.		1,179,015		—		—		—		—		784
LG Display Nanjing Co., Ltd.		15,376		—		—		—		385,181		—
LG Display Shanghai Co., Ltd.		999,447		—		—		—		—		216
LG Display Poland Sp. z o.o.		1,893		—		—		—		26,022		33
LG Display Guangzhou Co., Ltd.		27,808		—		5,829		—		1,666,594		7,732
LG Display Shenzhen Co., Ltd.		1,274,715		—		—		—		—		5
LG Display Yantai Co., Ltd.		27,030		—		13,322		373		1,584,782		17,228
LG Display (China) Co., Ltd.		12,053		9,575		1,134,134		—		—		—
LG Display Singapore Pte. Ltd.		777,716		—		—		—		—		648
L&T Display Technology (Fujian) Limited		370,995		—		15		—		—		768
Nanumnuri Co., Ltd.		72		—		—		—		—		13,226
Global OLED Technology LLC		—		—		—		—		—		4,503
LG Display Guangzhou Trading Co., Ltd.		513,040		—		—		—		—		180
LG Display Vietnam Haiphong Co., Ltd.		3,289		—		—		—		39,731		—
Suzhou Lehui Display Co., Ltd.		170,909		—		—		—		—		—

	W	16,784,424		9,575		1,153,300		373		3,702,310		52,124

166

26.	Related Parties and Others, Continued


	For the nine-month period ended September 30, 2017
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
New Optics Ltd.(*)	W	1		—		—		—		4		6
WooRee E&L Co., Ltd.		—		—		—		—		—		110
INVENIA Co., Ltd.		10		—		1,304		20,778		—		171
AVATEC Co., Ltd.		—		530		—		—		65,899		538
Paju Electric Glass Co., Ltd.		—		8,109		289,760		—		—		3,218
Narenanotech Corporation(*)		—		—		279		12,251		—		177
YAS Co., Ltd.		—		—		2,871		64,337		—		2,132

	W	11		8,639		294,214		97,366		65,903		6,352

Entity that has significant influence over the Company
LG Electronics Inc.	W	1,168,067		—		27,694		528,088		—		85,688
Subsidiaries of the entity that has significant influence over the Company
LG Electronics India Pvt. Ltd.	W	63,346		—		—		—		—		75
LG Electronics Vietnam Haiphong Co., Ltd.		149,796		—		—		—		—		167
LG Electronics Reynosa S.A. DE C.V.		53,202		—		—		—		—		1,391
LG Electronics Almaty Kazakhstan		10,642		—		—		—		—		12
LG Electronics S.A. (Pty) Ltd.		11,760		—		—		—		—		18
LG Electronics Mexicali S.A.DE C.V.		25,843		—		—		—		—		175
LG Electronics RUS, LLC		3,477		—		—		—		—		730

167

26.	Related Parties and Others, Continued


	For the nine-month period ended September 30, 2017
					Purchase and others
(In millions of won)	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries of the entity that has significant influence over the Company
LG Innotek Co., Ltd.	W	10,919		—		136,493		—		—		4,445
LG Hitachi Water Solutions Co., Ltd.		—		—		—		151,845		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		88,504		—		—		—		—		—
Qingdao LG Inspur Digital Communication Co., Ltd.		56,423		—		—		—		—		—
Hi Entech Co., Ltd.		—		—		—		—		—		20,030
Others		2,608		—		3		—		—		5,682

	W	476,520		—		136,496		151,845		—		32,725

	W	18,429,022		18,214		1,611,704		777,672		3,768,213		176,889

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

168

26.	Related Parties and Others, Continued

(c)

Trade accounts and notes receivable and payable as of September 30, 2018 and December 31, 2017 are as follows:


	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
(In millions of won)	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Subsidiaries
LG Display America, Inc.	W	977,166		1,795,757		6		—
LG Display Japan Co., Ltd.		474,647		230,804		—		2
LG Display Germany GmbH		454,577		497,677		3,098		—
LG Display Taiwan Co., Ltd.		442,684		436,943		7		106
LG Display Nanjing Co., Ltd.		379		176		378,045		85,646
LG Display Shanghai Co., Ltd.		202,887		176,816		—		74
LG Display Poland Sp. z o.o.		48		73		6,059		5,480
LG Display Guangzhou Co., Ltd.		167,830		345,212		152,683		189,996
LG Display Guangzhou Trading Co., Ltd.		153,180		88,876		—		—
LG Display Shenzhen Co., Ltd.		148,871		217,542		—		—
LG Display Yantai Co., Ltd.		831		123,059		159,614		30,397
LG Display (China) Co., Ltd.		1,766		55,309		300,860		150,933
LG Display Singapore Pte. Ltd.		104,959		187,420		1		1
L&T Display Technology (Fujian) Limited		76,706		57,545		184,523		177,487
Nanumnuri Co., Ltd.		—		—		2,398		2,453
LG Display Vietnam Haiphong Co., Ltd.		25,551		9,119		562,754		58,666
Suzhou Lehui Display Co., Ltd.		43,917		21,110		—		36,919

	W	3,275,999		4,243,438		1,750,048		738,160

169

26.	Related Parties and Others, Continued


	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
(In millions of won)	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Associates and their subsidiaries
WooRee E&L Co., Ltd.	W	—		—		50		61
INVENIA Co., Ltd.		2,000		2,375		8,540		18,523
AVATEC Co., Ltd.		—		—		4,870		2,949
Paju Electric Glass Co., Ltd.		—		—		61,707		60,141
YAS Co., Ltd.		—		375		9,895		6,474

	W	2,000		2,750		85,062		88,148

Entity that has significant influence over the Company
LG Electronics Inc.	W	174,932		550,101		120,259		206,616

170

26.	Related Parties and Others, Continued


	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
(In millions of won)	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Subsidiaries of the entity that has significant influence over the Company
LG Innotek Co., Ltd.	W	2,833		407		25,581		58,741
LG Hitachi Water Solutions Co., Ltd.		—		—		101,315		154,079
HiEntech Co., Ltd.		—		—		5,889		4,854
Inspur LG Digital Mobile Communications Co., Ltd.		26,744		20,953		—		—
LG Electronics Reynosa S.A. DE C.V.		3,085		11,494		29		82
LG Electronics India Pvt. Ltd.		17,429		3,030		3		—
LG Electronics Vietnam Haiphong Co., Ltd.		34,176		36,017		2		1
LG Electronics S.A. (Pty) Ltd		839		2,400		1		4
LG Electronics Egypt S.A.E.		2,787		—		—		1
Qingdao LG Inspur Digital Communication Co., Ltd.		6,052		9		—		80
Others		2,259		18,385		2,122		1,308

	W	96,204		92,695		134,942		219,150

	W	3,549,135		4,888,984		2,090,311		1,252,074

171

26.	Related Parties and Others, Continued

(d)


	2018				2017
(In millions of won) Associates	Loans		Collection of loans		Loans		Collection of loans
INVENIA Co., Ltd.	W	—		375		—		333
YAS Co., Ltd.		—		375		—		333

	W	—		750		—		666

172

26.	Related Parties and Others, Continued

(e)

Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Company and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the three-month and nine-month periods ended September 30, 2018 and 2017 and as of September 30, 2018 and December 31, 2017 are as follows. These entities are not related parties according to K-IFRS No. 1024, Related Party Disclosures.


	For the three-month period ended September 30, 2018				For the nine-month period ended September 30, 2018				September 30, 2018
(In millions of won)	Sales and others		Purchase and others		Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
LG International Corp. and its subsidiaries(*)	W	171,420		39,572		559,012		136,111		148,973		133,587
LG Uplus Corp.		—		552		21		1,170		—		216
LG Chem Ltd. and its subsidiaries		70		202,820		1,634		571,940		97		119,095
Serveone and its subsidiaries		96		245,678		291		932,230		21,307		364,063
Silicon Works Co., Ltd		—		195,615		—		499,456		—		197,320
LG Corp.		—		13,634		—		39,003		11,401		5,583
LG Management Development Institute		—		2,366		—		7,484		3,480		470
LG CNS Co., Ltd. and its subsidiaries		—		36,920		—		108,174		—		33,312
LG Hausys Ltd		1		—		1,111		1		—		—
G2R Inc. and its subsidiaries		—		1,901		—		38,971		—		2,337

	W	171,587		739,058		562,069		2,334,540		185,258		855,983

(*)

For transactions which LG International and its subsidiaries act as an agent of the Company and receive commission revenue from the Company, above transaction amount only include commission revenue recognized by LG International and its subsidiaries. For prior year comparative purpose, gross sales and others for the three-month and nine-month periods ended September 30, 2018 amount to W171,420 million and W559,012 million, respectively, and gross purchase and others for the three-month and nine-month periods ended September 30, 2018 amount to W77,450 million and W444,027 million, respectively.

173

26.	Related Parties and Others, Continued


	For the three-month period ended September 30, 2017				For the nine-month period ended September 30, 2017				December 31, 2017
(In millions of won)	Sales and others		Purchase and others		Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
LG International Corp. and its subsidiaries	W	163,050		340,755		440,704		978,944		110,786		186,799
LG Household & Health Care and its subsidiaries		—		24		—		116		—		—
LG Uplus Corp.		54		136		152		453		—		1,505
LG Chem Ltd. and its subsidiaries		8,243		230,324		8,256		642,523		8,659		127,416
SK Siltron Co., Ltd. (formerly, Siltron Co., Ltd.)(*)		—		—		10		—		—		—
Lusem Co., Ltd.(*)		2		10		10		641		1		53
Serveone and its subsidiaries		97		363,476		346		955,433		21,565		491,719
Silicon Works Co., Ltd		—		163,019		—		448,486		—		120,031
LG Corp.		—		15,804		—		46,762		4,700		1,523
LG Management Development Institute		—		3,237		—		7,607		3,480		699
LG CNS Co., Ltd. and its subsidiaries		184		64,625		323		133,644		—		90,374
LG Hausys Ltd		419		3		1,255		47		—		374
G2R Inc. and its subsidiaries		—		4,233		—		11,810		—		14,275

	W	172,049		1,185,646		451,056		3,226,466		149,191		1,034,768

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

174

26.	Related Parties and Others, Continued

(f)

Key management personnel compensation

Compensation costs of key management for the three-month and nine-month periods ended September 30, 2018 and 2017 are as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(In millions of won)	2018		2017		2018		2017
Short-term benefits	W	918		858		2,734		2,866
Expenses related to the defined benefit plan		103		95		690		392

	W	1,021		953		3,424		3,258

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

175

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: November 14, 2018	By:	/s/ Heeyeon Kim
		(Signature)

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

176