Form 6-K
Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of February 2019

 

 

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

 

 

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

(Address of principal executive offices)

 

 

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

Form 20-F  ☒            Form 40-F  ☐

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

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

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

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

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

Yes  ☐            No  ☒

 

 

 


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Submission of Audit Report

 

1.

Name of external auditor: Samjong Accounting Corporation (KPMG)

 

2.

Date of receiving external audit report: February 28, 2019

 

3.

Auditor’s opinion

 

     FY 2018      FY 2017  

Audit Report on Consolidated Financial Statements

     Unqualified        Unqualified  

 

4.

Financial Highlights of Consolidated Financial Statements

 

Items

   FY 2018     FY 2017  

Total Assets

     33,175,710,242,708       29,159,687,233,535  

Total Liabilities

     18,289,464,427,307       14,178,177,736,048  

Total Shareholders’ Equity

     14,886,245,815,401       14,981,509,497,484  

Capital Stock

     1,789,078,500,000       1,789,078,500,000  

Revenues

     24,336,570,894,923       27,790,215,889,137  

Operating Income

     92,890,993,922       2,461,618,169,136  

Ordinary Income

     (91,365,902,690     2,332,631,739,384  

Net Income

     (179,443,032,794     1,937,051,628,911  

Total Shareholders’ Equity / Capital Stock

     832.1     837.4


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

For the Years Ended December 31, 2018 and 2017

(With Independent Auditors’ Report Thereon)

 


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Contents

 

     Page  

Independent Auditors’ Report

     1  

Consolidated Statements of Financial Position

     5  

Consolidated Statements of Comprehensive Income (Loss)

     6  

Consolidated Statements of Changes in Equity

     7  

Consolidated Statements of Cash Flows

     8  

Notes to the Consolidated Financial Statements

     10  


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Independent Auditors’ Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Opinion

We have audited the accompanying consolidated financial statements of LG Display Co., Ltd. and its subsidiaries (the “Group”), which comprise the consolidated statements of financial position of the Group as of December 31, 2018 and 2017, the related consolidated statements of comprehensive income (loss), changes in equity and cash flows for the years then ended, and comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

Basis for Opinion

We conducted our audit in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements as of and for the year ended December 31, 2018. These matters were addressed in the context of our audit of the consolidated financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

(i) Assessment of impairment of non-current assets

As at December 31, 2018, goodwill amounts to W104,311 million and has been allocated to the entire Group as one cash generating unit. Management performs impairment assessment of the Group by estimating the recoverable amount for the Group at each reporting period. As described in note 3(k)(ii) to the consolidated financial statements, an impairment loss for non-current assets is recognized if the carrying amount of the Group exceeds its recoverable amount.

The recoverable amount used in impairment testing as of December 31, 2018 is value in use, which is estimated based on the expected future cash flows including the estimates of revenue, operating expense and growth rate, and discount rate. Considering the significant degree of the judgment in estimating the value in use of the Group and the potential impact of the impairment on its consolidated financial statements, we identified the impairment of non-current assets as a key audit matter.


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The primary procedures we performed to address this key audit matter included:

 

   

Testing certain internal controls over the Group’s non-current assets impairment process.

 

   

Comparing the forecasts included in discounted cash flow forecasts prepared in prior year with the current year’s performance to assess the Group’s ability to accurately forecast.

 

   

Evaluating the key assumptions used to determine the value in use which included the estimated revenue, operating expenses and growth rate by comparison with the latest financial budgets approved by the board of directors, historical performance and industry reports.

 

   

Engaging our internal valuation specialists to assist us in assessing the discount rate applied by comparison with our recalculated rate using market data.

 

   

Performing sensitivity analysis on the discount rate and terminal growth rate applied to assess the impact of changes in these key assumptions on the conclusion reached in management’s impairment assessment.

(ii) Assessment of recoverability of deferred tax assets

As described in note 3 (r)(ii) to the consolidated financial statements, deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. As at December 31, 2018, deferred tax assets of KRW 308,393 million are from tax credit carryforwards which are primarily related to Korea.

The determination of the recoverability of deferred tax assets is complex as it requires the exercise of management judgment in estimating future taxable income and the timing of utilization of tax credits. Considering that estimation contains certain judgmental assumptions about future taxable profits including the estimates of revenue and operating expense, which are inherently uncertain and involve significant degree of judgment, we identified the assessment of recoverability of deferred tax assets as a key audit matter.

The primary procedures we performed to address this key audit matter included:

 

   

Testing certain internal controls relating to the Group’s deferred tax assets recoverability evaluation process.

 

   

Evaluating key inputs used to determine future taxable income, such as revenue and operating expense, by comparing with the latest financial budgets approved by the board of directors, historical performance and industry reports.

 

   

Comparing the forecasts of taxable income and timing of utilization of tax credit in prior years to actual results to assess the Group’s ability to accurately forecast.

Other matter

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

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

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

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

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

 

2


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Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

 

   

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

 

   

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control

 

   

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

 

   

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

 

   

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

   

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements as of and for the year ended December 31, 2018 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditors’ report is Heon Chang Oh.

KPMG Samjong Accounting Corp.

Seoul, Korea

February 25, 2019

 

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This report is effective as of February 25, 2019, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

4


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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Financial Position

As of December 31, 2018 and 2017

 

(In millions of won)    Note      December 31, 2018     December 31, 2017  

Assets

       

Cash and cash equivalents

     4, 26      W 2,365,022     2,602,560

Deposits in banks

     4, 26        78,400     758,078

Trade accounts and notes receivable, net

     5, 14, 26 28        2,829,163     4,325,120

Other accounts receivable, net

     5, 26        169,313     164,827

Other current financial assets

     6, 26        46,301     27,252

Inventories

     7        2,691,203     2,350,084

Prepaid income taxes

        4,516     3,854

Non-current assets held for sale

     30        70,161     —  

Other current assets

     5        546,048     241,928
     

 

 

   

 

 

 

Total current assets

        8,800,127     10,473,703

Deposits in banks

     4, 26        11     11

Investments in equity accounted investees

     8        113,989     122,507

Other non-current accounts receivable, net

     5, 26        11,448     8,738

Other non-current financial assets

     6, 26        144,214     59,836

Property, plant and equipment, net

     9, 17        21,600,130     16,201,960

Intangible assets, net

     10, 17        987,642     912,821

Deferred tax assets

     24        1,136,166     985,352

Other non-current assets

     5        381,983     394,759
     

 

 

   

 

 

 

Total non-current assets

        24,375,583     18,685,984
     

 

 

   

 

 

 

Total assets

      W 33,175,710     29,159,687
     

 

 

   

 

 

 

Liabilities

       

Trade accounts and notes payable

     26, 28      W 3,087,461     2,875,090

Current financial liabilities

     11, 26        1,553,907     1,452,926

Other accounts payable

     26        3,566,629     3,169,937

Accrued expenses

        633,346     812,615

Income tax payable

        105,900     321,978

Provisions

     13        98,254     76,016

Advances received

     14        834,010     194,129

Other current liabilities

     13        74,976     75,991
     

 

 

   

 

 

 

Total current liabilities

        9,954,483     8,978,682

Non-current financial liabilities

     11, 26        7,030,628     4,150,192

Non-current provisions

     13        32,764     28,312

Defined benefit liabilities, net

     12        45,360     95,447

Long-term advances received

     14        1,114,316     830,335

Deferred tax liabilities

     24        15,087     24,646

Other non-current liabilities

     13        96,826     70,563
     

 

 

   

 

 

 

Total non-current liabilities

        8,334,981     5,199,495
     

 

 

   

 

 

 

Total liabilities

        18,289,464     14,178,177
     

 

 

   

 

 

 

Equity

       

Share capital

     15        1,789,079     1,789,079

Share premium

        2,251,113     2,251,113

Retained earnings

        10,239,965     10,621,571

Reserves

     15        (300,968 )     (288,280 )
     

 

 

   

 

 

 

Total equity attributable to owners of the Controlling Company

        13,979,189     14,373,483
     

 

 

   

 

 

 

Non-controlling interests

        907,057     608,027
     

 

 

   

 

 

 

Total equity

        14,886,246     14,981,510
     

 

 

   

 

 

 

Total liabilities and equity

      W 33,175,710     29,159,687
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

5


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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

For the years ended December 31, 2018 and 2017

 

(In millions of won, except earnings per share)    Note    2018     2017  

Revenue

   16, 17, 28    W 24,336,571     27,790,216

Cost of sales

   7, 18, 28      (21,251,305 )     (22,424,661 )
     

 

 

   

 

 

 

Gross profit

        3,085,266     5,365,555

Selling expenses

   19      (832,963 )     (994,483 )

Administrative expenses

   19      (938,214 )     (696,022 )

Research and development expenses

        (1,221,198 )     (1,213,432 )
     

 

 

   

 

 

 

Operating profit

        92,891     2,461,618
     

 

 

   

 

 

 

Finance income

   22      254,131     279,019

Finance costs

   22      (326,893 )     (268,856 )

Other non-operating income

   21      1,003,038     1,081,746

Other non-operating expenses

   21      (1,115,233 )     (1,230,455 )

Equity in income of equity accounted investees, net

   8      700     9,560
     

 

 

   

 

 

 

Profit (loss) before income tax

        (91,366 )     2,332,632

Income tax expense

   23      (88,077 )     (395,580 )
     

 

 

   

 

 

 

Profit (loss) for the year

        (179,443 )     1,937,052
     

 

 

   

 

 

 

Other comprehensive income (loss)

       

Items that will never be reclassified to profit or loss

       

Remeasurements of net defined benefit liabilities

   12, 23      5,690     (16,260 )

Other comprehensive income from associates and joint ventrues

        20     441

Related income tax

   12, 23      (1,169 )     9,259
     

 

 

   

 

 

 
        4,541     (6,560 )

Items that are or may be reclassified to profit or loss

       

Foreign currency translation differences for foreign operations

   22, 23      (19,987 )     (231,738 )

Other comprehensive income from associates

   23      37     905
        (19,950 )     (230,833 )
     

 

 

   

 

 

 

Other comprehensive loss for the year, net of income tax

        (15,409 )     (237,393 )
     

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      W (194,852 )     1,699,659
     

 

 

   

 

 

 

Profit (loss) attributable to:

       

Owners of the Controlling Company

        (207,239 )     1,802,756

Non-controlling interests

        27,796     134,296
     

 

 

   

 

 

 

Profit (loss) for the period

      W (179,443 )     1,937,052
     

 

 

   

 

 

 

Total comprehensive income (loss) attributable to:

       

Owners of the Controlling Company

        (215,386 )     1,596,394

Non-controlling interests

        20,534     103,265
     

 

 

   

 

 

 

Total comprehensive income (loss) for the period

      W (194,852 )     1,699,659
     

 

 

   

 

 

 

Earnings (loss) per share (In won)

       

Basic earnings (loss) per share

   25    W (579 )     5,038
     

 

 

   

 

 

 

Diluted earnings (loss) per share

   25    W (579 )     5,038
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 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 year

                

Profit for the year

     —        —        1,802,756     —       1,802,756     134,296     1,937,052

Other comprehensive income (loss)

                

Remeasurements of net defined benefit liabilities, net of tax

     —        —        (7,001 )     —       (7,001 )     —       (7,001 )

Foreign currency translation differences for foreign operations, net of tax

     —        —        —       (200,707 )     (200,707 )     (31,031 )     (231,738 )

Other comprehensive income (loss) from associates and joint ventures

     —        —        441     905     1,346     —       1,346
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

     —        —        (6,560 )     (199,802 )     (206,362 )     (31,031 )     (237,393 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

   W —        —        1,796,196     (199,802 )     1,596,394     103,265     1,699,659
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 December 31, 2017

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

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 year

                

Profit (loss) for the year

     —        —        (207,239 )     —       (207,239 )     27,796     (179,443 )

Other comprehensive income (loss)

                

Remeasurements of net defined benefit liabilities, net of tax

     —        —        4,521       4,521     —       4,521

Foreign currency translation differences for foreign operations, net of tax

     —        —        —       (12,725 )     (12,725 )     (7,262 )     (19,987 )

Other comprehensive income from associates

     —        —        20     37     57     —       57
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss)

     —        —        4,541     (12,688 )     (8,147 )     (7,262 )     (15,409 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the year

   W —        —        (202,698 )     (12,688 )     (215,386 )     20,534     (194,852 )
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 December 31, 2018

   W 1,789,079      2,251,113      10,239,965     (300,968 )     13,979,189     907,057     14,886,246
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2018 and 2017

 

(In millions of won)    Note      2018     2017  

Cash flows from operating activities:

       

Profit (loss) for the year

      W (179,443 )     1,937,052

Adjustments for:

       

Income tax expense

     23        88,077     395,580

Depreciation

     9,18        3,123,659     2,791,883

Amortization of intangible assets

     10,18        430,906     422,693

Gain on foreign currency translation

        (84,643 )     (187,558 )

Loss on foreign currency translation

        138,452     174,919

Expenses related to defined benefit plans

     12,20        179,880     198,241

Gain on disposal of property, plant and equipment

        (6,620 )     (101,227 )

Loss on disposal of property, plant and equipment

        15,048     20,030

Impairment loss on disposal of property, plant and equipment

        43,601     —  

Gain on disposal of intangible assets

        (239 )     (308 )

Loss on disposal of intangible assets

        —       30

Impairment loss on intangible assets

        82     1,809

Reversal of impairment loss on intangible assets

        (348 )     (35 )

Warranty expenses

        234,928     251,131

Finance income

        (101,313 )     (202,591 )

Finance costs

        173,975     142,591

Equity in income of equity method accounted investees, net

     8        (700 )     (9,560 )

Other income

        (3,310 )     (16,812 )

Other expenses

        593     1,870
     

 

 

   

 

 

 
        4,232,028     3,882,686

Changes in

       

Trade accounts and notes receivable

        1,304,963     484,592

Other accounts receivable

        (56,870 )     (3,004 )

Inventories

        (449,901 )     (55,979 )

Other current assets

        (249,968 )     180,844

Other non-current assets

        (61,164 )     (119,002 )

Trade accounts and notes payable

        267,358     113,590

Other accounts payable

        (111,053 )     106,930

Accrued expenses

        (194,394 )     181,509

Provisions

        (217,984 )     (210,973 )

Other current liabilities

        78,849     (585 )

Defined benefit liabilities, net

        (224,335 )     (261,966 )

Long-term advances received

        948,276     1,020,470

Other non-current liabilities

        24,510     5,974
     

 

 

   

 

 

 
        1,058,287     1,442,400

Cash generated from operating activities

        5,110,872     7,262,138

Income taxes paid

        (486,549 )     (416,794 )

Interests received

        71,819     55,340

Interests paid

        (212,019 )     (136,483 )
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 4,484,123     6,764,201
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

8


Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2018 and 2017

 

(In millions of won)    Note      2018     2017  

Cash flows from investing activities:

       

Dividends received

      W 5,272     8,639

Proceeds from withdrawal of deposits in banks

        1,454,561     2,206,148

Increase in deposits in banks

        (775,239 )     (1,803,718 )

Acquisition of financial assets at fair value through profit or loss

        (431 )     —  

Proceeds from disposal of financial assets at fair value through other comprehensive income

        6     —  

Acquisition of available-for-sale financial assets

        —       (273 )

Proceeds from disposal of available-for-sale financial assets

        —       917

Acquisition of investments in equity accounted investees

        (14,732 )     (20,309 )

Proceeds from disposal of investments in equity accounted investees

        4,527     13,128

Acquisition of property, plant and equipment

        (7,942,210 )     (6,592,435 )

Proceeds from disposal of property, plant and equipment

        142,088     160,252

Acquisition of intangible assets

        (480,607 )     (454,448 )

Proceeds from disposal of intangible assets

        960     1,674

Government grants received

        1,210     1,859

Receipt from settlement of derivatives

        2,026     2,592

Increase in short-term loans

        (7,700 )     —  

Proceeds from collection of short-term loans

        15,968     1,118

Increase in long-term loans

        (36,580 )     (13,930 )

Decrease in deposits

        4,136     4,272

Increase in deposits

        (58,794 )     (2,648 )

Proceeds from disposal of emission rights

        10,200     6,090
     

 

 

   

 

 

 

Net cash used in investing activities

        (7,675,339 )     (6,481,072 )
     

 

 

   

 

 

 

Cash flows from financing activities:

     27       

Proceeds from short-term borrowings

        552,164     —  

Repayments of short-term borrowings

        (552,884 )     (105,864 )

Proceeds from issuance of bonds

        828,169     497,959

Proceeds from long-term borrowings

        3,882,958     1,195,415

Repayments of current portion of long-term borrowings and bonds

        (1,859,098 )     (544,731 )

Capital contribution from non-controlling interests

        331,603     4,300

Subsidiaries’ dividends distributed to non-controlling interests

        (51,085 )     (5,929 )

Dividends paid

        (178,908 )     (178,908 )
     

 

 

   

 

 

 

Net cash provided by financing activities

        2,952,919     862,242
     

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

        (238,297 )     1,145,371

Cash and cash equivalents at January 1

        2,602,560     1,558,696

Effect of exchange rate fluctuations on cash held

        759     (101,507 )
     

 

 

   

 

 

 

Cash and cash equivalents at December 31

      W 2,365,022     2,602,560
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

9


Table of Contents

LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

1.

Reporting Entity

 

  (a)

Description of the Controlling Company

LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 and the Controlling Company is a public corporation listed in the Korea Exchange since 2004. The main business of the Controlling Company and its subsidiaries (the “Group”) is to manufacture and sell displays and its related products. As of December 31, 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 December 31, 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 December 31, 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 December 31, 2018, there are 20,890,926 ADSs outstanding.

 

10


Table of Contents

LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

1.

Reporting Entity, Continued

 

  (b)

Consolidated Subsidiaries as of December 31, 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 Germany GmbH

  Eschborn,
Germany
    100   December 31   November 5,
1999
  Sell Display products     EUR 1  

LG Display Japan Co., Ltd.

  Tokyo,
Japan
    100   December 31   October 12,
1999
  Sell Display products     JPY 95  

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

    51   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.

  Guangzhou,
China
    70   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 2  

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

  Guangzhou,
China
    69   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 24,501  

 

11


Table of Contents

LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

1.

Reporting Entity, Continued

 

  (b)

Consolidated Subsidiaries as of December 31, 2018, Continued

 

(*1)

For the year ended December 31, 2018, the Controlling Company contributed W212,600 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”).

(*2)

For the year ended December 31, 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 year ended December 31, 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 year ended December 31, 2018, the Controlling Company acquired and disposed interests in Money Market Trust (“MMT”) and the MMT amount as of December 31, 2018 is W24,501 million.

W90,281 million and W603,493 million, respectively, are attributable to the Controlling Company over the distributed dividends from consolidated subsidiaries for the years ended December 31, 2018 and 2017.

 

12


Table of Contents

LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

1.

Reporting Entity, Continued

 

  (c)

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

 

(In millions of won)    December 31, 2018      2018  

Subsidiaries

   Total
assets
     Total
liabilities
     Total
shareholders’
equity
     Sales      Net income
(loss)
 

LG Display America, Inc.

   W 1,048,112        1,035,975        12,137        8,895,127        7,268  

LG Display Germany GmbH

     451,328        444,676        6,652        1,780,233        4,322  

LG Display Japan Co., Ltd.

     374,356        370,860        3,496        2,388,644        2,359  

LG Display Taiwan Co., Ltd.

     294,103        280,794        13,309        1,558,166        2,653  

LG Display Nanjing Co., Ltd.

     1,397,886        758,499        639,387        1,738,895        55,623  

LG Display Shanghai Co., Ltd.

     931,773        921,289        10,484        994,258        5,977  

LG Display Poland Sp. z o.o.

     165,079        5,308        159,771        38,437        249  

LG Display Guangzhou Co., Ltd.

     2,689,670        1,860,804        828,866        2,366,355        293,222  

LG Display Shenzhen Co., Ltd.

     50,337        43,636        6,701        1,370,364        3,386  

LG Display Singapore Pte. Ltd.

     152,768        149,405        3,363        1,099,288        2,471  

L&T Display Technology (Fujian) Limited

     293,025        231,955        61,070        1,156,111        (1,937

LG Display Yantai Co., Ltd.

     1,336,692        989,121        347,571        1,459,165        53,480  

Nanumnuri Co., Ltd.

     5,171        3,757        1,414        22,964        295  

LG Display (China) Co., Ltd.

     2,780,364        932,526        1,847,838        2,573,254        106,269  

Unified Innovative Technology, LLC

     4,898        3        4,895        —          (986

LG Display Guangzhou Trading Co., Ltd.

     485,800        483,502        2,298        807,536        1,266  

Global OLED Technology, LLC

     81,922        18,537        63,385        7,692        (5,232

LG Display Vietnam Haiphong Co., Ltd.

     2,342,774        1,963,922        378,852        871,755        60,923  

Suzhou Lehui Display Co., Ltd

     212,138        95,359        116,779        365,914        5,018  

LG DISPLAY FUND I LLC

     7        —          7        —          (2,242

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

     3,258,830        2,208,244        1,050,586        —          (10,152
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 18,357,033        12,798,172        5,558,861        29,584,428        584,232  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

13


Table of Contents

LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

1.

Reporting Entity, Continued

 

(In millions of won)    December 31, 2017      2017  

Subsidiaries

   Total
assets
     Total
liabilities
     Total
shareholders’
equity
     Sales      Net income
(loss)
 

LG Display America, Inc.

   W 1,805,429        1,801,175        4,254        11,000,647        268  

LG Display Germany GmbH

     245,128        244,041        1,087        2,484,558        263  

LG Display Japan Co., Ltd.

     519,989        517,559        2,430        1,846,424        1,441  

LG Display Taiwan Co., Ltd.

     450,202        439,753        10,449        1,699,164        2,303  

LG Display Nanjing Co., Ltd.

     690,353        101,291        589,062        527,566        45,649  

LG Display Shanghai Co., Ltd.

     723,893        719,200        4,693        1,334,361        3,288  

LG Display Poland Sp. z o.o.

     173,243        8,419        164,824        35,722        1,228  

LG Display Guangzhou Co., Ltd.

     1,864,870        1,321,134        543,736        2,544,600        143,402  

LG Display Shenzhen Co., Ltd.

     230,670        227,288        3,382        1,870,152        2,384  

LG Display Singapore Pte. Ltd.

     365,426        364,604        822        968,583        1,082  

L&T Display Technology (Fujian) Limited

     322,684        259,558        63,126        1,348,391        (6,912

LG Display Yantai Co., Ltd.

     1,239,341        944,190        295,151        2,212,055        102,017  

Nanumnuri Co., Ltd.

     5,659        4,540        1,119        21,530        109  

LG Display (China) Co., Ltd.

     3,395,779        1,473,781        1,921,998        2,922,116        458,940  

Unified Innovative Technology, LLC

     5,664        14        5,650        —          (1,025

LG Display Guangzhou Trading Co., Ltd.

     98,079        97,038        1,041        626,322        852  

Global OLED Technology, LLC

     79,429        13,616        65,813        8,160        (4,779

LG Display Vietnam Haiphong Co., Ltd.

     1,066,218        976,339        89,879        148,725        (14,543

Suzhou Lehui Display Co., Ltd

     202,661        90,123        112,538        408,797        3,721  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 13,484,717        9,603,663        3,881,054        32,007,873        739,688  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

14


Table of Contents

LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

2.

Basis of Presenting Financial Statements

 

  (a)

Statement of Compliance

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

The consolidated financial statements were authorized for issuance by the Board of Directors on January 29, 2019, which will be submitted for approval to the shareholders’ meeting to be held on March 15, 2019.

 

  (b)

Basis of Measurement

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

 

   

derivative financial instruments at fair value, 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 consolidated financial statements are presented in Korean won, which is the Controlling Company’s functional currency.

 

  (d)

Use of Estimates and Judgments

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

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

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

 

   

Financial instruments (note 3(f))

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

 

   

Recognition and measurement of provisions (note 3(l) and13)

 

   

Measurement of defined benefit obligations (note 12)

 

   

Deferred tax assets (note 24)

 

15


Table of Contents

LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies

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

 

  (a)

Changes in Accounting Policies

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

The Group has consistently applied the accounting policies to the consolidated financial statements for 2018 and 2017 except for the new amendments effective for annual period beginning January 1, 2018 as mentioned below.

(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 has initially adopted K-IFRS No. 1109, Financial Instruments, from January 1, 2018, and the Group has used an exemption not to restate the consolidated financial statements for prior years with respects to transition requirements.

The followings describe the nature and impact on the significant changes in accounting policies from the adoption of K-IFRS No. 1109. There is no impact on the opening balance of retained earnings at January 1, 2018 resulting from the initial adoption of K-IFRS No. 1109.

Classification and measurement of financial assets and financial liabilities

K-IFRS No. 1109 contains three principal classification categories for financial assets measured at: amortized cost, FVOCI and FVTPL. The classification of financial assets under K-IFRS No. 1109 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. K-IFRS No. 1109 eliminates the previous K-IFRS No. 1039 categories of held to maturity, loans and receivables and available for sale.

K-IFRS No. 1109 largely retains the existing requirements in K-IFRS No. 1039 for the classification and measurement of financial liabilities.

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 following table below explains 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.

 

16


Table of Contents

LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (a)

Changes in Accounting Policies, Continued

 

(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 was no financial liabilities measured at FVTPL.

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.

As a result of applying the new impairment model under K-IFRS No. 1109, as of January 1, 2018, there is no additional allowance for impairments recognized as compared with the impairment model under K-IFRS No. 1039.

Hedge Accounting

When initially applying K-IFRS No. 1109, the Group has elected as its accounting policy to continue to apply hedge accounting requirements under K-IFRS No. 1039 and as a result, there is no impact of applying K-IFRS No. 1109 on the consolidated financial statements as at January 1, 2018.

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (a)

Changes in Accounting Policies, Continued

 

(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 adopted K-IFRS No. 1115, Revenue from contracts with customers, from January 1, 2018. The Group has adopted K-IFRS No.1115 using the cumulative effect method with the effect of initially applying this standard recognized at the date of initial application, January 1, 2018. 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 statement of financial position as of December 31, 2018 is as follows. There is no significant impact on the consolidated statement of comprehensive income and the cash flows for the year ended December 31, 2018.

 

(In millions of won)                

Categories

   As reported      Adjustments      Amounts without
adoption of K-IFRS
No. 1115
 

Current Assets

        

Other current assets

   W 546,048        (7,489      538,559  

Current Liabilities

        

Provisions

   W 98,254        (7,489      90,765  

(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 consolidated financial statements of the Group.

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (b)

Consolidation

(i) Business Combinations

The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities in accordance with K-IFRS No. 1032 and K-IFRS No. 1109. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognized in profit or loss.

(ii) Subsidiaries

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

(iii) Non-controlling interests

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

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

(iv) Loss of Control

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

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (b)

Consolidation, Continued

 

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

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

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

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

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

(vi) Transactions eliminated on consolidation

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

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (c)

Foreign Currency Transaction and Translation

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

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

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

 

  (d)

Cash and cash equivalents

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

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (e)

Inventories

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

 

  (f)

Financial Instruments

(i) Non-derivative financial assets

Recognition and initial measurement

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets or liabilities are recognized in statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instrument.

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

Classification and subsequent measurement

i) Financial assets: Policy applicable from January 1, 2018

On initial recognition, a financial asset is classified as measured at: amortized cost; FVOCI – debt investment; FVOCI – equity investments; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

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

 

   

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

 

   

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

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

 

   

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

 

   

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

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (f)

Financial Instruments, Continued

 

On initial recognition of an equity investments 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. At 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.

ii) Financial assets: business model: Policy applicable from January 1, 2018

The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

 

   

the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;.

 

   

how the performance of the portfolio is evaluated and reported to the Group’s management;

 

   

the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;.

 

   

how managers of the business are compensated – e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

 

   

the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

Transfers of financial asset to third parties in transaction that do not qualify for derecognition are not considered sale for this purpose.

A financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

 

  iii)

Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest: Policy applicable from January 1, 2018

For the purpose of this assessment, “principal” is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and cost (e.g. liquidity risk and administrative costs), as well as profit margin.

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (f)

Financial Instruments, Continued

 

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers.

 

   

contingent events that would change the amount or timing of cash flows:

 

   

terms that may adjust the contractual coupon rate, including variable-rate features;

 

   

prepayment and extension features; and

 

   

terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features)

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

iv) Financial assets: Subsequent measurement and gains and losses: Policy applicable from January 1, 2018

 

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.

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (f)

Financial Instruments, Continued

 

v) Financial assets: Policy applicable before January 1, 2018

The Group has classified financial assets into one of the following categories

 

   

loans and receivables

 

   

available-for-sale

 

   

at FVTPL

vi) Financial assets: subsequent measurement, gains and losses: Policy applicable before January 1, 2018

 

Financial assets at

  FVTPL

   Measured at fair value and changes therein, including any interest or dividend income, were recognized in profit or loss.

Loans and

  receivables

   Measured at amortized cost using the effective interest method.

Available-for-sale

  financial assets

   Measured at fair value and changes therein, other than impairment losses, interest income and foreign currency differences on debt instruments, were recognized in OCI and accumulated in the fair value reserves. When these assets were derecognized, the gain or loss accumulated in equity was classified to profit or loss.

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (f)

Financial Instruments, Continued

 

Derecognition

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, it transfers the rights to receive the contractual cash flows of the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred, or it transfers or does not retain substantially all the risks and rewards of ownership of a transferred asset, and does not retain control of the transferred asset.

If the Group has retained substantially all the risks and rewards of ownership of the transferred asset, the Group continue to recognize the transferred asset.

Offset

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

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (f)

Financial Instruments, Continued

 

(ii) Non-derivative financial liabilities

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

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

Non-derivative financial liabilities other than financial liabilities classified as FVTPL are classified as other financial liabilities and measured initially at fair value minus transaction costs that are directly attributable to the issuance of financial liabilities. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. As of December 31, 2018, non-derivative financial liabilities comprise borrowings, bonds and others.

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

(iii) Share Capital

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

(iv) Derivative financial instruments

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

Hedge Accounting

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

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

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (f)

Financial Instruments, Continued

 

i) Fair value hedges

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

ii) Cash flow hedges

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

Embedded derivative

Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.

Other derivative financial instruments

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

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (g)

Property, Plant and Equipment

(i) Recognition and measurement

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

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

(ii) Subsequent costs

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

(iii) Depreciation

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

Estimated useful lives of the assets are as follows:

 

     Useful lives (years)

Buildings and structures

   20, 40

Machinery

   4, 5

Furniture and fixtures

   4

Equipment, tools and vehicles

   2, 4, 12

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate and any changes are accounted for as changes in accounting estimates.

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (g)

Property, Plant and Equipment, Continued

 

During the year ended December 31, 2018, the Group changed estimated useful lives of the mask and mold which had previously been classified as inventories. Based on the review of the accumulated historical usage information that became available, it is expected that the mask and mold will be used for the period exceeding one year. Accordingly, the Group changed useful lives of Mask and Mold to two years accounted for the change in accounting estimate and reclassified the mask and mold to property, plant and equipment from inventories. As a result of such change, the Group reclassified inventories amounting to W111,456 million at the beginning of January 1, 2018 to property, plant, and equipment. The impact on the depreciation expense of the property, plant and equipment at the beginning of January 1, 2018 and newly acquired property, plant and equipment during the year ended December 31, 2018 are as follows:

 

(In millions of won)                     
Description    2018      2019      2020  

Increase (decrease) in depreciation expense

   W (110,373      58,364        52,009  

 

  (h)

Borrowing Costs

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

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (i)

Government Grants

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

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

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

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

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

(iii) Other government grants

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

 

  (j)

Intangible Assets

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

(i) Goodwill

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

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (j)

Intangible Assets, Continued

 

(ii) Research and development

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

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

 

   

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

 

   

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

 

   

its ability to use or sell the intangible asset,

 

   

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

 

   

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

 

   

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

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

(iii) Other intangible assets

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

(iv) Subsequent costs

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

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (j)

Intangible Assets, Continued

 

(v) Amortization

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

 

     Estimated useful lives (years)

Intellectual property rights

   5, 10

Rights to use electricity, water and gas supply facilities

   10

Software

   4

Customer relationships

   7, 10

Technology

   10

Development costs

   (*)

Condominium and golf club memberships

   Not amortized

 

  (*)

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

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

 

  (k)

Impairment

(i) Financial assets

Financial instruments and contract assets: Policy applicable from January 1, 2018

The Group recognizes loss allowance for financial assets measured at amortized cost and debt investments at FVOCI at the ‘expected credit loss’ (ECL).

The Group recognizes a loss allowance for the life-time expected credit losses except for following, which are measured at 12-month ECLs:

 

   

debt securities that are determined to have low credit risk at the reporting date; and

 

   

other debt securities and bank securities for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both qualitative and quantitative information and analysis, based on the Group’s historical experience and informed credit assessment including forward-looking information.

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (k)

Impairment, Continued

 

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of the ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

Estimation of expected credit losses: Policy applicable from January 1, 2018

Expected credit losses are a probability-weighted estimate of credit losses (i.e. the present value of all cash shortfalls) over the expected life of the financial instrument. Credit losses are measured using the present value of a cash shortfall (the difference between the contractual cash flows and the expected contractual cash flows). The expected credit losses are discounted using effective interest rate of the financial assets.

Credit-impaired financial assets: Policy applicable from January 1, 2018

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

Evidence that a financial asset is credit-impaired includes the following observable data:

 

   

significant financial difficulty of the issuer or the borrower;

 

   

the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;

 

   

it is probable that the borrower will enter bankruptcy or other financial reorganization; or

 

   

the disappearance of an active market for a security because of financial difficulties;

Presentation of loss allowance for ECL in the statement of financial position: Policy applicable from January 1, 2018

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in OCI.

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (k)

Impairment, Continued

 

Write-off: Policy applicable from January 1, 2018

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations for recovering a financial asset in its entirety or a portion thereof. The Group assess whether there are reasonable expectations of recovering the contractual cash flows from customers and individually assess the timing and amount of write-off. The Group expects no significant recovery from the amount written-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

Non-derivative financial assets: Policy applicable before January 1, 2018

Financial assets not classified as at FVTPL were assessed at each reporting date to determine whether there was objective evidence of impairment.

Objective evidence that financial assets were impaired included:

 

   

default or delinquency by a debtor;

 

   

restructuring of an amount due to the Group on terms that the Group would not consider otherwise

 

   

indications that a debtor or issuer would enter bankruptcy

 

   

adverse changes in the payment status of borrowers or issuers;

 

   

the disappearance of an active market for a security because of financial difficulties

 

   

observable data indicating that there was measurable decrease in the expected cash flows from a group of financial assets.

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (k)

Impairment, Continued

 

For an investment in an equity instrument, objective evidence of impairment include a significant or prolonged decline in its fair value below its cost.

 

Financial assets at

amortized cost

   The Group considered evidence of impairment for these assets at both collective level and individual asset. All individual significant assets were individually assessed for impairment. Those found not to be impaired were then collectively assessed for any impairment that had been incurred but not yet individually identified. Assets that were not individually significant were collectively assessed for impairment. Collective assessment was carried out by grouping together assets with similar risk characteristics.
   In assessing collective impairment, the Group used historical information on the timing of recoveries and the amount of loss incurred and made an adjustment if current economic and credit conditions were such that the actual losses were likely to be greater or lesser than suggested by historical trends.
   An impairment loss was calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses were recognized in profit or loss and reflected in an allowance account.
   For financial assets such as equity instruments which the carrying amount would be the cost, the impairment loss is the difference between the carrying value and the present value of estimated future cash receipts of a similar financial instruments discounted at current market rate. The impairment loss is recognized as profit and losses and would be not reversed as profit and losses.

Available-for-sale

financial assets

   For the financial assets classified as available-for-sale which its decrease in the fair value has been recognized as other comprehensive income, the loss which has been recognized as other comprehensive income would be reclassified from other comprehensive income to profit and losses less the amount already recognized as profit and losses.
   If the fair value of an impaired available-for-sale debt security subsequently increased and the increase was related objectively to an event occurring after the impairment loss was recognized, then the impairment loss was reversed through profit or loss. Impairment losses recognized in profit or loss for an investment in an equity instrument classified as available-for-sale were not reversed through profit or loss.

(ii) Non-financial assets

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

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (k)

Impairment, Continued

 

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

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

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

 

  (l)

Provisions

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

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

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

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (l)

Provisions, Continued

 

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

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

 

  (m)

Non-current Assets Held for Sale

Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is highly probable that they will be recovered primarily from sale rather than through continuing use. In order to be classified as held for sale, the asset (or disposal group) is available for immediate sale in its present condition and its sale is highly probable. The assets (or disposal groups) that are classified as non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell on initial classification. The Group recognizes an impairment loss for any subsequent decrease in fair value of the asset (or disposal group) for which an impairment loss was recognized on initial classification as held-for-sale and a gain for any subsequent increase in fair value in profit or losses, up to the cumulative impairment loss previously recognized.

The Group does not depreciate a non-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale.

 

  (n)

Employee Benefits

(i) Short-term employee benefits

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

(ii) Other long-term employee benefits

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

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (n)

Employee Benefits, Continued

 

(iii) Defined contribution plan

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

(iv) Defined benefit plan

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

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

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

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

(v) Termination benefits

The Group recognizes expense for termination benefits at the earlier of the date when the entity can no longer withdraw the offer of those benefits and when the entity recognizes costs for a restructuring that is within the scope of K-IFRS 1037 and involves the payment of termination benefits. If the termination benefits are not expected to be settled wholly before twelve months after the end of the annual reporting period, the Group measures the termination benefit with present value of future cash payments.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (o)

Revenue from contracts with customers

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of estimated returns, earned trade discounts, volume rebates and other cash incentives paid to customers. The Group has initially applied K-IFRS 1115 from January 1, 2018 and recognized revenue according to the 5 stage revenue recognition model (①Identifying the contract g☐ Identifying performance obligation g☐ Determining transaction price g☐ Allocating the transaction price to performance obligation g☐ Recognition of revenue at performance of obligation). The Group generates revenue primarily from sales of display panels to customer. Product revenue is recognized when the customer obtains control over the products, which typically occurs upon shipment or delivery depending on the terms of the contracts with the customers.

The Group includes return option in the sales contract of display panels to its customers thus the consideration received from the customer is subject to change. The Group has recognized the expected return amount of gross revenue as warranty provision until previous financial year. After applying the K-IFRS 1115 “Revenue from contracts with customers”, the Group estimates an amount of variable consideration by using the expected value method which the Group expects to better predict the amount of consideration. The Group includes in the transaction price some or all of an amount of variable consideration estimated only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The Group recognizes a refund liability and an asset for its right to recover products from customers if the Group receives consideration from a customer and expects to refund some or all of that consideration to the customer. Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from revenues in the consolidated statements of comprehensive income.

 

  (p)

Operating Segments

An operating segment is a component of the Group that: 1) engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with other components of the group, 2) whose operating results are reviewed regularly by the Group’s chief operating decision maker (“CODM”) in order to allocate resources and assess its performance, and 3) for which discrete financial information is available. Management has determined that the CODM of the Group is the Board of Directors. The CODM does not receive and therefore does not review discrete financial information for any component of the Group. Consequently, no operating segment information is included in these consolidated financial statements. Entity wide disclosures of geographic and product revenue information are provided in note 17 to these consolidated financial statements.

 

  (q)

Finance Income and Finance Costs

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

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

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (r)

Income Tax

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

(i) Current tax

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

(ii) Deferred tax

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

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

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

The Group offsets deferred tax assets and deferred tax liabilities if, and only if the Group has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously.

 

  (s)

Earnings Per Share

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

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (t)

New Standards and Amendments Not Yet Adopted

The following new standards and amendments to existing standards have been published and are mandatory for the Group for annual periods beginning after January 1, 2018, and the Group has not early adopted them.

(i) K-IFRS No. 1116, Leases

K-IFRS No. 1116, Leases, published on May 22, 2017 is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted. K-IFRS No. 1116 replaces existing leases guidance including K-IFRS No. 1017, Leases, K-IFRS No.2014, Determining whether an Arrangement contains a Lease, K-IFRS No.2015, Operating Leases—Incentives and K-IFRS No.2027, Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

K-IFRS No. 1116, Leases introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognizes a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low value items. Lessor accounting remains similar to the current standard—i.e lessors continue to classify leases as finance or operating leases.

The Group is assessing the potential impact on its consolidated financial statements resulting from the application of K-IFRS no.1116 and the actual impacts are determined based on the future economic environment at the date of initial recognition such as interest rate implicit in the lease, lease portfolio, certainty of exercising purchase option, the extent which the practical expedient and recognition exemption election to be utilized.

Previously, the Group recognized operating lease expense on a straight-line basis over the term of the lease. The nature of expenses related to those leases will now change because the Group will recognize a depreciation charge for right-of-use assets and interest expense on lease liabilities.

No significant impact is expected for the Group’s finance lease.

A lessee may apply the K-IFRS No.1116 to its leases either:

 

   

Retrospectively to each prior reporting period presented

 

   

Retrospectively with the cumulative effect of initially applying the Standard recognized at the date of initial application

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

3.

Summary of Significant Accounting Policies, Continued

 

  (t)

New Standards and Amendments Not Yet Adopted, Continued

 

A lessee shall apply the election consistently to all of its lease in which it is a lessee. The Group plans to apply K-IFRS No. 1116 initially on January 1, 2019, using the modified retrospective approach. Therefore, the cumulative effect of adopting K-IFRS No. 1116 will be recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information.

A lessee may use various practical expedients when applying K-IRFS No. 1116 retrospectively to leases previously classified as operating leases applying IAS 17. The Group is currently assessing the potential impacts when applying the practical expedients. The Group expects that additional amounts to be recognized as right-of-use assets and lease liabilities are not significant when practical expedient is applied.

(ii) Other standards

The following amended standards and interpretations are not expected to have a significant impact on the Group’s financial statements.

 

   

K-IFRS No. 2123, Uncertainty over Tax Treatments

 

   

K-IFRS No. 1109, Prepayment Features with Negative Compensation (Amendments to K-IFRS 1109)

 

   

K-IFRS No. 1028, Long-term Interests in Associates and Joint Ventures (Amendments to K-IFRS 1028)

 

   

K-IFRS No. 1019, Plan Amendment, Curtailment or Settlement (Amendments to K-IFRS 1019)

 

   

Amendments to References to Conceptual Framework in IFRS Standards.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

4.

Cash and Cash Equivalents and Deposits in Banks

 

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

 

(In millions of won)              
     December 31, 2018      December 31, 2017  

Current assets

     

Cash and cash equivalents

     

Demand deposits

   W 2,365,022        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 2,443,433        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 December 31, 2018 and December 31, 2017 are as follows:

 

(In millions of won)              
     December 31, 2018      December 31, 2017  

Trade, net

   W 2,305,368        3,275,902  

Due from related parties

     523,795        1,049,218  
  

 

 

    

 

 

 
   W 2,829,163        4,325,120  
  

 

 

    

 

 

 

 

  (b)

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

 

(In millions of won)    December 31, 2018      December 31, 2017  

Current assets

     

Non-trade receivable, net

   W 159,238        150,554  

Accrued income

     10,075        14,273  
  

 

 

    

 

 

 
   W 169,313        164,827  
  

 

 

    

 

 

 

Non-current assets

     

Long-term non-trade receivable

     11,448        8,738  
  

 

 

    

 

 

 
   W 180,761        173,565  
  

 

 

    

 

 

 

Due from related parties included in other accounts receivable, as of December 31, 2018 and 2017 are W39,092 million and W10,821 million, respectively.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

5.

Receivables and Other Assets, Continued

 

  (c)

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

 

(In millions of won)    December 31, 2018  
     Book value      Impairment loss  
     Trade accounts
and notes
receivable
     Other
accounts
receivable
     Trade accounts
and notes
receivable
     Other
accounts
receivable
 

Not past due

   W 2,807,598        177,689        (473      (816

Past due 1-15 days

     21,558        3,148        (4      (26

Past due 16-30 days

     454        441        —          (4

Past due 31-60 days

     30        96        —          (1

Past due more than 60 days

     —          668        —          (434
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,829,640        182,042        (477      (1,281
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(In millions of won)    December 31, 2017  
     Book value      Impairment loss  
     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
  

 

 

    

 

 

    

 

 

    

 

 

 

The movement in the allowance for impairment in respect of trade accounts and notes receivable and other accounts receivable for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)    2018      2017  
     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

     (1,155      (30      144        195  
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at the reporting date

   W 477        1,281        1,632        1,311  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

5.

Receivables and Other Assets, Continued

 

  (d)

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

 

(In millions of won)    December 31, 2018      December 31, 2017  

Current assets

     

Advance payments

   W 13,259        7,973  

Prepaid expenses

     89,110        83,626  

Value added tax refundable

     436,190        148,351  

Emission rights

     —          1,978  

Right to recover returned goods(*)

     7,489        —    
  

 

 

    

 

 

 
   W 546,048        241,928  
  

 

 

    

 

 

 

Non-current assets

     

Long-term prepaid expenses

   W 381,983        394,759  

 

(*)

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

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

6.

Other Financial Assets

 

  (a)

Other financial assets as of December 31, 2018 are as follows:

 

(In millions of won)    December 31, 2018  

Current assets

  

Financial asset at fair value through profit or loss

  

Derivatives(*)

   W 13,059  

Financial asset at fair value through other comprehensive income

  

Debt instrument

  

Government bonds

   W 106  

Financial asset carried at amortized cost

  

Deposits

   W 17,020  

Short-term loans

     16,116  
  

 

 

 
   W 46,301  
  

 

 

 

Non-current assets

  

Financial asset at fair value through profit or loss

  

Equity instrument

  

Intellectual Discovery, Ltd.

   W 4,598  

Kyulux, Inc.

     2,460  

Fineeva Co., Ltd.

     286  

ARCH Venture Fund Vill, L.P.

     6,337  
  

 

 

 
   W 13,681  
  

 

 

 

Convertible bonds

   W 1,327  

Financial asset at fair value through other comprehensive income

  

Debt instrument

  

Government bonds

   W 55  

Financial asset carried at amortized cost

  

Deposits

   W 74,103  

Long-term loans

     55,048  
  

 

 

 
   W 144,214  
  

 

 

 

 

(*)

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

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

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 December 31, 2018 and 2017 are W2,000 million and W2,750 million, respectively.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

7.

Inventories

Inventories at the reporting date are as follows:

 

(In millions of won)    December 31, 2018      December 31, 2017  

Finished goods

   W 1,084,297        965,643  

Work-in-process

     856,388        748,592  

Raw materials

     554,720        344,997  

Supplies

     195,798        290,852  
  

 

 

    

 

 

 
   W 2,691,203        2,350,084  
  

 

 

    

 

 

 

For the years ended December 31, 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 21,251,305        22,424,661  

Including: inventory write-downs

     313,180        206,127  

Including: reversal and usage of inventory write downs

     (206,127      (204,123

There were no significant reversals of inventory write-downs recognized during 2018 and 2017.

 

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LG DISPLAY CO., LTD.

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

8.

Investments in Equity Accounted Investees

 

  (a)

Associates as of December 31, 2018 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   W 47,823       40   W 46,511  

INVENIA Co., Ltd.

 

Seongnam,

South Korea

  December 31   January 2001   Develop and manufacture equipment for FPDs     13       4,166       13       2,887  

WooRee E&L Co., Ltd. (*1)

 

Ansan,

South Korea

  December 31   June 2008   Manufacture LED back light unit packages     14       4,746       14       7,270  

LB Gemini New Growth Fund No. 16 (*2)

 

Seoul,

South Korea

  December 31   December 2009   Invest in small and middle sized companies and benefit from M&A opportunities     —         —         31       5,910  

YAS Co., Ltd. (*4)

 

Paju,

South Korea

  December 31   April 2002   Develop and manufacture deposition equipment for OLEDs     15       16,308       15       15,888  

AVATEC Co., Ltd.

 

Daegu,

South Korea

  December 31   August 2000   Process and sell electric glass for FPDs     17       23,441       17       23,732  

Arctic Sentinel, Inc.

  Los Angeles, U.S.A.   March 31   June 2008  

Develop and manufacture

tablet for kids

    10       —         10       —    

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

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
 

CYNORA GmbH (*3)

 

Bruchsal,

Germany

    December 31       March 2003     Develop organic emitting materials for displays and lighting devices     14   W 8,668       14   W 20,309  

Material Science Co., Ltd. (*4)

 

Seoul,

South Korea

    December 31       January 2014     Develop, manufacture, and sell materials for display     10       3,346       —         —    

Nanosys Inc. (*5)

 

Milpitas,

U.S.A.

    December 31       July 2001     Develop, manufacture, and sell materials for display     4       5,491       —         —    
           

 

 

     

 

 

 
            W 113,989       W 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 Co., Ltd. and Nanosys Inc. are below 20% as of December 31, 2018, 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

8.

Investments in Equity Accounted Investees, Continued

 

  (*1)

The Controlling Company recognized a reversal of impairment loss of W802 million as finance income for the difference between the carrying amount and the recoverable amount of investments in WooRee E&L Co., Ltd.

 

  (*2)

In 2018, the LB Gemini New Growth Fund No.16 (“the Fund”) which the Controlling Company was a member of a limited partnership, was approved to be dissolve at the general meeting and completed liquidation. In 2018, the Controlling Company received W1,545 million in cash from the Fund and recognized W385 million for the difference between the amount received and the carrying amount as finance cost.

 

  (*3)

In 2018, the Controlling Company determined investments in CYNORA GmbH irrecoverable and accordingly recognized an impairment loss of W11,641 million as finance cost for the difference between the carrying amount and the recoverable amount of investments in CYNORA GmbH.

 

  (*4)

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. In 2018, the Controlling Company assessed that the recoverability of the investment is uncertain. Accordingly, the Controlling Company recognized an impairment loss of W671 million as finance cost for the difference between the carrying amount and the recoverable amount of investments in Material Science Co., Ltd.

 

  (*5)

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. In 2018, the Controlling Company recognized an impairment loss of W5,085 million as finance cost for the difference between the carrying amount and the recoverable amount of investments in Nanosys Inc.

As of December 31, 2018, the market value for the Controlling Company’s investments in INVENIA Co., Ltd., WooRee E&L Co., Ltd., YAS Co., Ltd., and AVATEC Co., Ltd., all of which are listed in KOSDAQ, are W8,850 million, W4,746 million, W31,200 million and W14,151 million, respectively.

Dividends received from equity method investees for the years ended December 31, 2018 and 2017 amounted to W5,272 million and W8,639 million, respectively.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

8.

Investments in Equity Accounted Investees, Continued

 

  (b)

Summary of financial information as of and for the years ended December 31, 2018 and 2017 of the significant associate is as follows:

 

  (i)

Paju Electric Glass Co., Ltd.

 

(In millions of won)    December 31, 2018      December 31, 2017  

Total assets

   W 194,021        193,584  

Current assets

     128,788        146,702  

Non-current assets

     65,233        46,882  

Total liabilities

     72,686        77,174  

Current liabilities

     66,797        71,973  

Non-current liabilities

     5,889        5,201  

Revenue

   W 384,144        408,846  

Profit for the year

     12,744        12,327  

Other comprehensive income (loss)

     2,612        (9,366

Total comprehensive income

     15,356        2,961  

 

  (c)

Reconciliation from financial information of the significant associate to its carrying value in the consolidated financial statements as of December 31, 2018 and 2017 is as follows:

 

  (i)

As of December 31, 2018

 

(In millions of won)                                        

Company

   Net asset      Ownership
interest
    Net asset
(applying
ownership
interest)
     Goodwill      Intra-group
transaction
    Book value  

Paju Electric Glass Co., Ltd.

   W 121,335        40     48,534        —          (711     47,823  

 

  (ii)

As of December 31, 2017

 

(In millions of won)                                        

Company

   Net asset      Ownership
interest
    Net asset
(applying
ownership
interest)
     Goodwill      Intra-group
transaction
    Book value  

Paju Electric Glass Co., Ltd.

   W 116,410        40     46,564        —          (53     46,511  

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

8.

Investments in Equity Accounted Investees, Continued

 

  (d)

Book value of other associates, in aggregate, as of December 31, 2018 and 2017 is as follows:

 

  (i)

As of December 31, 2018

 

(In millions of won)                          
     Book value      Net profit (loss) of associates
(applying ownership interest)
 
   Profit (loss)
for the year
    Other
comprehensive
income (loss)
    Total
comprehensive
income (loss)
 

Other associates

   W 66,166        (3,739     (988     (4,727

 

  (ii)

As of December 31, 2017

 

(In millions of won)                            
     Book value      Net profit (loss) of associates
(applying ownership interest)
 
   Profit (loss)
for the year
     Other
comprehensive
income (loss)
     Total
comprehensive
income (loss)
 

Other associates

   W 75,996        3,943        5,093        9,036  

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

8.

Investments in Equity Accounted Investees, Continued

 

  (e)

Changes in investments in associates accounted for using the equity method for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)                                               
         2018  

Company

  January 1     Acquisition/
Disposal
    Dividends
received
    Equity income
(loss) on
investments
    Other
comprehensive
income (loss)
    Other
gain (loss)
    December 31  

Associates

   Paju Electric Glass Co., Ltd.   W 46,511       —         (4,172     4,439       1,045       —         47,823  
  

Others

    75,996       12,592       (1,100     (3,739     (988     (16,595     66,166  
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     W 122,507       12,592       (5,272     700       57       (16,595     113,989  
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(In millions of won)                                               
         2017  

Company

  January 1     Acquisition/
Disposal
    Dividends
received
    Equity income
(loss) on
investments
    Other
comprehensive
income (loss)
    Other
gain (loss)
    December 31  

Associates

   Paju Electric Glass Co., Ltd.   W 52,750       —         (8,109     5,617       (3,747     —         46,511  
  

Others

    119,933       (48,209     (530     3,943       5,093       (4,234     75,996  
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     W 172,683       (48,209     (8,639     9,560       1,346       (4,234     122,507  
    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

9.

Property, Plant and Equipment

 

  (a)

Changes in property, plant and equipment for the year ended December 31, 2018 are as follows:

 

(In millions of won)                                           
     Land     Buildings
and
structures
    Machinery
and
equipment
    Furniture
and
fixtures
    Construction-
in-progress

(*1)
    Others     Total  

Acquisition cost as of January 1, 2018

   W 460,511       6,539,506       38,901,158       772,824       5,971,856       205,475       52,851,330  

Accumulated depreciation as of January 1, 2018

     —         (2,678,970     (33,186,118     (631,482     —         (148,753     (36,645,323

Accumulated impairment loss as of January 1, 2018

     —         (1,757     (2,290     —         —         —         (4,047
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2018

   W 460,511       3,858,779       5,712,750       141,342       5,971,856       56,722       16,201,960  

Additions

     —         —         —         —         8,605,551       —         8,605,551  

Depreciation

     —         (318,311     (2,568,335     (67,274     —         (169,739     (3,123,659

Disposals

     (15     (161     (112,752     (311     —         (2,971     (116,210

Impairment loss

     —         —         (25,711     —         (17,890     —         (43,601

Others (*2)

     1,332       55,430       1,959,645       68,177       (2,357,412     380,278       107,450  

Effect of movements in exchange rates

     —         9,809       14,520       359       15,010       312       40,010  

Government grants received

     —         —         (1,029     —         (181     —         (1,210

Reclassification to assets held-for-sale

     —         (69,758     (1     (37     —         (365     (70,161
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of December 31, 2018

   W 461,828       3,535,788       4,979,087       142,256       12,216,934       264,237       21,600,130  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost as of December 31, 2018

   W 461,828       6,528,939       39,825,070       834,628       12,234,824       633,220       60,518,509  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation as of December 31, 2018

   W —         (2,991,445     (34,817,982     (692,372     —         (368,893     (38,870,782
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated impairment loss as of December 31, 2018

   W —         (1,706     (28,001     —         (17,890     —         (47,597
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

As of December 31, 2018, construction-in-progress mainly relates to construction of manufacturing facilities.

(*2)

Others are mainly amounts transferred from construction-in-progress.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

9.

Property, Plant and Equipment, Continued

 

  (b)

Changes in property, plant and equipment for the year ended December 31, 2017 are as follows:

 

(In millions of won)                                           
     Land     Buildings
and
structures
    Machinery
and
equipment
    Furniture
and
fixtures
    Construction-
in-progress

(*1)
    Others     Total  

Acquisition cost as of January 1, 2017

   W 461,484       6,284,778       37,472,177       775,682       2,981,964       202,306       48,178,391  

Accumulated depreciation as of January 1, 2017

     —         (2,397,967     (32,947,359     (651,424     —         (146,251     (36,143,001

Accumulated impairment loss as of January 1, 2017

     —         (1,651     (2,290     —         —         —         (3,941
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2017

   W 461,484       3,885,160       4,522,528       124,258       2,981,964       56,055       12,031,449  

Additions

     —         —         —         —         7,272,476       —         7,272,476  

Depreciation

     —         (295,045     (2,416,202     (66,963     —         (13,673     (2,791,883

Disposals

     (1,042     (7,206     (75,275     (52     —         (3,133     (86,708

Others (*2)

     69       339,640       3,825,155       87,186       (4,270,210     18,160       —    

Effect of movements in exchange rates

     —         (63,222     (140,306     (3,087     (14,213     (687     (221,515

Government grants received

     —         (548     (3,150     —         1,839       —         (1,859
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of December 31, 2017

   W 460,511       3,858,779       5,712,750       141,342       5,971,856       56,722       16,201,960  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost as of December 31, 2017

   W 460,511       6,539,506       38,901,158       772,824       5,971,856       205,475       52,851,330  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation as of December 31, 2017

   W —         (2,678,970     (33,186,118     (631,482     —         (148,753     (36,645,323
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated impairment loss as of December 31, 2017

   W —         (1,757     (2,290     —         —         —         (4,047
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

As of December 31, 2017, construction-in-progress mainly relates to construction of manufacturing facilities.

(*2)

Others are mainly amounts transferred from construction-in-progress.

 

  (c)

Capitalized borrowing costs and capitalization rate for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)             
     2018     2017  

Capitalized borrowing costs

   W 146,607       47,686  

Capitalization rate

     2.80     1.92

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

10.

Intangible Assets

 

  (a)

Changes in intangible assets for the year ended December 31, 2018 are as follows:

 

(In millions of won)   Intellectual
property
rights
    Software     Member-
ships
    Development
costs
    Construction-
in-progress
(software)
    Customer
relationships
    Technology     Good-
will
    Others
(*2)
    Total  

Acquisition cost as of January 1, 2018

  W 895,721       898,278       54,985       1,769,998       30,933       59,176       11,074       103,048       13,077       3,836,290  

Accumulated amortization as of January 1, 2018

    (648,755     (736,788     —         (1,473,238     —         (31,337     (8,490     —         (13,076     (2,911,684

Accumulated impairment loss as of January 1, 2018

    —         —         (11,785     —         —         —         —         —         —         (11,785
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2018

  W 246,966       161,490       43,200       296,760       30,933       27,839       2,584       103,048       1       912,821  

Additions - internally developed

    —         —         —         372,835       —         —         —         —         —         372,835  

Additions - external purchases

    24,596       —         2,844       —         100,820       —         —         —         —         128,260  

Amortization (*1)

    (43,437     (80,159     —         (302,685     —         (3,517     (1,107     —         (1     (430,906

Disposals

    —         —         (721     —         —         —         —         —         —         (721

Impairment loss

    —         —         (82     —         —         —         —         —         —         (82

Reversal of impairment loss

    —         —         348       —         —         —         —         —         —         348  

Transfer from construction-in-progress

    —         95,028       449       —         (95,028     —         —         —         —         449  

Effect of movements in exchange rates

    1,896       1,240       1       —         238       —         —         1,263       —         4,638  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of December 31, 2018

  W 230,021       177,599       46,039       366,910       36,963       24,322       1,477       104,311       —         987,642  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost as of December 31, 2018

  W 926,969       992,139       57,560       2,142,832       36,963       59,176       11,075       104,311       13,077       4,344,102  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization as of December 31, 2018

  W (696,948     (814,540     —         (1,775,922     —         (34,854     (9,598     —         (13,077     (3,344,939
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated impairment loss as of December 31, 2018

  W —         —         (11,521     —         —         —         —         —         —         (11,521
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

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

(*2)

Others mainly consist of rights to use electricity and gas supply facilities.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

10.

Intangible Assets, Continued

 

  (b)

Changes in intangible assets for the year ended December 31, 2017 are as follows:

 

(In millions of won)                                                            
    Intellectual
property
rights
    Software     Member-
ships
    Development
costs
    Construction-
in-progress
(software)
    Customer
relationships
    Technology     Good-
will(*2)
    Others
(*3)
    Total  

Acquisition cost as of January 1, 2017

  W 904,664       806,835       51,564       1,433,791       18,738       59,176       11,074       110,072       13,077       3,408,991  

Accumulated amortization as of January 1, 2017

    (618,398     (661,063     —         (1,177,451     —         (26,678     (7,382     —         (13,071     (2,504,043

Accumulated impairment loss as of January 1, 2017

    —         —         (10,011     —         —         —         —         —         —         (10,011
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of January 1, 2017

  W 286,266       145,772       41,553       256,340       18,738       32,498       3,692       110,072       6       894,937  

Additions - internally developed

    —         —         —         336,207       —         —         —         —         —         336,207  

Additions - external purchases

    22,746       —         4,819       —         108,761       —         —         —         —         136,326  

Amortization (*1)

    (42,195     (78,939     —         (295,787     —         (4,659     (1,108     —         (5     (422,693

Disposals

    (4     —         (1,392     —         —         —         —         —         —         (1,396

Impairment loss

    —         —         (1,809     —         —         —         —         —         —         (1,809

Reversal of impairment loss

    —         —         35       —         —         —         —         —         —         35  

Transfer from construction-in-progress

    —         98,989       —         —         (98,989     —         —         (3,218     —         (3,218

Effect of movements in exchange rates

    (19,847     (4,332     (6     —         2,423       —         —         (3,806     —         (25,568
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Book value as of December 31, 2017

  W 246,966       161,490       43,200       296,760       30,933       27,839       2,584       103,048       1       912,821  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost as of December 31, 2017

  W 895,721       898,278       54,985       1,769,998       30,933       59,176       11,074       103,048       13,077       3,836,290  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization as of December 31, 2017

  W (648,755     (736,788     —         (1,473,238     —         (31,337     (8,490     —         (13,076     (2,911,684
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated impairment loss as of December 31, 2017

  W —         —         (11,785     —         —         —         —         —         —         (11,785
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

10.

Intangible Assets, Continued

 

(*1)

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

(*2)

As of December 31, 2017, the book value of goodwill decreased by W3,218 million as the Group completed the fair value measurement of land use right, acquired from business combination during the year ended December 31, 2016.

(*3)

Others mainly consist of rights to use electricity and gas supply facilities.

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

10.

Intangible Assets, Continued

 

  (c)

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.

 

  (d)

Development costs as of December 31, 2018 and 2017 are as follows:

 

  (i)

As of December 31, 2018

 

(In millions of won and in years)                         

Classification

     Product        Book Value      Remaining
Useful life
 

Development completed

       Mobile        W 108,467        0.5  
       TV          28,001        0.5  
       Notebook          4,458        0.6  
       Others          9,475        0.5  
         

 

 

    
               Sub-Total        W 150,401     
         

 

 

    

Development in process

       Mobile        W 144,679        —    
       TV          55,580        —    
       Notebook          9,639        —    
       Others          6,611        —    
         

 

 

    
       Sub-Total        W 216,509     
         

 

 

    

Total

          W 366,910     
         

 

 

    

 

(ii)  As of December 31, 2017

 

                        
(In millions of won and in years)                         

Classification

     Product        Book Value      Remaining
Useful life
 

Development completed

       Mobile        W 79,372        0.6  
       TV          36,038        0.6  
       Notebook          14,311        0.5  
       Others          12,444        0.4  
         

 

 

    
               Sub-Total        W 142,165     
         

 

 

    

Development in process

       Mobile        W 117,222        —    
       TV          30,670        —    
       Notebook          2,356        —    
       Others          4,347        —    
         

 

 

    
       Sub-Total        W 154,595     
         

 

 

    

Total

          W 296,760     
         

 

 

    

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

11.

Financial Liabilities

 

  (a)

Financial liabilities at the reporting date are as follows:

 

(In millions of won)      
     December 31, 2018      December 31, 2017  

Current

     

Current portion of long-term borrowings and bonds

   W 1,553,907        1,452,926  
  

 

 

    

 

 

 
   W 1,553,907        1,452,926  
  

 

 

    

 

 

 

Non-current

     

Won denominated borrowings

   W 2,700,608        1,251,258  

Foreign currency denominated borrowings

     2,531,663        1,392,931  

Bonds

     1,772,599        1,506,003  

Derivatives(*)

     25,758        —    
  

 

 

    

 

 

 
   W 7,030,628        4,150,192  
  

 

 

    

 

 

 

 

(*)

Represents exchange rate swap contracts related to foreign currency denominated borrowings and bonds.

 

  (b)

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

 

(In millions of won)                   

Lender

  

Annual interest rate

as of

December 31, 2018 (%)

   December 31,
2018
     December 31,
2017
 

Woori Bank

  

3-year Korean Treasury

Bond rate - 2.75

   W 1,259        1,922  

Shinhan Bank

   —        —          200,000  

Korea Development Bank and others

  

CD rate (91days) +

0.64, 2.43~3.25

     2,850,000        1,250,000  

Less current portion of long-term borrowings

        (150,651      (200,664
     

 

 

    

 

 

 
      W 2,700,608        1,251,258  
     

 

 

    

 

 

 

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

11.

Financial Liabilities, Continued

 

  (c)

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

 

(In millions of won and USD, CNY)  

Lender

  

Annual interest rate

as of

December 31, 2018 (%)(*)

   December 31,
2018
     December 31,
2017
 

The Export-Import Bank of Korea

   3ML+0.75~1.70    W 955,975        755,337  

China Construction Bank and others

  

USD: 3ML+0.80~2.00

CNY: PBOC*(0.90~1.05)

     2,419,286        1,385,097  
     

 

 

    

 

 

 

Foreign currency equivalent

        USD 2,262        USD 1,500  
        CNY 5,198        CNY 3,263  

Less current portion of long-term borrowings

      W (843,598      (747,503
     

 

 

    

 

 

 
      W 2,531,663        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 at the reporting date are as follows:

 

(In millions of won)                        
    

Maturity

  

Annual interest rate

as of

December 31, 2018 (%)

   December 31,
2018
     December 31,
2017
 

Won denominated bonds (*1)

           

Publicly issued bonds

  

March 2018 ~

October 2022

   1.80~3.45    W 1,900,000        2,015,000  

Privately issued bonds

  

May 2025 ~

May 2033

   3.25~4.25      110,000        —    

Less discount on bonds

           (3,949      (4,238

Less current portion

           (559,658      (504,759
        

 

 

    

 

 

 
         W 1,446,393        1,506,003  
        

 

 

    

 

 

 

Foreign currency denominated bond (*2)

           

Publicly issued bond

   November 2021    3.88    W 335,430        —    

Foreign currency equivalent

           USD 300        —    

Less discount on bonds

           (9,224      —    
           326,206        —    
        

 

 

    

 

 

 
         W 1,772,599        1,506,003  
        

 

 

    

 

 

 

 

(*1)

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

(*2)

Principal of the foreign currency denominated bond is to be repaid at maturity and interests are paid semi-annually.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

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.

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

 

  (a)

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

 

(In millions of won)              
     December 31, 2018      December 31, 2017  

Present value of partially funded defined benefit obligations

   W 1,595,423        1,562,424  

Fair value of plan assets

     (1,550,063      (1,466,977
  

 

 

    

 

 

 
   W 45,360        95,447  
  

 

 

    

 

 

 

 

(b)

Changes in the present value of the defined benefit obligations for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Opening defined benefit obligations

   W 1,562,424        1,401,396  

Current service cost

     204,668        195,850  

Past service cost

     (25,749      —    

Interest cost

     49,145        40,844  

Remeasurements (before tax)

     (27,885      (114

Benefit payments

     (88,562      (76,011

Transfers from (to) related parties

     (4,217      534  

Curtailment of plans

     (74,459      —    

Others

     58        (75
  

 

 

    

 

 

 

Closing defined benefit obligations

   W 1,595,423        1,562,424  
  

 

 

    

 

 

 

Weighted average remaining maturity of defined benefit obligations as of December 31, 2018 and 2017 are 14.4 years and 14.0 years, respectively.

 

  (c)

Changes in fair value of plan assets for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Opening fair value of plan assets

   W 1,466,977        1,258,409  

Expected return on plan assets

     48,184        38,453  

Remeasurements (before tax)

     (22,195      (16,374

Contributions by employer directly to plan assets

     212,224        250,998  

Benefit payments

     (80,690      (64,509

Curtailment of plans

     (74,437      —    
  

 

 

    

 

 

 

Closing fair value of plan assets

   W 1,550,063        1,466,977  
  

 

 

    

 

 

 

 

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Table of Contents

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

12.

Employee Benefits, Continued

 

  (d)

Plan assets at the reporting date are as follows:

 

(In millions of won)              
     December 31, 2018      December 31, 2017  

Guaranteed deposits in banks

   W 1,550,063        1,466,977  

As of December 31, 2018, the Controlling Company maintains the plan assets with Mirae Asset Securities Co., Ltd., KB Insurance Co., Ltd. and others.

The Group’s estimated additional contribution to the plan assets for the year ending December 31, 2019 is W63,688 million.

 

  (e)

Expenses recognized in profit or loss for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)    2018      2017  

Current service cost

   W 204,668        195,850  

Past service cost

     (25,749      —    

Net interest cost

     961        2,391  
  

 

 

    

 

 

 
   W 179,880        198,241  
  

 

 

    

 

 

 

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

 

(In millions of won)    2018      2017  

Cost of sales

   W 134,879        158,418  

Selling expenses

     11,045        11,114  

Administrative expenses

     19,472        16,287  

Research and development expenses

     14,484        12,422  
  

 

 

    

 

 

 
   W 179,880        198,241  
  

 

 

    

 

 

 

 

  (f)

Remeasurements of net defined benefit liabilities (assets) included in other comprehensive income (loss) for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)    2018      2017  

Balance at January 1

   W (170,510      (163,950

Remeasurements

     

Actuarial profit or loss arising from:

     

Experience adjustment

     56,225        (48,890

Demographic assumptions

     (15,379      (7,702

Financial assumptions

     (12,961      56,706  

Return on plan assets

     (22,195      (16,374

Share of associates regarding remeasurements

     20        441  
  

 

 

    

 

 

 
   W 5,710        (15,819
  

 

 

    

 

 

 

Income tax

   W (1,169      9,259  
  

 

 

    

 

 

 

Balance at December 31

   W (165,969      (170,510
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

12.

Employee Benefits, Continued,

 

  (g)

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

 

     December 31, 2018     December 31, 2017  

Expected rate of salary increase

     4.3     4.7

Discount rate for defined benefit obligations

     2.8     3.2

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

 

     December 31, 2018     December 31, 2017  

Teens

  

Males

Females

    

0.01

0.00


   

0.01

0.00


Twenties

  

Males

Females

    

0.01

0.00


   

0.01

0.00


Thirties

  

Males

Females

    

0.01

0.01


   

0.01

0.01


Forties

  

Males

Females

    

0.03

0.02


   

0.03

0.02


Fifties

  

Males

Females

    

0.05

0.02


   

0.05

0.02


 

  (h)

Reasonably possible changes to respective relevant actuarial assumptions would have affected the defined benefit obligations by the following amounts as of December 31, 2018:

 

(In millions of won)    Defined benefit obligation  
     1% increase      1% decrease  

Discount rate for defined benefit obligations

   W (199,750      241,608  

Expected rate of salary increase

     236,002        (199,363

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

13.

Provisions and Other Liabilities

 

  (a)

Changes in provisions for the year ended December 31, 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)

     —          234,928        (2,694      232,234  

Usage

     (43      (215,290      —          (215,333
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at December 31, 2018

   W —          122,088        8,930        131,018  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W —          89,324        8,930        98,254  

Non-current

   W —          32,764        —          32,764  

 

(*)

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 at the reporting date are as follows:

 

(In millions of won)              
     December 31, 2018      December 31, 2017  

Current liabilities

     

Withholdings

   W 30,970        63,766  

Unearned revenues

     43,841        12,225  
  

 

 

    

 

 

 

Security deposits

     165        —    
  

 

 

    

 

 

 
   W 74,976        72,991  
  

 

 

    

 

 

 

Non-current liabilities

     

Long-term accrued expenses

   W 80,817        70,561  

Long-term other accounts payable

     3,103        2  

Long-term unearned revenue

     2,116        —    

Security deposits

     10,790        —    
  

 

 

    

 

 

 
   W 96,826        70,563  
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

14.

Contingent Liabilities 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. The Controlling Company and LG Display Taiwan Co., Ltd. reached a settlement with Argos in November 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 December 31, 2018.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

14.

Contingent Liabilities and Commitments, Continued

 

  (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 USD1,670 million (W1,867,227 million) in connection with the Controlling Company’s export sales transactions with its subsidiaries. As of December 31, 2018, no short-term borrowings were outstanding in connection with these agreements. In connection with all of the contracts mentioned above, the Controlling Company has sold its accounts receivable with recourse.

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

 

(In millions of USD and KRW)  

Classification

  

Financial institutions

   Maximum      Not yet due  
          Contractual
amount
     KRW
equivalent
     Contractual
amount
     KRW
equivalent
 

Controlling Company

   Shinhan Bank      KRW 90,000        90,000        —          —    
     USD 25        27,953        USD 12        13,286  
  

Sumitomo Mitsui Banking

Corporation

     USD 20        22,362        —          —    
     KRW 130,000        130,000        KRW 36,089        36,089  
   Bank of Tokyo-Mitsubishi UFJ      USD 40        44,724        USD 40        44,516  
   BNP Paribas      USD 200        223,620        USD 12        13,630  
   ING Bank      USD 150        167,715        USD 31        35,554  
     

 

 

    

 

 

    

 

 

    

 

 

 
        USD 435           USD 95     
        KRW 220,000        706,374        KRW 36,089        143,075  
     

 

 

    

 

 

    

 

 

    

 

 

 

Subsidiaries

              

LG Display Singapore Pte. Ltd.

   Standard Chartered Bank      USD 300        335,430        USD 209        233,364  
     

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Taiwan Co., Ltd.

   BNP Paribas      USD 52        58,141        USD 9        10,063  
  

Austrailia and New Zealand

Banking Group Ltd

     USD 70        78,267        USD 52        58,142  
   Taishin International Bank      USD 289        323,131        USD 86        96,157  
     

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Germany GmbH

   Citibank      USD 160        178,896        —          —    
   BNP Paribas      USD 75        83,858        USD 75        83,767  
     

 

 

    

 

 

    

 

 

    

 

 

 

LG Display

America, Inc.

   Hongkong & Shanghai Banking Corp.      USD 400        447,240        USD 230        257,164  
   Standard Chartered Bank      USD 600        670,860        USD 515        575,823  
  

Sumitomo Mitsui

Banking Corporation

     USD 80        89,448        USD 67        74,915  
     

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Japan Co., Ltd.

  

Sumitomo Mitsui

Banking Corporation

     USD 20        22,362        —          —    
     

 

 

    

 

 

    

 

 

    

 

 

 

LG Display Guangzhou Trading Co., Ltd.

   Industrial and Commercial Bank of China      —          —          —          —    
     

 

 

    

 

 

    

 

 

    

 

 

 
        USD 2,046        2,287,633        USD 1,243        1,389,395  
     

 

 

    

 

 

    

 

 

    

 

 

 
        USD 2,481           USD 1,338     
        KRW 220,000        2,994,007        KRW 36,089        1,532,470  
     

 

 

    

 

 

    

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

14.

Contingent Liabilities and Commitments, Continued

 

  (b)

Commitments, Continued

 

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

Letters of credit

As of December 31, 2018, the Controlling Company has agreements in relation to the opening of letters of credit up to USD 30 million (W33,543 million) with KEB Hana Bank, USD 80 million (W89,448 million) with Bank of China and USD 50 million (W9,504 million) with Sumitomo Mitsui Banking Corporation.

Payment guarantees

The Controlling Company obtained payment guarantees amounting to USD 1,538 million (W1,719,079 million) from KEB Hana Bank and others for advance received related to the long-term supply agreements. The Controlling Company also obtained payment guarantees amounting to USD 306 million (W341,929 million) from Korea Development Bank for foreign currency denominated bonds and USD 8.5 million (W9,504 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 and other various banks amounting to CNY1,711 million (W278,401 million), JPY 900 million (W9,119 million), EUR 2.5 million (W3,198 million), VND 40,498 million (W1,952 million), USD 0.5 million (W559 million), PLN 0.1 million (W30 million) and, respectively, for their local tax payments and utility payments.

License agreements

As of December 31, 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 December 31, 2018, in connection with long-term supply agreements with customers, the Controlling Company recognized USD 1,475 million (W1,649,198 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 (W1,719,079 million) from KEB Hana Bank and other various banks relating to advance received.

Pledged Assets

Regarding the secured bank loan amounting to USD 240 million (W268,093 million) from China Construction Bank, as of December 31, 2018, the Group provided its property, plant and equipment and others with carrying amount of W146,262 million as pledged assets.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

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 December 31, 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, 2018 to December 31, 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 December 31, 2018 and 2017 are as follows:

 

(In millions of won)  
         December 31, 2018              December 31, 2017      

Foreign currency translation differences for foreign operations

   W (272,474      (259,749

Other comprehensive loss from associates

(excluding remeasurements of net defined benefit liabilities)

     (28,494      (28,531
  

 

 

    

 

 

 
   W (300,968      (288,280
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

15.

Capital and Reserves, Continued

 

  (b)

Reserves, Continued

The movement in reserves for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     Foreign currency
translation differences
for foreign operations
     Other comprehensive income
(loss) from associates
(excluding remeasurements)
     Total  

January 1, 2017

   W (59,042      (29,436      (88,478

Change in reserves

     (200,707      905        (199,802

December 31, 2017

     (259,749      (28,531      (288,280

January 1, 2018

     (259,749      (28,531      (288,280

Change in reserves

     (12,725      37        (12,688

December 31, 2018

     (272,474      (28,494      (300,968

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

16.

Revenue

 

Details of revenue for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Sales of goods

   W 24,293,798        27,745,047  

Royalties

     17,513        20,175  

Others

     25,260        24,994  
  

 

 

    

 

 

 
   W 24,336,571        27,790,216  
  

 

 

    

 

 

 

 

17.

Geographic and Other Information

The following is a summary of sales by region based on the location of the customers for the years ended December 31, 2018 and 2017.

 

  (a)

Revenue by geography

 

(In millions of won)              

Region

   2018      2017  

Domestic

   W 1,589,452        1,996,183  

Foreign

     

China

     15,242,533        18,090,974  

Asia (excluding China)

     2,481,112        2,383,390  

United States

     2,462,918        2,724,714  

Europe (excluding Poland)

     1,496,138        1,433,126  

Poland

     1,064,418        1,161,829  
  

 

 

    

 

 

 
   W 22,747,119        25,794,033  
  

 

 

    

 

 

 
   W 24,336,571        27,790,216  
  

 

 

    

 

 

 

Sales to Company A and Company B amount to W7,262,255 million and W5,171,354 million, respectively, for the year ended December 31, 2018 (2017: W9,027,165 million and W6,511,961 million). The Group’s top ten end-brand customers together accounted for 77% of sales for the year ended December 31, 2018 (2017: 81%).

 

  (b)

Non-current assets by geography

 

(In millions of won)                

Region

  

December 31, 2018

    

December 31, 2017

 
   Property,
plant and
equipment
     Intangible
assets
     Property,
plant and
equipment
     Intangible
assets
 

Domestic

   W 14,984,688        816,808        12,487,111        731,373  

Foreign

           

China

     5,049,216        12,332        2,929,739        17,244  

Others

     1,566,226        158,502        785,110        164,204  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,615,442        170,834        3,714,849        181,448  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 21,600,130        987,642        16,201,960        912,821  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

17.

Geographic and Other Information, Continued

 

  (c)

Revenue by product and services

 

(In millions of won)              
     2018      2017  

Televisions

   W 9,727,260        11,717,982  

Desktop monitors

     4,040,025        4,393,482  

Tablet products

     1,990,766        2,369,634  

Notebook computers

     2,836,888        2,244,088  

Mobile and others

     5,741,632        7,065,030  
  

 

 

    

 

 

 
   W 24,336,571        27,790,216  
  

 

 

    

 

 

 

 

18.

The Nature of Expenses and Others

The classification of expenses by nature for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Changes in inventories

   W (341,120      (62,299

Purchases of raw materials, merchandise and others

     12,863,812        13,548,848  

Depreciation and amortization

     3,554,565        3,214,576  

Outsourcing fees

     825,393        771,697  

Labor costs

     3,222,110        3,258,427  

Supplies and others

     1,010,352        1,239,915  

Utility

     899,075        865,347  

Fees and commissions

     722,134        692,125  

Shipping costs

     240,288        249,820  

Advertising

     112,400        236,440  

Warranty expenses

     234,928        251,131  

Travel

     104,009        92,976  

Taxes and dues

     123,210        91,806  

Others

     757,673        919,051  
  

 

 

    

 

 

 
   W 24,328,829        25,369,860  
  

 

 

    

 

 

 

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

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

19.

Selling and Administrative Expenses

 

Details of selling and administrative expenses for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Salaries(*1)

   W 500,610        327,288  

Expenses related to defined benefit plans(*2)

     30,724        27,401  

Other employee benefits

     90,348        94,740  

Shipping costs

     200,434        214,866  

Fees and commissions

     221,050        197,070  

Depreciation

     174,575        138,711  

Taxes and dues

     65,621        46,317  

Advertising

     112,400        236,440  

Warranty expenses

     234,928        251,131  

Rent

     26,691        26,711  

Insurance

     11,584        12,459  

Travel

     24,659        27,879  

Training

     13,309        16,311  

Others

     64,244        73,181  
  

 

 

    

 

 

 
   W 1,771,177        1,690,505  
  

 

 

    

 

 

 

 

(*1)

The expense related to retirement allowance for the year ended December 31, 2018 is W184,941 million.

 

(*2)

The expense related to the define contribution plan for the year ended December 31, 2018 is W111 million.

 

20.

Personnel Expenses

Details of personnel expenses for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Salaries and wages

   W 2,720,014        2,704,217  

Other employee benefits

     500,169        483,704  

Contributions to National Pension plan

     75,668        73,061  

Expenses related to defined benefit plan and defined contribution plan(*)

     180,737        198,241  
  

 

 

    

 

 

 
   W 3,476,588        3,459,223  
  

 

 

    

 

 

 

 

(*)

The expense related to the define contribution plan for the year ended December 31, 2018 is W857 million.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

21.

Other Non-operating Income and Other Non-operating Expenses

 

  (a)

Details of other non-operating income for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Foreign currency gain

   W 970,306        969,425  

Gain on disposal of property, plant and equipment

     6,620        101,227  

Gain on disposal of intangible assets

     239        308  

Reversal of impairment loss on intangible assets

     348        35  

Rental income

     3,584        2,212  

Others

     21,941        8,539  
  

 

 

    

 

 

 
   W 1,003,038        1,081,746  
  

 

 

    

 

 

 

 

  (b)

Details of other non-operating expenses for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Foreign currency loss

   W 1,030,084        1,189,193  

Other bad debt expenses

     4        1,798  

Loss on disposal of property, plant and equipment

     15,048        20,030  

Impairment loss on property, plant, and equipment

     43,601        —    

Loss on disposal of intangible assets

     —          30  

Impairment loss on intangible assets

     82        1,809  

Donations

     7,698        17,152  

Expenses related to legal proceedings or claims and others

     18,716        443  
  

 

 

    

 

 

 
   W 1,115,233        1,230,455  
  

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

22.

Finance Income and Finance Costs

 

  (a)

Finance income and costs recognized in profit or loss for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Finance income

     

Interest income

   W 69,020        60,106  

Foreign currency gain

     160,989        210,890  

Gain on disposal of investments in equity accounted investees

     —          3,669  

Reversal of impairment loss of investments in equity accounted investees

     802        —    

Gain on transaction of derivatives

     2,075        3,106  

Gain on valuation of derivatives

     13,059        1,070  

Gain on disposal of available-for-sale financial assets

     —          8  

Gain on valuation of financial asset at fair value through profit or loss

     8,186        170  
  

 

 

    

 

 

 
   W 254,131        279,019  
  

 

 

    

 

 

 

Finance costs

     

Interest expense

   W 80,517        90,538  

Foreign currency loss

     184,309        126,642  

Loss on disposal of investments in equity accounted investees

     595        42,112  

Loss on impairment of investments in equity accounted investees

     17,397        4,234  

Loss on impairment of available-for-sale financial assets

     —          1,948  

Loss on valuation of financial asset at fair value through profit or loss

     225        —    

Loss on sale of trade accounts and notes receivable

     13,361        784  

Loss on transaction of derivatives

     49        514  

Loss on valuation of derivatives

     26,600        —    

Others

     3,840        2,084  
  

 

 

    

 

 

 
   W 326,893        268,856  
  

 

 

    

 

 

 

 

  (b)

Finance income and costs recognized in other comprehensive income or loss for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Foreign currency translation differences for foreign operations

   W (19,987      (231,738
  

 

 

    

 

 

 

Finance income (costs) recognized in other comprehensive income or loss after tax

   W (19,987      (231,738
  

 

 

    

 

 

 

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

23.

Income Taxes

 

  (a)

Details of income tax expense (benefit) for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)       
     2018      2017  

Current tax expense

     

Current year

     167,394        512,123  

Adjustment for prior years

     82,225        —    
  

 

 

    

 

 

 
   W 249,619        512,123  
  

 

 

    

 

 

 

Deferred tax expense (benefit)

     

Origination and reversal of temporary differences

     (226,360      (104,835

Change in unrecognized deferred tax assets

     64,818        (11,708
  

 

 

    

 

 

 
   W (161,542      (116,543
  

 

 

    

 

 

 

Income tax expense

   W 88,077        395,580  
  

 

 

    

 

 

 

 

  (b)

Income taxes recognized directly in other comprehensive income or loss for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)    2018     2017  
     Before
tax
    Tax
benefit
    Net of
tax
    Before
tax
    Tax
benefit

(expense)
     Net of
tax
 

Remeasurements of net defined benefit liabilities (assets)

     5,690       (1,169     4,521       (16,260     9,259        (7,001

Foreign currency translation differences for foreign operations

     (19,987     —         (19,987     (231,738     —          (231,738

Change in equity of equity method investee

     57       —         57       1,346       —          1,346  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
   W     (14,240     (1,169     (15,409     (246,652     9,259        (237,393
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

23.

Income Taxes, Continued

 

  (c)

Reconciliation of the actual effective tax rate for the years ended December 31, 2018 and 2017 is as follows:

 

(In millions of won)    2018      2017  

Profit (loss) for the year

     W (179,443        1,937,052  

Income tax expense

       88,077          395,580  
    

 

 

      

 

 

 

Profit (loss) before income tax

       (91,366        2,332,632  
    

 

 

      

 

 

 

Income tax expense using the statutory tax rate of each country

     (33.60 %)      30,695        28.54     665,733  

Non-deductible expenses

     (40.07 %)      36,608        2.72     63,416  

Tax credits

     117.27     (107,146      (10.64 %)      (248,191

Change in unrecognized deferred tax assets

     (70.94 %)      64,818        (0.50 %)      (11,708

Adjustment for prior years

     (90.00 %)      82,225        —         —    

Effect on change in tax rate (Note 24(d))

     15.68     (14,326      (3.10 %)      (72,376

Others

     5.25     (4,797      (0.06 %)      (1,294
    

 

 

      

 

 

 

Actual income tax expense

     W 88,077          395,580  
    

 

 

      

 

 

 

Actual effective tax rate

       (*        16.96

 

(*)

Actual effective tax rate are not calculated due to loss before income tax.

 

24.

Deferred Tax Assets and Liabilities

 

  (a)

Unrecognized deferred tax liabilities

As of December 31, 2018, in relation to the temporary differences on investments in subsidiaries amounting to W85,368 million, the Controlling Company did not recognize deferred tax liabilities since the Controlling Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary differences will not reverse in the foreseeable future.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

24.

Deferred Tax Assets and Liabilities, Continued

 

  (b)

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

Realization of deferred tax assets related to tax credit carryforwards which are primarily related to Korea is dependent on whether sufficient taxable income will be generated prior to their expiration. As of December 31, 2018, the Controlling Company recognized deferred tax assets of W308,393 million, in relation to tax credit carryforwards, to the extent that management believes the realization is probable. The amount of unused tax credit carryforwards for which no deferred tax asset is recognized and their expiration dates are as follows:

 

(In millions of won)                
     December 31,
2019
     December 31,
2020
     December 31,
2021
     December 31,
2022
 

Tax credit carryforwards

   W 29,770        —          58,391        91,862  

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

24.

Deferred Tax Assets and Liabilities, Continued

 

  (c)

Deferred tax assets and liabilities are attributable to the following:

 

(In millions of won)    Assets      Liabilities     Total  
     December 31,
2018
     December 31,
2017
     December 31,
2018
    December 31,
2017
    December 31,
2018
    December 31,
2017
 

Other accounts receivable, net

   W —          —          (1,013     (1,441     (1,013     (1,441

Inventories, net

     60,606        34,550        —         —         60,606       34,550  

Defined benefit liabilities, net

     —          2,375        —         —         —         2,375  

Unrealized gain or loss and others

     13,404        29,061        —         —         13,404       29,061  

Accrued expenses

     126,072        183,903        —         —         126,072       183,903  

Property, plant and equipment

     445,721        409,928        (1,495     —         444,226       409,928  

Intangible assets

     3,468        3,457        (14,588     (24,646     (11,120     (21,189

Provisions

     32,468        27,018        —         —         32,468       27,018  

Gain or loss on foreign currency translation, net

     13        13        —         —         13       13  

Others

     20,850        27,562        (7,665     —         13,185       27,562  

Tax loss carryforwards

     134,845        —          —         —         134,845       —    

Tax credit carryforwards

     308,393        268,926        —         —         308,393       268,926  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax assets (liabilities)

   W 1,145,840        986,793        (24,761     (26,087     1,121,079       960,706  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

24.

Deferred Tax Assets and Liabilities, Continued

 

  (d)

Changes in deferred tax assets and liabilities for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)    January 1,
2017
    Profit
or loss
    Other
compre-
hensive
income
(loss)
     December 31,
2017
    Profit or
loss
    Other
compre-
hensive
income
    December 31,
2018
 

Other accounts receivable, net

   W (1,190     (251     —          (1,441     428       —         (1,013

Inventories, net

     35,771       (1,221     —          34,550       26,056       —         60,606  

Defined benefit liabilities, net

     10,817       (17,701     9,259        2,375       (1,206     (1,169     —    

Subsidiaries and associates

     34,777       (5,716     —          29,061       (15,657     —         13,404  

Accrued expenses

     122,998       60,905       —          183,903       (57,831     —         126,072  

Property, plant and equipment

     338,860       71,068       —          409,928       34,298       —         444,226  

Intangible assets

     (31,027     9,838       —          (21,189     10,069       —         (11,120

Provisions

     15,051       11,967       —          27,018       5,450       —         32,468  

Gain or loss on foreign currency translation, net

     11       2       —          13       —         —         13  

Others

     21,435       6,127       —          27,562       (14,377     —         13,185  

Tax loss carryforwards

     —         —              134,845       —         134,845  

Tax credit carryforwards

     287,400       (18,474     —          268,926       39,467       —         308,393  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Deferred tax assets (liabilities)

   W 834,903       116,544       9,259        960,706       161,542       (1,169     1,121,079  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Statutory tax rate applicable to the Controlling Company is 24.2% for the year ended December 31, 2017. During the year ended December 31, 2017, certain amendments to corporate income tax rules in 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 December 31, 2018 and December 31, 2017 have been measured using the applicable tax rates from the amendment.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

25.

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

 

  (a)

Basic earnings (loss) per share for the years ended December 31, 2018 and 2017 are as follows:

 

(In won and No. of shares)    2018      2017  

Profit (loss) attributable to owners of the Controlling Company

   W (207,239,484,774      1,802,756,119,275  

Weighted-average number of common stocks outstanding

     357,815,700        357,815,700  
  

 

 

    

 

 

 

Earnings (loss) per share

   W (579      5,038  
  

 

 

    

 

 

 

For the years ended December 31, 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 years ended December 31, 2018 and 2017 are not calculated since there was no potential common stock.

 

26.

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 Controlling Company, 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, USD and CNY.

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. The Group entered into a currency swap contract to hedge currency risk with respect to foreign currency borrowings and bonds.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

26.

Financial Risk Management, Continued

 

  (i)

Currency Risk, Continued

 

  i)

Exposure to currency risk

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

 

(In millions)    December 31, 2018  
     USD     JPY     CNY     TWD     EUR     PLN     VND  

Cash and cash equivalents

     790       83       5,515       121       8       206       2,070,889  

Trade accounts and notes receivable

     2,175       7       1,098       —         —         —         —    

Non-trade receivable

     21       852       201       3       4         23,182  

Other assets denominated in foreign currencies

     33       220       11,157       108       12       23       2,782  

Trade accounts and notes payable

     (863     (12,501     (2,862     —         —         —         (355,390

Other accounts payable

     (928     (20,326     (4,762     (6     (3     (4     (1,585,130

Borrowings

     (2,571     —         (5,198     —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Aggregate notional amounts in financial position

     (1,343     (31,665     5,149       226       21       225       156,333  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Currency swap contracts

     780       —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net exposure

     (563     (31,665     5,149       226       21       225       156,333  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
(In millions)    December 31, 2017  
     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
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

26.

Financial Risk Management, Continued

 

  (i)

Currency Risk, Continued

 

  i)

Exposure to currency risk, Continued

Average exchange rates applied for the years ended December 31, 2018 and 2017 and the exchange rates at December 31, 2018 and December 31, 2017 are as follows:

 

(In won)    Average rate      Reporting date spot rate  
     2018      2017      December 31,
2018
     December 31,
2017
 

USD

   W 1,100.21        1,131.08        1,118.10        1,071.40  

JPY

     9.96        10.09        10.13        9.49  

CNY

     166.41        167.52        162.76        163.65  

TWD

     36.51        37.16        36.58        35.92  

EUR

     1,298.53        1,277.01        1,279.16        1,279.25  

PLN

     304.87        299.98        297.33        306.07  

VND

     0.0478        0.0498        0.0482        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 a foreign currency as of December 31, 2018 and 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:

 

(In millions of won)    December 31, 2018      December 31, 2017  
     Equity      Profit or
loss
     Equity      Profit or
loss
 

USD (5 percent weakening)

   W (46,136      38,725        50,040        91,238  

JPY (5 percent weakening)

     (12,060      (10,497      (10,294      (9,141

CNY (5 percent weakening)

     41,779        318        13,212        (6,396

TWD (5 percent weakening)

     413        1        23        1  

EUR (5 percent weakening)

     1,197        390        16        594  

PLN (5 percent weakening)

     3,451        (236      2,515        (120

VND (5 percent weakening)

     273        273        (4,445      —    

A stronger won against the above currencies as of December 31, 2018 and 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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

26.

Financial Risk Management, Continued

 

  (ii)

Interest Rate Risk

 

  i)

Profile

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

 

(In millions of won)              
     December 31, 2018      December 31, 2017  

Fixed rate instruments

     

Financial assets

   W 2,443,583        3,360,800  

Financial liabilities

     (5,033,515      (2,962,671
  

 

 

    

 

 

 
   W (2,589,932      398,129  
  

 

 

    

 

 

 

Variable rate instruments

     

Financial liabilities

   W (3,525,262      (2,640,447

 

  ii)

Equity and profit or loss sensitivity analysis for variable rate instruments

For the years ended December 31, 2018 and 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 the respective following years. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

(In millions of won)    Equity      Profit or loss  
     1%p
increase
     1%p
decrease
     1%p
increase
     1%p
decrease
 

December 31, 2018

           

Variable rate instruments(*)

   W (25,558      25,558        (25,558      25,558  

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.

 

  (iii)

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.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

26.

Financial Risk Management, Continued

 

  (iii)

Credit risk, Continued

 

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 December 31, 2018 and 2017 are as follows:

 

  i)

As of December 31, 2018

 

(In millions of won)       
     December 31, 2018  

Financial assets carried at amortized cost

  

Cash and cash equivalents

   W 2,365,022  

Deposits in banks

     78,411  

Trade accounts and notes receivable

     2,829,163  

Non-trade receivable

     159,238  

Accrued income

     10,075  

Deposits

     91,123  

Short-term loans

     16,116  

Long-term loans

     55,048  

Long-term non-trade receivable

     11,448  
  

 

 

 
   W 5,615,644  
  

 

 

 

Financial assets at fair value through profit or loss

  

Convertible bonds

   W 1,327  

Derivatives

     13,059  
  

 

 

 
   W 14,386  
  

 

 

 

Financial assets at fair value through other comprehensive income

  

Debt instrument

   W 161  
  

 

 

 
   W 5,630,191  
  

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

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.

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

26.

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 securities, equity-linked and other debt securities. 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 December 31, 2018.

 

(In millions of won)           Contractual cash flows  
     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 268,093        268,190       268,190       —         —         —         —    

Unsecured bank borrowings

     5,958,427        6,588,502       565,832       356,688       973,297       4,169,682       523,003  

Unsecured bond issues

     2,332,257        2,537,553       291,738       328,400       456,990       1,320,248       140,177  

Trade accounts and notes payable

     3,087,461        3,087,461       3,087,461       —         —         —         —    

Other accounts payable

     3,566,629        3,566,629       3,565,599       1,030       —         —         —    

Long-term other accounts payable

     3,103        3,103       —         —         2,077       1,026       —    

Security deposits

     10,955        10,955       —         165       10,790       —         —    

Derivative financial liabilities

               

Derivatives

   W 25,758        (35,140     (6,742     (6,728     (12,517     (9,153     —    
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 15,252,683        16,027,253       7,772,078       679,555       1,430,637       5,481,803       663,180  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

26.

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)             
     December 31, 2018     December 31, 2017  

Total liabilities

   W 18,289,464       14,178,177  

Total equity

     14,886,246       14,981,510  

Cash and deposits in banks (*1)

     2,443,422       3,360,638  

Borrowings (including bonds)

     8,558,777       5,603,118  

Total liabilities to equity ratio

     123     95

Net borrowings to equity ratio (*2)

     41     15

 

  (*1)

Cash and deposits in banks consist of cash and cash equivalents and current deposit in banks.

  (*2)

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

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

26.

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.

 

  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

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 securities

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.

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

26.

Financial Risk Management, Continued

 

  (e)

Determination of fair value, Continued

 

  (ii)

Fair values versus carrying amounts

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

 

  i)

As of December 31, 2018

 

(In millions of won)              
     December 31, 2018  
     Carrying
amounts
     Fair
values
 

Financial assets carried at amortized cost

     

Cash and cash equivalents

   W 2,365,022             (*) 

Deposits in banks

     78,411             (*) 

Trade accounts and notes receivable

     2,829,163             (*) 

Non-trade receivable

     159,238             (*) 

Accrued income

     10,075             (*) 

Deposits

     91,123             (*) 

Short-term loans

     16,116             (*) 

Long-term loans

     55,048             (*) 

Long-term non-trade receivable

     11,448             (*) 

Financial assets at fair value through profit or loss

     

Equity instrument

   W 13,681        13,681  

Convertible bonds

     1,327        1,327  

Derivatives

     13,059        13,059  

Financial assets at fair value through other comprehensive income

     

Debt instrument

   W 161        161  

Financial liabilities at fair value through profit or loss

     

Derivatives

   W 25,758        25,758  

Financial liabilities carried at amortized cost

     

Secured bank borrowings

   W 268,093        268,093  

Unsecured bank borrowings

     5,958,427        6,013,903  

Unsecured bond issues

     2,332,257        2,384,987  

Trade accounts and notes payable

     3,087,461             (*) 

Other accounts payable

     3,566,629             (*) 

Long-term other accounts payable

     3,103             (*) 

Security deposits

     10,955             (*) 

 

  (*)

Excluded from disclosures as the carrying amount approximates fair value.

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

26.

Financial Risk Management, Continued

 

  (e)

Determination of fair value, Continued

 

  ii)

As of December 31, 2017

 

(In millions of won)              
     December 31, 2017  
     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.

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

26.

Financial Risk Management, Continued

 

  (e)

Determination of fair value, Continued

 

  (iii)

Fair values of financial assets and liabilities

 

  i)

Fair value hierarchy

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

 

   

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

 

   

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

 

   

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

 

  ii)

Financial instruments measured at fair value

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

 

(In millions of won)                            
     Level 1      Level 2      Level 3      Total  

December 31, 2018

           

Financial assets at fair value through profit or loss

           

Equity instrument

   W —          —          13,681        13,681  

Convertible bonds

     —          —          1,327        1,327  

Derivatives

     —          —          13,059        13,059  

Financial asset at fair value through other comprehensive income

           

Debt instrument

   W 161        —          —          161  

Financial liabilities at fair value through profit or loss

           

Derivatives

   W
 

  

 
     —          25,758        25,758  

 

(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  

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

26.

Financial Risk Management, Continued

 

  (e)

Determination of fair value, Continued

 

  iii)

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

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

 

(In millions of won)    December 31, 2018      Valuation
technique
     Input  

Classification

   Level 1      Level 2      Level 3  

Liabilities

              

Secured bank borrowings

   W  —          —          268,093       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Unsecured bank borrowings

     —          —          6,013,903       
Discounted
cash flow
 
 
    
Discount
rate
 
 

Unsecured bond issues

     —          —          2,384,987       
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

   W —          —          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
 
 

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

 

     December 31, 2018     December 31, 2017  

Borrowings, bonds and others

     2.09~3.37     1.57~2.92

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

27.

Changes in liabilities arising from financing activities

 

Changes in liabilities arising from financing activities for the year ended December 31, 2018 are as follows:

 

(In millions of won)                                       
     January 1,
2018
           Non-cash transactions         
     Cash flows from
financing activities
    Reclassification     Exchange
rate effect
    Effective interest
adjustment
     December 31,
2018
 

Short-term borrowings

   W —          (720     —         720       —          —    

Current portion of long-term borrowings and bonds

     1,452,926        (1,859,098     1,904,888       54,659       532        1,553,907  

Long-term borrowings

     2,644,189        3,882,958       (1,345,520     50,644       —          5,232,271  

Bonds

     1,506,003        828,169       (559,368     (4,172     1,967        1,772,599  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
   W 5,603,118        2,851,309       —         101,851       2,499        8,558,777  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

28.

Related Parties and Others

 

  (a)

Related parties

 

Related parties for the year ended December 31, 2018 are as follows:

 

Classification

  

Description

Associates(*)    Paju Electric Glass 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.

Related parties other than associates and joint ventures that have transactions such as sales or balance of trade accounts and notes receivable and payable with the Group for the years ended December 31, 2018 and 2017 are as follows:

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

28.

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 years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)    2018  
     Sales
and others
            Purchase 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        1,608        58,111        —          896  

AVATEC Co., Ltd.

     —          530        —          —          71,403        905  

Paju Electric Glass Co., Ltd.

     —          4,172        364,183        —          —          4,411  

WooRee E&L Co., Ltd.

     —          —          58        —          —          144  

YAS Co., Ltd.

     —          —          5,281        143,192        —          3,391  

LB Gemini New Growth Fund No. 16 (*)

     1,112        540        —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,112        5,272        371,130        201,303        71,403        9,747  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 1,215,153        —          36,522        1,041,563        —          127,775  

Subsidiaries of the entity that has significant influence over the Controlling Company

                 

LG Electronics India Pvt. Ltd.

   W 71,798        —          —          —          —          103  

LG Electronics Vietnam Haiphong Co., Ltd.

     173,051        —          —          4,541        —          166  

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

28.

Related Parties and Others, Continued

 

 

(In millions of won)    2018  
     Sales
and others
            Purchase 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 223,524        —          —          424        —          1,528  

LG Electronics RUS, LLC

     106,631        —          —          —          —          2,673  

LG Electronics do Brasil Ltda.

     192,775        —          —          —          —          350  

LG Innotek Co., Ltd.

     29,267        —          147,453        —          —          39,136  

Qingdao LG Inspur Digital Communication Co., Ltd.

     37,738        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     131,970        —          —          —          —          1  

LG Electronics Mexicalli, S.A. DE C.V.

     187,844        —          —          —          —          210  

LG Electronics Mlawa Sp. z o.o.

     740,784        —          —          —          —          631  

LG Electronics Taiwan Taipei Co., Ltd.

     12,746        —          —          —          —          330  

LG Hitachi Water Solutions Co., Ltd.

     9,100        —          —          304,365        —          8,980  

LG Electronics Reynosa, S.A. DE C.V.

     1,030,414        —          —          —          —          2,021  

LG Electronics Almaty Kazakhstan

     3,759        —          —          —          —          42  

LG Electronics Air-Conditioning (Shandong) Co., Ltd.

     —          —          330        26,871        —          7,264  

HiEntech Co., Ltd.

     —          —          —          22,378        —          29,215  

Hientech (Tianjin) Co., Ltd.

     —          —          —          92,900        —          23,880  

LG Electronics S.A. (Pty) Ltd.

     7,244        —          —          —          —          20  

LG Electronics Egypt S.A.E.

     25,491        —          —          —          —          16  

Others

     5,195        —          28        15        —          11,480  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,989,331        —          147,811        451,494        —          128,046  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,205,596        5,272        555,463        1,694,360        71,403        265,556  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Represents transactions occurred prior to disposal of the entire investments.

 

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Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

28.

Related Parties and Others, Continued

 

 

(In millions of won)    2017  
     Sales
and others
            Purchase 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.

     —          —          1,862        66,548        —          2,259  

AVATEC Co., Ltd.

     —          530        —          —          90,785        720  

Paju Electric Glass Co., Ltd.

     —          8,109        380,815        —          —          4,225  

Shinbo Electric Co., Ltd. (*)

     15,812        —          —          —          —          21  

Narenanotech Corporation (*)

     —          —          279        21,727        —          244  

WooRee E&L Co., Ltd.

     —          —          —          —          —          175  

YAS Co., Ltd.

     —          —          6,347        69,243        —          2,474  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 15,813        8,639        389,303        157,518        90,789        10,124  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

                 

LG Electronics Inc.

   W 1,689,381        —          47,898        906,427        —          109,865  

Subsidiaries of the entity that has significant influence over the Controlling Company

                 

LG Electronics India Pvt. Ltd.

   W 71,597        —          —          —          —          163  

LG Electronics Vietnam Haiphong Co., Ltd.

     205,934        —          —          8,892        —          198  

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

28.

Related Parties and Others, Continued

 

 

(In millions of won)    2017  
     Sales
and others
            Purchase 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 300,785        —          —          245        —          379  

LG Electronics RUS, LLC

     103,479        —          —          —          —          963  

LG Electronics do Brasil Ltda.

     228,821        —          —          —          —          430  

LG Innotek Co., Ltd.

     14,836        —          199,896        —          —          5,692  

Qingdao LG Inspur Digital Communication Co., Ltd.

     77,787        —          —          —          —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     230,832        —          —          —          —          —    

LG Electronics Mexicalli, S.A. DE C.V.

     319,772        —          —          —          —          186  

LG Electronics Mlawa Sp. z o.o.

     847,565        —          —          —          —          985  

LG Electronics Taiwan Taipei Co., Ltd.

     13,693        —          —          —          —          164  

LG Hitachi Water Solutions Co., Ltd.

     —          —          —          318,978        —          1,532  

LG Electronics Reynosa, S.A. DE C.V.

     1,287,340        —          —          —          —          1,926  

LG Electronics Almaty Kazakhstan

     14,079        —          —          —          —          53  

LG Electronics Air-Conditioning (Shandong) Co., Ltd.

     —          —          255        3,744        —          2,621  

HiEntech Co., Ltd.

     —          —          —          6,991        —          34,432  

Hientech (Tianjin) Co., Ltd.

     —          —          —          21,838        —          11,822  

LG Electronics S.A. (Pty) Ltd.

     14,155        —          —          —          —          25  

Others

     857        —          3        14        —          7,264  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 3,731,532        —          200,154        360,702        —          68,835  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,436,726        8,639        637,355        1,424,647        90,789        188,824  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(*)

Represents transactions occurred prior to disposal of the entire investments.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

28.

Related Parties and Others, Continued

 

  (c)

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

 

(In millions of won)                            
     Trade accounts and notes receivable
and others
     Trade accounts and notes payable
and others
 
     December 31, 2018      December 31, 2017      December 31, 2018      December 31, 2017  

Associates

           

INVENIA Co., Ltd.

     2,000        2,375        30,179        18,662  

AVATEC Co., Ltd.

     —          —          4,382        2,949  

Paju Electric Glass Co., Ltd.

     —          —          60,566        60,141  

WooRee E&L Co., Ltd.

        —          30,179        61  

YAS Co., Ltd.

     —          375        4,382        6,474  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,000        2,750        101,279        88,287  
  

 

 

    

 

 

    

 

 

    

 

 

 

Entity that has significant influence over the Controlling Company

           

LG Electronics Inc.

   W 247,679        550,335        430,677        257,071  

Subsidiaries of the entity that has significant influence over the Controlling Company

           

LG Electronics do Brasil Ltda.

   W 15,608        19,091        62        10  

LG Electronics RUS, LLC

     22,570        25,102        90        80  

LG Innotek Co., Ltd.

     2,885        407        47,382        62,675  

Qingdao LG Inspur Digital Communication Co., Ltd.

     3,530        13,061        —          —    

Inspur LG Digital Mobile Communications Co., Ltd.

     13,172        55,278        —          —    

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

28.

Related Parties and Others, Continued

 

 

(In millions of won)                            
     Trade accounts and notes receivable and
others
     Trade accounts and notes payable
and others
 
     December 31, 2018      December 31, 2017      December 31, 2018      December 31, 2017  

LG Electronics Mexicali, S.A. DE C.V.

   W 15,305        29,440        —          —    

LG Electronics Mlawa Sp. z o.o.

     70,236        136,874        33        25  

LG Electronics Nanjing New Technology Co., Ltd.

     43,463        46,373        139        699  

LG Electronics Reynosa, S.A. DE C.V.

     69,189        137,413        134        82  

LG Electronics Vietnam Haiphong Co., Ltd.

     25,544        36,017        —          3,917  

LG Hitachi Water Solutions Co., Ltd.

     9,100        —          50,425        154,864  

Hientech (Tianjin) Co., Ltd.

     —          —          16,345        5,600  

Hientech Co., Ltd.

     —          —          16,816        6,679  

LG Electronics India Pvt. Ltd.

     9,047           29     

LG Electronics Egypt S.A.E.

     10,296           —       

LG Electronics Air-Conditioning (Shandong) Co., Ltd.

     —             17,654     

Others

     5,263        10,648        1,246        1,715  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 315,208        509,704        150,355        236,346  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 564,887        1,062,789        682,311        581,704  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

28.

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 years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)  
     Loans(*)  

Associates

   January 1,
2018
     Increase      Decrease      December 31,
2018
 

INVENIA Co., Ltd.

     2,375        —          375        2,000  

YAS Co., Ltd.

     375        —          375        —    
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,750        —          750        2,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Loans are presented based on nominal amounts.

 

(In millions of won)  
     Loans(*1)  

Associates

   January 1,
2017
     Increase      Decrease      December 31,
2017
 

New Optics Ltd.(*2)

   W 1,000        —          125        875  

INVENIA Co., Ltd.

     833        2,000        458        2,375  

Narenanotech Corporation(*2)

     300        —          75        225  

YAS Co., Ltd.

     833        —          458        375  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 2,966        2,000        1,116        3,850  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Loans are presented based on nominal amounts.

(*2)

Excluded from related parties due to disposal of equity investments during the year ended December 31, 2017.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

28.

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 years ended December 31, 2018 and 2017 are as follows. These entities are not related parties according to K-IFRS No. 1024, Related Party Disclosures.

 

(In millions of won)  
     For the year ended December 31, 2018      December 31, 2018  
     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(*)

     715,835        578,153        83,011        146,836  

LG Uplus Corp.

     21        1,745        —          178  

LG Chem Ltd. and its subsidiaries

     1,648        1,233,945        173        184,357  

Serveone and its subsidiaries

     401        1,928,820        21,307        510,132  

Silicon Works Co., Ltd.

     —          713,093        —          140,694  

LG Corp.

     —          54,434        11,246        —    

LG Management Development Institute

     —          9,734        3,480        441  

LG CNS Co., Ltd. and its subsidiaries

     —          278,330        1        95,703  

LG Hausys Ltd

     1,111        4        —          3  

LG Household & Health Care and its subsidiaries

     1        118        —          —    

LG Holdings Japan Co., Ltd.

     —          1,836        2,037        —    

G2R Inc. and its subsidiaries

     —          60,978        —          19,773  

Robostar Co., Ltd.

     —          3,616        —          2,723  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 719,017        4,864,806        121,255        1,100,840  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

28.

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 year ended December 31, 2018 amount to W770,277 million and gross purchase and others for the year ended December 31, 2018 amount to W1,140,207 million.

 

(In millions of won)  
     For the year ended December 31, 2017      December 31, 2017  
     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 734,555        1,906,476        112,200        230,179  

LG Household & Health Care and its subsidiaries

     —          132        —          3  

LG Uplus Corp.

     152        1,859        —          1,505  

LG Chem Ltd. and its subsidiaries

     16,915        1,336,867        8,684        246,491  

SK Siltron Co., Ltd. (formerly, Siltron Co., Ltd.)(*)

     10        —          —          —    

Lusem Co., Ltd.(*)

     13        694        1        53  

Serveone and its subsidiaries

     677        1,869,660        21,567        645,847  

Silicon Works Co., Ltd.

     —          624,127        —          120,031  

LG Corp.

     —          60,756        4,700        1,523  

LG Management Development Institute

     —          10,233        3,480        699  

LG CNS Co., Ltd. and its subsidiaries

     323        282,506        4        115,899  

LG Hausys Ltd

     1,673        391        —          374  

LG Holdings Japan Co., Ltd.

     —          1,859        1,908        —    

G2R Inc. and its subsidiaries

     —          97,006        —          14,785  
  

 

 

    

 

 

    

 

 

    

 

 

 
     754,318        6,192,566        152,544        1,377,389  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (*)

Represents transactions occurred prior to disposal of the entire investments.

 

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

For the years ended December 31, 2018 and 2017

 

28.

Related Parties and Others, Continued

 

  (f)

Key management personnel compensation

 

Compensation costs of key management for the years ended December 31, 2018 and 2017 are as follows:

 

(In millions of won)              
     2018      2017  

Short-term benefits

   W 2,622        3,724  

Expenses related to the defined benefit plan

     794        488  
  

 

 

    

 

 

 
   W 3,416        4,212  
  

 

 

    

 

 

 

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

 

29.

Supplemental Cash Flow Information

Supplemental cash flow information for the years ended December 31, 2018 and 2017 is as follows:

 

(In millions of won)              
     2018      2017  

Non-cash investing and financing activities:

     

Changes in other accounts payable arising from the purchase of property, plant and equipment

   W 516,734        632,355  

 

30.

Non-current Assets Held for Sale

The Group plans to dispose a part of tangible assets of LG Display Poland Sp. z o.o. based on the management’s approval and began effort to sell the disposal group. The Group expects to complete the sale within the first half of 2019.

 

  (1)

impairment loss of disposal group

Fair value less costs to sell of disposal group is expected to exceed the carrying amount and no impairment loss is recognized to the non-current assets held for sale.

 

  (2)

assets of disposal group

Non-current assets as held for sale at the reporting date is as follows:

 

(In millions of won)       
     December 31, 2018  

Property, plant and equipment

   W 70,161  

 

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SIGNATURES

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

 

    LG Display Co., Ltd.
    (Registrant)

Date: February 28, 2019

    By:     /s/ Heeyeon Kim                                                                               
      (Signature)
      Name: Heeyeon Kim
      Title:   Head of IR / Vice President