Samsung Electro-Mechanics Co., Ltd.
Consolidated financial statements
Samsung Electro-Mechanics Co., Ltd.
Consolidated financial statements
Samsung Electro-Mechanics Co., Ltd. December 31, 2009 and 2008
Contents
Page
Independent auditors’ report 1-2
Consolidated statements of financial position 3-4
Consolidated statements of income 5
Consolidated statements of changes in equity 6-7
Consolidated statements of cash flows 8-10
Independent auditors’ report
The Board of Directors and Stockholders Samsung Electro-Mechanics Co., Ltd.
We have audited the accompanying consolidated statements of financial position of Samsung Electro-Mechanics Co., Ltd. (the “Company”) and its subsidiaries (collectively the “Group”) as of December 31, 2009 and 2008, and the related consolidated statements of income, changes in equity and cash flows for the years then ended, all expressed in Korea won. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of certain subsidiaries that are included in the accompanying consolidated financial statements, whose financial statements reflect \1,552,014 million of the Group’s total consolidated assets as of December 31, 2009, and \4,851,422 million of the Group’s consolidated sales for the year then ended. These financial statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the subsidiaries, is based solely on the reports of the other auditors.
We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audit and the reports of the other auditors, the consolidated financial position of Samsung Electro-Mechanics Co., Ltd. and its subsidiaries as of December 31, 2009 and 2008, and the consolidated results of their operations, their changes in equity and their cash flows for the years then ended in conformity with accounting principles generally accepted in the Republic of Korea.
We have also reviewed the translation of the 2009 and 2008 consolidated financial statements mentioned above into United States dollar amounts on the basis described in Note 2 to the accompanying consolidated financial statements. In our opinion, such statements have been properly translated on such basis.
Accounting principles and auditing standards and their application in practice vary among countries. The accompanying consolidated financial statements are not intended to present the consolidated financial position, results of operations, changes in retained earnings and equity, and cash flows in accordance with accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures and practices utilized in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries. Accordingly, this report and the accompanying consolidated financial statements are for use by those who are knowledgeable about Korean accounting principles and auditing standards and their application in practice.
March 15, 2009
This report is effective as of March 15, 2009 the independent auditors’ report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the auditors’ report date to the time this audit report is used. Such events and circumstances could significantly affect the accompanying consolidated financial statements and may result in modifications to this report.
Assets Current assets:
Cash and cash equivalents (Note 13) \ 1,083,816,428,549 \ 330,013,300,748 $ 928,242,916 $ 282,642,430 Short-term financial instruments (Note 3) 15,723,885,330 16,155,680,588 13,466,842 13,836,657 Held-to-maturity securities (Note 6) 19,910,000 92,635,000 17,052 79,338 Trade accounts and notes receivable, net of allowance
for doubtful accounts (Notes 12, 13 and 18) 645,668,756,782 374,300,196,793 552,987,973 320,572,282 Other accounts receivable, net of allowance
for doubtful accounts (Notes 13 and 18) 75,289,494,008 49,740,302,477 64,482,266 42,600,464 Short-term loans receivable, net of allowance
for doubtful accounts (Note 7) 6,348,741,135 5,425,513,163 5,437,428 4,646,722 Inventories (Note 4) 484,568,420,561 487,140,436,037 415,012,351 417,215,173
Accrued income 1,337,546,792 1,036,861,190 1,145,552 888,028
Advance payments 1,427,809,234 305,053,066 1,222,858 261,265
Prepaid income tax 16,664,907,506 266,978,048 14,272,788 228,655
Prepaid expenses 16,696,721,092 17,192,681,910 14,300,035 14,724,805
Short-term guarantee deposits 6,985,056,999 776,537,314 5,982,406 665,071 Deferred income tax assets (Note 20) 38,794,820,139 51,866,565,170 33,226,122 44,421,519 Total current assets 2,393,342,498,127 1,334,312,741,504 2,049,796,589 1,142,782,409
Non-current assets:
Equity method investments (Note 5) 51,919,943,148 39,900,032,043 44,467,235 34,172,689 Available-for-sale securities (Note 6) 900,328,183,985 469,602,255,481 771,092,998 402,194,463 Held-to-maturity securities (Note 6) 92,400,000 92,475,000 79,137 79,201 Long-term loans receivable, net of present value
discount and allowance for doubtful
accounts (Note 7) 14,155,142,553 12,690,252,673 12,123,281 10,868,665
Property, plant and equipment, net (Notes 8 and 10) 2,088,411,086,518 1,821,084,040,694 1,788,635,737 1,559,681,433 Intangible assets, net (Notes 9) 23,151,822,637 13,388,224,267 19,828,555 11,466,448 Long-term financial instruments (Note 3) 45,310,989 26,500,000 38,807 22,695
Long-term other accounts receivable - 97,685,593 - 83,664
Long-term prepaid expenses 4,554,120,539 2,008,193,231 3,900,411 1,719,933 Long-term guarantee deposits 27,324,285,096 28,624,164,427 23,402,094 24,515,386 Deferred income tax assets (Note 20) 19,384,958,868 80,973,764,687 16,602,397 69,350,604 Other non-current assets 40,234,864,252 34,599,934,830 34,459,459 29,633,380 Total non-current assets 3,169,602,118,585 2,503,087,522,926 2,714,630,111 2,143,788,561
Total assets \ 5,562,944,616,712 \ 3,837,400,264,430 $ 4,764,426,700 $ 3,286,570,970
Samsung Electro-Mechanics Co., Ltd. Consolidated statements of financial position
As of December 31, 2009 and 2008
2008 2009
Korean won US dollars (Note 2)
Liabilities and equity Current liabilities:
Trade accounts and notes payable (Note 13 and 18) \ 322,340,255,822 \ 175,807,867,660 $ 276,070,791 $ 150,572,001 Other accounts payable (Notes 13) 337,018,844,495 206,357,175,273 288,642,381 176,736,190
Advances received 4,963,240,361 22,377,500 4,250,805 19,165
Withholdings 33,447,567,603 15,857,722,419 28,646,427 13,581,468
Withholding deposits 2,221,744,871 561,334,980 1,902,831 480,760
Accrued expenses (Note 13) 165,442,712,786 79,211,343,401 141,694,684 67,841,164
Income taxes payable 20,231,328,757 - 17,327,277 -
Dividends payable 2,623,131,563 229,361,709 2,246,601 196,439
Short-term borrowings (Notes 10 and 13) 639,669,833,855 531,182,081,550 547,850,149 454,934,979 Current portion of long-term borrowings (Note 10) 430,084,290,608 150,000,000,000 368,348,998 128,468,654 Unearned income (Note 8) 8,453,257,085 7,357,016,704 7,239,857 6,300,974 Provision of product warranties 1,767,779,846 1,249,162,790 1,514,029 1,069,856
Deferred income tax liabilities (Note 20) 7,336,031 - 6,283 -
Total current liabilities 1,968,271,323,683 1,167,835,443,986 1,685,741,113 1,000,201,650
Non-current liabilities:
Bonds payable, net of discount (Note 10) 299,011,488,957 - 256,090,689 - Long-term borrowings (Note 10) 309,127,056,600 500,000,000,000 264,754,245 428,228,845 Long-term other accounts payable (Note 8) 8,098,437,436 6,837,128,291 6,935,969 5,855,711 Long-term accrued expenses 11,525,743,834 5,130,000,000 9,871,312 4,393,628 Severance and retirement benefits (Note 11) 106,518,529,647 153,406,090,902 91,228,614 131,385,826
Provision for restoration costs 219,927,396 - 188,359 -
Deferred income tax liabilities (Note 20) 65,658,036,430 - 56,233,330 -
Total non-current liabilities 800,159,220,300 665,373,219,193 685,302,518 569,864,010 Total liabilities 2,768,430,543,983 1,833,208,663,179 2,371,043,631 1,570,065,660
Equity:
Equity attributable to holders of the parent: Capital stock (Note 14):
Common stock 373,468,480,000 373,468,480,000 319,859,952 319,859,952
Preferred stock 14,534,920,000 14,534,920,000 12,448,545 12,448,545
388,003,400,000 388,003,400,000 332,308,497 332,308,497 Capital surplus 1,131,702,616,870 1,076,815,882,380 969,255,410 922,247,244 Capital adjustments:
Treasury stock (Note 14) (20,181,018,270) (35,748,462,553) (17,284,189) (30,617,046) Share based payments (Note 16) 9,905,816,096 31,076,401,938 8,483,912 26,615,623 (10,275,202,174) (4,672,060,615) (8,800,277) (4,001,423) Accumulated other comprehensive
income (Note 20):
Equity adjustment arising from equity method
investments, net 6,465,817,100 4,630,040,035 5,537,698 3,965,433
Gain on valuation of available-for-sale securities,
net (Notes 6) 393,002,673,464 51,124,049,230 336,590,162 43,785,585
Foreign currency translation adjustments 50,452,208,872 82,363,892,289 43,210,182 70,541,189 449,920,699,436 138,117,981,554 385,338,042 118,292,207 Retained earnings (Note 15):
Appropriated 334,695,257,472 308,695,257,472 286,652,327 264,384,427
Unappropriated 280,258,652,172 47,124,166,940 240,029,678 40,359,855
614,953,909,644 355,819,424,412 526,682,005 304,744,282 Minority interests 220,208,648,953 50,106,973,520 188,599,392 42,914,503 Total equity 2,794,514,072,729 2,004,191,601,251 2,393,383,069 1,716,505,310
Total liabilities and equity \ 5,562,944,616,712 \ 3,837,400,264,430 $ 4,764,426,700 $ 3,286,570,970 As of December 31, 2009 and 2008
Korean won US dollars (Note 2)
2009 2008
Samsung Electro-Mechanics Co., Ltd.
Consolidated statements of financial position (cont'd)
Sales (Notes 17, 18 and 25) \ 5,550,514,688,069 \ 4,284,469,416,646 $ 4,753,780,994 $ 3,669,466,784 Cost of sales (Notes 17 and 18) 4,374,775,873,784 3,553,828,384,122 3,746,810,443 3,043,703,652 Gross profit 1,175,738,814,285 730,641,032,524 1,006,970,551 625,763,132
Selling and administrative expenses (Notes 19) 710,740,736,070 593,688,663,516 608,719,370 508,469,222
Operating income 464,998,078,215 136,952,369,008 398,251,181 117,293,910
Other income (expenses):
Interest income 17,476,951,876 11,081,503,234 14,968,270 9,490,839
Interest expense (66,777,306,499) (55,962,975,230) (57,191,938) (47,929,921)
Dividend income 7,964,795,604 10,801,996,358 6,821,510 9,251,453
Service fee income 3,043,838,071 3,210,975,968 2,606,919 2,750,065
Loss on disposal of trade notes and accounts
receivable (4,644,234,451) (7,193,389,352) (3,977,590) (6,160,834)
Gain (loss) on foreign currency transactions, net (2,845,339,993) 3,888,726,028 (2,436,913) 3,330,529 Loss on foreign currency translation, net (Note 13) (68,297,598) (12,183,729,504) (58,494) (10,434,849) Reversal of allowance for doubtful accounts 4,203,425,202 - 3,600,056 - Gain (loss) on valuation of equity method
investments, net (Note 5) 7,379,113,213 (1,737,693,501) 6,319,898 (1,488,261) Loss on disposal of held-for-trading
securities, net (16,853,760) - (14,435) -
Impairment loss on available-for-sale
securities (Note 6) (4,230,000,000) (1,459,230,000) (3,622,816) (1,249,769) Loss on disposal of property, plant
and equipment, net (5,261,566,605) (2,690,398,320) (4,506,309) (2,304,212) Impairment loss on property, plant
and equipment, net (Notes 8) (2,526,538,366) (254,765,235) (2,163,873) (218,196)
Gain on disposal of intangible assets - 3,055,890 - 2,617
Gain (loss) on disposal of other
non-current assets, net 243,312,332 (14,861,656) 208,387 (12,728)
Bad debt expense-non-trade (929,525,065) (13,686,065,206) (796,099) (11,721,536)
Donations (4,152,753,050) (2,208,721,702) (3,556,657) (1,891,677)
Others 17,816,646,260 15,086,063,547 15,259,204 12,920,575
Income before income taxes 431,673,745,386 83,632,860,327 369,710,301 71,628,005 Provision for income taxes (Note 20) 113,104,995,763 29,537,083,971 96,869,644 25,297,263 Net income \ 318,568,749,623 \ 54,095,776,356 $ 272,840,657 $ 46,330,742
Attributable to:
Equity holders of the parent \ 278,476,226,596 \ 48,036,022,292 $ 238,503,106 $ 41,140,821 Minority interests (Note 21) \ 40,092,523,027 \ 6,059,754,064 $ 34,337,551 $ 5,189,921
Earnings per share (Note 22):
Basic \ 3,616 \ 624 $ 3.10 $ 0.53
Diluted \ 3,606 \ 624 $ 3.09 $ 0.53
Samsung Electro-Mechanics Co., Ltd. Consolidated statements of income
Korean won US dollars (Note 2)
For the years ended December 31, 2009 and 2008
2008
As of January 1, 2008 (as previously stated) \ 388,003,400,000 \ 1,076,760,016,456 \ (4,851,657,413) \ 155,222,106,924 \ 348,037,823,607 \ 42,608,133,307 \ 2,005,779,822,881 Cumulative effect of changes
in accounting policy - 1,272,139,190 - (1,272,139,190) - - -
As of January 1, 2008 (as restated) 388,003,400,000 1,078,032,155,646 (4,851,657,413) 153,949,967,734 348,037,823,607 42,608,133,307 2,005,779,822,881
Dilution of interest in subsidiaries - - - 825,390,752 825,390,752
Dividends - - - - (38,529,164,200) (10,953,003,506) (49,482,167,706)
Effect on retained earnings from
the change of functional currency of a subsidairy - - - - (9,696,419) - (9,696,419)
Effect on deferred income tax from
the change of income tax rate - - - - (1,715,560,868) - (1,715,560,868)
Net income for the year - - - - 48,036,022,292 6,059,754,064 54,095,776,356
Other capital surplus - (1,216,273,266) - - - - (1,216,273,266)
Treasury stock - - 516,225,000 - - - 516,225,000
Share based payments - - (336,628,202) - - - (336,628,202)
Equity adjustment arising from
equity method investments, net - - - (5,471,533,848) - - (5,471,533,848)
Loss on valuation of
available-for-sale securities, net - - - (110,523,892,804) - - (110,523,892,804)
Foreign currency translation adjustments - - - 100,163,440,472 - 10,780,223,413 110,943,663,885
Minority interest arising from acquisition of
subsidiaries - - - 786,475,490 786,475,490
As of December 31, 2008 \ 388,003,400,000 \ 1,076,815,882,380 \ (4,672,060,615) \ 138,117,981,554 \ 355,819,424,412 \ 50,106,973,520 \ 2,004,191,601,251 As of January 1, 2009 \ 388,003,400,000 \ 1,076,815,882,380 \ (4,672,060,615) \ 138,117,981,554 \ 355,819,424,412 \ 50,106,973,520 \ 2,004,191,601,251
Issuance of capital stock - 34,340,240,107 - - - 38,101,642,233 72,441,882,340
Dividends - - - - (19,339,670,950) (9,772,126,272) (29,111,797,222)
Retained earnings - - - - (2,070,414) - (2,070,414)
Net income for the year - - - - 278,476,226,596 40,092,523,027 318,568,749,623
Gains on disposal of treasury stock 20,546,494,383 - - - - 20,546,494,383
Treasury stock - - 15,567,444,283 - - - 15,567,444,283
Share based payments - - (21,170,585,842) - - - (21,170,585,842)
Equity adjustment arising from
equity method investments, net - - - 1,835,777,065 - - 1,835,777,065
Gain on valuation of
available-for-sale securities, net - - - 341,878,624,234 - - 341,878,624,234
Foreign currency translation adjustments - - - (31,911,683,417) - (4,996,923,296) (36,908,606,713)
Minority interest arising from acquisition of
subsidiaries - - - 106,676,559,741 106,676,559,741
\ \ \ \
Consolidated statements of changes in equity Samsung Electro-Mechanics Co., Ltd.
Accumulated other comprehensive
income Retained earnings Total
For the years ended December 31, 2009 and 2008
Capital stock Capital surplus Capital adjustments Minority interests
As of January 1, 2008 (as previously stated) $ 332,308,497 $ 922,199,398 $ (4,155,240) $ 132,941,166 $ 298,079,670 $ 36,492,064 $ 1,717,865,555 Cumulative effect of changes
in accounting policy - 1,089,533 - (1,089,533) - - -
As of January 1, 2008 (as restated) 332,308,497 923,288,931 (4,155,240) 131,851,633 298,079,670 36,492,064 1,717,865,555
Dilution of interest in subsidiaries - - - 706,914 706,914
Dividends - - - - (32,998,599) (9,380,784) (42,379,383)
Effect on retained earnings from
the change of functional currency of a subsidairy - - - - (8,305) - (8,305)
Effect on deferred income tax from
the change of income tax rate - - - - (1,469,305) - (1,469,305)
Net income for the year - - - - 41,140,821 5,189,921 46,330,742
Other capital surplus - (1,041,687) - - - - (1,041,687)
Treasury stock - - 442,125 - - - 442,125
Share based payments - - (288,308) - - - (288,308)
Equity adjustment arising from
equity method investments, net - - - (4,686,137) - - (4,686,137)
Loss on valuation of
available-for-sale securities, net - - - (94,659,038) - - (94,659,038)
Foreign currency translation adjustments - - - 85,785,749 - 9,232,805 95,018,554
Minority interest arising from acquisition of
subsidiaries - - - 673,583 673,583
As of December 31, 2008 $ 332,308,497 $ 922,247,244 $ (4,001,423) $ 118,292,207 $ 304,744,282 $ 42,914,503 $ 1,716,505,310 As of January 1, 2009 $ 332,308,497 $ 922,247,244 $ (4,001,423) $ 118,292,207 $ 304,744,282 $ 42,914,503 $ 1,716,505,310
Issuance of capital stock - 29,410,963 - - - 32,632,444 62,043,407
Dividends - - - - (16,563,610) (8,369,413) (24,933,023)
Retained earnings - - - - (1,773) - (1,773)
Net income for the year - - - - 238,503,106 34,337,551 272,840,657
Gains on disposal of treasury stock - 17,597,203 - - - - 17,597,203
Treasury stock - - 13,332,857 - - - 13,332,857
Share based payments - - (18,131,711) - - - (18,131,711)
Equity adjustment arising from
equity method investments, net - - - 1,572,265 - - 1,572,265
Minority interests Consolidated statements of changes in equity
Samsung Electro-Mechanics Co., Ltd.
Accumulated other comprehensive income Retained earnings Total
For the years ended December 31, 2009 and 2008
Capital stock
Capital adjustments Capital surplus
Cash flows from operating activities:
Net income \ 318,568,749,623 \ 54,095,776,356 $ 272,840,657 $ 46,330,742 Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for severance and retirement benefits 53,578,156,749 55,579,559,239 45,887,424 47,601,541
Depreciation 370,862,441,054 336,122,731,988 317,627,990 287,874,899
Bad debt expense-trade 1,065,450,653 1,715,026,479 912,513 1,468,848
Amortization of intangible assets 6,365,014,668 4,650,054,855 5,451,366 3,982,575
Amortization of discount on bonds payable 263,888,957 - 226,010 -
Amortization of present value discount - (589,211,318) - (504,635)
Provision of product warranties 66,478,853 242,898,146 56,936 208,032
Loss on disposal of trade accounts and notes
receivable 4,644,234,451 7,193,389,352 3,977,590 6,160,834
Loss (gain) on foreign currency translation, net (2,384,457,437) 12,794,972,282 (2,042,187) 10,958,352
Reversal of allowance for doubtful accounts (4,203,425,202) - (3,600,056) -
Loss on valuation of inventories - 24,581,649,007 - 21,053,142
Loss on inventories written off 37,689,701,501 27,476,519,561 32,279,635 23,532,476
Supplies expenses - 1,534,543,895 - 1,314,272
Loss (gain) on valuation of equity method
investments, net (7,379,113,213) 1,737,693,501 (6,319,898) 1,488,261
Loss on disposal of held-for-trading
securities, net 16,853,760 - 14,435 -
Impairment loss on available-for-sale securities 4,230,000,000 1,459,230,000 3,622,816 1,249,769 Loss on disposal of property, plant
and equipment, net 5,261,566,605 2,690,398,320 4,506,309 2,304,212
Impairment loss on property, plant
and equipment, net 2,526,538,366 254,765,235 2,163,873 218,196
Gain on disposal of of intangible assets - (3,055,890) - (2,617)
Loss (gain) on disposal of other
non-current assets, net (243,312,332) 14,861,656 (208,387) 12,728
Bad debt expense-non-trade 929,525,065 13,686,065,206 796,099 11,721,536
Donations 20,423,949 334,174,085 17,492 286,206
Changes in operating assets and liabilities:
Trade accounts and notes receivable (278,572,524,268) 127,325,770,143 (238,585,581) 109,049,136
Other accounts receivable (26,393,505,935) (279,959,899) (22,604,921) (239,773)
Accrued income (300,685,602) 164,675,204 (257,524) 141,038
Advance payments (1,122,367,269) 437,510,484 (961,260) 374,710
Prepaid income tax (16,397,929,458) (266,978,048) (14,044,134) (228,654)
Prepaid expenses 484,702,474 2,370,749,258 415,127 2,030,446
Short-term guarantee deposits (6,170,891,075) 63,298,976 (5,285,107) 54,213
Current-deferred income tax assets 13,071,745,031 (4,981,098,747) 11,195,397 (4,266,100)
Inventories (42,283,890,873) (32,340,599,212) (36,214,364) (27,698,355)
Long-term other accounts receivable 97,685,593 93,101,560 83,664 79,738
Long-term prepaid expenses (2,545,927,308) (1,266,815,427) (2,180,479) (1,084,974)
Deferred income tax assets 55,334,149,455 10,610,184,419 47,391,358 9,087,174
Trade accounts and notes payable 147,216,770,918 (177,064,138,454) 126,084,936 (151,647,943)
Advances received 4,944,219,875 (1,608,548,091) 4,234,515 (1,377,653)
Withholdings 17,589,845,184 10,041,076,803 15,064,958 8,599,757
Withholding deposits 1,660,409,891 214,077,425 1,422,071 183,348
Accrued expenses 86,602,594,335 (12,778,481,594) 74,171,458 (10,944,229)
(Continued)
See accompanying notes.
Samsung Electro-Mechanics Co., Ltd. Consolidated statements of cash flows For the years ended December 31, 2009 and 2008
2009 2008
Korean won
2009 2008
Cash flows from operating activities (cont'd):
Income taxes payable \ 20,231,328,757 \ (2,992,975,176) $ 17,327,277 $ (2,563,357)
Unearned income 1,096,240,381 2,432,374,009 938,884 2,083,225
Provision of product warranties 452,138,203 (217,660,366) 387,237 (186,417)
Current-deferred income tax liabilities 7,336,031 - 6,283 -
Long-term other accounts payable 1,261,309,145 2,052,841,356 1,080,258 1,758,172
Long-term accrued expenses 6,395,743,834 2,430,000,000 5,477,684 2,081,192
Deferred income tax liabilities (25,717,372,279) - (22,025,841) -
Payment of severance and retirement
benefits (41,886,059,981) (38,782,299,611) (35,873,638) (33,215,399)
Succession of severance and retirement
benefits 11,225,627,600 96,425,000 9,614,275 82,584
Deposits for severance and retirement (69,866,447,366) (3,227,299,747) (59,837,656) (2,764,046) benefits
Net decrease in prepayments to NPS 132,172,900 186,932,800 113,200 160,100
Total adjustments 329,856,384,640 374,188,428,664 282,508,037 320,476,560
Net cash provided by operating
activities 648,425,134,263 428,284,205,020 555,348,694 366,807,302
Cash flows from investing activities:
Decrease (increase) in short-term financial
instruments, net 431,795,258 (2,078,215,024) 369,814 (1,779,903)
Decrease (increase) in held-for-trading
securities, net (16,853,760) - (14,435) -
Decreasein short-term loans receivable, net 4,112,981,277 1,355,780,658 3,522,594 1,161,169
Increase in long-term financial instruments (19,591,478) - (16,779) -
Proceeds from disposal of available-for-sale
securities 7,580,000,000 560,000,000 6,491,949 479,616
Proceeds from disposal of held-to-maturity securities 92,635,000 73,935,000 79,338 63,322 Increase in long-term loans receivable, net (3,511,569,585) (8,546,291,052) (3,007,511) (7,319,537) Decrease (increase) in long-term guarantee
deposits, net 1,235,607,870 (1,794,576,730) 1,058,246 (1,536,979)
Proceeds from disposal of other non-current assets 1,126,818,182 17,119,123 965,072 14,662 Proceeds from disposal of property, plant
and equipment 48,270,186,006 37,393,657,372 41,341,372 32,026,085
Proceeds from disposal of intangible assets 188,367,689 37,442,836 161,329 32,068 Acquisition of held-to-maturity securities (19,835,000) (26,315,000) (16,988) (22,538) Acquisition of other non-current assets (6,580,574,927) (2,950,391,042) (5,635,984) (2,526,885) Acquisition of property, plant and equipment (756,840,202,761) (414,638,308,481) (648,201,613) (355,120,168) Acquisition of intangible assets (16,705,749,678) (5,319,959,478) (14,307,768) (4,556,320) Net cash used in investing activities (720,655,985,907) (395,916,121,818) (617,211,364) (339,085,408)
Cash flows from financing activities:
Issuance of capital stock 38,101,642,233 825,390,752 32,632,445 706,912
Issuance of bonds payable 298,747,600,000 - 255,864,680 -
Increase in other accounts payable, net 133,798,717,276 3,580,783,723 114,592,940 3,066,790 Drawdown of short-term borrowings 809,129,978,277 70,493,099,123 692,985,593 60,374,357
Drawdown of long-term borrowings 315,944,511,677 - 270,593,107 -
Increase in long-term other accounts payable - 259,910,333 - 222,602
Proceeds from exercise of share-based payments 36,875,675,565 670,500,000 31,582,456 574,255
Payment of dividends (23,813,025,818) (49,413,761,060) (20,394,849) (42,320,796)
Repayment of short-term borrowings (682,428,206,661) - (584,470,886) -
Repayment of current portion of long-term
borrowings (150,000,000,000) - (128,468,654) -
Repayment of long-term borrowings (70,301,755,677) - (60,210,479) -
Acquisition of treasury stock (21,932,322,741) - (18,784,106) -
2009 2008
Samsung Electro-Mechanics Co., Ltd. Consolidated statements of cash flows
2009 2008
For the years ended December 31, 2009 and 2008
Net effect of foreign exchange differences \ (15,003,620,484) \ 22,934,525,708 $ (12,849,966) $ 19,642,451
Net increase in cash and cash equivalents
arising from changes in consolidated subsidiaries 156,914,785,798 500,809,214 134,390,875 428,922
Net increase in cash and cash equivalents 753,803,127,801 82,219,340,995 645,600,486 70,417,387
Cash and cash equivalents at the beginning
of the year 330,013,300,748 247,793,959,753 282,642,430 212,225,043
Cash and cash equivalents at the end
of the year \ 1,083,816,428,549 \ 330,013,300,748 $ 928,242,916 $ 282,642,430
See accompanying notes.
Samsung Electro-Mechanics Co., Ltd. Consolidated statements of cash flows For the years ended December 31, 2009 and 2008
2008 2009 2008
2009
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008 1. Organization and business
The organization and business of Samsung Electro-Mechanics Co., Ltd. (the “Company”) and its consolidated subsidiaries (collectively the “Group”), as well as the organization and business of unconsolidated subsidiaries and equity method investees accounted for using the equity method of accounting are described below.
The Company
The Company was incorporated on August 8, 1973 under the laws of the Republic of Korea to engage in the manufacture and sales of various electronic components. The Company listed its common shares on the Korea Exchange (“KRX”) in 1979.
The Company’s manufacturing plants are located in Suwon, Gyunggi-do, Busan, Gyeongsangnam-do and Yeongi-gun, Chungcheongnam-Gyeongsangnam-do. The Company maintains its overseas business operations through 15 overseas direct subsidiaries and 3 overseas indirect subsidiaries located in the Americas, Europe and Asia.
Consolidated and unconsolidated subsidiaries
Consolidated and unconsolidated subsidiaries as of December 31, 2009 are as follows:
Subsidiaries
Net asset value (Korean won in thousands) Number of shares Ownership (%) Principal activities Country Samsung Electro-Mechanics
America Inc. (*) \ 3,420,160 5,000 100.00 Trading US
Samsung Electro-Mechanics
Germany, GmbH (**) 3,089,662 - 100.00 Trading German
Samsung Portugal Produtos
Electro-Mechanicos, S.A. 10,591,700 1,304,389 75.85
Manufacturing
and trading Portugal Samsung Electro-Mechanics
Hungary Inc. 2,478,280 13,800 100.00 Real estate Hungary
Samsung Electro-Mechanics
Thailand Co., Ltd. 13,130,733 3,181,869 75.00
Manufacturing
and trading Thailand Samsung Electro-Mechanics
Philippines Corp. 53,917,212 4,046,711 100.00
Manufacturing
and trading Philippines Samsung Electro-Mechanics
Pte Ltd. 1,215,800 1,760,200 100.00 Trading Singapore
Calamba Premier Realty
Corp. 3,383 398 39.80 Real estate Philippines
Samsung Electro-Mechanics
Indonesia, PT. 8,765,980 3,600 100.00
Manufacturing
and trading Indonesia Tianjin Samsung Electro-
Mechanics Co., Ltd. (**) 76,475,075 - 80.96
Manufacturing
and trading China Dongguan Samsung Electro-
Mechanics Co., Ltd. (**) 62,574,549 - 100.00
Manufacturing
and trading China Samsung Electro-Mechanics
Hong Kong Co., Ltd. (***)
3,787,360 23,310,000 100.00 Trading China
Samsung High Tech
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
1. Organization and business (cont’d)
Consolidated and unconsolidated subsidiaries (cont’d)
Subsidiaries
Net asset value (Korean won in thousands) Number of shares Ownership (%) Principal activities Country Samsung Electro-Mechanics
(Shenzen) Co., Ltd. (**) \ 139,343 - 100.00 Trading China Samsung LED Co., Ltd.
(****) 20,000,000 2,000,000 50.00
Manufacturing
and trading Korea Tianjin Samsung LED Co.,
Ltd. (**) 37,661,700 - 50.00
Manufacturing
and trading China Kunshan Samsung
Electro-Mechanics Co., Ltd. (**) 14,149,200 - 100.00
Manufacturing
and trading China Samsung Electro-Mechanics
do Brasil Intermediacoes de Negocios Ltda (**)
233,520 - 100.00 Trading Brazil
(*) Samsung Electro-Mechanics America Inc. is a direct subsidiary which wholly owns Samsung Electro-Mechanics do Brasil Intermediacoes de Negocios Ltda.
(**) These subsidiaries are limited liability entities which do not issue shares in accordance with the local law.
(***) Samsung Electro-Mechanics Hong Kong Co., Ltd. is a direct subsidiary which wholly owns Samsung Electro-Mechanics (Shenzen) Co., Ltd.
(****) Samsung LED Co., Ltd. is a direct subsidiary which wholly owns Tianjin Samsung LED Co., Ltd.
Since Samsung Portugal Produtos Electro-Mechanicos, S.A. has filed for bankruptcy and Samsung Electro-Mechanics Indonesia, PT. is under liquidation procedings, these subsidiaries are excluded from the consolidated financial statements for the year ended December 31, 2009.
Samsung LED Co., Ltd., Tianjin Samsung LED Co., Ltd., Kunshan Samsung Electro-Mechanics Co., Ltd. and Samsung Electro-Mechanics do Brasil Intermediacoes de Negocios Ltda were newly incorporated during current financial year, and are included in the consolidated financial statements for the year ended December 31,2009.
Samsung Mechanics Hungary Inc., Calamba Premier Realty Corp. and Samsung Electro-Mechanics (Shenzen) Co., Ltd. are excluded from the consolidated financial statements and accounted for using the equity method of accounting, as each investee’s total assets as of the end of previous year were less than the \10 billion threshold.
The summary of the consolidated subsidiaries’ financial position as of December 31, 2009, and the results of their operations for the year then ended, which are included in the accompanying consolidated financial statements are as follows (Korean won in thousands):
Total assets Total liabilities Sales
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
1. Organization and business (cont’d)
Consolidated and unconsolidated subsidiaries (cont’d)
Total assets Total liabilities Sales
Net income (loss) Samsung Electro-Mechanics Philippines Corp. \ 259,253,094 \ 166,449,713 \ 399,323,830 \ 23,238,946 Samsung Electro-Mechanics Pte Ltd. 61,907,823 58,801,426 239,144,869 747,821
Tianjin Samsung Electro-
Mechanics Co., Ltd. 313,291,622 151,557,475 841,116,784 40,947,235 Dongguan Samsung Electro-
Mechanics Co., Ltd. 297,198,868 190,213,852 1,004,268,628 24,490,799 Samsung Electro-Mechanics
Hong Kong Co., Ltd. 63,941,447 52,618,541 413,336,212 710,651 Samsung High Teah
Electronics (Tianjin) Co., Ltd.
152,859,288 77,681,719 653,964,010 16,668,131 Samsung LED Co., Ltd. 909,476,439 574,152,541 531,623,001 47,998,827 Tianjin Samsung LED Co.,
Ltd. 294,945,287 237,208,227 340,071,614 23,916,791
Kunshan Samsung
Electro-Mechanics Co., Ltd. 30,473,243 16,476,877 - (19,635)
\ 2,721,216,603 \ 1,764,925,379 \ 5,782,369,068 \ 215,041,322 Equity method investments
The summary of the financial position of equity method investments as of December 31, 2009, and the result of their operations for the year then ended that are included in the accompanying consolidated financial statements are as follows (Korean won in thousands):
Total assets Total liabilities Sales
Net income (loss) Samsung Electro-Mechanics
Hungary Inc. \ 8,108,015 \ 3,399,536 \ 915,415 \ 99,241
Calamba Premier Realty
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
2. Summary of significant accounting policies Basis of financial statements preparation
The Company maintains its official accounting records in Korean won and prepares statutory financial statements in the Korean language in conformity with accounting principles generally accepted in the Republic of Korea (“Korean GAAP”). Overseas subsidiaries prepare their financial statements in accordance with the Group’s Global Accounting Manual (“GAM”), which is model based on accounting principles generally accepted in the US. Significant GAAP differences between Korean GAAP and GAM are adjusted to conform with the Group’s accounting policy. Certain accounting principles applied by the Group that conform with financial accounting standards and accounting principles in the Republic of Korea may not conform with generally accepted accounting principles in other countries. Accordingly, these consolidated financial statements are intended for use by those who are informed about Korean accounting principles and practices. In the event of any differences in interpreting the consolidated financial statements or the independent auditors’ report thereon, the Korean version, which is used for regulatory reporting purposes, shall prevail. The accompanying consolidated financial statements have been condensed, restructured and translated into English with certain expanded descriptions from the Korean language consolidated financial statements.
The consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the Republic of Korea including, Statements of Korea Accounting Standards (“SKAS”) 1 to 23 and 25, and the summary of significant account policies used for the preparation of the consolidated financial statements are as follows:
Adoption of revised Statements of Korea Accounting Standards (“SKAS”)
The Group has adopted the revised SKAS 5 Amendments – Property, Plant and Equipment for the current year. The adoption of this revised standard did not have any effect on the Group’s financial statements as the Group chose not to revalue any of its existing property, plant and equipment.
Revenue recognition
The Group recognizes revenue when the amount of revenue can be reliably measured, and it is probable that future economic benefits will flow into the Group. Revenue from the sale of goods is recognized when significant risks and rewards of ownership of goods have passed to the buyer upon delivery of goods sold.
Cash equivalents
Highly liquid deposits and marketable securities with original maturities of three months or less, and which have no significant risk of loss in value by interest rate fluctuations, are considered as cash equivalents.
Financial instruments
Financial instruments, such as time deposits and restricted bank deposits, which are traded by financial institutions and are held for short-term cash management purposes or which will mature within one year, are accounted for as short-term financial instruments. Financial instruments other than cash equivalents and short-term financial instruments are recorded as long-term financial instruments.
Allowance for doubtful accounts
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
2. Summary of significant accounting policies (cont’d) Inventories
Inventories are stated at the lower of cost or net realizable value, with cost being determined using the moving weighted-average method. A perpetual inventory system is used to record inventories, in which inventories are adjusted to physical inventory counts that are performed at the end of the year.
When a decline in the value of an inventory indicates that its cost exceeds net realizable value, a valuation loss will be recognized to write the inventory down to its net realizable value. The write-down of inventories as of December 31, 2009 and 2008 amounted to \29,903,718 thousand and \54,770,424 thousand, respectively, and inventories written-off amounting to \37,689,702 thousand and \27,476,520 thousand were recognized as an expense in 2009 and 2008, respectively. If the circumstances that previously caused the inventories to be written down cease to exist or there is an increase in net realizable value, the amount of the write-down is reversed to the extent of the original write-down amount so that the new carrying amount is the lower of cost and the revised net realizable value.
Investments in securities
Investments in securities within the scope of SKAS 8 Investments in Securities are classified as either trading, held-to-maturity or available-for-sale securities, depending on the acquisition and holding purpose. The Group determines the classification of its investments after initial recognition, and, where allowed and appropriate, re-evaluates this designation at each financial year end. Securities that are acquired and held principally for the purpose of selling them in the near term are classified as trading securities. Debt securities which carry fixed or determinable payments and fixed maturity are classified as held-to-maturity if the Group has the positive intention and ability to hold to maturity. Securities that are not classified as either trading or held-to-maturity are classified as available-for-sale securities.
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
2. Summary of significant accounting policies (cont’d) Investments in securities (cont’d)
Trading securities are classified as current assets. Available-for-sale and held-to-maturity securities are classified as long-term investments, except that securities maturing within one year or that are certain to be disposed of within one year from the statement of financial position date are classified as short-term investments.
The Group recognizes an impairment loss on its investments in securities if there is objective evidence that the securities are impaired. The impairment loss is charged to the statement of income.
Equity method investments
Investments in entities over which the Group has significant influence are accounted for using the equity method.
Under the equity method of accounting, the Group’s initial investment in an investee is recorded at acquisition cost. Subsequently, the carrying amount of the investment is adjusted to reflect the Group’s share of income or loss of the investee in the statement of income and share of changes in equity that have been recognized directly in the equity of the investee in the related equity account of the Group on the statement of financial position. If the Group’s share of losses of the investee equals or exceeds its interest in the investee, it suspends recognizing its share of further losses. However, if the Group has other long-term interests in the investee, it continues recognizing its share of further losses to the extent of the carrying amount of such long-term interests.
At the date of acquisition, the excess of the cost of the investment over the Group’s share of the net fair value of the investee’s identifiable assets and liabilities is accounted for as goodwill which is amortized over its useful life of 20 years using the straight-line method. Conversely, negative goodwill represents the excess of the Group’s share in the net fair value of the investee’s identifiable assets and liabilities over the cost of the investment. Negative goodwill is recorded to the extent of the fair value of acquired non-monetary assets and recognized as income using the straight-line method over the remaining weighted-average useful life of those acquired monetary assets. The amount of negative goodwill in excess of the fair value of acquired non-monetary assets is recognized as income immediately.
The Group’s share in the investee’s unrealized gains and losses resulting from transactions between the Group and its investee are eliminated to the extent of the interest in the investee.
In translating the financial statements of foreign investees into Korean won, assets and liabilities are translated at the exchange rate on the statement of financial position date and income and expenses are translated at the weighted-average exchange rate for the period. All resulting exchange differences are recognized as foreign currency translation adjustments in other comprehensive income within equity.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation, except for certain assets of the Group which were revalued in accordance with the previous Korean Assets Revaluation Law and are stated at revalued amount less accumulated depreciation(Note 8).
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
2. Summary of significant accounting policies (cont’d) Property, plant and equipment (cont’d)
Depreciation of property, plant and equipment is provided using the straight-line method over the estimated useful life of the assets as follows:
Years
Buildings 10 - 50
Structures 7 - 50
Machinery and equipment 2 - 8
Furniture and fixtures 2 - 12
Vehicles 3 - 6
Intangible assets
Intangible assets of the Group primarily consist of development costs, patents, trademarks and software, which are stated at cost less accumulated amortization. Amortization is recognized as an expense based on the straight-line method over the estimated useful life of the assets as follows:
Years
Development costs 5
Industrial property rights (Patents) 10
Industrial property rights (Trademarks) 5
Software 4
Others 30
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets that necessarily takes a substantial period of time to get ready for their intended use or sale are capitalized as part of the cost of the respective assets.
Impairment of assets
When the recoverable amount of an asset is less than its carrying amount due to obsolescence, physical damage or abrupt decline in the market value of the asset, the decline in value, if material, is deducted from the carrying amount and recognized as an asset impairment loss in the current year. Total impairment losses amounting to \6,756,538 thousand recognized in 2009 consisted of \4,230,000 thousand which was attributable to impairment loss on available-for-sale securities (2008: \1,459,230 thousand) and \2,526,538 thousand on property, plant and equipment (2008: \254,765 thousand).
Government subsidy
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
2. Summary of significant accounting policies (cont’d) Discount (premium) on bonds
Discount (premium) on bonds is presented as a direct deduction from (addition to) the nominal value of the bonds and is amortized using the effective-interest-rate method over the life of the bonds.
Severance and retirement benefits
In accordance with the Employee Retirement Benefit Security Act (“ERBSA”) of Korea and the employee benefits policy of the Company and its domestic subsidiaries, employees terminating their employment with at least one year of service are entitled to severance and retirement benefits based on the rates of pay in effect at the time of termination, years of service and certain other factors. The provision is determined based on the amount that would be payable assuming all employees were to terminate their employment as of the reporting date.
The severance and retirement benefits are partly funded through an insurance plan with Samsung Life Insurance. Up to March 1999, the Company had previously prepaid a portion of its severance and retirement benefits obligation to the National Pension Service (“NPS”). The insurance deposits and prepayments are presented as a deduction from the provision for severance and retirement benefits.
Provision for product warranties
The Group accrues warranty reserves for the estimated costs of future repairs and returns, based on the past experience on the levels of repairs and returns. The provision for product warranties is charged to selling and administrative expenses when the goods covered by warranties are sold to customers.
Provisions and contingent liabilities
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The provision is used only for expenditures for which the provision was originally recognized. If the effect of the time value of money is material, provisions are stated at present value.
A contingent liability is disclosed, but not recognized when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
Income taxes
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
2. Summary of significant accounting policies (cont’d) Foreign currency translation
Transactions involving foreign currencies are recorded at the exchange rates prevailing at the time the transactions are made.
Monetary assets and liabilities denominated in foreign currencies are translated into Korean won at the appropriate exchange rates on the statement of financial position date. The resulting unrealized foreign currency translation gains or losses are credited or charged to current operations. Non-monetary items that are re-measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
Leases
A lease is accounted for as either a capital lease or an operating lease. A lease is recognized as a capital lease if it transfers substantially to the Group all the risks and rewards incidental to ownership of the leased asset.
An asset acquired by way of a capital lease arrangement is stated in the statement of financial position at the lower of the fair value or the present value of minimum lease payments at the inception of the lease. The corresponding liability is included in the statement of financial position as a capital lease obligation. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Capitalized lease assets are depreciated in the same manner as other depreciable property, plant and equipment.
Operating lease payments are recognized as an expense on a straight-line basis over the lease term.
Share-based payment transactions
For equity-settled share-based payment transactions, the Company measures the goods or services received, and the corresponding increase in equity at the fair value of the goods or services received or the equity instruments granted over the vesting period. For cash-settled share-based payment transactions, the Company measures the goods or services acquired and the liability incurred at the fair value of the liability, and re-measures the fair value of the liability at each reporting date, with any changes in value recognized in profit or loss for the period. For share-based payment transactions in which the terms of the arrangement provide the supplier of goods or services with a choice of whether the Company settles the transaction in cash or by issuing equity instruments, the Company accounts for that transaction, or the components of that transaction, as a cash-settled share-based payment transaction if, and to the extent that, the Company has incurred a liability to settle in cash (or other assets), or as an equity-settled share-based payment transaction if, and to the extent that, no such liability has been incurred.
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
2. Summary of significant accounting policies (cont’d) Principles of consolidation
The consolidated financial statements comprise the financial statements of Samsung Electro-Mechanics Co., Ltd. and its subsidiaries as of December 31, 2009.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains controls of the subsidiaries.
The investment account of the parent company and the corresponding equity accounts of the subsidiaries are eliminated in consolidation. The excess of the cost of the investment over the Group’s share of the net fair value of the subsidiary’s identifiable assets and liabilities is accounted for as goodwill which is amortized within 20 years using the straight-line method. Conversely, negative goodwill represents the excess of the Group’s share in the net fair value of the subsidiary’s identifiable assets and liabilities over the cost of the investment. Negative goodwill is recorded to the extent of the fair value of acquired non-monetary assets and recognized as income using the straight-line method over the remaining weighted-average useful life of those acquired monetary assets. The amount of negative goodwill in excess of the fair value of acquired non-monetary assets is recognized as income immediately.
The post-acquisition retained earnings and changes in equity of a subsidiary are included in the consolidated financial statements from the date of acquisition or the date when the Group obtains control of a subsidiary. Changes in the Group’s ownership interest in a subsidiary such as those arising from issuance of additional shares by the subsidiary or additional shares acquired by the Group through stock dividend declared by the subsidiary, the difference between the additional cost of investment and the additional share of the fair value of assets and liabilities acquired is accounted for as a capital surplus within equity.
All group balances, income and expenses and unrealized gains and losses resulting from intra-group transactions are eliminated. Unrealized gains or losses arising from sales by the parent to its subsidiaries are fully eliminated and are charged or credited to the equity holders of the parent. Unrealized gains or losses arising from sales by the subsidiaries to the parent or among the subsidiaries are fully eliminated and the minority interests are allocated for their share of the unrealized gains or losses.
Minority interest in a subsidiary is presented as a separate component of equity in the consolidated statement of financial position. Losses are attributed to the minority interest even if that results in a deficit balance, unless the minority interest has a binding agreement of not being able to absorb the full losses, where the excess of such losses will be absorbed by the parent company.
The financial statements of foreign subsidiaries and branches are maintained in the currencies of the countries in which they conduct their operations. In translating their foreign currency financial statements into Korean won, income and expenses are translated at the average exchange rate for the year, and assets and liabilities at the exchange rate prevailing on the reporting date. Equity items are translated using historical exchange rates. Foreign currency translation gains or losses are recorded and presented in other comprehensive income within equity.
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
2. Summary of significant accounting policies (cont’d) United States dollar amounts
The US dollar amounts provided herein represent supplementary information solely for the convenience of the reader. All Korean won amounts of the 2009 and 2008 financial statements are translated to US dollars at US$1:￦1,167.6, the exchange rate in effect on December 31, 2009. Such presentation is not in accordance with accounting principles generally accepted in the Republic of Korea, and should not be construed as a representation that the won amounts shown could be readily converted, realized or settled in US dollars at this or at any other rate.
Significant judgments and accounting estimates
The preparation of financial statements in accordance with Korean GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
3. Restricted deposits
Restricted deposits as of December 31, 2009 and 2008 consist of the following (Korean won in thousands):
Financial
institution 2009 2008 Description
Short-term financial
instruments Woori Bank ￦ 15,723,885 ￦ 16,155,681
Government-sponsored R&D projects Long-term financial instruments Eight banks including Woori Bank 37,000 26,500 Overdraft facilities ￦ 15,760,885 ￦ 16,182,181 4. Inventories
Inventories as of December 31, 2009 and 2008 are as follows (Korean won in thousands):
2009 2008 Merchandises \ 60,471,354 \ 81,873,627 Finished goods 169,436,641 176,887,760 Work in-progress 103,067,395 103,444,735 Components 7,689,196 9,677,104 Raw materials 132,056,192 119,680,323 Supplies 28,592,584 23,930,857 Materials in-transit 13,158,777 26,416,454 514,472,139 541,910,860
Less valuation allowance (29,903,718) (54,770,424)
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008 5. Equity method investments
Investments in equity securities accounted for using the equity method as of December 31, 2009 and 2008 are as follows (Korean won in thousands):
2009 Number of shares Ownership (%) Acquisition cost Proportionate
net asset value Book value Samsung Portugal Produtos
Electro-Mechanicos S.A. 1,304,389 75.85 \ 8,459,180 \ - \ - Samsung Electro-Mechanics Indonesia, PT. 3,600 100.00 8,765,980 3,071,549 3,071,869 Samsung Electro-Mechanics (Shenzen) Co., Ltd. - 100.00 139,343 991,965 991,965 Samsung Electro-Mechanics Hungary Inc. 13,800 100.00 16,947,400 4,708,479 4,706,058
Calamba Premier Realty
Corp. 398 39.80 1,346 694,718 694,718 Stemco Co., Ltd. 1,440,000 30.00 7,200,000 14,734,901 14,734,901 Samsung Economic Research Institute 2,856,000 23.80 14,280,000 20,895,192 20,895,192 e-Samsung International Co., Ltd. 900,000 11.25 3,648,600 6,825,240 6,825,240 \ 59,441,849 \ 51,922,044 \ 51,919,943 2008 Number of shares Ownership (%) Acquisition cost Proportionate
net asset value Book value Samsung Portugal Produtos
Electro-Mechanicos S.A. 1,304,389 75.85 \ 8,459,180 \ - \ - Samsung Electro-Mechanics Indonesia, PT. 3,600 100.00 8,765,980 3,394,983 3,396,438 Samsung Electro-Mechanics (Shenzen) Co., Ltd. - 100.00 139,343 586,351 586,351 Stemco Co., Ltd. 1,440,000 30.00 7,200,000 9,657,762 9,657,762 Samsung Economic Research Institute 2,856,000 23.80 14,280,000 20,402,101 20,402,101 e-Samsung International Co., Ltd. 900,000 11.25 3,648,600 5,857,380 5,857,380 \ 42,493,103 \ 39,898,577 \ 39,900,032
The Group equity accounted for its share in the earnings of e-Samsung International Co., Ltd. as the Group has significant influence over the investee despite a less than 20% ownership interest. The investment in Samsung Portugal Produtos Electro-Mechanicos, S.A. has been fully impaired as a result of the probable contingent loss from the unauthorized forward exchange contracts (Note 12). As of December 31, 2009, Samsung Electro-Mechanics Indonesia, PT. is under liquidation.
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
5. Equity method investments (cont’d)
The summary of financial position of the investees as of December 31, 2009 and 2008, and the results of their operations for the years then ended, are presented as follows (Korean won in thousands):
2009
Total assets Total liabilities Sales Net income (loss)
Samsung Electro-Mechanics Indonesia, PT. \ 3,074,336 \ 2,787 \ - \ (585,781) Samsung Electro-Mechanics (Shenzen) Co., Ltd. 2,214,893 1,222,927 7,653,824 488,702 Samsung Electro-Mechanics Hungary Inc. 8,108,015 3,399,536 915,415 99,241
Calamba Premier Realty
Corp. 8,592,259 6,846,737 860,480 15,317 Stemco Co., Ltd. 149,000,444 99,884,106 182,436,096 16,923,797 Samsung Economic Research Institute 114,180,079 26,385,153 108,822,981 70,810 e-Samsung International Co., Ltd. 63,122,361 2,453,561 - 20,184,556 \ 348,292,387 \ 140,194,807 \ 300,688,796 \ 37,196,642 2008
Total assets Total liabilities Sales Net income (loss)
Samsung Electro-Mechanics Indonesia, PT. \ 3,396,569 \ 1,586 \ - \ 433,651 Samsung Electro-Mechanics (Shenzen) Co., Ltd. 1,242,192 655,842 5,548,154 143,553 Stemco Co., Ltd. 135,100,799 102,908,258 119,997,738 (10,571,976) Samsung Economic Research Institute 111,930,015 26,206,899 109,209,281 42,209 e-Samsung International Co., Ltd. 59,079,564 7,013,969 - 3,327,076 \ 310,749,139 \ 136,786,554 \ 234,755,173 \ (6,625,487)
The application of equity method of accounting for Stemco Co., Ltd., Samsung Economic Research Institute and e-Samsung International Co., Ltd. was performed based on the investees’ most recent available unaudited financial statements. In connection with those unaudited financial statements, the Group used financial statements signed by the management of those entities.
The elimination of unrealized gains arising from inter-company transactions for the years ended December 31, 2009 and 2008 are as follows (Korean won in thousands):
2009 2008
Property, plant and equipment
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
5. Equity method investments (cont’d)
The details of changes in carrying amount of equity method investments for the years ended December 31, 2009 and 2008 are as follows (Korean won in thousands):
2009 Jan. 1, 2009 Equity in earnings of investee Equity in losses of investee Share of changes in other comprehensive
income Dividends Others Dec. 31, 2009 Samsung Electro- Mechanics Indonesia PT. \ 3,396,438 \ - \ (586,916) \ 262,347 \ - \ - \ 3,071,869 Samsung Electro-Mechanics (Shenzen) Co., Ltd. 586,351 488,702 - (83,088) - - 991,965 Samsung Electro-Mechanics Hungary Inc. 4,886,486 106,477 - (286,905) - - 4,706,058 Calamba Premier Realty
Corp. 721,642 6,096 - (33,020) - - 694,718 Stemco Co., Ltd. 9,657,762 5,077,139 - - - - 14,734,901 Samsung Economic Research Institute 20,402,101 16,853 - 476,238 - - 20,895,192 e-Samsung International Co., Ltd. 5,857,380 2,270,763 - (1,302,903) - - 6,825,240 \ 45,508,160 \ 7,966,030 \ (586,916) \ (967,331) \ - \ - \ 51,919,943 2008 Jan. 1, 2008 Equity in earnings of investee Equity in losses of investee Share of changes in other comprehensiv
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
6. Available-for-sale securities and held-to-maturity securities
Available-for-sale securities as of December 31, 2009 and 2008 consist of the following (Korean won in thousands):
2009 2008
Acquisition
cost Fair value
Book value
Unrealized gain
Impairment loss Book value Up to 2008 2009 Marketable securities \ 223,778,709 \ 390,410,980 \ 390,410,980 \ 166,632,271 \ - \ - \ 289,156,168 Non-marketable securities 173,175,229 604,492,076 497,085,960 337,054,348 (8,913,617) (4,230,000) 160,031,612 Other investments 12,668,283 17,100,584 12,831,244 162,961 - - 20,414,475 \ 409,622,221 \1,012,003,640 \ 900,328,184 \ 503,849,580 \ (8,913,617) \(4,230,000) \ 469,602,255
Marketable securities as of December 31, 2009 and 2008 are as follows (Korean won in thousands):
2009 2008 Number of shares Ownership (%) Acquisition
cost Fair value Book value
Unrealized
gain Book value Samsung Heavy
Industries Co., Ltd. 5,508,563 2.38 \ 36,152,902 \133,307,225 \133,307,225 \ 97,154,323 \124,493,523 Samsung Fine
Chemicals Co., Ltd. 66,911 0.26 2,890,149 3,148,163 3,148,163 258,014 2,572,728 Samsung Card Co., Ltd. 4,416,619 3.59 184,735,658 253,955,592 253,955,592 69,219,934 162,089,917 \223,778,709 \390,410,980 \390,410,980 \166,632,271 \289,156,168
The unrealized gain of Samsung Card Co., Ltd. includes \35,712,219 thousand of equity in earnings when the investment was accounted for using equity method of accounting in the previous years.
Non-marketable securities as of December 31, 2009 and 2008 are as follows (Korean won in thousands): 2009 2008 Number of shares Ownership (%) Acquisition cost Proportion-ate net asset
value Book value
Samsung Electro-Mechanics Co., Ltd.
Notes to consolidated financial statements
December 31, 2009 and 2008
6. Available-for-sale securities and held-to-maturity securities (cont’d)
2009 2008 Number of shares Ownership (%) Acquisition cost Proportion-ate net asset
value Book value Book value
Impairment loss Up to 2008 2009 Samsung Life Insurance Co., Ltd. 120,638 0.60 84,446,600 65,432,298 84,446,600 - - 84,446,600 Samsung Venture Investment Co., Ltd. 1,020,000 17.00 5,100,000 6,737,447 5,100,000 - - 5,100,000 Imarket Korea 360,000 13.36 1,800,000 10,423,292 1,800,000 - - 1,800,000 Cosmotech Co., Ltd 2,338,460 8.65 1,459,230 - - (1,459,230) - - KMAC fund 8,000 1.00 40,000 143,970 40,000 - - 40,000 Gmate Co., Ltd. 12,412 4.35 300,000 - - (300,000) - - Korea Orbcom Ltd. 16,000 3.42 600,000 - - (600,000) - - Ceratron Co., Ltd. 40,200 1.26 402,000 23,618 - (402,000) - - Bluebird Soft Inc. 50,000 8.04 3,642,500 1,343,035 820,710 (2,821,790) - 820,710 LINEO 340,000 0.68 1,140,156 - - (1,140,156) - - DTI 333,333 2.77 564,799 2,213 9,581 (555,218) - 9,581 IML 666,667 3.23 1,114,600 1,245,396 5,524 (1,109,076) - 5,524 LB Semicon Co., Ltd. 23,333 0.07 500,000 10,097 - (500,000) - - Skylife Co., Ltd. 5,400 0.00 29,700 11,200 3,553 (26,147) - 3,553 Inkel Co., Ltd. 61 0.00 305 442 305 - - 305 Cosmolink Co.,Ltd. 70,500 11.60 4,230,000 - - - (4,230,000) - \173,175,229 \604,492,076 \497,085,960 \(8,913,617) \(4,230,000) \160,031,612
(*) Among the Group’s non-marketable securities, the valuation of investments in Samsung SDS Co., Ltd. and Samsung Network Co., Ltd. were performed by an independent professional valuer. The professional valuer calculated the fair values using the discount future cash flows and competitor’s average stock price valuation models.
