KGAAP_Illustrative_Financial_Statements_K Turbo
KOREA TURBO MACHINE. INC Appendix. Financial Statements ( B/S, I/S )
December 31, 2007, 2006
( 2008 year's F/S is Provisional )
Page(s) Financial Statements
1. Balance Sheets ..............................................................................................
2.Statements of Income ......................................................................................
3.Appendix to the Financial Statements .............................................................
(in millions of Korean won) 2008 2007 2006
Assets
Current assets
Cash and cash equivalents ?577 ?1,137 ?1,482 Short-term financial instruments 510 565 3,230 Short-term investments - 1,000 - Trade accounts and notes receivable,
net 6,513 6,649 6,836 Advance payments 207 20 120 Inventories, net 8,260 6,455 5,339 Others 164 238 332
Total current
16,231 16,064 17,339
assets
Long-term investments 2 2 2 Property, plant and equipment, net 1,188 1,442 1,336 Intangible assets, net 9,112 6,468 3,924 Other non-current assets 1,808 1,825 1,861
Total other assets 12,110 9,737 7,123
Total assets ?28,341 ?25,801 ?24,462 Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings ?7,585 ?6,303 ?5,000 Account payable 1,319 463 873 Non-trade payables 631 170 246 Advances from customers 131 309 259 Current portion of long-term borrowings 875 371 661 Others 47 45 22
Total current
10,588 7,661 7,061
liabilities
Long-term borrowings 735 1,209 847 Long-term non-trade payables 280 307 350 Accrued severance benefits, net 894 857 657
Total liabilities 12,497 10,034 8,915
(in millions of Korean won) 2008 2007 2006 Shareholders' equity
Capital stock
Common stock ?3,632 ?3,632 ?3,632 Capital surplus
Paid-in capital in excess of par value 14,220 14,220 14,220
Other capital surplus 30 30 30 Capital adjustments
Treasury stock (155) (80) (23)
Others - - - Retained earnings
Unappropriated retained earnings (1,883) (2,035) (2,312)
Total shareholders’ equity15,844 15,767 15,547
Total liabilities and
?28,341 ?25,801 ?24,462
shareholders' equity
(in millions of Korean won) 2008 2007 2006
Sales ?11,427 ?12,599 ?9,103 Cost of sales 4,722 5,795 6,187 Gross profit 6,705 6,804 2,916 Selling and administrative expenses
5,920 6,140 6,870 Operating income 785 664 -3,954 Non-operating income
Interest income 85 116 190 Gain on foreign currency transaction 17 45 3 Gain on foreign currency translation 5 5 Reversal of the allowance for bad debts 5 18 0 Others 111 123 37
218 307 235 Non-operating expenses
Interest expenses 792 622 473 Loss on foreign currency transaction 9 11 12 Loss on foreign currency translation 4 4 Loss on disposal of trading securities 1
Loss on disposal of property, plant and equipment 2 2 Others 43 59 2
849 694 493 Income before income taxes 154 277 -4,212 Income tax expenses 1 0 0
Net income ?153 ?277 ?-4,212
1. Organization
KOREA TURBO MACHINE. INC (the “Company”) was established on December 8, 1999, under the Commercial Law of the Republic of Korea, to engage in turbo-blow,
compressor manufacturing based on technology of airbearing and high-speed motor.
The Company’s operations are headquartered in Cheongwon-gun, Chungcheongbuk-do of the Republic of Korea, and its manufacturing facilities are located in too.
2. Summary of Significant Accounting Policies
Basis of Presentation
The Company maintains its accounting records in Korean won and prepares statutory financial statements in Korean language (Hangul) in conformity with the accounting
principles generally accepted in the Republic of Korea. Certain accounting principles applied by the Company 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 financial statements are intended for use by those who are informed about Korean accounting principles and practices. The
accompanying financial statements have been condensed, restructured and translated into English from the Korean language financial statements.
The following is a summary of significant accounting policies followed by the Company in the preparation of its financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.
In 2007, the Company adopted the following new Statements of Korean Financial
Accounting Standards (SKFAS) issued by the Korea Accounting Standards Board:
?SKFAS No. 5, Property, Plant and Equipment (As Revised)
?SKFAS No. 20, Related Party Disclosures (As Revised)
Revenue Recognition
Revenue is the gross inflow of economic benefits arising in the ordinary course of the Company’s activities and is measured as the fair value of the consideration received or receivable for the sale of goods and services in the said ordinary course of the
Company’s activities. Revenue is shown as net of value-added tax, sales discounts and sales returns. The Company recognizes revenue when the amount of revenue can be reliably measured, and it is probable that future economic benefits will flow into the
Company.
Revenue from the sale of goods are recognized when the significant risks and rewards of ownership of goods are transferred to the buyer. Revenue from the rendering of services is recognized under the percentage-of-completion method, under which revenue is generally recognized based on the costs incurred to date as a percentage of the total estimated costs to be incurred.
Government Grants
Government grants received, which are to be repaid, are recorded as liability, while grants without obligation to be repaid are offset against cost of assets purchased with such grants. Grants received for a specific purpose are offset against the specific expense for which it was granted, and other grants are recorded as a gain for the period. Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks, and financial instruments with maturity of three months or less at the time of purchase. These financial instruments are readily convertible into cash without significant transaction costs and bear low risks from changes in value due to interest rate fluctuations.
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts and notes receivable. Allowances are calculated based on the estimates made through a reasonable and objective method.
Inventories
The quantities of inventories are determined using the perpetual method and periodic inventory count, while the costs of inventories are determined using the moving-weighted average method. Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expense. Replacement cost is used for the estimate of net realizable value of raw materials. If, however, the circumstances which caused the valuation loss cease to exist, the valuation loss is reversed up to the original carrying amount before valuation. The said reversal is deducted from cost of sales.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, which includes acquisition cost, production cost and other costs required to prepare the asset for its intended use. It also includes the present value of the estimated cost of dismantling and removing the asset, and restoring the site after the termination of the asset's useful life, provided it meets the criteria for recognition of provisions.
Property, plant and equipment are stated net of accumulated depreciation calculated based on the following depreciation method and estimated useful lives:
Estimated Useful Lives Depreciation Method Building 15 years Straight-line method
Machinery 5 years Straight-rate method Expenditures incurred after the acquisition or completion of assets are capitalized if they enhance the value of the related assets over their recently appraised value or extend the useful life of the related assets. Routine maintenance and repairs are charged to expense as incurred.
Intangible Assets
Intangible assets are stated at cost, which includes acquisition cost, production cost and other costs required to prepare the asset for its intended use. Intangible assets are stated net of accumulated amortization calculated based on using the following depreciation method and estimated useful lives:
Estimated Useful Lives Depreciation
Methods Development Cost 10 years Straight-line method
10 years Straight-line method
Industrial property
rights
Development costs which are individually identifiable and directly related to a new
technology or to new products which carry probable future benefits are capitalized as intangible assets. Amortization of development cost begins at the commencement of the commercial production of the related products or use of the related technology.
Impairment of Assets
When the book value of an asset is significantly greater than its recoverable value due to obsolescence, physical damage or an abrupt decline in the market value of the asset, the said decline in value is deducted from the book value to agree with recoverable amount and is recognized as an asset impairment loss for the period. When the recoverable value subsequently exceeds the book value, the impairment amount is recognized as gain for the period to the extent that the revised book value does not exceed the book value that would have been recorded without the impairment.
Accrued Severance Benefits
Employees and directors with at least one year of service are entitled to receive a lump-sum payment upon termination of their employment with the Company based on their length of service and rate of pay at the time of termination. Accrued severance benefits represent the amount which would be payable assuming all eligible employees and
directors were to terminate their employment as of the balance sheet date.
Provisions and Contingent Liabilities
When there is a probability that an outflow of economic benefits will occur due to a
present obligation resulting from a past event, and whose amount is reasonably
estimable, a corresponding amount of provision is recognized in the financial statements.
However, when such outflow is dependent upon a future event, is not certain to occur, or cannot be reliably estimated, a disclosure regarding the contingent liability is made in the notes to the financial statements.
Translation of Assets and Liabilities Denominated in Foreign Currencies
Monetary assets and liabilities denominated in foreign currencies are translated into Korean won at the rates of exchange in effect at the balance sheet date, and the resulting translation gains and losses are recognized in current operations.
3. Trade Accounts and Notes Receivable
(in millions of Korean won)2007 2006
Accounts receivable ? 6,716 ? 6,921
Less: Allowance for doubtful
accounts (67) (85)
? 6,649 ? 6,836
4. Inventories
(in millions of Korean won)2007 2006
Merchandise ? 700 ? 1,161
Finished goods 0 0
Work-in-process 925 62
Raw materials 4,830 4,116
Stored goods 0 0
? 6,455 ? 5,339
Inventories are insured against fire and other casualty losses for up to ?3,589 million as of December 31, 2007 .
5. Property, Plant and Equipment
(in millions of Korean won) Buildings Equipment Structures Others Total (2007)
Balance as of January 1, ? 431 ? 362 ? 283 ? 260 ? 1,336 Acquisition 288 158 14 116 577 Disposal (18) (4) (22) Depreciation (61) (217) (21) (151) (451) Balance as of December31 ? 659 ? 303 ? 259 ? 155,34 ? 1,442
6. Intangible Assets
(in millions of
Korean won)Industrial
property
Develop-
ment cost Others Total
Balance as of January1
? 109 ? 3,769 ? 46 ? 3,924 Aquisition 6 2,980 37 3,017 Disposal - (202) (202) Amortization (28) (230) (19) (277) Balance as of
December 31 ? 87 ? 6,316 ? 64 ? 6,468 7. Borrowings
Long-term Borrowings
(in millions
of Korean won) Bank
Interest
rate
2007 2006
Payment
schedule at
12/31/2007
Strategic
loans Hana 3.92~5.88% ? 206 ? 423 Installment for 3 years
Small
Business
Corporation 4.75% 75 327 Installment for 3 years after 2 yrs
General loans
Industrial
Bank of
Korea
7.70%
4.0~
5.85%
450
848 758
Lump sum
payment
after 2 yrs
Installment
for 5 years
after 3 yrs
1,580 1,508
Less: Current portion (371) (661)
? 1,209 ? 847
The long-term borrowings above are secured by short-term investments, available-for-sale securities and intangible assets .
8. Accrued Severance Benefits
(in millions of Korean won) 2007 2006
Beginning balance ? 657 ? 635
Increase 333 64
Payment 132 41
Ending balance 857 657
Accrued severance benefits ? 857 ? 657
As of December 31, 2007, the Company estimates severance payable to all employees to be ?857 million (2006: ?657 million) and records the corresponding amount as accrued severance benefits.
9. Capital Stock
Details of changes in the Company’s capital stock are as follows:
(in millions of
Korean won) Number of
shares
(in
thousands)
Common
Stock
Paid-in
Capital in
excess of
par value Total
2007. 1. 1
7,263 ? 3,632 ?14,250 ? 17 ,882
2007. 12. 31 7,263 ? 3,632 ? 14,250 ? 17,882
The Company is authorized to issue 50 million shares with the par value per share of ?500. As of December 31, 2007, the Company has issued 7.26 million shares of
common stock.
10. Sales
(in millions of Korean won) 2007 2006
Sales - trading ? 192 ? 224
Sales –sale of manufactured
goods
12,006 8,867 Sales – services
Sales – others 401
12
Total sales 12,599 9,103
Sales discounts and others
Net sales ? 12,599 ? 9,103
11. Cost of Sales
(in millions of Korean won) 2007 2006
Cost of goods sold
Inventory, beginning ? 0 ? 51 Net purchase 137 173 Transfer from other accounts
Transfer to other accounts (0) (0) Inventory, ending (0) (0)
137 224 Cost of manufacture
Inventory beginning 1,161 301 Manufacturing cost for the year 5,430 6,823 Transfer from other accounts
Transfer to other accounts (434) (0) Inventory, ending (700) (1,161)
5,457 5,963 Cost of service 201
Cost of sales ? 5,795 ? 6,187
12. Selling and Administrative Expenses
(in millions of Korean won) 2007 2006
Salaries and wages ? 1,014 ? 1,063 Severance benefits 35 Severance pay 166 0 Employee fringe benefits 219 10 Rent
Entertainment 7 7 Depreciation 51 43
Amortization Service fees Sales commitions Repairs expenses
6
240
2,291
614
59
315
1,928
631
Taxes and dues 15 18 Advertising 129 81 Research expense
General development expense 446 343 Bad debt expense 1,487 Others -
? 6,140 ? 6,869
13. Value Added Information
(in millions of Korean won) 2007 2006
Salaries and wages ? 2,670 ? 2,473 Severance benefits 290 64 Employee fringe benefits 355 254 Rent 63 26 Depreciation 727 521 Taxes and dues 21 22
? 4,126 ? 3,359