Audit Report: Hyundai Commercial 2Q2011

Hyundai Commercial, Inc. and
Subsidiaries
Interim Consolidated Financial Statements
June 30, 2011

Hyundai Commercial, Inc. and Subsidiaries
Index
June 30, 2011

Report on Review of Interim Financial Statements ..........................................................................1-2

Interim Consolidated Financial Statements

Interim Consolidated Statements of Financial Position .........................................................................3-5

Interim Consolidated Statements of Comprehensive Income................................................................6-7

Interim Consolidated Statements of Changes in Shareholders’ Equity ................................................ 8-9

Interim Consolidated Statements of Cash Flows ....................................................................................10

Notes to the Interim Consolidated Financial Statements...................................................................11-61

Report on Review of Interim Financial Statements

To the Shareholders and Board of Directors of
Hyundai Commercial, Inc.

Reviewed Financial Statements
We have reviewed the accompanying interim consolidated financial statements of Hyundai
Commercial, Inc. (the Company) and subsidiaries. These financial statements consist of the
consolidated statement of financial position of the Company and subsidiaries as of June 30,
2011, and the related consolidated statements of comprehensive income for the three-month
and the six-month periods ended June 30, 2011, and statements of changes in equity and
cash flows for the six-month period ended June 30, 2011, and a summary of significant
accounting policies and other explanatory notes, expressed in Korean won.

Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these interim
consolidated financial statements in accordance with the International Financial Reporting
Standards as adopted by the Republic of Korea (Korean IFRS) 1034, Interim Financial
Reporting, and for such internal control as management determines is necessary to enable
the preparation of interim consolidated financial statements that are free from material
misstatement, whether due to fraud or error.

Auditor's Responsibility
Our responsibility is to issue a report on these interim consolidated financial statements based
on our review.

We conducted our review in accordance with the quarterly and semi-annual review standards
established by the Securities and Futures Commission of the Republic of Korea. A review of
interim financial information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance with auditing
standards generally accepted in the Republic of Korea and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.

1

Conclusion
Based on our review, nothing has come to our attention that causes us to believe the
accompanying interim consolidated financial statements do not present fairly, in all material
respects, in accordance with the Korean IFRS 1034, Interim Financial Reporting.

Emphasis of Matter
Without qualifying our opinion, as mentioned in Note 2, we draw attention to the fact that
these interim consolidated financial statements are prepared in accordance with Korean IFRS
and the interpretations which are effective as of this report date. Therefore, there may be
changes in the Korean IFRS and related interpretations adopted in the preparation of these
consolidated financial statements when Company prepares its first full Korean IFRS financial
statements.

Others
The consolidated statement of financial position as of December 31, 2010, and the related
consolidated statements of comprehensive income for the three-month and the six-month
periods ended June 30, 2010, and statements of changes in equity and cash flows for the six-
month period ended June 30, 2010, presented herein for comparative purposes, were not
reviewed.

Review standards and their application in practice vary among countries. The procedures and
practices used in the Republic of Korea to review such interim consolidated financial
statements may differ from those generally accepted and applied in other countries.
Accordingly, this report is for use by those who are informed about Korean review standards
and their application in practice.

Seoul, Korea
August 25, 2011

This report is effective as of August 25, 2011, the review report date. Certain subsequent
events or circumstances, which may occur between the review report date and the time of
reading this report, could have a material impact on the accompanying interim consolidated
financial statements and notes thereto. Accordingly, the readers of the review report should
understand that there is a possibility that the above review report may have to be revised to
reflect the impact of such subsequent events or circumstances, if any.

2

Interim Consolidated Statements of Financial Position
June 30, 2011 and December 31, 2010

(In Korean won)
June 30, December 31,
2011 2010
(Non-reviewed)
Assets
Cash and deposits
Cash and cash equivalents (Note 24) 164,895,256,232 99,938,403,013
Deposits (Note 4) 11,500,000 11,500,000
164,906,756,232 99,949,903,013
Securities (Note 5)
Available-for-sale securities 19,245,582,500 17,657,945,000
Equity method investment 141,404,313,845 133,160,973,077
160,649,896,345 150,818,918,077

Loans receivable (Notes 6 and 7)
Factoring 859,634,492 1,185,464,975
Allowance for doubtful accounts (11,229,125) (15,550,313)
Loans 2,205,761,749,704 1,789,237,279,462
Allowance for doubtful accounts (16,922,573,593) (12,780,139,160)
2,189,687,581,478 1,777,627,054,964

Installment financial assets (Notes 6 and 7)
Auto installment financing receivables 453,182,771,031 487,175,195,698
Allowance for doubtful accounts (3,366,916,393) (3,055,399,069)
Durable goods installment financing receivables 80,058,055,945 81,485,373,499
529,319,259,300 565,051,542,230

Lease receivables (Notes 6, 7 and 9) 63,491,720,805 40,950,640,964

Property and equipment (Note 10)
Vehicles 144,561,065 119,066,527
Fixtures and furniture 1,713,612,376 1,986,277,290
Others 410,999,664 410,999,664
2,269,173,105 2,516,343,481

3


(In Korean won)
2011 2010
(Non-reviewed)
Other assets
Intangible assets (Note 11) ￦ 2,780,325,178 ￦ 2,481,402,934
Non-trade receivables 37,147,569,939 39,739,949,691
Accrued revenues 15,400,435,507 13,110,214,431
Advance payments 246,330,329 770,372,440
Prepaid expenses 4,204,873,165 8,350,859,781
Leasehold deposits 9,101,650,774 7,233,368,763
Derivative assets (Note 17) - 6,151,267,007
Others 4,709,566,420 5,319,566,420
73,203,274,982 82,784,027,145
Total assets ￦3,183,527,662,247 ￦2,719,698,429,874

Liabilities and Shareholders’ Equity
Borrowings
Borrowings (Note 12) ￦ 817,409,986,992 ￦ 774,749,000,000
Debentures (Note 13) 1,703,378,977,128 1,504,362,479,869
Securitized debts (Note 14) 379,204,999,136 199,530,274,091
2,899,993,963,256 2,478,641,753,960
Other liabilities
Non-trade payables 5,049,421,358 4,345,884,784
Accrued expenses 18,383,954,957 22,977,718,513
Unearned revenue 4,637,289,868 2,897,710,421
Advances 96,122,929 216,279,513
Withholdings 2,936,942,216 2,809,860,961
Accrued income taxes 9,693,915,619 10,125,301,190
Defined benefit liability (Note 15) 2,635,533,361 1,681,174,959
Leasehold deposits received 9,734,860,095 2,824,085,004
Deferred income tax liabilities (Note 16) 12,708,808,816 8,472,287,159
Derivative liabilities (Note 17) 5,668,407,164 4,088,617,272
71,545,256,383 60,438,919,776
Total liabilities 2,971,539,219,639 2,539,080,673,736

4


(In Korean won)
2011 2010
(Non-reviewed)
Shareholders' equity
Common stock (Notes 1 and 18) ￦100,000,000,000 ￦100,000,000,000
Accumulated other comprehensive income and
expenses (Note 23)
Loss on valuation of derivatives (892,637,586) (1,662,559,500)
Gain on valuation of available-for-sale
6,016,687,482 2,180,056,816
securities
Accumulated comprehensive income of equity
(1,703,960,565) (1,379,778,772)
method investees
3,420,089,331 (862,281,456)
Retained earnings (Note 18) 108,548,533,277 81,470,127,594
Non-controlling interests 19,820,000 9,910,000
Total shareholders' equity 211,988,442,608 180,617,756,138
Total liabilities and shareholders' equity ￦3,183,527,662,247 ￦2,719,698,429,874

The accompanying notes are an integral part of these interim consolidated financial statements.

5

Interim Consolidated Statements of Comprehensive Income
Three-Month and Six-Month Periods ended June 30, 2011 and 2010

(In Korean won)
Three months Six months
2011 2010 2011 2010
(Non-reviewed) (Non-reviewed)
Operating revenue
Interest income ￦1,279,969,441 ￦ 661,268,689 ￦2,387,169,557 ￦1,074,705,465
Income on loans 59,945,849,276 35,809,768,908 113,805,600,081 65,858,728,797
Income on installment financial
15,401,001,549 16,528,814,530 31,475,076,372 32,101,601,256
receivables
Income on leases 1,092,108,442 962,744,369 2,335,488,860 2,024,004,098
Gain on disposal of loans 653,969,795 379,761,240 1,117,030,921 424,975,973
Gain on foreign currency transactions
Gain on foreign currency
3,348,000,000 - 3,348,000,000 -
transactions
Gain on foreign exchange
- - 2,186,000,000 -
translation
3,348,000,000 - 5,534,000,000 -
Dividend income - - 300,000,000 -
Other operating income
Gain on valuation of derivatives 825,500,000 4,770,000,000 - 2,562,000,000
Others 416,170,031 291,131,587 754,483,806 560,862,830
1,241,670,031 5,061,131,587 754,483,806 3,122,862,830
Total operating revenue 82,962,568,534 59,403,489,323 157,708,849,597 104,606,878,419

Operating expenses
Interest expenses 36,938,859,569 26,153,993,436 70,920,446,952 49,685,394,262
Bad debts expense (Note 7) 5,817,998,892 1,776,906,611 10,960,116,735 2,782,210,661
Loss on disposal of loans 148,596,245 349,846,215 286,474,469 655,408,600
Loss on foreign transactions
Loss on foreign currency
346 - 1,962 -
transactions
Loss on foreign exchange
825,500,000 4,770,000,000 - 2,562,000,000
translation
825,500,346 4,770,000,000 1,962 2,562,000,000
General and administrative expenses
13,278,632,714 11,666,031,790 27,065,419,592 20,615,512,969
(Note 21)
Other operating expenses
Loss on valuation of derivatives - - 2,186,000,000 -
Loss on derivatives transactions 3,348,000,000 - 3,348,000,000 -
Others 1,123,744,947 731,129,226 1,549,202,834 921,668,365
4,471,744,947 731,129,226 7,083,202,834 921,668,365
Total operating expenses 61,481,332,713 45,447,907,278 116,315,662,544 77,222,194,857

Operating income 21,481,235,821 13,955,582,045 41,393,187,053 27,384,683,562

6

Interim Consolidated Statements of Comprehensive Income
Three-Month and Six-Month Periods ended June 30, 2011 and 2010

(In Korean won)
2011 2010 2011 2010
(Non-reviewed) (Non-reviewed)
Non-operating income
Gain on equity method valuation
￦ 4,557,764,212 ￦ 3,810,931,304 ￦ 8,660,056,384 ￦ 7,610,947,725
(Note 5)

Non-operating expenses
Donations - - - 1,197,915

Income before income taxes 26,039,000,033 17,766,513,349 50,053,243,437 34,994,433,372

Income tax expense (Note 16) 6,365,741,803 4,270,843,376 12,974,837,754 8,461,294,375

Net income ￦19,673,258,230 ￦13,495,669,973 ￦37,078,405,683 ￦26,533,138,997

Net income attributable to:
Owners of the parent 19,673,258,230 13,495,669,973 37,078,405,683 26,533,138,997
Non-controlling interests - - - -
19,673,258,230 13,495,669,973 37,078,405,683 26,533,138,997

Other comprehensive income,
net of income taxes (Note 23)
Gain (Loss) on valuation of
(102,132,583) 297,598,074 769,921,914 76,114,849
derivatives
Gain(Loss) on valuation of
available-for-sale financial (1,230,487,830) (245,700,000) 3,836,630,666 (128,700,000)
securities
Other comprehensive income of
(305,379,086) (465,831,660) (324,181,793) (140,948,079)
equity method investees
(1,637,999,499) (413,933,586) 4,282,370,787 (193,533,230)

Total comprehensive income ￦18,035,258,731 ￦13,081,736,387 ￦41,360,776,470 ￦26,339,605,767

Total comprehensive income
attributable to:
Owners of the parent 18,035,258,731 13,081,736,387 41,360,776,470 26,339,605,767
Non-controlling interests - - - -
18,035,258,731 13,081,736,387 41,360,776,470 26,339,605,767

Earnings per share attributable to
the ordinary equity holders of the
Parent Company (Note 22)
Basic earnings per
￦ 984 ￦ 675 ￦ 1,854 ￦ 1,327
share (Note 22)


7

Interim Consolidated Statements of Changes in Shareholders’ Equity
Six-Month Periods ended June 30, 2011 and 2010

Accumulated Total
(In Korean won) other attributable to Non-
comprehensive
Capital income and Retained owners of the controlling
Capital stock surplus expenses earnings parent interests Total equity
Balances as of January 1, 2010 100,000,000,000 (663,810,140) (1,931,396,310) 25,005,933,366 122,410,726,916 - 122,410,726,916
Net income - - - 26,533,138,997 26,533,138,997 - 26,533,138,997
Other comprehensive income
Gain on valuation of derivatives - - 76,114,849 - 76,114,849 - 76,114,849
Loss on valuation of available-for-
- - (128,700,000) - (128,700,000) - (128,700,000)
sale securities
- - (140,948,079) - (140,948,079) - (140,948,079)
equity method investee
Total comprehensive income - - (193,533,230) 26,533,138,997 26,339,605,767 - 26,339,605,767
Transactions with owners
Discount on stock issuance - 663,810,140 - (663,810,140) - - -
Establishment of special purpose
- - - - - 9,910,000 9,910,000
entity
Other - - - (11,510,884) (11,510,884) - (11,510,884)
Total transactions with owners - 663,810,140 - (675,321,024) (11,510,884) 9,910,000 (1,600,884)
Balances as of June 30, 2010
(Non-reviewed) 100,000,000,000 - (2,124,929,540) 50,863,751,339 148,738,821,799 9,910,000 148,748,731,799

8

Interim Consolidated Statements of Changes in Shareholders’ Equity

Accumulated Total
(In Korean won) other attributable to Non-
comprehensive
Capital income and Retained owners of the controlling
Capital stock surplus expenses earnings parent interests Total equity
Balances as of January 1, 2011 100,000,000,000 - (862,281,456) 81,470,127,594 180,607,846,138 9,910,000 180,617,756,138
Net income - - - 37,078,405,683 37,078,405,683 - 37,078,405,683
Other comprehensive income
Gain on valuation of derivatives - - 769,921,914 - 769,921,914 - 769,921,914
Gain on valuation of available-for-
- - 3,836,630,666 - 3,836,630,666 - 3,836,630,666
sale securities
- - (324,181,793) - (324,181,793) - (324,181,793)
equity method investee
Total comprehensive income - - 4,282,370,787 37,078,405,683 41,360,776,470 - 41,360,776,470
Transactions with owners
Establishment of special purpose
- - - - - 9,910,000 9,910,000
entity
Dividends - - - (10,000,000,000) (10,000,000,000) - (10,000,000,000)
Total transactions with owners - - - (10,000,000,000) (10,000,000,000) 9,910,000 (9,990,090,000)
Balances as of June 30, 2011 100,000,000,000 - 3,420,089,331 108,548,533,277 211,968,622,608 19,820,000 211,988,442,608


9

Interim Consolidated Statements of Cash Flows

(In Korean won)
2011 2010
(Non-reviewed)
Cash flows from operating activities
Cash generated from operations (Note 24) (275,138,668,439) (402,151,289,248)
Interest received 2,537,128,759 794,840,631
Interest paid (68,918,870,047) (47,777,377,333)
Dividends received 300,000,000 -
Income taxes paid (10,358,293,801) (3,081,958,436)
Net cash used in operations (351,578,703,528) (452,215,784,386)

Cash flows from investing activities
Dividends from equity method investments - 5,778,254,300
Disposal of vehicles 27,020,000 -
Acquisition of vehicles (79,715,188) -
Acquisition of fixtures and furniture (416,747,741) (159,788,993)
Acquisition of intangible assets (85,415,316) (138,658,420)
Decrease in leasehold deposits - 29,532,250
Increase in leasehold deposits (2,161,847,000) (152,900,000)
Disposal of other investment assets - 25,000,000
Net cash provided by(used in) investing activities (2,716,705,245) 5,381,439,137

Cash flows from financing activities
Proceeds from borrowings 525,939,158,071 696,400,000,000
Repayments of borrowings (483,278,171,079) (688,400,000,000)
Issuance of debentures 440,865,039,400 409,333,150,000
Repayments of debentures (233,740,000,000) (185,000,000,000)
Issuance of securitized debts 199,456,325,600 249,316,692,300
Repayments of securitized debts (20,000,000,000) -
Cash inflows of transactions with subsidiaries 9,910,000 9,910,000
Payments of dividends (10,000,000,000) -
Net cash provided by financing activities 419,252,261,992 481,659,752,300

Net increase in cash and cash equivalents 64,956,853,219 34,825,407,051

Cash and cash equivalents
Beginning of period 99,938,403,013 26,810,646,159
End of period 164,895,256,232 61,636,053,210

The accompanying notes are an integral part of these interim consolidated financial statement

10

Notes to the Interim Consolidated Financial Statements
June 30, 2011 and 2010, and December 31, 2010

1. General Information

Hyundai Commercial, Inc. (the Company) was established on March 27, 2007, by taking over all
the assets, liabilities, rights and obligations related with the loans of the industrial product division
of Hyundai Capital Services, Inc. and its installment financing and lease financing division. It is
engaged in installment financing, and leasing of facilities. The Company’s operations are
headquartered in Yeouido, Seoul. Its shareholders are as follows:

Shareholders Ownership
Hyundai Motor Company 50.00%
Myung-yi Chung 33.33%
Tae-young Chung 16.67%
Total 100.00%

2. Summary of Significant Accounting Policies

The consolidated financial statements have been prepared and presented which included the
accounts of Hyundai Commercial, Inc., as the parent company according to the Korean IFRS
1027, and Commercial Auto First trust and SPC and another subsidiary(collectively the “Group”),
while Hyundai Card Co., Ltd. is accounted for under the equity method.

Subsidiaries as of June 30, 2011 and December 31, 2010, are as follows. The Company has the
substantial power over the subsidiaries established as special purpose entities for asset
securitization even though its ownership interests over the subsidiaries do not exceed 50%.

2011 2010
Special Commercial Auto First Trust and SPC Commercial Auto First Trust and SPC
Purpose
Commercial Auto Second Trust and SPC
Entities

The Company’s interim consolidated financial statements are prepared in the Korean language
(Hangul) in conformity with International Financial Reporting Standards as adopted by the Republic
of Korea (“Korean IFRS”). The Company’s Korean IFRS transition date is January 1, 2010, and the
adoption date is January 1, 2011.

The interim consolidated financial statements are stated at historical cost unless otherwise stated
in the notes.

The reconciliations and descriptions of the effect of the transition from the consolidated financial
statements of the Company prepared in accordance with accounting principles generally accepted
in the Republic of Korea (“K-GAAP”) before the adoption date to Korean IFRS on the Company’s
equity as of January 1, 2010, June 30, 2010, and December 31, 2010, its comprehensive income
and cash flows for the six-month period ended June 30, 2010 and year ended December 31, 2010,
are provided in Note 3.

11


The interim consolidated financial statements for the six-month periods ended June 30, 2011 and
2010, have been prepared in accordance with Korean IFRS 1034. Because these interim
consolidated financial statements are a part of financial statements prepared by Korean IFRS as of
December 31, 2011, these are subject to Korean IFRS 1101, ‘First-time Adoption of Korean IFRS’.
These interim consolidated financial statements have been prepared in accordance with the
Korean IFRS standards and interpretations issued and effective at the reporting date. The Korean
IFRS standards and interpretations that will be applicable at December 31, 2011, including those
that will be applicable on an optional basis, are not known with certainty at the time of preparing
these interim consolidated financial statements.

The legislative and amended standards and interpretations the Group has not adopted earlier,
which have been promulgated but are not yet effective for the fiscal year starting from January 1,
2011, are as follows.

- Amendments to Korean IFRS 1101, ‘Deletion of Hyperinflation and the particular date’
(announced in December, 2010)
The date of prospective application, the exceptions to retrospective application in derecognition of
financial assets, has been changed from the particular date(January 1, 2004) to Korean IFRS
transition date according to the amendment above. Therefore, derecognition transactions that
occurred before the transition date are not restated in accordance with Korean IFRS. The
modification is required to be adopted from July 1, 2011.

- Amendments to Korean IFRS 1012, ‘Income Taxes’
If there is no disproof, investment property measured at fair value when measuring deferred
income tax assets and liabilities should be measured in consideration of recovered tax effects by
selling. This will be effective on January 1, 2011.

- Amendments to Korean IFRS 1107, ‘Financial Instruments: Disclosures’
The financial assets transferred to counterparts but still remained in the financial statements are
required to be disclosed in terms of the nature of the assets, the book value, the risks and rewards.
If an entity is exposed to the particular risks and rewards on the derecognized financial assets,
additional disclosures are required to the understand effects of the risks. The amendments are
applicable from July 1, 2011.

The following is a summary of significant accounting policies followed by the Group in the
preparation of its consolidated financial statements. These policies have been consistently applied
to all the periods presented, unless otherwise stated.

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2.1 Consolidation

a. Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Company has the
power to govern the financial and operating policies generally accompanying a shareholding of
more than one half of the voting rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Company controls
another entity. Subsidiaries are fully consolidated from the date on which control is transferred to
the Company. They are deconsolidated from the date that control ceases.

The Group uses the acquisition method to account for business combinations. The consideration
transferred is measured as the fair values of the assets transferred, equity interests issued and
liabilities incurred or assumed at the acquisition date. Acquisition-related costs are expensed as
incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date. On an acquisition-by-
acquisition basis, the Group recognizes any non-controlling interest in the acquiree at the non-
controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the consideration transferred and the amount of any non-controlling interest in the
acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the
fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this
is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain
purchase, the difference is recognized directly in the statement of comprehensive income.

Intercompany transactions, balances and unrealized gains on transactions between Group
companies are eliminated.

b. Special purpose entities

The Group established several SPEs for the purpose of asset-backed securitization, but owns none
of the shares directly or indirectly. The Group consolidates the SPEs when the risks, rewards and
substance of the relationship indicated that the Group consolidates the SPEs. SPEs controlled by
the Group are created with conditions that impose strict limits on the decision-making power over
the operations therefore the Group obtains all benefits from the SPEs’ operation and net assets,
and that the Group may be exposed to risks incident to the activities of the SPEs or the Group
retains the majority of the residual or ownership risks related to the SPEs’ assets.

c. Transactions with non-controlling interests

The Group treats transactions with non-controlling interests as transactions with equity owners of
the Group. For purchases from non-controlling interests, the difference between any consideration
paid and the relevant share acquired of the carrying value of net assets of the subsidiary is
recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in
equity.

13


d. Associates

Associates are all entities over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in
associates are accounted for using the equity method of accounting and are initially recognized at
cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any
accumulated impairment loss.

The Group’s share of its associates’ post-acquisition profits or losses is recognized in the income
statement, and its share of post-acquisition movements in other comprehensive income is
recognized in other comprehensive income. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. When the Group’s share of losses in an
associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognize further losses, unless it has incurred obligations or made
payments on behalf of the associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent
of the Group’s interest in the associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of
associates have been changed where necessary to ensure consistency with the policies adopted by
the Group.

2.2 Foreign currency translation

a. Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which the entity operates (the “functional
currency”). The consolidated financial statements are presented in Korean won, which is the
Group’s functional currency.

b. Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions or valuation where items are remeasured. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognized in the income statement, except when deferred in other comprehensive
income as qualifying cash flow hedges.

2.3 Critical accounting estimates and assumptions

Estimates and judgments are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances. The resulting accounting estimates will, by definition, seldom equal the related

14


actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are
addressed below.

a. Allowance for doubtful accounts

The Group presents the allowance for doubtful accounts calculated based on the best estimates
that are necessary to reflect the impairment incurred at each reporting date. Allowance for doubtful
accounts is recognized as individual and collective units considering the financial circumstances of
customers, net realizable value, credit quality, size of portfolio, concentrativeness, economic factors
and others. According to the change in these factors, the allowance for doubtful accounts will be
changed in a future period.

b. Fair value of financial instruments

Fair value of financial assets and liabilities is based on quoted market prices, exchange-broker
prices of financial instruments traded in an active market. If there is no quoted price for a financial
instrument, the Group establishes fair value by using valuation techniques and advanced self-
valuation techniques.

Valuation techniques include the Discount Cash Flow method using variables observable in the
market, comparative method with similar instruments that have observable market transactions, and
option pricing model. For more complicated financial instruments, the Group uses advanced self-
valuation techniques. Parts of or all the variables used in this valuation technique may not be
observable in market, or may be derived from quoted prices and market ratio, or may be measured
based on specific assumption.

At initial recognition, if the difference between the fair value of valuation technique and transaction
price occurs, then the transaction price as the best estimate of fair value is recognized as fair value.
This fair value difference presents in profit immediately on any available observable market data
according to individual factors and changes of environment.

2.4 Revenue recognition

The Group recognizes capital lent to customers as loans receivable, when installment payments or
deferred payments on services and goods are made. While installment financial capital paid by the
Group to manufacturers or sellers on behalf of customers is recognized as installment financial
assets. Financial lease receivables classified as financial leases are recognized as lease
receivables.

The expected future cash flows from loans receivable, installment financial assets and lease
receivables (“Financial receivables”) described above are amortized under the effective interest
method over the period of the financial receivables being used by customers.

15


2.5 Statements of cash flows

The Group prepares statements of cash flows using indirect method.

2.6 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term
highly liquid investments with original maturities of six months or less and bank overdrafts.

2.7 Financial assets

a. Classification

The Group classifies its financial assets as financial assets at fair value through profit or loss, loans
and receivables and available-for-sale financial assets. Management determines the classification
of its financial assets at initial recognition.

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market.

Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or
not classified in any of the other categories.

b. Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade-date (the date on
which the Group commits to purchase or sell the asset). Investments are initially recognized at fair
value plus transaction costs for all financial assets not carried at fair value through profit or loss.
Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are
subsequently carried at amortized cost using the effective interest method.

When securities classified as available-for-sale are sold or impaired, the accumulated fair value
adjustments recognized in equity are transferred to the income statement as gain or loss on
disposal of securities. Interest on available-for-sale securities calculated using the effective interest
method is recognized in the income statement as part of interest income. Dividends on available-for
sale equity instruments are recognized in the income statement as dividend income when the
Group’s right to receive payments is established.

c. Derecognition of financial assets

A financial asset is derecognized only if the contractual rights on cash flow of the financial asset
terminate or all the risks and rewards of ownership of the financial asset are substantially
transferred.

16


The Group can transfer an asset in statement of financial position but retains parts of or all the risks
and rewards of ownership of the transferred asset substantially. To the extent that a transfer of a
financial asset retains rights and obligations, the Group accounts both asset and liability at the
same time. After the Group transfers a financial asset and still retains control, it shall continue to
recognize the asset to the extent of its continuing involvement in the asset.

d. Impairment of financial assets

(1) Assets carried at amortized cost

The Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset is impaired. Impairment losses are incurred only if there is objective evidence of
impairment and that loss event has an impact on the estimated future cash flows of the financial
asset. The amount of the loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows discounted at the financial asset’s original
effective interest rate.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the reversal of the
previously recognized impairment loss is recognized in the income statement.

(2) Available-for-sale financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a
financial asset or a group of financial assets is impaired. For equity securities classified as
available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is
also evidence that the assets are impaired. If any such evidence exists for available-for-sale
financial assets, the difference between carrying amount and current fair value is recognized in
profit or loss. Impairment losses recognized in profit or loss for an investment in an equity
instrument classified as available for sale are not be reversed through profit or loss. If, in a
subsequent period, the fair value of a debt instrument classified as available-for-sale increases and
the increase can be objectively related to an event occurring after the impairment loss was
recognized in profit or loss, the impairment loss is reversed.

2.8 Deferral of loan origination fee and loan origination cost

Loan origination fee, which is a processing fee in relation to the loan origination process such as
upfront fee, is deferred and deducted from the loan account, adjusted over the life of the loan based
on the effective interest rate method. Loan origination cost, which relates to activities performed by
the lender such as soliciting potential borrowers, is deferred and added to the loan account,
adjusted over the life of the loan based on the effective interest rate method when the future
economic benefit in connection with the cost incurred can be identified on a per loan basis.

17


2.9 Allowances for financial receivables

a. Calculation of allowances for doubtful accounts

The Group recognizes the impairment of receivables as an allowance for doubtful accounts. It is
based on the impairment estimates made through impairment assessment of receivables carried at
amortized cost. Allowance for doubtful accounts consists of impairments related to individually
material financial receivables and allowances of collective assessment for impairment incurred in
homogeneous assets.

Individually material receivables undertake the individual assessment of the difference between the
assets’ carrying amount and the present value of estimated future cash flows.
Unimpaired assets from individual assessments and individually immaterial assets undertake the
collective assessment classified by asset groups that have analogous risk attributes. The Group
uses statistical model in the collective assessment based on the expected probability of default,
periodic collect amounts, loss-given default based on the past losses, loss emergency period, and
management’s decision about the current economy and credit circumstances. The material factors
used in statistical model for the collective assessment are evaluated to compare with actual data
regularly.

The amount of impairment loss is reflected in allowance for doubtful accounts as profit or loss. And
the interest for impaired assets is recognized through the amortization of present value discounts.

b. Write-off policy

The Group writes off the doubtful receivables when the assets are deemed unrecoverable. This
decision considers the information about significant changes of financial position such that a
borrower or an obligor is in default, or the amount recoverable from security is not enough. The
decision to write off a standard small loan is generally made based on the delinquent status of loan.

2.10 Leases

a. Classification

The Group classifies leases based on the extent to which risks and rewards incidental to ownership
of a leased asset lie with the lesser or the lessee.

The lease arrangement classified as a financial lease is where: ①the lease transfers ownership of
the asset to the lessee by the end of the lease term, ②the lessee has the option to purchase the
asset at a price that is expected to be sufficiently lower than the fair value at the date the option
becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will
be exercised, ③the lease term is for the major part of the economic life of the asset even if title is
not transferred, ④at the inception of the lease the present value of the minimum lease payments
amounts to at least substantially all of the fair value of the leased asset, and ⑤the leased assets
are of such a specialized nature that only the lessee can use them without major modifications.

18


Minimum lease payments include that part of the residual value that is guaranteed by the lessee,
by a party related to the lessee or by a third party unrelated to the Group that is financially capable
of discharging the obligations under the guarantee.

b. Finance leases

Where the Group has substantially all the risks and rewards of ownership, leases of property, plant
and equipment are classified as finance lease. An amount equal to the net investment in the lease
is presented as a receivable. Expenses that are incurred with regard to the lease contract made but
not executed at the date of the statement of financial position are accounted for as prepaid leased
assets and are reclassified as finance lease receivables at the inception of the lease. Lease
receivables include amounts such as commissions, legal fees and internal costs that are
incremental and directly attributable to negotiating and arranging a lease. Each lease payment is
allocated between principal and finance income. Financial income on an uncollected part of net
investment shall be allocated to each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability.

2.11 Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation and
accumulated impairment losses. Historical cost includes expenditure that is directly attributable to
the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or
recognized as a separate asset, as appropriate, only when 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.

Depreciation method and estimated useful lives used by the Group are as follows:

Depreciation Method Useful life
Vehicles Straight-line 4 years
Fixtures and furniture Straight-line 4 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of
each reporting period. An asset’s carrying amount is written down immediately to its recoverable
amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and
losses on disposals are determined by comparing the proceeds with the carrying amount and are
recognized within other operating income (expenses) in the income statement.

2.12 Intangible assets

Intangible assets are stated at cost, which includes acquisition cost and directly related costs
required to prepare the asset for its intended use. Intangible assets are stated net of accumulated
amortization calculated based on using the following amortization method and estimated useful
lives:

19


Amortization Method Useful life
Software Straight-line 4 years
Other intangible assets Straight-line 5 years

2.13 Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortization and are tested annually for
impairment. Assets that are subject to amortization are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating units). Non-financial
assets that are subject to amortization suffered impairment are reviewed for possible reversal of the
impairment at each reporting date.

2.14 Pension obligations

The Group operates a defined benefit plan. The liability recognized in the statement of financial
position in respect of defined benefit pension plans is the present value of the defined benefit
obligation at the end of the reporting period less the fair value of plan assets, together with
adjustments for unrecognized past-service costs. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity approximating to the terms of the related
pension obligation.

Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are recognized in profits or losses in the period in which they arise.

2.15 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 present legal or as a result of past events, and whose amount is
reasonably estimable, a corresponding amount of provision is recognized in the financial
statements. Where there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole. A provision
is recognized even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.

20


Provisions are the best estimate of the expenditure required to settle the present obligation that
consider the risks and uncertainties inevitably surround many events and circumstances at the
reporting date. Where the effect of the time value of money is material, the amount of a provision is
the present value of the expenditures expected to be required to settle the obligation.

A possible obligation that arises from past events and whose existence will be confirmed only by
the occurrence or non-occurrence of uncertain future events, or a present obligation that arises
from past events but 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.

2.16 Derivative financial instruments

The Group has applied hedging policies using derivatives to deal with the risk of changes in foreign
currency exchange rates and interest rates arising from liabilities. The Group has contracted
currency swap and interest swap derivative financial instruments to deal with the risk of changes in
foreign currency exchange rates arising from foreign currency liabilities and the risk of changes in
interest rates arising from floating-rate liabilities.

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and
are subsequently re-measured at their fair value. The method of recognizing the resulting gain or
loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged. The Group applies cash flow hedge, which are hedges of a particular risk
associated with a recognized asset or liability or a highly probable forecast transaction.

The Group documents at the inception of the transaction the relationship between hedging
instruments and hedged items, as well as its risk management objectives and strategy for
undertaking various hedging transactions to apply hedging accounting. The Group also documents
its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
are used in hedging transactions are highly effective in offsetting changes in fair values or cash
flows of hedged items.

The effective portion of changes in the fair value of derivatives that are designated and qualify as
cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the
ineffective portion is recognized immediately in profits or losses. The cumulative gain or loss that
was reported in equity is recognized when the hedged items affect profits and losses.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and
is recognized when the forecast transaction is ultimately recognized in the income statement. When
a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported
in equity is immediately transferred to profit or loss.

21


2.17 Current and deferred income tax

Interim period income tax expense is calculated by applying to an interim period’s pre-tax income
the tax rate that would be applicable to expected total annual earnings.

Deferred income tax is recognized, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. However, deferred tax assets and liabilities are not accounted for if they arise
from the initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates and laws that have been enacted or substantially enacted
by the date of the statement of financial position and are expected to apply when the related
deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries
and associates, except for deferred income tax liability where the timing of the reversal of the
temporary difference is controlled by the Group and it is probable that the temporary difference will
not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to
offset current tax assets against current tax liabilities and when the deferred income taxes assets
and 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, in each future
period in which significant amounts of deferred tax liabilities or assets are expected to be settled or
recovered.

2.18 Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the
Company by the weighted average number of ordinary shares in issue during the period excluding
ordinary shares purchased by the Company and held as treasury shares.

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive potential ordinary shares. Only dilutive
potential ordinary shares are dilutive, they are added to the number of ordinary shares outstanding
in the calculation of diluted earnings per share.

3. Transition to Korean IFRS

The interim consolidated financial statements as of June 30, 2011, are prepared according to
Korean IFRS at the adoption date of January 1, 2011. The statements of financial position as of

22


December 31, 2010 and as of June 30, 2010, which were prepared previously under K-GAAP are
restated in accordance with Korean IFRS 1101, “First-time adoption of Korean IFRS”, for the
comparative purposes, at the transition date of January 1, 2010.

a. Exemptions of Korean IFRS 1101 elected by the Group

The Group has elected to apply the following optional exemptions from full retrospective
application.

(1) Business combination

The Group has not retrospectively applied Korean IFRS 1103 (Business combination) to the
business combinations that took place prior to the transition date.

(2) Deemed cost of property and equipment

The Group has elected to use the carrying amount of property and equipment under K-GAAP as
deemed cost at the date of transition to Korean IFRS.

b. Explanation on the reconciliation of K-GAAP and Korean IFRS

Major reconciliations of the transition between K-GAAP and Korean IFRS are as follows:

(1) Impairment of financial assets (allowance for financial assets)

Under K-GAAP, allowances for financial receivables are calculated based on the long-term
average expected loss. In case the allowance calculated based on the expected loss is smaller
than the allowance calculated in accordance to the guidelines provided in the Act on the
Specialized Credit Financial Business, the Group recognizes an allowance in accordance to the
guidelines provided in the Act on the Specialized Credit Financial Business. Under Korean IFRS,
impairment losses are recognized where there is evidence that impairment occurred. Allowance for
financial receivables is measured individually for assets that are individually significant and on a
collective basis for portfolios with similar risk characteristics.

(2) Accrued revenue for overdue receivables

Under K-GAAP, accrued revenue for receivables which are overdue is not recognized. Under
Korean IFRS, accrued revenue for past due and impaired receivables is recognized.

(3) Measurement of financial assets carried at amortized cost

Under K-GAAP, non-marketable loan and receivables are measured at nominal value if the
difference between nominal value and discounted value is not substantial. Under Korean IFRS,
loan and receivables are initially measured at fair value and subsequently carried at amortized cost
using the effective interest method.

23


(4) Depreciation method for property and equipment

Under K-GAAP, depreciation method used for certain property and equipment was the declining-
balance method. Under Korean IFRS, the Group uses the straight-line method to reflect properly
the matching of the future economic benefits.

(5) Retirement benefit obligations

Under K-GAAP, the Group recognizes the amount which would be payable assuming all eligible
employees and directors were to terminate their employment as of the statement of financial
position date as accrued severance benefits represent. Under Korean IFRS, the Group recognizes
the estimated amount using the projected unit credit method which is on an actuarial basis as the
defined benefit obligation.

(6) Recognition of unused compensated absences

According to K-GAAP, unused compensated absences given to employees are recognized as
liabilities at the end of the reporting period only when the right to be paid has been established.
Under Korean IFRS, the Group recognizes liabilities when an employee has provided service in
exchange for compensated absences.

(7) Consolidation

Under K-GAAP, Commercial Auto First SPC, trust and other subsidiaries were previously excluded
from consolidation in accordance with Article 1.3, Clause 1 of Enforcement Decree of the Act on
External Audit of Stock Companies. Under Korean IFRS, they are consolidated (Note 2).

(8) Income tax effects

The Group recognized changes in deferred tax representing the impact of deferred taxes on the
adjustments for the transition to Korean IFRS.

24


c. Effects on the comprehensive income and net income

(1) Reconciliation of assets, liabilities and equity as of January 1, 2010

(in thousands of Korean won)
Assets Liabilities Equity
K-GAAP 1,628,843,966 1,519,996,760 108,847,206
Conversion effects to Korean IFRS
Allowance for doubtful accounts 7,431,968 - 7,431,968
Accrued revenues 1,132,941 - 1,132,941
Measurement of amortized cost (1,378,454) - (1,378,454)
Depreciation 2,001,667 - 2,001,667
Retirement benefit obligations - 5,711 (5,711)
Recognition of unused compensated
- 229,507 (229,507)
absences
Equity method investment 8,260,061 (92,431) 8,352,492
Others 366,621 33,745 332,876
Deferred income taxes (337,432) 3,737,319 (4,074,751)
Total effect of transition 17,477,372 3,913,851 13,563,521
Korean IFRS 1,646,321,338 1,523,910,611 122,410,727

(2) Reconciliation of assets, liabilities and equity as of June 30, 2010

Assets Liabilities Equity
K-GAAP 1,925,114,227 1,782,858,632 142,255,595
Allowance for doubtful accounts 7,266,798 - 7,266,798
Accrued revenues 1,279,385 - 1,279,385
Measurement of amortized cost (3,209,611) - (3,209,611)
Depreciation 1,577,559 - 1,577,559
Retirement benefit obligations - (62,854) 62,854
Recognition of unused compensated
- 326,448 (326,448)
absences
Equity method investment 9,180,671 (129,822) 9,310,493
Others 141,204 (199,763) 340,967
Scope of consolidation 224,241,180 231,922,186 (7,681,006)
Deferred income taxes - 2,127,855 (2,127,855)
Total effect of transition 240,477,186 233,984,050 6,493,136
Korean IFRS 2,165,591,413 2,016,842,682 148,748,731

25


(3) Reconciliation of total comprehensive income and net income for the three-month and the six-
month periods ended June 30, 2010

Total Total
comprehensive Net Income comprehensive Net Income
income income
K-GAAP 19,275,097 19,165,102 33,408,390 33,510,140
Allowance for doubtful
1,336,500 1,336,500 (165,170) (165,170)
accounts
Accrued revenues 55,774 55,774 146,444 146,444
Measurement of amortized
(1,255,824) (1,255,824) (1,890,314) (1,890,314)
cost
Depreciation (206,837) (206,837) (424,108) (424,108)
Retirement benefit obligations 27,320 27,320 66,774 66,774
Recognition of unused
(44,153) (44,153) (96,942) (96,942)
compensated absences
Equity method investment 452,960 573,959 863,674 1,004,623
Others (378,952) 23,978 153,436 104,271
Scope of consolidation (7,690,916) (7,690,916) (7,690,916) (7,690,916)
Deferred income taxes 1,510,767 1,510,767 1,968,337 1,968,337
Total effect of transition (6,193,361) (5,669,432) (7,068,785) (6,977,001)
Korean IFRS 13,081,736 13,495,670 26,339,605 26,533,139

26


(4) Reconciliation of assets, liabilities, equity, total comprehensive income and net income as of
and for the year ended December 31, 2010

Total
Assets Liabilities Total equity comprehensive Net Income
income
K-GAAP 2,534,174,650 2,359,395,222 174,779,428 65,932,223 64,833,503
Allowance for doubtful
9,071,121 - 9,071,121 1,639,153 1,639,153
accounts
Accrued revenues 495,782 - 495,782 (637,159) (637,159)
Measurement of
(4,130,557) - (4,130,557) (2,752,102) (2,752,102)
amortized cost
Depreciation 1,275,895 - 1,275,895 (725,772) (725,772)
Retirement benefit
- 378,378 (378,378) (372,667) (372,667)
obligations
Recognition of unused
- 258,690 (258,690) (29,184) (29,184)
compensated absences
Equity method investment 6,603,813 (29,025) 6,632,838 (1,930,262) (1,900,657)
Others - (135,307) 135,307 132,857 132,857
Scope of consolidation 172,207,726 177,075,156 (4,867,430) (4,877,341) (4,877,341)
Deferred income taxes - 2,137,560 (2,137,560) 1,958,632 1,958,632
Total effect of transition 185,523,780 179,685,452 5,838,328 (7,593,845) (7,564,240)
Korean IFRS 2,719,698,430 2,539,080,674 180,617,756 58,338,378 57,269,263

d. Adjustments of cash flows in 2010

According to Korean IFRS, cash flows of the related income (expenses) and assets (liabilities) are
adjusted to separately disclose the cash flows from interest received, interest paid and cash
payments of income taxes that were not presented separately under K-GAAP. There are no other
significant differences between cash flows under Korean IFRS and K-GAAP.

e. Adjustments of operating income and expenses

The Group reclassified certain non-operating income and expenses under K-GAAP to other
operating income and expenses according to Korean IFRS.

27


Adjustments for the three-month and the six-month periods ended June 30, 2011 and 2010, are as
follows:

(in thousands of Korean won) 2011 2010
Three Six Three Six
Type months months months months
Other operating income 159,450 242,649 79,289 141,025
Other operating expenses 99,087 130,144 36,429 49,574

4. Restricted Financial Instruments

Restricted financial instruments as of June 30, 2011 and December 31, 2010, are as follows:

(in thousands of Korean won) Amount
Type Entities 2011 2010 Restriction
Kookmin Bank Maintaining deposits
Deposits
and 3 others 11,500 11,500 for opening accounts

5. Securities

Securities as of June 30, 2011 and December 31, 2010, are as follows:

Type 2011 2010
Available-for-sale securities
Marketable equity
securities 16,300,000 11,518,000
Equity securities
Unlisted equity
securities
2,945,582 6,139,945
Sub-total 19,245,582 17,657,945
Equity method investment 141,404,314 133,160,973
160,649,896 150,818,918

28


Available-for-sale securities
Available-for-sale securities as of June 30, 2011 and December 31, 2010, are as follows:

Book value
Number of Ownership Acquisition
2011 2010
shares (%) cost
Marketable equity securities
JNK Heaters Co.,
Ltd.
1,000,000 12.5 10,126,881 16,300,000 11,518,000
Unlisted equity securities
West End
Corporate
Restructuring 4,655,000,000 17.24 1,405,000 2,945,582 6,139,945
1
Corp.
11,531,881 19,245,582 17,657,945

1
The fair value for West End Corporate Restructuring Corp. was valued at the valuation prices
published by Korea Asset Pricing, using the net asset value approach. Its assets consist of the
financial assets which have rational market values, and its assets and liabilities were adjusted to
proper market values to approximate the fair value.

Equity method investment
Equity method investment as of June 30, 2011 and December 31, 2010, is as follows:

2011
Number of Ownership Acquisition Net asset
Book value
shares (%) cost value
Hyundai Card Co.,
Ltd.
1 8,889,622 5.54 113,820,162 104,477,564 141,404,314

2010
Number of Ownership Acquisition Net asset
Book value
shares (%) cost value
Hyundai Card Co.,
Ltd.
1 8,889,622 5.54 113,820,162 96,233,125 133,160,973

1
The Company’s shareholdings in Hyundai Card Co., Ltd. are less than 20%. However, the
Company is able to participate in the management and significantly influence the financial and
operating processes. Thus, the equity method is applied.

Valuations of equity method investment for the six-month periods ended June 30, 2011 and 2010,
is as follows:

29


2011
Changes in
accumulated
Beginning Gain (loss) Ending
Dividends other Others
Balance on valuation Balance
comprehensive
income
Hyundai Card
133,160,973 8,660,056 - (415,618) (1,097) 141,404,314
Co., Ltd.

2010
Changes in
Changes
accumulated
Beginning Gain (loss) in Ending
Dividends other
Balance on valuation retained Balance
comprehensive
earnings
income
Hyundai Card
127,357,477 7,610,947 (5,778,254) (180,703) (11,511) 128,997,957
Co., Ltd.

The difference between the acquired amounts of equity method investment and its corresponding
net asset value as of June 30, 2011 and December 31, 2010, follows:

2011 2010
Hyundai Card Co., Ltd. 36,926,750 36,926,750

Summary of financial information of investee as of June 30, 2011 and December 31, 2010, and for
the six-month periods follows:

2011
Operating
Assets Liabilities Net income
revenue
Hyundai Card Co., Ltd. 10,096,407,232 8,210,468,047 1,214,360,035 156,321,430

2010
Operating
Assets Liabilities Net income
revenue
Hyundai Card Co., Ltd. 10,416,574,470 8,679,464,372 2,316,447,184 284,376,845

30


6. Financial Receivables

Financial receivables as of June 30, 2011 and December 31, 2010, are as follows:

2011
Deferred loan
origination fees and Allowance
Present value
Principal costs for doubtful Book value
discounts
(Initial direct costs accounts
for lease assets)
Loan receivables
Factoring
859,634 - - (11,229) 848,405
receivables
Loans 2,193,260,868 12,661,532 (160,650) (16,922,573) 2,188,839,177

2,194,120,502 12,661,532 (160,650) (16,933,802) 2,189,687,582

Installment financial assets
Auto 456,045,728 (2,862,957) - (3,366,917) 449,815,854
Durable goods 80,909,122 (851,066) - (554,651) 79,503,405
536,954,850 (3,714,023) - (3,921,568) 529,319,259
Lease receivables
Finance lease
63,960,312 (27,663) - (440,928) 63,491,721
receivables
2,795,035,664 8,919,846 (160,650) (21,296,298) 2,782,498,562

2010
Deferred loan
origination fees and Allowance
Present value
Principal costs for doubtful Book value
discounts
(Initial direct costs accounts
for lease assets)
Loan receivables
Factoring 1,185,465 - - (15,550) 1,169,915
Loans 1,782,518,786 6,898,083 (179,590) (12,780,139) 1,776,457,140
1,783,704,251 6,898,083 (179,590) (12,795,689) 1,777,627,055
Installment financial assets
Auto 493,287,083 (6,111,888) - (3,055,399) 484,119,796
Durable goods 81,961,709 (476,335) - (553,628) 80,931,746
575,248,792 (6,588,223) - (3,609,027) 565,051,542
Lease receivables
Finance lease
41,206,800 (41,546) - (214,613) 40,950,641
receivables
2,400,159,843 268,314 (179,590) (16,619,329) 2,383,629,238

31


7. Allowance for Doubtful Accounts

Changes in allowance for doubtful accounts for the six-month periods ended June 30, 2011 and
2010, are as follows:

2011
Loan Installment Lease
Type Other assets Total
receivables financial assets receivables
Beginning balance 12,795,689 3,609,027 214,613 372,974 16,992,303
Amounts written off (1,491,516) (108,512) - - (1,600,028)
Recoveries of amounts
(3,811,733) (790,425) (6,798) - (4,608,956)
previously written off
Unwinding of discount (52,619) (6,935) (108) - (59,662)
Additional(reversed)
9,493,981 1,218,413 233,221 14,502 10,960,117
allowance
Ending balance 16,933,802 3,921,568 440,928 387,476 21,683,774

2010
Loan Installment Lease
Type Other assets Total
receivables financial assets receivables
Beginning balance 10,110,193 3,420,293 233,056 387,760 14,151,302
Amounts written off (179,201) - - - (179,201)
Recoveries of amounts
(1,378,555) (126,763) 453,608 - (1,051,710)
previously written off
Unwinding of discount (29,903) (5,798) (8,132) - (43,833)
Additional(reversed)
2,132,653 586,579 9,691 53,288 2,782,211
allowance
Ending balance 10,655,187 3,874,311 688,223 441,048 15,658,769

32


8. Financial Instruments

The fair values of financial instruments as of June 30, 2011 and December 31, 2010, are as follows:

2011 2010
Type Book Fair Book Fair
value value value value
Assets
Financial assets
Cash and deposits 164,906,756 164,906,756 99,949,903 99,949,903
Available-for-sale
19,245,582 19,245,582 17,657,945 17,657,945
securities
Loans receivable 2,189,687,582 2,179,001,160 1,777,627,055 1,713,240,877
Installment financial
529,319,259 534,531,973 565,051,542 576,954,790
assets
Derivative assets - - 6,151,267 6,151,267
Non-trade
36,875,454 36,875,454 39,460,549 39,460,549
receivables
Accrued revenues 15,285,076 15,285,076 13,016,641 13,016,641
Leasehold deposits 9,101,650 8,927,856 7,233,369 7,632,659
2,964,421,359 2,958,773,857 2,526,148,271 2,474,064,631
Liabilities
Financial liabilities
Borrowings 817,409,987 819,742,342 774,749,000 774,193,924
Debentures 1,703,378,977 1,750,327,785 1,504,362,480 1,543,521,096
Securitized debts 379,204,999 365,515,906 199,530,274 202,500,316
Derivative liabilities 5,668,407 5,668,407 4,088,617 4,088,617
Non-trade payables 5,049,421 5,049,421 4,345,885 4,345,885
Accrued expenses 18,383,955 18,383,955 22,977,719 22,977,719
1
Withholdings 2,615,731 2,615,731 2,583,344 2,583,344
Leasehold deposits
9,734,860 9,823,246 2,824,085 2,854,340
received
2,941,446,337 2,977,126,793 2,515,461,404 2,557,065,241

1
Excluding taxes.

33

Audit Report: Hyundai Commercial 2Q2011

Audit Report: Hyundai Commercial 2Q2011

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Audit Report: Hyundai Commercial 2Q2011