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HYUNDAI CARD CO., LTD. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2012 AND 2011
AND FOR THE YEARS ENDED
DECEMBER 31, 2012 AND 2011
AND INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Report
English Translation of a Report Originally Issued in Korean

To the Shareholders and Board of Directors of
Hyundai Card Co., Ltd. :

We have audited the accompanying consolidated statements of Hyundai Card Co., Ltd. and its subsidiaries (the
“Company”). The financial statements consist of the consolidated statements of financial position as of December
31, 2012 and 2011, respectively, and the related consolidated statements of comprehensive income, consolidated
statements of changes in shareholders’ equity and consolidated statements of cash flows, all expressed in Korean
won, for the years ended December 31, 2012 and 2011, respectively. The Company’s management is responsible for
the preparation and fair presentation of the consolidated financial statements and our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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 provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of the Company as of December 31, 2012 and 2011, respectively, and the results of its operations and its cash flows
for the years ended December 31, 2012 and 2011, respectively in conformity with Korean International Financial
Reporting Standards (“K-IFRS”).

Accounting principles and auditing standards and their application in practice vary among countries. The
accompanying consolidated financial statements are not intended to present the financial position, results of
operations 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 knowledgeable about Korean
accounting procedures and auditing standards and their application in practice.

March 12, 2013

Notice to Readers

This report is effective as of March 12, 2013, the auditor’s report date. Certain subsequent events or
circumstances may have occurred between the auditor’s report date and the time the auditor’s report is read. Such
events or circumstances could significantly affect the accompanying consolidated financial statements and may
result in modifications to the auditor’s report.

(the “Company”)

CONSOLIDATED FINANCIAL STATEMENTS
AND FOR THE YEARS ENDED
DECEMBER 31, 2012 AND 2011

The accompanying financial statements including all footnote disclosures were prepared by and
are the responsibility of the Company.

Chung, Tae Young
CEO


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


(Unit: Korean Won)
December 31, 2012 December 31, 2011
ASSETS:

CASH AND BANK DEPOSITS (Notes 5, 32, 33 and 34):
Cash and cash equivalents ￦ 791,547,295,193 ￦ 830,022,903,023
Bank deposits 33,029,000,000 33,031,500,000
Total cash and bank deposits 824,576,295,193 863,054,403,023

INVESTMENT FINANCIAL ASSETS (Notes 6 and 34):
Financial assets available-for-sale (AFS) 1,766,969,764 1,766,969,764
Total investment financial assets 1,766,969,764 1,766,969,764

CARD ASSETS (Notes 7, 8, 30, 33 and 34):
Card receivables, net of present value discounts, deferred
origination fees and allowance for doubtful accounts 6,530,709,506,111 6,432,351,415,041
Cash advances, net of allowance for doubtful accounts 906,232,767,098 978,117,626,263
Card loans, net of present value discounts, deferred loan
origination fees and allowance for doubtful accounts 2,270,095,402,706 1,963,797,640,687
Total card assets 9,707,037,675,915 9,374,266,681,991

LOANS (Notes 7, 8, 33 and 34)
Other loans, net of allowance for doubtful accounts - 469,647,440

PROPERTY AND EQUIPMENT (Notes 9, 11, 14 and 30):
Land 122,011,816,788 83,994,796,609
Buildings, net of accumulated depreciation 60,330,598,734 42,186,583,765
Vehicles, net of accumulated depreciation 163,464,977 270,015,754
Fixtures and equipment, net of accumulated depreciation 56,690,437,564 57,974,548,577
Finance lease assets 1,389,170,627 2,500,507,128
Construction in progress 23,797,602,168 471,628,080
Total property and equipment 264,383,090,858 187,398,079,913

OTHER FINANCIAL ASSETS
(Notes 5, 8, 19, 30, 33 and 34):
Other accounts receivable, net of allowance for doubtful
accounts 85,387,050,368 44,939,903,548
Accrued revenue, net of allowance for doubtful accounts 43,654,761,801 43,753,371,236
Guarantee deposits 52,348,673,218 71,368,896,821
Derivative assets 901,423,501 2,555,101,143
Total other financial assets 182,291,908,888 162,617,272,748

OTHER NON-FINANCIAL ASSETS
(Notes 8, 10, 26 and 30):
Advanced payments, net of allowance for doubtful
accounts 11,254,701,307 25,223,575,660
Prepaid expenses 48,279,724,993 48,548,656,736
Intangible assets 74,664,032,134 72,976,002,526
Deferred income tax assets 135,666,642,303 112,403,093,896
Others 2,342,574,040 3,209,332,113
Total other non-financial assets 272,207,674,777 262,360,660,931
Total Assets ￦11,252,263,615,395 ￦10,851,933,715,810

(Continued)


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (CONTINUED)

AS OF DECEMBER 31, 2012 AND DECEMBER 31, 2011

(Unit: Korean Won)
LIABILITIES AND SHAREHOLDERS’
EQUITY:

BORROWINGS :
Borrowings (Notes 12, 33 and 34) ( ￦ 487,500,000,000 ￦ 590,000,000,000
Bonds payable, net of discounts on bonds
(Notes 13, 29, 33 and 34) 6,533,175,825,125 6,481,760,496,118
Total borrowings 7,020,675,825,125 7,071,760,496,118

RETIREMENT BENEFIT (Note 15)
Retirement benefit obligation 10,695,054,186 17,774,550,158
Total retirement benefit 10,695,054,186 17,774,550,158

OTHER FINANCIAL LIABILITIES
(Notes 14, 19, 30, 33 and 34):
Accounts payable 1,186,714,518,145 1,066,705,610,154
Withholdings 123,824,521,370 64,312,342,703
Accrued expenses 139,353,829,793 140,922,092,976
Finance lease liabilities 1,452,239,137 2,548,330,830
Derivative liabilities 53,554,957,780 5,326,133,113
Guarantee deposits 12,776,716,986 11,684,414,000
Total other financial liabilities 1,517,676,783,211 1,291,498,923,776

OTHER NON-FINANCIAL LIABILITIES :
Withholdings 6,968,385,070 5,649,822,585
Unearned revenue(Note 17) 397,830,493,299 347,865,031,849
Provisions (Notes 18 and 28) 75,687,285,760 80,233,007,232
Current tax liability 30,439,361,053 40,468,853,188
Total other non-financial liabilities 510,925,525,182 474,216,714,854

SHAREHOLDERS’ EQUITY :
Share capital (Note 20) 802,326,430,000 802,326,430,000
Capital surplus (Note 21) 57,704,443,955 57,704,443,955
Retained earnings (Notes 22 and 24) 1,339,725,219,219 1,148,396,655,980
Reserves (Notes 23, 26 and 31) (7,485,485,483) (11,764,319,031)
Non-controlling interest 19,820,000 19,820,000
Total shareholders’ equity 2,192,290,427,691 1,996,683,030,904
Total Liabilities and Shareholders’ Equity ￦ 11,252,263,615,395 ￦ 10,851,933,715,810

See accompanying notes to consolidated financial statements.


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011

(Unit: Korean Won)
For the year ended For the year ended
OPERATING REVENUE:
Card income (Notes 30, 34 and 36) ￦ 2,388,278,853,242 ￦ 2,318,410,234,112
Interest income (Note 34 and 35) 22,593,511,595 26,005,809,597
Gain on disposal of financial assets AFS (Note 34) - 7,650,343,198
Reversal of impairment loss on financial assets AFS
(Note 34) 461,757,518 805,860,595
Dividends income 477,523,977 591,173,105
Reversal of provision for unused credit limits
(Note 18) 781,111,756 -
Other operating revenue (Notes 2 and 37) 113,042,414,018 54,856,013,148
Total operating revenue 2,525,635,172,106 2,408,319,433,755

OPERATING EXPENSES:
Card expenses (Notes 30, 34 and 36) 1,043,710,631,004 923,941,904,342
Interest expenses (Notes 34 and 35) 343,398,755,949 357,374,378,109
General and administrative expenses
(Notes 25 and 30) 609,986,735,363 538,383,719,988
Securitization expenses 367,539,337 336,492,018
Bad debt expense and loss on disposal of loans 202,956,968,418 200,062,143,140
Transfer to provision for unused credit limits
(Note 18) - 1,094,594,223
Impairment loss on financial assets AFS (Note 34) - 8,324,157
Other operating expenses (Notes 2 and 37) 91,937,747,576 62,898,344,999
Total operating expenses 2,292,358,377,647 2,084,099,900,976

OPERATING INCOME 233,276,794,459 324,219,532,779

NON-OPERATING INCOME (Note 2):
Gain from sale of property and equipment 9,133,500 5,897,268
Rental revenue 2,157,675,587 863,082,718
Miscellaneous gain 200,026,435 190,101,137
Total non-operating income 2,366,835,522 1,059,081,123

NON-OPERATING EXPENSES (Note 2):
Loss from sale of property and equipment 577,531,514 4,520,026
Impairment loss for intangible assets 512,947,720 -
Donations 1,920,539,994 1,656,755,516
Miscellaneous loss 115,000,000 -
Total non-operation expense 3,126,019,228 1,661,275,542

INCOME BEFORE INCOME TAX 232,517,610,753 323,617,338,360

INCOME TAX EXPENSE (Note 26) 41,189,047,514 84,969,756,377

INCOME FOR THE PERIOD ￦ 191,328,563,239 ￦ 238,647,581,983

(Continued)


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (CONTINUED)


(Unit: Korean Won)
For the year ended For the year ended
OTHER COMPREHENSIVE INCOME (LOSS) FOR
THE PERIOD (Note 31)

Effective portion of changes in fair value of cash flow
hedges 4,278,833,548 (8,613,983,761)

TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD ￦ 195,607,396,787 ￦ 230,033,598,222

Net income attributable to:
Owners of the Company 191,328,563,239 238,647,581,983
Non-controlling interests - -

Total comprehensive income attributable to:
Owners of the Company 195,607,396,787 230,033,598,222
Non-controlling interests - -

Earnings per share (In won per share) (Note 27)
Basic earnings per share ￦ 1,192 ￦ 1,487
Diluted earnings per share ￦ 1,192 ￦ 1,487



CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


Capital surplus Reserve
Cash flow Attributable to Non-
Share Share Other Retained hedging owners of the controlling
capital premium capital earnings reserves Company Interests Total
Balance at
January 1,
2011 ￦802,326,430,000 ￦ 45,399,364,539 ￦12,305,079,416 ￦ 909,749,073,997 ￦ (3,150,335,270) ￦ 1,766,629,612,682 ￦ 19,820,000 ￦ 1,766,649,432,682
Comprehensive
income
Net income - - - 238,647,581,983 - 238,647,581,983 - 238,647,581,983
Other
comprehensi
ve loss - - - - (8,613,983,761) (8,613,983,761) - (8,613,983,761)
Acquisition of
subsidiaries - - - - - - 9,910,000 9,910,000
Disposal of
subsidiaries - - - - - - (9,910,000) (9,910,000)
Balance at
December 31,
2011 802,326,430,000 45,399,364,539 12,305,079,416 1,148,396,655,980 (11,764,319,031) 1,996,663,210,904 19,820,000 1,996,683,030,904
Balance at
January 1,
2012 802,326,430,000 45,399,364,539 12,305,079,416 1,148,396,655,980 (11,764,319,031) 1,996,663,210,904 19,820,000 1,996,683,030,904
Comprehensive
income
Net income - - - 191,328,563,239 - 191,328,563,239 - 191,328,563,239
Other
comprehensi
ve income - - - - 4,278,833,548 4,278,833,548 - 4,278,833,548
Acquisition of
subsidiaries 9,910,000 9,910,000
Disposal of
subsidiaries - - - - - - (9,910,000) (9,910,000)
Balance at
December 31,
2012 ￦802,326,430,000 ￦ 45,399,364,539 ￦12,305,079,416 ￦ 1,339,725,219,219 ￦ (7,485,485,483) ￦ 2,192,270,607,691 ￦ 19,820,000 ￦ 2,192,290,427,691



CONSOLIDATED STATEMENTS OF CASH FLOWS


For the year ended December 31,
2012 2011
(Unit: Korean Won)
CASH FLOWS FROM OPERATING ACTIVITIES:
Income for the period ￦ 191,328,563,239 ￦ 238,647,581,983
Income tax expense 41,189,047,514 84,969,756,377
Interest income (22,593,511,595) (26,005,809,597)
Interest expense 343,398,755,949 357,374,378,109
Dividend received (477,523,977) (591,173,105)
Bad debt expense and loss on disposal of receivables 202,956,968,418 200,062,143,140
Retirement benefits 13,228,745,147 12,807,599,848
Depreciation 26,992,252,034 21,209,077,434
Amortization 14,180,876,300 11,354,527,198
Loss on foreign currency translation 38,093,094 16,397,494,270
Loss on valuation of trading derivatives 55,633,000,000 -
(Decrease) increase in provision for unused credit limit (781,111,756) 1,094,594,223
(Decrease) increase in provision for others (3,764,609,716) 1,763,623,684
Loss from sale of property and equipment 577,531,514 4,520,026
Impairment loss of financial assets AFS - 8,324,157
Other operating losses 924,569,785 1,656,707,383
Impairment loss of intangible assets 512,947,720 -
Reversal of impairment loss of financial assets AFS (461,757,518) (805,860,595)
Gain on disposals of financial assets AFS - (7,650,343,198)
Gain on foreign currency translation (55,663,248,513) (160,817,131)
Gain on valuation of trading derivatives - (16,377,000,000)
Amortization of present value discounts of card asset (40,906,150,359) (27,320,178,901)
Amortization of deferred origination fees of card assets (18,129,500,265) (22,513,290,136)
Gain from sale of property and equipment (9,133,500) (5,897,268)
Changes in working capital:
(Increase) in card assets (478,742,209,861) (521,184,666,885)
Decrease in other receivables 500,000,000 500,000,000
(Increase) in other financial assets (41,853,625,282) (21,810,729,459)
Decrease in other non-financial assets 8,425,805,126 54,853,752,837
Decrease in derivative assets 1,865,000,000 13,645,800,001
(Decrease) in retirement benefit obligations (6,571,624,714) (4,334,319,356)
(Increase) in plan asset (13,726,405,314) (307,277,080)
(Decrease) in derivative liabilities (1,972,000,000) (27,070,682,349)
(Decrease) increase in capital lease liabilities (1,096,091,693) 2,548,330,830
Increase in other financial liabilities 168,017,357,285 278,289,966,782
Increase in other non-financial liabilities 49,965,461,450 60,424,613,138
Cash generated from operating activities
Interest received 24,109,712,867 23,576,136,047
Interest paid (324,680,224,065) (339,415,547,854)
Dividend received 477,523,977 591,173,105
Income tax paid (75,846,752,199) (128,883,895,329)
Net cash provided by operating activities 57,046,731,092 237,342,612,329

(Continued)


CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)


For the year ended December 31,
2012 2011
(Unit: Korean Won)

CASH FLOWS FROM INVESTING ACTIVITIES:
Disposal of investment financial assets ￦ 461,757,518 ￦ -
Disposal of property and equipment 30,217,356 110,930,258
Disposal of intangible assets 1,250,000,000 -
Net increase in guarantee deposit 21,000,758,986 504,302,464
Net increase (decrease) in bank deposit 2,500,000 (9,900,500,000)
Acquisition of property and equipment (99,177,344,840) (51,874,596,951)
Acquisition of intangible assets (18,435,122,958) (18,207,275,153)
Net cash used in investing activities (94,867,233,938) (79,367,139,382)

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in borrowings 7,680,000,000,000 5,734,000,000,000
Proceeds from issue of bonds payable 3,342,529,395,016 3,790,757,057,942
Repayment of borrowings (7,782,500,000,000) (6,725,766,400,000)
Repayment of bonds payable (3,240,684,500,000) (2,923,991,000,000)
Net cash used in financing activities (655,104,984) (125,000,342,058)

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (38,475,607,830) 32,975,130,889
CASH AND CASH EQUIVALENTS, BEGINNING OF
THE PERIOD 830,022,903,023 797,047,772,134
CASH AND CASH EQUIVALENTS, END OF THE
PERIOD ￦ 791,547,295,193 ￦ 830,022,903,023



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. GENERAL:

Hyundai Card Co., Ltd ( the “Parent”) is engaged in the credit card business under the Specialized Credit
Financial Business Law of Korea. On June 15, 1995, the Parent acquired the credit card business of Korea
Credit Circulation Co., Ltd. and on June 16, 1995, Korean government granted permission to the Parent to
engage in the credit card business.

As of December 31, 2012, the Parent has approximately 9.13 million card members, 1.98 million registered
merchants, and 159 marketing centers, branches and posts. Its head office is located in Yoido, Seoul.

As of December 31, 2012, the total common stock of the Parent is ￦802,326 million. The shareholders of the
Parent and their respective ownerships as of December 31, 2012 and December 31, 2011 are as follows:

Shareholder Number of shares % of ownership Number of shares % of ownership
Hyundai Motor Co., Ltd. 50,572,187 31.52 50,572,187 31.52
Kia Motors Co., Ltd. 18,422,142 11.48 18,422,142 11.48
Hyundai Steel Co., Ltd. 8,729,750 5.44 8,729,750 5.44
GE Capital Int'l Holdings 69,000,073 43.00 69,000,073 43.00
Hyundai Commercial Inc. 8,889,622 5.54 8,889,622 5.54
Others 4,851,512 3.02 4,851,512 3.02
Totals 160,465,286 100.00 160,465,286 100.00

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The Company maintains its official accounting records in the Republic of Korean won (“Won”) and prepares
consolidated financial statements in conformity with Korean statutory requirements and Korean International
Reporting Standards (“K-IFRS”), in Korean language (Hangul). Accordingly, these consolidated financial
statements are intended for use by those who are informed about K-IFRS and Korean practices. Certain
information included in the Korean language financial statements, but not required for a fair presentation of the
Company’s financial position, operating results, changes in shareholders’ equity or cash flows, is not presented
in the accompanying consolidated financial statements.

(1) Basis of Preparation

The Company has adopted K-IFRS for the annual period beginning on January 1, 2011.

The Company’s significant accounting policies applied for the accompanying consolidated financial statements
are the same as the policies applied for the preparation of the consolidated financial statements for the year
ended December 31, 2011, except for the effects from the introduction of new and revised accounting standards
or interpretations as described below.

The consolidated financial statements have been prepared on the historical cost basis except for certain non-
current assets and financial instruments that are measured at revalued amounts or fair values, as explained in
the accounting policies below. Historical cost is generally based on the fair value of the consideration given in
exchange for assets.

- 2 -

1) Accounting standards and interpretations that were newly applied for the year ended December 31, 2012,
and changes in the Company’s accounting policies are as follows:

K-IFRS 1107 Financial Instruments: Disclosures – Transfers of Financial Assets (Revised)

The amendments to K-IFRS 1107 require the Company to disclose the nature of the transferred assets, the
nature of the risks and rewards of ownership to which the Company is exposed, when the Company continues
to recognise all of the transferred assets, the carrying amounts of the transferred assets and the associated
liabilities at each reporting date for each class of transferred financial assets that are not derecognised in their
entirety. In addition, when the Company derecognizes transferred financial assets in their entirety but has
continuing involvement in them, the Company disclosed, for each type of continuing involvement at each
reporting date, the carrying amount of the assets and liabilities that are recognised in the Company’s
consolidated statements of financial position and represent the Company’s continuing involvement in the
derecognised financial assets, the amount that best represents the Company’s maximum exposure to loss from
its continuing involvement in the derecognised financial assets, and other risk exposure related information
(See Note 29).

Amendments to K-FIRS 1001, Presentation of Financial Statements – Disclosure of Operating Income
(Revised)

The amendment to K-IFRS 1001 require the Company to change the presentation of operating income by
deducting cost of sales and general and administration expenses from operating income line items. The
Company applied these amendments retroactively for the comparative period and changes in operating income
for the years ended December 31, 2012 and December 31, 2011 are as follows (Unit: Won in millions):

For the years ended December 31,
2012 2011
Operating income before the
application of the amendments ￦ 232,517,610,753 ￦ 323,617,338,360
Deduct:
Non-operating income
Gain on disposal of property
and equipment 9,133,500 5,897,268
Rental revenue 2,157,675,587 863,082,718
Miscellaneous revenue 200,026,435 190,101,137
Sub-total 2,366,835,522 1,059,081,123
Add:
Non-operating expenses
Loss on disposal of property
and equipment 577,531,514 4,520,026
Impairment loss of intangible
Assets 512,947,720 -
Donations 1,920,539,994 1,656,755,516
Miscellaneous expenses 115,000,000 -
Sub-total 3,126,019,228 1,661,275,542
Operating income after the
application of the amendments ￦ 233,276,794,459 ￦ 324,219,532,779

Amendments to K-FIRS 1012 Deferred Tax – Recovery of Underlying Assets (Revised)

The amendments to K-IFRS 1012 provide an exception to the general principles in K-IFRS 1012 that the
measurement of deferred tax assets and deferred tax liabilities should reflect the tax consequences that would
follow from the manner in which the Company expect to recover the carrying amount of an asset. Investment
property measured using the revaluation model under K-IFRS 1040 Investment Property or a non-depreciable
asset measured using the revaluation model in K-IFRS 1016 Property, Plant, and Equipment, are presumed to
be recovered through sale for the purposes of measuring deferred taxes, unless the presumption is rebutted in
certain circumstances. These amendments have no effect on the Company’s consolidated financial statements
and disclosures.

- 3 -

2) Currently, enactments and amendments of the K-IFRSs are in progress, and the financial information
presented in the consolidated financial statements may change accordingly in the future. The Company has
not applied or adopted earlier the following new and revised K-IFRSs that have been issued but are not yet
effective:

Amendment to K-IFRS 1001 (as revised in 2012), Presentation of financial statements: Presentation of Items
of Other Comprehensive Income

The amendments to K-IFRS 1001 require the Company to present items in the other comprehensive income
section to be grouped into those that will not be reclassified subsequently to profit or loss; and will be
reclassified subsequently to profit or loss when specific conditions are met. The amendments are effective for
annual periods beginning on or after July 1, 2012. The Company does not anticipate that these amendments
referred above will have a significant effect on the Company’s consolidated financial statements and
disclosures.

K-IFRS 1019 (as revised in 2011), Employee Benefits

The amendments to K-IFRS 1019 require the recognition of changes in defined benefit obligations and in fair
value of plan assets when they occur, and hence eliminate the ‘corridor approach’ permitted under the previous
version which allowed the Company defer the recognition of changes in net defined benefit liability and present
the gains or losses on defined benefit liability and planned assets either in net income or in other
comprehensive income. The amendments to K-IFRS 1019 are effective for annual periods beginning on or after
January 1, 2013 and require retrospective application with certain exceptions. The Company is reviewing on
the effect of these amendments on the Company’s consolidated financial statements and disclosures.

K-IFRS 1032 (as revised in 2012), Financial Instruments: Presentation

The amendments to K-IFRS 1032 clarify existing application issue relating to the offset of financial assets and
financial liabilities requirements. The Group’s right of set-off must not be contingent upon any future events
but enforceable anytime during the contract period in all of the circumstances; in the event of default,
insolvency or bankruptcy of the entity or the counterparties as well as in the ordinary course of business.
The amendments to K-IFRS 1032 are effective for annual periods beginning on or after January 1, 2014. The
Company does not anticipate that these amendments referred above will have a significant effect on the
Company’s consolidated financial statements and disclosures.

K-IFRS 1107 (as revised in 2012), Financial Instruments: Disclosures – Offsetting Financial Assets and
Financial Liabilities

The amendments to K-IFRS 1107 increase the disclosure requirements to include information about offsetting
financial assets and financial liabilities. The amendments to K-IFRS 1107 are effective for annual periods
beginning on or after January 1, 2013. The Company does not anticipate that these amendments referred above
will have a significant effect on the Company’s consolidated financial statements and disclosures.

K-IFRS 1110(as issued in 2011), Consolidated Financial Statements

K-IFRS 1110 establishes a single source of guidance in the application of definition of control. The standard
states that an investor controls an investee when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee.
K-IFRS 1110 is effective for annual periods beginning on or after 1 January 2013. The Company does not
anticipate that these enactments referred above will have a significant effect on the Company’s consolidated
financial statements and disclosures.

K-IFRS 1111(as issued in 2011), Joint Arrangements

K-IFRS 1111 deals with how a joint arrangement of which two or more parties have joint control should be
determined. Under K-IFRS 1111, joint arrangements are classified as joint operations or joint ventures,
depending on the rights and obligations of the parties to the arrangements. A joint operation is a joint
arrangement whereby the parties that have joint control of the arrangement (ie joint operators) have rights to
the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement

- 4 -

whereby the parties that have joint control of the arrangement (ie joint venturers) have rights to the net assets of
the arrangement. K-IFRS 1111 is effective for annual periods beginning on or after 1 January 2013. The
Company does not anticipate that these enactments referred above will have a significant effect on the
Company’s consolidated financial statements and disclosures.

K-IFRS 1112(as issued in 2011), Disclosures of Interests in Other Entities

K-IFRS 1112 improves disclosures of reporting entities that have an interest in a subsidiary, a joint
arrangement, an associate or unconsolidated structured entity. K-IFRS 1112 is effective for annual periods
beginning on or after 1 January 2013. The Company is reviewing on the effect of these amendments on the
Company’s consolidated financial statements and disclosures at the end of reporting period.

K-IFRS 1113(as issued in 2011) , Fair Value Measurements

K-IFRS 1113 establishes a single source of guidance for fair value measurements and disclosures about fair
value measurements. The standard defines fair value, establishes a framework for measuring fair value, and
requires disclosures about fair value measurements. K-IFRS 1113 is effective for annual periods beginning on
or after January 1, 2013, with earlier application permitted. The Company is reviewing on the effect of these
amendments on the Company’s consolidated financial statements and disclosures at the end of reporting period.

The accompanying consolidated financial statements of the Company were approved by the board of directors
on February 28, 2013

(2) Significant Accounting Policies

1) Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Parent and entities (including
special purpose entities) controlled by the Parent (or its subsidiaries). Control is achieved where the company
has the power to govern the financial and operating policies of an entity so as to obtain benefits from its
activities.

Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated
statement of comprehensive income from the effective date of acquisition and up to the effective date of
disposal, as appropriate. Carrying amounts of the non-controlling interests in subsidiaries is adjusted by the
changes in the proportion of the equity held by non-controlling interests after initial acquisition of non-
controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Changes in the Company’s ownership interests in subsidiaries without loss of control are accounted for as
equity transactions. The carrying amounts of the Company’s interests and the non-controlling interests are
adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount
by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is
recognized directly in equity and attributed to the owners of the Company.

When the Parent loses control of a subsidiary, the profit or loss on disposal is calculated as the difference
between (i) the aggregate of the fair value of the consideration received and the fair value of any retained
interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary
and any non-controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values
and the related cumulative gain or loss has been recognized in other comprehensive income and accumulated in
equity, the amounts previously recognized in other comprehensive income and accumulated in equity are
accounted for as if the Parent had directly disposed of the relevant assets (i.e. reclassified to profit or loss or
transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at

- 5 -

the date when control is lost is recognized as the fair value on initial recognition for subsequent accounting
under K-IFRS 1039 Financial Instruments: Recognition and Measurement or, when applicable, the cost on
initial recognition of an investment in an associate or a jointly controlled entity.

2) Card assets

Card assets are amounts due from customers for services performed in the ordinary course of business. Card
assets are initially measured at a fair value including direct transaction cost; thereafter it is measured at
amortized cost using the effective interest rate method except for the financial assets classified as at fair value
through profit or loss (“FVTPL”).

① Card Receivables

The Company records card receivables when its cardholders of the Company make purchases from domestic
and foreign merchants, and when cardholders of MasterCard International, Visa International and Diners Club
International make purchases from domestic merchants. Commission from merchants for advanced payments;
and commission from cardholders for installment payments and cash advances are recognized as revenue on an
accrual basis. Card receivables with non-interest bearing installment payment are initially recognized at fair
value using a discounted cash flow. Since interest rate and other factors considering for calculating the
discounted cash flow of interest bearing installment payments are different than those for non-interest bearing
installment payment, the Company independently determines the discount rates for non-interest bearing
installment payments with objective and reasonable method.

② Card Loans

The Company extends the card loans to its cardholders in accordance with the Specialized Credit Financial
Business Law. Commission incomes are accrued on a daily basis by calculating based on a constant rate per
cardholders’ credit rate until repayments of card loans.

③ Cash Advances

Cash advance service allows cardholders to withdraw cash up to certain limits depending on card members’
credit rating in accordance with the Specialized Credit Financial Business Law. Fees related to cash advances
are charged on the payment date with a specific percentage of service charges and interest income is accrued on
a daily basis until repayment of cash advance.

3) Financial assets

A financial asset is recognised when the Company becomes a party to the contract and at initial recognition. A
financial assets excluding a financial asset at fair value through profit of loss (“FVTPL”) is measured at its fair
value plus or minus, transaction costs that are directly attributable to the acquisition of the financial asset.
Otherwise, the transaction cost that is directly attributable to the acquisition of the financial asset at fair value
through profit or loss is recognized in profit or loss immediately when it arises.

A regular way purchase and sale of financial assets is recognised and derecognised at trade date. It is a
purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time
frame established generally by regulation or convention in the marketplace concerned.

Financial assets are classified into the following specified categories: financial assets at FVTPL, held-to-
maturity (“HTM”), available-for-sale (“AFS”) and loans and receivables. The classification depends on the
nature and purpose of the financial assets and is determined at the time of initial recognition.

① Effective interest rate method

The effective interest rate method is used for calculating the amortized cost of a debt instrument and allocating
interest income over the relevant period. The effective interest rate is the discounting rate used to estimate the
net carrying amount of future cash receipts (including all fees and points paid or received that form an integral
part of the effective interest rate, transaction costs and other premiums or discounts) throughout the expected
life of the debt instrument, or, where appropriate, a shorter period,

- 6 -

Interest income for debt instruments except for those financial assets classified as at FVTPL is recognized
using an effective interest rate method.

② Financial assets at FVTPL

Financial assets at FVTPL include financial assets held for trading or financial assets designated as at FVTPL
upon initial recognition. A financial asset which is acquired or incurred principally for the purpose of selling or
repurchasing in the near term and all derivatives including embedded derivatives bifurcated from host contract
(except for a derivative that is a designated and effective hedging instrument) are classified as held for trading.
Financial assets at FVTPL are measured at fair value and the change in value is recognised in income (loss) for
the period.

A financial asset is classified as held for trading if:

• it has been acquired principally for the purpose of selling in the near term; or
• on initial recognition it is part of a portfolio of identified financial instruments that the Company manages
together and has a recent actual pattern of short-term profit-taking; or
• it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial
recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise; or
• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed
and its performance is evaluated on a fair value basis, in accordance with the Company's documented risk
management or investment strategy, and information about the grouping is provided internally on that basis;
or
• it forms part of a contract containing one or more embedded derivatives, and K-IFRS 1039 Financial
Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be
designated as at FVTPL.

Financial assets at FVTPL are stated at fair value, and any gains or losses arising on remeasurement are
recognized in income (loss) for the period.

③ HTM investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Company
has the positive intent and ability to hold to maturity are classified as HTM investments. HTM investments are
measured at amortized cost using the effective interest rate method less any impairment, with revenue
recognized on an effective interest rate method basis.

④ AFS financial assets

Non-derivative financial assets that are not classified as at HTM, held-for-trading, designated as at FVTPL, or
loans and receivables are classified as at financial assets AFS.

Financial assets AFS are subsequently measured at fair value. Gains and losses arising from changes in fair
value are recognized and accumulated in other comprehensive income, with the exception of interest calculated
using the effective interest rate method and foreign exchange gains and losses on monetary AFS financial
assets, which are recognized in income (loss) for the period. Where the AFS financial assets are disposed of or
is determined to be impaired, the cumulative gains or losses previously accumulated in the other
comprehensive income is recognized income (loss) for the period.

Dividends from AFS equity instruments are recognized in income (loss) for the period when the Company’s
right to receive payment of the dividends is established.

- 7 -

The AFS investments in equity instruments that do not have a quoted price in an active market for an identical
instrument and their fair value are not reliably measurable and derivative assets that are linked to those
investments and must be settled by delivery of such an equity instrument are measured at cost, net of identified
impairment losses.

⑤ Loans and receivables

Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in
an active market are classified as loans and receivables. Loans and receivables are measured at amortized cost
using the effective interest rate method, less any impairment. Interest income is recognized by applying the
effective interest rate, except for short-term receivables when the effects of discount would be immaterial.

⑥ Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each
reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a
result of one or more events that occurred after the initial recognition of the financial asset, the estimated future
cash flows of the investment have been affected.

For listed and unlisted equity investments classified as AFS, a significant or prolonged decline in the fair value
of the security below its cost is considered to be objective evidence of impairment.

For all financial assets classified as AFS, objective evidence of impairment could include:

• significant financial difficulty of the issuer or counterparty;
• default or delinquency in interest or principal payments;
• it becoming probable that the borrower will enter bankruptcy or financial re-organization; or
• an active market for financial assets closes due to financial difficulties.

For certain categories of financial asset, such as card receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment
for a portfolio of receivables could include the Company’s past experience of collecting payments, an increase
in the number of delayed payments in the portfolio exceeding the average credit period, as well as observable
changes in national or local economic conditions that correlate with default on receivables.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is 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.

For financial assets measured at amortized cost, the amount of the impairment is recognized as the difference
between the carrying amount of the asset and current value of estimated future cash flows discounted by similar
to the current market rate. The impairment is not reversed in subsequent periods.

When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognized in
other comprehensive income are recognized in income (loss) for the period.

For financial assets measured at amortized cost, 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 previously recognized impairment loss is reversed through income (loss) for the period to the extent that the
carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized
cost would have been had the impairment not been recognized.

In respect of AFS equity instruments, impairment losses previously recognized in income (loss) for the period
are not reversed. Any increase in fair value subsequent to an impairment loss is recognized in other
comprehensive income. In respect of AFS debt instruments, in a subsequent period, the amount of the
impairment loss increases and the increase can be related objectively to an event occurring after the impairment
was recognized, the previously recognized impairment loss is reversed through income (loss) for the period.

- 8 -

⑦ Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the
asset to another entity. If the Company neither transfers or retains substantially all the risks and rewards of
ownership but continues to control the transferred asset, the Company recognizes its retained interest in the
asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the
risks and rewards of ownership of a transferred financial asset, the Company continues to recognize the
financial asset and also recognizes a collateralized borrowing for the proceeds received.
If the Company derecognizes the entire financial asset, the difference between total received amount plus the
sum of cumulative income recognized in other comprehensive income and the book value of the asset is
recognized in income (loss) for the period.

If the Company does not derecognize the entire financial asset, (for example, the Company holds either an
option to repurchase a certain portion of the asset or remaining equity, which does not allow the Company to
hold the most of the risks and benefits from the financial asset or the Company controls assets) the Company
divides the book value of financial assets into a recognized part and a unrecognized part in accordance with
relative fair value of each portion. The difference between total received amount for derecognized portion of
the asset plus the sum of cumulative income recognized in other comprehensive income and the book value of
the asset is recognized in income (loss) for the period. Cumulative income recognized in other comprehensive
income is divided into a recognized part and a unrecognized part in accordance with relative fair value of each
portion.

4) Property and Equipment

Property, plant and equipment are stated at cost less subsequent accumulated depreciation and accumulated
impairment losses. The cost of an item of property and equipment is directly attributable to their purchase or
construction, which includes any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management. It also includes the initial
estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Subsequent costs are recognized in carrying amount of an asset or as a separate asset if it is probable that future
economic benefits associated with the assets will flow into the Company and the cost of an asset can be
measurable. Routine maintenance and repairs are expensed as incurred.

The Company does not depreciate land. Depreciation expense is computed using the straight-line method based
on the estimated useful lives of the assets as follows:

Estimated useful lives
Building 40 years
Fixtures and equipment 4 years
Vehicles 4 years

Each part of property and equipment with a cost that is significant in relation to the total cost are depreciated
separately.

The Company assesses the depreciation method, the estimated useful lives and residual values of property and
equipment at the end of each reporting period. If expectations differ from previous estimates, the changes are
accounted for as a change in an accounting estimate.

When future economic benefits aren’t expected through the use or disposition of property and equipment, the
Company removes the book value of the assets from the consolidated statements of financial position. The
difference between the amounts received from the disposal and the book values of assets are recognized as
income (loss) of the period when the assets are removed.

5) Lease

A lease is classified as a finance lease whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases.

- 9 -

The Company recognizes the lesser of the current value of minimum lease payment and the fair value of lease
assets as capital lease assets and capital lease liabilities.

Lease payments are apportioned to each period between interest expense and the reduction of lease liabilities to
produce a constant periodic rate of interest on the remaining balance of lease liability. Financial cost except for
certain qualifying assets, in accordance with the Company’s accounting policies, is recognized immediately as
an expense in the period. Any adjustments to lease payment are recognized as cost when it occurred.

6) Intangible assets

① Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated
amortization and accumulated impairment losses. Amortization is recognized on a straight-line basis over their
estimated useful lives. The estimated useful lives and amortization method are reviewed at the end of each
reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.
Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated
impairment losses.

② Internally-generated intangible assets - research and development expenditure

Expenditure on research activities is recognized as an expense in the period in which it is incurred.

An internally-generated intangible asset arising from development (or from the development phase of an
internal project) is recognized if, and only if, all of the following have been demonstrated:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale;
• the intention to complete the intangible asset and use or sell it;
• the ability to use or sell the intangible asset;
• how the intangible asset will generate probable future economic benefits;
• the availability of adequate technical, financial and other resources to complete the development and to use
or sell the intangible asset; and
• the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred
from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-
generated intangible asset can be recognized, development expenditure is recognized in income (loss) for the
period when it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated
amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired
separately.

③ Intangible assets acquired in a business combination

Intangible assets that are acquired in a business combination are recognized separately from goodwill and are
initially recognized at their fair value at the acquisition date (which is regarded as their deemed cost).

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less
accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are
acquired separately.

④ Disposal of intangible assets

If future economic benefits are not expected through the use or disposition of the intangible assets, the
Company removes the book value of the assets from the consolidated financial statements. The difference
between the amounts received from the disposal of intangible assets and the book values of the assets are
recognized as income (loss) of the period when the assets are removed..

- 10 -

7) Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible
assets to determine whether there is any indication that those assets have suffered an impairment loss. If any
such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the
Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified, assets which recoverable amounts are not
individually estimated are also allocated to individual cash-generating units, or otherwise they are allocated to
the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be
identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for
impairment at least annually, and whenever there is an indication that the assets may be impaired.
Recoverable amounts are the higher of fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or a cash-generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (or the cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognized immediately in income (loss) for the period.

If impairment recognized in prior periods is reversed, the book value of the individual assets (or cash-
generating unit) is the smaller of the carrying amount of the recoverable amount and the book value that the
impairment would not have recognized in prior periods and the reversal of impairment loss is recognized
immediately in income (loss) for the period at the time.

8) Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a
past event, it is probable that the Company will be required to settle the obligation, and the amount of the
obligation is reliably estimated.

The amounts recognized as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows (where the effect of the time value of money is
material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a
third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received
and the amount of the receivable can be measured reliably.

At the end of each reporting period, the remaining provision balance is reviewed and assessed to determine if
the current best estimate is being recognized. If the existence of an obligation to transfer economic benefit is no
longer probable, the related provision is reversed during the period.

9) Financial liabilities and equity instruments

① Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or equity in accordance with the
substance of the contractual arrangement and the definition of financial liabilities and equity instruments.

- 11 -

② Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of
direct issue costs.

Treasury shares transactions are deducted directly from equity. Profit or loss arising from purchases and sales,
issuances, and incinerations of treasury shares are not recognized in income (loss) for the period.

③ Compound instruments

The component parts of compound instruments issued by the Company are allocated into financial liabilities
and equity in accordance with the definition of the financial asset and liability. Convertible option which can be
settled by exchanging financial asset such as fixed amount of cash for the fixed number of treasury shares is
equity instruments.

At the date of issue, the fair value of the liability component is estimated using the prevailing market interest
rate for a similar non-convertible instrument. This amount is recorded as a liability with an amortized cost basis
using the effective interest rate method until extinguished upon conversion or at the instrument’s maturity date.

The equity component is determined by deducting the amounts of the liability component from the fair value of
the compound instrument as a whole. This is recognized and included in equity, net of income tax effects, and
is not subsequently remeasured.

④ Financial liabilities

A financial liability is recognised when the Company becomes a party to the contract and at initial recognition.
A financial liability other than financial liability at FVTPL is measured at its fair value plus or minus
transaction costs that are directly attributable to the issue of the financial liability. Otherwise, the transaction
cost that is directly attributable to the issue of the financial liability at FVTPL is recognized in income (loss) for
the period immediately when it arises.

Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities.

⑤ Other financial liabilities

Other financial liabilities are subsequently measured at amortized cost using the effective interest rate method,
with interest expense recognized on an effective interest rate method.

The effective interest rate method is used for calculating the amortized cost of a financial liability and of
allocating interest expense over the relevant period. The effective interest rate is discounting rate used to
estimate the net carrying value of future cash payment including commission and points to be paid or received,
transaction cost and other premium or discounts throughout the expected life of financial liability, or, where
appropriate, a shorter period.

⑥ Derecognition of financial liabilities

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are
discharged, cancelled or they expire. On derecognition of a financial liability in its entirety, the difference
between the carrying amount and the consideration received is recognised in income (loss) for the period.

10) Derivative instruments

The Company enters into a variety of derivative contract, including interest rate swaps and currency swaps, to
manage its exposure to interest rate and foreign exchange rate risk.

- 12 -

Derivatives are initially recognized at fair value at the date the derivative contract is entered into and are
subsequently remeasured to their fair value at the end of each reporting period. Gain or loss from the change in
fair value is recognized in income (loss) for the period immediately unless the derivative is designated and
effective as a hedging instrument, in such case the timing of the recognition in profit or loss depends on the
nature of the hedge relationship.

A derivative with a positive fair value is recognized as a financial asset; a derivative with a negative fair value
is recognized as a financial liability.

① Embedded derivatives

When economic characteristics and risks of an embedded derivative are not closely related to the host contract
and a separate instrument with the same terms as the embedded derivative would meet the definition of a
derivative; and the changes in fair value of hybrid contract is not recognised in income (loss) for the period, the
Company accounts for the embedded derivative separately from the host contract.

② Hedge accounting

The Company designates certain derivative instruments as cash flow hedges.

At the inception of the hedge relationship, the Company documents the relationship between the hedging
instrument and the hedged item, along with its risk management objectives and its strategy for undertaking
various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company
documents whether the hedging instrument is highly effective in offsetting changes in cash flows of the hedged
item.

③ Cash flow hedges

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 income (loss) for the period, and is included in the other operating revenue or
expenses line item.

Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to
income (loss) for the period when the hedged item is recognized in income (loss) for the period.

Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging
instrument expires or is sold, terminated, or exercised, or it no longer qualifies for hedge accounting. Any gain
or loss accumulated in equity at that time remains in equity and is recognized when the forecasted transaction is
ultimately recognized in profit or loss. When a forecasted transaction is no longer expected to occur, the gain or
loss accumulated in equity is recognized immediately in profit or loss.

11) Share capital

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds. Stock issuance costs are incremental costs directly attributable to the issue of
equity instruments and are deducted on the initial recognition of the equity instruments.

Where the Parent or its subsidiary purchases any shares of the Parent or its subsidiary, the consideration paid is
deducted from shareholders’ equity as treasury shares until they are cancelled. Where such shares are
subsequently sold or reissued, any consideration received is included in shareholders’ equity.

12) Commission revenue

① Fees that are a part of the financial instruments’ effective interest rate

Fees that are a part of the effective interest rate of a financial instrument are treated as an adjustment to the
effective interest rate. Such fees include compensation for activities such as evaluating the borrower's financial
condition, evaluating and recording guarantees, collateral, and other security arrangements, negotiating the

- 13 -

terms of the instrument, preparing and processing documents and closing the transaction as well as origination
fees received on issuing financial liabilities measured at amortized cost. These fees are deferred and recognized
as an adjustment to the effective interest rate. However, in case the financial instrument is classified as a
financial asset at FVTPL, the relevant fee is recognized as revenue when the instrument is initially recognized.

② Commission from rendering of services

Commission revenue from rendering of services is recognized as the services are provided. When it is not
probable that specific loan agreement is contracted and agreed commission is not applied to K-IFRS 1039,
relating those services will be recognized on a straight-line basis as the work performs.

③ Commission from significant act performed

The recognition of revenue is postponed until the significant act is executed.

④ Unearned revenue from point programs (Customer loyalty program)

The Company operates customer loyalty program to provide customers with incentives to buy their goods or
services. If a customer buys goods or services, the Company grants the customer awards credits (often
described as ‘points’). The customer can redeem the award credits for awards such as free or discounted goods
or services. The awards credits are accounted separately as identifiable component of the sales transaction(s) in
which they are granted (the ‘initial sales’). The fair value of the consideration received or receivable in respect
of the initial sale shall be allocated between the award credits and the other components of the sale.

If the Company supplies the awards itself, it shall recognize the consideration allocated to award credits as
revenue when award credits are redeemed and it fulfills its obligation to supply awards. The amount of revenue
recognized shall be based on the number of award credits that have been redeemed in exchange for awards,
related to the total number expected to be redeemed.

If the third party supplies the awards, the Company shall assess whether it is collecting the consideration
allocated to the award credits on its own account (as the principal in the transaction ) or on behalf of the third
party (as agent for the third party). The amount of revenue recognized shall be net amount retained on its own
account.

13) Interest income and expense

Using the effective interest rate method, the Company recognizes interest income and expense in the
consolidated statements of comprehensive income. Effective interest rate method calculates the amortized cost
of financial assets or liabilities and allocates interest income or expense over the relevant period. The effective
interest rate discounts the expected future cash in and out through the expected life of financial instruments or,
if appropriate, through shorter period, to net carrying amount of financial assets or liabilities. When
calculating the effective interest rate, the Company estimates future cash flows considering all contractual
financial instruments except the loss on future credit risk. Also, effective interest rate calculation includes
redemption costs, points (part of the effective interest rate) that are paid or earned between contracting parties,
transaction costs, and other premiums or discounts. It is assumed that the cash flows and the expected existing
period of aggregation of homogeneous financial instruments are reliably estimable. However, in the exception
that cash flow of financial instruments (or aggregation of homogeneous financial instruments) or the estimated
maturity is not reliably estimable, the effective interest rate is calculated using the contractual terms of cash
flows for the entire contract period. If financial instruments or aggregation of homogeneous financial
instruments are impaired, the subsequent interest income is recognized based on the discount rate used in
discounting future cash flows for the purpose of the measurement of impairments.

14) Dividend revenue

Dividend income from investments is recognized when the shareholder’s right to receive the payment of
dividends has been established (provided that it is probable that the economic benefits will flow to the
Company and the amount of income can be measured reliably).

- 14 -

15) Foreign currency translation

The individual financial statements of the consolidated entities are presented in the currency of the primary
economic environment in which the Company operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial position of each entity are expressed in Korean Won,
which is the functional currency of the Company and the presentation currency for the consolidated financial
statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the
transactions. At the end of each reporting period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in
foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-
monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognized in income (loss) for the period in which they arise except for exchange
differences on transactions entered into in order to hedge certain foreign currency risks. See Note 2 (10) above
for hedging accounting policies.

16) Retirement benefit costs

Contributions to defined contribution plans are recognized as an expense when employees have rendered
service entitling them to the contributions.

For defined benefit plans, the cost of providing benefits is determined using the projected unit credit method,
with actuarial valuations being carried out at the end of each reporting period. The present value of defined
benefit obligations are determined by the discount rate that reflects the current rate of return on a high quality
corporate bond (or, in countries where there is no deep market in such bonds, government bonds) of equivalent
term and currency to the plan liabilities.
Actuarial gains and losses are changes in the present value of the defined benefit obligation resulting from
experience adjustments (the effects of differences between the previous actuarial assumptions and what has
actually occurred); and the effects of changes in actuarial assumptions. Past service cost is recognized
immediately to the extent that the benefits are already vested and otherwise is amortized on a straight-line basis
over the average period until the benefits become vested.

The retirement benefit obligation recognized in the consolidated statements of financial position represents the
present value of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses and
unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this
calculation is limited to unrecognized actuarial losses and past service cost, plus the present value of available
economic benefits of refunds and reductions in future contributions to the plan.

17) Taxation

Income tax consists of current tax and deferred tax.

① Current tax

The tax currently payable is based on taxable income for the period. Taxable income differs from income (loss)
before tax expenses as reported in the consolidated statement of comprehensive income because of items of
income or expense that are taxable or deductible in other periods. The Company’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

② Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in
the consolidated financial statements and the corresponding tax bases used in the computation of taxable
income. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred income
tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that
taxable income will be available against which those deductible temporary differences can be utilized. Such
deferred tax assets and liabilities are not recognized if the taxable or deductible temporary difference arises

- 15 -

from goodwill or from the initial recognition (other than in a business combination) of other assets and
liabilities in a transaction that affects neither the taxable income (taxable deficit) nor the accounting income.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in
subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such
investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable
income against which to utilize the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the
asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which
the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from the manner in which the Company expects, at the end of
the reporting period, to recover or settle the carrying amount of its assets and liabilities.

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

If a deferred tax liability or asset arises from investment property that is measured using the fair value model in
K-IFRS 1040 Investment Property, there is a rebuttable presumption that the carrying amount of the investment
property will be recovered through sale. Accordingly, unless the presumption is rebutted, the measurement of
the deferred tax liability or deferred tax asset shall reflect the tax consequences of recovering the carrying
amount of the investment property entirely through sale. This presumption is rebutted if the investment
property is depreciable and is held within a business model whose objective is to consume substantially all of
the economic benefits embodied in the investment property over time, rather than through sale.

③ Current and deferred tax for the year

Current and deferred tax are recognized in income (loss) for the period except when they relate to items that are
recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are
also recognized in other comprehensive income or directly in equity respectively. Where current tax or deferred
tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for
the business combination.

18) Earnings per share

Basic earnings per share is calculated by dividing net profit from the period available to common shareholders
by the weighted-average number of common shares outstanding during the year. Diluted earnings per share
are calculated using the weighted-average number of common shares outstanding adjusted to include the
potentially dilutive effect of common equivalent shares outstanding.

- 16 -

3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Company’s accounting policies, which are described in Note 2, management is
required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that
are not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimate is revised if the revision affects only that period or in the
period of the revision and future periods if the revision affects both current and future periods.

Critical accounting judgement and key sources of estimation uncertainty at the end of reporting period having
significant risk factors which can incur the material changes in the book value of assets and liabilities of the
Company for the following fiscal year are as follows:

1) Allowance for Doubtful Accounts

The Company determines and recognizes allowances for losses through impairment testing on credit card assets
and other assets, such as other accounts receivable, advance payments and accrued income. The Company also
recognizes provisions for losses on unused commitments. The accuracy of provisions for credit losses is
determined by the risk assessment methodology and assumptions used for estimating expected cash flows of
the borrower for allowances on individual loans and collectively assessing allowances for groups of loans and
provisions for unused commitments.

2) Unearned revenue from point programs

The Company provides its customers with incentives to buy goods or services by providing awards (called
“customer loyalty programs”) and allocates the fair value of the consideration received or receivable between
the award credits granted (“points”) and the other components of the revenue transaction. The Company
supplies the awards such as discounted payments or free gifts. The consideration allocated to the award credits
is measured by reference to their fair value, i.e. the amount for which the award credits could be sold separately.
The fair value of the consideration allocated to the award credits is estimated by taking into account expected
redemption rates, etc. and recognized as deferred revenue until the Company fulfills its obligations to deliver
awards to customers. The amount of revenue recognized is to be based on the number of award credits that
have been redeemed in exchange for awards, relative to the total number expected to be redeemed.

3) Post-Employment Benefits: Defined Benefit Plans

The Company operates a defined benefit pension plan (“Plan”). The amount recognized as a defined benefit
liability is the present value of the defined benefit obligation less the fair value of plan assets at the end of the
reporting period. The present value of defined benefit obligation is calculated annually by using actuarial
assumptions such as future increases in salaries, expected returns on plan assets, discount rate and others. The
Plan has the uncertainty due to the nature of long-term plan. The defined benefit obligation as of December 31,
2012 and December 31, 2011 are ￦10,695 million and ￦17,775 million, respectively (See Note 15).

4) Fair Value Measurement of Financial Instruments

As disclosed in Note 34, the fair value of financial instruments classified as certain level are measured using
valuation techniques where significant inputs are not based on observable market data. The Company believes
that valuation methods and assumptions used for measuring the fair value of financial instruments are
reasonable and that the fair value recognized in the consolidated statements of financial position is appropriate.

- 17 -

4. SUBSIDIARY:

(1) Details of the Company’s subsidiaries as of December 31, 2012 and December 31, 2011 are as follows:

Voting share (%)
Place of End of
incorporation and reporting
Companies Major operation operation December 31, 2012 December 31, 2011 period
PRIVIA 1st SPC Asset securitization Korea - 0.9 December
PRIVIA 2nd SPC Asset securitization Korea 0.9 0.9 "
PRIVIA 3rd SPC Asset securitization Korea 0.9 - "

The Company is considered to have substantial control over the entities by relationship with special purpose entities.

(2) Summary of financial information for subsidiaries as of December 31, 2012 and December 31, 2011 are as
follows (Unit: Won in millions)

December 31, 2012
Total assets Total liabilities Sales Net income Comprehensive income
PRIVIA 2nd SPC 448,139 453,646 50,584 - -
PRIVIA 3rd SPC 450,569 449,321 33,483 - -

December 31, 2011
Total assets Total liabilities Sales Net income Comprehensive income
PRIVIA 1st SPC 10 - 17,854 391 391
PRIVIA 2nd SPC 448,139 463,317 29,895 - -

(3) The changes in subsidiaries for the year ended December 31, 2012 are as follows (Unit: Won in millions):

Year ended December 31, 2012
PRIVIA 1st SPC Liquidation from asset-backed securities (“ABS”) maturity
PRIVIA 3rd SPC Establishment from newly issuing ABS

- 18 -

5. CASH AND DEPOSITS:

(1) Details of cash and cash equivalents as of December 31, 2012 and December 31, 2011 are as follows (Unit:
Won in millions):

Annual Annual
interest rate (%) Amount interest rate (%) Amount
Cash on hand - ￦ - - ￦ 4
Current deposits - 90 - 8,749
Pass-book deposits - 89,957 - 72,770
Other cash equivalents 2.70~2.90 170,000 3.20~3.60 300,000
Time deposits 2.00 11,500 2.90~3.70 25,500
Other deposits 2.80~3.00 520,000 3.00~4.25 423,000
￦ 791,547 ￦ 830,023

(2) Restricted deposits and others as of December 31, 2012 and December 31, 2011 are as follows (Unit: Won in
millions):

Type Entity December 31, 2012 December 31, 2011 Restriction
Deposits Guarantee deposits
KB and others ￦ 16 ￦ 18 for overdraft
Shinhan Bank
and others 33,000 33,000 Secured deposits
Mirae Asset Social enterprise
Securities 13 13 fund
Other Korea Asset
financial Management
assets Corporation 9,246 18,610 Escrow account
￦ 42,275 ￦ 51,641

6. INVESTMENT FINANCIAL ASSETS:

Investment financial assets as of December 31, 2012 and December 31, 2011 are as follows (Unit: Won in
millions):

Financial assets AFS
Unlisted shares investments ￦ 1,767 ￦ 1,767

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