kia motors slovakia s.r.o. annual report 2016
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1. Foreword ................................................................................................. 4
2. Key Events in Kia Motors Slovakia’s History .................................... 6
3. Kia Motors Slovakia ............................................................................... 8
CompanyProfile........................................................................... 8
CompanyExecutives................................................................... 8
KiaMotorsCorporation............................................................... 8
KiaMotorsSlovakiain2016....................................................... 9
GoalsandForecastfor2017...................................................... 9
ProductLine-Up......................................................................... 10
ProductionProcess....................................................................12
4. Sustainable Development ...................................................................14
EnvironmentalAspects..............................................................14
HumanResources.......................................................................15
EducationofEmployees............................................................15
SafetyandOccupationalHealthin2016.................................16
DueFulfilmentofObligations...................................................17
CooperationwithSchools.........................................................17
Philanthropy................................................................................18
CorporatePhilosophy.................................................................19
5. Quality Management System ...........................................................20
6. Financial Overview ................................................................................21
7. Yearly Closing ....................................................................................... 22
CONTENTS
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FOREwORD
InDecember2016,KiaMotorsSlovakiacelebrated the 10th anniversaryof the launch of passenger carproduction in Slovakia. During the
past decade more than 2.5 millionvehicles and 3.8 million engineshave left the production lines. Thementioned period represents an eraof continuous growth and develop-mentinthecompany’shistoryduringwhichtheannualproductioncapacityhas gradually increased to current350,000vehicles.
Last year was the seventh conse-cutiveyearinwhichtheproductionwasincreased. In total, 339,500 vehiclesand 612,915 engines were produced.ThefourthgenerationofKiaSportage,havingdominatedproductionquantitywithnearlytwothirdssincethelaunchof volume production in December2015,hasbecomethemain reasonofsuccess.ProductionofoneofthemostsellingCUVsinEuroperecordedover10percentriseyear-on-year.
Record breaking production has alsobeen confirmed by performance ofourmodelsinthereliabilityandqualitytests. Among many, a particularly
significant success of Sportage ina reliability survey of the reputableresearch company J.D. Power on theGerman market stands out whenin competition with 24 brands and68 models it came in first place. Itsdominance was also affirmed bya victory in 100,000 km long-termdurability tests of the renownedGerman automotive magazines AutoMotorundSportandAutoBild.Inbothlong-term tests the third generationachievedzero-defectresults.
Kia Motors Slovakia is one of themost significant companies in thecountry inmany aspects. On a long-termbasis,ithasbelongedtothetopproducers, employers and exporters,as well as contributors to the statebudget. Achieved production andbusiness results were highlighted
with the National Quality Award in2016 awarded by the Slovak OfficeofStandards,MetrologyandTesting.At the same time, our companywas
evaluatedasaLeadingHROrganisationamong automotive companies inSlovakia by PricewaterhouseCoopersSlovenskofourtimesinarow.
Allofthementionedresultswouldbedifficult to achieve without challengeand passion of our employees.Combination of their everyday efforttogether with a unique innovationsystemgivesourcompanyaparticularcompetitiveness advantage. Hugeacknowledgement belongs also to allofoursuppliersandbusinesspartnersthankstowhomweareabletoprovidethe top quality cars and fulfil ourambitiousgoalscontinuously.
EekHeeLeePresidentandCEOKiaMotorsSlovakia
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KEY EvENTS iN KiA MOTORS SLOvAKiA‘S HiSTORY
2 0 1 62004MarchInvestmentAgreementbetweenKMCandtheSlovakRepublicOctober Plantconstructionlaunched
2006December Productionofcee’d
2007June SportageproductionNovember ISO14001certificate
2008November ISO9001certificate
2010June 3rdgenerationSportage
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2 0 1 62011September ProductioninEngineshopIIOctober ProductionofVenga
2012April 2ndgenerationcee’dDecember STNOHSAS18001certificate
2013May cee’dGTandpro_cee’dGTproduction
2014October NationalProductivityAward2013NovemberSlovakGoldExclusivequalitycertificate
2015November4thgenerationSportage
2016NovemberSlovakNationalQualityAward2016
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KiA MOTORS SLOvAKiA
On March 18, 2004, Kia MotorsCorporation officially confirmed theconstruction of its first Europeanautomotive plant in Slovakia. KiaMotors Slovakia s.r.o. (hereinafterreferred to as “KiaMotors Slovakia”)is a company 100 percent owned byKia Motors Corporation. The main
activity is the production of motorvehicles including engines. Theregistered capital is in the amountof 433,322,934.01 EUR. In 2016, thecompanyexecutiveswereEekHeeLeeandJunGyuLee.
ThevolumeproductionatKiaMotorsSlovakia started in December 2006.TheplantcurrentlymanufacturesKiacee’d of lower middle class in threecarbodyversions,theCUVmodelKiaSportage,andtheMPVrepresentativeKiaVenga.
Eek Hee LeePresident and CEO
EekHeeLeestudiedattheUniversityofUlsan,SouthKorea,andsuccessfullygraduated in the field of MechanicalEngineering in 1979. He started hiscareer with Hyundai Group in 1981.Afterseveralyears,he joined thecarproductionplantinUlsanasDirectorofProductionManagementuntil2004.
Later,Mr. Lee began towork for theHyundaiMotorCompanyHeadquarterswhere he became responsible forStrategicPlanningandGlobalProduc-tion Management. As a highly skilledprofessional,hebecamethePresidentand CEO of Kia Motors Slovakia inDecember 2011. He is authorized toact solely as a statutory body of KiaMotorsSlovakia.
KiaMotorsCorporationisamakerofworld-class quality vehicles for theyoung-at-heart. The company wasfoundedin1944andisKorea‘soldestmanufacturer of motor vehicles.OverthreemillionKiavehiclesayearare produced at 14 manufacturingand assembly operations in fivecountries. In 2016, Kia Motors sold3,007,976vehiclesthroughanetworkof distributors and dealers covering180 countries thus conquering thethree-millionmarkforthefirsttime.The global value of the Kia Motors
brand has grown by 12 percentover the last year, according toInterbrand’s exclusive list of the 100‘BestGlobalBrands’.Accordingtothe2016study,Kiahasrisentothe69thmostvaluablebrandintheworld.TheKorean manufacturer’s estimatedbrand value grew from 5.7 billionUSD in 2015 to 6.3 billion USD in2016. As of December 31, 2016, KiaMotors employed 51,443 employeesworldwide. Its annual revenuesrepresent 52,713 billion KRW. KiaMotors Corporation‘s brand slogan –"ThePowertoSurprise“–representsthe company‘s global commitmentto surprise the world by providingexcitingandinspiringexperiencesthatgobeyondexpectations.
Jun Gyu LeeChief Financial Officer, Head of Business Management Division
In 1991, Jun Gyu Lee graduatedfrom Sogang University in Seoul,South Korea, specializing in BusinessAdministration.Threeyears later, hestarted to work for Hyundai Motorin Foreign Capital Management. In2010, JunGyu Lee joined KiaMotorsCorporation and worked with theGlobal Accounting department. Mr.Lee has beenworking at KiaMotorsSlovakia since March 2015 as CFOand Head of Business Managementdivision.Heisauthorizedtoactsolelyas a statutory body of Kia MotorsSlovakia.
Company Profile
Company Executives Kia Motors Corporation
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In recent years, car sales havestabilizedontheEuropeanmarketandgradually reached the pre-crisis levelof 2008. Despite the positive sales
trendonmarketsinseveralEuropeancountries, vehicle demand on KiaMotors Slovakia’s two key marketswilldependonpoliticaldecisions.TheEU economic sanctions against theRussian Federation remain in place,which is why a continuous negativeimpact on the purchasing power ofthe local population canbeexpected.The impact of Brexit from the singleEuropeanmarketwillbeknownafterthe final agreement on arrangementof its trade relations with the EU.ThedepreciationoftheBritishpoundmay have a negative impact on theeconomic results of our company inthenearfuture.
During 2016 Kia Motors Slovakiainvested60millioneuros in itsplant.Another130millioneuroswillbeusedin 2017 to adapt production lines for
productionofanewmodelandengine.The business plan of Kia MotorsSlovakia counts with production of335,000 cars. During the upcomingyear, employee’s training in relationto the planned production of a newmodelwillbeorganized.Besidesthem,another around 240 operators andengineersaregoingtogettrainingonthenewmodeldirectlyattheResearchandDevelopmentCentreinNamyang,South Korea. The main educationalfocus will again remain on technicalskillsandmanagementcompetencies.
Despitetheunfavourablesituationonthe labourmarket over the last yearwemanagedtosecurethenecessary
staff to cover the continuousproduction.Findingsuitablecandidateswith appropriate qualifications andworkhabitsisincreasinglychallenging.
Incaseoffurtherdeteriorationonthelabour market, Kia Motors Slovakiais ready to expand its recruitmentactivities also outside the Zilinaregion. In terms of employee healthprotection, several activities focusedon preventing damage of health,evaluation factors at workplace andwork,ergonomicsandregularmedicalcheck-upswerecarriedout lastyear.In 2017, attention will be aimed atfurther development of ergonomics,start of rehabilitation program foremployeesaswellascreatingasingleelectronic system for more efficientdata collection in the field of healthandsafety.
Kia Motors Slovakia in 2016
Goals and forecasts for 2017
Export: 95 countries
339,500 cars
612,915 engines
Sportage 64%, cee’d 28%, venga 8%
56% of Kia EU* sales made in KMS
Export: UK 16%, Germany 9%, Russia 9%
Most popular engine: 1.7 L diesel 24%
Profit after taxes: 213,991 thousand EUR
Revenue: 5,566,181 thousand EUR
*EUandEFTAmemberstates
Yearly car production (units) Yearly engines production
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016339,500 612,900
338,020 582,238
323,720 493,141
313,000 491,046
292,050 464,480
252,252 359,588
229,505 320,977
150,021 244,407
201,507 176,934
145,078 114,499
5,015 2,882
YEAR I PRODUCTION YEAR I PRODUCTION
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Kia Sportage
TheKia cee’d family of the C-segmenthas successfully applied itself withEuropean customers ever since 2006.Kia cee’d comes in three bodyversions: five-door hatchback, three-door sporty pro_cee’d, and familySportswagon. From the first half of2015, a product enhanced versionof its second generation has beenmanufactured. For those who enjoya sporty ride, two high-performanceversionsareathand:Kiacee’dGTandKiapro_cee’dGTpoweredby1.6-litreturbocharged GDI gasoline enginedelivering 150 kW. Themodern cee’dalsocomesinaGTLinethatattractscustomers with its sporty look and
dynamicattributesoftheGTversion.The GT Line comes in three bodyversions.Atthemoment,eachofthebodyversionsofKiacee’disavailablein two gasoline engines: 1.4-litre (73kW) and 1.6-litre (99 kW) as well astwo diesel engines: 1.4-litre (66 kW)and1.6-litre(81kWand100kW).The1.0-litreT-GDI(73kWor88kW)isatdisposal,too.
Lastyear, theCUVKiaSportagewasKia’s most sold model in Europe. InNovember 2015, production of thefourth generation with improveddriving experience and higher com-fort was launched. It acquired themaximum of five stars in the EuroNCAP safety rating. For customersexpecting sportier drive, a GT Lineeditioncomesinhandy.
ThemodelSportageissoldasafront-wheel drivewith a six-speedmanualgearbox in combinationwith gasoline1.6-litre GDI (GDI 97 kW or T-GDI130 kW) or diesel 1.7-litre (85 kW)or 2.0-litre (100 kW) engines. Theall-wheel drive variant comes withgasoline 1.6-litre T-GDI (130 kW) anddiesel2.0-litreCRDi(100kWor136kW)engines. For 2.0-litre engines, a six-
speed automatic or manual gearboxcanbechosenfrom.TheKiaSportagealsocomeswithaseven-speeddual-clutchtransmission. It isofferedonlywith the new 1.6-litre T-GDI enginewith 130kWor 1.7-litredieselengine(104kW).The2.4-litre(135kW)engineavailable in combination with thesix-speed automatic transmissioncompletes the all-wheel driveSportageportfolio.
Kia cee‘d
Product Line-Up
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Kia venga
EnginesIn 2016, Kia Motors Slovakiamanufactured a record 612,900engines representing a 5 percentyear-on-yearincrease.Morethanhalfofallproducedengineswereexported.Thesinglemostbuiltenginewasthe1.7-litre diesel accounting for 24percentofallcustomerorders.Dieselengines constituted over 50 percentof the total engine production. Theplantcurrentlyassembles1.4-litreand1.6-litre as well as 1.6-litre GDI andT-GDIgasolineengines.Thecompanyalso produces 1.4-litre, 1.6-litre,1.7-litre,and2.0-litredieselengines.
The spacious mini MPV designedand produced only for Europeancustomers completes the productline-uprollingofftheproductionlinesatKiaMotorsSlovakia.Vengaaswellascee’darebothproducedexclusivelyin the Slovak plant. It passed strictreliability and durability tests and isa product with stable position in theproduction portfolio. Since October2014, a product enhanced versionwith a new face and more moderninteriorhasbeenavailable.Currently,the model comes with two gasoline1.4-litre(66kW)and1.6-litre(92kW)in addition to two diesel 1.4-litre (66kW)and1.6-litre(85kW)engines. Sportage
64%
cee’d 28%
venga 8%
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Production Process
Press shop
2presslines86typesofpanels20-secondpanelproduction
5millionpanelsannually
Paint shop
360º Ro-Dipconveyorsystem7.5 kmconveyorsystem
80robots
14 colouroptions
Body shop
100%weldingautomatization
354robotsCapacity8typesofcarbodies
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Engine shop
5gasolineengines4 dieselengines
7metalcuttinglines2assemblylines
Assembly shop
Area 18footballpitches225 workingstations43%modularization
3.5 kmtesttrack
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SUSTAiNABLE DEvELOPMENTEnvironmental Aspects
An Environmental Management Sys-tem at Kia Motors Slovakia is basedon corporate social responsibilityprinciples valid for the wholeHYUNDAI MOTOR GROUP dividedinto economical, societal andenvironmental responsibility. Thecompany implements managementsystems in order to achieve itsenvironmental responsibility as anoutstandingcarmaker.
Environmental strategy is based onthekey factorssuchasminimizationof climate change effect, reductionofgasemission,recyclabilityincreaseandfulfilmentofcleanproduction.
Throughoutthewholemanufacturingprocess, Kia Motors Slovakia takesenvironment into consideration focu-sing on car production and R&Dactivities which are environmentallyfriendly. Evidence of such behaviourisshownintheimplementationoftheEnvironmental Management System,
which was certified according to theinternational standard ISO 14001.Amongothersarecertificatesreceivedfor manufactured car models: LCA -Life Cycle Assessment based on ISO14040 and Integrating environmentalaspects into product design anddevelopmentbasedonISO14062.
The company is a member of seve-ral national and internationalenvironmentalgroupings,e.g.member-ship in the legislative committee ofAutomotive Industry Association ofthe Slovak Republic, working groupsofACEA(industrialemissions,processchemicals,REACH),etc.
The Environmental Management Sys-tem commits the company tocomply not only with the requiredlegislation, but also to a constantimprovement of environmental pro-tection, regular evaluation ofenvironmental performance andgrowth in environmental awarenessof all employees. An important partof the system is regular monitoringand evaluation of consumption ofwater, energy, materials as well as
the amount of waste, waste watersand emissions over the period ofone car production, and acceptanceof environmental goals for theirreduction.
The Kia manufacturing plant redu-ces its long-term impact on theenvironment.While using the electricenergy in themainplant, theenergyeffectivity has been improved by 17percent due to implementation ofinnovative solutions. Also decreasedconsumption of natural gas hasbeen recorded thanks to which theamountofCO2emittedduringthecarproductionwasreducedby13percentinthesameperiod.Kiahasconfirmedits responsibleapproach towards theenvironment by planting 1,258 treesonitspremisesinTeplickanadVahom.
The goal of Kia Motors Slovakia isto proceed in the development ofenvironmental management becauseenvironmental protection is a key toasuccessfulbusinessandsustainabledevelopment.
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Human Resources As of December 31, 2016, the plantemployed a total of 3,625 people,while the average age reached 35years. The human resources policyatKiaMotorsSlovakia standson thefollowingbasicpillars:employeecare,transparent communication withemployees on horizontal level, highlycompetitive remuneration system,wide range of benefits usable infree time aswell as improvement ofconditionsforemployees.Since2005,auniqueconceptofcounsellingroomsso-called Harmony rooms have beenutilized; Harmony rooms are locateddirectly in production shops, throughwhichemployeeshaveanopportunitytoactivelyparticipateinimprovementof the working environment andrelationships in the workplace. Everyyear the company organizes eventsfor its employees and their familymembers; the most significant onesbeingtheKiaFamilyDayandParents’Day. In order to increase the levelof care for its employees and offerassistance in overcoming personaldifficulties, the company prepareda new program of psychologicalcounseling available from December
2016. The idea behind the concept istohelpemployeesconqueranystressrelated to their person and achieveharmony.
In 2016, a consulting firm Price-waterhouseCoopers Slovensko reco-gnized Kia Motors Slovakia as
a Leading HR Organization with themost effective management ofhuman resources and best practicesinthefieldofpersonnelmanagementinSlovakiainthecontestthecompanyhaswonfourtimesinarow.
Education of Employees
Kia Motors Slovakia has, since itsinception,focusedonthepersonalandprofessionalgrowthofitsemployees,whichthecompanyconsidersakeytoitssuccess.Lastyear,productionandadministrative employees attended345 different types of trainings,including trainings required by law.Thegoalofalltrainingswastoimprovetheirskillsandincreasetheirexpertiseas well as strengthen the work andmanagementcompetencies.
Kia Motors Slovakia also organizestrainingsincooperationwiththeparentcompany Kia Motors Corporation.The main objective is to acquirenecessary skills and technicalknowledge required forproductionofnew models. In 2016, 91 employeesattended trainings in South Korea.Throughouttheyear2016,KiaMotors
Slovakia’s employees were trainedfor 41,986 hours altogether. ForemployeeswithbestworkresultsKiaorganizesamotivationalprogramKiaSpiriteveryyear inSouthKorea; last
year, 60 of them participated in theprogram.KiaMotors Slovakia has itsown Training Centre in the village ofGbelany.
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In 2016, several activities in thefield of occupational health werecarried out focusing on preventionagainsthealthdamageofemployees,especially through medical exams,field evaluation factors of work andworkplaces as well as ergonomics.Throughout the year, orientationexams with electromyograph andperimeter were launched at thecompany’s doctor’s office, whichoptimize conditions for selection ofemployeesforcertainpositions.
Thisyear,intheareaoffieldevaluationofworkfactors,thecompanyfocusedon re-evaluation of all positions in
the plant that are in contact withchemicalagents.Atthesametime,incooperation with production relateddepartments and based on resultsfrom measurement of work factors(noise, vibration and physical load),auniformso-calledhealthiestpossiblerotation of positionswas establishedduringashiftinfourproductionshops,accordingtowhichtheRegionalOfficeof Public Health in Zilina categorizedpositions to one of the four workcategories.
Inergonomicswesuccessfullymana-ged to improve workplaces, e.g. bysupplementing ergonomic pads for
underneath the feet and exchangingordeterminingprocessesofrepairingvibration tools. Moreover, KiaMotorsSlovakia purchased ergonomic soft-ware that we plan to start using in2017,therebycontributingtoanalysisof problematic places and positionsin terms of physical load. Suggestedsolutionsofproblematicplaceswillbeconsultedandappliedbymembersofaworkgroupcreatedin2016tomakeworkplacesevenmoreeffectivefromergonomicspointofview.
Safety and Occupational Health in 2016
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Due Fulfilment of Obligations
Cooperation with Schools
Kia Motors Slovakia follows and fulfilsalllegalobligations,suchasfilingreportsand payment of taxes, insuranceand all other obligations under VAT,customs duties and employee-relatedduties. The company observes theobligations under the statutory auditact, whereby the legally stipulatedfunctions of the audit committeerest with the company’s supervisoryboard. Investment reports about thefulfilmentofobligationsconnectedwiththe drawing of state aid are preparedon a regular basis and provided to theMinistry of Economy of the SlovakRepublic. Kia settled all due claimsand due liabilities towards all stateauthoritiesbyDecember31,2016.
Kia Motors Slovakia has cooperatedactively with secondary vocationalschools in the Zilina region since2007;sincethenithasenabledmorethan700studentstoobtainpracticalexperience in itsproductionfacilities.
In the 2016/2017 school year, 39students finished vocational practicaltrainingintheKiaplant.
In the 2016/2017 school year, Kia isparticipating in the dual education
system for the first time. Twenty-two students in total from theSecondary Vocational EngineeringSchool in Kysucke Nove Mesto willgraduate in the following spe-cializations: Mechanical specialistof car production and Programmerof machining and welding tools anddevices. The students have not onlybeen receiving practical experiencewith themostattractiveemployer inthe Zilina region, they are also going
to be guaranteed a working positionaftertheirgraduation.
Six secondary students and twouniversity students have joined thescholarship program at Kia MotorsSlovakiainthe2016/2017schoolyear.Conditions for obtaining scholarshipswere excellent study results andpractical vocational training duringtheirstudies.
KiaMotorsSlovakiaoffersplanttoursof its production shops to secondaryvocational school students andtechnicaluniversitystudents.In2016,3,422 students accompaniedby theirteachersvisitedtheproductionplant.
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In 2016, Kia Motors Slovakiacontinuedtorealizeitsintentiontobearesponsiblepartnerfororganizationsand inhabitants of the Zilina Self-Governing Region by supportingvarious philanthropic activities. Thecompany supported 181 projects viaKia Motors Slovakia Foundation withthetotalamountofEUR1,614,726(formoreinformation,pleaseseethe2016Annual Report of KiaMotors SlovakiaFoundation).Thecompanyalsodonateda financial amount of EUR 375,000for direct realization of projects. Theprimaryfieldsofsupportin2016wereself-realizationofdisabledsportsmen,equalopportunitiesforminoritygroups,increaseofenvironmentalstabilityandsafety,education,culture,developmentof sports and volunteering of thecompany employees. Development ofeducation and sports with focus onchildrenandyouthremainsthetargetofthefoundationin2017.
A significant part of the corporateresponsibilityofKiaMotorsSlovakiaisthecompany’svolunteeringprogram:blood donation, support of 20 non-profit organizations via volunteering
or help with reconstruction ofZilina Faculty Hospital. In 2016, Kiavolunteers worked for 1,875 hoursaltogether.Inthesameyear,69ofouremployeesparticipatedinthelargestvolunteering event in Slovakia titledOur City,which benefited 10 variousorganizations in the Zilina region inoneday.In2016,KiaMotorsSlovakia
Foundation in cooperation with theNational Blood Transfusion Serviceorganized three blood donations foradministrativeemployees.Themostprecious body fluid was donated 57times. Voluntary blood donationshave been organized in Kia MotorsSlovakiasince2007.
Philanthropy
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Since its establishment, HYUNDAIMOTOR GROUP has been guided byits philosophy and values, and hasflourished by keeping these intact inthe organization. In 2011, Kia MotorsSlovakia adopted the corporatephilosophy and believes that itsgrowth into a global company couldnot have been possible withoutour management philosophy andhorizontalprinciplesthatstresstrustbased, on-site, and transparentmanagement.EffectiveasofMarch1,2014,KiaMotorsSlovakiaestablished
a system for handling motionsand investigation of allegations ofunethical behaviour of the companyemployees.
KiaMotorsfulfilscorporatephilosophyrepresenting the values which haveto be kept, the directionwewant totake,andaclearvisionofourfuture.Endowedwithanintrinsicpassionforsuccess,wepledge towork togethertowardournewvisionandaspirationfor 2020. A company’s managementphilosophy is the answer to why
the HYUNDAI MOTOR GROUP exists,and is a tenet that should be deeplyembeddedinthemindsandactionsofemployees.
The five core values defined as partof our new corporate philosophyare principles that have existed inus throughout our history, and areprinciples thatall employeespromisetofurtherfosterinourorganization.
Corporate Philosophy
We promote a customer-drivencorporate culture by providingthe best quality and impeccableservice.
We embrace every opportunityfor greater challenge, and areconfidentinachievingourgoals.
We are focused on mutualcommunication and collaboration within the company and with ourbusinesspartners.
Werespectthediversityofculturesandcustomsandstrivetobecomea respected global corporatecitizen.
We believe the future of ourorganization lies intheheartsandcapabilitiesofpeople,andwillhelpthem develop their potential bycreating a corporate culture thatrespectstalent.
Together for a better future.
viSiON 2020Lifetime partner in automobiles and beyond
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Customersatisfactionisatoppriorityfor Kia Motors Slovakia and all itsemployees. Qualified and educatedemployeesensurethehighestqualitylevelthroughoutthewholeproductionprocess, from the very beginningof production planning through carproductionallthewaytofinalqualitycontrol of newly manufactured ve-hicles prepared for export tocustomers. Almost 400 employeesensure the quality of vehicles duringthe manufacturing process to onlydeliver safe and reliable cars of highquality.
Automobiles produced at Kia MotorsSlovakia meet the high demands ofthe European Union and countriesthey are exported to. All enginesassembled into the plant’s productsdistributed in the European Union
comply with the Euro 6 emissionstandard. Engines exported to theRussian Federation comply with theEuro 5 emission standard. Moreover,allvehiclesmanufacturedintheplantreceivedtopcrashtestsafetyranking– five stars – in Euro NCAP. Modelsmanufactured in theSlovakKiaplanthave achieved success across thewhole of Europe. Among the mostsignificantonesisthewinofthethirdgeneration of Kia Sportage in theVehicleDependabilityStudyconductedin Germany by the renowned J.D.Power association. Model Sportagerankedfirstamong24brandsand68models. Its dominance was ensuredwith a win in the 100,000-kilometrelong termtests inacclaimedGermanautomotive magazines Auto MotorundSportandAutoBild.
Apart for product quality, focus isturned to improvement of a ma-nagement system. The QualityManagement System at Kia MotorsSlovakia was recertified by an inde-pendent certification body DNV GLaccording to ISO 9001:2008 in 2014.In2016,ahistoricallyhighestvalueofcustomer satisfactionwith quality ofourvehicleswasrecorded.Continuousimprovement of all processes withinthe company in order to achievemaximum customer satisfaction en-suredthecompanyawininthemostprestigiousqualityawardinSlovakia-the2016NationalQualityAwardoftheSlovak Republic. In 2017, Kia MotorsSlovakiawillprepareforrecertificationaccording to a new ISO 9001:2015standardsplannedforOctober2017.
QUALiTY MANAGEMENT SYSTEM
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6. Financial Overview
income Statement InTEUR
2016 2015
Revenue 5,566,181 5,073,403
Costofsales -5,031,643 -4,464,096
Gross profit 534,538 609,307
Administrativeandsellingexpenses -272,912 -303,184
Operating profit 261,626 306,123
Interestcosts -1,968 -2,200
Interestincome 1,379 2,831
Otherfinancial(expense)/income,net -4,220 -9,869
Net finance costs -4,809 -9,238
Otheroperatingincome/(expenses),net 23,356 -26,647
Profit before taxes 280,173 270,238
Currentanddeferredincometax -66,182 -60,100
Total comprehensive income for the year 213,991 210,138
Statement of changes in share capitalInTEUR
Capital increasing Amount Contributions of capital EUR
Balance as of 1.1.2016 433,323 EUR
Balance as of 31.12.2016 433,323 EUR
Balance sheet InTEUR
31 December 2016 31 December 2015
Assets
Non-currentassets 652,390 730,533
Currentassets 1,507,047 1,459,483
Total assets 2,159,437 2,190,016
Equity
Issuedcapital 433,323 433,323
Legalreservefundandaccumulatedprofit 467,462 418,347
Total equity 900,785 851,670
Liabilities
Non-currentliabilities 604,688 497,530
Currentliabilities 653,964 840,816
Total liabilities 1,258,652 1,338,346
Total equity and liabilities 2,159,437 2,190,016
Distribution of profit Thegeneralmeetingwilldecideonthedistributionofprofitintheamountof213,991TEURfortheyear2016accountingperiod.Theproposalpresentedbythestatutorybodytothegeneralmeetingisasfollows:• Nocontributiontoreservefund.• Distributionoftheremainingamountwillbedecidedongeneralmeeting.ThegeneralmeetingwillbeheldinMarch2017.
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7. Yearly Closing
Statement of financial position as at 31 December 2016inTEUR
Note 31 December 2016 31 December 2015
Assets
Property,plantandequipment 11 568,861 646,953
Intangibleassets 12 4,044 3,882
Prepaidroyaltyexpense 13 4,904 24,519
Deferredtaxassets 15 74,581 55,179
Total non-current assets 652,39 730,533
Inventories 16 307,866 316,936
Tradeandotheraccountsreceivable 17 863,791 946,068
Cashandcashequivalents 18 53,939 35,287
Prepaidexpenses 13 19,774 19,783
Intercompanyloanreceivable 19 259,891 99,674
Financeleasereceivable 14 - 557
Incometaxreceivable 1,786 41,178
Total current assets 1,507,047 1,459,483
Total assets 2,159,437 2,190,016
Equity
Issuedcapital 20 433,323 433,323
Legalreservefund 20 43,332 43,332
Accumulatedprofit 424,13 375,015
Total equity 900,785 851,67
Liabilities
Interest-bearingloansandborrowings 21 190,396 111,448
Provisions 22 414,292 386,082
Total non-current liabilities 604,688 497,53
Interest-bearingloansandborrowings 21 16,064 29,434
Tradeandotheraccountspayable 23 443,452 689,300
Provisions 22 194,448 122,082
Total current liabilities 653,964 840,816
Total liabilities 1,258,652 1,338,346
Total equity and liabilities 2,159,437 2,190,016
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Statement of cash flows for the year ended 31 December 2016 inTEUR
Cashflowsfromoperatingactivities Note 2016 2015
Profitfortheyear 213,991 210,138
Adjustmentsfor:
Depreciationofproperty,plantandequipmentandintangibleassets,netofamortisationofstateaid 11,12 105,102 107,109
Valueadjustmentforinventories 80 -17,598
Scrapofpropertyonretirement 92 255
Interestcosts 8 1,968 2,200
Interestincome 8 -1,379 -2,831
UnrealizedFXlosses 1,152 20,607
UnrealizedFXgains -14,936 258
Warrantyprovisionscharges 22 117,568 145,150
Otherprovisioncharges,netofactualcosts 22 52,083 -44,644
Warrantyprovisionreversal 22 - -3,500
Releaseofprepaidroyalty 6 19,616 20,715
Taxexpense 10 66,182 60,100
Gainon/(lossfrom)saleofproperty,plantandequipment -599 554
Operating profit before changes in working capital items 560,920 497,997
Decrease/(Increase)ininventories 16 8,990 -17,244
Decrease/(Increase)intradeandotherreceivablesandprepaidexpenses 13,17 95,849 -225,845
(Decrease)/Increaseintradeandotherpayables 23 -245,855 223,665
Cash generated from operating activities 419,904 478,573
Interestpaidfromfinancingreceivables,overdraftsandother -387 -
Interestreceivedfromonbillsofexchangeandbankdeposits 1,236 2,767
Taxpaid -46,192 -124,753
Warrantyclaims 22 -69,074 -70,063
Net cash generated from operating activities 305,487 286,024
Cashflowsfrominvestingactivities
Acquisitionofproperty,plantandequipment 11 -26,201 -116,606
Acquisitionofintangibleassets 12 -1,712 -887
Receiptoffinanceleasepaymentsincludinginterest 14 559 6,713
Provisionofintercompanyloan 19 -160,217 -54,892
Proceedsfromsaleofnon-currentassets 1,247 287
Interestreceivedfromintercompanyloan 368 623
Net cash (used for) investing activities -185,956 -164,762
Cashflowsfromfinancingactivities
Financeleasepaymentsincludinginterests 21 -3,491 -4,189
Repaymentoflong-termbankloans 21 -26,250 -36,719
Paymentofdividend -164,876 -173,238
Interestpaidonlong-termbankloans -1,262 -1,616
Receiptoflong-termbankloan 21 95,000 80,000
Net cash (used for) financing activities -100,879 -135,762
Netincrease/(decrease)incashandcashequivalents 18,652 -14,500
Cashandcashequivalentsatbeginningoftheperiod 18 35,287 49,787
Cash and cash equivalents at end of the period 18 53,939 35,287
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Statement of comprehensive income for the year ended 31 December 2016inTEUR
Note 2016 2015
Revenue 5 5,566,181 5,073,403
Costofsales 6 -5,031,643 -4,464,096
Gross profit 534,538 609,307
Administrativeandsellingexpenses 7 -272,912 -303,184
Operating profit 261,626 306,123
Interestcosts -1,968 -2,2
Interestincome 1,379 2,831
Otherfinancialexpense,net -4,22 -9,869
Net finance costs 8 -4,809 -9,238
Otheroperatingincome/(expense) 9 23,356 -26,647
Profit before taxes 280,173 270,238
Currentanddeferredincometax 10 -66,182 -60,1
Profit for the year 213,991 210,138
Othercomprehensiveincome - -
Total comprehensive income for the year 213,991 210,138
Statement of changes in equity for the year ended 31 December 2016inTEUR
Note Share capital Legal reserve
fund
Retained earnings
Total
(Note20) (Note20)
Balance as of 1 January 2015 433,323 30,154 351,293 814,770
Totalcomprehensiveincomefortheyear - - 210,138 210,138
Legalreservefundtransfer - 13,178 -13,178 -
Dividenddistribution - - -173,238 -173,238
Balance as of 31 December 2015 20 433,323 43,332 375,015 851,670
Balance as of 1 January 2016 433,323 43,332 375,015 851,670
Totalcomprehensiveincomefortheyear - - 213,991 213,991
Dividenddistribution - - -164,876 -164,876
Balance as of 31 December 2016 20 433,323 43,332 424,130 900,785
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Notes to the financial statements for the year ended 31 December 2016
1. General information about the CompanyKiaMotorsSlovakias.r.o.(hereinafterreferredtoas“theCompany”)isacompanyincorporatedinSlovakia.TheCompanywasestablishedon13February2004andwasregisteredintheCommercialRegisteron26February2004(CommercialRegisteroftheDistrictCourtZilina,Sections.r.o.,file15074/L).
TheCompany’sregisteredaddressis:
KiaMotorsSlovakias.r.o.ICO:35876832DIC:2021787801Sv.JanaNepomuckeho1282/1TeplickanadVahom01301Slovakia
TheprincipalactivityoftheCompanyisthemanufactureandsaleofautomobilesandengines.
Thesefinancialstatementshavebeenpreparedasat31December2016andfortheyearthenendedandwerepreparedandauthorizedforissuebytheCompany’sdirectorson24January2017.FinancialstatementscanbemodifieduntiltheapprovaloftheGeneralAssembly.
TheFinancialStatementshavebeenpreparedasordinaryfinancialstatementsinaccordancewithArticle17(6)ofSlovakActNo.431/2002Coll.onAccountingfortheaccountingperiodfrom1January2016to31December2016.
The Financial Statements of the Company as at 31 December 2015 including the auditor’s report on the audit of thefinancialstatementsasat31December2015andtheannualreportincludingthesupplementauditor’sreportontheauditofthecomplianceoftheannualreportwiththefinancialstatementswerefiledintheRegisterofFinancialStatementson22June2016.
On16January2017thegeneralmeetingappointedKPMGSlovenskospol.sr.o.astheauditoroftheFinancialStatementsfortheperiodfrom1January2016to31December2016.
The Company’s bodies:Directors EekHeeLee JunGyuLee
information about the ultimate parent
TheCompanyisconsolidatedintothefinancialstatementsofKiaMotorsCorporation,12,Heolleung-ro,Seocho-gu,Seoul,Korea,whichistheCompany’sparentthuspotentialstatementsareavailabletopublicatSeoul,Koreastockexchange.
2. Statement of complianceThesefinancialstatementshavebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)asadoptedbytheEuropeanUnion(EU).
3. Basis of preparation
Thefinancialstatementshavebeenpreparedonahistoricalcostbasis.
FunctionalcurrencyThe financial statements are presented in euro,which is the Company’s functional currency, and are rounded to thenearestthousand.
Use of estimates and judgmentThepreparationoffinancialstatementsinconformitywithIFRSrequiresmanagementtomakejudgments,estimatesandassumptionsthataffecttheapplicationofpoliciesandreportedamountsofassets,liabilities,incomeandexpenses.Theestimatesandassociatedassumptionsarebasedonhistoricalexperienceandvariousotherfactorsthatarebelievedtobereasonableunderthecircumstances,theresultsofwhichformthebasisofmakingthejudgmentsaboutcarryingvaluesofassetsandliabilitiesthatarenotreadilyapparentfromothersources.Actualresultsmaydifferfromtheseestimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognizedintheperiodinwhichtheestimateisrevisediftherevisionaffectsonlythatperiodor intheperiodoftherevisionandfutureperiodsiftherevisionaffectsbothcurrentandfutureperiods.
Inparticular,informationaboutsignificantareasofestimationuncertaintyandcriticaljudgmentsinapplyingaccountingpoliciesthathavethemostsignificanteffectontheamountrecognizedinthefinancialstatementsaredescribedinthefollowingnotes:
•Note22–Provisionforwarrantyrepairs
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4. Significant accounting policies
Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedinthesefinancialstatements.
a) Foreign currency
Transactionsinforeigncurrenciesaretranslatedtoeuroattheforeignexchangeraterulingatthedateprecedingthedateofthetransaction.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesatthebalancesheetdatearetranslatedtoeuroattheforeignexchangeraterulingatthatdate.Foreignexchangedifferencesarisingontranslationarerecognizedintheincomestatement.Non-monetaryassetsandliabilitiesthataremeasuredintermsofhistoricalcostinaforeigncurrencyaretranslatedusingtheexchangerateatthedateprecedingthedateofthetransaction.Non-monetaryassetsand liabilitiesdenominated in foreign currencies thatarestatedat fair valueare translated toeuroat foreignexchangeratesrulingatthedatesthefairvaluewasdetermined.
b) Property, plant and equipment
i. Owned assets
Itemsofproperty,plantandequipmentarestatedatcost lessaccumulateddepreciation (seebelow)and impairmentlosses(seeaccountingpolicyi).Thecostofself-constructedassetsincludesthecostofmaterials,directlabour,theinitialestimate,whererelevant,ofthecostsofdismantlingandremovingtheitemsandrestoringthesiteonwhichtheyarelocated,andanappropriateproportionofproductionoverheads.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset arecapitalizedaspartofthecostofthatasset.
Wherepartsofanitemofproperty,plantandequipmenthavedifferentusefullives,theyareaccountedforasseparateitemsofproperty,plantandequipment.
ii. Subsequent costs
TheCompanyrecognizesinthecarryingamountofanitemofpropertyorplantandequipmentthecostofreplacingpartofsuchanitemwhenthatcostisincurredifitisprobablethatthefutureeconomicbenefitsembodiedwithintheitemwillflowtotheCompanyanditscostcanbemeasuredreliably.Allothercostsarerecognizedintheincomestatementasanexpenseasincurred.
iii. Leased assets
Leases in termsofwhich theCompanyassumessubstantiallyall the riskand rewardsofownershipare classifiedasfinanceleases.Uponinitialrecognitiontheleasedassetismeasuredatanamountequaltothelowerofitsfairvalueortheminimumleasepayments.Subsequenttoinitialrecognition,theassetisaccountedforinaccordancewiththeaccountingpolicyapplicabletothatasset.
Other leases are operating leases and the leased assets are not recognized in the Company’s statement of financialposition.
iv. Depreciation
Depreciationischargedtotheincomestatementonastraight-linebasisovertheestimatedusefullivesofeachpartofanitemofproperty,plantandequipment.Theestimatedusefullivesareasfollows:
• buildings 20-30years• machineryandequipment 3-15years• moulds 4-5years• other 2-4years
Assetsaredepreciatedfromthedateofacquisitionor,inrespectofinternallyconstructedassets,fromthetimeanassetiscompletedandreadyforuse.Expenditureonrepairsormaintenanceofpropertyandequipmentincurredtorestoreormaintainfutureeconomicbenefitsexpectedfromtheassetsisrecognizedasanexpensewhenincurred.Depreciationmethodsandusefullives,aswellasresidualvalues,arereassessedatthereportingdate.
v. Government grants
TheCompanyisentitledtoreceivegovernmentgrantsrelatedtotheacquisitioncostsofproperty,plantandequipmentifcertainconditionsarefulfilled.TheconditionsarestipulatedintheInvestmentAgreementbetweentheCompanyandtheSlovakRepublicorindecisionsissuedbyMinistryofEconomy.Thegrantsreceivedarerecordedasadeductionofproperty,plantandequipmentandarebeingamortizedovertheestimatedusefullivesoftheproperty,plantandequipmentforwhichtheyhavebeenreceivedoncesuchassetsareplacedintouse.Non-monetarygrantsreceivedarerecordedatfairvalueuponreceiptdate.
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c) intangible assets
i. Owned assets
IntangibleassetsacquiredbytheCompanyhavefiniteusefullivesandaremeasuredatcostlessaccumulatedamortizationandaccumulatedimpairmentlosses(seeaccountingpolicyi).
EmissionrightspurchasedorgrantedbySlovakRepublicaremeasuredatcostsrespectivelythemarketvalueatthegrantdate.
ii. Subsequent costs
Subsequentexpenditureiscapitalizedonlywhenitincreasesthefutureeconomicbenefitsembodiedinthespecificassettowhichitrelates.Allotherexpendituresarerecognizedinprofitorlossasincurred.
iii. AmortizationAmortizationischargedtotheincomestatementonastraight-linebasisovertheestimatedusefullivesofeachpartofintangibleassets.Theestimatedusefullivesareasfollows:
• software 4-6years• otherintangibleassets 4-5years
iv. Emission rights
Emissionrightsareacquiredforownuseonlyandareaccountedforasanintangibleasset.Theemissionrightsgrantedbygovernmentarerecordedatfairvalueatthedateofreceipt.Emissionrightsaredisposedtocostofgoodssold,onceused.
d) Royalties
TheCompanypaysroyaltytoitsparentCompanyfortheproductionandsaleofcars.
i. Lump sum royalty
Prepaid lumpsumroyaltiesare initially recordedasprepaymentsandareamortizedonastraight-linebasisover theperiodforwhichtheroyaltyhasbeenpaid.Amortizationcostisrecordedascostofgoodssold(refertoNote6).Thelumpsumroyaltyreducestherunningroyaltycalculatedonthebasisdescribedbelow.
ii. Running royalty
Royaltiesrepresentregularexpensederivedfromtheentity’srevenueforsaleofcars(until2012:onthebasisofnumberofcarsproduced),andarerecordedascostofgoodssold(refertotheNote6).
e) Trade and other accounts receivable, finance lease receivable and intercompany loan receivable
Trade, other receivables, finance receivables and intercompany loans provided are recognized initially at fair value,subsequentto initialrecognitiontheyarestatedattheiramortizedcostusingtheeffective interestratemethod, lessimpairmentlosses(seeaccountingpolicyi).Tradereceivableisoffsetwithtradeliabilityandpresentedonthenetbasisinfinancialpositionwhenandonlywhen,thereiscurrentlyalegalenforceablerighttosetoffandthereisanintentiontosettlethereceivablesandliabilitiesonthenetbasisortorealizethemsimultaneously.
Accordingtotheagreementwiththreecustomers,theCompanychargesthecustomerafixedinterestratefortheagreedportionoffinancedperiod,whichisrecordedasinterestincomeonBillsofExchangefromrelatedparties(refertonote8).
f) inventories
Inventoriesarestatedatthelowerofcostornetrealizablevalue.Netrealizablevalueistheestimatedsellingpriceintheordinarycourseofbusiness,lesstheestimatedcostofcompletionandsellingexpenses.
Thecostofproductioninventoriesisbasedonstandardcostandincludesexpenditureincurredinacquiringtheinventoriesandbringingthemtotheirexistinglocationandcondition.Thecostofnon-productioninventoriesisbasedonaweightedaveragecostformulaandincludesexpenditureincurredinacquiringtheinventoriesandbringingthemtotheirexistinglocationandcondition.Inthecaseofmanufacturedinventoriesandworkinprogress,costincludesanappropriateshareofproductionoverheadsbasedonnormaloperatingcapacity.
g) Cash and cash equivalents
Cashandcashequivalentscomprisecashbalances.BankoverdraftsthatarerepayableondemandandformanintegralpartoftheGroup’scashmanagementareincludedasacomponentofcashandcashequivalentsforthepurposeofthestatementofcashflows.
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h) impairmentFinancial assetsAfinancialassetisconsideredtobeimpairedifobjectiveevidenceindicatesthatoneormoreeventshavehadanegativeeffectontheestimatedfuturecashflowsofthatasset.
Animpairmentlossinrespectofafinancialassetmeasuredatamortizedcostiscalculatedasthedifferencebetweenitscarryingamount,andthepresentvalueoftheestimatedfuturecashflowsdiscountedattheoriginaleffectiveinterestrate.
Individuallysignificantfinancialassetsaretestedforimpairmentonanindividualbasis.Theremainingfinancialassetsareassessedcollectivelyingroupsthatsharesimilarcreditriskcharacteristics.
Allimpairmentlossesarerecognizedinprofitorloss.
Animpairmentlossisreversedifthereversalcanberelatedobjectivelytoaneventoccurringaftertheimpairmentlosswasrecognized.Forfinancialassetsmeasuredatamortizedcost,thereversalisrecognizedinprofitorloss.
Non-financial assetsThecarryingamountsoftheCompany’sassets,otherthaninventories(seeaccountingpolicyb,cande)anddeferredtaxassets (seeaccountingpolicyo) are reviewedateach reportingdate todeterminewhether there is any indicationofimpairment.Ifanysuchindicationexists,theasset’srecoverableamountisestimated.An impairment loss is recognizedwhenever the carrying amount of an asset or its cash-generating unit exceeds itsrecoverableamount.Acash-generatingunitisthesmallestidentifiableassetgroupthatgeneratescashflowsthatarelargelyindependentfromotherassetsandgroups.
Impairmentlossesrecognizedinrespectofcash-generatingunitsareallocatedfirsttoreducethecarryingamountofanygoodwillallocatedtocash-generatingunits(groupofunits)andthen,toreducethecarryingamountoftheotherassetsintheunit(groupofunits)onaproratabasis.
Therecoverableamountofotherassetsisthegreateroftheirfairvaluelesscoststosellandvalueinuse.Inassessingvalue inuse,theestimatedfuturecashflowsarediscountedtotheirpresentvalueusingapre-taxdiscountratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.Foranassetthatdoesnotgeneratelargelyindependentcashinflows,therecoverableamountisdeterminedforthecash-generatingunittowhichtheassetbelongs.
Inrespectofotherassets, impairment lossesrecognized inpriorperiodsareassessedateachreportingdateforanyindicationsthatthelosshasdecreasedornolongerexists.Animpairmentlossisreversediftherehasbeenachangeintheestimatesusedtodeterminetherecoverableamount.
Animpairmentlossisreversedonlytotheextentthattheasset’scarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendetermined,netofdepreciationoramortization,ifnoimpairmentlosshadbeenrecognized.
i) interest-bearing borrowingsInterest-bearingborrowingsarerecognizedinitiallyatfairvaluelessattributabletransactioncosts.Subsequenttoinitialrecognition,interest-bearingborrowingsarestatedatamortizedcostwithanydifferencebetweencostandredemptionvaluebeingrecognizedintheincomestatementovertheperiodoftheborrowingsonaneffectiveinterestbasis.
j) Provisions
AprovisionisrecognizedinthebalancesheetwhentheCompanyhasapresentlegalorconstructiveobligationasaresultofapasteventthatcanbeestimatedreliably,andit isprobablethatanoutflowofeconomicbenefitswillberequiredtosettletheobligation.Provisionsaredeterminedbydiscountingtheexpectedfuturecashflowsatapre-taxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyand,whereappropriate,therisksspecifictotheliability.
Aprovisionforwarranties is recognizedwhentheunderlyingproductsorservicesaresold.Thesupplierswarrantforapartofwarrantyprovisionandtheybeartheriskoffailureoftheirparts.KMSwarrantsfortheactualclaimtothecustomersand itmayreclaimaportionthatwascausedbysuppliers.Thereclaimasset isfullyrecognizedwhen it isvirtuallycertainitwillbecollected.ForfurtherdescriptionrefertoNote29.
k) Trade and other payables
Tradeandotherpayablesarerecognizedinitiallyatfairvalue.Subsequenttoinitialrecognitiontheyarestatedatamortizedcost.Tradepayableisoffsetwithtradereceivableandpresentedonthenetbasisinfinancialpositionwhenandonlywhen,thereiscurrentlyalegalenforceablerighttosetoffandthereisanintentiontosettletheliabilitiesandreceivablesonthenetbasisortorealizethemsimultaneously.
l) Revenue for goods sold
Revenuefromthesaleofgoodsisrecognizedintheincomestatementwhenthesignificantrisksandrewardsofownershiphavebeentransferredtothebuyer.Norevenueisrecognizediftherearesignificantuncertaintiesregardingrecoveryoftheconsiderationdue,associatedcostsorthepossiblereturnofgoodsalsocontinuingmanagementinvolvementwiththegoods.AsignificantelementoftheCompany’srevenueiswithrelatedparties(seeNote25).
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Thetimingofthetransfersofrisksandrewardsvariesdependingontheindividualtermsofthesalesagreement.Formajorityofcustomerstherisksandrewardsusuallytransferwhentheproductisdeliveredtofirstcarrier.Generallythecarssoldtothecustomershavenorightsofreturn.
m) Finance costs and finance income
Financecostsandfinanceincomecompriseinterestexpenseonborrowingscalculatedusingtheeffectiveinterestratemethod,interestincomeonfundsinvestedandforeignexchangegainsandlossesrelatedtochangesinthebankbalancesandloans.
Interestincomeandexpensearerecognizedintheincomestatementastheyaccrue,usingtheeffectiveinterestmethod,excepttotheextentthattheyrelatetothefinancingofproperty,plantandequipment,inwhichcasetheyarecapitalizedaspartoftheacquisitioncostsoftherelatedassets.
Interestpaidfromthelongtermbankloan,shorttermbankloanandfinanceleaseliabilitiesarepresentedinthecashflowsfromfinancingactivities.Interestreceivedfromfinanceleasereceivableispresentedincashflowsfrominvestingactivities.Interestpaidonoverdrafts,interestpaidandreceivedfromfinancingreceivables(seeaccountingpolicyf)andotherinterestpaidandreceivedarepresentedincashflowsfromoperatingactivities.
n) Other operating income and expense
Otheroperatingcostsandotheroperating incomecompriseofforeignexchangegainsand lossesrelatedtooperatingincomeandoperatingexpenses,gainonsaleofproperty,plantandequipment,governmentgrantsforjobcreationandeducationandotheritems.
o) income tax
Incometaxexpensecomprisescurrentanddeferredtax.Incometaxisrecognizedintheincomestatementexcepttotheextentthatitrelatestoitemsrecognizeddirectlyinequity,inwhichcaseitisrecognizedinequity. Current tax is theexpected taxpayableon the taxable incomefor theyear,using tax ratesenactedorsubstantivelyenactedatthebalancesheetdate,andanyadjustmenttotaxpayableinrespectofpreviousperiods.
Deferredtaxisprovidedusingthebalancesheetliabilitymethod,providingfortemporarydifferencesbetweenthecarryingamounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes and taxlossescarriedforward.Temporarydifferencesrelatingtothe initialrecognitionofassetsor liabilitiesthataffectneitheraccountingnortaxableprofitarenotprovidedfor.Deferredtaxismeasuredatthetaxratesthatareexpectedtobeappliedtothetemporarydifferenceswhentheyreverse,basedonthelawsthathavebeenenactedorsubstantivelyenactedbythereportingdate. Adeferredtaxassetisrecognizedonlytotheextentthatitisprobablethatfuturetaxableprofitswillbeavailableagainstwhichthetemporarydifferencecanbeutilized.Deferredtaxassetsarereviewedateachreportingdateandarereducedtotheextentthatitisnolongerprobablethattherelatedtaxbenefitwillberealized.
p) Employee benefits
Short-termemployeebenefitsobligationsaremeasuredonanundiscountedbasisandareexpensedastherelatedserviceisprovided.
Aliabilityisrecognizedfortheamountexpectedtobepaidundershort-termcashbonusiftheCompanyhasapresentlegalorconstructiveobligationtopaythisamountasaresultofpastserviceprovidedbytheemployeeandtheobligationcanbeestimatedreliably.
Long-termemployeebenefitscompriseofaretirementbonusdefinedbasedonthebenefitthatanemployeewillreceiveuponfirstretirement.Theamountofthisbenefitdependsonyearsofserviceandisaccruedbasedonactuarialestimations.TheminimumrequirementoftheLabourCodeforaretirementbonusisonemonthaveragesalary.
q) Government grants
GovernmentgrantsareinitiallyrecognizedinthebalancesheetwhenthereisreasonableassurancethatitwillbereceivedandthattheCompanywillcomplywiththeconditionsattachingtoit.GrantsthatcompensatetheCompanyforexpensesincurredareinitiallyrecognizedasdeferredrevenueanditisreleasedtotheincomestatementasotheroperatingincomeonasystematicbasisinthesameperiodsinwhichtheexpensesarerecognized.GrantsthatcompensatetheCompanyfortheacquisitioncostsofproperty,plantandequipmentareinitiallyrecognizedasadeductionofproperty,plantandequipmentandareamortized,reflectedintheincomestatementasadeductionofdepreciationexpenseovertheusefullifeoftheassetstowhichtheyrelate(refertoNote4,b.v.).
r) New standards
ThefollowingnewStandardsandInterpretationsarenotyeteffectivefortheannualperiodended31December2016andhavenotbeenappliedinpreparingthesefinancialstatements:
30
iFRS 9 Financial instruments
IFRS9wasissuedinJuly2014andiseffectiveforannualperiodsbeginningonorafter1January2018.Keyfeaturesofthenewstandardare:
Financialassetsarerequiredtobeclassifiedintothreemeasurementcategories:thosetobemeasuredsubsequentlyatamortisedcost,thosetobemeasuredsubsequentlyatfairvaluethroughothercomprehensiveincome(FVOCI)andthosetobemeasuredsubsequentlyatfairvaluethroughprofitorloss(FVPL).
Classificationfordebtinstrumentsisdrivenbytheentity’sbusinessmodelformanagingthefinancialassetsandwhetherthecontractualcashflowsrepresentsolelypaymentsofprincipalandinterest(SPPI).Ifadebtinstrumentisheldtocollectcashflows,itmaybecarriedatamortisedcostifitalsomeetstheSPPIrequirement.DebtinstrumentsthatmeettheSPPIrequirementandareheldinaportfoliowhereanentitybothholdstocollectassets’cashflowsandsellsassetsmaybeclassifiedasFVOCI.FinancialassetsthatdonotcontaincashflowsthatareSPPImustbemeasuredatFVPL(forexample,derivatives).EmbeddedderivativesarenolongerseparatedfromfinancialassetsbutwillbeincludedinassessingtheSPPIcondition.
Investments inequity instrumentsarealwaysmeasuredatfairvalue.However,managementcanmakeanirrevocableelectiontopresentchangesinfairvalueinothercomprehensiveincome,providedtheinstrumentisnotheldfortrading.Iftheequityinstrumentisheldfortrading,changesinfairvaluearepresentedinprofitorloss.
Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forwardunchangedtoIFRS9.Thekeychangeisthatanentitywillberequiredtopresenttheeffectsofchangesinowncreditriskoffinancialliabilitiesdesignatedatfairvaluethroughprofitorlossinothercomprehensiveincome.
IFRS9introducesanewmodelfortherecognitionofimpairmentlosses–theexpectedcreditlosses(ECL)model.Thereisa ‘threestage’approachwhich isbasedonthechange increditqualityoffinancialassetssince initialrecognition. Inpractice, thenewrulesmean thatentitieswillhave to recordan immediate lossequal to the 12-monthECLon initialrecognitionoffinancialassetsthatarenotcreditimpaired(orlifetimeECLfortradereceivables).Wheretherehasbeena significant increase in credit risk, impairment ismeasuredusing lifetimeECL rather than 12-monthECL.Themodelincludesoperationalsimplificationsfortradereceivablesandlease.
Hedgeaccounting requirementswereamendedtoalignaccountingmorecloselywith riskmanagement.Thestandardprovides entitieswith an accounting policy choice between applying the hedge accounting requirements of IFRS 9 orcontinuingtoapplyIAS39toallhedgesbecausethestandardcurrentlydoesnotaddressaccountingformacrohedging.ThestandardhasnotbeenendorsedbytheEuropeanUnionyet.TheCompanyiscurrentlyassessingtheimpactofthenewstandardonitsfinancialstatements.
iFRS 15 Revenue from Contracts with CustomersIFRS15hasbeenissuedon28May2014andiseffectivefortheperiodsbeginningonorafter1January2018.Thenewstandardintroducesthecoreprinciplethatrevenuemustberecognisedwhenthegoodsorservicesaretransferredtothecustomer,atthetransactionprice.Anybundledgoodsorservicesthataredistinctmustberecognisedseparately,andanydiscountsorrebatesonthecontractpricemustgenerallybeallocatedtotheseparateelements.Whentheconsiderationvariesforanyreason,minimumamountsmustberecognisediftheyarenotatsignificantriskofreversal.Costsincurredtosecurecontractswithcustomershavetobecapitalisedandamortisedovertheperiodwhenthebenefitsofthecontractareconsumed.
ThestandardhasbeenendorsedbytheEuropeanUnion.ClarificationstoIFRS15RevenuefromContractswithCustomersisnotyetendorsedbytheEUbutIFRS15RevenuefromContractswithCustomersincludingEffectiveDateofIFRS15havebeenendorsedbytheEU.TheCompanyiscurrentlyassessingtheimpactofthenewstandardonitsfinancialstatements.
iFRS 16 LeasesIFRS16iseffectiveforannualperiodsbeginningonorafter1January2019.EarlierapplicationispermittediftheentityalsoappliesIFRS15.IFRS16supersedesIAS17Leasesandrelatedinterpretations.TheStandardeliminatesthecurrentdualaccountingmodelforlesseesandinsteadrequirescompaniestobringmostleaseson-balancesheetunderasinglemodel,eliminatingthedistinctionbetweenoperatingandfinanceleases.UnderIFRS16,acontractis,orcontains,aleaseifitconveystherighttocontroltheuseofanidentifiedassetforaperiodoftimeinexchangeforconsideration.Forsuchcontracts,thenewmodelrequiresalesseetorecognisearight-of-useassetandaleaseliability.Theright-of-useassetisdepreciatedandtheliabilityaccruesinterest.Thiswillresultinafront-loadedpatternofexpenseformostleases,evenwhenthelesseepaysconstantannualrentals.
ThenewStandardintroducesanumberoflimitedscopeexceptionsforlesseeswhichinclude:• leaseswithaleasetermof12monthsorlessandcontainingnopurchaseoptions,and• leaseswheretheunderlyingassethasalowvalue(‘small-ticket’leases).
LessoraccountingshallremainlargelyunaffectedbytheintroductionofthenewStandardandthedistinctionbetweenoperatingandfinanceleaseswillberetained.
AnnualImprovementstoIFRSs
The improvements introduce amendments existing standards, interpretations and consequential amendments tootherstandardsandinterpretations.NoneoftheseamendmentsorinterpretationshavebeenendorsedbyEUyet.
NoneoftheseamendmentsareexpectedtohaveasignificantimpactonthefinancialstatementsoftheEntity.
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AmendmentstoIAS7(applicabletoannualperiodsbeginningonorafter1January2017).Theamendmentrequirenewdisclosuresthathelpuserstoevaluatechangesinliabilitiesarisingfromfinancingactivities,includingchangesfromcashflowsandnon-cashchanges(suchastheeffectofforeignexchangegainsorlosses,changesarisingforobtainingorlosingcontrolofsubsidiaries,changesinfairvalue).
AmendmentstoIAS12:RecognitionofDeferredTaxAssetsforUnrealisedLosses(applicabletoannualperiodsbeginningonorafter1January2017).Theamendmentsclarifyhowandwhentoaccountfordeferredtaxassetsincertainsituationsandclarifyhowfuturetaxableincomeshouldbedeterminedforthepurposesofassessingtherecognitionofdeferredtaxassets.
Amendments to IFRS 2: Classification andMeasurement of Share-based Payment Transactions (applicable to annualperiodsbeginningonorafter1January2018).Theamendmentsclarifyshare-basedpaymentaccountingonthefollowingareas: • theeffectsofvestingandnon-vestingconditionsonthemeasurementofcash-settledshare-basedpayments; • share-basedpaymenttransactionswithanetsettlementfeatureforwithholdingtaxobligations;andamodificationtothetermsandconditionsofashare-basedpaymentthatchangestheclassificationofthetransactionfromcash-settledtoequitysettled.
Amendments to IFRS 4: Applying IFRS 9 Financial Instrumentswith IFRS 4 Insurance Contracts (applicable to annualperiodsbeginningonorafter1January2021).TheamendmentsaddressconcernsarisingfromimplementingIFRS9beforeimplementingthereplacementstandardthattheIASBisdevelopingforIFRS4.Theamendmentsintroducetwooptionalsolutions.OnesolutionisatemporaryexemptionfromIFRS9,effectivelydeferringitsapplicationforsomeinsurers.Theother isanoverlayapproachtopresentationtoalleviatethevolatilitythatmayarisewhenapplyingIFRS9beforetheforthcominginsurancecontractsstandard.
AmendmentstoIFRS10andIAS28Saleorcontributionofassetsbetweenaninvestoranditsassociateorjointventure(effectivedatehasnotbeensetyetbytheIASB).TheAmendmentsclarifythatinatransactioninvolvinganassociateor joint venture, theextentofgainor loss recognitiondependsonwhether theassets soldor contributed constituteabusiness,suchthat: • afullgainorlossisrecognisedwhenatransactionbetweenaninvestoranditsassociateorjointventureinvolves
thetransferofanassetorassetswhichconstituteabusiness(whetheritishousedinasubsidiaryornot),whilea partial gain or loss is recognisedwhen a transaction between an investor and its associate or joint ventureinvolvesassetsthatdonotconstituteabusiness,eveniftheseassetsarehousedinasubsidiary.
AmendmentstoIAS12:RecognitionofDeferredTaxAssetsforUnrealisedLosses(applicabletoannualperiodsbeginningonorafter1January2017).Theamendmentsclarifyhowandwhentoaccountfordeferredtaxassetsincertainsituationsandclarifyhowfuturetaxableincomeshouldbedeterminedforthepurposesofassessingtherecognitionofdeferredtaxassets.
AmendmentstoIAS40TransfersofInvestmentProperty(applicabletoannualperiodsbeginningonorafter1January2018).Theamendmentsreinforcetheprinciplefortransfersinto,oroutof, investmentpropertyin IAS40InvestmentPropertytospecifythatsuchatransfershouldonlybemadewhentherehasbeenachangeinuseoftheproperty.Basedontheamendmentsatransfer ismadewhenandonlywhenthere isanactualchangeinuse– i.e.anassetmeetsorceasestomeetthedefinitionofinvestmentpropertyandthereisevidenceofthechangeinuse.Achangeinmanagementintentionalonedoesnotsupportatransfer.
InterpretationIFRIC22ForeignCurrencyTransactionsandAdvanceConsideration(applicabletoannualperiodsbeginningonorafter1January2018).TheInterpretationclarifieshowtodeterminethedateofthetransactionforthepurposeofdeterminingtheexchangeratetouseoninitialrecognitionoftherelatedasset,expenseorincome(orpartofit)onthederecognitionofanon-monetaryassetornon-monetary liabilityarising fromthepaymentor receiptofadvanceconsideration ina foreigncurrency. Insuchcircumstances, thedateof the transaction is thedateonwhichanentityinitially recognises thenon-monetaryassetornon-monetary liabilityarising fromthepaymentor receiptofadvanceconsideration.
5. Revenue
Revenueisprincipallyrepresentedbysaleofcars(cee’d,Venga,SportageandnewSportagemodel)andsaleofenginestoanotherproductionplant.Thebreakdownbykeyproductsandgeographicalareaisasfollows:
Inthousandsofeuro 2016 2015
RevenuefromsalesofcarstoEUcountriesexcludingSlovakia 3,468,552 2,918,333
RevenuefromsalesofcarstononEUcountries 1,397,301 1,491,306
Saleofengines,sparepartsandwaste 636,877 611,066
RevenuefromsaleofcarstoSlovakia 63,451 52,698
Total 5,566,181 5,073,403
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6. Cost of sales
Inthousandsofeuro 2016 2015
Materialconsumption 4,497,322 3,952,284
Depreciationandamortization(refertoNote11,12) 110,927 113,914
Amortizationofgovernmentgrants(refertoNote11) -6,319 -7,300
Personnelexpenses 92,037 87,898
Energyconsumption 22,229 22,961
Creationofinventoryprovision 89 3,025
Runningroyaltycharge 226,849 202,402
Royaltycharge 19,616 20,715
Othercostofsales 68,893 68,197
Total 5,031,643 4,464,096
TheCompanyhadonaverage3,605employees,outofthatwere2managers(in2015:3,590,outofthat2managers).Asat31December2016theCompanyhad3,625employees,outofthat2managers(asat31December2015:3,646,outofthat2managers).
7. Administrative and selling expenses
Inthousandsofeuro 2016 2015
Logisticsservices 138,233 152,763
Warrantycharges(refertoNote22) 117,568 141,650
Personnelexpenses 4,264 3,869
Marketingservices 6,766 1,156
Depreciationandamortization(refertoNote11,12) 494 495
Otheroperatingexpenses 5,587 3,251
Total 272,912 303,184
8. Net finance costs
Inthousandsofeuro 2016 2015
Interestexpense,longtermbankloans -1,513 -1,960
Interestexpense,leasesandother 455 240
-1,968 -2,200
Interestincome,other 747 1,717
InterestincomeonBillsofExchangefromrelatedparties 264 491
Interestincomeintercompanyloan 368 623
1,379 2,831
Net interest (expense)/income -589 631
Foreignexchangelosses -12,424 -14,252
Foreignexchangegains 8,204 4,383
Net foreign exchange losses -4,220 -9,869
Net finance costs -4,809 -9,238
33
interests on trade receivables and related borrowings
Accordingtotheagreementwiththreecustomers,relatedparties,theCompanychargesthecustomerafixedinterestratefortheagreedportionoffinancedperiod,which isrecordedas interest incomeontradereceivablesfromrelatedparties(refertoNote25).
9. Other operating income/(expense), net
Inthousandsofeuro 2016 2015
Foreignexchangegains 50,929 38,369
Foreignexchangelosses -29,091 -65,689
Governmentsgrantsreceivedforjobcreationandeducation - -44
Scrapofpropertyonretirement -92 -255
Gain/(Loss)fromsaleofproperty 678 -554
Otheroperatingincome 932 1,526
Net other operating income/(expense) 23,356 -26,647
10. income tax
Inthousandsofeuro 2016 2015
Current tax expense
Periodincometaxcharge -73,387 -63,339
Adjustmenttoprioryearincometax -12,197 11
-85,584 -63,328
Deferred tax expense
Originationandreversaloftemporarydifferences 19,402 3,228
19,402 3,228
Total income tax expense -66,182 -60,100
Reconciliation of effective tax rate
Inthousandsofeuro 2016 % 2015 %
Profitbeforetax 280,173 270,238
Incometaxusingthedomesticcorporationtaxrate -61,638 (22.00%) -59,452 (22.00%)
Effectofdecreaseinthetaxrate(from22%to21%) -3,941 (1.41%) - -
Taxnon-deductibleexpensesandotheritems -601 (0.21%) -659 (0.24%)
Changeinestimatesrelatedtoprioryear -2 (0.00%) 11 0.00%
income tax charge for the year -66,182 (23.62%) -60,100 (22.24%)
ThestatutorytaxratedecreasedinDecember2016from22%to21%andwillbeapplicableeffectivefrom1January2017.
34
11. Property, plant and equipment
Inthousandsofeuro Lands and Buildings
Machinery and equipment
Other investments in progress
Total
Cost
Balanceat1January2015 284,115 1,059,342 7,962 5,037 1,356,456
Acquisitions - - - 116,606 116,606
Transfer 1,831 116,309 753 -118,893 -
Disposals - -19,672 -301 - -19,973
Balance at 31 December 2015 285,946 1,155,979 8,414 2,750 1,453,089
Balanceat1January2016 285,946 1,155,979 8,414 2,750 1,453,089
Acquisitions - - - 26,200 26,200
Transfer 2,555 23,636 654 -26,845 -
Disposals - -14,628 -208 - -14,836
Balance at 31 December 2016 288,501 1,164,987 8,860 2,105 1,464,453
Depreciation and impairment losses
Balanceat1January2015 63,425 585,211 6,959 - 655,595
Depreciationchargefortheperiod 9,320 103,012 648 - 112,980
Disposals - -18,576 -301 - -18,877
Balance at 31 December 2015 72,745 669,647 7,306 - 749,698
Balanceat1January2016 72,745 669,647 7,306 - 749,698
Depreciationchargefortheperiod 9,397 99,911 641 - 109,949
Disposals - -13,969 -205 - -14,174
Balance at 31 December 2016 82,142 755,589 7,742 - 845,473
Government grants acquisition costs
Balance1January2015 38,282 118,227 - - 156,509
At31December2015 38,282 118,227 - - 156,509
At 31 December 2016 38,282 118,227 - - 156,509
Government grants amortization
Balance1January2015 9,406 83,365 - - 92,771
Amortization 1,317 5,983 - - 7,300
At31December2015 10,723 89,348 - - 100,071
Amortization 1,317 5,002 - - 6,319
At 31 December 2016 12,040 94,350 - - 106,390
Carrying amounts
At1January2015 191,814 439,269 1,003 5,037 637,123
At31December2015 185,642 457,453 1,108 2,750 646,953
At 31 December 2016 180,117 385,521 1,118 2,105 568,861
insuranceProperty,plantandequipmentisinsuredagainstdamageuptoTEUR1,064,762(2015:TEUR1,033,533).
LeasesTheCompanyleasesmaterialmouldsforproductionofVengamodelfromrelatedpartyunderfinancelease.Thenetbookvalueofthemouldsat31December2016amountstoTEUR2,296(2015:TEUR3,551).
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12. intangible assets
Inthousandsofeuro information technologies
and software
Emission rights Assets under construction
Total
Cost
Balanceat1January2015 22,594 155 160 22,909
Acquisition - - 1,083 1,083
Transfers 882 233 -1,115 -
Disposals - -192 - -192
Balance at 31 December 2015 23,476 196 128 23,800
Balanceat1January2016 23,476 196 128 23,800
Acquisition - - 1,844 1,844
Transfers 1,472 210 -1,682 -
Disposals -383 -225 - -608
Balance at 31 December 2016 24,565 181 290 25,036
Amortization and impairment losses
Balanceat1January2015 18,343 - - 18,343
Amortizationfortheyear 1,429 - - 1,429
Balance at 31 December 2015 19,772 - - 19,772
Balanceat1January2016 19,772 - - 19,772
Amortizationfortheyear 1,472 - - 1,472
Disposals -383 - - -383
Balance at 31 December 2016 20,861 - - 20,861
Government grants acquisition costs
Balanceat1January2015 - 141 - 141
Acquisitions - 196 - 196
Disposals - -191 - -191
Balanceat31December2015 - 146 - 146
Acquisitions - 131 - 131
Disposals - 146 - 146
Balance at 31 December 2016 - 131 - 131
Carrying amounts
At1January2015 4,251 14 160 4,425
At 31 December 2015 3,704 50 128 3,882
At1January2016 3,704 50 128 3,882
At 31 December 2016 3,704 50 290 4,044
36
13. Prepaid expenses
Inthousandsofeuro 31 December 2016 31 December 2015
Non-current assets:
Lumpsumroyaltyprepaid 24,520 44,135
less:currentportion -19,616 -19,616
Total 4,904 24,519
Inthousandsofeuro 31 December 2016 31 December 2015
Current assets:
Lumpsumroyaltyprepaid 19,616 19,616
Otherprepayments 158 167
Total 19,774 19,783
Followingisanoverviewoflumpsumroyaltyprepayments:
Inthousandsofeuro Year Royalty prepaid (TEUR) Amortization period (months)
Royaltyforcurrentcee’dcarmodel 2012 117,693 72
TheCompanypayslumpsumroyaltyandrunningroyaltyaccordingtoroyaltyagreements.TheseagreementssecuretheCompanyarighttoproduceandsellcarsandenginesintheproductionplant.Theamortizationofroyaltyprepaymentsisrecordedincostofgoodssold,inthesamelineofthestatementofcomprehensiveincomeasthecostsforrunningroyalty(refertoNote6).
Royaltiesrepresentregularexpensesderivedfromtheentity’srevenueforsaleofcars(until2012:onthebasisofnumberofcarsproduced),andarerecordedascostofgoodssold(refertotheNote6).
14. Finance lease receivable
Financeleasereceivablerepresentspresentvalueoffuturepaymentsfromrelatedpartyforafiveyearsleaseofmoulds.Theoutstandingfinanceleasepaymentsareasfollows:
Inthousandsofeuro Minimum lease payments
interest Present value of minimum lease payments
Finance lease
31 December 2016 31 December 2016 31 December 2016 31 December 2015
Lessthanoneyear - - - 557
Betweenoneandfiveyears - - - -
- - - 557
15. Deferred tax assets
Inthousandsofeuro 31 December 2016 31 December 2015
Property,plantandequipment(netofgovernmentgrants) -45,679 -48,907
Warrantyprovision 116,364 111,236
Otherprovisions 11,735 191
Otheritems 333 831
Subtotal for temporary difference 82,753 63,351
Unrecognizeddeferredtaxasset -8,172 -8,172
Deferred tax asset 74,581 55,179
37
16. inventories
Inthousandsofeuro 31 December 2016 31 December 2015
Rawmaterialsandconsumables 250,609 267,936
Lessvalueadjustment -2,431 -
Workinprogressandsemi-finishedgoods 31,900 20,443
Lessvalueadjustment -234 -299
Finishedgoods 28,471 31,582
Lessvalueadjustment -449 -2,726
307,866 316,936
Valueadjustmenttoinventorieswascreatedforexpectedlowerrecoverableamountoffinishedproductsandforotherinventoryitemsthatareexpectedtohavelowerrecoverablevalue.
Movementsofprovisionforinventoriesaresetoutinthetablebelow:
Inthousandsofeuro 31 December 2015 Creation Use Reversal 31 December 2016
Provisiontorawmaterial - 2,431 - - 2,431
Provisiontoworkinprogressandsemi-finishedgoods 299 234 -299 - 234
Provisiontofinishedgoods 2,726 449 -2,726 - 449
3,025 3,114 -3,025 - 3,114
insuranceInventoryisinsuredagainstdamageuptoTEUR178,250(2015:TEUR147,328).
17. Trade and other accounts receivable
Inthousandsofeuro 31 December 2016 31 December 2015
Tradeaccountsreceivable 684,105 719,185
Valueaddedtaxreceivable 173,747 222,471
Otherreceivables 4,865 4,295
Financial 862,717 945,951
Advancepaymentreceived 1,074 117
Non-financial 1,074 117
863,791 946,068
Thebreakdownbycurrencyisasfollows:
Inthousandsofeuro 31 December 2016 % 31 December 2015 %
EUR 517,629 60.0% 641,206 67.8%
RUB 195,020 22.6% 152,182 16.1%
GBP 87,596 10.1% 93,345 9.9%
USD 26,904 3.1% 59,167 6.2%
SEK 25,531 3.0% - 0,0%
PLN 10,037 1.2% - 0.0%
NZD - 0.0% 51 0.0%
862,717 100.0% 945,951 100.0%
67%orTEUR 580,587 (as at 31December 2015: 70%orTEUR657,809) of trade and other receivables are due fromcompanieswithintheHYUNDAIMOTORGROUP.TheCompanyhasnotincurredanysignificanthistoricalimpairmentlosses.
TheCompanyexpectstorecovervalueaddedtax intwomonthsfromthebalancesheetdateonthegroundsofvalidlegislation.
Asat31December2016theCompanyoffsetgrosstradeandotheraccountsreceivableofTEUR53,360(asat31December2015:TEUR73,793)withthegrosstradeandotheraccountspayableofselectedbusinesspartnersofTEUR27,257(31December2015:TEUR30,557)withcertainpartnersandpresentedthemasnetreceivableofTEUR26,103(31December2015:TEUR43,236).
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18. Cash and cash equivalents
Inthousandsofeuro 31 December 2016 31 December 2015
Bankbalances 53,938 35,286
Vouchers 1 1
Cash and cash equivalents 53,939 35,287
Cashand cashequivalents in theamountofEUR 16,183 thousandaredenominated inGBPandEUR53 thousandaredenominatedinRUB(31December2015:inGBPwasEUR53thousandandinRUBwasEUR27,072thousand).
19. intercompany loan receivable
The intercompany loan receivable represents the positive balance on the cash pool account of theGroup,where theCompanytransferredpartofitsavailablecashresources.
20. Capital and reserves
Share capitalTheCompany’stotalauthorizedandissuedsharecapitalamountedtoTEUR433,323asof31December2016(31December2015:TEUR433,323).Thesharecapitalisfullypaidup.ThesoleshareholderoftheCompanyexercisefullvotingrightsandhasrightstoreceivedividends.
Legal reserve fundTheCompanyisobligedbySlovaklawtocreatealegalreservetotallingaminimumof5%ofnetprofit(annually)anduptoamaximumof10%ofregisteredsharecapital.Asthefund’sbalancehasalreadyreachedthemaximumbalance,nofurtherdistributionfromtheCompany’sprofitsisrequiredbylaw.ThelegalreservefundcanonlybeusedtocovertheCompany’slosses.
21. interest-bearing loans and borrowings
Inthousandsofeuro 31 December 2016 31 December 2015
Non-current liabilities
Long-termbankloans 190,396 111,448
Long-term bank loans 190,396 111,448
Current liabilities
Short-termportionofthelong-termbankloan 16,052 25,982
Leaseliability - 3,423
Accruedinterestandother 12 29
Short-term bank loans 16,064 29,434
CertaintypeoflongtermbankloansisfullycoveredbyaguaranteeprovidedbyKiaMotorsCorporation,theCompany’sparentcompany.
Alltheloanspresentedabovebearthevariableinterestrate.
Finance leaseFinanceleaseliabilityrepresentspresentvalueofpaymentstorelatedpartiesforfiveyearleaseofparkinglotandanotherfiveyearleaseofmouldsandarepayableasfollows:
Inthousandsofeuro Future minimum lease payments
interest Present value of mini-mum lease payments
Finance lease
31 December 2016 31 December 2016 31 December 2016 31 December 2015
Lessthanoneyear - - - 3,423
Betweenoneandfiveyears - - - -
- - - 3,423
39
22. Provisions
Inthousandsofeuro warranty Other Total
Balanceat1January2015 434,032 47,189 481,221
Provisionscharges(refertoNote7) 145,150 1,768 146,918
Actualcosts -70,063 -46,412 -116,475
Provisionreversed -3,500 - -3,500
Balance at 31 December 2015 505,619 2,545 508,164
Balanceat1January2016 505,619 2,545 508,164
Provisionscharges(refertoNote7) 117,568 53,759 171,327
Actualcosts -69,075 -1,676 -70,751
Provisionreversed(refertoNote7) - - -
Balance at 31 December 2016 554,112 54,628 608,740
Anoverviewoflong-termandshort-termprovisionsissetoutinthefollowingtable:
Inthousandsofeuro 31 December 2016 31 December 2015
Non-current 414,292 386,082
Current 194,448 122,082
Balance at the reporting date 608,740 508,164
warranty provision
Thewarrantyprovision ismeasuredbasedontheprobabilityof theproductsrequiringrepairor replacementandthebestestimateofthecoststobeincurredinrespectofdefectiveproductssoldonorbeforethebalancesheetdate.Thewarrantyperiodgrantedisupto7years,whichistheperiodoverwhichitisexpectedtheprovisiontobeused.
Other provisions
Otherprovisionswere recorded forestimatedcashoutflows resulted frompastevents incurredduring2016and it isexpectedtheywillbeusedin2017.
warranty provision reclaims
KMSwarrantsfortheactualclaimamounttothecustomersanditreclaimsaportionthatwascausedbysuppliers.Thereclaimassetisrecognizedwhenitisvirtuallycertainitwillbecollected,i.e.mostlyatthetimetheclaimisattributedtothesupplier.Asat31December2016theamountofestimatedreclaimsrepresentsTEUR83,761(asat31December2015:TEUR68,209).
23. Trade and other accounts payable
Inthousandsofeuro 31 December 2016 31 December 2015
Tradepayablesincludingaccruals 420,043 662,407
Employeerelatedliabilities 10,080 9,743
Otherpayables 7,715 10,282
Payrollwithholdingtaxes 1,143 1,533
Financial 438,981 683,965
Advancepaymentreceived 4,471 5,335
Non-financial 4,471 5,335
443,452 689,300
40
Thebreakdownbycurrenciesisasfollows:
Inthousandsofeuro 31 December 2016 Balance
recalculated to EUR
% 31 December 2015 Balance
recalculated to EUR
%
EUR 436,452 99.4% 681,449 99.6%
USD 1,880 0.4% 2,027 0.3%
RUB 649 0.2% 479 0.1%
JPY 0 0.0% 10 0.0%
438,981 100.0% 683,965 100.0%
66%orTEUR291,325(asat31December2015:75%orTEUR516,862)oftradeandotherpayablesareduetocompanieswithintheHYUNDAIMOTORGROUP.
Asat31December2016theCompanyoffsetgrosstradeaccountspayableofTEUR249,007(asat31December2015:TEUR312,624)withthegrosstradeaccountsreceivableofTEUR27,257(asat31December2015:TEUR30,557)withcertainpartnersandpresentedthemasnetreceivableofTEUR221,750(asat31December2015:TEUR282,067).
24. Capital commitments and contingencies
Capital commitmentsAt31December2016theCompanyhadordersinplacetoacquireproperty,plantandequipmentintheamountofTEUR12,545(31December2015:TEUR9,379).
ContingencesThedirectorsdonotexpecttheoutcomeofpendinglitigationstohaveamaterialeffectontheCompany’sfinancialposition.
25. Related parties
IdentityofrelatedpartiesTheCompanyhasarelatedpartyrelationshipwithitsparentKiaMotorsCorporationandothergroupcompanieswithinthe HYUNDAIMOTOR GROUP andwith its directors and executive officers. The ultimate controlling party is HyundaiMotorCompany,whoisentitledtoexercisethecontroloverentitiesidentifiedbytheCompanyasrelatedparties.ThoseCompanieswithinHYUNDAIMOTORGROUPhaveacommonBoard.
Transactions with key management personnelThere have been no transactions with management, except for their salaries, which are included in the caption ofadministrativeexpenseintheincomestatementandintotalamounttoTEUR666(2015:TEUR532).
Other related party transactionsOtherrelatedpartiesarepartoftheHYUNDAIMOTORGROUPandalsotheparentCompanyKiaMotorsCorporation,themanagingCompany.
Transactions with the parent company 2016 2015
Inthousandsofeuro
Revenue 38 1,559
Warrantyprovisionchargebacks 4,226 1,309
Purchasesofmaterial -75,982 -92,687
Acquisitionofproperty,plantandequipment -64 -15,272
Purchaseofservices -635 -3,765
Paymentofdividends -164,876 -173,238
Runningroyaltiescharge -226,850 -202,402
41
Transactions with other companies 2016 2015
Inthousandsofeuro
Revenues 4,620,280 4,410,200
Revenuefromsaleofproperty 1,239 21
Interestincomefromleaseinterest 2 177
Warrantyprovisionchargebacks 14,365 8,240
Purchaseofmaterial -2,761,397 -2,476,026
Acquisitionofproperty,plantandequipment -7,839 -22,275
Purchaseofservices -149,871 -145,381
Warrantycharges -76,672 -71,562
Interestfromintercompanyloan 371 625
Interestexpenseonfinancelease -68 -240
Interestincomefromrefundedinterestfromfinancingreceivables 264 491Significantassetsandliabilitiesarisingfromrelated-partytransactionsarepresentedinthetablebelow:
Assets and liabilities arising from transactions with the parent company 2016 2015
Inthousandsofeuro
Tradeaccountsreceivableandprepayments 4 1
Tradeaccountspayable -11,680 -75,924
Assets and liabilities arising from transactions with other group companies
2016 2015
Inthousandsofeuro
Tradeaccountsreceivable 580,583 657,808
Intercompanyloanreceivable 259,891 99,674
Financeleasereceivable - 557
Financeleaseliability - -3,423
Tradeaccountspayable -279,645 -440,938
Alloutstandingbalanceswiththeserelatedpartiesarepricedonanarm’slengthbasisandaretobesettledincashwithinsixmonths period, except for the finance lease receivable and finance lease liability,whichmatures according to therepaymentcalendarwithinfiveyearsperiod.
26. Financial risk management
OverviewTheCompanyhasexposuretothefollowingrisksfromitsuseoffinancialinstruments: • creditrisk; • liquidityrisk; • marketrisk.ThisnotepresentsinformationabouttheCompany’sexposuretoeachoftheaboverisks,theCompany’sobjectives,policiesandprocesses formeasuringandmanaging risk, and theCompany’smanagementof capital and furtherquantitativedisclosures.
Risk management frameworkTheDirectorshaveoverallresponsibilityfortheestablishmentandoversightoftheCompany’sriskmanagementframework.TheCompany’sriskmanagementpoliciesareestablishedtoidentifyandanalysetherisksfacedbytheCompany,tosetappropriaterisklimitsandcontrols,andtomonitorrisksandadherencetolimits.RiskmanagementpoliciesandsystemsarereviewedregularlytoreflectchangesinmarketconditionsandtheCompany’sactivities.TheCompany,throughitstrainingandmanagementstandardsandprocedures,aimstodevelopadisciplinedandconstructivecontrolenvironmentinwhichallemployeesunderstandtheirrolesandobligations.
TheDirectorsmonitorcompliancewiththeCompany’sriskmanagementpoliciesandproceduresandreviewstheadequacyoftheriskmanagementframeworkinrelationtotherisksfacedbytheCompany.
Credit riskCreditriskistheriskoffinanciallosstotheCompanyifacustomerorcounterpartytoafinancialinstrumentfailstomeetitscontractualobligations,andarisesprincipallyfromtheCompany’sreceivablesfromcustomers.
83% (1-12/2015:88%)of theCompany’s revenue isattributable tosales transactionswith customers in theHYUNDAIMOTORGROUPwhicharerelatedparties.TodatetheCompanyhasrecoveredalldueamountsfromHYUNDAIMOTOR
42
GROUPcustomers.84%(in2015:91%)oftheoutstandingtradereceivablesbalanceisduefromcustomersinHYUNDAIMOTORGROUPwhocooperateswiththeentitysinceitsincorporationoftaxofficeforVAT.Noimpairmentprovisionhasbeenrecordedtoeitherdueorpastduebalanceofthisreceivableasmanagementassessedthesecreditswithhighqualityonthebasisofhistoricalcollection.InthepasttheCompanyrecovereditsVATbalancewithin2monthsfromthebalancesheetdate,onthisbasisitexpectslowcollectionrisk.
Managementhasacreditpolicyinplaceandtheexposuretocreditriskismonitoredonanongoingbasis.CreditevaluationsareperformedonallcustomersoutsidetheHYUNDAIMOTORGROUPrequiringcreditoveracertainamount.Themaximumexposuretocreditriskisrepresentedbythecarryingamountofeachfinancialassetinthebalancesheet.
Liquidity riskLiquidityriskistheriskthattheCompanywillencounterdifficultyinmeetingtheobligationsassociatedwithitsfinancialliabilitiesthataresettledbydeliveringcashoranotherfinancialasset.TheCompany’sapproachtomanagingliquidityistoensure,asfaraspossible,thatitwillalwayshavesufficientliquiditytomeetitsliabilitieswhendue,underbothnormalandstressedconditions,withoutincurringunacceptablelossesorriskingdamagetotheCompany’sreputation.
TheCompany’smanagementusesoverdraftaccountsandshorttermfacilitiestofinancetheiroperationalneeds,whereaslongtermfinancingandequityareusedtofinanceinvestments.
The Company’smanagement ismonitoring the available cash balance on a regular basis. The available cash balancecomprise of overdraft limits and available cash in comparison to the expected financial liabilities that become due inthefollowingmonth.TheCompanytreats itsplansaccordingtocurrentsituationand incompliancewith itsplansandpredictionsoffuturecash-flowsituation.
TheCompany’smanagementismonitoringwhethertheyhavesufficientresourcestofulfiltheirobligationswhentheyfalldue.Themanagementismonitoringliquiditythroughtargetedcurrentratioofabove1.2calculatedascurrentassetsdividedwith current liabilities. At 31 December 2016 the current ratio reachedmanagement target of 2.30 (as at 31December2015:1.74).
Thefollowingarecontractualmaturitiesoffinancialliabilitiesincludinginterestpaymentsasat:
31 December 2016
Inthousandsofeuro Note Carrying amount
6 months or less
7-12 months
2-3 years
4-5 years
more than 5 years
Tradeandotherreceivables 17 862,717 862,717 - - - -
Intercompanyloanreceivable 19 259,891 259,891 - - - -
Cashandcashequivalents 18 53,939 53,939 - - - -
Interestbearingloansandbor-rowings,excl.unamortizedcosts
21 -206,875 -13,125 -3,125 -187,500 -3,125 -
Interests -1,578 -425 -414 -716 -23 -
Transactioncosts 21 427 108 90 213 16 -
Tradeandotheraccountspay-able 23 -438,981 -438,981 - - - -
Warrantyprovision 22 -554,112 -70,679 -70,664 -254,448 -132,463 -25,858
Otherprovisions 22 -54,628 -53,105 - - - -1,523
Incometaxreceivable/payable 1,786 - 1,786 - - -
-77,414 600,340 -72,327 -442,451 -135,595 -27,381
43
Thefollowingarecontractualmaturitiesoffinancialliabilitiesincludinginterestpaymentsasat:
31 December 2015
Inthousandsofeuro Note Carrying amount
6 months or less
7-12 months
2-3 years
4-5 years
more than 5 years
Tradeandotherreceivables 17 945,951 945,951 - - 2 24
Intercompanyloanreceivable 19 99,674 99,674 - - - -
Financeleasereceivable,in-cludinginterests 14 559 559 - - - -
Cashandcashequivalents 18 35,287 35,287 - - - -
Interestbearingloansandbor-rowings,excl.unamortizedcosts
21 -141,548 -15,164 -14,509 -102,500 -9,375 -
Interests -2,200 -591 -561 -906 -142 -
Transactioncosts 21 695 143 125 335 92 -
Tradeandotheraccountspay-able 23 -683,965 -683,965 - - - -
Warrantyprovision 22 -505,619 -61,751 -58,654 -222,553 -131,574 -31,087
Otherprovisions 22 -2,545 -1,676 - - - -869
Incometaxreceivable/payable 41,178 - 41,178 - - -
-212,533 318,441 -32,421 -325,624 -140,997 -31,932
Market riskMarketriskistheriskthatchangesinmarketprices,suchasforeignexchangeratesandinterestrateswillaffecttheCompany’sincomeorthevalueofitsholdingsoffinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,whileoptimizingthereturnonrisk.
Currency riskTheCompanyisexposedtoforeigncurrencyriskinsalesandpurchasesinothercurrencythatthefunctionalcurrency,i.e.GBP,USD,PLN,SEKandRUB.Thetotalexposureswhicharisefromthecurrencyriskaremonitoredonrevenueside,as74%(2015:71%)ofrevenuesand99%(2015:99%)ofpurchasesaredenominatedineuroandmanagementisnothedgingtheexposuresonFXfluctuations.Inadditionmanagementhasexposureinforeigncurrencyonthebankaccount.Thetotalexposureisstatedinnote8.Netfinancecosts.
Alltheborrowingsaredenominatedinthefunctionalcurrencyeurotoreduceanycurrencyriskfromborrowings.
AstrengtheningandweakeningofRUB,GBP,SEK,USDandPLNby5%againstEURat31December2016wouldhaveincreased/(decreased)equityandnetprofitbytheamountsshownbelow.
InthousandsofEUR impact on profit and equity – strengthening of foreign currency
impact on profit and equity – weakening of foreign currency
31 December 2016 31 December 2015 31 December 2016 31 December 2015
RUB 10,233 9,409 -9,258 -8,513
GBP 5,462 4,915 -4,942 -4,447
SEK 1,373 - -1,243 -
USD 1,364 3,010 -1,234 -2,723
PLN 553 - -501 -
NZD - 3 - -2
interest rate riskManagementhasenteredintoloancontractswhichareexposedtofloatinginterestratesinthenormalcourseofbusiness.Managementpolicyistoenterinthevariableinterestratesborrowingscontractsonly.Managementdoesnotseetheneedtohedgetheinterestratesrelatedtothesecontracts.
Anincreaseofinterestrate(EURIBOR,LIBOR)by100basispoints,consideringallotherfactorsremainunchanged,wouldcauseadecreaseofprofitabilitybyTEUR2,069(2015:TEUR1,165).
Thesensitivitieswereestimatedbasedonyearendbalancesandtheactualresultsmightdifferfromtheseestimates.
Capital managementTheCompanydefinesthecapitalasitsEquityandlong-termborrowings.TheCompany’spolicyistomaintainastrongcapital basesoas to sustain futuredevelopmentof thebusinessandmaintain sufficient funds for significant capitalexpenditures that are planned within the next three years. The Company’s needs for capital are satisfied throughborrowingsandthroughcontributionstosharecapital.TheCompanydoesnotprovideshareoptionstoemployeesorotherexternalparties.
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Managementistargetingthedebttoequityratiobelow2.5.Theratioiscalculatedastotalliabilitieslesscashdividedbytheequityassummarizedinthetablebelow:
Inthousandsofeuro 2016 2015
Totalliabilities 1,258,652 1,338,346
Lessavailablecash -53,939 -35,287
Totalliabilitieslesscash 1,204,713 1,303,059
Totalequity 900,785 851,670
Adjusteddebt/equityratio 1.3 1.5
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27. Operational risk
TheCompanyisexposedindirectlytothepurchasingtrendsofconsumersintheautomotivesector.ThisriskismanagedbytheCompany’sparentcompanythroughmonitoringmarkettrendsandadjustingproductionvolumesaccordingly.
Day-to-day operations harbour various risks that could potentially weaken the Company’s financial position andperformance.Businessrisksthatcouldresultfromproductioninterruptionsduetoe.g.energyoutages,technicalfailures,fires,floodsetc.arepartiallyhedgedusinginsurancecontracts.
Newproductsinherentlycarrytheriskthatcustomermightnotacceptthem.Forthisreason,theparentCompanyconductsextensiveanalysesandcustomersurveys.Trendsareidentifiedintimelyfashionandexaminedcloselytodeterminetheirrelevancetocustomers.
28. Fair values
Fair values versus carrying amountsThe fair value of trade and other receivables, cash and cash equivalents, finance lease receivables, trade and otherpayables,finance leasepayables, loansand interestbearingborrowingswithvariable interestrate isapproximatedbytheircarryingamountsasat31December2016aswellasat31December2015.Basis for determining fair valuesThe fair value of trade and other receivables, cash and cash equivalents, finance lease receivables, trade and otherpayables,financeleasepayables,loansandinterestbearingborrowingsisestimatedasthepresentvalueofthefuturecashflowsdiscountedatmarketrateofinterestatthereportingdate.
29. Accounting estimates and judgments
The preparation of financial statements requiresmanagement tomake judgments, estimates and assumptions thataffecttheapplicationofaccountingpoliciesandthereportedamountsofassets,liabilities,incomeandexpense.Actualresultsmaydifferfromtheseestimates.
Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognizedintheperiodinwhichtheestimatesarerevisedandinanyfutureperiodaffected.
Provisionsforwarrantyrepairs
TheCompanyhasaprovisionforwarrantycosts,whichat31December2016amountedtoTEUR554,112(31December2015:TEUR505,619)asdisclosed innote22.TheCompanyprovidesawarrantycoverageperioduptofiveyearson itscee’d,Sportage,Vengaandix35models.Inaddition,forKiavehiclessoldintheEuropeanUnionandotherselectedcountriesafurthertwoyearswarrantycoverageperiodisprovidedonenginesandtransmissions.Allwarrantycoverageperiodsaresubjecttoamaximummileageof150,000kilometres.Theseconditionsmayvarydependingonrespectivemodelandmarket.
Theprovisionrepresenttheestimatedwarrantycosts,whichwecalculatebasedonhistoricalexperiencewithconsiderationgiventotheexpectedleveloffuturewarrantyrepairs,theexpectednumberofunitstobeaffectedandtheestimatedaveragerepaidcostsperunitandeachcountry.Theproductscontainpartsmanufacturedbythirdpartysuppliers.
Webelievethecalculationofwarrantyprovisionisacriticalaccountingestimatebecausechangesinthecalculationcanmateriallyaffectnetincomeandrequireustoestimatethefrequencyandamountsoffuturewarrantyclaims,whichareinherentlyuncertain.Theuncertaintiesfurtherinclude,butarenotlimitedto,thefactthatthemodelsproducedinourfactory,especiallySUVmodelofnewSportageQLarenewfirstproducedin2015,aswellastheperiodofthewarrantycoverageisabovethatpreviouslyprovidedbytheKiaMotorsGroup.Thepolicyistocontinuouslymonitortheadequacyofwarrantyprovisions.Thereforewarrantychargesaremaintainedatanamountdeemedadequatetocoverestimatedfuturewarrantyclaims.Actualclaimsinthefuturemaydifferfromtheoriginalestimates,whichmayresultinmaterialrevisionsofthewarrantycharges.
Thewarrantyprovisionestimatewasbasedonatrend lineforgroupofcountries,whichrepresentsexpected levelofwarrantycosts inyear2toyear7asapercentageofyear1.This isourbestestimatewhichwasbasedonhistoricalexperiencesfromclaimsincurredfordifferentmodelsofKiaMotorsGroup.Thecalculationofwarrantyprovisionissensitivetothechangesinthewarrantytrendlineandtotheestimatedvalueoffuturewarrantyclaims.Anincreaseordecreaseofthewarrantytrendlineby10%wouldincreaseordecreasethewarrantyprovisionbyTEUR49,222(31December2015:TEUR44,914).Thesensitivitieswereestimatedbasedonyearendbalancesandtheactualresultsmightdifferfromtheseestimates.
Thesefinancialstatementswereapprovedon24January2017.
JunGuyLeeCFO
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