Samsung Electronics Co., Ltd.

and Subsidiaries
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General Information
Samsung Electronics Co., Ltd. ("SEC") was incorporated under the laws of the Republic of Korea to manufacture and sell
semiconductors, LCDs, telecommunication products, and digital media products.
As of June 30, 2011, SECs shares are listed on the Korea Stock Exchange, and its global depository receipts are
listed on the London and Luxembourg Stock Exchange. SEC is domiciled in the Republic of Korea and the
address of its registered office is Suwon, the Republic of Korea.
Consolidated Subsidiaries
The consolidated financial statements include the accounts of SEC and its controlled subsidiaries (collectively
referred to as "the Company"). Controlled subsidiaries generally include those companies over which the
Company exercises control. Control over an entity is presumed to exist when the Company owns, directly or
indirectly through subsidiaries, over 50% of the voting rights of the entity, the Company has the power to govern
the operating and financial policies of the entity through agreement or the Company has the power to appoint or
remove the majority of the members of the board of the entity.
Outlined below is a full list of SECs consolidated subsidiaries:
Area

Subsidiaries

Korea

STECO, SEMES, Samsung Electronics Service, Living Plaza, Samsung Electronics Logitech,
SECRON, S-LCD, Samsung Electronics Hainan Fiberoptics Korea,
Samsung Electronics Football Club, Samsung Mobile Display, World Cyber Games,
Samsung Venture Capital Union #6, #7, #14 and #20, Ray, GES, Prosonic,
Samsung Medison, Medison X-Ray, Medison Healthcare, CSL

Americas

Samsung Electronics Canada (SECA), Samsung Electronics America (SEA),

Samsung Electronics Latinoamerica (SELA), Samsung Electronics Mexico (SEM),
Samsung Electronics Argentina (SEASA),
Samsung Receivables (SRC), Samsung Semiconductor (SSI),
Samsung Information Systems America (SISA), Samsung Telecommunications America (STA),
Samsung International (SII), Samsung Austin Semiconductor (SAS),
Samsung Mexicana (SAMEX), Samsung Electronics Latinoamerica Miami (SEMI),
Samsung Electronica Columbia (SAMCOL), Samsung Electronica da Amazonia (SEDA),
SEMES America (SEMESA), Samsung Electronics Chile (SECH),
Samsung Electronics Peru (SEPR), Samsung Electronics Venezuela (SEVEN),
Samsung Medison America(SMUS), Samsung Medison Brasil(SMBR)

14

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Area

Subsidiaries

Europe and
Africa

Samsung Electronics Iberia (SESA), Samsung Electronics Nordic (SENA),

Samsung Electronics Hungarian (SEH), Samsung Electronics Portuguesa (SEP),
Samsung Electronics France (SEF), Samsung Electronics (UK)(SEUK),
Samsung Electronics Holding (SEHG), Samsung Electronics Italia (SEI),
Samsung Electronics South Africa (SSA), Samsung Electronics Benelux (SEBN),
Samsung Electronics LCD Slovakia (SELSK), Samsung Electronics Polska (SEPOL),
Samsung Semiconductor Europe (SSEL), Samsung Electronics GmbH (SEG),
Samsung Semiconductor Europe GmbH (SSEG), Samsung Electronics Austria (SEAG),
Samsung Electronics Overseas (SEO), Samsung Electronics Europe Logistics (SELS),
Samsung Electronics Rus (SER), Samsung Electronics Rus Company (SERC),
Samsung Electronics Slovakia (SESK), Samsung Russia Service Center (SRSC),
Samsung Electronics Rus Kaluga (SERK), Samsung Electronics Baltics (SEB),
Samsung Electronics Ukraine Company (SEUC),
Samsung Electronics KZ and Central Asia (SEKZ),
Samsung Semiconductor Israel R&D Center(SIRC), Samsung Gulf Electronics (SGE),
Samsung Electronics Ukraine (SEU), Samsung Electronics Limited (SEL),
Samsung Telecoms (UK)(STUK), Samsung Electronics Kazakhstan (SEK),
Samsung Electronics Turkey (SETK), Samsung Electronics Levant (SELV),
Samsung Electronics Romania (SEROM), Samsung Electronics Czech and Slovak (SECZ),
Samsung Electronics European Holding(SEEH), Samsung Electronics Morocco (SEMRC),
Samsung Electronics Poland Manufacturing (SEPM), Samsung Electronics West Africa (SEWA),
Samsung Electronics Greece (SEGR), Samsung LCD Netherlands R&D Center(SNRC),
Samsung LCD Netherlands R&D Center UK(SNRC(UK)),
Samsung Opto-Electronics GmbH (SOG),
SonoAce Deutschland(SMDE), Samsung Medison Italia(SMIT), Samsung Medison France(SMFR),
Samsung Medison Europe(SMNL)

China

Samsung Electronics Hong Kong (SEHK), Samsung Electronics Taiwan (SET),

Samsung Electronics Huizhou (SEHZ), Samsung Electronics (Shandong) Digital Printing (SSDP),
Samsung Electronics Suzhou Semiconductor (SESS), Suzhou Samsung Electronics (SSEC),
Samsung Suzhou Electronics Export (SSEC-E), Samsung (China) Investment (SCIC),
Tianjin Samsung Electronics (TSEC), Tianjin Samsung Telecom Technology (TSTC),
Samsung Electronics Suzhou LCD (SESL), Samsung Electronics Suzhou Computer (SESC),
Shanghai Samsung Semiconductor (SSS),
Shenzhen Samsung Kejian Mobile Telecommunication Technology (SSKMT),
Samsung Electronics Hainan Fiberoptics (SEHF), Samsung Electronics (Beijing) Service (SBSC),
Samsung Semiconductor (China) R&D (SSCR), Beijing Samsung Telecom R&D Center (BST),
Samsung Electronics Shanghai Telecommunication (SSTC),
Samsung Electronics China R&D Center (SCRC),
Dongguan Samsung Mobile Display (DSMD), Tianjin Samsung Mobile Display (TSMD),
Samsung Guangzhou Mobile R&D Center (SGMC), Tianjin Samsung Opto-Electronics (TSOE),
Samsung Tianjin Mobile R&D (STMC), Samsung LCD Netherlands R&D Center HK(SNRC(HK)),
Medison (Shanghai) (SMS2), Samsung Medison Shanghai Medical Instrument (SMS1),
Medison Medical Equipment(Shanghai) (MMS)

15

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Rest of Asia

Samsung Yokohama Research Institute (SYRI), Samsung Electronics Australia (SEAU),

Samsung Electronics Indonesia (SEIN), Samsung Asia (SAPL),
Samsung Electronics Asia Holding (SEAH), Samsung Electronics Display (M)(SDMA),
Samsung Electronics (M)(SEMA), Samsung Vina Electronics (SAVINA),
Samsung India Electronics (SIEL), Thai Samsung Electronics (TSE),
Samsung Electronics Philippines (SEPCO), Batino Realty Corporation (BRC),
Samsung Electronics Philippines Manufacturing (SEPHIL), Samsung Japan (SJC),
Samsung Telecommunications Indonesia (STIN), Samsung Malaysia Electronics (SME),
Samsung Electronics Vietnam (SEV), Samsung India Software Operations (SISO),
Samsung Telecommunications Japan (STJ), Samsung Telecommunications Malaysia (STM)
Samsung Bangladesh R&D (SBRC),
Samsung Medison Japan (SMJP), Samsung Medison India (SMIN),
Medison Medical Systems (India) (MI)

2. Basis of Presentation
This condensed consolidated interim financial information has been prepared in accordance with K-IFRS 1034 and
should be read in conjunction with the annual financial statements for the year ended December 31, 2010, which
have been prepared in accordance with K-IFRSs.
The accounting policies adopted are consistent with those of the previous financial year, except as described
below. Exceptional items are disclosed and described separately in the financial statements where it is necessary to
do so to provide further understanding of the financial performance of the Company. They are material items of
income or expense that have been shown separately due to the significance of their nature or amount.
New standards, amendments and interpretations issued and effective for the financial year beginning
January 1, 2011
(a) New and amended standards adopted by the Company
The following new standards and amendments to standards are mandatory for the first time for the financial year
beginning January 1, 2011
Revised K-IFRS 1024 (revised), Related party disclosures. It supersedes K-IFRS 1024, Related party
disclosures.
K-IFRS 1024 (revised) is mandatory for periods beginning on or after January 1, 2011. Earlier application, in
whole or in part, is permitted. The Company has applied the revised standard from January 1, 2011. When the
revised standard is applied, the Company and the parent will need to disclose any transactions between its
subsidiaries and its associates.
Amendment to K-IFRS 1034, Interim financial reporting
K-IFRS 1034(revised) is mandatory for periods beginning on or after January 1, 2011. The Company has applied
the revised standard from January 1, 2011. This standard adds disclosure requirements around circumstances likely
to affect fair values of financial instruments and their classification; transfers of financial instruments between
different levels of the fair value hierarchy; changes in classification of financial assets; and changes in contingent
liabilities and assets.

16

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(b) New and amended standards, and interpretations mandatory for the first time for the financial year
beginning 1 January 2011 but not currently relevant to the Company.

Classification of rights issues (amendment to K-IFRS 1032).

The amendment addresses the accounting for rights issues that are denominated in a currency other than the
functional currency of the issuer. Provided certain conditions are met, such rights issues are now classified as
equity regardless of the currency in which the exercise price is denominated. Previously, these issues had to be
accounted for as derivative liabilities. The amendment applies retrospectively in accordance with K-IFRS 1008
Accounting policies, changes in accounting estimates and errors. The Company has applied the amended
standard from January 1, 2011. It is not expected to have any impact on the Company or the parent entitys
financial statements.
K-IFRS 1103 (revised), Business combinations.
The option to measure non-controlling interest either at fair value or at the non-controlling interests proportionate
share of the acquirees identifiable net assets is amended to be available only in certain cases. Otherwise, noncontrolling interest should be measured at fair value. In addition, the guidance applies to share-based payment
transactions that are chosen not to be replaced as a consequence of the business combination and to share-based
payment transactions that the acquirer chooses to exchange for share-based transactions of the acquiree. It is not
expected to have any impact on the Company or the parent entitys financial statements.

Prepayments of a minimum funding requirement(amendments to K-IFRIC 2114).

The amendments correct an unintended consequence of K-IFRIC 2114, K-IFRS 1019 The limit on a defined
benefit asset, minimum funding requirements and their interaction. Without the amendments, entities are not
permitted to recognize as an asset on some voluntary prepayments for minimum funding contributions. This was
not intended when K- IFRIC 2114 was issued, and the amendments corrected this. The amendments are effective
for annual periods beginning January 1, 2011. The Company has applied these amendments for the financial
reporting period commencing on January 1, 2011. It is not expected to have any impact on the Company or the
parent entitys financial statements.
K-IFRIC 2119, Extinguishing financial liabilities with equity instruments.
The interpretation clarifies the accounting by an entity when the terms of a financial liability are renegotiated and
result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial
liability (debt for equity swap). It requires a gain or loss to be recognized in profit or loss, which is measured as the
difference between the carrying amount of the financial liability and the fair value of the equity instruments issued.
If the fair value of the equity instruments issued cannot be reliably measured, the equity instruments should be
measured to reflect the fair value of the financial liability extinguished. The Company has applied the
interpretation from January 1, 2011. It is not expected to have any impact on the Company or the parent entitys
financial statements.

17

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Standards, amendments and interpretations to existing standards that are not yet effective and have not
been early adopted by the Company.
K-IFRS 1012, Deferred Tax: Recovery of Underlying Assets
The amendment addresses the measurement of deferred tax liabilities and deferred tax assets shall reflect the tax
consequences that would follow from the manner in which the entity expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets and liabilities. The amendments to standard are mandatory for
the first time for the financial year beginning January 1, 2012.
K-IFRS 1107, DisclosuresTransfers of Financial Assets (Amendments to IFRS 7)
The amendments will help users of financial statements evaluate the risk exposures relating to transfers of
financial assets and the effect of those risks on an entitys financial position and will promote transparency in the
reporting of transfer transactions, particularly those that involve securitisation of financial assets. Entities are
required to apply the amendments for annual periods beginning on or after 1 July 2011. In the first year of
application, an entity need not provide comparative information for the disclosures required by the amendments
for periods beginning before July 1, 2011. Earlier application is permitted.

18

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.1 Convenience translation into United States Dollar Amounts
The Company operates primarily in Korean Won and its official accounting records are maintained in Korean
Won. The U.S. dollar amounts provided in the financial statements represent supplementary information solely for
the convenience of the reader. All Won amounts are expressed in U.S. dollars at the rate of 1,078 to US $1, the
exchange rate in effect on June 30, 2011. Such presentation is not in accordance with generally accepted
accounting principles, and should not be construed as a representation that the Won amounts shown could be
readily converted, realized or settled in U.S. dollars at this or at any other rate.

3.

Financial instruments by category

Financial instruments by category as of June 30, 2011 consist of the following:

(In millions of Korean Won)

Assets
Cash and cash equivalents

Assets at fair
value through
the profit and
loss

Short -term financial instruments

Available-for-sale financial assets
Trade and other receivables
Other financial assets (*)
Total

(In millions of
Korean Won)
Liabilities
Trade and other payables
Borrowings
Debentures
Other financial liabilities (**)
Total

Loans
and
receivables

Availablefor-sale
financial
assets

9,251,994

42,907

9,161,162
21,740,862
1,847,032

3,693,435
-

9,161,162
3,693,435
21,740,862
1,889,939

9,161,162
3,693,435
21,740,862
1,889,939

42,907

42,001,050

3,693,435

45,737,392

45,737,392

Liabilities at fair
value through the
profit and loss

Financial liabilities
measured at
amortized cost

Total
9,251,994

Total

Fair value

9,251,994

Fair value

21,625

16,068,363
10,331,615
638,021
5,583,926

16,068,363
10,331,615
638,021
5,605,551

16,068,363
10,331,615
638,021
5,605,551

21,625

32,621,925

32,643,550

32,643,550

(*)

Other financial assets consist of amounts included in other current assets, deposits, and other non-current
assets in the statement of financial position, and do not include investments in joint-ventures and associated
companies.
(**) Other financial liabilities consist of amounts included in current and non-current accrued expenses, and other
current and non-current liabilities, excluding items which are non-financial.

19

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Financial instruments by category as of December 31, 2010, consist of the following:
Assets at fair
value through
the profit and
loss

(In millions of Korean Won)

Availablefor-sale
financial
assets

Loans
and
receivables

Total

Fair value

9,791,419

9,791,419

11,529,392

11,529,392

4,199,358
21,308,834

4,199,358
21,308,834

1,703,891

1,703,891

48,532,894

48,532,894

Assets

Cash and cash equivalents

Short -term financial
instruments
Available-for-sale financial
assets
Trade and other receivables
Other financial assets (*)

Total

(In millions of
Korean Won)

9,791,419

11,529,392

21,308,834

34,458

1,669,433

4,199,358
-

44,299,078 4,199,358

34,458

Liabilities at fair
value through the
profit and loss

Liabilities
Trade and other payables
Borrowings
Debentures
Other financial liabilities
(**)
Total

Financial liabilities
measured at
amortized cost

24,638

Total

Fair value

17,122,461
10,082,577
692,797

17,122,461
10,082,577
692,797

17,122,461
10,082,577
692,797

7,789,567

7,814,205

7,814,205

24,638
35,687,402
35,712,040
35,712,040
(*) Other financial assets consist of amounts included in other current assets, deposits, and other non-current
assets in the statement of financial position, and do not include investments in joint-ventures and associated
companies.
(**) Other financial liabilities consist of amounts included in current and non-current accrued expenses, and other
current and non-current liabilities, excluding items which are non-financial.
The following table presents the assets and liabilities that are measured at fair value at June 30, 2010.

(In millions of Korean Won)

Derivatives

Level 1

Level 2
-

42,907

Level 3

Total balance
-

42,907

Available-for-sale financial assets

3,292,787

70,494

330,154

3,693,435

Total assets
Derivatives

3,292,787

113,401

330,154

3,736,342

21,625

21,625

Total liabilities

20

21,625

21,625

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the assets and liabilities that are measured at fair value at 31 December 2010.
(In millions of Korean Won)
Derivatives

Level 1

Level 2
-

34,458

Level 3

Total balance
-

34,458

Available-for-sale financial assets

3,823,234

49,765

326,359

4,199,358

Total assets
Derivatives

3,823,234

84,223

326,359

4,233,816

24,638

24,638

Total liabilities

24,638

24,638

The levels of the fair value hierarchy and its application to financial assets and liabilities are described below
Level 1 : Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 : Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly or indirectly
Level 3 : Inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs)
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance
sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange,
dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and
regularly occurring market transactions on an arms length basis. The quoted market price used for financial assets
held by the Company is the current bid price. These instruments are included in level 1. Instruments included in
level 1 comprise primarily listed equity investments classified as trading securities or available-for-sale.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of
observable market data where it is available and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level
3.
Specific valuation techniques used to value financial instruments include:
Quoted market prices or dealer quotes for similar instruments.
The fair value of forward foreign exchange contracts is determined using forward exchange rates at the
balance sheet date, with the resulting value discounted back to present value.
Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining
financial instruments. As for trade and other receivables, the book value approximates a reasonable estimate of fair
value.

21

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. Inventories
Inventories, net of valuation losses, as of June 30, 2011 and December 31, 2010, consist of the following:
(In millions of Korean Won)
Finished goods
Work in Process
Raw materials and supplies
Materials-in-transit
Total

2011

4,406,500
2,853,812
4,754,080
2,046,002

14,060,394

2010

4,511,391
2,619,713
4,159,842
2,073,578

13,364,524

As of June 30, 2011, losses from valuation of inventories of 491,149 million (December 31, 2010: 524,850
million) were deducted to inventories.
5. Assets and liabilities classified as held-for-sale
The Company decided to dispose of photovoltaic cell business to to Samsung SDI (one of the associates of the
Company) with a closing date of July 1, 2011 based on the approval of the Board of Directors of the Company on May
27, 2011. Therefore the assets and liabilities related to photovoltaic cell business have been presented as classified as
held-for-sale. The assets and liabilities were remeasured to the lower of carrying amount and fair value less costs to sell
at the date of held-for-sale classification.
The major classes of assets and liabilities of disposal group are as follows:

(In millions of Korean Won)

June 30, 2011

Assets classified as held for sale:

Trade and other receivables

Inventories

6,309
34,761

Property, plant and equipment

122,849

Intangible assets

2,433

Total
Liabilities classified as held for sale:
Current liabilities

166,352

14,736

Non-current liabilities

Total

22

3,388
18,124

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6. Long-Term Available-for-sale financial assets

Long-term available-for-sale financial assets as of June 30, 2011 and December 31, 2010, consist of the following:

(In millions of Korean Won)

Detail

Listed equities 1
Non-listed equities 1, 2
Government, public bonds and others

June 30, 2011

Acquisition
Recorded
Cost
Book Value

1)
2)

610,009
252,363
70,494
932,866

December 31, 2010

Recorded
Book Value

2,634,542
330,154
70,494
3,035,190

2,664,082
326,359
49,765
3,040,206

Excludes associates and joint ventures

The company measures available-for-sale financial assets, at their fair values. For an investment in equity instruments that do
not have a quoted market price in an active market and its fair value cannot be measured reliably, it is measured at cost.

1) Listed equities
Listed equities June 30, 2011 and December 31, 2010, consist of the following:
(In millions of Korean Won, except for the number of shares and percentage)

Number of
Shares
Owned
Samsung Life Insurance
Samsung Heavy Industries
Samsung Fine Chemicals
Hotel Shilla
Cheil Worldwide
iMarket Korea
A-Tech Solution
SFA
SNU Pricision
Rambus
Others

June 30, 2011

Percentage of
Ownership
Acquisition
(%)
Cost

40,675,641
2,164,970
2,004,717
2,998,725
3,800,000
1,592,000
1,822,000
1,075,446
9,576,250

17.6
8.4
5.0
2.6
10.6
15.9
10.0
5.3
8.3

258,299
45,678
13,957
2,920
1,900
26,348
38,262
14,204
185,363
23,078
610,009

December 31,
2010
Recorded
Book
Value

1,936,161
148,300
54,228
47,530
68,020
23,562
96,748
13,389
151,559
95,045
2,634,542

Recorded
Book Value
134,878
1,675,836
179,476
55,631
41,532
103,360
33,432
89,278
18,874
223,363
108,422
2,664,082

The differences between the acquisition cost and the fair value of the investment is recorded under other reserves, a
separate component of equity.

23

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. Associates and Joint Ventures
Changes in associates and joint ventures for the six-month ended June 30, 2011 and 2010, consist of the following:
(In millions of Korean Won)

2011
8,335,290
326,384
(278,675)
786,267
(282,854)
8,886,412

At January 1
Acquisition of Associates and Joint Ventures
Disposal of Associates and Joint Ventures
Share of profit1
Others
At June 30

2010
7,334,705
(20,193)
1,014,573
114,347
8,443,432

1
Share of profit/(loss) is after-tax and minority interest in associates.
Others consist of dividends and effect of change in foreign exchange rates.

8. Property, Plant and Equipment

Changes in property, plant and equipment for the six-month ended June 30, 2011 and 2010, consist of the
following:

(In millions of Korean won)

Net book value at January 1
Acquisition
Acquisition from business combination
Disposal / Impairment
Depreciation
Others
Net book value at June 30

2011

2010

52,964,594
11,174,006
121,285
(163,685)
(6,127,464)
(588,088)
57,380,648

43,560,295
9,235,606
23,401
(879,918)
(5,324,189)
451,265
47,066,460

9. Intangible Assets
Changes in intangible assets for the six-month ended June 30, 2011 and 2010, consist of the following:
(In millions of Korean won)
Net book value at January 1
Internal generation
Acquisition
Acquisition from business combination
Disposal / Impairment
Amortization
Others
Net book value at June 30

24

2011

2010

2,779,439
179,440
164,386
434,905
(3,174)
(300,339)
72,707
3,327,364

1,256,008
159,869
718,679
931,737
(6,851)
(254,636)
(69,470)
2,735,336

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. Borrowings
Borrowings as of June 30, 2011 and December 31, 2010, consist of the following:

Financial
Institutions

(In millions of Korean Won)

Short-term Borrowings
Collateralized borrowings
Bank borrowings
Total
Current Portion of longterm Borrowings
Bank borrowings
Financial lease liabilities

Annual Interest
Rates (%)
as of June 30, 2011

Woori Bank etc

Woori Bank etc

1.4 ~ 5.9

2011
4,296,074

0.3 ~ 13.5

Woori Bank etc

APCI etc

Financial lease liabilities

Woori Bank etc

APCI etc

5,090,433

3,004,412

3,339,288

7,300,486

8,429,721

2.8 ~ 9.6

376,796

1,008,884

2.4 ~ 15.3

23,971

9,591

400,767

1,018,475

Total
Long-term Borrowings
Bank borrowings

2010

1.0 ~ 5.4

2,532,757

1.2 ~ 15.3

97,606

Total

2,630,363

536,871
97,510

634,381

(*1) Collateralized borrowings are secured by trade receivables. Bank borrowings are secured by lands and buildings (Note 8).
(*2) The Company leases certain property, plant and equipment under various finance lease arrangements.

11. Debentures
Debentures as of June 30, 2011 and December 31, 2010, consist of the following:
(In millions of Korean Won)

2011

2010

Korea Won denominated debenture(A)

550,000

600,000

Foreign currency denominated debenture(B)

Total

88,020
638,020

92,797
692,797

Current portion of debentures

55,178

105,459

Non-current portion of debentures

582,842

587,338

25

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(A) Korean Won denominated debentures as of June 30, 2011 and December 31, 2010, consist of the
following:

(In millions of
Korean Won)
Samsung Mobile
Display
Samsung Mobile
Display
Total
Current portion

Issue
Date

Due
Date

Annual Interest
Rates (%)
as of June 30,
2011

2006.12.01

2011.12.01

5.11

2010.6.17

2013.6.17

4.71

500,000
550,000
50,000

2011

50,000

2010

100,000

500,000
600,000
100,000

Korean Won denominated debentures were issued by Samsung Mobile Display, one of SECs domestic
subsidiaries and included in consolidation scope since 2009. The debenture issued in 2006 will mature on
December 1, 2011 with repayment to be made annually for two years after a three-year grace period, while the
one issued in 2010 is due for repayment at maturity.
(B) Debentures denominated in foreign currencies as of June 30, 2011 and December 31, 2010, consist of
the following:

(In millions of
Korean Won)
US dollar
denominated
straight bonds
Less: Discounts
Total
Current portion

Issue
Date

1997.10.2

Due
Date

Annual Interest
Rates (%)
as of June 30,
2011

2027.10.1

7.7

2011

91,639
(USD 85M)
(3,619)

88,020

5,178

2010

96,807
(USD 85M)
(4,010)

92,797

5,459

US dollar straight bonds will be repaid annually for twenty years after a ten-year grace period from the date of
issuance. Interests will be paid semi-annually.

26

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. Provisions
The changes in the main liability provisions during the six-month period ended June 30, 2011, are as follows:
(In millions of Korean Won)

Ref.

Balance at
January 1,
2011

Increase

Warranty

(A)

1,633,506

840,682

Royalty expenses

(B)

989,057

853,975

Long-term incentives

(C)

590,712

126,251

Decrease

Others1

(939,522)

Balance at
June 30, 2011

5,811

1,540,477

(273,119)

(8,346)

1,561,567

(303,785)

413,178

Others include amounts from changes in foreign currency exchange rates.

(A) The Company accrues warranty reserves for estimated costs of future service, repairs and recalls, based on
historical experience and terms of warranty programs (which have terms ranging from one to four years).
(B) The Company makes provisions for estimated royalty expenses related to technical assistance agreements that
have not been settled. The timing of payment depends on the settlement of agreement.
(C) The Company has a long-term incentive plans for its executives based on a three-year management
performance criteria and has made a provision for the estimated incentive cost for the accrued period.

13. Commitments and Contingencies

(A) Guarantees

(In millions of Korean Won)

Balance at
June 30, 2011

Balance at
December 31, 2011

Guarantees of debt for housing rental

176,180

171,674

The guarantees of debt for housing rental relate to guarantees provided by the Company to the landlords for housing
for expatriate employees.
(B) Litigation
A. Civil class actions with respect to fixed pricing on the sales of TFT-LCD were filed against the Company
and its subsidiaries in the United States. As of balance sheet date, the outcome of the investigation and
civil actions cannot be reasonably determined, and therefore, the Company has not recorded any liability
for these matters in the consolidated financial statements.
B. Based on the agreement entered into on August 24, 1999 with respect to Samsung Motor Inc.s (SMI)
bankruptcy proceedings, Samsung Motor Inc.s creditors (the Creditors) filed a civil action lawsuit
against Mr. Kun Hee Lee, chairman of the Company, and 28 Samsung Group affiliates including the
Company under joint and several liability for failing to comply with such agreement. Under the suit, the
Creditors have sought 2,450,000 million (approximately $1.95 billion) for loss of principal on loans
extended to SMI, a separate amount for breach of the agreement, and an amount for default interest.

27

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SLI completed its Initial Public Offering (IPO) on May 7, 2010. After disposing of 2,277,787 of the
shares donated by Mr. Lee and payment of the principal balance owed to the Creditors, 878,000
million (approximately $ 0.80 billion) was deposited into an escrow account. That remaining balance was
to be used to pay the Creditors interest due to the delay in the SLI IPO. On January 11, 2011, the Seoul
High Court ordered Samsung Group affiliates to pay 600,000 million (approximately $ 0.53 billion) to
the Creditors and pay 5% annual interest for the period between May 8, 2010 and January 11, 2011, and
pay 20% annual interest for the period after January 11, 2011 until the amounts owed to the Creditors are
paid. In accordance with the Seoul High Court order, 620,400 million (which includes penalties and
interest owed) was paid to the Creditors from the funds held in escrow during January 2011. Samsung
Group affiliates and the Creditors all have appealed to the Korean Supreme Court. The Company has
concluded that no provision for loss related to this matter should be reflected in the Companys
consolidated financial statements at June 30, 2011.
C. As of June 30, 2011, the Company was named as a defendant in legal actions filed by 29 overseas
companies including AUO, and as the plaintiff in legal actions against 6 overseas companies including
Apple Inc. for alleged patent infringements. In addition to the cases mentioned above, the Companys
domestic and foreign subsidiaries have been involved in various claims and proceedings during the
normal course of business. As the outcome of these matters cannot be reasonably determined, the
Company has not recorded any liability for these matters in the consolidated financial statements at June
30, 2011.
(C) Other Commitment
The Company announced the signing of a definitive agreement that it's selling its hard disk drive operations to
Seagate Technology plc on April 19, 2011. The combined value of these transactions and agreements is a
approximately $1.375 billion, which will be paid by Seagate to the Company in the form of 50% cash and 50%
stock(9.6% ownership of Seagate). The agreement is subject to customary closing conditions, including review by
U.S and international regulators. The transactions are expected to close by the end of year 2011.
14. Share capital and premium
Under its Articles of Incorporation, SEC is authorized to issue 500 million shares of capital stock with a par value
of 5,000 per share, of which 100 million shares are cumulative, participating preferred stock that are nonvoting and entitled to a minimum cash dividend at 9% of par value.
As of June 30, 2011, exclusive of retired stocks, 147,299,337shares of common stock and 22,833,427 shares of
preferred stock have been issued. The preferred shares which are non-cumulative and non-voting, were all issued
on or before February 28, 1997, and are entitled to an additional cash dividend of 1% of par value over common
stock.
SEC has issued global depositary receipts (GDR) to overseas capital markets. The number of outstanding GDR
as of June 30, 2011 and December 31, 2010, are as follows:
2011
Non-voting
Preferred Stock
Outstanding GDR
- Share of Stock
- Share of GDR

3,291,642
6,583,284

2010
Common
Stock

7,811,804
15,623,608

28

Non-voting
Preferred Stock

3,253,577
6,507,154

Common
Stock

9,243,488
18,486,976

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15. Retained earnings

Retained earnings as of June 30, 2011 and December 31, 2010, consist of the following:
(In millions of Korean won)

2011

Legal reserve

2010
450,789

450,789

Discretionary reserve:

78,262,530

62,693,841

Unappropriated

11,716,616

21,869,920

90,429,935

85,014,550

On July 28, 2011, the Company declared cash dividends to shareholders of common stock and preferred stock as
interim dividends for the six month period ended June 30, 2011.
Details of interim dividends for the six month period ended June 30, 2011 and 2010 are as follows:
(In millions of Korean won)
Number of shares
eligible for dividends

2011

Common stock

2010

130,148,288

Preferred stock

129,558,812

19,853,734

19,853,734

10%

100%

Common stock

65,074

647,794

Preferred stock

9,927

99,269

Dividend rate
Dividend amount

Total

75,001

747,063

16. Other components of equity

Other components of equity as of June 30, 2011 and December 31, 2010, consist of the following:
(In millions of Korean Won)

2011

Treasury stock(*)
Stock option
Unrealized holding gains on available-for-sale financial
assets
Share of associates and joint ventures accumulated other
comprehensive income
Foreign-currency translation differences
Others

2010

(7,637,087)

(7,761,927)

96,407

128,320

1,662,407

1,608,035

1,206,560

1,185,333

(1,398,078)

(957,579)

967,362

1,071,420

(5,102,429)

(4,726,398)
(*) As of June 30, 2011, the Company holds 17,151,049 common shares and 2,979,693 preferred shares as
treasury stocks.

29

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. Expenses by Nature
Expenses by nature for the three and six months ended June 30, 2011 and 2010, consists of the following:
(In millions of Korean won)
Wages and salaries
Severance and retirement benefits
Welfare expenses
Depreciation expenses
Amortization expenses

3 Months
2011
2,972,807
153,365
529,188
3,148,822
155,233

6 Months

2010
2,809,123
133,803
435,475
2,571,072
135,627

2011
5,961,910
306,291
973,314
6,127,464
300,339

2010
5,298,429
262,062
812,778
5,324,189
254,636

18. Selling, general and administrative expenses

Selling, general and administrative expenses for the three and six months ended June 30, 2011 and 2010, consists
of the following:
(In millions of Korean won)
Wages and salaries
Severance and retirement benefits
Commission and service charges
Depreciation expenses
Amortization expenses
Advertising expenses
Sales promotion expenses
Transportation expenses
Warranty expenses
Public relation expenses
Others

3 Months
2011
848,938
37,504
1,472,264
90,930
68,705
677,402
1,035,776
958,911
521,387
119,584
542,596
6,373,997

6 Months

2010
785,646
31,735
1,674,946
85,514
59,514
681,667
874,342
1,075,757
594,045
125,748
366,785
6,355,699

2011
1,704,028
74,809
2,984,909
180,623
131,698
1,071,975
1,842,368
1,837,037
1,102,389
201,131
1,034,084
12,165,051

2010
1,533,102
62,547
3,196,837
173,012
103,920
1,181,870
1,534,529
1,966,619
1,112,174
222,404
809,986
11,897,000

19. Other operating income and expense

Other operating income and expenses for the three and six months ended June 30, 2011 and 2010, consists of the
following:
1) Other operating income
(In millions of Korean won)
Dividend income
Commission income
Rental income
Gain on disposal of investments
Gain on disposal of property, plant
and equipment
Gain on transfer of business
Other

3 Months
2011
2010

4,903

3,559
6,688
5,166
20,451
32,314
31,756
227,626

8,300
184,820
256,918

30

52,138
149,625
470,428

Accumulate
2011
2010

31,583

32,152
11,822
6,984
43,887
50,715
47,300
361,056
68,790
363,291
566,673

204,143
179,418
224,973
1,059,441

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2) Other operating expense
(In millions of Korean won)
Other bad debts expense

3 Months
2011
2010

807

2,943

Loss from disposal of property,

plant and equipment
Donations
Other

24,778
68,480
184,585
278,650

86,550
60,469
11,129
161,091

Accumulate
2011
2010

3,616

7,079

38,377
100,376
292,945
435,314

126,837
104,712
141,159
379,787

20. Finance income and expenses

Finance income and expenses for the three and six months ended June 30, 2011 and 2010, consists of the
following:
(In millions of Korean won)
Interest income:
Interest income from loans and
receivables
Interest income from available-forsale financial assets
Realized foreign exchange gains
Unrealized foreign exchange gains
Other finance income
Finance income
Interest expense:
Interest expense from financial
liabilities measured at amortized cost
Realized foreign exchange losses
Unrealized foreign exchange losses
Other finance expenses
Finance expenses

3 Months
2011
165,216

Accumulate
2010
124,490

2011
315,072

2010
264,334

164,065

124,253

312,825

264,096

1,151
1,104,330

237
2,202,568

2,247
1,661,957

238
2,926,066

148,461
71,385
1,489,392

55,676
122,471
2,505,205

500,175
164,608
2,641,812

474,702
184,120
3,849,222

148,131

122,745

286,388

252,291

148,131
1,138,695

122,745
2,148,183

286,388
1,782,751

252,291
2,916,430

90,304
110,216
1,487,346

411,729
75,620
2,758,277

285,535
221,477
2,576,151

679,958
148,018
3,996,697

The company recognizes the profits and losses regarding translation differences as financial income and
expenses.

21. Income Tax

Income tax expense is recognized based on managements best estimate of the weighted average annual income
tax rate expected for the full financial year. The estimated average annual tax rate used for the year ended
December 31, 2011 is 16.7% (the estimated tax rate for the period ended June 30, 2010: 19.6%). The primary
reason for the decrease in estimated average annual tax rate for FY 2011 is the proportionate increase in tax credits
relative to taxable income compared to FY 2010.

31

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22. Earnings Per Share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company by the
weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the
company and held as treasury shares.
Basic earnings per share for the years ended June 30, 2011 and 2010, are calculated as follows:
(In millions of Korean Won)
Net income as reported on the statements of
income
Adjustments:
Dividends for preferred stock1
Undeclared participating preferred stock
dividend1
Net income available for common stock
Weighted-average number of common shares
Outstanding (in thousands)
Basic earnings per share (in Korean won)
1

3 Months

6 Months

2011

2010

2011

2010

3,456,956

4,172,692

6,171,601

8,189,135

(30,029)

(119,371)

(60,058)

(149,399)

(431,386)

(435,306)

(764,523)

(939,193)

2,995,541

3,618,015

5,347,020

7,100,543

130,141
23,018

129,517
27,935

130,087
41,104

128,930
55,073

Basic earnings per preferred share (in Korean Won)

(In millions of Korean Won)

Net income available for preferred stock
Weighted-average number of preferred shares
Outstanding (in thousands)
Basic earnings per preferred share (in Korean
Won)

3 Months
2011
2010
461,415
554,677
19,854

6 Months
2011
2010
824,581
1,088,592

19,854

23,240

27,938

19,854

19,854

41,532

54,830

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding
to assume conversion of all dilutive potential ordinary shares. The company has one category of dilutive potential
ordinary shares: stock options. A calculation is done to determine the number of shares that could have been
acquired at fair value (determined as the average annual market share price of the companys shares) based on
the monetary value of the subscription rights attached to outstanding share options. The number of shares
calculated as above is compared with the number of shares that would have been issued assuming the exercise of
the share options.
Diluted earnings per share for the years ended December 31, 2011 and 2010, is calculated as follows:
(In millions, except for share amounts)

3 Months

6 Months

2011

2010

2011

2010

Net income available for common stock

Net income available for common stock and
common equivalent shares
Weighted-average number of shares of
common stock and common shares equivalent

2,995,541

3,618,015

5,347,020

7,100,543

2,995,541

3,618,015

5,347,020

7,100,543

Diluted earnings per share (in Korean Won)

130,070
27,816

130,353
41,020

130,400
22,972

32

129,483
54,838

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. Cash generated from operations
a. Cash flows from operating activities as of June 30, 2011 and 2010, consist of the following:
(In millions of Korean Won)

2011

Adjustments for:
Tax expense

Finance income
Finance costs
Severance and retirement benefits
Depreciation expenses
Amortization expenses
Bad debt expenses
Share of profit or loss of associates and joint ventures
Gain on disposal of property, plant and equipment
Loss on disposal of property, plant and equipment
Obsolescence and scrappage of inventories
Other income/expense
Adjustments, total

Changes in assets and liabilities:

Increase in trade receivables

Decrease/(increase) in other receivables

(Increase)/decrease in advances
Decrease/(increase) in prepaid expenses
Increase in inventories
Increase in trade payables
(Decrease)/increase in other payables
Decrease in advance received
Increase/(decrease) in withholdings
Decrease in accrued expenses
Increase in provisions
Payment of severance benefits
Other
Changes in operating assets and liabilities, total

33

2010

1,261,242
(979,855)
793,428
306,291
6,127,464
300,339
30,593
(786,267)
(68,790)
38,377
420,073
(81,179)
7,361,716

(1,183,086)
319,701
(21,661)
142,961
(1,258,621)
236,922
(1,026,452)
(8,991)
554,865
(1,921,472)
1,669,509
(89,460)
(272,384)
(2,858,169)

2,016,237
(784,239)
966,950
262,062
5,324,189
254,636
79,209
(1,014,573)
(204,143)
126,837
511,486
(376,844)

7,161,807

(1,695,035)
(293,747)
270,194
(1,090,205)
(4,353,161)
1,097,913
2,334,940
(401,724)
(37,768)
(891,134)
156,864
(498,563)
(10,249)
(5,411,675)

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24. Segment Information
The chief operating decision maker has been identified as the Management Committee. The Management Committee is responsible for making strategic decisions based
on review of the Companys internal reporting. The Management Committee has determined the operating segments based on these reports.
The Management Committee reviews operating profit of each operating segment in order to assess performance and make decisions on resources to be allocated to the
segment.
The operating segments are product based and include Digital media, Telecommunication, Semiconductor, LCD and others.
The segment information provided to the Management Committee for the reportable segments for the six-month and three-month ended June 30, 2011 and 2010, consist
of the following:
1) Six-month ended June 30, 2011
2011 Summary of Business by Segment
SET

(In millions of Korean Won)

Total

Device

TeleDigital Media Communication

Total segment revenue

106,118,196
61,520,146
44,202,395
Inter segment revenue
(55,503,716) (33,920,265)
(21,382,280)
Revenue from external customers
50,614,480
27,599,881
22,820,115
Operating profit1
3,728,600
610,867
3,104,586
Total assets
84,154,398
43,067,721
33,647,110
1
Operating profit for each segment is inclusive of all consolidation eliminations.

Total
62,293,916
(30,723,547)
31,570,369
2,994,820
92,883,949

34

Semiconductor

Total

Elimination

Consolidated

LCD

35,092,241 27,486,248
(16,757,880) (13,881,730)
18,334,361 13,604,518
3,435,929
(442,627)
60,092,691 32,794,465

169,270,265
(92,846,394)
76,423,871
6,700,416
197,278,491

(92,846,394)
92,846,394
(59,308,792)

76,423,871
76,423,871
6,700,416
137,969,699

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2) Three-month ended June 30, 2011
2011 Summary of Business by Segment
SET
(In millions of Korean Won)

Total

Device

TeleDigital Media Communication

Total

Semiconductor

Total

Elimination

Consolidated

39,438,854

LCD

Total segment revenue

54,473,082

30,789,604

23,480,094

31,869,328

17,577,794

14,432,592

86,868,791

(47,429,937)

Inter segment revenue

(28,115,460)

(16,714,652)

(11,296,435)

(15,799,214)

(8,419,207)

(7,341,357)

(47,429,937)

47,429,937

26,357,622

14,074,952

12,183,659

16,070,114

9,158,587

7,091,235

39,438,854

39,438,854

2,186,037

507,366

1,671,146

1,579,331

1,791,262

(213,373)

3,751,880

3,751,880

Total assets
84,154,398
43,067,721
33,647,110
1
Operating profit for each segment is inclusive of all consolidation eliminations.

92,883,949

60,092,691

32,794,465

197,278,491

(59,308,792)

137,969,699

Revenue from external customers

Operating profit1

3) Six-month ended June 30, 2010

2010 Summary of Business by Segment
SET

(In millions of Korean Won)

Total segment revenue

Total
97,583,921

Device

TeleDigital Media Communication

Total

62,504,925

34,575,562

64,675,649

(52,137,778) (34,869,121)

Semiconductor
34,300,251

LCD

Total

(101,181,320)

72,529,988

(16,565,888) (16,057,537)

(101,181,320)

101,181,320

(17,095,253)

(32,676,916)

27,635,804

17,480,309

31,998,733

17,734,363

14,613,814

72,529,988

2,591,764

885,509

1,724,650

6,266,743

4,898,694

1,369,501

9,419,824

Total assets
93,165,737
43,049,787
32,739,545
1
Operating profit for each segment is inclusive of all consolidation eliminations.

83,654,962

54,165,667

29,458,795

179,108,299

Operating profit1

35

Consolidated

173,711,308

45,446,143

Inter segment revenue

Revenue from external customers

Elimination

30,671,351

(53,431,639)

72,529,988
9,419,824
125,676,660

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4) Three-month ended June 30, 2010

2010 Summary of Business by Segment

Device

SET

(In millions of Korean Won)

Total segment revenue
Inter segment revenue
Revenue from external customers

Total
50,546,300

TeleDigital Media Communication

Total

Semiconductor

LCD

Total

Elimination

Consolidated

33,762,246

16,511,625

34,450,876

18,452,410

16,172,515

90,564,579

(52,672,661)

(27,036,588) (18,958,592)

(7,990,774)

(17,366,782)

(8,922,975)

(8,409,042)

(52,672,661)

52,672,661

23,509,712

14,803,654

8,520,851

17,084,094

9,529,435

7,763,473

37,891,918

37,891,918

985,093

358,400

628,587

3,823,573

2,903,476

878,405

5,014,212

5,014,212

Total assets
93,165,737
43,049,787
32,739,545
1
Operating profit for each segment is inclusive of all consolidation eliminations.

83,654,962

54,165,667

29,458,795

179,108,299

Operating profit1

(53,431,639)

The regional segment information provided to the Management Committee for the reportable segments for the six-month ended June 30, 2011 and 2010, consist of the
following:
1)

37,891,918

Six-month ended June 30, 2011

(In millions of Korean Won)

Korea

America

Europe

Total segment revenue

66,198,696
31,120,312
27,289,161
Inter segment revenue
(52,450,458)
(9,026,672)
(10,885,685)
Revenue from external customers
13,748,238
22,093,640
16,403,476
Non-current assets1
50,026,556
6,831,542
1,105,674
1
The total of non-current assets other than financial instruments, and deferred tax assets

36

Asia
18,305,783
(5,103,895)
13,201,888
1,144,057

China
26,356,313
(15,379,684)
10,976,629
1,709,915

Eliminations
(92,846,394)
92,846,394
(109,178)

Consolidated
76,423,871
76,423,871
60,708,566

125,676,660

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2) Three-month ended June 30, 2011
(In millions of Korean Won)

Korea

America

Total segment revenue

34,234,750
16,620,076
Inter segment revenue
(27,279,076)
(4,799,533)
Revenue from external customers
6,955,674
11,820,543
Non-current assets1
50,026,556
6,831,542
1
The total of non-current assets other than financial instruments, and deferred tax assets

3)

Europe
12,975,774
(4,977,586)
7,998,188
1,105,674

9,665,015
(2,712,328)
6,952,687
1,144,057

China
13,373,176
(7,661,414)
5,711,762
1,709,915

Eliminations
(47,429,937)
47,429,937
(109,178)

Consolidated
39,438,854
39,438,854
60,708,566

Six-month ended June 30, 2010

(In millions of Korean Won)

Korea

America

Europe

Total segment revenue

63,653,741
28,961,280
29,523,787
Inter segment revenue
(51,168,772)
(9,842,716)
(13,614,637)
Revenue from external customers
12,484,969
19,118,564
15,909,150
Non-current assets1
43,231,202
3,597,220
853,925
1
The total of non-current assets other than financial instruments, and deferred tax assets

4)

Asia

Asia
16,697,002
(4,698,895)
11,998,107
912,788

China
34,875,498
(21,856,300)
13,019,198
1,658,347

Eliminations
(101,181,320)
101,181,320
(451,686)

Consolidated
72,529,988
72,529,988
49,801,796

Three-month ended June 30, 2010

(In millions of Korean Won)

Korea

America

Total segment revenue

33,423,045
16,224,341
Inter segment revenue
(26,972,243)
(5,551,052)
Revenue from external customers
6,450,802
10,673,289
Non-current assets1
43,231,202
3,597,220
1
The total of non-current assets other than financial instruments, and deferred tax assets

Europe
14,576,003
(6,708,989)
7,867,014
853,925

37

Asia
8,922,006
(2,457,148)
6,464,858
912,788

China
17,419,184
(10,983,229)
6,435,955
1,658,347

Eliminations
(52,672,661)
52,672,661
(451,686)

Consolidated
37,891,918
37,891,918
49,801,796

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. Related-party transactions
1) Associates
The principal associate companies are Samsung SDI Co., Ltd., Samsung Electro-mechanics, Samsung SDS,
Samsung Techwin Co., Ltd., and Samsung Card Co., Ltd.
Transactions with associates for the six-month ended June 30, 2011 and 2010, and the related receivables
and payables as of June 30, 2011 and December 31, 2010, are as follows:
(In millions of Korean Won)

2011

Inter-company transactions
Sales
Purchases
Receivables and Payables
Receivables
Payables

554,086
2,422,735

2010

688,014
2,322,075

170,317
709,656

183,812
816,473

2) Joint ventures
The principal joint venture companies are Samsung Corning Precision Glass, and Siltronic Samsung Wafer.
Transactions with joint venture partners for the six-month ended June 30, 2011 and 2010, and the related
receivables and payables as of June 30, 2011 and December 31, 2010, are as follows:
(In millions of Korean Won)

2011

Inter-company transactions
Sales
Purchases
Receivables and Payables
Receivables
Payables

4,467
1,568,442

2010

6,942
1,494,039

208
160,582

131
126,906

3) Other related parties

Samsung Everland and Samsung Petrochemical, etc. are defined as related parties for the company.
Transactions with other related parties for the six-month ended June 30, 2011 and 2010, and the related
receivables and payables as of June 30, 2011 and December 31, 2010, are as follows:
(In millions of Korean Won)

2011

Inter-company transactions
Sales
Purchases

Receivables and Payables

Receivables
Payables

35,997
273,508

233,235
115,900

38

2010

8,472
197,009

233,649
109,875

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4) Key management compensation
Key management includes directors (executive and non-executive), members of the Executive Committee.
The compensation paid or payable to key management for employee services for the periods ended June 30,
2011 and 2010 is shown below:
(In millions of Korean Won)

2011

Salaries and other short-term benefits

Termination benefits
Other long-term benefits

12,670
348
2,548

2010

3,741
1,316
2,714

26. Financial risk management

Financial risk factors
The Company is exposed to credit risk, liquidity risk and market risk. Market risk arises from currency risk,
interest rate risk and fair value risk associated with investments. The Company has a risk management
program in place to monitor and actively manage such risks. Also, financial risk management officers are
dispatched to the regional headquarters of each area including United States of America, England, Singapore,
China, Japan, and Brazil to run and operate a local financial center for global financial risk management.
The Companys financial assets that are under financial risk management are composed of cash and cash
equivalents, short-term financial instruments, available-for-sale financial assets, trade and other receivables
and other financial assets. The Companys financial liabilities under financial risk management are composed
of trade and other payables, borrowings and debentures and other financial liabilities.
(1) Market risk
(a) Foreign exchange risk
The Company is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the United States of America, European Union, Japan, other Asian countries and South America.
Revenues and expenses arise from foreign currency transactions and exchange positions, and the most widely
used currencies are the US Dollar, EUs Euro, Japanese Yen and Chinese Yuan. Foreign exchange risk
management of the Company is carried out by both SEC and its subsidiaries. To minimize foreign exchange
risk arising from operating activities, the Companys foreign exchange management policy requires all
normal business transactions to be in local currency, or cash-in currency be matched up with cash-out
currency. The Companys foreign risk management policy also defines foreign exchange risk, measuring
period, controlling responsibilities, management procedures, hedging period and hedge ratio very specifically.
The Company limits all speculative foreign exchange transactions and operates a system to manage
receivables and payables denominated in foreign currency. It evaluates, manages and reports foreign currency
exposures to receivables and payables.
(b) Price risk
The Companys investment portfolio consists of direct and indirect investments in listed and non-listed
securities. The market values for the Companys equity investments as of June 30, 2011 and December 31,

39

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2010 are 2,964,696 million and 2,990,441million respectively. (Note 6)
If there is change in price of equity investment by 1%, the amount of other comprehensive income changes
for the six-month ended June 30, 2011 and for the year ended December 31, 2010 are 26,345 million and
26,641 million, respectively.
(c) Interest rate risk
Interest rate risk is defined as the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk mainly
arising through interest bearing liabilities and assets. The Companys position with regard to interest rate risk
exposure is mainly driven by its debt obligations such as bonds, interest-bearing deposits and issuance of
receivables. In order to avoid interest rate risk, the Company maintains minimum external borrowing by
facilitating cash pooling systems on a regional and global basis. The Company manages exposed interest rate
risk via periodic monitoring and handles risk factors on a timely basis.
(2) Credit risk
Credit risk arises during the normal course of transactions and investing activities, where clients or other
party fails to discharge an obligation. The Company monitors and sets the counterpartys credit limit on a
periodic basis based on the counterpartys financial conditions, default history and other important factors.
There were no significant loans or other receivables which are overdue or subject to impairment, included in
accounts receivables or other financial instruments. The Company has evaluated there is no indication of
default by any of its counterparties.
Credit risk arises from cash and cash equivalents, savings and derivative instruments transactions with
financial institutions. To minimize such risk, the Company transacts only with banks which have strong
international credit rating (S&P A above), and all new transactions with financial institutions with no prior
transaction history are approved, managed and monitored by the Companys finance team and the local
financial center. The Company requires separate approval procedure for contracts with restrictions.
The top five customers account for approximately occupies 17.0% (3,386,418 million) and 14.3%
(2,734,014 million) as of June 30, 2011 and December 31, 2010, respectively, while the top three credit
exposures by country amounted to 17.3%, 16.5% and 13.3% (December 31, 2010: 15.6%, 12.0% and 11.0%),
respectively.
(3) Liquidity risk
The Company manages its liquidity risk to maintain adequate net working capital by constantly managing
projected cash flows. Beyond effective working capital and cash management, the Company mitigates
liquidity risk by contracting with financial institutions with respect to bank overdrafts, Cash Pooling or
Banking Facility agreement for efficient management of funds. Cash Pooling program allows sharing of
funds among subsidiaries to minimize liquidity risk and reduce financial expense.
(4) Capital structure management
The object of capital management is to maintain sound capital structure. Consistent with others in the
industry, the Company monitors capital on the basis of the debt to equity ratio. This ratio is calculated as total
liabilities divided by equity based on the consolidated financial statements.

40

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In 2011, the Companys strategy was to maintain a reliable credit rating. The Company has maintained an A
credit rating for long term debt from S&P and A1 from Moodys, respectively throughout the period. The
gearing ratios at June 30, 2011 and December 31, 2010 were as follows:
(In millions of Korean Won)

2011
43,361,485
94,608,214
45.8%

Total liabilities
Total equity
Gearing ratio

2010
44,939,653
89,349,091
50.3%

27. Business Combination

(1) Merger of Samsung Gwangju Electronics
The Company acquired Samsung Gwangju Electronics with a closing date of January 1, 2011. The approval
of the Board of Directors of the Company replaces shareholders meeting approval of the acquisition, as the
acquisition of Samsung Gwangju Electronics is a small and simple merger as defined in the commercial law.
1) Overview of the acquired company
Name of the acquired company

Samsung Gwangju Electronics

Headquarters location

Gwangju, Gwangsan-gu

Representative director

Chang-wan Hong

Classification of the acquired company

Former relationship with the Company

Unlisted company
Subsidiary

2) Terms of the business combination

The shareholders of Samsung Gwangju Electronics received 0.0252536 shares of the Companys
common stock for each share of Samsung Gwangju Electronics common stock owned on the closing date.
The Company transferred its treasury stocks to the shareholders of Samsung Gwangju Electronics,
instead of issuing new stocks.
(2) Acquisition of Prosonic
The Company acquired 100% shares of Prosonic Co.,Ltd. with a closing date of February 16, 2011.
1) Overview of the acquired company
Name of the acquired company

Prosonic

Headquarters location

Gyeongsangbukdo, Gyeongju-si

Representative director

Sang-won Bang

Classification of the acquired company

After acquision relationship with the
Company

Unlisted company
Subsidiary

41

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2) Purchase price allocation
Classification

Amount
(in millions of KRW)

I. Considerations transferred

43,438

II. Identifiable assets and liabilities

Cash and cash equivalents

4,197

Trade and other receivables

2,345

Inventories

2,036

Property, plant, and equipment

9,183

Intangible assets

26,664

Other assets

1,977

Trade and other payables

(1,713)

Retirement benefit obligation

(919)

Other liabilities
Total

(2,793)
40,977

III. Goodwill

2,461

(3) Acquisition of Samsung Medison

The Company acquired 43.5% shares of Samsung Medison Co.,Ltd. with a closing date of February 16, 2011
and additionally acquired 22.3% shares of Samsung Medison Co.,Ltd. with closing date of April 29, 2011.
1) Overview of the acquired company
Name of the acquired company

Samsung Medison

Headquarters location

Gangwondo, Hongchengun

Representative director

Sang-won Bang

Classification of the acquired company

After acquision relationship with the
Company

Unlisted company
Subsidiary

2) Purchase price allocation

Classification

Amount
(in millions of KRW)

I. Considerations transferred

436,965

II. Identifiable assets and liabilities

Cash and cash equivalents

42,287

Trade and other receivables

66,471

Inventories

57,880

Property, plant, and equipment

112,102

Intangible assets

331,433

Other assets

42,708

Trade and other payables

(39,161)

42

Samsung Electronics Co., Ltd. and Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Borrowings and loans

(88,236)

Retirement benefit obligation

(3,306)

Provisions

(8,506)

Deferred income tax liabilities

(71,157)

Other liabilities
Total

(22,450)
420,065

III. Non-controlling interests

(57,447)

IV. Goodwill

74,347

Had Samsung Medison been consolidated from January 1, 2011, the consolidated for the six-month period
would show revenue of 57,023 million and loss of 12,219 million, additionally.
The revenue included in the financial statement of income statement since the date of acquisition contributed
by Samsung Medison was 83,304 million and profit of 1,491 million over the period.
28. Events after the Reporting Period
The Company disposed of photovoltaic cell business to Samsung SDI (one of the associates of the Company)
on July 1, 2011.

43