PARADISE CO., LTD. and Subsidiaries€¦ · · 2017-05-17Trade receivables 6,29,30 18,946,845,928...
Transcript of PARADISE CO., LTD. and Subsidiaries€¦ · · 2017-05-17Trade receivables 6,29,30 18,946,845,928...
PARADISE CO., LTD. and Subsidiaries Index December 31, 2016 and 2015
Page(s)
Independent Auditor’s Report ···················································································· 1 - 2
Consolidated Financial Statements
Consolidated Statements of Financial Position ································································ 3 - 4
Consolidated Statements of Comprehensive Income ························································· 5 - 6
Consolidated Statements of Changes in Equity ······························································· 7
Consolidated Statements of Cash Flows ········································································ 8 - 10
Notes to the Consolidated Financial Statements ·························································· 11 – 59
Independent Auditor’s Report
(English Translation of a Report Originally Issued in Korean) To the Board of Directors and Shareholders of PARADISE Co., Ltd.
We have audited the accompanying consolidated financial statements of PARADISE Co., Ltd. and its subsidiaries (collectively referred to as “the Group”), which comprise the consolidated statements of financial position as at December 31, 2016 and 2015, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information. Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with the Korean Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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Opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of PARADISE Co., Ltd. and its subsidiaries as at December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean IFRS Other Matter Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries.
Seoul, Korea
March 16, 2017
This report is effective as of March 16, 2017, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.
PARADISE CO., LTD. and Subsidiaries
Consolidated Statements of Financial Position December 31, 2016 and 2015
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(in Korean won) Notes 2016 2015
Assets
Current assets
Cash and cash equivalents 5,29,30,32 ₩ 182,298,788,180 ₩ 338,805,004,141
Short-term financial instruments 5,29,30 262,500,000,000 286,200,000,000
Available-for-sale financial assets 7,29,30 3,000,000,000 31,000,000,000
Held-to-maturity financial assets 8,29,30 1,300,000 300,000
Trade receivables 6,29,30 18,946,845,928 24,426,530,004
Non-trade receivables 6,29,30,31 1,500,750,322 1,262,435,599
Advance payments 3,470,008,804 2,912,532,931
Prepaid expenses 6,579,575,965 4,678,994,836
Inventories 2,402,757,864 2,701,040,263
Other receivables 6,29,30 3,804,139,672 4,603,815,148
Other current assets 7,477,847,494 1,518,009,364
491,982,014,229 698,108,662,286
Non-current assets
Long-term financial instruments 5,29,30 28,382,865,104 23,117,058,156
Available-for-sale financial assets 7,29,30 12,059,592,250 23,642,080,131
Held-to-maturity financial assets 8,29,30 585,000 1,885,000
Investments in associates 9 8,162,842 8,749,791
Investment properties 4,10 139,343,561,364 122,922,567,993
Property and equipment, net 4,11 1,336,963,637,147 830,878,168,011
Intangible assets 4,12,35 285,118,405,012 279,890,926,493
Long-term prepaid expenses 3,850,000,000 2,758,473,050
Long-term advance payments - 2,185,300,000
Other non-current receivable 6,29,30 10,309,820,358 10,355,619,704
1,816,036,629,077 1,295,760,828,329
Total assets ₩ 2,308,018,643,306 ₩ 1,993,869,490,615
Liabilities
Current liabilities
Trade payables 29,30 ₩ 1,652,452,562 ₩ 1,518,824,821
Short-term borrowings 13,29,30 59,570,000,000 36,400,000,000
Current portion of long-term borrowings 13,29,30 10,785,446,664 10,061,706,664
Derivative financial instruments 14,29,30 1,083,612,553 -
Other payables 29,30,31 37,149,774,284 30,099,887,982
Advance from customers 4,639,040,246 3,908,819,983
Withholdings 43,274,626,159 38,545,133,328
Deposit received for guarantee 29,30 12,153,000,000 12,352,000,000
Income tax payables 8,530,800,613 3,797,301,054
Other current liabilities 15 111,110,392,139 102,915,251,442
289,949,145,220 239,598,925,274
PARADISE CO., LTD. and Subsidiaries
Consolidated Statements of Financial Position December 31, 2016 and 2015
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(in Korean won) Note 2016 2015
Non-current liabilities
Long-term borrowings 13,29,30 ₩ 636,461,988,113 ₩ 394,850,814,818
Derivative financial instruments 14,29,30 1,077,893,470 -
Net defined benefit liabilities 16 14,880,702,839 11,959,939,935
Long-term deposits received 29,30 67,842,500 67,842,500
Deferred tax liabilities 27 45,310,128,638 47,684,158,375
Other non-current liabilities 17,29,30,31 10,605,436,548 13,192,458,329
708,403,992,108 467,755,213,957
Total liabilities 998,353,137,328 707,354,139,231
Equity attributable to owners of the Parent Company
Share capital 1,18 47,032,355,000 47,032,355,000
Share premium 19 295,020,106,467 295,020,106,467
Retained earnings 20 726,949,182,043 706,065,592,249
Other components of equity 21 (24,898,348,615) (25,435,938,394)
1,044,103,294,895 1,022,682,115,322
Non-controlling interest 265,562,211,083 263,833,236,062
Total equity 1,309,665,505,978 1,286,515,351,384
Total liabilities and equity ₩ 2,308,018,643,306 ₩ 1,993,869,490,615
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
PARADISE CO., LTD. and Subsidiaries
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2016 and 2015
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(in Korean won) Notes 2016 2015
Sales 4,22,31 ₩ 694,856,269,443 ₩ 615,357,060,781
Cost of sales 24,31 556,420,448,712 492,742,473,637
Gross profit 138,435,820,731 122,614,587,144
Selling expenses 23,24,31 15,433,509,063 9,043,253,594
Administrative expenses 23,24,31 57,216,466,627 55,249,604,615
Operating income 4 65,785,845,041 58,321,728,935
Finance income 25 9,501,314,208 12,257,108,161
Finance costs 25 3,514,314,512 2,993,813,522
Other income 26 23,613,145,171 23,161,940,453
Other expenses 26 19,936,639,605 10,602,141,638
Share of net loss of associates 9 (586,949) (1,000,614,357)
Profit before income tax 75,448,763,354 79,144,208,032
Income tax expense 27 17,826,685,360 23,769,718,518
Profit from continuing operations 57,622,077,994 55,374,489,514
Profit from discontinued operations 34 - 16,457,391,193
Profit for the period 57,622,077,994 71,831,880,707
Other Comprehensive Income(Expenses) (2,527,752,024) (1,808,426,911)
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit plans 16 (3,072,380,553) (5,252,498,119)
Tax effect 743,516,094 1,271,104,545
(2,328,864,459) (3,981,393,574)
Items that may be subsequently reclassified to profit or loss
Changes in the fair value of available-for-sale financial assets
39,665,376 (325,299,490)
Reclassification due to disposal of available-for-sale financial assets
1,519,950,000 (9,581,443)
Cash flow hedges (2,161,506,022) -
Exchange differences 257,345,536 2,426,806,410
Tax effect 145,657,545 81,041,186
(198,887,565) 2,172,966,663
Total Comprehensive Income for the period ₩ 55,094,325,970 ₩ 70,023,453,796
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
PARADISE CO., LTD. and Subsidiaries
Consolidated Statements of Comprehensive Income
Years Ended December 31, 2016 and 2015
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(in Korean won) Notes 2016 2015
Profit for the period attributable to :
Owners of the Parent
Profit from continuing operations ₩ 55,125,791,729 ₩ 48,782,040,565
Profit from discontinuing operations 34 - 16,456,089,893
Non-controlling interests
Profit from continuing operations 2,496,286,265 6,592,448,949
Profit from discontinuing operations 34 - 1,301,300
₩ 57,622,077,994 ₩ 71,831,880,707
Total Comprehensive income attributable to :
Owners of the Parent ₩ 53,365,350,948 ₩ 63,793,600,897
Non-controlling interests 1,728,975,022 6,229,852,899
₩ 55,094,325,970 ₩ 70,023,453,796
Earnings per share : 28
Basic and diluted earnings per share from continuing operations
₩ 647 ₩ 571
Basic and diluted earnings per share from discontinued operations
- 193
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
PARADISE CO., LTD. and Subsidiaries
Consolidated Statements of Changes in Equity Years Ended December 31, 2016 and 2015
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Attributable to owners of the company Non-controlling
(in Korean won) Share capital Share premium Retained earnings Other components of equity interests Total
Balance at January 1, 2015 ₩ 47,032,355,000 ₩ 295,020,106,467 ₩ 687,210,012,703 ₩ (18,900,656,045) ₩ 167,842,254,593 ₩ 1,178,204,072,718
Comprehensive income
Profit for the period - - 65,238,130,458 - 6,593,750,249 71,831,880,707
Remeasurement of defined benefit plans - - (3,616,863,912) - (364,529,662) (3,981,393,574)
Change in value of available-for-sale financial assets - - - (253,839,747) - (253,839,747)
Exchange differences - - - (622,333,232) 632,312 (621,700,920)
Disposal of subsidiaries - - - 3,048,507,330 (13,847,635) 3,034,659,695
Transactions with owners :
Dividends to owners of the company - - (42,765,687,000) - - (42,765,687,000)
Retirement of treasury shares - - - (8,707,616,700) - (8,707,616,700)
Increase in paid-in capital - - - - 89,774,976,205 89,774,976,205
Balance at December 31, 2015 ₩ 47,032,355,000 ₩ 295,020,106,467 ₩ 706,065,592,249 ₩ (25,435,938,394) ₩ 263,833,236,062 ₩ 1,286,515,351,384
Balance at January 1, 2016 ₩ 47,032,355,000 ₩ 295,020,106,467 ₩ 706,065,592,249 ₩ (25,435,938,394) ₩ 263,833,236,062 ₩ 1,286,515,351,384
Comprehensive income
Profit for the period - - 55,125,791,729 - 2,496,286,265 57,622,077,994
Remeasurement of defined benefit plans - - (2,298,030,560) - (30,833,899) (2,328,864,459)
Change in value of available-for-sale financial assets - - - 30,066,363 - 30,066,363
Reclassification due to disposals of available-for-sale financial assets
- - - 1,152,122,100 - 1,152,122,100
Cash flow hedges - - - (901,140,674) (737,280,891) (1,638,421,565)
Exchange differences - - - 256,541,990 803,546 257,345,536
Transactions with owners :
Dividends to owners of the company - - (31,944,171,375) - - (31,944,171,375)
Balance at December 31, 2016 ₩ 47,032,355,000 ₩ 295,020,106,467 ₩ 726,949,182,043 ₩ (24,898,348,615) ₩ 265,562,211,083 ₩ 1,309,665,505,978
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
PARADISE CO., LTD. and Subsidiaries
Consolidated Statements of Cash Flows Years Ended December 31, 2016 and 2015
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(in Korean won) 2016 2015
Cash flows from operating activities
Net income ₩ 57,622,077,994 ₩ 71,831,880,707
Adjustment for
Retirement benefit expense 12,617,606,472 11,334,941,842
Depreciation 24,907,120,258 21,346,593,806
Amortization 6,726,603,171 5,516,832,610
Depreciation of investment properties 787,412,858 704,253,955
Bad debt expense(reversal) 2,537,756,623 (484,195,199)
Other bad debt expense 402,473,083 -
Loss on foreign currency translation 79,252 823,400
Loss on disposal of property and equipment 455,383,620 516,982,603
Losses on disposal of intangible assets 53,350,000 -
Impairment loss on property and equipment 4,183,823,573 -
Losses on disposal of inventory - 18,956,359
Interest expenses 3,514,314,512 3,003,718,071
Income tax expense 17,826,685,360 26,347,511,133
Reversal of financial guarantee liability (802,191,780) (403,287,671)
Gain on foreign currency translation (418,947,192) (405,445,703)
Gain on disposal of property and equipment (253,270,828) (4,174,781,678)
Gains on disposal of intangible assets (290,272,440) (33,118,414)
Gain on disposal of available-for-sale financial assets (734,981,820) -
Gain on disposal of investments in subsidiaries - (17,652,885,072)
Gains on assets contributed - (167,380,500)
Interest income (9,501,314,208) (12,257,108,161)
Dividend income (45,016,300) (39,044,750)
Loss from equity method investments 586,949 1,000,614,357
61,967,201,163 34,173,980,988
Changes in assets and liabilities resulting from operating activities
Decrease in trade receivables 3,368,973,023 14,675,368,007
Increase in non-trade receivables (194,272,314) (1,748,852,836)
Increase in other current assets (123,054,851) (1,747,192,746)
Increase in advance payments (8,429,587,304) (1,431,890,784)
Decrease in prepaid expenses 485,605,286 286,378,234
Decrease (increase) in inventories 328,336,881 (137,898,951)
Increase in other non-current receivable (42,555,129) (846,043,058)
Decrease in long-term advance payments 1,185,300,000 -
Decrease (increase) in long-term prepaid expenses 9,311,280 (2,753,570,424)
Increase (decrease) in trade payables 91,193,730 (3,032,330,408)
Increase (decrease) in other payables 4,191,917,983 (453,327,839)
Increase (decrease) in advance receipts 728,772,803 (3,741,818,900)
Increase in withholdings 4,729,788,719 1,491,812,583
Decrease in deposits received for guarantee (199,000,000) (245,500,000)
Increase (decrease) in other current liabilities 5,397,621,677 (9,440,739,810)
PARADISE CO., LTD. and Subsidiaries
Consolidated Statements of Cash Flows Years Ended December 31, 2016 and 2015
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(in Korean won) 2016 2015
Increase (decrease) in other non-current liabilities (1,784,830,000) 661,790,000
Decrease in long-term deposit received for guarantee - (15,510,000)
Decrease (increase) in retirement pension plan assets 8,278,722,060 (10,453,848,846)
Transfers between affiliates 205,489,375 9,668,862
Payment of retirement benefit (18,869,439,137) (6,303,031,383)
(641,705,918) (25,226,538,299)
Interest received 9,373,038,490 13,134,152,585
Interest paid (1,581,420,045) (2,081,186,334)
Dividends received 45,016,300 39,044,750
Income tax paid (14,578,623,256) (92,543,877,996)
Net cash inflow(outflow) from operating activities 112,205,584,728 (672,543,599)
Cash flows from investing activities
Disposal of short-term investments 59,000,000,000 251,300,000,000
Disposal of available-for-sale financial assets 51,840,026,685 6,220,000,000
Disposal of held-to-maturity financial assets 300,000 34,185,000
Decrease in other receivables 2,159,781,370 1,683,657,721
Withdrawal of long-term financial instruments 6,061,474,000 124,740,000
Disposal of investments in subsidiaries - 210,662,499,875
Disposal of property and equipment 22,580,217 7,093,198,716
Disposal of intangible assets 2,665,000,000 300,000,000
Decrease in other non-current receivable 808,001,157 -
Acquisition of short-term investments (35,300,000,000) (413,835,350,000)
Acquisition of available-for-sale financial assets (10,010,044,865) (31,600,000,000)
Acquisition of long-term financial instruments (10,316,086,482) (11,430,543,094)
Increase in long-term advance payments - (2,185,300,000)
Increase in other non-current receivables (1,920,930,000) (3,913,672,840)
Acquisition of Investments in associates - (1,000,000,000)
Consideration for business combination (41,322,653,455) (95,583,079,514)
Acquisition of property and equipment (489,763,823,138) (295,605,284,939)
Acquisition of intangible assets (4,434,682,850) (669,786,980)
Acquisition of investment properties (967,146,008) (6,182,210,200)
Payment of capitalized interest (26,841,738,314) (13,500,534,224)
Decrease in other liabilities (772,609,589) -
Net cash outflow from investing activities (499,092,551,272) (398,087,480,479)
PARADISE CO., LTD. and Subsidiaries
Consolidated Statements of Cash Flows Years Ended December 31, 2016 and 2015
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(in Korean won) 2016 2015
Cash flows from financing activities
Proceeds from short-term borrowings 31,210,000,000 -
Proceeds from long-term borrowings 250,000,000,000 381,480,103,838
Repayment of short-term borrowings (9,000,000,000) (8,118,931,000)
Repayment of current portion of long-term borrowings
(10,061,706,664) (12,802,986,672)
Payment of dividends (31,944,171,375) (42,765,687,000)
Acquisition of treasury shares - (8,707,616,700)
Additional paid-in capital - 89,500,870,392
Net cash inflow from financing activities 230,204,121,961 398,585,752,858
Effects of exchange rate changes on cash and cash equivalents
176,628,622 402,640,285
Net increase(decrease) in cash and cash equivalents (156,506,215,961) 228,369,065
Cash and cash equivalents at the beginning of the year 338,805,004,141 338,576,635,076
Cash and cash equivalents at the end of the year ₩ 182,298,788,180 ₩ 338,805,004,141
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
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1. General Information 1.1 The Company
Paradise Co., Ltd. (the Company) was incorporated on April 27, 1972, to engage in casino operations, property leasing and others. On October 20, 1997, it changed its name to the current one. The Company operates a casino facility at the Walkerhill Hotel in Seoul, Maison Glad Hotel in Jeju, and Paradise Hotel in Busan. The company also operates a spa and leisure facility in Asan, and leases certain properties in Seoul. The Company listed its shares on Kosdaq of the Korea Exchange on November 5, 2002. It merged with Paradise Jeju Co., Ltd. and the casino operations segment of Paradise Global Co., Ltd. on June 26, 2012 and July 1, 2015, respectively. As at December 31, 2016, the share capital of the Company is ₩ 47,032,355 thousand, and its major shareholders are as follows:
Number of shares Percentage of
ownership (%)
Paradise Global Co., Ltd.
34,420,619
37.85
Kaywon Educational Foundation 3,720,000 4.09 Treasury share 5,758,215 6.33 Others 47,043,838 51.73
90,942,672 100.00
1.2 Consolidated Subsidiaries (a) Details of the consolidated subsidiaries as at December 31, 2016 and 2015, are as follows:
Subsidiaries
Main business
Location
Year-end
closing date
Percentage of ownership (%)
2016
2015
Paradise Hotel Pusan Co., Ltd. Hotel Korea December 31 74.49 74.49 Paradise Segasammy Co., Ltd. Hotel and Casino Korea December 31 55.00 55.00 Paradise International Co., Ltd. Advertisement Japan December 31 99.38 99.38 PARADISE AMERICA LLC. Hotel USA December 31 100.00 -
(b) Subsidiaries newly included in consolidation for the year ended December 31, 2016, are as follows:
Subsidiary Reason
PARADISE AMERICA LLC.
Establishment
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
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1.3 Summarized Financial Information Summarized financial information for each subsidiary is adjusted for goodwill and fair value adjustment from business combination, and differences in accounting policies between the Company and the consolidated subsidiaries. However, intercompany transactions were not eliminated. (a) Summarized statements of financial position for consolidated subsidiaries as at December 31, 2016 and 2015, are as follows:
2016
(in thousands of Korean won)
Assets Liabilities Equity
Current Non-current Current Non-current
Paradise Hotel Pusan Co., Ltd.
₩ 15,430,718 ₩ 263,563,037 ₩ 66,365,184 ₩ 18,457,845 ₩ 194,170,726
Paradise Segasammy Co., Ltd. 283,616,122 863,581,061 32,718,310 634,435,808 480,043,065
Paradise International Co., Ltd 2,169,559 721,892 654,190 243,323 1,993,938
PARADISE AMERICA LLC. 7,739,791 41,616,946 25,121,621 - 24,235,116
2015
(in thousands of Korean won)
Assets Liabilities Equity
Current Non-current Current Non-current
Paradise Hotel Pusan Co., Ltd.
₩ 19,665,762 ₩ 264,326,542 ₩ 66,364,249 ₩ 29,469,093 ₩ 188,158,962
Paradise Segasammy Co., Ltd. 445,886,213 443,627,956 23,692,559 386,209,215 479,612,395
Paradise International Co., Ltd. 2,154,624 726,319 768,293 203,430 1,909,219
(b) Summarized operating results of the Company’s consolidated subsidiaries for the periods ended December 31, 2016 and 2015, are as follows:
2016
(in thousands of Korean won)
Sales Operating income
Profit for the period
Comprehensive income
Paradise Hotel Pusan Co., Ltd. ₩ 79,045,300 ₩ 9,554,880 ₩ 5,761,649 ₩ 6,011,764
Paradise Segasammy Co., Ltd. 95,683,668 (502,586) 2,279,402 430,670
Paradise International Co., Ltd. 6,876,231 (2,424) (43,848) 84,719
PARADISE AMERICA LLC. 9,799,884 617,902 62,530 184,306
2015
(in thousands of Korean won)
Sales Operating income
Profit for the period
Comprehensive income
Paradise Hotel Pusan Co., Ltd. ₩ 79,033,927 ₩ 11,963,675 ₩ 7,830,740 ₩ 6,823,703
Paradise Segasammy Co., Ltd. 95,157,148 10,469,925 10,213,091 9,973,901
Paradise International Co., Ltd. 6,497,917 118,392 46,212 147,382
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
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(c) Summarized cash flows of the Company's consolidated subsidiaries for the periods ended December 31, 2016 and 2015, are as follows:
2016
(in thousands of Korean won)
Cash flows from operation activities
Cash flows from Investing activities
Cash flows from financing activities
Paradise Hotel Pusan Co., Ltd. ₩ 14,040,201 ₩ (9,709,316) ₩ (8,711,707)
Paradise Segasammy Co., Ltd. 10,895,820 (389,641,978) 247,650,000
Paradise International Co., Ltd. 29,716 (38,566) -
PARADISE AMERICA LLC. 2,733,665 (42,007,523) 46,420,000
2015
(in thousands of Korean won)
Cash flows from operation activities
Cash flows from Investing activities
Cash flows from financing activities
Paradise Hotel Pusan Co., Ltd. ₩ 20,026,388 ₩ (3,193,998) ₩ (15,546,918)
Paradise Segasammy Co., Ltd. 13,311,613 (510,936,789) 575,605,974
Paradise International Co., Ltd. 321,151 (28,839) -
(d) Details of significant non-controlling interest are as follows:
(%, in thousands of Korean won)
Paradise Hotel Pusan Co., Ltd.
Paradise Segasammy Co., Ltd.
Ownership percentage of non-controlling interests 25.51% 45.00%
Non-controlling interests 49,532,952 216,019,379
Profit attributable to non-controlling interests 1,469,797 1,025,731
Comprehensive income to non-controlling interests 1,533,601 193,802
2. Significant Accounting Policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of Preparation The Group maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with the International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”). The accompanying consolidated financial statements have been condensed, restructured and translated into English from the Korean language financial statements. Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Group's financial position, financial performance or cash flows, is not presented in the accompanying consolidated financial statements. The consolidated financial statements of the Group have been prepared in accordance with Korean IFRS. These are the standards, subsequent amendments and related interpretations issued by the International Accounting Standards Board ("IASB") that have been adopted by the Republic of Korea.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
14
The preparation of financial statements requires the use of critical accounting estimates. Management also needs to exercise judgement in applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3. 2.2 Changes in Accounting Policy and Disclosures (a) New and amended standards adopted by the Group The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2016. The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods.
- Disclosure Initiative – Amendments to Korean IFRS 1001 Presentation of Financial Statements
- Agriculture: Bearer Plants – Amendments to Korean IFRS 1016 Property, Plant and
Equipment, and Korean IFRS 1041 Agriculture - Clarification of Acceptable methods of Depreciation and Amortization – Amendments to
Korean IFRS 1016 Property, Plant and Equipment, and Korean IFRS 1038 Intangible assets - Investment entities: Applying the Consolidation Exception – Amendments to Korean IFRS
1110 Consolidated Financial Statements, Korean IFRS 1028 Investments in Associates and Joint Ventures, and Korean IFRS 1112 Disclosures of Interests in Other Entities
- Accounting for Acquisitions of Interests in Joint Operations – Amendments to Korean IFRS
1111 Joint Arrangement - Annual Improvements to Korean IFRS 2012-2014 Cycle - Korean IFRS 1011 Construction Contract, Korean IFRS 1037 Provisions, Contingent
Liabilities and Contingent Assets and Interpretation 2115 Arrangements for Property Construction
(b) New standards and interpretations not yet adopted by the Group Certain new accounting standards and interpretations that have been published that are not mandatory for December 31, 2016 reporting periods and have not been early adopted by the Group are set out below. - Amendments to Korean IFRS 1007 Statement of Cash Flows Amendments to Korean IFRS 1007 Statement of Cash flows requires to provide disclosures that enable used of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The Group will apply this amendment for annual reporting periods beginning on or after January 1, 2017 with early application permitted. The Group does not expect the amendments to have a significant impact on the consolidated financial statements.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
15
- Amendments to Korean IFRS 1012 Income Tax Amendments to Korean IFRS 1012 clarify how to account for deferred tax assets related to debt instruments measured at fair value. Korea IFRS 1012 provides requirements on the recognition and measurement of current or deferred tax liabilities or assets. The amendments issued clarify the requirements on recognition of deferred tax assets for unrealized losses, to address diversity in practice. The Group will apply the amendments for annual periods beginning on or after January 1, 2017 with early application permitted. The Group does not expect the amendments to have a significant impact on the consolidated financial statements. - Amendments to Korean IFRS 1102 Share-based Payment Amendments to IFRS 2 clarifies accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. And also, clarifies that the measurement approach should treat the terms and conditions of a cash-settled award in the same way as for an equity-settled award. The Group will apply the amendments for annual periods beginning on or after January 1, 2018 with early application permitted. The Group does not expect the amendments to have a significant impact on the consolidated financial statements. - Korean IFRS 1109 Financial Instruments The new standard for financial instruments issued on September 25, 2015 are effective for annual periods beginning on or after January 1, 2018 with early application permitted. This standard will replace Korean IFRS 1039 Financial Instruments: Recognition and Measurement. The Group will apply the standards for annual periods beginning on or after January 1, 2018. The standard requires retrospective application with some exceptions such as entities need not restate prior period in relation to classification and measurement (including impairment) of financial instruments. The standard requires prospective application of its hedge accounting requirements for all hedging relationships except the accounting for time value of options and other exceptions. Korean IFRS 1109 Financial Instruments requires all financial assets to be classified and measured on the basis of the entity’s business model for managing financial assets and the contractual cash flow characteristics of the financial assets. A new impairment model, an expected credit loss model, is introduced and any subsequent changes in expected credit losses will be recognized in profit or loss. Also, hedge accounting rules amended to extend the hedging relationship, which consists only of eligible hedging instruments and hedged items, qualifies for hedge accounting. With the implementation of Korean IFRS 1109, the Group needs to analyze financial effects and establish accounting policies, build accounting system, stabilize the system and others that will be necessary to drive an effective implementation. The impacts of the initial application of the standard on the financial statements depend on not only the Group’s election and judgement on the standard, but also, financial instruments and economic condition of the Group at the initial application. With the implementation of Korean IFRS 1109, the Group plans to improve its internal management process and accounting system. Also, the Group plans to perform preliminary analysis of the financial effects of applying the standard on the consolidated financial statements.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
16
- Korean IFRS 1115 Revenue from Contracts with Customers The Group will apply Korean IFRS 1115 Revenue from Contracts with Customers issued on November 6, 2015 for annual reporting periods beginning on or after January 1, 2018, and earlier application is permitted. This standard replaces Korean IFRS 1018 Revenue, Korean IFRS 1011 Construction Contracts, Interpretation 2031 Revenue-Barter Transactions Involving Advertising Services, Interpretation 2113 Customer Loyalty Programs, Interpretation 2115 Agreements for the Construction of Real Estate and Interpretation 2118 Transfers of assets from customers. The Group will apply Korean IFRS 1115 Revenue from Contracts with Customers within annual reporting periods beginning on or after January 1, 2018. The new standard is based on the principle that revenue is recognized when control of a good or service transfers to a customer – so the notion of control replaces the existing notion of risks and rewards. A new five-step process must be applied before revenue from contract with customer can be recognized: Identify contracts with customers Identify the separate performance obligation Determine the transaction price of the contract Allocate the transaction price to each of the separate performance obligations, and Recognize the revenue as each performance obligation is satisfied.
The Group plans to improve its internal management process and accounting system. Also, the Group plans to perform preliminary analysis of the financial effects of applying the standard on the consolidated financial statements. 2.3 Consolidation The Group has prepared the consolidated financial statements in accordance with Korean IFRS 1110, Consolidated financial statements.
(a) Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred is measured at the fair values of the assets transferred, and identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. All other non-controlling interests are measured at fair values, unless otherwise required by other standards. Acquisition-related costs are expensed as incurred. The excess of consideration transferred, amount of any non-controlling interest in the acquired entity and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recoded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognized directly in the profit or loss as a bargain purchase. Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
17
(b) Associates
Associates are entities over which the Group has significant influence but not control or joint control. Investments in associates are accounted for using the equity method of accounting, after initially being recognized at cost. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. If there is any objective evidence of impairment for the investment in the associate, the Group recognizes the difference between the recoverable amount of the associate and its book amount as impairment loss.
(c) Joint Arrangements
A joint arrangement, wherein two or more parties have joint control, is classified as either a joint operation or a joint venture. A joint operator recognizes its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. Interests in joint ventures are accounted for using the equity method, after initially being recognized at cost in the consolidated statement of financial position. 2.4 Foreign Currency Translation (a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the each entity operates (the “functional currency”). The consolidated financial statements are presented in Korean won, which is the controlling company’s functional and presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognized in other comprehensive income.
2.5 Financial Assets (a) Classification and measurement
The Group classifies its financial assets in the following categories: loans and receivables, available-for-sale financial assets, and held-to-maturity financial assets. Regular way purchases and sales of financial assets are recognized on trade date, the date on which the Group commits to purchase or sell the asset. At initial recognition, the Group measures a financial assets at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in in profit or loss. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. And, loans and receivables and held-to-maturity investments are subsequently carried at amortized cost using the effective interest rate method.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
18
Gains or losses arising from changes in fair value of financial assets at fair value through profit or loss are recognized in profit or loss within other income or other expenses. Gains or losses arising from changes in the available-for-sale financial assets are recognized in other comprehensive income, and amounts are reclassified to profit or loss when the associated assets are sold or impaired. (b) Impairment The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or a group of financial assets that can be reliably estimated. Impairment of loans and receivables is presented as a deduction in an allowance account, and that of other financial assets is directly deducted from their carrying amount. The Group writes off financial assets when the assets are determined to be no longer recoverable. The Group considers that there objective evidence of impairment if significant financial difficulties of the debtor; a prolonged delinquency in interest or principal payments. In case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security is considered an objective evidence of impairment. (c) Derecognition If a transfer does not result in derecognition because the Group has retained substantially of all the risks and rewards of ownership of the transferred asset, the Group continues to recognize the transferred asset in its entirety and recognizes a financial liability for the consideration received.
(d) Offsetting of financial instruments Financial assets and liabilities are offset and the net amount reported in the consolidated statements of financial position where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Group or the counterparty.
2.6 Derivative Instruments
Derivatives are initially recognized at fair value on the date when a derivative contract is entered into and are subsequently remeasured at their fair value at the end of each reporting period. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognized immediately in profit or loss within 'other income (expenses)' or 'finance income (expenses)' based on the nature of transactions. The Group applies cash flow hedge accounting to hedge the interest rate risk associated with borrowings. The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income, and the ineffective portion is recognized in ‘other income (expenses)’. When the forecast transaction that is hedge results in the recognition of a non-financial asset, the gains and losses previously deferred in other comprehensive income are reclassified from other comprehensive income and included in the initial measurement of the cost of the assets. The deferred amounts are ultimately recognized in profit or loss. When a forecast transactions no longer to occur, the cumulative gain or loss that was reported in other comprehensive income is immediately reclassified to profit or loss within 'other income (expenses)'.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
19
2.7 Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined using the first-in first-out(FIFO) method. 2.8 Property and Equipment Property and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditures that is directly attributable to the acquisition of the items.
Depreciation of all property, plant and equipment, except for land, is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values over their estimated useful lives as follows:
Useful lives
Buildings and structures 2 ~ 53 years
Supplies 6 ~ 10
Others 6 ~ 10
The assets’ depreciation method, residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period. 2.9 Borrowing Costs General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying asset is deducted from the borrowing costs eligible for capitalization. Other borrowing costs are expensed in the period in which they are incurred. 2.10 Intangible Assets Goodwill is measured as described in Note 2.3 (a), and carried at cost less accumulated impairment losses. Intangible assets, except for goodwill, are initially recognized at its historical cost, and carried at cost less accumulated amortization and accumulated impairment losses. Software development costs that are directly attributable to internally generated by the Group are recognized when the criteria; such as, technically feasible, generate probable future economic benefits and other, are met. Membership rights that have an indefinite useful life are not subject to amortization because there is no foreseeable limit to the period over which the assets are expected to be utilized. The Group amortizes intangible assets with a limited useful life using the straight-line method over the following periods:
Useful lives
Other intangible assets 5 ~ 13 years
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
20
2.11 Investment Property Investment property is property held to earn rentals or for capital appreciation or both. An investment property is measured initially at its cost. An investment property is measured after initial measurement at depreciated cost (less any accumulated impairment losses). After recognition as an asset, investment property is carried at cost less accumulated depreciation and impairment losses. The Group depreciates investment properties, except for land, using the straight-line method over their useful lives of 25~53 years. 2.12 Impairment of Non-financial Assets Goodwill or intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at end of each reporting period. 2.13 Financial Liabilities (a) Classification and measurement
The Group classifies non-derivative financial liabilities, except for financial liabilities at fair value through profit or loss, financial guarantee contracts and financial liabilities that arise when a transfer of financial assets does not qualify for derecognition, as financial liabilities carried at amortized cost and presented as ‘trade and other payables’ and ‘other payables’ in the statement of financial position. (b) Derecognition Financial liabilities are removed from the statement of financial position when it is extinguished, for example, when the obligation specified in the contract is discharged or, cancelled or expired or when the terms of an existing financial liability are substantially modified. 2.14 Financial Guarantee Contract Financial guarantee contracts are recognized as a financial liability at the time the guarantee is issued. The liability is measured at fair value, subsequently at the higher of the amount determined in accordance with Korean IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognized less cumulative amortization in accordance with Korean IFRS1018 Revenue, and recognized in the consolidated statement of financial position within ‘other non-current liabilities’:
2.15 Provisions Provisions are measured at the present value of management’s best estimate of the expenditures required to settle the present obligation at the end of the reporting period, and the increase in the provision due to passage of time is recognized as interest expense. 2.16 Current and Deferred Tax The tax expense for the period consists of current and deferred tax. Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
21
The tax expense is measured at the amount expected to be paid to the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations which applicable tax regulation is subject to interpretation. The Group recognizes current income tax on the basis of amounts expected to be paid to the tax authorities Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax asset is not accounted if it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognized only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses. The Group recognizes a deferred tax liability all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint arrangements, except to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. In addition, the Group recognizes a deferred tax asset for all deductible temporary differences arising from such investments to the extent that it is probable the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis. 2.17 Employee Benefits (a) Post-employment benefits The Group operates both defined contributions and defined benefit pension plans. For defined contribution plans, the Group pays contribution to publicly or privately administered pension insurance plans on mandatory, contractual or voluntary basis. The contribution are recognized as employee benefit expense when they are due. A defined benefit plan is a pension plan that is not a defined contribution plan. Generally, post-employment benefits are payable after the completion of employment,, and the benefit amount depended on the employee’s age, periods of service or salary levels. The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. Remeasurements gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service costs.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
22
(b) Other long-term employee benefits The Group provide long-term employee benefits that are entitled to employees. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. The Group recognizes service cost, net interest on other long-term employee benefits and remeasurements as profit or loss for the year. These liabilities are ‘other current liabilities’ and valued annually by an independent qualified actuary. 2.18 Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or rendering of services arising from the normal course of the business. Amounts disclosed as revenue are net of value added taxes, returns, rebates and discounts and after elimination of intra-company transactions. The Group recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Group and when specific criteria have been met for each of the Group’s activities, as described below. The Group bases its estimate on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. (a) Rendering of services The Group performs physical count of drops and payouts on a daily basis. Casino revenues are measured by the aggregate net difference between gaming wins and losses. When credit is provided, such amount is added to drops. Rooms, entrance fee, and food & beverage revenues are recognized when services are rendered to customers. Revenue from property leasing services is generally recognized on a straight-line basis over the period the service is rendered. (b) Interest income Interest income is recognized using the effective interest method according to the time passed. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount and continues unwinding the discount as interest income. Interest income on impaired loan and receivables is recognized using the original effective interest rate. (c) Dividend income Dividend income is recognized when the right to receive payment is established. (d) Customer loyalty program A customer loyalty program is operated by the Group to provide customers with incentives to buy their goods or services. If a customer buys goods or services, the Group grants the customer award credits (often described as 'points'). The customer can redeem the award credits for awards such as free or discounted goods or services. The award credits are recognized as a separately identifiable component of the initial sale transaction. The fair value of the consideration received or receivable in respect of the initial sale is allocated between the award credits and the other components of the sale. The fair value of the award credits is measured by taking into account the proportion of the award credits that are not expected to be redeemed by customers. Revenue from the award credits is recognized when the points are redeemed.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
23
2.19 Lease A lease is an agreement, whereby the lessor conveys to the lessee, in return for a payment or series of payments, the right to use an asset for an agreed period of time. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group are classified as operating leases. Payments made under operating leases are charge to profit or loss on a straight-line basis over the period of lease. Leases where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease’s inception the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. If the Group is a lessor, a lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership at the inception of the lease. A lease other than a finance lease is classified as an operating lease. Lease income from operating leases is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred by the lessor in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income. 2.20 Segment Reporting Information of each operating segment is reported in a manner consistent with the business segment reporting provided to the chief operating decision-maker. 2.21 Approval of Issuance of the Financial Statements The consolidated financial statements 2016 were approved for issue by the Board of Directors on February 9, 2017, and are subject to change with the approval of the shareholders at their Annual General Meeting.
3. Critical Accounting Estimates and Assumptions The preparation of financial statements requires the Group to make estimates and assumptions concerning the future. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) Estimated goodwill impairment The Group tests whether goodwill has suffered any impairment on an annual basis. The recoverable amounts of cash generating units (CGU) is determined based on value-in-use calculations. (b) Income taxes The Group’s taxable income generated from these operations is subject to income taxes based on tax laws and interpretations of tax authorities in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain. If certain portion of the taxable income is not used for investments, increase in wages or dividends in accordance with the Tax System For Recirculation of Corporate Income, The Group is liable to pay additional income tax calculated based on the tax laws. The new tax system is effective for
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
24
three years from 2015. Accordingly, the measurement of current and deferred income tax is affected by the tax effects from the new system. As The Group’s income tax is dependent on the investments, increase in wages and dividends, there is an uncertainty measuring the final tax effects. (c) Fair value of financial instruments The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. (d) Defined benefit liability
The present value of defined benefit liability depends on a number of factors that are determined on an actuarial basis using a number of assumptions including the discount rate.
4. Segment Information The Group’s segments are classified at the business unit level, at which the Group generates separately identifiable revenue and costs, and the related information is reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. The Group’s segments, in accordance with K-IFRS 1108, are ‘Casino business,’ ‘Hotel business’ and ‘Others.’ (a) The Group’s profit and loss by segment for the periods ended December 31, 2016 and 2015, respectively, are as follows:
(in thousands of Korean won)
Segment revenue Depreciation Expense Operating revenue
2016 2015 2016 2015 2016 2015
Casino ₩ 603,415,418 ₩ 528,202,301 ₩ 18,210,119 ₩ 9,073,710 ₩ 52,929,957 ₩ 44,397,807
Hotel 88,845,184 79,033,927 12,768,569 10,831,702 10,172,782 11,963,675
Other 19,895,621 17,963,785 1,442,448 7,548,609 1,058,723 1,960,247
Adjustment1 (17,299,954) (9,842,952) - - 1,624,383 -
Total ₩ 694,856,269 ₩ 615,357,061 ₩ 32,421,136 ₩ 27,454,021 ₩ 65,785,845 ₩ 58,321,729
1 Elimination of intra-segment transactions. (b) The Group’s assets and liabilities by segment as at December 31, 2016 and 2015, are as follows.
(in thousands of Korean won)
Asset Acquisition of
non-current assets2 Liability
2016 2015 2016 2015 2016 2015
Casino ₩ 1,911,017,065 ₩ 1,647,622,714 ₩ 506,869,737 ₩ 410,682,254 ₩ 887,575,746 ₩ 607,549,418
Hotel 328,245,900 283,992,304 51,438,890 559,119 107,018,547 95,833,342
Other 68,755,678 62,254,473 7,412,432 1,113,965 3,758,844 3,971,379
Total ₩ 2,308,018,643 ₩ 1,993,869,491 ₩ 565,721,059 ₩ 412,355,338 ₩ 998,353,137 ₩ 707,354,139
2 Property and equipment, investment properties and intangible assets.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
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(c) Revenue and non-current assets by region where the Group’s entities are located for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
Revenue from external customers
Non-current assets3
2016 2015 2016 2015
Korea ₩ 682,711,969 ₩ 613,397,372 ₩ 1,720,119,715 ₩ 1,233,630,563
Others 12,144,300 1,959,689 41,305,889 61,099
Total ₩ 694,856,269 ₩ 615,357,061 ₩ 1,761,425,604 ₩ 1,233,691,662
3 Property and equipment, investment properties and intangible assets. (d) None of the external customers contributes more than 10% of the Group’s revenue.
5. Restricted Financial Instruments
Restricted financial instruments as at December 31, 2016 and 2015, consist of the following.
(in thousands of Korean won)
Description
2016
2015
Cash and cash equivalents Collateral ₩ 7,598,165 ₩ 5,187,928
Short-term financial instruments Collateral for Leasehold deposits 1,700,000 1,700,000
Long-term financial instruments Deposits for checking account 5,000 5,000
Long-term financial instruments Collateral 118,269 118,269
Total ₩ 9,421,434 ₩ 7,011,197
6. Trade, Non-trade, and Other Receivables
(a) Trade, non-trade and other receivables as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016 2015
Current
Non-current
Current
Non-current
Trade receivables ₩ 22,117,860 ₩ - ₩ 25,262,376 ₩ -
Less: allowance for doubtful accounts
(3,171,014) - (835,846) -
Net: Trade receivables 18,946,846 - 24,426,530 -
Non-trade receivables 2,645,302 - 2,062,766 -
Less: allowance for doubtful accounts
(1,144,552) - (800,331) -
Net: Non-trade receivables 1,500,750 - 1,262,435 -
Short-term loans 2,682,959 - 3,658,020 -
Less: allowance for doubtful accounts
(1,000,000) - (1,000,000) -
Accrued revenues 2,121,181 - 1,945,795 -
Net: other receivables 3,804,140 - 4,603,815 -
Long-term loans - 3,083,257 - 3,155,408
Guarantee deposits - 5,997,347 - 6,307,112
Other deposits - 1,229,216 - 893,459
Net: other non-current receivables
₩ - ₩ 10,309,820 ₩ - ₩ 10,355,619
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
26
(b) Allowance for bad debt For receivables with specific evidence of impairment, allowance for bad debt is estimated based on appropriate individual analysis. Receivables that are not individually significant and similar in nature are assessed for impairment using aging analysis based on historical experience. For accounts greater than 3 years past due, the Group establishes allowance for total uncollected balances as they are generally uncollectible. For accounts less than 3 years past due, the Group estimates allowance based on historical default experience. Non-trade receivables and other receivables are subject to individual analysis for impairment. Aging analysis of trade, non-trade and other receivables as at December 31, 2016 and 2015, is as follows:
(in thousands of Korean won)
2016
Trade Non-trade Other
receivables receivables receivables
Not past due ₩ 17,917,069 ₩ 1,500,750 ₩ 14,113,960
Impaired receivables(past due):
One to two years 3,732,126 344,221 -
Two to three years 125,773 - -
Over three years 342,892 800,331 1,000,000
Total ₩ 22,117,860 ₩ 2,645,302 ₩ 15,113,960
(in thousands of Korean won)
2015
Trade Non-trade Other
receivables receivables receivables
Not past due ₩ 24,409,535 ₩ 1,262,435 ₩ 14,959,435
Impaired receivables(past due):
One to two years 304,559 - -
Two to three years 79,040 - -
Over three years 469,242 800,331 1,000,000
Total ₩ 25,262,376 ₩ 2,062,766 ₩ 15,959,435
Changes in allowance for doubtful accounts for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016
Trade receivables Non-trade receivables
Other receivables
Beginning balance ₩ 835,846 ₩ 800,331 ₩ 1,000,000
Bad debt expenses 2,537,757 402,473 -
Write off (203,000) (58,252) -
Exchange differences 411 - -
Ending balance ₩ 3,171,014 ₩ 1,144,552 ₩ 1,000,000
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
27
(in thousands of Korean won)
2015
Trade receivables Non-trade receivables
Other receivables
Beginning balance ₩ 1,433,019 ₩ 800,331 ₩ 1,000,000
Bad debt expenses (488,703) - -
Write off (189,217) - -
Business combinations 81,634 - -
Exchange differences (887) - -
Ending balance ₩ 835,846 ₩ 800,331 ₩ 1,000,000
7. Available-for-sale financial assets
(a) Available-for-sale financial assets as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016
2015
Current Non-current Current Non-current
Equity securities
Listed equity investments ₩ - ₩ 1,642,176
₩ - ₩ 1,763,904 Unlisted equity investments
- 2,693,210
- 788,210 Beneficiary certificate - - - 13,480,050
Debt securities
Corporate bonds 3,000,000 7,724,206
31,000,000 7,609,916
Total
₩ 3,000,000 ₩ 12,059,592 ₩ 31,000,000 ₩ 23,642,080
(b) The changes in available-for-sale financial assets for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Beginning balance ₩ 54,642,080 ₩ 29,646,343
Acquisition 10,010,045
31,600,000
Disposal
(51,105,045)
(6,220,000)
Net gains(losses) reclassified from equity 1,519,950 (9,581)
Net gains (losses) reclassified to equity 39,665 (325,300)
Amortization (47,103) (49,382)
Ending balance
₩ 15,059,592 ₩ 54,642,080
Less: Current portion (3,000,000) (31,000,000)
Non-current portion 12,059,592 23,642,080
8. Held-to-maturity investment Held-to-maturity investment as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016 2015
Current Non-current Current Non-current
Government bonds
₩ 1,300 ₩ 585 ₩ 300 ₩ 1,885
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
28
9. Investments in Associates
(a) Investments in associates as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016 2015
Associate Location Main business Year-end closing
Ownership
Book amount
Ownership Book
amount
Coral Resort Co., Ltd. Korea Development and sales of properties
December 31 20.00% ₩ 8,163 20.00% ₩ 8,750
Base Myeongdong Co., Ltd1
Korea Development and rental of properties
December 31 29.90% - 29.90% -
₩ 8,163 ₩ 8,750
1As at December 31, 2016, Unrecognized accumulated losses due to discontinuance of the use of the equity method is ₩ 4,139,009 thousand. (b) Changes in the investments in associates for periods ended December 31, 2016 and 2015, are as follows.
(in thousands of Korean won)
2016
Beginning balance Share of loss of associates
Ending balance
Coral Resort Co., Ltd. ₩ 8,750 ₩ (587) ₩ 8,163
Base Myeongdong Co., Ltd. - - -
Total ₩ 8,750 ₩ (587) ₩ 8,163
(in thousands of Korean won)
2015
Beginning balance
Acquisition (disposal)
Share of loss of associates
Ending balance
Coral Resort Co., Ltd. ₩ 9,364 ₩ - ₩ (614) ₩ 8,750
Base Myeongdong Co., Ltd. - 1,000,000 (1,000,000) -
Total ₩ 9,364 ₩ 1,000,000 ₩ (1,000,614) ₩ 8,750
(c) Summarized financial information of associates as at and for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016
Assets Liabilities Sales Net Income
Comprehensive Income
Current Non-current Current Non-current
Coral Resort Co., Ltd. ₩ 41,221 ₩ - ₩ 406 ₩ - ₩ - ₩ (2,935) ₩ (2,935)
Base Myeongdong Co., Ltd 26,933,366 310,665,091 11,841,298 339,600,000 17,635,908 2,702,401 2,631,848
(in thousands of Korean won)
2015
Assets Liabilities Sales Net Income
Comprehensive Income
Current Non-current Current Non-current
Coral Resort Co., Ltd. ₩ 44,155 ₩ - ₩ 406 ₩ - ₩ - ₩ (3,072) ₩ (3,072)
Base Myeongdong Co., Ltd 24,529,310 311,997,327 343,401,326 9,600,000 17,534,382 (10,686,197) (10,686,197)
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
29
10. Investment Properties
(a) Investment properties as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean
won)
2016 2015
Acquisition cost
Accumulated depreciation
Book amount
Acquisition
cost
Accumulated depreciation
Book
amount
Land ₩ 120,232,664 ₩ - ₩ 120,232,664 ₩ 105,516,529 ₩ - ₩ 105,516,529
Buildings and structures
27,784,669 (8,673,772) 19,110,897 25,167,314 (7,761,275) 17,406,039
Total ₩ 148,017,333 ₩ (8,673,772) ₩ 139,343,561 ₩ 130,683,843 ₩ (7,761,275) ₩ 122,922,568
(b) Changes in investment properties as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016
Beginning balance
Acquisition Transfer1 Depreciation Ending balance
Land ₩ 105,516,529 ₩ 275,136 ₩ 14,440,999 ₩ - ₩ 120,232,664
Buildings and structures 17,406,039 692,010 1,800,261 (787,413) 19,110,897
Total ₩ 122,922,568 ₩ 967,146 ₩ 16,241,260 ₩ (787,413) ₩ 139,343,561
1 Transfer from construction-in-progress of ₩ 14,904,298 thousand and reclassification due to changes in rental portion of property amounting to ₩ 1,336,932 thousand are included.
(in thousands of Korean won)
2015
Beginning balance
Acquisition Transfer1 Depreciation Ending balance
Land ₩ 97,950,149 ₩ 6,182,210 ₩ 1,384,170 ₩ - ₩ 105,516,529
Buildings and structures 17,843,021 - 267,272 (704,254) 17,406,039
Total ₩ 115,793,170 ₩ 6,182,210 ₩ 1,651,442 ₩ (704,254) ₩ 122,922,568
1 Transfer from construction-in-progress of ₩ 1,651,442 thousand is included. (c) Allocation of depreciation expense for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Cost of Sales(Hotel) ₩ 562,091 ₩ 504,236
Selling and administrative expenses 225,322 200,018
Total ₩ 787,413 ₩ 704,254
(d) Income and expenses related to investment properties for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Rental income ₩ 8,569,063 ₩ 8,485,403 Operating and maintenance expenses (2,825,848) (2,685,893)
Total ₩ 5,743,215 ₩ 5,799,510
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
30
(e) The details of fair value of investment properties as at December 31, 2016 and 2015, are as follows.
(in thousands of Korean won)
2016 2015
Book amount Fair value Book amount Fair value
Land 120,232,664 157,937,452 ₩ 105,516,529 ₩ 143,221,317
Buildings and structures 19,110,897 26,048,752 17,406,039 24,343,894
Total
139,343,561 183,986,204 ₩ 122,922,568 ₩ 167,565,211
The Group assessed the fair value of its investment property through Daeil Appraisal Co., Ltd. The evaluation firm evaluated the land and building based on average of standard published price method and cost approach method. There is no significant changes in fair value of the investment properties since appraisal date. Certain investment properties are pledged as collateral up to ₩ 44,659,775 thousand for lessees' security deposit of ₩ 4,368,078 thousand. Other certain investment properties are pledged as collateral for borrowings (Note 11,13).
11. Property and Equipment (a) Property and equipment as at December 31, 2016 and 2015, are as follows:
2016
(in thousands of Korean won)
Acquisition cost
Accumulated depreciation
Accumulated impairment
Book amount
Land ₩ 377,677,820 ₩ - ₩ - ₩ 377,677,820 Buildings and structures 227,034,454 (71,863,822) (1,486,617) 153,684,015 Tools and equipment 91,677,220 (42,536,331) - 49,140,889 Others 55,452,867 (29,161,037) (2,697,207) 23,594,623 Trees 1,585,539 - - 1,585,539 Construction in progress 731,280,751 - - 731,280,751
Total ₩ 1,484,708,651 ₩ (143,561,190) ₩ (4,183,824) ₩ 1,336,963,637
2015
(in thousands of Korean won) Acquisition
cost
Accumulated depreciation
Book
amount
Land ₩ 338,062,810 ₩ - ₩ 338,062,810 Buildings and structures 192,321,278 (62,026,456) 130,294,822 Tools and equipment 80,114,761 (36,721,588) 43,393,173 Others 45,427,448 (23,177,133) 22,250,315 Trees 1,569,639 - 1,569,639 Construction in progress 295,307,409 - 295,307,409
Total ₩ 952,803,345 ₩ (121,925,177) ₩ 830,878,168
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
31
(b) Changes in property and equipment for the periods ended December 31, 2016 and 2015, as at 2016 and 2015 are as follows:
(in thousands of
Korean won)
2016
Land Buildings and
structures
Tools and equipment
Others Trees Construction in progress
Total
Beginning balance ₩ 338,062,810 ₩ 130,294,822 ₩ 43,393,173 ₩ 22,250,315 ₩ 1,569,639 ₩ 295,307,409 ₩ 830,878,168
Acquisition1 27,716,301 3,493,371 10,932,575 4,932,346 15,900 472,190,672 519,281,165
Disposal - - (429,970) (164,722) - - (594,692)
Depreciation - (9,954,039) (8,905,657) (6,047,424) - - (24,907,120)
Impairment loss2 - (1,486,617) - (2,697,207) - - (4,183,824)
Transfer3 8,502,824 3,262,060 1,810,443 5,321,315 - (36,229,443) (17,332,801)
Business Combination4 3,261,005 26,958,415 2,321,000 - - - 32,540,420
Effect of exchange rate changes
134,880 1,116,003 19,325 - - 12,113 1,282,321
Ending balance ₩ 377,677,820 ₩ 153,684,015 ₩ 49,140,889 ₩ 23,594,623 ₩ 1,585,539 ₩ 731,280,751 ₩ 1,336,963,637
1 In 2016, the Group capitalized borrowing costs amounting to ₩ 26,671,263 thousand(in 2015: ₩ 8,574,822 thousand) on qualifying assets. The capitalization rate of borrowings used to determine the amount of borrowing costs eligible for capitalization is 5.36%(in 2015: 5.65%).
2 The Group recognizes impairment loss for remaining book value of assets to be retired when its casino in Incheon and Pusan move into new locations in 2017 (Note 26). 3 The Group transferred land, building and properties of ₩ 1,336,962 thousand to Investment properties due to changes in rental portion. Also, the Group transferred construction-in-progress of ₩ 14,904,298 thousand and ₩ 1,091,540 thousand to investment properties and intangible assets, respectively.
4 The group recognized property and equipment of ₩ 32,540,420 thousand through acquisition of Embassy Suite Orlando Downtown in Orlando, Florida (Note 35).
(in thousands of Korean won)
2015
Land Buildings and
structures
Tools and equipment
Others Trees Construction in progress
Total
Beginning balance ₩ 327,692,193 ₩ 136,804,114 ₩ 38,404,881 ₩ 11,769,535 ₩ 1,500,062 ₩ 33,963,565 ₩ 550,134,350
Acquisition - 239,888 10,216,592 3,914,594 40,000 289,369,071 303,780,145
Contribution - - 167,381 - - - 167,381
Disposal - (366,766) (2,764,254) (243,957) (60,423) - (3,435,400)
Depreciation - (9,988,816) (6,612,014) (4,632,105) - - (21,232,935)
Transfer1 10,370,617 1,996,261 3,880,598 8,776,168 90,000 (28,047,109) (2,933,465)
Business Combination2 - 1,607,153 103,941 2,746,913 - 21,882 4,479,889
Effect of exchange rate changes
- 2,988 (3,952) (80,833) - - (81,797)
Ending balance ₩ 338,062,810 ₩ 130,294,822 ₩ 43,393,173 ₩ 22,250,315 ₩ 1,569,639 ₩ 295,307,409 ₩ 830,878,168
1 ₩ 1,651,442 thousand and ₩ 1,282,036 thousand are transferred to investment properties and intangible assets, respectively. 2 The group recognized property and equipment of ₩ 4,479,889 thousand through acquisition of Casino segment of Paradise Global Co., Ltd. (Note 35).
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
32
(c) Allocation of depreciation expenses for the periods ended December 31, 2016 and 2015, are as follows: 2016 2015
Cost of sales (Casino) ₩ 10,371,974 ₩ 8,613,859 Cost of sales (Hotel) 11,921,880 10,058,995 Cost of sales (Others) 1,215,125 1,196,266 Selling and administrative expenses 1,398,141 1,363,815
Total ₩ 24,907,120 ₩ 21,232,935
Certain property and equipment and investment properties are pledged as collateral for borrowings of Paradise Global Co., Ltd. and the Group up to ₩ 19,500,000 thousand and ₩ 208,419,495 thousand, respectively.
12. Intangible Assets
(a) Details of intangible assets as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016
Goodwill Memberships Other Book amount
Acquisition cost ₩ 232,299,350 ₩ 19,114,473 ₩ 62,529,201 ₩ 313,943,024 Accumulated amortization and impairment
- (1,621,935) (27,202,684) (28,824,619)
Total ₩ 232,299,350 ₩ 17,492,538 ₩ 35,326,517 ₩ 285,118,405
(in thousands of Korean won)
2015
Goodwill Memberships Other Book amount
Acquisition cost ₩ 223,450,230 ₩ 20,266,153 ₩ 58,566,904 ₩ 302,283,287 Accumulated amortization and impairment
- (1,915,935) (20,476,426) (22,392,361)
Total ₩ 223,450,230 ₩ 18,350,218 ₩ 38,090,478 ₩ 279,890,926
(b) Changes in intangible assets for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016 Goodwill Memberships Other Book amount
Beginning balance ₩ 223,450,230 ₩ 18,350,218 ₩ 38,090,478 ₩ 279,890,926 Purchase - 1,569,670 2,865,013 4,434,683 Disposal - (2,427,350) (728) (2,428,078) Transfer - - 1,091,540 1,091,540 Business Combinations1 8,497,646 - - 8,497,646 Amortization
- - (6,726,603) (6,726,603) Exchange difference 351,474 - 6,817 358,291
Total ₩ 232,299,350 ₩ 17,492,538 ₩ 35,326,517 ₩ 285,118,405
1 The group recognized goodwill of ₩ 8,947,646 thousand through acquisition of Embassy Suite Orlando Downtown in Orlando, Florida (Note 35).
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
33
(in thousands of Korean won)
2015 Goodwill Memberships Other Book amount
Beginning balance ₩ 147,473,719 ₩ 16,296,311 ₩ 22,709,480 ₩ 186,479,510 Purchase - 619,183 50,604 669,787 Disposal - (266,882) - (266,882) Transfer - - 1,282,036 1,282,036 Business Combinations1 75,976,511 1,701,606 19,565,191 97,243,308 Amortization
- - (5,516,833) (5,516,833)
Total ₩ 223,450,230 ₩ 18,350,218 ₩ 38,090,478 ₩ 279,890,926
1 In 2015, The Group recognized identifiable intangible asset of ₩ 21,266,797 thousand and goodwill of ₩ 75,976,511 thousand in the acquisition of Pusan Casino business segment from Paradise Global (Note 35). (c) Allocation of depreciation expenses for the periods ended December 31, 2016 and 2015, are as follows. (in thousands of Korean won) 2016 2015
Cost of sales (Casino) ₩ 496,584 ₩ 459,852 Cost of sales (Hotel) 284,982 268,472 Cost of sales (Others) 68,088 60,528 Selling and administrative expenses 5,876,949 4,727,981
Total ₩ 6,726,603 ₩ 5,516,833
(d) Impairment test for goodwill
Goodwill is allocated to identifiable cash-generating units(CGU) by operating segments. As at December 31, 2016, Allocation of goodwill are as follows:
(in thousands of Korean won) Busan Casino
Incheon Casino USA Hotel Others Total
Goodwill ₩ 75,976,511 ₩ 142,423,120 ₩ 8,849,120 ₩ 5,050,599 ₩ 232,299,350
The recoverable amount of all CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the shoe business in which the CGU operates. Management estimated pre-tax cash flow based on past performance, forecasts for market growth, and pre-tax discount rate that reflects the specific risk of business. The discount rate used in value-in-use calculation are as follows: Busan Casino Incheon Casino USA Hotel
Discount rate 11.24% 11.79% 13.68% Nominal perpetual growth 1.00% 1.00% 3.00%
There is no impairment loss on goodwill based on the recoverable amount calculated based on value-in-use for CGU.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
34
13. Borrowings (a) Details of borrowings as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016 2015 Current Non-current Current Non-current
Short-term borrowings ₩ 59,570,000 ₩ - ₩ 36,400,000 ₩ - Long-term borrowings 10,785,447 636,461,988 10,061,707 394,850,815
Total
₩ 70,355,447 ₩ 636,461,988 ₩ 46,461,707 ₩ 394,850,815
(b) Short-term borrowings as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
Category Creditors
Interest rate
2016
2015 General loans denominated in Korean won
Shinhan Bank 2.67~2.74 ₩ 20,400,000 ₩ 22,400,000 KEB Hana Bank - - 3,000,000 Woori Bank 2.79 7,000,000 7,000,000 Korea Development Bank
2.5
5,000,000 -
Facility loan denominated in Korean won
KEB Hana Bank 2.59
3,000,000 4,000,000
Facility loan denominated in US Dollars
Woori Bank 2.56
24,170,000 -
Total ₩ 59,570,000 ₩ 36,400,000
(c) Long-term borrowings as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
Category Creditors Longest maturity
Interest rate 2016 2015
Project Financing 1-1 KEB Hana bank and other 16 financial Institutions1
JUN, 2020
4.17~4.30 ₩ 437,500,000 ₩ 187,500,000
6.17 200,000,000 200,000,000
Project Financing 1-2 Hi Investment & Securities co.Ltd1
DEC, 2020 2.65 5,000,000 5,000,000
Tourism Promotion Fund Loan
Woori Bank JUN, 2024 2.25 9,762,500 12,112,500
Facility Loan Shinhan Bank JUN, 2021 2.25~2.28 9,967,807 17,679,514
Total 662,230,307 422,292,014
Less : Present value discount (14,982,872) (17,379,492)
Less : Current portion of long-term borrowings (10,785,447) (10,061,707)
Long-term borrowings ₩ 636,461,988 ₩ 394,850,815
1 Certain property and equipment, and the parent company’s equity share for the subsidiary are pledged as collateral for the project finance loan (Notes 10,11,33).
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
35
14. Derivative Financial Instruments
Derivatives as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016 2015
Liabilities Liabilities
Interest rate swap – Cash flow hedges
Current portion ₩ 1,083,613 ₩ -
Non-current portion 1,077,893 -
Total ₩ 2,161,506 ₩ -
For cash flow hedges, highly probable forecast transactions are expected to be happen on various dates in next 27 months, and they are expected to affect profit or loss. In these consolidated financial statements, there is no forecast transaction for which hedge accounting had previously been used, but which is no longer expected to occur. In relation to cash flow hedges, the Group recognized other comprehensive income for ₩ 1,638,422(net of tax effect) thousand for the year.
15. Other Current Liabilities
Other current liabilities as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Non-financial payables ₩ 6,898,227 ₩ 2,905,108
Non-financial accrued expenses1 102,382,564 91,798,422
Deferred revenue 1,829,601 8,017,088
Unearned revenue - 194,633
Total ₩ 111,110,392 ₩ 102,915,251
According to Article 30, Tourism Promotion Act, the Group pays up to 10% of total revenue as Tourism Promotion Development Fund. As at December 31, 2016, ₩ 57,574,220 thousand (2015: ₩ 55,161,457 thousand) is recognized as non-financial accrued expenses. According to Article 1, Individual Consumption Tax Law, the Group pays up to 4% of total revenue as individual consumption tax. As at December 31, 2016, ₩ 16,732,840 thousand (2015: ₩ 16,358,333 thousand) is recognized as non-financial accrued expenses.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
36
16. Net defined benefit liabilities
(a) Details of net defined benefit liabilities recognized in the statements of financial position as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Present value of defined benefit obligation ₩ 99,366,320 ₩ 103,179,078
Fair value of plan assets (84,485,617) (91,219,138)
Net defined benefit liability ₩ 14,880,703 ₩ 11,959,940
(b) Movements in net defined benefit obligations for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Beginning of the year ₩ 103,179,078 ₩ 82,599,420
Current service cost 11,973,954 10,876,056
Interest expense 3,397,628 3,243,966
Remeasurements:
- Actuarial loss from change in demographic assumptions
109,013 (1,959)
- Actuarial loss from change in financial assumptions (2,515,273) 1,750,487
- Actuarial loss (gain) from experience adjustments 1,635,909 2,437,262
Payments from plans (18,632,243) (6,303,032)
Transfers between affiliates 205,489 9,669
Business Combination - 8,603,223
Others 12,765 (36,014)
End of the year ₩ 99,366,320 ₩ 103,179,078
(c) Changes in fair value of plan assets for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Beginning of the year ₩ 91,219,138 ₩ 71,187,699
Interest income 2,991,171 2,785,081
Remeasurements:
- Return on plan assets (excluding amounts included in interest income)
(1,445,970) (1,066,709)
Contributions by employer 8,700,000 16,340,000
Benefits payments from plans (17,187,611) (5,942,090)
Transfers between affiliates 208,889 55,938
Business Combination - 7,859,219
End of the year ₩ 84,485,617 ₩ 91,219,138
(d) The fair value of the plan assets as at December 31, 2016 and 2015, consists of the following:
(in thousands of Korean won) 2016 2015
Cash and cash equivalents ₩ 84,485,617 ₩ 91,219,138
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
37
(e) The significant actuarial assumptions used as at December 31, 2016 and 2015, are as follows:
2016 2015
Discount rate 2.93%~3.37% 3.07%~3.52%
Salary growth rate 3.50%~5.00% 4.00%~5.00% (f) The sensitivity of the defined benefit obligations to 1% changes in the significant actuarial assumptions as at December 31, 2016 is:
(in thousands of Korean won) Increase(1%) Decrease(1%)
Discount rate ₩ (8,084,395) ₩ 9,429,298
Expected rate of salary increase 9,293,078 (8,126,411)
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. The sensitivity of the defined benefit obligation to changes in principal actuarial assumptions is calculated using the projected unit credit method, the same method applied when calculating the defined benefit obligations recognized on the statement of financial position. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period. (g) Effect on future cash flows The Group reviews the funding level on an annual basis and has a policy of eliminating deficit from the fund. Expected contributions to post-employment benefit plans for the year ending December 31, 2017, are ₩ 11,296 million. The expected maturity analysis of undiscounted pension benefits as at December 31, 2016, is as follows:
Less than 1 year
Less than 1~2 years
Less than 2~5 years
Over 5 years Total
Pension benefits 13,794,370 15,173,804 65,561,594 488,216,250 582,746,018
The weighted average duration of the defined benefit obligation is from 7.4 to 9.5 years. (h) In 2016, the Group adopted defined contribution plan. The expense recognized in the current
period in relation to defined contribution plan was ₩ 237,197 thousand.
17. Other Non-current Liabilities
Other non-current liabilities as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Security Deposits
₩ 9,410,916 ₩ 11,195,746
Financial guarantee liabilities 1,194,521 1,996,712
Total ₩ 10,605,437 ₩ 13,192,458
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
38
18. Share capital
Details of share capital as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
Shares authorized
Shares issued
Par value per share
(in Korean won) 2016 2015
Ordinary share 1
196,877,962 90,942,672 ₩ 500 ₩ 47,032,355 ₩ 47,032,355
1 The Group retired 3,122,038 shares of ordinary share using retained earnings in 2003; therefore, the Group’s share capital does not agree with the aggregate par value of issued shares.
19. Share premium
Share premium as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Paid-in capital in excess of par value ₩ 68,730,444 ₩ 68,730,444 Gain on disposal of treasury shares 199,016,890 199,016,890 Others 27,272,772 27,272,772
Total ₩ 295,020,106 ₩ 295,020,106
20. Retained Earnings and Dividends
Retained earnings as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Legal reserves: Earned profit reserve1 ₩ 23,516,178 ₩ 23,516,178
Discretionary reserves Business rationalization reserve 41,800,000 41,800,000 Reserve for corporate development 123,448,828 123,448,828
Voluntary reserve 427,139,220 399,839,220 Unappropriated retained earnings 111,044,956 117,461,366
Total ₩ 726,949,182 ₩ 706,065,592
1 The Commercial Code of the Republic of Korea requires the Parent Company to appropriate for each financial period, as a legal reserve, an amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued share capital. The reserve is not available for cash dividends payment, but may be transferred to share capital or used to reduce accumulated deficit. When the accumulated legal reserves (the sum of capital reserves and earned profit reserves) are greater than 1.5 times the paid-in capital amount, the excess legal reserves may be distributed (in accordance with a resolution of the shareholders’ meeting).
(b) Changes in retained earnings for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Beginning balance ₩ 706,065,592 ₩ 687,210,013 Net income attributable to owners 55,125,792 65,238,130 Payment of dividends (31,944,171) (42,765,687) Remeasurements of defined benefit plans (2,298,031) (3,616,864)
Ending balance ₩ 726,949,182 ₩ 706,065,592
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
39
(c) Details of dividend payments for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of
Korean won) 2016
Shares issued Treasury shares
Outstanding shares
Dividend per
share (In Korean won)
Total
dividends
Ordinary share 90,942,672 5,758,215 85,184,457 ₩ 375 ₩ 31,944,171
(in thousands of Korean won)
2015
Shares issued Treasury shares
Outstanding shares
Dividend per
share (In Korean won)
Total
dividends
Ordinary share 90,942,672 5,411,298 85,531,374 ₩ 500 ₩ 42,765,687
21. Other Component of Equity
Other component of equity as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Treasury shares1 ₩ (26,145,488) ₩ (26,145,488)
Gain on valuation of available-for-sale financial assets 2,553,004 2,522,938
Loss on valuation of available-for-sale financial assets (36,270) (1,188,392)
Cash-flow hedges (901,141) -
Currency translation differences of foreign operations (368,454) (624,996)
Total ₩ (24,898,349) ₩ (25,435,938)
1 In a business combination of Casino segment of Paradise Global Co., Ltd., The Group acquired 346,917 treasury shares for ₩ 8,707,617 thousand due to dissenting shareholders' execution of appraisal right.
22. Revenue Revenues other than finance income, other income, and share of net loss of associates for the periods ended December 31, 2016 and 2015, is as follows:
(in thousands Korean won) 2016 2015
Revenues from rendering of services ₩ 694,856,269 ₩ 615,357,061
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
40
23. Selling and Administrative Expenses (a) Selling expenses for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Advertisement ₩ 15,433,509 ₩ 9,043,254
(b) Administrative expenses for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Salaries ₩ 22,525,968 ₩ 24,056,969
Provision for severance benefits 1,740,702 1,769,121
Benefits 2,788,580 3,011,419
Depreciation for investment properties 225,322 200,018
Depreciation 1,398,141 1,363,815
Amortization 5,876,949 4,727,981
Taxes and dues 3,345,725 2,625,647
Commission 5,827,644 7,206,956
Training 1,663,049 475,730
Insurance premium 274,266 507,705
Rental expense 830,089 950,439
Travel and lodging 1,001,453 1,139,562
Communication 228,353 237,532
Utilities 613,088 634,811
Event 178,827 228,826
Entertainment 2,140,875 2,397,711
Maintenance 2,408,467 2,212,680
Bad debt expenses(reversal) 2,537,757 (488,703)
Vehicles 697,896 922,598
Supplies 376,275 236,459
Publication 461,425 746,802
Others 75,616 85,527
Total ₩ 57,216,467 ₩ 55,249,605
24. Breakdown of Expenses by Nature
Expenses by nature for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Employee benefit ₩ 203,713,202 ₩ 182,525,250 Depreciation and amortization 32,421,136 27,567,680
Rental expense 18,712,763 18,170,135
Commission 37,803,964 39,925,253
Others 336,419,359 288,847,014
Total1 ₩ 629,070,424 ₩ 557,035,332
1 Total amount is consist of cost of sales, selling and administration expenses.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
41
25. Finance Income and Expenses Finance income and expenses for the periods ended December 31, 2016 and 2015, as follows: (in thousands of Korean won) 2016 2015
Finance income Interest income ₩ 9,501,314 ₩ 12,257,108
Finance expense Interest expense 3,514,315 2,993,814
26. Other Income and Expenses
(a) Other income for the periods ended December 31, 2016 and 2015, consist of:
(in thousands of Korean won) 2016 2015
Gain on foreign currency transactions ₩ 8,573,180 ₩ 6,617,601 Gain on foreign currency translation 418,947 405,446 Income from currency exchange service 6,857,714 7,563,279 Rental income 1,127,489 1,118,025 Gain on disposal of property and equipment 253,271 4,174,781 Gain on disposal of intangible assets 290,272 33,118 Gain on assets contributed - 167,381 Dividend income 45,016 39,045 Commission income 107,078 500,585 Gain on disposal of available–for-sale financial assets 734,982 - Reversal of financial guarantee liabilities 802,192 403,288 Miscellaneous income 4,403,003 2,139,391
Total ₩ 23,613,144 ₩ 23,161,940
(b) Other expenses for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Loss on foreign currency transactions ₩ 7,417,348 ₩ 5,401,369 Loss on foreign currency translation 79 823 Other bad debt expenses 402,473 - Donations 5,980,446 3,845,929 Fees for foreign currency deposits 46,930 39,079 Loss on disposal of property and equipment 455,384 516,983 Loss on sale of intangible assets 53,350 - Loss on sale of inventory - 18,956 Impairment loss of property and equipment 4,183,824 - Miscellaneous losses 1,396,806 779,003
Total ₩ 19,936,640 ₩ 10,602,142
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
42
27. Tax Expense and Deferred Tax
(a) Income tax expense for the periods ended December 31, 2016 and 2015, consists of:
(in thousands of Korean won) 2016 2015
Current tax
Current tax on profits for the year ₩ 19,982,010 ₩ 20,014,317
Adjustments in respect of prior year (670,469) (4,730,169)
Deferred tax
Origination and reversal of temporary differences (2,374,029) 7,133,425
Deferred income tax charged to equity 889,173 1,352,146
Income tax expense ₩ 17,826,685 ₩ 23,769,719
(b) The tax on the Group’s profit (loss) before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:
(in thousands of Korean won) 2016 2015
Profit before income tax expense ₩ 75,448,763 ₩ 79,144,208
Tax at domestic tax rates applicable to profits in the respective countries
17,818,172 18,690,898
Tax effects of:
Expenses not deductible for tax purposes 344,294 954,860
Adjustments in respect of prior year (670,469) (4,730,169)
Others 334,688 8,854,130
Income tax expense ₩ 17,826,685 ₩ 23,769,719
(c) The income tax credited (charged) directly to equity for the periods ended December 31, 2016 and 2015, is as follows:
(In thousands of Korean won) 2016 2015
Gain(loss) on valuation of available-for-sale financial assets ₩ (377,427) ₩ 81,041
Remeasurement of net defined benefit liabilities 743,516 1,271,105
Cash flow hedges 523,084 -
Total ₩ 889,173 ₩ 1,352,146
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
43
(d) Changes in deferred tax assets and liabilities for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016
Beginning balance
Statement of
comprehensive income
Equity Ending balance
Net defined benefit liabilities ₩ (1,268,501) ₩ 2,589,431 ₩ 743,516 ₩ 2,064,446
Allowance for doubtful accounts 705,899 407,726 - 1,113,625
Available-for-sale financial assets 1,211,091 (1,122,251) (377,427) (288,587)
Investments in associates 482,036 121,299 - 603,335
Property and equipment (50,054,089) 858,047 - (49,196,042)
Cash flow hedges - - 523,084 523,084
other 1,239,406 (1,369,396) - (129,990)
Total ₩ (47,684,158) ₩ 1,484,856 ₩ 889,173 ₩ (45,310,129)
(in thousands of Korean won)
2015
Beginning balance
Statement of
comprehensive income
Equity Ending balance
Net defined benefit liabilities ₩ 663,037 ₩ (3,202,643) ₩ 1,271,105 ₩ (1,268,501)
Allowance for doubtful accounts 863,762 (157,863) - 705,899
Available-for-sale financial assets 1,122,701 7,349 81,041 1,211,091
Investments in associates1 (2,278,655) 2,760,691 - 482,036
Property and equipment (50,401,156) 347,067 - (50,054,089)
Individual consumption tax 4,803,132 (4,379,830) - 423,302
other 2,397,335 (1,581,231) - 816,104
Total ₩ (42,829,844) ₩ (6,206,460) ₩ 1,352,146 ₩ (47,684,158)
1 In 2015, decrease in deferred income tax liabilities from discontinued operations amounting to ₩ 2,279,111 thousand was recognized as loss from discontinued operations. (e) Deferred tax assets and liabilities as at December 31, 2016 and 2015, is as follows:
(in thousands of Korean won) 2016 2015
Deferred tax liabilities ₩ 45,310,129 ₩ 47,684,158
(f) Temporary differences not recognized as deferred tax assets (liabilities) are as follows:
(in thousands of Korean won) 2016 2015
Investments in associates and subsidiaries ₩ (99,449,288) ₩ (91,983,767)
Goodwill from business combination 8,325,146 8,325,146
Total ₩ (91,124,142) ₩ (83,658,621)
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
44
28. Earnings per Share Basic earnings per share is calculated by dividing the profit attributable to owners of the Group by the weighted average number of ordinary shares outstanding during the financial year excluding treasury shares. Basic earnings per share of ordinary share for the periods ended December 31, 2016 and 2015, is calculated as follows:
(In Korean won) 2016 2015
Profit for the period attributable to owners of the parents
Profit from continuing operations ₩ 55,125,791,729 ₩ 48,782,040,565 Profit from discontinued operations - 16,456,089,893
₩ 55,125,791,729 ₩ 65,238,130,458
Weighted-average number of shares outstanding 85,184,457 85,384,053
Earnings per share for continuing operations 647 571 Earnings per share for discontinued operations - 193
The Group did not issue any potential ordinary shares. Therefore, basic earnings per share is identical to diluted earnings per share.
29. Financial Risk Management
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders or sell assets to reduce debt. Debt-to-equity ratios as at December 31, 2016 and 2015, are as follows:
(in thousands of Korean won) 2016 2015
Total liabilities ₩ 998,353,137 ₩ 707,354,139
Total equity 1,309,665,506 1,286,515,351
Debt-to-equity ratio 76% 55%
Financial risk management
The Group is exposed to a variety of market risk, including currency risk, interest rate risk, and price risk, because of financial instruments held by the Group. The Group’s risk management program focuses on identifying potential risks that could affect the Group’s financial results and seeks to minimize, eliminate, and avoid them. Market risk management
The Group is mainly exposed to the financial risks arising from the changes of the foreign exchange rates and the interest rates.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
45
- Foreign exchange risk management The Group is exposed to various foreign currency risks since it makes transactions in foreign currencies, but the degree of risks is not high because transactions occur after exchange of currency. The degree of risks depends on the scale of foreign currency retained. The Group is mainly exposed to the risk on US dollars, Japanese yen, HongKong dollars, and Chinese yuan. The Group does not allow foreign exchange transaction except for those from operating activities. Foreign currency risk is managed within the limits approved by the Group’s policy. Net assets and liabilities denominated in foreign currency as at December 31, 2016 and 2015, are as follows:
(In thousands of Korean won) 2016 2015
USD ₩ 3,549,158 ₩ 3,398,998 JPY 7,657,359 9,359,457 HKD 396,611 1,073,806 CNY 565,408 854,663
Total ₩ 12,168,536 ₩ 14,686,924
The sensitivity of the profit before tax for the periods ended December 31, 2016 and 2015, to 10% changes of currency exchange rates are as follows:
(In thousands of Korean won) 2016 2015
Increase Decrease Increase Decrease
USD ₩ 354,916 ₩ (354,916) ₩ 339,900 ₩ (339,900) JPY 765,736 (765,736) 935,946 (935,946) HKD 39,661 (39,661) 107,381 (107,381) CNY 56,541 (56,541) 85,466 (85,466)
₩ 1,216,854 ₩ (1,216,854) ₩ 1,468,693 ₩ (1,468,693)
- Interest rate risk management The Group is exposed to interest rate risk since it borrows funds with fixed and variable interest rates. Interest rate risk is defined as the risk that the interest income or expenses arising from deposits and borrowings will fluctuate because of changes in future market interest rate. The interest rate risk mainly arises through floating rate deposits and borrowings. The objective of interest rate risk management lies in maximizing corporate value by minimizing uncertainty caused by fluctuations in interest rates and minimizing net interest expense. To manage its interest rate risk, the Group entered into interest rate swap contracts to minimize risk arising from interest rate fluctuation (Note 14). The impact of 50 basis points higher/lower of interest rate with all other variables held constant on the Group’s profit before tax for the year and on equity as at December 31, 2016 and 2015, is ₩ 281,485 thousand and ₩ 339,960 thousand, respectively. - Price risks The Group is exposed to equity price risks arising from its equity investments. As equity investments are held for strategic rather than trading purposes, the Group does not actively trade these investments.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
46
Credit risk management Credit risk refers to the risk of financial losses to the Group when the counterpart defaults on the contractual obligation. Credit risk arises from cash and cash equivalents, deposits in financial institutions, as well as credit exposures to customers, including outstanding receivables. As the Group only accepts financial institutions with a sound credit rating, Credit risk from financial institutions is limited. The credit quality of customer is evaluated taking into account its financial position, past experience and other factors. The maximum exposed amounts to credit risk of the Group as at December 31, 2016 and 2015, are as follows:
(In thousands of Korean won) 2016 2015
Financial guarantee contracts1 ₩ 96,000,000 ₩ 96,000,000
1 The maximum amount can be claimed in the earliest period.
Maximum credit risk exposures of financial assets, other than financial guarantee contracts, are not disclosed as the book amount of the corresponding assets are the best estimates of the maximum credit exposures.
Liquidity risk management
The Group manages liquidity risk by establishing short-term and long-term fund management plans and analyzing and reviewing actual cash outflow and its budget to correspond the maturity of financial liabilities to that of financial assets. Management believes that the Group can repay its financial liabilities with cash inflows from its operating activities and disposal of financial assets. The maturity analysis for the Group’s undiscounted cash outflows due to principal and interest payment of financial liabilities as at December 31, 2016 and 2015, are as follows:
(In thousands of Korean won)
2016
Less than one year
One to five years
Over five years
Total
Non interest bearing financial liabilities1
₩ 51,071,007 ₩ 9,478,759
₩ - ₩ 60,549,766
Interest liability 104,580,640 786,535,399 1,794,105 892,910,144
Derivative financial instruments
1,083,613 1,077,893
-
2,161,506
Financial guarantee Contracts2
96,000,000 -
- 96,000,000
Total ₩ 252,735,260 ₩ 797,092,051 ₩ 1,794,105 ₩ 1,051,621,416
(In thousands of Korean won)
2016
Less than one year
One to five years
Over five years
Total
Non interest bearing financial liabilities1
₩ 44,057,634 ₩ 11,263,589
₩ - ₩ 55,321,223
Interest liability 68,074,928 477,462,321 1,832,355 547,369,604
Financial guarantee Contracts2
96,000,000 -
- 96,000,000
Total ₩ 208,132,562 ₩ 488,725,910 ₩ 1,832,355 ₩ 698,690,827
1 Other payables, withholdings, and security deposits are included. 2 The maximum amount can be claimed in the earliest period.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
47
The maturity analysis for the Group’s undiscounted cash inflows from non-derivative financial assets as at December 31, 2016 and 2015, are as follows. As the Group manages its liquidity based on net asset (liability), information of non-derivative financial assets is required to understand the Group’s liquidity risk management.
2016
(In thousands of Korean won) Less than one year One to five years Total
Non interest bearing financial assets1
₩ 204,867,565 ₩ 7,226,563 ₩ 212,094,128
Assets with fixed interest rate2 267,184,259 43,526,299 310,710,558
Total ₩ 472,051,824 ₩ 50,752,862 ₩ 522,804,686
2015
(In thousands of Korean won) Less than one year One to five years Total
Non interest bearing financial assets1
₩ 366,439,765 ₩ 7,200,571 ₩ 373,640,336
Assets with fixed interest rate2 319,858,320 49,916,072 369,774,392
Total ₩ 686,298,085 ₩ 57,116,643 ₩ 743,414,728
1 Includes cash and cash-equivalents, trade receivables, security deposits and others. 2 Includes financial instruments, available-for-sale financial assets, loans and others.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
48
30. Financial Instruments 30.1 Carrying Amounts of Financial Instruments by Category Categorization of financial assets and liabilities as at December 31, 2016 and 2015, are as follows:
(In thousands of Korean won) 2016 2015
Fair value Book amount Fair value Book amount
Financial Assets
Loans and Receivables
Cash and cash equivalents ₩ 182,298,788
₩ 182,298,788
₩ 338,805,004
₩ 338,805,004
Short-term Financial Instruments 262,500,000 262,500,000 286,200,000 286,200,000
Long-term Financial Instruments 28,382,865 28,382,865 23,117,058 23,117,058
Trade receivables 18,946,846 18,946,846 24,426,530 24,426,530
Non-trade receivables 1,500,750 1,500,750 1,262,436 1,262,436
Other receivables 3,804,140 3,804,140 4,603,815 4,603,815
Other non-current receivables 10,309,820 10,309,820 10,355,620 10,355,620
Total 507,743,209 507,743,209 688,770,463 688,770,463
Available for sale Current available-for-sale 3,000,000 3,000,000 31,000,000 31,000,000
Non-current available-for-sale 12,059,592 12,059,592 23,642,080 23,642,080
Total 15,059,592 15,059,592 54,642,080 54,642,080
Held to Maturity Current held to maturity 1,300 1,300 300 300
Non-current held to maturity 585 585 1,885 1,885
Total 1,885 1,885 2,185 2,185
Financial Liabilities
Financial liabilities carried at amortized cost
Trade payables ₩ 1,652,453
₩ 1,652,453
₩ 1,518,825
₩ 1,518,825
Short-term borrowings 59,570,000 59,570,000 36,400,000 36,400,000
Long-term borrowings 647,247,435 647,247,435 404,912,521 404,912,521
Non-trade payables 37,149,775 37,149,775 30,099,888 30,099,888
Deposits received 12,220,843 12,220,843 12,419,843 12,419,843
Other Non-current liabilities 9,410,916 9,410,916 11,195,746 11,195,746
Total 767,251,422 767,251,422 496,546,823 496,546,823
Other Derivative financial instruments 2,161,506 2,161,506 - -
Financial guarantee contracts 1,194,521 1,194,521 1,996,712 1,996,712
Total 3,356,027 3,356,027 1,996,712 1,996,712
For certain financial assets and liabilities measured at cost because their fair value cannot be measured reliability, management determined that book value is the best estimation of the financial assets and liabilities.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
49
30.2. Fair Value Hierarchy
Items that are measured at fair value or for which the fair value is disclosed are categorized by the fair value hierarchy levels, and the defined levels are as follows:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1). All inputs other than quoted prices included in level 1 that are observable (either directly
that is, prices, or indirectly that is, derived from prices) for the asset or liability (Level 2). Unobservable inputs for the asset or liability (Level 3).
Fair value hierarchy classifications of the financial instruments that are measured at recurring fair value as at December 31, 2016 and 2015, are as follows:
2016
(In thousands of Korean won) Level 1 Level 2 Level 3 Total
Available-for-sale financial assets
Marketable equity securities ₩ 1,642,176 ₩ - ₩ - ₩ 1,642,176
Debt securities - 10,724,206 - 10,724,206
Other financial liabilities
Derivative financial instruments - 2,161,506 - 2,161,506
₩ 1,642,176 ₩ 12,885,712 ₩ - ₩ 14,527,888
2015
(In thousands of Korean won) Level 1 Level 2 Level 3 Total
Available-for-sale financial assets
Marketable equity securities ₩ 1, 763,904 ₩ - ₩ - ₩ 1, 763,904
Debt securities - 38,609,916 - 38,609,916
Beneficiary securities - 13,480,050 - 13,480,050
₩ 1, 763,904 ₩ 52,089,966 ₩ - ₩ 53,853,870
Financial assets or financial liabilities measured at cost because their fair value cannot be measured reliably are as follows:
(In thousands of Korean won)
Accounts Description 2016 2015
Available-for-sale financial assets Unlisted equity ₩ 2,693,210 ₩ 788,210
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
50
30.3. Net gains or net losses on each category of financial instruments Net gains or net losses on each category of financial instruments for the periods ended December 31, 2016 and 2015, are as follows
(In thousands of Korean won) 2016 2015
Loans and receivables Impairment (reversal) ₩ 2,537,757 ₩ (488,703)
Other bad debt expenses 402,473 -
Income from currency exchange service 6,857,714 7,563,279
Interest income 9,501,314 12,257,108
Net exchange differences1 1,574,700 1,620,854
Available-for-sale financial assets Gain (loss) on valuation 30,066 (253,840)
Reclassification due to disposal 1,152,122 - Gain on disposal 734,982 -
Dividends income 45,016 39,045 Financial liabilities measured at amortized cost
Interest expenses 3,514,315 2,993,814
Other financial liabilities Cash flow hedges (901,141) -
Reversal of financial guarantee liability 802,192 403,288
1 Net exchange differences are consist of gain (loss) on foreign currency translation and transaction.
31. Related Party Transactions
(a) The related parties as at December 31, 2016 and 2015, are as follows: 2016 2015
Company with significant influence
Paradise Global Co., Ltd. Paradise Global Co., Ltd.
Associates Coral Resort Co., Ltd. Myeongdong Co., Ltd.
Coral Resort Co., Ltd. Myeongdong Co., Ltd.
Other related parties Doosung Co., Ltd. Paradise TNL Co., Ltd., Paradise Culture Foundation. Etc
Doosung Co., Ltd. Paradise TNL Co., Ltd., Paradise Culture Foundation. Etc
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
51
(b) Significant transactions (excluding fund and equity transactions) with related parties for the periods ended December 31, 2016 and 2015, are as follows:
(in thousands of Korean won)
2016
Income Expenses
Rental revenues
Others Service fees Others1
Company with significant influence
Paradise Global Co., Ltd. ₩ 8,565 ₩ 1,288,738 ₩ 987,963 ₩ 16,230,976
Associates
Base Myeongdong Co., Ltd. - 802,192 - -
Other related parties
Doosung Co., Ltd. - 188,139 - -
Paradise TNL Co., Ltd. 81,760 37,959 2,194,064 2,491
Vino paradise Co., Ltd. - - 3,504 306,651
Others 222,320 11,060 - 5,610,000
Total ₩ 312,645 ₩ 2,328,088 ₩ 3,185,531 ₩ 22,150,118
1 The Group awarded Paradise Global Co., Ltd. construction contracts of ₩ 43,261,800 thousand
and ₩ 4,882,850 in relation to the Paradise city and Pusan casino interior project, respectively.
The group recognized ₩ 11,461,800 thousand and ₩ 3,892,000 thousand of construction-in-
progress in relation to the contracts respectively.
(in thousands of Korean won)
2015
Income Expenses
Rental revenues
Others Service fees others
Company with significant influence
Paradise Global Co., Ltd. ₩ 1,010,553 ₩ 3,956,158 ₩ 1,242,370 ₩ 199,777
Associates
Base Myeongdong Co., Ltd. - 1,131,014 - -
Other related parties
Doosung Co., Ltd. - 73,260 - -
Paradise TNL Co., Ltd. 120,960 25,474 1,726,581 33,489
Vino paradise Co., Ltd. - 163 4,809 115,625
Others 210,840 18,947 - 3,640,007
Total ₩ 1,342,353 ₩ 5,205,016 ₩ 2,973,760 ₩ 3,988,898
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
52
(c) Outstanding balances arising related to the transactions with related parties as at December 31, 2016 and 2015, are as follows: 2016
(in thousands of Korean won) Receivables Payables
Accounts receivable
Others Lease deposits
Accounts payable
Company with significant influence
Paradise Global Co., Ltd. ₩ 132,072 ₩ 770 ₩ - ₩ 443,287
Associates
Base Myeongdong Co., Ltd. 800,000 - - -
Other related parties
Doosung Co., Ltd. 15,929 - - -
Paradise TNL Co., Ltd. 8,929 - 57,400 283,595
Vino paradise Co., Ltd. - - 99,000 38,526
Others 25,612 - 106,256 -
Total ₩ 982,542 ₩ 770 ₩ 262,656 ₩ 765,408
2015
(in thousands of Korean won) Receivables Payables
Accounts receivable
Others Lease deposits
Accounts payable
Company with significant influence
Paradise Global Co., Ltd. ₩ 53,358 ₩ 796 ₩ - ₩ 408,527
Associates
Base Myeongdong Co., Ltd. 1,600,000 - - -
Other related parties
Doosung Co., Ltd. 41,498 - - -
Paradise TNL Co., Ltd. 39,245 - 57,400 212,579
Vino paradise Co., Ltd. - - 99,000 755
Others 20,108 - 194,406 42,640
Total ₩ 1,754,209 ₩ 796 ₩ 350,806 ₩ 664,501
(d) Fund and equity transactions with a related party for the year ended December 31, 2016 and 2015, are as follows:
(In thousands of Korean won)
Associate Transactions 2016 2015
Base Myeongdong Co., Ltd. Additional investment - 1,000,000
(e) The Group acquired the casino business of Paradise Global Co., Ltd in July 1, 2015(Note 35). (f) Details of payment guarantees and collateral provided by the Group to the related parties as at December 31, 2016, are as follows:
(In thousands of Korean won) Borrower Guaranteed
amount Lender
Payment guarantee Base Myeongdong Co., Ltd. 96,000,000 Hi Investment &
Securities co. Ltd Collateral for borrowing Paradise Global Co., Ltd. 19,500,000 Woori Bank
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
53
(g) The compensation paid or payable to key management for employee services consists of:
(In thousands of Korean won) 2016 2015
Salary and bonuses ₩ 10,379,858 ₩ 8,416,454
Severance benefits 1,398,638 1,601,386
Total ₩ 11,778,496 ₩ 10,017,840
32. Supplemental Cash Flow Information
(a) Cash and cash equivalents as at December 31, 2016 and 2015, are as follows:
(In thousands Korean won) 2016 2015
Cash and deposits on demand ₩ 124,468,801 ₩ 278,318,578
Short-term financial deposits1 57,829,987 60,486,426
Total ₩ 182,298,788 ₩ 338,805,004
1 Short-term financial deposits consist of shore-term investments with high liquidity, readily convertible to known amount of cash and be subject to an insignificant risk of changes in value. (b) Significant transactions not affecting cash flows for the periods ended December 31, 2016 and 2015, are as follows:
(In thousands of Korean won) 2016 2015
Transfer of current portion of held-to-maturity investment ₩ 1,300 ₩ 300
Write-off of trade receivables 203,000 189,217
Transfer of construction-in-process to property, plant and equipment 36,229,443 28,047,109
Transfer of construction-in-process to investment property 1,336,962 -
Change in value of available-for-sale financial assets 1,559,615 334,881
Transfer of current portion of short-term loans 1,221,276 5,307
Transfer of current portion of long-term borrowings 10,785,447 10,061,777
Amortization of present value discounts 2,396,620 17,719,896
Changes in payables in relation to the acquisition of property and equipment 2,846,078 1,859,344
Business combination 32,832,391 15,416,398
Transfer of long-term prepayment 2,185,300 -
Changes in receivables in relation to the disposal of property and equipment (370,000) -
Changes in valuation loss on derivative financial instruments 2,161,506 -
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
54
33. Contingent Liabilities and Commitments (a) Lease contracts of Casino Operations
(In thousands of Korean won)
Contractor Location Deposit Monthly Rental Expense
SK Networks Co. Ltd Seoul 1,013,200 ₩ 955,188
Ora-Resort Co. Ltd Jeju Island 1,500,000 165,000
Kal Hotel Network Co. Ltd Incheon 400,000 181,104
(b) Incheon International Airport International Business District(IBC) -Ⅰ2nd phase Development
Project
a) Agreements
The Group has entered into a concession agreement with Incheon International Airport Corporation regarding Incheon International Airport IBC-I 2nd phase development projects on September 14, 2012. Details of the agreement are as follows:
- Scope: Design, construction, management and operation of the Project
- Area : Incheon International business area (IBC) -I Phase 2 area, Unseo - dong, Incheon
- Land use Period
Commencement : 14 Sep 2012
Expiration : 50 years from the initial operation date
On May 22, 2015, the Group awarded a construction contract amounting to ₩ 459,258 million to the consortium of POSCO and Kolon Global. On August 16, 2016, the Group awarded a construction contract amounting to ₩ 144,206 million to the consortium of SK E&C Co., Ltd. and Paradise Global Co., Ltd. The Group recognized ₩ 464,156 million as construction-in-progress in relation to the construction contracts.
The Company has provided performance guarantee insurance (Insured amount: ₩ 20,640 million) in favor of the Incheon International Airport Corporation in connection with the concession agreement, and also has provided licensing guarantee insurance in favor of Incheon Free Economic Zone Authority (Insured amount: ₩ 3,217 million).
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
55
b) Project finance loan facilities
As at December 31, 2016, the Group has entered into two project finance loan agreements for the development projects. The details of the agreements are as follows:
- Project Financing 1-1
Contract date 2015-06-12
Redemption date 2020-06-15 (bullet payment)
Creditors KEB Hana Bank and 16 financial Institutions
Maximum line of credit1 Tranche A ₩ 500 billion Fixed interest rate(4.3%) and Floating rate(CD + 2.65%)
Tranche B 200 billion Floating rate(CD+4.65%) Total ₩ 700 billion
Others Pledge of deposits (deposit for interests, deposit for redemption, deposit for withdrawing)
Pledge of insurances for facilities
Business rights and enforce rights waiver and transfer of memorandum Collateral for facilities
1 As at December 31, 2016. the Group borrowed tranche A of ₩ 437.5 billion and tranche B of ₩
200 billion. - Project Financing 1-2
Contract date 2015-12-23
Redemption date 2020-12-28
Creditors Hi-A-one 11th Co., Ltd.
Maximum line of credit2 ₩ 100 billion Floating rate(CD + 1.13%)
2 As at December 31, 2016, the Group borrowed ₩ 5 billion from this loan facility. For the Project Financing 1-1, ordinary shares of Paradise Segasammy Co., Ltd. owned by the Parents Company (26,476,000 shares) and Segasammy Holdings (21,661,711 shares), are pledged as collateral up to ₩ 910 billion.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
56
(c) Other than project finance, the Group has commitments with financial institution for the periods ended December 31, 2016 and 2015, as follows:
(In thousands of Korean won)
Bank Categories Maximum line of credit
Outstanding
Shinhan Bank Bank overdrafts ₩ 2,000,000 ₩ -
Tourism Promotion and Development Fund Loan
3,301,140 3,301,140
General Loans 20,400,000 20,400,000 Facility Loans 6,666,667 6,666,667
KEB Hana Bank Facility Loans 3,000,000 3,000,000
Woori Bank General Loans 7,000,000 7,000,000
Tourism Promotion and Development Fund Loan
9,762,500 9,762,500
Facility Loans 24,170,000 24,170,000
(USD 20,000,000) (USD 20,000,000)
Korea Development Bank
General Loans 5,000,000 5,000,000
Total ₩ 81,300,307 ₩ 79,300,307
(d) As at December 31, 2016, the Group is named as a defendant in 4 legal cases, including payroll
claims and others. The aggregate amounts of claim amounted to approximately ₩ 1,857,599
thousand. As they are still pending in court, the outcome of the cases is uncertain. Accordingly, the ultimate effect of these matters on the consolidated financial statements cannot be reliably determined.
34. Discontinued Operations
(a) In 2015, profit and loss related to loss of control and discontinuation of business due to disposal of shares of Paradise Safari Park Ltd. and Paradise Investment and Development Kenya Ltd. were presented as discontinued operations. Income and loss from discontinued operations for the periods ended December 31, 2015, consist of the following:
(In thousands of Korean won)
2015
Description Paradise Safari
Park Ltd.
Paradise Investment and
Development Ltd. Total
Income1 ₩ 21,428,843 ₩ 706,689 ₩ 22,135,532
Expense (3,004,731) (95,617) (3,100,348)
Discontinued operations before Income Tax expense
18,424,112 611,072 19,035,184
Income Tax expense (2,418,354) (159,439) (2,577,793)
Profit after tax from discontinued operations
16,005,758 451,633 16,457,391
Attributable to
Owners of the parent 16,005,758 450,332 16,456,090
Non-controlling interests - 1,301 1,301
1 Gain on disposal of investments in subsidiaries amounting to ₩ 17,653 million are included.
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
57
(b) The cash flows from discontinued operations for the periods ended December 31, 2015, are as follows: (In thousands of Korean won)
2015
Description Paradise Safari
Park Ltd.
Paradise Investment and
Development Ltd. Total
Cash flows from operating activities ₩ (2,535,838) ₩ 6,904 ₩ (2,528,934)
Cash flows from investing activities (86,454) (2,417) (88,871)
Cash flows from financing activities - - -
Total cash flows ₩ (2,622,292) ₩ 4,487 ₩ (2,617,805)
35. Business Combination
35.1 Acquisition of Embassy Suites Orlando Downtown (a) In order to enter into hotel business in USA, the Group established PARADISE AMERICA LLC. to acquire Embassy Suites Orlando Downtown in Orlando, Florida Details of the business combination are as follows:
(in thousands of Korean won)
Principal activity Date of acquisition
Consideration transferred
Embassy Suites Orlando Downtown Hotel March 3, 2016 ₩ 41,330,037
(b) The identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date are as follows: (In thousands of Korean won)
Assets
Properties and equipment ₩ 32,540,420
Trade receivables 350,237
Other current assets 35,497
32,926,154
Liabilities
Non-financial other payables 93,763
Total fair value of identifiable net assets ₩ 32,832,391
(c) Details of goodwill from the business combination are as follows:
(In thousands of Korean won):
Consideration transferred ₩ 41,330,037
Deduction: Fair value of net assets acquired (32,832,391)
Goodwill ₩ 8,497,646
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
58
(d) Details of net cash outflow during the business combination in 2016 are as follows: (In thousands of Korean won):
Cash consideration ₩ 41,322,654
35.2 Merge of Casino Segment of Paradise Global Co. Ltd. (a) To improve its corporate governance to achieve its mid-Long term growth strategy of qualitative growth of current business and creation of business synergies, the Group acquired Casino business segment of Paradise Global Co., Ltd. on July , 2015. The acquisition was approved by board of directors and shareholders on May 11, 2015 and June 24, 2015, respectively. Details of the business combination are as follows:
(in thousands
of Korean won) Principal activity
Date of acquisition
Consideration transferred
Paradise Global Co., Ltd. Casino July 1, 2015 ₩ 120,204,000
(b) The identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date are as follows:
(In thousands of Korean won)
Current assets
Cash and cash equivalents ₩ 15,309,570
Trade receivables 3,872,188
Other receivables 71,064
Other assets 479,811
Inventories 296,822
Total 20,029,455
Non-current assets
Properties and equipments 4,479,889
Intangible assets 1,767,056
Other non- current assets 1,470,241
Total 7,717,186
Current liabilities
Non-trade payables 1,951,633
Withholdings 5,512,569
Other liabilities 4,143,205
Total 11,607,407
Non-current liabilities
Retirement Benefit Obligations 722,836
Total fair value of identifiable net assets ₩ 15,416,398
Paradise Co., Ltd. and Subsidiaries Notes to the Consolidated Financial Statements
December 31, 2016 and 2015
59
(c) Details of goodwill from the business combination are as follows:
(In thousands of Korean won):
Consideration transferred ₩ 120,204,000
Deduction: Settlement of Consideration transferred (9,311,350)
Deduction: Fair value of net assets acquired (5,416,398)
Deduction: Fair value of identifiable intangible assets (19,499,741)
Goodwill ₩ 75,976,511
As a part of acquisition, the Group acquired customer-related information of Paradise Global’s Casino business. These items are identified separately from goodwill because it meets the recognition criteria for intangible assets. (d) Details of net cash outflow during the business combination in 2016 are as follows:
(In thousands of Korean won):
Cash consideration ₩ 120,204,000
Deduction: Settlement of Consideration transferred (9,311,350)
Deduction: Acquired cash and cash equivalents (15,309,570)
Net Total ₩ 95,583,080
36. Event after the Reporting Period
According to the decision of board of directors on January 11, 2017, the Group issued Corporate bond of ₩ 100 billion on January 24, 2017.