LG Display (LPL) 6-K Current report (foreign)

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March 2020

LG Display Co., Ltd.

(Translation of Registrant’s name into English)

LG Twin Towers, 128Yeoui-daero,Yeongdeungpo-gu, Seoul 07336, Republic of Korea

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form20-F or Form40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(1):  ☐

Note: RegulationS-T Rule 101(b)(1) only permits the submission in paper of a Form6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(7):  ☐

Note: RegulationS-T Rule 101(b)(7) only permits the submission in paper of a Form6-K if submission to furnish a report or other document that the registration foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form6-K submission or other Commission filing on EDGAR.

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ☐            No  ☒

ANNUAL REPORT

(From January 1, 2019 to December 31, 2019)

THIS IS A TRANSLATION OF THE ANNUAL REPORT ORIGINALLY PREPARED IN KOREAN AND IS IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SUPERVISORY COMMISSION.

IN THE TRANSLATION PROCESS, SOME PARTS OF THE REPORT WERE REFORMATTED, REARRANGED OR SUMMARIZED AND CERTAIN NUMBERS WERE ROUNDED FOR THE CONVENIENCE OF READERS. REFERENCES TO “Q1”, “Q2”, “Q3” AND “Q4” OF A FISCAL YEAR ARE REFERENCES TO THETHREE-MONTH PERIODS ENDED MARCH 31, JUNE 30, SEPTEMBER 30 AND DECEMBER 31, RESPECTIVELY, OF SUCH FISCAL YEAR.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTEDON A CONSOLIDATED BASIS IN ACCORDANCE WITH KOREAN INTERNATIONAL FINANCIAL REPORTING STANDARDS, OR K-IFRS, WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES.K-IFRS ALSO DIFFERS IN CERTAIN RESPECTS FROM THE INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ISSUED BY THE INTERNATIONAL ACCOUNTING STANDARDS BOARD. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES IN THIS DOCUMENT.

Contents

1.	Company		4
	A.	Name and contact information	4
	B.	Credit rating	4
	C.	Capitalization	6
	D.	Voting rights	7
	E.	Dividends	7
2.	Business		8
	A.	Business overview	8
	B.	Industry	8
	C.	New businesses	10
3.	Major Products and Raw Materials		10
	A.	Major products	10
	B.	Average selling price trend of major products	11
	C.	Major raw materials	11
4.	Production and Equipment		12
	A.	Production capacity and output	12
	B.	Production performance and utilization ratio	13
	C.	Investment plan	13
5.	Sales		13
	A.	Sales performance	13
	B.	Sales organization and sales route	13
	C.	Sales methods and sales terms	14
	D.	Sales strategy	14
	E.	Major customers	14
6.	Purchase Orders		15
7.	Market Risks and Risk Management		15
	A.	Market risks	15

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		B.	Risk management	15
	8.	Derivative Contracts		15
		A.	Currency risks	15
		B.	Interest rate risks	16
	9.	Major Contracts		16
	10.	Research & Development		16
		A.	Summary ofR&D-related expenditures	16
		B.	R&D achievements	17
	11.	Intellectual Property		19
	12.	Environmental and Safety Matters		19
	13.	Financial Information		22
		A.	Financial highlights (Based on consolidatedK-IFRS)	22
		B.	Financial highlights (Based on separateK-IFRS)	23
		C.	Consolidated subsidiaries as of December 31, 2019	24
		D.	Status of equity investments as of December 31, 2019	25
	14.	Audit Information		26
		A.	Audit service	26
		B.	Non-audit service	26
	15.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
		A.	Risk relating to forward-looking statements	26
		B.	Overview	27
		C.	Financial condition and results of operations	27
		D.	Liquidity and capital resources	39
	16.	Board of Directors		44
		A.	Members of the board of directors	44
		B.	Committees of the board of directors	45
		C.	Independence of directors	45
	17.	Information Regarding Shares		46
		A.	Total number of shares	46
		B.	Shareholder list	46
	18.	Directors and Employees		46
		A.	Directors	46
		B.	Employees	50
	19.	Other Matters		51
		A.	Legal proceedings	51
		B.	Material events subsequent to the reporting period	51
		C.	Material change in management	51
Attachment: 1. Financial Statements in accordance withK-IFRS

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1. Company

A. Name and contact information

The name of our company is“EL-GI DISPLAY CHUSIK HOESA,” which shall be “LG Display Co., Ltd.” in English.

Our principal executive office is located at LG Twin Towers, 128Yeoui-daero,Yeongdeungpo-gu, Seoul 07336, Republic of Korea, and our telephone number is+82-2-3777-1010. Our website address ishttp://www.lgdisplay.com.

B. Credit rating

(1) Corporate bonds (Domestic)

Subject instrument	Month of rating(1)	Credit rating(2)	Rating agency (Rating range)
Corporate bonds	May 2017	AA	NICE Information Service Co., Ltd. (AAA ~ D)
	February 2018
	May 2018
	February 2019	AA-
	April 2019
	November 2019
	May 2017	AA	Korea Investors Service, Inc. (AAA ~ D)
	October 2017
	May 2018
	February 2019	AA-
	June 2019
	October 2019
	May 2017	AA	Korea Ratings Corporation (AAA ~ D)
	October 2017
	February 2018
	April 2018
	April 2019	AA-
	November 2019

(1) The results of our credit ratings subsequent to the reporting period are as follows:

Subject instrument	Month of rating	Credit rating(2)	Rating agency (Rating range)
Corporate bonds	February 2020	A+	NICE Information Service Co., Ltd. (AAA ~ D)
Corporate bonds	February 2020	A+	Korea Investors Service, Inc. (AAA ~ D)
Corporate bonds	February 2020	A+	Korea Ratings Corporation (AAA ~ D)

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(2) Domestic corporate bond credit ratings are generally defined to indicate the following:

Subject instrument	Credit rating	Definition
Corporate bonds	AAA	Strongest capacity for timely repayment.
	AA+/AA/AA-	Very strong capacity for timely repayment. This capacity may, nevertheless, be slightly inferior than is the case for the highest rating category
	A+/A/A-	Strong capacity for timely repayment. This capacity may, nevertheless, be more vulnerable to adverse changes in circumstances or in economic conditions than is the case for higher rating categories.
	BBB+/BBB/BBB-	Capacity for timely repayment is adequate, but adverse changes in circumstances and in economic conditions are more likely to impair this capacity.
	BB+/BB/BB-	Capacity for timely repayment is currently adequate, but that there are some speculative characteristics that make the repayment uncertain over time.
	B+/B/B-	Lack of adequate capacity for repayment and speculative characteristics. Interest payment in time of unfavorable economic conditions is uncertain.
	CCC	Lack of capacity for even current repayment and high risk of default.
	CC	Greater uncertainties than higher ratings.
	C	High credit risk and lack of capacity for timely repayment.
	D	Insolvency.

(2) Corporate bonds (Overseas)

Subject instrument	Month of rating	Credit rating	Rating agency (Rating range)
Corporate bonds(1)	November 2018	AA	Standard & Poor’s Rating Services (AAA ~ D)

(1) Represents credit rating for our overseas corporate bonds guaranteed by the Korea Development Bank.

(2) Overseas corporate bond credit ratings are generally defined to indicate the following:

Subject instrument	Credit rating	Definition
Corporate bonds	AAA	Highest level of stability.
	AA+/AA/AA-	Very high level of stability. This stability may be slightly more risky than is the case for the highest rating category but presents no issues.
	A+/A/A-	High level of stability. There are no issues with repaying the principal, but there are characteristics that could be subject to future deterioration.
	BBB+/BBB/BBB-	Level of stability is adequate. Current level of stability and profitability is adequate, but requires special attention during times of economic downturns.
	BB+/BB/BB-	Speculative characteristics. There is no guarantee on future stability. Expected business performance is uncertain.
	B+/B/B-	Inadequate as an investment target. Ability to make principal repayments or comply with contractual terms and conditions is uncertain.
	CCC/CC/C	Very low level of stability. Ability to make payments of principal and interest is highly unlikely. Extremely speculative. Currently in default or undergoing a serious problem.
	D	Bankruptcy.

(3) Commercial paper

Subject instrument	Month of rating	Credit rating(1)	Rating agency (Rating range)
Commercial paper	May 2017	A1	Korea Investors Service, Inc. (A1 ~ D)

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Subject instrument	Month of rating	Credit rating(1)	Rating agency (Rating range)
	May 2017	A1	Korea Ratings Corporation (A1 ~ D)
	October 2017	A1	Korea Investors Service, Inc. (A1 ~ D)
	December 2017	A1	Korea Ratings Corporation (A1 ~ D)
	May 2018	A1	Korea Investors Service, Inc. (A1 ~ D)
	May 2018	A1	NICE Information Service Co., Ltd. (A1 ~ D)
	November 2018	Cancelled(2)	Korea Investors Service, Inc. (A1 ~ D)
	November 2018	Cancelled(2)	NICE Information Service Co., Ltd. (A1 ~ D)

(1) Domestic commercial paper credit ratings are generally defined to indicate the following:

Subject instrument	Credit rating	Definition
Commercial paper	A1	Timely repayment capability is at the highest level with extremely low investment risk and is stable such that it will not be influenced by any reasonably foreseeable changes in external factors.
	A2	Strong capacity for timely repayment with very low investment risk. This capacity may, nevertheless, be slightly inferior than is the case for the highest rating category.
	A3	Capacity for timely repayment is adequate with low investment risk. This capacity may, nevertheless, be somewhat influenced by sudden changes in external factors.
	B	Capacity for timely repayment is acknowledged, but there are some speculative characteristics.
	C	Capacity for timely repayment is questionable.
	D	Insolvency.

※ ‘+’ or ‘-’ modifier can be attached to ratings A2 through B to differentiate ratings within broader rating categories.

(2) Ratings have been cancelled due to repayment of our outstanding commercial paper on October 22, 2018 upon maturity.

C. Capitalization

(1) Change in capital stock (as of December 31, 2019)

There were no changes to our issued capital stock during the annual reporting period ended December 31, 2019.

(2) Convertible bonds (as of December 31, 2019)

Description	Issue Date	Maturity Date	Issue Amount (in Won)			Class of Shares Subject to Conversion	Conversion Period	Conditions for Conversion		Outstanding Bonds				Notes
								Conversion Ratio	Conversion Price	Issue Amount (in Won)			Number of Shares subject to conversion
Unsecured Foreign Convertible Bonds No. 3	Aug. 22, 2019	Aug. 22, 2024		813,426,670,000	(1)(2)	Registered Common Shares	Aug. 23, 2020 ~ Aug. 12, 2024	100%	W19,845		813,426,670,000	(1)	40,988,998	Listed on Singapore Stock Exchange
Total	—	—		813,426,670,000		—	—	100%	W19,845		813,426,670,000		40,988,998	—

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(1) The issue amount for Unsecured Foreign Convertible Bonds No. 3 is calculated based on the application of themid-point of the relevantWon-US dollar exchange rates as of noon, July 30, 2019 (Korea Standard Time) quoted on Bloomberg, which wasW1,182.65 per U.S. dollar, to the actual issue amount of USD 687,800,000.

(2) The proceeds of our Unsecured Foreign Convertible Bonds No. 3 were used for general corporate purposes.

D. Voting rights (as of December 31, 2019)

(Unit: share)

Description		Number of shares
A. Total number of shares issued(1):	Common shares(1)		357,815,700
	Preferred shares		—
B. Shares without voting rights:	Common shares		—
	Preferred shares		—
C. Shares subject to restrictions on voting rights pursuant to our articles of incorporation:	Common shares		—
	Preferred shares		—
D. Shares subject to restrictions on voting rights pursuant to regulations:	Common shares		—
	Preferred shares		—
E. Shares with restored voting rights:	Common shares		—
	Preferred shares		—
Total number of issued shares with voting rights (=A – B – C – D + E):	Common shares		357,815,700
	Preferred shares		—

(1) Authorized: 500,000,000 shares

E. Dividends

Dividends for the three most recent fiscal years

Description (unit)		2019			2018			2017
Par value (Won)			5,000			5,000			5,000
Profit (loss) for the year (million Won)(1)			(2,829,705	)		(207,239	)		1,802,756
Earnings (loss) per share (Won)(2)			(7,908	)		(579	)		5,038
Total cash dividend amount for the period (million Won)			—			—			178,908
Total stock dividend amount for the period (million Won)			—			—			—
Cash dividend payout ratio (%)(3)			—			—			9.92	%
Cash dividend yield (%)(4)	Common shares		—			—			1.69	%
	Preferred shares		—			—			—
Stock dividend yield (%)	Common shares		—			—			—
	Preferred shares		—			—			—
Cash dividend per share (Won)	Common shares		—			—			500
	Preferred shares		—			—			—
Stock dividend per share (share)	Common shares		—			—			—
	Preferred shares		—			—			—

(1) Based on profit for the year attributable to the owners of the controlling company.

(2) Earnings per share is based on par value ofW5,000 per share and is calculated by dividing net income by weighted average number of common shares.

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(3) Cash dividend payout ratio is the percentage that is derived by dividing total cash dividend by profit for the year attributable to the owners of the controlling company.

(4) Cash dividend yield is the percentage that is derived by dividing cash dividend by the arithmetic average of the daily closing prices of our common shares during theone-week period ending two trading days prior to the closing of the register of shareholders for the purpose of determining the shareholders entitled to receive annual dividends.

2. Business

A. Business overview

We were incorporated in February 1985 under the laws of the Republic of Korea. LG Electronics and LG Semicon transferred their respective LCD business to us in 1998, and since then, our business has been focused on the research, development, manufacture and sale of display panels, applying technologies such asTFT-LCD and OLED.

As of December 31, 2019, in order to support our business activities, we operatedTFT-LCD and OLED production and research facilities in Paju and Gumi in Korea, and we have also established subsidiaries in the Americas, Europe and Asia.

As of December 31, 2019, our business consisted of the manufacture and sale of display and display related products utilizingTFT-LCD, OLED and other technologies under a single reporting business segment.

Consolidated operating results highlights

(Unit: In billions of Won)

	2019			2018		2017(1)
Sales Revenue		23,476			24,337		27,790
Gross Profit		1,868			3,085		5,366
Operating Profit (loss)		(1,359	)		93		2,462
Total Assets		35,575			33,176		29,160
Total Liabilities		23,086			18,289		14,178

(1) Figures for 2017 were recorded in accordance with the previously applicable accounting standards, includingK-IFRS 1018, “Revenue” andK-IFRS 1039, “Financial Instruments.”

B. Industry

(1) Industry characteristics

• The entry barriers to manufacture display panels are relatively high due to the technology and capital intensive nature of the mass manufacturing process that is required to achieve economies of scale, among other factors.

• While growth in the market for displays used in notebook computer, monitor and other traditional IT products has stagnated or declined, the market for small- andmedium-sized displays (including those used in smartphones) in the rapidly evolving IT environment has shown gradual growth. The display market for televisions has also shown steady growth mainly due to growing demand from developing countries as well as from consumers in general for larger sized display panels. As for displays used in industrial, automobile and other value added products, we expect to see growth in these markets.

(2) Growth Potential

• We are focusing on securing profitability through differentiated products such as “Cinematic Sound” OLED and “Wallpaper” display panels under our strategic plan to transition our business to center around OLED, which has a strong future growth potential. In the television business, we are expanding our offerings of premium products such as OLED and UHD products. In particular, with respect tolarge-sized OLED television display panels, we are continuing to secure additional production capacity of 8.5th generation OLED panels and are planning to further strengthen the fundamentals of our OLED business through building a successfulline-up of new products and investments in the 8.5th and 10.5th generation OLED display panel production. In the IT business, we are increasing the proportion of premium products such as high resolution and wide screen products based on IPS and Oxide technologies. In the mobile business, we are continuously striving to secure mass production capabilities for 6th generation plastic OLED smartphones through additional investments. We are also strengthening the foundation for the expansion of small- andmedium-sized OLED business.

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(3) Cyclicality

• The display panel business is highly cyclical and sensitive to fluctuations in the general economy. The industry experiences recurring volatility caused by imbalances between supply and demand due to capacity expansion and changing production utilization rates within the industry.

• Macroeconomic factors and other causes of business cycles can affect the rate of growth in demand for display panels. Accordingly, if supply exceeds demand, average selling prices of display panels may decrease. Conversely, if growth in demand outpaces growth in supply, average selling prices may increase.

(4) Market conditions

• Most display panel manufacturers are located in Asia as set forth below. Pursuant to the Chinese government’s initiative and support, Chinese panel manufacturers have continued to invest in new fabrication facilities and additional supplies, and the concern over intensification of a structural oversupply in the LCD industry continues to exist.

a. Korea: LG Display, Samsung Display, etc.

b. Taiwan: AU Optronics, Innolux, CPT, HannStar, etc.

c. Japan: Japan Display, Sharp, Panasonic LCD, etc.

d. China: BOE, CSOT, CEC Panda, HKC, etc.

• Our worldwide market share oflarge-sized display panels (i.e., panels that are 9 inches or larger) based on revenue is as follows:

	2019	2018	2017
Panels for Televisions(1)(2)	28.1%	28.3%	28.1%
Panels for Monitors(1)	27.5%	30.7%	36.3%
Panels for Notebook Computers(1)	22.3%	23.7%	21.3%
Panels for Tablet Computers(1)	24.8%	31.0%	29.1%
Total(1)	27.2%	28.8%	29.2%

(1) Source: Large-Area Display Market Tracker (IHS Technology). The relevant amounts for the fourth quarter of 2019 reflect IHS Technology’s research based on actual results of operations.

(2) Includes panels for public displays.

(5) Competitiveness and competitive advantages

• Our ability to compete successfully depends on factors both within and outside our control, including product pricing, our relationship with customers, timely investments, adaptable production capabilities, development of new and premium products through technological advances, competitive production costs, success in marketing to ourend-brand customers, component and raw material supply costs, foreign exchange rates and general economic and industry conditions.

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• In order to compete effectively, it is critical to be cost competitive and maintain stable andlong-term relationships with customers which will enable us to be profitable even in a buyer’s market.

• A substantial portion of our sales is attributable to a limited number ofend-brand customers and their designated system integrators. The loss of theseend-brand customers, as a result of customers entering into strategic supplier arrangements with our competitors or otherwise, would result in reduced sales.

• Developing new products and technologies that can be differentiated from those of our competitors is critical to the success of our business. It is important that we take active measures to protect our intellectual property internationally by obtaining patents and undertaking monitoring activities in our major markets. It is also necessary to recruit and retain experienced key managerial personnel and skilled line operators.

• As a leading technology innovator in the display industry, we continue to focus on delivering differentiated value to our customers by developing various technologies and products, including display panels with OLED, IPS,in-TOUCH and other technologies. With respect to OLED panels, following our supply of the world’s first55-inch OLED 3D panels for televisions in January 2013, we have shown that we are technologically a step ahead of the competition by continuing to introduce differentiated products with a variety of unique features specific to OLED technology, such as our “Wallpaper,” “Cinematic Sound,” “Rollable” and “Transparent” OLED panels for televisions. Moreover, we have supplied plastic OLED products for foldable notebook computers, automotive products, smartphones and wearable devices, among others. With respect toTFT-LCD panels, we are leading the market with our competitive advantages in technology, including through our IPS technology-based ultra-large and high-resolution ultra-high definition (“Ultra HD” or “UHD”) television panels, desktop and notebook monitors featuring differentiated designs and high frequency refresh rates, and specialized products for automotive, commercial and medical uses. Our production facilities are also equipped to produce products incorporatingin-TOUCH technology.

• Moreover, we are maintaining and strengthening close long-term relationships with major global firms to secure customers and expand partnerships for technology development.

C. New businesses

For our continued growth, we are actively exploring and preparing for new business opportunities that may arise in the changing market environment. As such, we are continually reviewing and looking at opportunities in the display and promising new industries.

3. Major Products and Raw Materials

A. Major products

We manufactureTFT-LCD and OLED panels, of which a significant majority is sold overseas.

(Unit: In billions of Won, except percentages)

					2019
Business area	Sales type	Items (By product)	Usage	Major trademark	Sales Revenue		Percentages (%)
Display	Goods/ Products/ Services/ Other sales	Televisions	Panels for televisions	LG Display		7,998		34.07	%
		Desktop monitors	Panels for monitors	LG Display		4,028		17.16	%
		Tablet products	Panels for tablets	LG Display		2,251		9.59	%
		Notebook computers	Panels for notebook computers	LG Display		2,784		11.86	%
		Mobile, etc.	Panels for smartphones, etc.	LG Display		6,415		27.32	%
Total						23,476		100.0	%

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B. Average selling price trend of major products

While average selling prices of display panels are subject to change based on market conditions and demand by product category, the average selling price of display panels per square meter of net display area shipped in the fourth quarter of 2019 increased by approximately 18% compared to the third quarter of 2019 due to an increase in the sales of plastic OLED mobile products, which resulted in an improvement in our overall product mix. There is no assurance that the average selling prices of display panels will not fluctuate in the future due to changes in market conditions.

(Unit: US$ / m² )

Period	Average Selling Price(1)(2) (in US$ / m2)
2019 Q4	606
2019 Q3	513
2019 Q2	456
2019 Q1	528
2018 Q4	559
2018 Q3	500
2018 Q2	501
2018 Q1	522
2017 Q4	589
2017 Q3	600
2017 Q2	574
2017 Q1	608

(1) Quarterly average selling price per square meter of net display area shipped.

(2) Excludessemi-finished products in the cell process.

C. Major raw materials

Prices of major raw materials depend on fluctuations in supply and demand in the market as well as on change in size and quantity of raw materials due to the increased production oflarge-sized panels.

(Unit: In billions of Won, except percentages)

Business area	Purchase type	Items	Usage	Cost(1)		Ratio (%)			Suppliers
Display	Raw materials	Printed circuit boards	Display panel manufacturing		2,298		18.9	%	Korea SMT Co., Ltd., etc.
		Polarizers			2,116		17.4	%	LG Chem, etc.
		Backlights			1,935		15.9	%	Heesung Electronics LTD., etc.
		Glass			1,098		9.0	%	Paju Electric Glass Co., Ltd., Asahi Electric Glass Co., Ltd., etc.
		Drive IC			983		8.1	%	Silicon Works Co., Ltd., MagnaChip Semiconductor Corporation, etc.
		Others			3,722		30.6	%	—
Total					12,153		100.0	%

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- Period: January 1, 2019 ~ December 31, 2019.

(1) Based on total cost for purchase of raw materials which includes manufacturing and development costs, etc.

(2) Among our major suppliers, LG Chem and Silicon Works Co., Ltd. are member companies of the LG Group, and Paju Electric Glass Co., Ltd. is our affiliate.

• The average price of EGI (Electrolytic Galvanized Iron), which is the main raw material for BLU components, increased by 0.3% from 2017 to 2018 but decreased by 8.6% from 2018 to 2019. Such decrease in 2019 was due to uncertainties arising from the U.S.-China trade disputes. The average price of resin increased by 18.7% from 2017 to 2018 but decreased by 38.2% from 2018 to 2019. Such decrease in 2019 was due to a mismatch between supply and demand. The average price of copper, the main raw material for PCB components, increased by 6.0% from 2017 to 2018 but decreased by 8.0% from 2018 to 2019. Such decrease in 2019 was due to uncertainties arising from the U.S.-China trade disputes.

4. Production and Equipment

A. Production capacity and output

(1) Production capacity

The table below sets forth the production capacity of our Gumi, Paju and Guangzhou facilities in the periods indicated.

(Unit: 1,000 glass sheets)

Business area	Items		Location of facilities		2019(1)		2018(1)		2017(1)
Display		Display panel		Gumi, Paju, Guangzhou		9,408		10,161		10,538

(1) Calculated based on the maximum monthly input capacity (based on glass input substrate size for eighth-generation glass sheets) during the year multiplied by the number of months in a year (i.e., 12 months). The production capacity for facilities with adjusted utilization rates have been calculated based on the maximum input capacity during the period.

(2) Production output

The table below sets forth the production output of our Gumi, Paju and Guangzhou facilities in the periods indicated.

(Unit: 1,000 glass sheets)

Business area	Items	Location of facilities	2019(1)	2018(1)	2017(1)
Display	Display panel	Gumi, Paju, Guangzhou	8,373	9,428	9,262

(1) Based on the production results (input standard) of each plant converted into eighth-generation glass sheets.

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B. Production performance and utilization ratio

(Unit: Hours, except percentages)

Production facilities	Available working hours in 2019	Actual working hours in 2019	Average utilization ratio
Gumi	8,760(1) (24 hours x 365 days)	8,680(1) (24 hours x 362 days)(2)		99.1	%
Paju	8,760(1) (24 hours x 365 days)	8,654(1) (24 hours x 361 days)(2)		98.8	%
Guangzhou	8,760(1) (24 hours x 365 days)	8,760(1) (24 hours x 365 days)(2)		100.0	%

(1) Based on the assumption that all 24 hours in a day have been fully utilized.

(2) Number of days is calculated by averaging the number of working days for each facility.

C. Investment plan

In 2019, our total capital expenditures on a cash out basis was approximatelyW7 trillion. In 2020, we expect that investment in OLED technology for the future will be nearly completed and plan to reduce our capital expenditures by approximately half as that compared to 2019.

5. Sales

A. Sales performance

(Unit: In billions of Won)

Business area	Sales types	Items (Market)		2019		2018		2017
	Products	Display panel	Overseas(1)		22,180		22,722		25,763
			Korea(1)		1,255		1,572		1,982
			Total		23,435		24,294		27,745
	Royalty	LCD, OLED technology patent	Overseas(1)		14		18		20
			Korea(1)		0		0		0
			Total		14		18		20
Display	Others	Raw materials, components, etc.	Overseas(1)		17		8		11
			Korea(1)		10		17		14
			Total		26		25		25
			Overseas(1)		22,211		22,747		25,794
	Total		Korea(1)		1,265		1,590		1,996
			Total		23,476		24,337		27,790

(1) Based onship-to-party.

(2) Sales for 2017 were recorded based on previously applicable accounting standards, includingK-IFRS 1018, “Revenue.”

B. Sales organization and sales route

• As of December 31, 2019, each of our television, IT, mobile and OLED businesses had individual sales and customer support functions.

• Sales subsidiaries in the United States, Germany, Japan, Taiwan, China and Singapore perform sales activities and provide local technical support to customers.

• Sales of our products take place through one of the following two routes:

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1) LG Display Headquarters and overseas manufacturing subsidiariesg Overseas sales subsidiaries (USA/Germany/Japan/Taiwan/China/Singapore), etc.g System integrators andend-brand customersg End users

2) LG Display Headquarters and overseas manufacturing subsidiariesg System integrators andend-brand customersg End users

• Sales performance by sales route

Sales performance	Sales route	Ratio
Overseas	Overseas subsidiaries		94.3	%
	Headquarters		5.7	%
Overseas sales portion (overseas sales / total sales)			94.6	%
Korea	Overseas subsidiaries		3.4	%
	Headquarters		96.6	%
Korea sales portion (Korea sales / total sales)			5.4	%

C. Sales methods and sales terms

• Direct sales and sales through overseas subsidiaries, etc. Sales terms are subject to change depending on the fluctuation in the supply and demand of LCD panels.

D. Sales strategy

• As part of our sales strategy, we have secured stable sales to major personal computer manufacturers and leading consumer electronics manufacturers globally.

• With respect to television products, we have led the premium television market with our OLED TVs and strengthened the differentiation of our OLED products through unique designs and integration of additional technologies (wallpaper, cinematic sound, rollable, etc.). We also strengthened sales ofhigh-resolution, IPS, narrow bezel and otherhigh-end display panels in the monitor, notebook computer and tablet markets.

• With respect to smartphones, commercial products (including interactive whiteboards and video wall displays, among others), industrial products (including aviation and medical equipment, among others) and automobile display products, we have continued to build a strong and diversified business portfolio by expanding our business with customers with a global reach on the strength of our differentiated products applying IPS, plastic OLED,high-resolution, high-reliability, Super Narrow bezel, in-TOUCH and other technologies.

E. Major customers

• Customers “A” and “B” each accounted for more than 10% of our sales revenue in 2018 and 2019, and our sales revenue derived from our top ten customers comprised 77% of our total sales revenue in 2018 and 80% in 2019.

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6. Purchase Orders

• We do not have purchase order contracts that recognize unbilled revenue by implementing the cost-based method.

7. Market Risks and Risk Management

A. Market risks

The display industry continues to experience continued declines in the average selling prices ofTFT-LCD and OLED panels irrespective of cyclical fluctuations in the industry, and our margins would be adversely impacted if prices decrease faster than we are able to reduce our costs.

The display industry is highly competitive. We have experienced pressure on the prices and margins of our major products due largely to additional industry capacity from panel manufacturers in Korea, Taiwan, China and Japan coupled with changes in the production mix of such manufacturers.

Our ability to compete successfully depends on factors both within and outside our control, including product pricing, performance and reliability, timely investments, adaptable production capabilities, utilization of differentiated technologies in product development, success or failure of ourend-brand customers in marketing their brands and products, component and raw material supply costs, and general economic and industry conditions. We cannot provide assurance that we will be able to compete successfully with our competitors on these fronts and, as a result, we may be unable to sustain our current market position.

Our results of operations are subject to exchange rate fluctuations. To the extent that we incur costs in one currency and generate sales in a different currency, our profit margins may be affected by changes in the exchange rates between the two currencies. Our sales of display panels are denominated mainly in U.S. dollars, whereas our foreign currency denominated purchases of raw materials are denominated mainly in U.S. dollars and Japanese Yen. Seeking to achieve stable management, we take every precaution in our foreign currency risk management to minimize the risk of foreign currency fluctuations on our foreign currency denominated assets and liabilities.

B. Risk management

As the average selling prices ofTFT-LCD and OLED panels can continue to decline over time irrespective ofindustry-wide cyclical fluctuations, we may find it hard to manage risks associated with certain factors that are outside our control. However, we counteract such declines in average selling prices by increasing the proportion of high value added panels in our product mix while also implementing various cost reduction measures. In addition, in order to manage our risk against foreign currency fluctuations, we eliminate such risk by matching foreign currency inflow and outflow by currency. We also continually monitor our currency position and risk, and when needed, we may from time to time enter intocross-currency interest rate swap contracts and foreign currency forward contracts.

8. Derivative Contracts

A. Currency risks

• We are exposed to currency risks on sales, purchases and borrowings that are denominated in currencies other than in Won, our functional currency. These currencies are primarily the U.S. dollar, the Chinese Yuan and the Japanese Yen.

• Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by our underlying operations, primarily in Won, the U.S. dollar and the Chinese Yuan.

• In respect of other monetary assets and liabilities denominated in foreign currencies, we have adopted a policy to maintain our net exposure within an acceptable level by buying or selling foreign currencies at spot rates, when necessary, to addressshort-term imbalances.

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• In 2019, in order to avoid risks of interest rate fluctuations and exchange rate fluctuations on foreign currency denominated borrowings with floating interest rates, we entered into an aggregate of $2,085 million in Won/US dollar cross currency swap agreements with Standard Chartered Bank and others, for which we have not applied hedge accounting.

• Any rights or obligations arising from derivative contracts that do not apply hedge accounting are measured at fair value and are accounted for as assets and liabilities, whereas any resulting valuation gain or loss is recognized as profit or loss at the time such valuation gain or loss is incurred.

We recognized a net gain on valuation of derivative instruments in the amount ofW41,782 million with respect to our foreign exchange derivative instruments held during the reporting period.

B. Interest rate risks

• Our exposure to interest rate risks relates primarily to our floating rate long term loan obligations. We have established and are managing interest rate risk policies to minimize uncertainty and costs associated with interest rate fluctuations by monitoring cyclical interest rate fluctuations and enacting countermeasures.

9. Major Contracts

Our material contracts, other than contracts entered into in the ordinary course of business, are set forth below:

Type of agreement	Name of party	Term	Content
Technology licensing agreement	Semiconductor Energy Laboratory	October 2005 ~	Patent licensing of LCD and OLED related technology
	Hewlett-Packard	January 2011 ~	Patent licensing ofsemi-conductor device technology
	Ignis Innovation, Inc.	July 2016 ~	Patent licensing of OLED related technology
Technology licensing/supply agreement	HannStar Display Corporation	December 2013 ~	Patentcross-licensing of LCD technology
	AU Optronics Corporation	August 2011~	Patentcross-licensing of LCD technology
	Innolux Corporation	July 2012 ~	Patentcross-licensing of LCD technology
	Universal Display Corporation	January 2015 ~ December 2022	Patent cross-licensing of OLED related technology

10. Research & Development

A. Summary ofR&D-related expenditures

(Unit: In millions of Won, except percentages)

Items(1)		2019			2018(3)			2017(3)
Material Cost			388,444			496,789			605,983
Labor Cost			618,187			630,695			611,450
Depreciation Expense			523,631			351,936			221,171
Others			246,027			277,699			233,266
TotalR&D-Related Expenditures			1,776,289			1,757,119			1,671,870
	Selling & Administrative Expenses		924,020			918,512			917,645
Accounting Treatment(2)	Manufacturing Cost		414,324			465,772			418,018
	Development Cost (Intangible Assets)		437,945			372,835			336,207
R&D-Related Expenditures / Revenue Ratio (TotalR&D-Related Expenditures ÷ Revenue for the period × 100)			7.6	%		7.2	%		6.0	%

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(1) Calculated based on the totalR&D-related expenditures before subtracting government subsidies (state subsidies).

(2) For accounting treatment purposes, selling & administrative expenses are presented as research and development expenses in our statements of comprehensive income, net of amortization of capitalized intangible asset development costs.

(3) The figures for 2017 and 2018 have been restated due to changes in our method of recognizingR&D-related expenditures whereas the figures for 2019 was prepared in accordance with such modified method.

B. R&D achievements

Achievements in 2017

(1) Developed5.7-inch QHD+ full vision display (LG Electronics)

• Developed a full vision display smartphone product (G6) through strategic collaboration with other LG Group companies

• Applied first 18:9 screen aspect ratio with4-corner round display

(2) Developed mobile LTPS 30Hz product (SH5.1-inch FHD)

• Secured 30Hzlow-frequency drive technology based on LTPSTFT-LCD

• Reduced logic power consumption through 30Hzlow-frequency drive (reduced from 96mW to 69mW on 5.1-inch FHD)

(3) Developed and released the world’s first Crystal Sound OLED, or CSO, television product

• Released product with a new platform concept through development of OLED panel product with integrated speakers

• Delivered OLED television product that achieves differentiated value not only in picture quality and design, but also sound quality

(4) Developed notebook oxide product(13.9-inch, Ultra HD)

• Achieved high definition/narrow bezel product through application of oxide BCE GIP technology

• Delivered low power consumption product through application of low refresh rate, or LRR, technology

(5) Developed medical monitor product for surgical endoscope(27.0-inch, Ultra HD)

• Newly entered the medical devices market through development and production of medical monitor product for surgical endoscope

• Achieved high definition (3,840 x 2,160), high luminance (800 nit) and high contrast ratio (1,300:1)

• Implemented coverglass direct bonding applying our own manufacturing processes (M6 line)

(6) Developed the world’s first four-side borderless monitor with a resolution of 8K4K(31.5-inch 8K4K oxide)

• Pioneered Ultra HD Premium MNT market through development of the world’s first four-side borderless monitor with a resolution of 8K4K

• Delivered Ultra HD based on oxide GIP (280 PPI with a resolution of 7680x4320)

• Delivered wide color gamut (Adobe RGB 100%/DCI 98%), four-side borderless

(7) Developed the world’s largest automotive Center Information Display (“CID”) product(15.4-inch Widescreen Ultra Extended Graphics Array (“WUXGA”))

• Developed the world’s largest auto component display in the automotive industry

• Guaranteed the first 1000hr reliability in the automotive industry

(8) Developed the world’s first88-inch Ultra Stretch display product

• Strengthened competitiveness through application of smart (digital) stepper

(9) Developed products utilizingU-IPS(75-inch/65-inch/55-inch/49-inch, Ultra HD)

• UtilizedU-IPS technology to strengthen product competitiveness by improving panel transmittance rate and reflectivity

(10) Developed the world’s first65-inch UHD OLED television product utilizing GIP

• Strengthened product competitiveness through application of the world’s first oxide based UHD GIP technology

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Achievements in 2018

(1) Developed the world’s first glass-integrated LCD television product (Art Glass Series)

• Achieved LCD modular appearance and simplicity in design by using glass material throughout product (including the panel, light guide plate and back cover)

• Strengthened competitiveness of frameless design by decreasing bezel size from 7.8mm to 5.9mm

(2) Developed our first5.8-inch Ultra HD Mobile 4K product

• Developed our first Ultra HD mobile product

• Achieved high luminance, low power consumption and HD resolution by applying Ultra HD RGBW (M+) pixel structure

(3) Developed the world’s first5.8-inch mobile FHD product applying M+

• Our first product applying camera notch concept technology

(4) Developed the world’s first four-side borderless curved monitor with 1900R curvature radius

• Our first product applying glass 0.25T (etching) bezel printing/reverse bonding process technology

• Strengthened product competitiveness with our first shared design applying three-side/four-side borderless TFT Mask

• Achieved high-speed driving at 144Hz, high color recall (DCI 98%) and HDR (peak luminance 550nit)

(5) Developed the world’s first34-inch large-screen monitor/high-resolution four-sided borderless HDR

• Pioneered HD Premium 21:9 monitor market through development of the world’s first WUHD(5K2K), four-side borderless monitor

• Delivered Ultra HD (DCI 98Z%, sRGB 135%) by applying Adv. KSF LED PKG technology

• Achieved high luminance (HDR 600); typ. 450 nit, maximum 600nit

(6) Developed LGD 6.01QHD+M+ Full Screen Display (LG Electronics)

• Developed a full screen display concept smartphone product (G7) through strategic collaboration with other LG Group companies

• Implemented a full screen display product concept through achievement of our first 19.5:9 screen aspect ratio and lower bezel of 2.7mm

(7) Developed the world’s narrowest bezel videowall product (0.44mm bezel,55-inch FHD)

• Achieved product competitiveness by developing the world’s narrowest bezel (originally 0.9mmg 0.44mm, Even Bezel)

(8) Developed the world’s first automotive glassless 3D cluster product

• Developed FHD glassless barrier type 3D model (12.3 inches, 167 ppi level)

• Achieved customers’eye-tracking movement by applying a top moving barrier panel at the top of the panel

• Improved adhesion accuracy of image panel and barrier panel by using OCA bonding technology

• Improved barrier contrast ratio by applying a copper-based metal barrier panel

(9) Developed the world’s first 6th generationa-Si Indirect DXD product(21.9-inch, 14 x 17 resolution, 14µm pixel pitches)

• Entered the DXD market through development of the world’s first 6th generationa-Si Indirect DXD product

• Set up infrastructure for DXD product development through the development of our first DXD product

(10) Developed the world’s first17-inchlarge-sized and lightweight notebook monitor

• Developedlarge-sized(17-inch) product with a new screen aspect ratio (16:10)

• Developed light-weight product (268g) through securing17-inch+ Slim Design model technology

Achievements in 2019

(1) Developed the world’s first ultralarge-sizedin-TOUCH product(50-inch UHD)

• World’s first to applyin-TOUCH technology on ultralarge-sized products(50-inch and larger)

• World’s first to apply low temperature PAS to achievein-TOUCH function

(2) Developed the world’s first transparent WOLED product(55-inch FHD)

• Developed WOLED-based Top Emission OLED device and process technology

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(3) Developed the world’s first OLED 8K product(88-inch 8K)

• Developed gearing technology that secures and compensates aperture ratio for high resolution (8K) product implementation

(4) Developed the world’s first gaming monitor product applying OLED (55” UHD)

• Developed 55” UHD gaming monitor product using advantages of OLED (latency, gray to gray, color recall)

(5) Developed the world’s first curved gaming monitor product applyingAH-IPS COT (37.5” WQ+)

• Developed and produced the world’s first monitor product applyingAH-IPS COT

• Pioneered gaming/curved premium monitor product market

(6) Developed the world’s first monitor product applying Crystal Sound Display (“CSD”) (27.0” FHD)

• Developed and produced the world’s first monitor product applying CSD

• Developedlarge-sized, front-oriented stereo speaker through the application of exciter and piezo to the bottom cover of the liquid crystal module

(7) Developed the world’s first automotive product applying plastic OLED (16.9” + 7.2” / 14.2”)

• Developed and produced the world’s first 1CG multi-display product applying plastic OLED (16.9” + 7.2” / 14.2”)

11. Intellectual Property

As of December 31, 2019, our cumulative patent portfolio (including patents that have already expired) included a total of 44,935 patents, consisting of 19,626 in Korea and 25,309 in other countries.

12. Environmental and Safety Matters

We are subject to a variety of environmental laws and regulations, and we may be subject to fines or restrictions that could cause our operations to be interrupted. Our manufacturing processes generate worksite waste, including water and air pollutants, at various stages in the manufacturing process, and we are subject to relevant laws and regulations in each area of the environment, including with respect to the treatment of chemicalby-products. We have installed various types ofanti-pollution equipment, consistent with environmental standards, for the treatment of chemical waste and equipment for the recycling of treated waste water at our various facilities. However, we cannot provide assurance that environmental claims will not be brought against us or that the local or national governments will not take steps toward adopting more stringent environmental standards. Any failure on our part to comply with any present or future environmental regulations could result in the assessment of damages or imposition of fines against us, suspension of production or a cessation of operations. In addition, environmental regulations could require us to acquire costly equipment or to incur other significant compliance expenses that may materially and negatively affect our financial condition and results of operations.

In accordance with the Framework Act on Low Carbon, Green Growth, we implemented the greenhouse gas emission and energy consumption target system from 2012 to 2014. In 2015, we implemented the greenhouse gas trading system, under which we are responsible to meet our emission targets based on the emission credits allocated to us by the Ministry of Environment of the Korean government. As a result, we have been investing in additional equipment and there may be other costs associated with meeting reduction targets, which may have a negative effect on our profitability or production activities.

In connection with the greenhouse gas emission and energy reduction target system, we submitted a statement of our domestic emissions and energy usage for 2018 to the Korean government in March 2019 after it was certified by BSI Korea, agovernment-designated certification agency. The table below sets forth yearly levels of our greenhouse gases emissions and energy usage in the statement submitted to the Korean government:

(Unit: thousand tonnes of CO₂ equivalent; Tetra Joules)

Category	2018		2017		2016
Greenhouse gases		6,696		6,314		6,092
Energy		64,296		63,451		60,423

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As we were designated as a target company for the greenhouse gas emission trading system in 2015, we submit a plan for allocating and monitoring our greenhouse gas emissions to the government every year. In order to continually promote the reduction of greenhouse gas emissions, we have set a short-term goal to reduce the emission level from 2014 to 2022 by 16.8% and a medium- to long-term goal to reduce the emission level from 2014 to 2045 by 65.1%. To achieve this, we are continually investing in facility improvements and monitoring our emission levels.

We are making extensive investments to replace SF6 gas, which is the main component of greenhouse gases, with NF3 gas. In addition, as a short-term strategy, we are actively implementing measures in compliance with the emission trading system. In 2018, we reduced our carbon dioxide greenhouse gas emission levels by 1.28 million tons, which was 0.63 million tons more than our initial target of 0.65 million tons. As our medium- to long-term goal, we plan to developlow-carbon production technologies in order to eliminate greenhouse gas emission during our manufacturing process and to conserve energy.

The increase in greenhouse gas emission in 2018 is due to the inclusion of certain other greenhouse gas emissions (N2O used in deposition facilities and CO2 in cleaning facilities) during the second planning period (2018 to 2020) that were not included during the first planning period (2015 to 2017) in the overall amount of greenhouse gas emissions in accordance with guidelines issued by the Korean government.

Operations at our manufacturing plants are subject to regulation and periodic scheduled and unscheduledon-site inspections by the Ministry of Environment and local environmental protection authorities. We believe that we have adopted adequateanti-pollution measures and have minimized our impact on the environment by improving existing and developing new technologies for the effective maintenance of environmental protection standards consistent with local industry practice. In addition, we have continually monitored, and we believe that we are in compliance in all material respects with, the applicable environmental laws and regulations in Korea. Expenditures related to such compliance may be substantial. Such expenditures are generally included in capital expenditures. As required by Korean law, we employ licensed environmental specialists to manage our water and air pollution, toxic materials and waste. In December 2013, to ensure safe water quality and reduce costs, we entered into a contract with a specialist company to operate our waste water treatment facilities. In stages beginning in November 1997, we have obtained environmental management system ISO 14001 certifications for our domestic panel and module production facilities and our overseas module production plants in Nanjing, Yantai, Guangzhou and Vietnam, and in December 2013, we have obtained energy management system ISO 50001 certifications for our domestic panel and module production plants and our overseas module production plants in Nanjing and Guangzhou.

In addition, in August 2014, GP1, our newest 8th generation panel fabrication facility located in Guangzhou, China, was the first electronics plant in China to receive the “Green Plant” designation under China’s Green China Policy, in addition to receiving ISO 14001, ISO 50001, OHSAS 18001, ISO 9001, PAS 2050 and ISO14064-1 certifications. Furthermore, with respect to our production facilities in Gumi, we were first certified by the Ministry of Environment as a “Green Company” for P1 in 1997, and such certification has since been renewed on a timely basis, most recently in May 2018. In recognition of our efforts to reduce greenhouse gas emissions, we were awarded a commendation from the Minister of Environment in the efforts against climate change category in the 2013 Green Management Awards, which was jointly hosted by the Ministry of Environment and the Ministry of Trade, Industry and Energy. In addition, in recognition of our efforts to improve recycling and reduce waste, we received a citation in 2014 for being a leading recycling company from the Prime Minister of Korea and, in recognition of our continued water conservation activities (reuse system investments, etc.) and greenhouse gas emission reduction activities (process gas and energy reduction, etc.), we attained the highest level, Leadership A, and received the grand prize award at the CDP Water Korea Best Awards in 2016 from the Carbon Disclosure Project, which was presided over by the Carbon Disclosure Project Korea Committee. We also attained a Leadership A in the climate change information technology sector and received a carbon management honors award. Our continued efforts to reduce greenhouse gas emissions was recognized again in 2018 following 2017 by becoming the only domestic information technology company to attain the Leadership A level and again receiving carbon management honors by ranking in the top five among all eligible companies. In May 2017, we were awarded a commendation from the Minister of Environment for having scored the highest grade among companies in thelow- and medium-volume pollutant emitters category that had entered into voluntary agreements with the Metropolitan Air Quality Management Office, in recognition of having successfully met our voluntary targets for reduction of air pollutants as well as our overall efforts to enhance our relevant facilities and operational systems. In addition, in recognition of efficient control, management and operating systems implemented in our manufacturing facilities, we received thetop-level certification, Level 1, in 2017 under the Factory Energy Management System evaluation presided by the Korea Energy Agency. Furthermore, in November 2017, we received the highest commendation, the Presidential Award, in the Korean Energy Efficiency Awards presided by the Ministry of Trade, Industry and Energy in recognition of our energy management practices and energy saving measures. In May 2018, we received the CEM Insight Award, presented at the Clean Energy Ministerial Meetings, and also received certification for our energy business management (Energy Champion) presided by the Ministry of Trade, Industry and Energy and the Korea Energy Agency in November 2018.

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In the case of the European Union’s Restriction of Hazardous Substances (RoHS) Directive 2011/65/EU, with the adoption of Directive (EU) 2015/863 in 2016, four additional substances (four phthalate substances) have been added to the six already restricted substances, which additional restrictions became effective as of July 22, 2019. In order to address the latent risk elements of the four phthalate substances scheduled to be restricted in 2019 and to establish a more stable management system, we implemented in 2016 a preemptive response process with respect to such four phthalate substances. In implementing this process, we collaborated with external agencies to ascertain regulatory trends and establish our response strategy, and we formulated and applied effective management measures through the collaborative efforts of our development, procurement and quality teams. Beryllium (Be) was not designated internationally as a mandatorily restricted substance but has continued to be the subject of discussion for restriction, and certain of our customers have designated it as a restricted substance not to be used in products. Accordingly, we have completed verification of the parts used in products for customers who have banned the use of Beryllium. We have also conducted verification of the parts used in products for all customers who are expected to implement a ban and we have established a Beryllium verification process for parts in development. Through such efforts, we have established a voluntary hazardous substance response process that can be expanded to products for all customers, not only those who have requested a response.

In October 2005, we became the first display panel company to receive accreditation as an International Accredited Testing Laboratory by the Korea Laboratory Accreditation Scheme, which is operated by the Korean Ministry of Trade, Industry & Energy. In September 2006, we received international accreditation from TUV SUD, EU’s German accreditation agency, as a RoHS testing laboratory. Our efforts to keep pace with the increasingly stringent accreditation standards and to receive and maintain such accreditations are part of ouron-going efforts to systematically monitor environmentally controlled substances in our component parts inventory. Moreover, we participated in reforming IEC 62321, an international testing standard published by the International Electrotechnical Commission and used by RoHS, and the commission adopted ourhalogen-free combustion ion chromatography method in as IEC62321-3-2, which was published in June 2013. In 2017, in a joint effort with the global product testing/accreditation agency SGS, we became the first display panel company to develop Eco Label, an environmentally friendly accreditation program for television display modules, and received the SGS Eco Label accreditation for our OLED and LCD television models in 2017 and 2018. For the IPS Nano Color for LCD, we received the Quality & Performance Mark from Intertek, a global product testing/accreditation agency, by applying a technology to eliminate cadmium (Cd) and indium phosphide (InP). In 2018, we became the first display panel company to receive the “Green Technology Certification” from the Korean Ministry of Science and ICT for improving the light efficiency technology of OLED to promote energy use reduction.

In June 2017, we were assessed a fine ofW1 million, which we subsequently paid, for failure to meet certain waste disposal subcontractor requirements under the Waste Management Act. To prevent such violations from occurring again, we are strengthening the periodic evaluation process for our waste management subcontractors.

In June 2017, we were audited by the Ministry of Employment and Labor in connection with the occurrence of a safety accident and found to be in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine ofW2.4 million. In addition, the trial court ordered a fine ofW0.5 million on each of us and our chief production officer on the basis of certain other applicable provisions of the Industrial Safety and Health Act. In relation to the same matter, in May 2018, the Prosecutor’s Office sought a fine ofW3.0 million on each of us and our chief production officer on the basis of certain other applicable provisions of the Industrial Safety and Health Act. The trial court (Goyang Branch of Uijeongbu District Court) issued a summary order confirming the same fine ofW3.0 million on November 22, 2018. We and our chief production officer appealed the trial court’s decision, and the case is currently pending appeal at the Uijeongbu District Court. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees.

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In January 2018, we were audited by the Ministry of Employment and Labor in connection with the occurrence of another safety accident and found to be in violation of certain provisions of the Industrial Safety and Health Act relating to supervisory obligations. As a result, we were issued a corrective order and assessed a fine ofW14.4 million. In relation to this matter, in January 2019, the trial court (Goyang Branch of Uijeongbu District Court) assessed a fine ofW1 million as a summary order on each of us and our chief production officer pursuant to certain other provisions of the Industrial Safety and Health Act. In addition, in January 2019, the trial court sought a fine ofW4 million andW2 million on us and the employee in charge ofon-site safety management, respectively, on the basis of certain other provisions of the Industrial Safety and Health Act. Relevant authorities are currently conducting further investigations. In order to prevent such accidents from occurring again, we are strengthening our safety management standards and training for our employees.

Also in January 2018, the government ofGyeong-gi Province issued a warning and assessed a fine ofW1 million on us, which we subsequently paid, for the failure to comply with certain requirements relating to air pollutant emission and prevention facilities under the Air Quality Management Act. To prevent such violations from occurring again, we have shortened the air pollutant emission maintenance reporting period and strengthened the verification process for relevant data.

In February 2018, we were assessed a fine ofW0.04 million by Paju City for stopping a vehicle in front of a day care center in violation of certain provisions of the Road Traffic Law. We have since paid the fine and are in the process of strengthening our parking guidance procedures to prevent such recurrence.

In March 2018, we were audited by the Ministry of Employment and Labor in connection with our health and safety training practices, and we were found to have omitted requisite health and safety training sessions for certain employees in our P9 facilities in 2016 and 2017. As a result, we were assessed a fine ofW6.95 million, which we subsequently paid, and have strengthened our efforts to promote health and safety training programs in advance as well as our management and supervision activities to ensure such programs are conducted.

In April 2018, we were assessed a fine ofW0.24 million byYeongdeungpo-gu Office for our failure to keep one of our rescue vehicles current with its statutory inspection requirements, which we subsequently paid. In order to prevent recurrence, we are continually monitoring the compliance of inspection requirements for our vehicles.

In June 2019, the government ofGyeong-gi Province reviewed the operational history and the number of self-measurements of our emission outlets and confirmed that there were certain deficiencies in self-measurements for our reserve facilities. As a result, we were assessed a fine ofW1.6 million by the government ofGyeong-gi Province, which we subsequently paid, for the violation of Article 39 of the Air Quality Management Act. To prevent the recurrence, we have established a monthly self-measurement plan for our reserve facilities.

13. Financial Information

A. Financial highlights (Based on consolidatedK-IFRS). Figures for 2017 are based on previously applicable accounting standards ofK-IFRS 1018, “Revenue” andK-IFRS 1039, “Financial Instruments.”

(Unit: In millions of Won)

Description	As of December 31, 2019			As of December 31, 2018			As of December 31, 2017
Current assets		10,248,315			8,800,127			10,473,703
Quick assets		8,197,160			6,108,924			8,123,619
Inventories		2,051,155			2,691,203			2,350,084
Non-current assets		25,326,248			24,375,583			18,685,984
Investments in equity accounted investees		109,611			113,989			122,507
Property, plant and equipment, net		22,087,645			21,600,130			16,201,960
Intangible assets		873,448			987,642			912,821
Othernon-current assets		2,255,544			1,673,822			1,448,696
Total assets		35,574,563			33,175,710			29,159,687
Current liabilities		10,984,976			9,954,483			8,978,682
Non-current liabilities		12,101,306			8,334,981			5,199,495
Total liabilities		23,086,282			18,289,464			14,178,177
Share capital		1,789,079			1,789,079			1,789,079
Share premium		2,251,113			2,251,113			2,251,113
Retained earnings		7,503,312			10,239,965			10,621,571
Other equity		(203,021	)		(300,968	)		(288,280	)
Non-controlling interest		1,147,798			907,057			608,027
Total equity		12,488,281			14,886,246			14,981,510

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(Unit: In millions of Won, except for per share data and number of consolidated entities)

Description	For the year ended December 31, 2019			For the year ended December 31, 2018			For the year ended December 31, 2017
Revenue		23,475,567			24,336,571			27,790,216
Operating profit (loss)		(1,359,382	)		92,891			2,461,618
Operating profit (loss) from continuing operations		(2,872,078	)		(179,443	)		1,937,052
Profit (loss) for the period		(2,872,078	)		(179,443	)		1,937,052
Profit (loss) attributable to:
Owners of the Company		(2,829,705	)		(207,239	)		1,802,756
Non-controlling interest		(42,373	)		27,796			134,296
Basic earnings (loss) per share		(7,908	)		(579	)		5,038
Diluted earnings (loss) per share		(7,908	)		(579	)		5,038
Number of consolidated entities		22			22			20

B. Financial highlights (Based on separateK-IFRS). Figures for 2017 are based on previously applicable accounting standards ofK-IFRS 1018, “Revenue” andK-IFRS 1039, “Financial Instruments.”

(Unit: In millions of Won)

Description	As of December 31, 2019		As of December 31, 2018		As of December 31, 2017
Current assets		7,081,228		6,378,339		8,381,074
Quick assets		5,554,929		4,427,184		6,698,829
Inventories		1,526,299		1,951,155		1,682,245
Non-current assets		20,301,452		20,683,767		17,028,341
Investments		4,958,308		3,602,214		2,683,941
Property, plant and equipment, net		12,764,175		14,984,564		12,487,001
Intangible assets		708,047		816,808		731,373
Othernon-current assets		1,870,922		1,280,181		1,126,026
Total assets		27,382,680		27,062,106		25,409,415
Current liabilities		9,140,483		7,416,630		7,394,605
Non-current liabilities		7,576,104		6,432,895		4,185,551
Total liabilities		16,716,587		13,849,525		11,580,156
Share capital		1,789,079		1,789,079		1,789,079
Share premium		2,251,113		2,251,113		2,251,113
Retained earnings		6,625,901		9,172,389		9,789,067
Other equity		0		0		0
Total equity		10,666,093		13,212,581		13,829,259

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(Unit: In millions of Won, except for per share data)

Description	For the year ended December 31, 2019			For the year ended December 31, 2018			For the year ended December 31, 2017
Revenue		21,658,329			22,371,687			25,591,082
Operating profit (loss)		(1,784,245	)		(472,995	)		1,536,730
Operating profit (loss) from continuing operations		(2,639,893	)		(442,291	)		1,779,721
Profit (loss) for the period		(2,639,893	)		(442,291	)		1,779,721
Basic earnings (loss) per share		(7,378	)		(1,236	)		4,974
Diluted earnings (loss) per share		(7,378	)		(1,236	)		4,974

C. Consolidated subsidiaries (as of December 31, 2019)

Company Interest	Primary Business	Location	Equity
LG Display America, Inc.	Sales	U.S.A.		100	%
LG Display Germany GmbH	Sales	Germany		100	%
LG Display Japan Co., Ltd.	Sales	Japan		100	%
LG Display Taiwan Co., Ltd.	Sales	Taiwan		100	%
LG Display Nanjing Co., Ltd.	Manufacturing	China		100	%
LG Display Shanghai Co., Ltd.	Sales	China		100	%
LG Display Poland Sp. zo.o. (1)	Manufacturing	Poland		100	%
LG Display Guangzhou Co., Ltd.	Manufacturing	China		100	%
LG Display Shenzhen Co., Ltd.	Sales	China		100	%
LG Display Singapore Pte. Ltd.	Sales	Singapore		100	%
L&T Display Technology (Fujian) Limited	Manufacturing and sales	China		51	%
LG Display Yantai Co., Ltd.	Manufacturing	China		100	%
LG Display (China) Co., Ltd.	Manufacturing and sales	China		70	%
Nanumnuri Co., Ltd.	Workplace services	Korea		100	%
Unified Innovative Technology, LLC	Managing intellectual property	U.S.A.		100	%
Global OLED Technology LLC	Managing intellectual property	U.S.A.		100	%
LG Display Guangzhou Trading Co., Ltd.	Sales	China		100	%
LG Display Vietnam Haiphong Co., Ltd. (2)	Manufacturing	Vietnam		100	%
Suzhou Lehui Display Co., Ltd.	Manufacturing and sales	China		100	%
LG Display Fund I LLC(3)	Investing in new emerging companies	U.S.A		100	%
LG Display High-Tech (China) Co., Ltd.(4)	Manufacturing and sales	China		75	%
MMT (Money Market Trust)	Money market trust	Korea		100	%

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D. Status of equity investments (as of December 31, 2019)

(1) Consolidated subsidiaries

Company	Investment Amount (in millions)		Initial Equity Investment Date		Equity Interest
LG Display America, Inc.	US$	411		September 24, 1999		100	%
LG Display Germany GmbH	EUR	1		November 5, 1999		100	%
LG Display Japan Co., Ltd.	¥	95		October 12, 1999		100	%
LG Display Taiwan Co., Ltd.	NT$	116		May 19, 2000		100	%
LG Display Nanjing Co., Ltd.	CNY	3,020		July 15, 2002		100	%
LG Display Shanghai Co., Ltd.	CNY	4		January 16, 2003		100	%
LG Display Poland Sp. zo.o.(1)	PLN	511		September 6, 2005		100	%
LG Display Guangzhou Co., Ltd.	CNY	1,655		August 7, 2006		100	%
LG Display Shenzhen Co., Ltd.	CNY	4		August 28, 2007		100	%
LG Display Singapore Pte. Ltd.	US$	1.1		January 12, 2009		100	%
L&T Display Technology (Fujian) Limited	CNY	116		January 5, 2010		51	%
LG Display Yantai Co., Ltd.	CNY	1,008		April 19, 2010		100	%
Nanumnuri Co., Ltd.	W	800		March 19, 2012		100	%
LG Display (China) Co., Ltd.	CNY	8,232		December 27, 2012		70	%
Unified Innovative Technology, LLC	US$	9		March 21, 2014		100	%
LG Display Guangzhou Trading Co., Ltd.	CNY	1.2		May 27, 2015		100	%
Global OLED Technology LLC	US$	138		May 7, 2015		100	%
LG Display Vietnam Haiphong Co., Ltd. (2)	US$	600		May 13, 2016		100	%
Suzhou Lehui Display Co., Ltd.	CNY	637		July 1, 2016		100	%
LG Display Fund I LLC(3)	US$	6		May 1, 2018		100	%
LG Display High-Tech (China) Co., Ltd.(4)	CNY	14,570		July 11, 2018		75	%
MMT (Money Market Trust)	W	34,700		March 31, 2017		100	%

Changes since December 31, 2018:

(1) LG Display Poland Sp. zo.o. began a liquidation process as of July 1, 2019.

(2) During the reporting period, we invested an additionalW342,680 million in LG Display Vietnam Haiphong Co., Ltd.

(3) During the reporting period, we invested an additionalW4,073 million in LG DISPLAY FUND I LLC.

(4) During the reporting period, we invested an additionalW1,045,393 million in LG Display High-Tech (China) Co., Ltd. As of the end of the reporting period, LG Display Guangzhou Co., Ltd.’s invested capital in LG Display High-Tech (China) Co., Ltd. wasW32,329 million, and thenon-controlling shareholders’ invested capital in LG Display High-Tech (China) Co., Ltd. wasW276,396 million. Due to such additional investment, our interest in LG Display High-Tech (China) Co., Ltd. has increased from 69% in 2018 to 75% in 2019.

Additionally, for the years ended December 31, 2018 and 2019, the amount of dividends attributable to the parent company from the aggregate dividends distributed by our consolidated subsidiaries wasW90,281 million andW11,120 million, respectively.

(2) Affiliated companies

Company	Carrying Amount (in millions)		Date of Incorporation	Equity Interest
Paju Electric Glass Co., Ltd.	W	50,697	January 2005		40	%
Invenia Co., Ltd.(1)		—	January 2001		—
Wooree E&L Co., Ltd.(2)	W	7,310	June 2008		14	%
YAS Co., Ltd.	W	19,424	April 2002		15	%
Avatec Co., Ltd.(3)	W	19,929	August 2000		14	%
Arctic Sentinel, Inc.		—	June 2008		10	%
Cynora GmbH(4)	W	4,714	March 2003		12	%
Material Science Co., Ltd.(5)	W	2,354	January 2014		10	%
Nanosys Inc.(6)	W	5,183	July 2001		4	%

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Changes since December 31, 2018:

(1) In 2019, we sold all of the 3,000,000 shares of Invenia Co., Ltd. we previously held, and recognized a disposal gain ofW4,324 million, which has been reflected as finance income.

(2) In 2019, we recognized a reversal of impairment loss ofW1,535 million as finance income with respect to the difference between the carrying amount and the recoverable amount of our investment in Wooree E&L Co., Ltd.

(3) In 2019, we sold 650,000 shares of Avatec Co., Ltd. we previously held, and our interest in Avatec Co., Ltd. following such sale is 14% as of December 31, 2019. As a result of such sale, we recognized a disposal gain ofW207 million, which has been reflected as finance income.

(4) In 2019, we recognized an impairment loss ofW3,954 million as finance cost with respect to the difference between the carrying amount and the recoverable amount of our investment in Cynora GmbH. We did not participate in Cynora GmbH’spaid-in capital increase during the reporting period, and as a result, our equity interest decreased from 14% as of December 31, 2018 to 12% as of December 31, 2019.

(5) In 2019, we recognized an impairment loss ofW736 million as finance cost with respect to the difference between the carrying amount and the recoverable amount of our investment in Material Science Co., Ltd.

(6) In 2019, we recognized a reversal of impairment loss ofW209 million as finance income with respect to the difference between the carrying amount and the recoverable amount of our investment in Nanosys Inc.

As of December 31, 2019, the market values of Woori E&L Co., Ltd., YAS Co., Ltd. and Avatec Co., Ltd., each of which is listed in the KOSDAQ market of the Korea Exchange, wereW7,310 million,W39,300 million andW15,380 million, respectively.

Additionally, for the years ended December 31, 2018 and 2019, the aggregate amount of dividends we received from our affiliated companies wasW5,272 million andW7,502 million, respectively.

14. Audit Information

A. Audit service

(Unit: In millions of Won, hours)

Description	2019	2018	2017
Auditor	KPMG Samjong	KPMG Samjong	KPMG Samjong
Activity	Audit by independent auditor	Audit by independent auditor	Audit by independent auditor
Compensation(1)	1,280 (500)(2)	1,170 (450)(2)	1,040 (450)(2)
Time required	21,194	17,269	17,909

(1) Compensation amount is the contracted amount for the full fiscal year.

(2) Compensation amount in ( ) is for Form20-F filing and SOX 404 audit.

B. Non-audit service

(Unit: In millions of Won, hours)

Period	Date of contract	Description of service	Period of service	Compensation
2019	July 23, 2019	Issuance of comfort letters	July 23, 2019 ~ August 31, 2019		120
2018	September 11, 2018	Green bond verification	September 11, 2018 ~ October 9, 2018		45

15. Management’s Discussion and Analysis of Financial Condition and Results of Operations

A. Risk relating to forward-looking statements

This annual report contains forward-looking statements that are, by their nature, subject to significant risks and uncertainties. These forward-looking statements reflect our current views as of the date of this report with respect to future events and are not a guarantee of future performance or results. Actual results may differ materially from information contained in the forward-looking statements as a result of a number of factors beyond our control. We have no obligation to update or correct the forward-looking statements contained in these materials subsequent to the date hereof. All forward-looking statements attributable to us in this report are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

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B. Overview

In 2019, the display industry continued to experience a decline in panel prices caused by increased competition. We responded to such decline by optimizing our LCD business, including through the discontinuation of production at certain of our less competitive LCD fabrication facilities, and the acceleration of the transition of our business focus to OLED. However, certain delays in our OLED panel production and a continued decline in LCD panel prices led to a decrease in our revenue and our recording of a net loss in 2019 compared to net profit in 2018.

With respect to each of our business areas:

• Television. While we were able to increase our revenue for OLED television panels through differentiated products and an expansion of our customer base,our overall revenue in the television business decreased as we discontinued the production of our large LCD fabrication facilities in Korea in the process of optimizing our less competitive LCD products.

• IT. We focused on supplying high value-added products centered onlarger-sized products leveraging the strengths of ouroxide-TFT and IPS technologies and differentiated products such as those featuring lightweight and high definition,.

• Mobile. We laid the foundation for the stabilization of our production by securing the technology necessary for mass production of plastic OLED products for smartphones.

C. Financial condition and results of operations

(1) Changes in Political, Economic, Social, Competitive and Regulatory Environment

Our industry is subject to cyclical fluctuations, including recurring periods of capacity increases, that may adversely affect our results of operations.

Display panel manufacturers are vulnerable to cyclical market conditions. Intense competition and expectations of growth in demand across the industry may cause display panel manufacturers to make additional investments in manufacturing capacity on similar schedules, resulting in a surge in capacity when production is ramped up at new fabrication facilities. During such surges in capacity growth, as evidenced by past experiences, customers can exert strong downward pricing pressure, resulting in sharp declines in average selling prices and significant fluctuations in the panel manufacturers’ gross margins. Conversely, demand surges and fluctuations in the supply chain can lead to price increases.

We address overcapacity issues by, in the short-term, adjusting the utilization rates of our existing fabrication facilities based on our assessment of industry inventory levels and demand for our products and, in themid- to long-term, by fine-tuning our investment strategies relating to product development and capacity growth in light of our assessment of future market conditions.

From time to time, we have been affected by overcapacity in the industry relative to the general demand for display panels which, together with uncertainties in the current global economic environment, has contributed to a general decline in the average selling prices of a number of our display panel products. Our average revenue per square meter of net display area decreased by 13.6% fromW667,726 in 2017 toW576,817 in 2018, which was largely driven by an increase in the supply capacity of globalTFT-LCD panel manufacturers that applied downward pricing pressure, but increased by 5.9% toW610,716 in 2019, which primarily reflected our ongoing efforts to increase in our product mix the proportion of OLED panels, which generally have higher selling prices thanTFT-LCD panels.

While we believe that overcapacity and other cyclical issues in the industry are best addressed by increasing the proportion of high margin, differentiated specialty products based on newer technologies in our product mix that are tailored to our customers’ evolving needs, we cannot provide any assurance that an increase in demand, which helped to mitigate the impact of industry-wide overcapacity in the past, can occur or be sustained in future periods. We will therefore continue to closely monitor the overcapacity issues in the industry and respond accordingly. However, construction of new fabrication facilities and other capacity expansion projects in the display panel industry are undertaken with a multiple-year time horizon based on expectations of future market trends. Therefore, even if overcapacity issues persist in the industry, there may be continued capacity expansion in the near future due topre-committed capacity expansion projects in the industry that were undertaken in past years. Any significant industry-wide capacity increases that are not accompanied by a sufficient increase in demand could further drive down the average selling price of our panels, which would negatively affect our gross margin. Any decline in prices may be further compounded by a seasonal weakening in demand growth for end products such as personal computer products, consumer electronics products and mobile and other application products. Furthermore, once the differentiated products that had a positive impact on our performance mature in their technology cycle, if we are not able to develop and commercialize newer products to offset the price erosion of such maturing products in a timely manner, our ability to counter the impact of cyclical market conditions on our gross margins would be further limited. We cannot provide assurance that any future downturns resulting from any large increases in capacity or other factors affecting the industry would not have a material adverse effect on our business, financial condition and results of operations.

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A global economic downturn may result in reduced demand for our products and adversely affect our profitability.

In recent years, difficulties affecting the global financial sectors, adverse conditions and volatility in the worldwide credit and financial markets, fluctuations in oil and commodity prices and the general weakness of the global economy have increased the uncertainty of global economic prospects in general and have adversely affected the global and Korean economies. Global economic downturns in the past have adversely affected demand for consumer products manufactured by our customers in Korea and overseas, including televisions, notebook computers, desktop monitors, tablet computers and mobile and other application products utilizing display panels, which in turn led them to reduce or plan reductions of their production.

The overall prospects for the global economy remain uncertain, especially in light of the ongoingCOVID-19 pandemic in China, Korea and other countries. We cannot provide any assurance that demand for our products can be sustained at current levels in future periods or that the demand for our products will not decrease again in the future due to such economic downturns which may adversely affect our profitability. We may decide to adjust our production levels in the future subject to market demand for our products, the production outlook of the global display panel industry, in particular, the display panel industry, any significant disruptions in our supply chain and global economic conditions in general. Any decline in demand for display panel products may adversely affect our business, results of operations and/or financial condition.

Earthquakes, tsunamis, floods, infectious diseases and other natural calamities could materially adversely affect our business, results of operations or financial condition.

As our main production facilities are concentrated in China, Korea and Vietnam and we are heavily dependent on certain countries including Korea, Japan and the United States for our major equipment, components and raw materials, any natural calamity that escalate in such regions may have an impact on our production. For such reasons, we experienced temporarily closures of certain of our manufacturing facilities located in those areas affected by the current outbreak ofCOVID-19 in order to disinfect such facilities, protect the safety of our employees and prevent the infection from further spreading to the local communities. As our supply chain is generally concentrated in Northeast Asia, there may be delays in the supply of raw materials, components and manufacturing equipment as well as disruptions in our production levels due to unforeseen natural calamities that may recur in the future.

In particular, an outbreak of infectious diseases, such asCOVID-19, which has had an effect on the global economic activities, may affect our operations. The global economy may be adversely affected by a variety of infectious diseases that spreads worldwide, which may impact the market demand for finished products that utilize display panels. As a result, any changes in inventory management or purchase adjustment or other changes in the operational strategies of ourend-brand customers, may affect our business performance.

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Our industry continues to experience steady declines in the average selling prices of display panels irrespective of cyclical fluctuations in the industry, and our margins would be adversely impacted if prices decrease faster than we are able to reduce our costs.

The average selling prices of display panels have declined in general and are expected to continually decline with time irrespective of industry-wide cyclical fluctuations as a result of, among other factors, technological advancements and cost reductions. Although we may be able to take advantage of the higher selling prices typically associated with new products and technologies when they are first introduced in the market, such prices decline over time, and in certain cases, very rapidly, as a result of market competition or otherwise. If we are unable to effectively anticipate and counter the price erosion that accompanies our products, or if the average selling prices of our display panels decrease faster than the speed at which we are able to reduce our manufacturing costs, our gross margin would decrease and our results of operations and financial condition may be materially and adversely affected.

We operate in a highly competitive environment and we may not be able to sustain our current market position.

The display panel industry is highly competitive. We have experienced pressure on the prices and margins of our major products due largely to additional capacity from panel makers in Korea, Taiwan, China and Japan.

Some of our competitors may currently, or at some point in the future, have greater financial, sales and marketing, manufacturing, research and development or technological resources than we do. In addition, our competitors may be able to manufacture panels on a larger scale or with greater cost efficiencies than we do and we anticipate increases in production capacity in the future by other display panel manufacturers using similar display panel technologies as us. Any price erosion resulting from strong global competition or additional industry capacity may materially adversely affect our financial condition and results of operations.

In addition, consolidation within the industry in which we operate may result in increased competition as the entities emerging from such consolidation may have greater financial, manufacturing, research and development and other resources than we do, especially if such mergers or consolidations result in vertical integration and operational efficiencies, which may have a material adverse effect on our financial condition and results of operations.

Our ability to compete successfully also depends on factors both within and outside our control, including product pricing, performance and reliability, our relationship with customers, successful and timely investment and product development, success or failure of ourend-brand customers in marketing their brands and products, component and raw material supply costs, and general economic and industry conditions. We cannot provide assurance that we will be able to maintain a competitive advantage with respect to all these factors and, as a result, we may be unable to sustain our current market position.

Our operating results fluctuate from period to period, so you should not rely onperiod-to-period comparisons to predict our future performance.

Our industry is affected by market conditions that are often outside the control of manufacturers. Our results of operations may fluctuate significantly from period to period due to a number of factors, including seasonal variations in consumer demand, capacityramp-up by competitors, industry-wide technological changes, the loss of a key customer and the postponement, rescheduling or cancellation of large orders by a key customer, any of which may or may not reflect a continued trend from one period to the next. As a result of these factors and other risks discussed in this section, you should not rely onperiod-to-period comparisons to predict our future performance.

Our financial condition may be adversely affected if we cannot introduce new products to adapt to rapidly evolving customer needs on a timely basis.

Our success will depend greatly on our ability to respond quickly to rapidly evolving customer requirements and to develop and efficiently manufacture new and differentiated products in anticipation of future demand. A failure or delay on our part to develop and efficiently manufacture products of such quality and technical specifications that meet our customers’ evolving needs may adversely affect our business.

Close cooperation with our customers to gain insights into their product needs and to understand general trends in theend-product market is a key component of our strategy to produce successful products. In addition, when developing new products, we often work closely with equipment suppliers to design equipment that will make our production processes for such new products more efficient. If we are unable to work together with our customers and equipment suppliers, or to sufficiently understand their respective needs and capabilities or general market trends, we may not be able to introduce or efficiently manufacture new products in a timely manner, which may have a material adverse effect on our financial situation.

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In addition, product differentiation, especially the ability to develop and market differentiated specialty products that command higher premiums in a timely manner, has become a key competitive strategy in the display panel market. This is in part due to trends in consumer electronics and other markets, such as televisions, tablet computers and mobile devices, where the growth in demand is led by end products employing newer technologies with specifications tailored to deliver enhanced performance, convenience and user experience in a cost-efficient and timely manner. Accordingly, we have focused our efforts on developing and marketing differentiated specialty products, such as OLED display panels for televisions and public displays including “Wallpaper” OLED panels, “Cinematic Sound OLED” sound integrated panels, rollable OLED display panels and transparent OLED display panels. We also strive to deliver differentiated values to meet our consumers’ demand for various display panels including (i) panels utilizing ultra-high definition, or Ultra HD, technology with oxide TFT backplanes, (ii) Advanced High-PerformanceIn-Plane Switching, orAH-IPS, panels for tablet computers, mobile devices, notebook computers, desktop monitors, and (iii) plastic OLED display panels for smartphones, automotive products and wearable devices. We have also focused our efforts on cost reductions in the production process, in particular of panels with newer technologies, such as OLED, in order to improve or maintain our profit margins while offering competitive prices to our customers.

We have developed differentiated sales and marketing strategies to promote our panels for differentiated specialty products as part of our strategy to grow our operations to meet increasing demand for new applications in consumer electronics and other markets. However, we cannot provide assurance that the differentiated products we develop and market will be responsive to our end customers’ needs nor that our products will be successfully incorporated into end products or new applications that lead market growth in consumer electronics or other markets.

Problems with product quality, including defects, in our products could result in a decrease in customers and sales, unexpected expenses and loss of market share.

Our products are manufactured using advanced, and often new, technology and must meet stringent quality requirements. Products manufactured using advanced and new technology, such as our OLED technology, may contain undetected errors or defects, especially when first introduced. For example, our latest display panels may contain defects that are not detected until after they are shipped or installed because we cannot test for all possible scenarios. Such defects could cause us to incur significantre-designing costs, divert the attention of our technology personnel from product development efforts and significantly affect our customer relations and business reputation. In addition, future product failures could cause us to incur substantial expense to repair or replace defective products.

We recognize a provision for warranty obligations based on the estimated costs that we expect to incur under our basic limited warranty for our products, which covers defective products and is normally valid for a certain period from the date of purchase. The warranty provision is largely based on historical and anticipated rates of warranty claims, and therefore we cannot provide assurance that the provision would be sufficient to cover any surge in future warranty expenses that significantly exceed historical and anticipated rates of warranty claims. In addition, if we deliver products with errors or defects, or if there is a perception that our products contain errors or defects, our credibility and the market acceptance and sales of our products could be harmed. Widespread product failures may damage our market reputation and reduce our market share and cause our sales to decline.

If economic conditions in Korea deteriorate, our current business and future growth could be materially and adversely affected.

Developments that could have an adverse impact on Korea’s economy include:

• declines in consumer confidence and a slowdown in consumer spending;

• deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from territorial or trade disputes or disagreements in foreign policy (such as the ongoing trade disputes with Japan);

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• adverse conditions or developments in the economies of countries and regions that are important export markets for Korea, such as China, the United States, Europe and Japan, or in emerging market economies in Asia or elsewhere, including as a result of deteriorating economic and trade relations between the United States and China and increased uncertainties resulting from the United Kingdom’s exit from the European Union;

• the occurrence of severe health epidemics in Korea and other parts of the world, such as the ongoingCOVID-19 pandemic;

• adverse changes or volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including fluctuation of the U.S. dollar, Euro or Japanese Yen exchange rates or revaluation of the Chinese Yuan, as well as the impact from the United Kingdom’s exit from the European Union on the value of Korean Won), interest rates, inflation rates or stock markets;

• increased sovereign default risk in select countries and the resulting adverse effects on the global financial markets;

• a deterioration in the financial condition or performance of small- andmedium-sized enterprises and other companies in Korea due to the Korean government’s policies to increase minimum wages and limit working hours of employees;

• investigations of large Korean business groups and their senior management for possible misconduct;

• a continuing rise in the level of household debt and increasing delinquencies and credit defaults by retail and small- andmedium-sized enterprise borrowers in Korea;

• the economic impact of any pending free trade agreements or changes in existing free trade agreements;

• social and labor unrest;

• decreases in the market prices of Korean real estate;

• a decrease in tax revenue coupled with a substantial increase in the Korean government’s expenditures for fiscal stimulus measures, unemployment compensation and other economic and social programs that would lead to an increased Korean government budget deficit;

• financial problems or lack of progress in the restructuring of Korean business groups, other large troubled companies, their suppliers or the financial sector;

• loss of investor confidence arising from corporate accounting irregularities or corporate governance issues at certain Korean companies;

• increases in social expenditures to support an aging population in Korea or decreases in economic productivity due to the declining population size in Korea;

• geo-political uncertainty and the risk of further attacks by terrorist groups around the world;

• natural orman-made disasters that have a significant adverse economic or other impact on Korea or its major trading partners;

• political uncertainty or increasing strife among or within political parties in Korea;

• hostilities or political or social tensions involving oil producing countries in the Middle East (including a potential escalation of hostilities between the U.S. and Iran) and Northern Africa and any material disruption in the global supply of oil or sudden increase in the price of oil;

• increased reliance on exports to service foreign currency debts, which could cause friction with Korea’s trading partners;

• the continued growth of the Chinese economy, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and the relocation of manufacturing bases from Korea to China);

• political or social tensions involving Russia and any resulting adverse effects on the global supply of oil or the global financial markets; and

• an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States.

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(1) Results of operations

In 2019, the display industry continued to experience a decline in LCD panel prices caused by increased competition. We responded to such decline by optimizing our LCD business, including through the discontinuation of production at certain of our less competitive LCD fabrication facilities, and the acceleration of the transition of our business focus to OLED. However, certain delays in our OLED panel production and a continued decline in LCD panel prices led to a decrease in our revenue and our recording of a net loss in 2019 compared to net profit in 2018.

By business area:

• Television. Our LCD television panel sales decreased by approximately 30% due to the discontinuation of our large LCD fabrication facilities production in Korea, while our revenue for OLED fabrication facilities increased by approximately 10% compared to the previous year due to increased productivity as well as our offering of differentiated products and an expansion of our customer base. As a result, the proportion of sales of our OLED television panels accounted for 34% within our overall television business, representing approximately a 10% increase compared to the previous year.

• IT. We focused on supplying high value-added products centered on differentiated products withlarge-sized, lightweight and high definition features based on the strengths of our oxide TFT and IPS technologies. As a result, our revenue in this business area increased by approximately 10% compared to the previous year.

• Mobile. We laid the foundation for the stabilization of our production by securing the technology necessary for mass production of plastic OLED products for smartphones. However, the cost incurred in the process of securing such mass production technology and the slowing demand in thehigh-end smartphone market contributed to a decline in our profitability for the year. Within our mobile business, our revenue in the automotive display sector increased by approximately 16% compared to the previous year, and we are expanding our automotive display business by supplying automotive plastic OLED products for the first time.

(Unit: In millions of Won)

Description	2019			2018			Changes
Revenue		23,475,567			24,336,571			(861,004	)
Operating profit		(1,359,382	)		92,891			(1,452,273	)
Profit (loss) before income tax		(3,344,242	)		(91,366	)		(3,252,876	)
Profit (loss) for the period		(2,872,078	)		(179,443	)		(2,692,635	)

(a) Revenue and cost of sales

Our revenue decreased by 3.5% compared to 2018 due to downward pricing pressure primarily resulting from increased supply competition from China and the downsizing of our LCD fabrication facility. Our cost of sales as a percentage of revenue increased by 4.7 percentage points from 87.3% in 2018 to 92.0% in 2019, reflecting a shift in our business model from LCD to OLED products as well as an upward impact from an increase in the supply of our OLED products.

(Unit: In millions of Won, except percentages)

Description	2019			2018			Changes
							Amount			Percentage
Revenue		23,475,567			24,336,571			(861,004	)		(3.5	)%
Cost of sales		21,607,240			21,251,305			355,935			1.7	%
Gross profit		1,868,327			3,085,266			(1,216,939	)		(39.4	)%
Cost of sales as a percentage of sales		92.0	%		87.3	%		4.7	%		—

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(b) Sales by category

Revenue attributable to sales of panels exhibited varying trends by product category according to changes in product mix, customers and market conditions.

Categories	2019			2018			Difference
Panels for televisions		34.1	%		40.0	%		(5.9	)%
Panels for desktop monitors		17.2	%		16.6	%		0.6	%
Panels for notebook computers		11.9	%		11.7	%		0.2	%
Panels for tablet computers		9.6	%		8.2	%		1.4	%
Panels for mobile applications and others		27.2	%		23.5	%		3.7	%

(c) Production capacity

Our annual production capacity increased by approximately 13% in 2019 compared to 2018, in large part due to increased efficiency in productivity with respect to ourlarge-sized OLED panels.

(2) Financial condition

Our current assets amounted toW10,248 billion as of December 31, 2019, representing an increase ofW1,448 billion from the end of the previous year, and ournon-current assets amounted toW25,326 billion as of December 31, 2019, representing an increase ofW951 billion from the end of the previous year. Our current liabilities amounted toW10,985 billion as of December 31, 2019, representing an increase ofW1,030 billion from the end of the previous year, and ournon-current liabilities amounted toW12,101 billion as of December 31, 2019, representing an increase ofW3,766 billion from the end of the previous year. Our total equity decreased byW2,398 billion toW12,488 billion as of December 31, 2019 from the end of the previous year, which mainly reflected the net loss for the period.

(Unit: In millions of Won)

Description	2019			2018			Changes
							Amount			Percentage
Current assets		10,248,315			8,800,127			1,448,188			16.5	%
Non-current assets		25,326,247			24,375,583			950,664			3.9	%
Total assets		35,574,562			33,175,710			2,398,852			7.2	%
Current liabilities		10,984,976			9,954,483			1,030,493			10.4	%
Non-current liabilities		12,101,306			8,334,981			3,766,325			45.2	%
Total liabilities		23,086,282			18,289,464			4,796,818			26.2	%
Share capital		1,789,079			1,789,079			—			0.0	%
Share premium		2,251,113			2,251,113			—			0.0	%
Retained earnings		7,503,311			10,239,965			(2,736,654	)		(26.7	)%
Reserves		(203,021	)		(300,968	)		97,947			(32.5	)%
Non-controlling interest		1,147,798			907,057			240,741			26.5	%
Total equity		12,488,280			14,886,246			(2,397,966	)		(16.1	)%
Total liabilities and equity		35,574,562			33,175,710			2,398,852			7.2	%

Due in part to the steady sales in inventory during the fourth quarter of 2019 and there-adjustment of our product mix in light of an expected decrease in demand during the first half of 2020, our inventory decreased byW640 billion from the end of the previous year toW2,051 billion as of December 31, 2019.

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Trade accounts and notes receivable as of December 31, 2019 wasW3,154 billion, representing an increase ofW325 billion from net trade accounts and notes receivable as of December 31, 2018, mostly reflecting a decrease in sale of our trade accounts and notes receivable and increase in foreign exchange rates as of December 31, 2019.

The book value of our total tangible assets as of December 31, 2019 wasW2,209 billion, representing an increase ofW488 billion from the book value of our total tangible assets as of December 31, 2018. The increase was due to our continued investment in increasing our production capacity and effects of increases in foreign exchange rates, which outpaced the negative effect of depreciation of our production facilities.

Trade accounts and notes payable as of December 31, 2019 wasW2,618 billion, representing a decrease ofW469 billion from trade accounts and notes payable as of December 31, 2018, and our other accounts payable increased toW4,397 billion as of December 31, 2019.

(3) Dependence on Key Customers

We sell our products to a select group of key customers, including our largest shareholder, and any significant decrease in their order levels will negatively affect our financial condition and results of operations.

A substantial portion of our sales is attributable to a limited group ofend-brand customers and their designated system integrators. Sales attributed to ourend-brand customers are for theirend-brand products and do not include sales to these customers for their system integration activities for otherend-brand products, if any. Our top tenend-brand customers, including LG Electronics Inc., our largest shareholder, together accounted for approximately 81% of our sales in 2017, 77% in 2018 and 80% in 2019.

We benefit from the strong collaborative relationships we maintain with ourend-brand customers by participating in the development of their products and gaining insights about levels of future demand for our products and other industry trends. Customers look to us for a dependable supply of quality products, even during downturns in the industry, and we benefit from the brand recognition of our customers’ end products. The loss of theseend-brand customers, as a result of their entering into strategic supplier arrangements with our competitors or otherwise, would thus result not only in reduced sales, but also in the loss of these benefits. We cannot provide assurance that a select group of keyend-brand customers, including our largest shareholder, will continue to place orders with us in the future at the same levels as in prior periods, or at all.

We expect that we will continue to be dependent upon LG Electronics and its affiliates for a significant portion of our revenue for the foreseeable future. Our results of operations and financial condition could therefore be affected by the overall performance of LG Electronics and its affiliates. Further details of our transactions with LG Electronics and its affiliates are described in Note 29 to our consolidated annual financial statements as of and for the years ended December 31, 2019 and 2018, which were furnished on March 11, 2020 as part of the current report on Form6-K titled “Submission of Audit Report.”

Our revenue depends on continuing demand for televisions, notebook computers, desktop monitors, tablet computers and mobile and other application products with panels of the type we produce. Our sales may not grow at the rate we expect if consumers do not purchase these products.

Currently, our total sales are derived principally from customers who use our products in televisions, notebook computers, desktop monitors, tablet computers and mobile and other application products with display devices. In particular, a substantial percentage of our sales is derived fromend-brand customers, or their designated system integrators, who use our panels in their televisions, which accounted for 42.2%, 40.0% and 34.1% of our total revenue in 2017, 2018 and 2019, respectively. A substantial portion of our sales is also derived fromend-brand customers, or their designated system integrators, who use our panels in their notebook computers, which accounted for 8.1%, 11.7% and 11.9% of our total revenue in 2017, 2018 and 2019, respectively, those who use our panels in their desktop monitors, which accounted for 15.8%, 16.6% and 17.2% of our total revenue in 2017, 2018 and 2019, respectively, those who use our panels in their tablet computers, which accounted for 8.5%, 8.2% and 9.6% of our total revenue in 2017, 2018 and 2019, respectively, and those who use our panels in their mobile and other applications, which accounted for 25.4%, 23.5% and 27.2% of our total revenue in 2017, 2018 and 2019, respectively. Although the degree to which our total sales are dependent on sales of television panels has fluctuated in recent years, television panels remain our largest product category in terms of revenue and we will therefore continue to be dependent on continuing demand from the television industry. In addition, we will continue to be dependent on continuing demand from the personal computer industry, the tablet computer industry and the mobile device industry for a substantial portion of our sales. Any downturn in any of those industries in which our customers operate would result in reduced demand for our products, which may in turn result in reduced revenue, lower average selling prices and/or reduced margins.

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(4) Changes in Manufacturing Costs and Difficulties in Securing Supply of Raw Material

If we cannot maintain high capacity utilization rates, our profitability will be adversely affected.

The production of display panels entails high fixed costs resulting from considerable expenditures for the construction of complex fabrication and assembly facilities and the purchase of costly equipment. We aim to maintain high capacity utilization rates so that we can allocate these fixed costs over a greater number of panels produced and realize a higher gross margin. However, due to any number of reasons, including fluctuating demand for our products or overcapacity in the display industry, we may need to reduce production, resulting in lower-than-optimal capacity utilization rates. As such, we cannot provide assurance that we will be able to sustain our capacity utilization rates in the future nor can we provide assurance that we will not reduce our utilization rates in the future as market and industry conditions change.

Limited availability of raw materials, components and manufacturing equipment could materially and adversely affect our business, results of operations or financial condition.

Our production operations depend on obtaining adequate supplies of quality raw materials and components on a timely basis. As a result, it is important for us to control our raw material and component costs and reduce the effects of fluctuations in price and availability. In general, we source most of our raw materials as well as key components, such as glass substrates, driver integrated circuits, polarizers and color filters used in both ourTFT-LCD and OLED products, backlight units and liquid crystal materials used in ourTFT-LCD products and hole transport materials and emission materials used in our OLED products, from two or more suppliers for each key component. However, we may establish a working relationship with a single supplier if we believe it is advantageous to do so due to performance, quality, support, delivery, capacity, price or other considerations. We may experience shortages in the supply of these key components, as well as other components or raw materials, as a result of, among other things, anticipated capacity expansion in the display industry or our dependence on a limited number of suppliers. Our results of operations would be adversely affected if we were unable to obtain adequate supplies of high-quality raw materials or components in a timely manner or make alternative arrangements for such supplies in a timely manner.

Furthermore, we may be limited in our ability to pass on increases in the cost of raw materials and components to our customers. We do not typically enter into binding long-term contracts with our customers, and even in those cases where we do enter into long-term agreements with certain of our majorend-brand customers, the price terms are contained in the purchase orders. Except under certain special circumstances, the price terms in the purchase orders are not subject to change. Prices for our products are generally determined through negotiations with our customers, based generally on the complexity of the product specifications and the labor and technology involved in the design or production processes. However, if we become subject to any significant increase in the cost of raw materials or components that were not anticipated when negotiating the price terms after the purchase orders have been placed, we may be unable to pass on such cost increases to our customers.

We have purchased, and expect to purchase, a substantial portion of our equipment from a limited number of qualified foreign and local suppliers. From time to time, increased demand for new equipment may cause lead times to extend beyond those normally required by the equipment vendors. The unavailability of equipment, delays in the delivery of equipment, or the delivery of equipment that does not meet our specifications, could delay implementation of our expansion plans and impair our ability to meet customer orders. This could result in a loss of revenue and cause financial stress on our operations.

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(5) Intangible Assets, Including Intellectual Property, and Research and Development Activities

Our business relies on our patent rights which may be narrowed in scope or found to be invalid or otherwise unenforceable.

Our success will depend, to a significant extent, on our ability to obtain and enforce our patent rights both in Korea and worldwide. The coverage claimed in a patent application can be significantly reduced before a patent is issued, either in Korea or abroad. Consequently, we cannot provide assurance that any of our pending or future patent applications will result in the issuance of patents. Patents issued to us may be subjected to further proceedings limiting their scope and may not provide significant proprietary protection or competitive advantage. Our patents also may be challenged, circumvented, invalidated or deemed unenforceable. In addition, because patent applications in certain countries generally are not published until more than 18 months after they are first filed, and because publication of discoveries in scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were, or any of our licensors was, the first creator of inventions covered by pending patent applications, that we or any of our licensors will be entitled to any rights in purported inventions claimed in pending or future patent applications, or that we were, or any of our licensors was, the first to file patent applications on such inventions.

Furthermore, pending patent applications or patents already issued to us or our licensors may become subject to dispute, and any dispute could be resolved against us. For example, we may become involved inre-examination, reissue or interference proceedings and the result of these proceedings could be the invalidation or substantial narrowing of our patent claims. We also could be subject to court proceedings that could find our patents invalid or unenforceable or could substantially narrow the scope of our patent claims. In addition, depending on the jurisdiction, statutory differences in patentable subject matter may limit the protection we can obtain on some of our inventions.

Failure to protect our intellectual property rights could impair our competitiveness and harm our business and future prospects.

We believe that developing new products and technologies that can be differentiated from those of our competitors is critical to the success of our business. We take active measures to obtain international protection of our intellectual property by obtaining patents and undertaking monitoring activities in our major markets. However, we cannot assure you that the measures we are taking will effectively deter competitors from improper use of our proprietary technologies. Our competitors may misappropriate our intellectual property, disputes as to ownership of intellectual property may arise and our intellectual property may otherwise become known or independently developed by our competitors.

Any failure to protect our intellectual property could impair our competitiveness and harm our business and future prospects.

We rely on technology provided by third parties and our business will suffer if we are unable to renew our licensing arrangements with them.

From time to time, we have obtained licenses for patent, copyright, trademark and other intellectual property rights to process and device technologies used in the production of our display panels. We have entered into key licensing arrangements with third parties, for which we have made, and continue to make, periodic license fee payments. In addition, we also have cross-license agreements with certain other third parties.These agreements terminate upon the expiration of the respective terms of the patents.

If we are unable to renew our technology licensing arrangements on acceptable terms, we may lose the legal protection to use certain of the processes we employ to manufacture our products and be prohibited from using those processes, which may prevent us from manufacturing and selling certain of our products, including our key products. In addition, we could be at a disadvantage if our competitors obtain licenses for protected technologies on more favorable terms than we do.

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In the future, we may also need to obtain additional patent licenses for new or existing technologies. We cannot provide assurance that these license agreements can be obtained or renewed on acceptable terms or at all, and if not, our business and operating results could be adversely affected.

We rely upon trade secrets and other unpatented proprietaryknow-how to maintain our competitive position in the display panel industry and any loss of our rights to, or unauthorized disclosure of, our trade secrets or other unpatented proprietaryknow-how could negatively affect our business.

We also rely upon trade secrets, unpatented proprietaryknow-how and information, as well as continuing technological innovation in our business. The information we rely upon includes price forecasts, core technology and key customer information. We enter into confidentiality agreements with each of our employees and consultants upon the commencement of an employment or consulting relationship. These agreements generally provide that all inventions, ideas, discoveries, improvements and copyrightable material made or conceived by the individual arising out of the employment or consulting relationship and all confidential information developed or made known to the individual during the term of the relationship is our exclusive property. We cannot provide assurance that these types of agreements will be fully enforceable, or that they will not be breached. We also cannot be certain that we will have adequate remedies for any such breach. The disclosure of our trade secrets or otherknow-how as a result of such a breach could adversely affect our business. Also, our competitors may come to know about or determine our trade secrets and other proprietary information through a variety of methods. Disputes may arise concerning the ownership of intellectual property or the applicability or enforceability of our confidentiality agreements, and there can be no assurance that any such disputes would be resolved in our favor. Furthermore, others may acquire or independently develop similar technology, or if patents are not issued with respect to technologies arising from our research, we may not be able to maintain information pertinent to such research as proprietary technology or trade secrets and that could have an adverse effect on our competitive position within the display panel industry.

We have designated R&D organizations for our research and development activities.

Our research organization consists of the infrastructure technology research center, display research center and designated departments, all of which are overseen by our chief technology officer. The research centers conduct research on differentiated and next-generation technologies and basic infrastructure technology, while our designated departments enhance our competitiveness by conducting research that is geared toward future product development. Our development organization comprises of departments and centers dedicated to the development of a wide range of television, information technology and mobile products, including product-specific circuits, instrument/optics and panel design.

Our research and development related expenditures amounted toW1,776 billion in 2019, an increase ofW19 billion from 2018. This increase is mainly due to the additional research and development activities in new products and technologies forlarge-sized OLED and plastic OLED panels, for which we expect to continue investing in the future.

The book value of our intangible assets decreased byW114 billion in 2019 compared to the previous year.

(6) Sensitivity to Exchange Rates and Inflation

There has been considerable volatility in foreign exchange rates in recent years, including rates between the Korean Won and the U.S. dollar and between the Korean Won and the Japanese Yen. To the extent that we incur costs in one currency and make sales in another, our profit margins may be affected by changes in the exchange rates between the two currencies.

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Our sales of display panels are denominated mainly in U.S. dollars, whereas our purchases of raw materials are denominated mainly in U.S. dollars and Japanese Yen. The largest proportion of our expenditures on capital equipment are denominated in U.S. dollars and Chinese Yuan. Accordingly, fluctuations in exchange rates, in particular between the U.S. dollar and the Korean Won, between the Chinese Yuan and the Korean Won as well as between the Japanese Yen and the Korean Won, affect ourpre-tax income, and in recent years, the value of the Won relative to the U.S. dollar, Chinese Yuan and Japanese Yen has fluctuated widely. Although a depreciation of the Korean Won against the U.S. dollar increases the Korean Won value of our export sales and enhances the price-competitiveness of our products in foreign markets in U.S. dollar terms, it also increases the cost of imported raw materials and components in Korean Won terms and our cost in Korean Won of servicing our U.S. dollar denominated debt. A depreciation of the Korean Won against the Chinese Yuan or Japanese Yen increases the Korean Won cost of our Chinese Yuan- or JapaneseYen-denominated purchases of equipment, raw materials or components, as applicable, and, to the extent we have any debt denominated in Chinese Yuan or Japanese Yen, our cost in Korean Won of servicing such debt, but has relatively little impact on our sales as most of our sales are denominated in U.S. dollars. In addition, continued exchange rate volatility may also result in foreign exchange losses for us. Although a depreciation of the Korean Won against the U.S. dollar, in general, has a net positive impact on our results of operations that more than offsets the net negative impact caused by a depreciation of the Korean Won against the Chinese Yuan or Japanese Yen, we cannot provide assurance that the exchange rate of the Korean Won against foreign currencies will not be subject to significant fluctuations, or that the impact of such fluctuations will not adversely affect the results of our operations.

(7) Impairment of Assets

The carrying amounts of ournon-financial assets, other than assets arising from employee benefits, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. We conduct such impairment review every year.

Due to the commencement of mass production of plastic OLED products in a new independent facility and our decision to discontinue our lighting business given the changes in its business environment, we recognized plastic OLED business and lighting business as separate cash generating units in 2019.

As a result of the determination to discontinue our lighting business and the signs of impairment due to negative developments in the business environment of our plastic OLED business, we tested for impairment of related assets for these cash generating units. The recoverable amount of each cash generating unit was estimated based on itsvalue-in-use, which in turn was calculated based on thepre-tax cash flow estimates in accordance with a five-year business plan approved by our management. Estimates of sales revenue, which reflected outside information and our prior experiences, were incorporated into the applicable period of the cash flow estimates, and our management determined thepre-tax cash flow estimates on the basis of our prior results of operations and its assessment of the expected market growth.

In 2019, the impairment losses on ournon-financial assets, which were recognized as othernon-operating expenses, include the following:

Description	2019
	Lighting (in millions of Won)		Plastic OLED (in millions of Won)
Property, plant and equipment		121,921		1,369,371
Intangible assets		105,344		26,284
Other assets		3,602		—
Total		230,867		1,395,655

(8) Changes in Organization and Business Reorganization

In order to secure the fundamental competitiveness of our businesses and to seek sustainable growth, we are accelerating the transition of our business focus to the OLED business, while simultaneously pursuing activities to restructure our LCD business. While we have implemented certain organizational changes and a voluntary retirement program in connection with such pursuit, our restructuring processes are being pursued from the perspective of constructing the most competitive corporate and business structures rather than simply reducing costs or the size of workforce. As such, we are working towards the goal to meaningfully improve our results of operations by strengthening the competitiveness of our LCD business through focusing on our ability to offer differentiated products and expanding our OLED business to markets that can utilize the inherent value of such products.

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D. Liquidity and capital resources

(1) Liquidity

Our main source for the procurement of funds include operations and financing activities. As of December 31, 2018 and 2019, our cash and cash equivalents amounted toW2,365 billion andW3,336 billion, respectively, and short-term deposits in banks amounted toW78 billion andW79 billion, respectively. Our primary use of cash has been to fund capital expenditures related to the expansion and improvement of our production capacity with respect to existing and newly developed products, including the construction andramping-up of new, or in certain cases, expansion or conversion of existing, fabrication facilities and production lines and the acquisition of new equipment. We also use cash flows from operations for our working capital requirements and servicing our debt payments. We expect our cash requirements for 2020 to be primarily for capital expenditures and repayment of maturing debt.

The details of the consolidated cash and cash equivalents, deposits in banks and other financial assets as of December 31, 2018 and 2019 are as follows:

(Unit: in millions of won)

Description	2019		2018
Current assets
Cash and cash equivalents
Demand deposits		3,336,003		2,365,022
Deposits in banks
Time deposits		1,500		4,318
Restricted cash(1)		77,257		74,082
Derivative assets(2)		34,036		13,059
Government bonds		6		106
Deposits		9,585		17,020
Short-term loans		21,623		16,116
Lease receivables		5,695		—
Total current assets		3,485,705		2,489,723
Non-current assets
Deposits in banks
Restricted cash(1)		11		11
Financial assets at fair value through profit or loss		—		—
Equity securities		9,879		13,681
Convertible bonds		1,544		1,327
Derivative assets(2)		15,640		—
Government bonds		70		55
Deposits		21,451		74,103
Long-term loans		40,827		55,048
Lease receivables		22,099		—
Totalnon-current assets		111,521		144,225
Total		3,597,226		2,633,948

(1) Restricted cash includes mutual growth fund to aid LG Group’s suppliers, pledge to enforce investment plans following receipt of subsidies from Gumi city andGyeongsangbuk-do and others.

(2) Represents derivatives that have not been recognized as hedging instruments, which have resulted from currency interest rate swap contracts related to foreign currency denominated borrowings and foreign currency denominated bonds.

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(Unit: in millions of won)

Description	2019			2018			Changes
							Amount		Percentage
Current assets		10,248,315			8,800,127			1,448,188		16.5	%
Current liabilities		10,984,976			9,954,483			1,030,493		10.4	%
Net current assets		(736,661	)		(1,154,356	)		417,695		36.2	%

As of December 31, 2018, our current assets and current liabilities amounted toW8,800 billion andW9,954 billion, respectively, resulting in net current liabilities ofW1,154 billion. As of December 31, 2019, our current assets and current liabilities amounted toW10,248 billion andW10,985 billion, respectively, resulting in net current liabilities ofW737 billion.

(2) Financial liabilities and capital resources

We need to observe certain financial and other covenants under the terms of our debt obligations, the failure to comply with which would put us in default under such debt obligations.

We are subject to financial and other covenants, including maintenance of credit ratings anddebt-to-equity ratios, under certain of our debt obligations.The documentation for such debt also contains negative pledge provisions limiting our ability to provide liens on our assets as well as cross-default and cross-acceleration clauses, which give related creditors the right to accelerate the amounts due under such debt if an event of default or acceleration has occurred with respect to our existing or future indebtedness, or if any material part of our indebtedness or indebtedness of our subsidiaries is capable of being declared payable before the stated maturity date. In addition, such covenants restrict our ability to raise future debt financing.

If we breach the financial or other covenants contained in the documentation governing our debt obligations, our financial condition will be adversely affected to the extent we are not able to cure such breaches, obtain a waiver from the relevant lenders or debtholders or repay the relevant debt.

As of December 31, 2019, we had agreements with several banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,360 million in connection with our export sales transactions, and our subsidiaries also have various such arrangements.

As of December 31, 2018, no short-term borrowings were outstanding. As of December 31, 2019,W697 billion of short-term borrowings were outstanding.

As of December 31, 2019, our long-term borrowings, including the current portion of long-term debt and the discount on bonds, amounted toW12,784 billion, which mainly consist of bonds denominated in Won ofW3,151 billion, long-term debt denominated in foreign currencies ofW6,302 billion and long-term debt denominated in Won ofW3,331 billion.

Some of our long-term borrowings may include covenants with acceleration rights. If an event of default occurs from failure to comply with the agreed financial ratios or cross-default occurs as a result of a breach of other debt obligations, the principal amount and interest may be subject to early repayment. As of December 31, 2019, we have complied with applicable financial and other covenants contained in the documentation governing our debt obligations.

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Our financial liabilities and capital resources are as follows:

(a) Financial liabilities

Our financial liabilities amounted toW13,590 billion in 2019, representing an increase ofW5,006 billion from 2018.

(Unit: in millions of won)

Description	2019		2018
Current financial liabilities
Short-term borrowings		696,793		—
Current portion of long-term borrowings		1,242,904		1,553,907
Lease liabilities		37,387		—
Sub-total		1,977,084		1,553,907
Non-current financial liabilities
Won denominated borrowings		2,692,560		2,700,608
Foreign currency denominated borrowings		6,107,117		2,531,663
Bonds		2,741,516		1,772,599
Derivatives(*)		20,592		25,758
Lease liabilities		51,125		—
Sub-total		11,612,910		7,030,628
Total		13,589,994		8,584,535

(*) Represents derivatives that have not been recognized as hedging instruments and have resulted from currency interest rate swap contracts entered into in order to manage risks arising from foreign currency denominated borrowings and foreign currency denominated bonds.

(b) Capital resources

Set forth below are the details of our procurement of funds as of December 31, 2019.

(Unit: In millions of Won or millions of other currency)

Categories	Interest rate as of December 31, 2019 (%)	2019			2018
Short-term borrowings	12-month LIBOR + 0.78~0.88		347,340			—
	3-month LIBOR + 0.80~0.90		61,613			—
	PBOC(*) * 1.05 PBOC(*) – 0.05		287,840 (US$353, CNY1,737	)		—
	Subtotal		696,793			—
Long-term borrowings denominated in Won	2.75		608			1,259
	CD(**) interest rate (91 days) + 1.00~1.39, 2.21~3.25		3,330,000			2,850,000
	Less: current portion		(638,048	)		(150,651	)
	Subtotal		2,692,560			2,700,608
Long-term borrowings denominated in foreign currencies	3-month LIBOR + 0.75~1.70 / 6-month LIBOR + 1.25~1.35		1,696,177			955,975
	US$:3-month LIBOR + 0.80~1.43 / CNY: PBOC * (0.95~1.05)		4,606,094 (US$2,767, CNY18,699	)		2,419,286 (US$2,262, CNY5,198	)
	Less: current portion		(195,154	)		(843,598	)
	Subtotal		6,107,117			2,531,663

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Categories	Interest rate as of December 31, 2019 (%)	2019			2018
Bonds denominated in Won	1.95~2.95		1,730,000			1,900,000
	3.25~4.25		110,000			110,000
	Less: original issue discount		(3,404	)		(3,949	)
	Less: current portion		(409,702	)		(559,658	)
	Subtotal		1,426,894			1,446,393
Bonds denominated in foreign currencies	3.88		347,340 (US$300	)		335,430 (US$300	)
	3-month LIBOR + 1.47		115,780 (US$100	)		—
	Less: original issue discount		(6,883	)		(9,224	)
	Subtotal		456,237			326,206
Financial liabilities at fair value through profit or loss (Foreign currency convertible bonds)	1.50		858,385 (US$741	)		—
Total			2,741,516			1,772,599

(*) Represents the People’s Bank of China’s base rate.

(**) Represents certificates of deposit.

Set forth below are the details of our convertible bonds as of December 31, 2019.

Categories	Content
Type of bond	Registered unsecured foreign currency-denominated convertible bonds
Issue amount	US$687,800,000
Annual interest rate (%)	1.50
Issue date	August 22, 2019
Maturity date	August 22, 2024
Interest payment	Payable semi-annually in arrear until maturity date in equal installments
Principal redemption	1. Redemption at maturity: Redeemed on the maturity date, at their outstanding principal amount, which has not been redeemed early or converted 2. Early redemption: Payment of the principal and interest accrued up to the expected repayment date upon the exercise of the company’s call option or the bondholder’s put option
Conversion price	W19,845 per common share (subject to adjustment based on dilutive effects of certain events)
Conversion period	August 23, 2020 ~ August 12, 2024
Redemption at the option of the issuer (Call option)	—  On or at any time after three years from the issue date, if the closing price of our common shares for any 20 trading days out of the 30 consecutive trading days is at least 130% of the applicable conversion price; —  The aggregate principal amount of the convertible bonds outstanding is less than 10% of the aggregate principal amount originally issued; or —  In the event of certain changes in laws and other directives resulting in additional taxes
Redemption at the option of the bondholders (Put option)	—  On the date which is three years from the issue date

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We designated the convertible bonds as financial liabilities at fair value through profit of loss and recognized the change in its fair value in our income statement. We measure the fair value of the convertible bonds using the market price of convertible bonds disclosed on Bloomberg. Set forth below is certain information regarding our common shares subject to conversion under the terms of the convertible bonds as of December 31, 2019:

Categories	2019
Aggregate outstanding amount of the convertible bonds	W813,426,670,000
Conversion price	W19,845
Number of common shares subject to conversion	40,988,998 shares

Set forth below are the cash flows on our borrowings by maturity.

(Unit: In millions of Won or millions of other currency)

Categories	Book value		Contractual cash flows
			Total		Within 6 months		6~12 months		1~2 years		2~5 years		Over 5 years
Borrowings		10,329,671		11,514,568		1,174,941		723,363		2,173,444		6,471,876		970,944
Bonds		3,151,218		3,306,729		297,649		184,878		908,281		1,780,014		135,907
Total		13,480,889		14,821,297		1,472,590		908,241		3,081,725		8,251,890		1,106,851

(3) Cash usage

Our management constantly monitors our working capital, and we have historically been able to satisfy our cash requirements from cash flows from operations and debt financing. Although we had a working capital deficit as of December 31, 2019, we believe that we have sufficient working capital for our present requirements.

Our ability to satisfy our cash requirements from cash flows from operations and financing activities will be affected by our ability to maintain and improve our margins and, in the case of external financing, market conditions, which in turn may be affected by several factors outside of our control. Therefore, were-evaluate our capital requirements regularly in light of our cash flows from operations, the progress of our expansion plans and market conditions. To the extent that we do not generate sufficient cash flows from our operations to meet our capital requirements, we may rely on other financing activities, such as external long-term borrowings and securities offerings, including the issuance of equity, equity-linked and other debt securities.

Our net cash from operating activities amounted toW4,484 billion in 2018 andW2,707 billion in 2019. The decrease in net cash provided by operating activities in 2019 compared to 2018 was mainly due to changes in net profit.

Our net cash used in investing activities amounted toW7,675 billion in 2018 andW6,755 billion in 2019. Net cash used in investing activities primarily reflected the expansion and conversion of our existing production facilities and construction of our new facilities centered on OLED products. These cash outflows from capital expenditures amounted toW7,942 billion in 2018 andW6,927 billion in 2019. We intend to fund our capital requirements associated with our expansion and construction projects with cash flows from operations and financing activities, such as external long-term borrowings.

We currently expect that, in 2020, our total capital expenditures on a cash out basis will be lower compared to 2019 and will be used primarily to continue to fund our previously announced investments related to facilities for OLED panels. However, our overall expenditure levels and our allocation among projects are subject to many uncertainties. We review the amount of our capital expenditures and may make adjustments from time to time based on cash flows from operations, the progress of our expansion plans and market conditions.

Our net cash provided by financing activities amounted toW2,953 billion in 2018 andW4,988 billion in 2019. The net cash provided by financing activities in 2018 and 2019 reflect primarily an increase in long-term borrowings.

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(Unit: In millions of Won)

Description	2019			2018			Changes
Net cash provided by operating activities		2,706,545			4,484,123			(1,777,578	)
Net cash used in investing activities		(6,755,393	)		(7,675,339	)		919,946
Net cash provided by financing activities		4,987,902			2,952,919			2,034,983
Cash and cash equivalents at December 31,		3,336,003			2,365,022			970,981

16. Board of Directors

A. Members of the board of directors

As of the date of this report, our board of directors consisted of twonon-outside directors, onenon-standing director and four outside directors.

(As of the date of this report)

Name	Position	Primary responsibility
James (Hoyoung) Jeong(1)	Representative Director(non-outside), Chief Executive Officer and President	Overall head of business management
Donghee Suh(2)	Director(non-outside), Chief Financial Officer and Senior Vice President	Overall head of finances
Young-Soo Kwon	Director(non-standing)	Chairman of the board of directors
Sung-Sik Hwang	Outside Director	Related to the overall management
Kun Tai Han	Outside Director	Related to the overall management
Byung Ho Lee	Outside Director	Related to the overall management
Chang-Yang Lee	Outside Director	Related to the overall management

(1) James (Hoyoung) Jeong was newly appointed as anon-outside director at the annual general meeting of shareholders and as the representative director at the board of directors’ meeting, both held on March 20, 2020.

(2) Donghee Suh was reappointed for another term as anon-outside director at the annual general meeting of shareholders held on March 20, 2020.

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B. Committees of the board of directors

We have the following committees that serve under our board of directors: Audit Committee, Outside Director Nomination Committee and Management Committee. The Management Committee consists of twonon-outside directors, James (Hoyoung) Jeong and Donghee Suh.

As of March 20, 2020, the composition of the Outside Director Nomination Committee was as follows.

(As of March 20, 2020)

Committee	Composition	Member
Outside Director Nomination Committee(1)	1non-standing director and 2 outside directors	Young-Soo Kwon,Kun Tai Han, Chang-Yang Lee

(1) Each ofYoung-Soo Kwon,Kun Tai Han, Chang-Yang Lee was appointed as a member of the outside director nomination committee of the board of directors at the board of directors’ meeting on March 20, 2020.

As of the date of this report, the composition of the Audit Committee was as follows.

(As of the date of this report)

Committee	Composition	Member
Audit Committee	3 outside directors	Sung-Sik Hwang(1), Kun Tai Han, Chang-Yang Lee(2)

(1) Sung-Sik Hwang is the audit committee chairman.

(2) Chang-Yang Lee was newly appointed as an audit committee member at the annual general meeting of shareholders held on March 15, 2019.

C. Independence of directors

Directors are appointed in accordance with the procedures of the Commercial Act and other relevant laws and regulations. Our board of directors is independent as four out of the seven directors that comprise the board are outside directors. Outside directors candidates are nominated for appointment at a shareholders’ meeting after undergoing rigorous review by the Outside Director Nomination Committee.

All of our current outside directors were nominated by the Outside Director Nomination Committee, and all of our currentnon-outside directors were nominated by the board of directors.

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17. Information Regarding Shares

A. Total number of shares

(1) Total number of shares authorized to be issued (as of December 31, 2019): 500,000,000 shares.

(2) Total shares issued and outstanding (as of December 31, 2019): 357,815,700 shares.

B. Shareholder list

(1) Largest shareholder and related parties as of December 31, 2019:

Name	Relationship	Number of shares of common stock		Equity interest
LG Electronics	Largest shareholder		135,625,000		37.9	%
Sang Beom Han	Officer of member company		54,000		0.0	%
Donghee Suh	Officer of member company		5,000		0.0	%

(2) Shareholders who are known to us that own 5% or more of our shares as of December 31, 2019:

Beneficial owner	Number of shares of common stock	Equity interest
LG Electronics	135,625,000	37.90%
National Pension Service	28,115,952	7.86%

18. Directors and Employees

A. Directors

(1) Remuneration for directors in 2019:

(Unit: person, in millions of Won)

Classification	No. of directors(1)		Amount paid(2)			Per capita average remuneration paid(3)
Non-outside directors		3		1,899			633
Outside directors who are not audit committee members		1		78			78
Outside directors who are audit committee members		3		241			80
Total		7		2,218	(4)		317

(1) Number of directors as at December 31, 2019.

(2) Amount paid is calculated on the basis of amount of cash actually paid.

(3) Per capita average remuneration paid is calculated by dividing total amount paid by the average number of directors for the year ended December 31, 2019.

(4) As Joon Park resigned as an outside director on March 14, 2019 and Chang Yang Lee was appointed as an outside director at the annual general meeting of shareholders held on March 15, 2019, the total amount paid includes remuneration paid to both Mr. Park and Mr. Lee.

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(2) Standards of remuneration paid tonon-outside and outside directors

• Non-outside directors (excluding outside directors and audit committee members)

The remuneration system fornon-outside directors consists of base salary, position salary and performance-related pay. The remuneration fornon-outside directors is measured in accordance with the standards established by the board of directors (within the amount approved at the annual general meeting of shareholders), including thenon-outside director’s position and job responsibilities.

• Standards for base salary/position salary: relevant position and job responsibilities, among others

• Standards for performance-related pay: financial performance of the company and achievement of individual management goals, among others

• Outside directors, audit committee members and auditor

The remuneration for outside directors, audit committee members and auditor is measured in accordance with the standards established by the board of directors (within the amount approved at the annual general meeting of shareholders), including the individual’s job responsibilities, among others.

(3) Remuneration for individual directors and audit committee members

• Individual amount of remuneration paid in 2019

(Unit: in millions of Won)

Name	Position	Total remuneration	Payment not included in total remuneration
Sang Beom Han	Former Chief Executive Officer	1,541	—

• Method of calculation

Name

Method of calculation

Sang Beom Han

Total remuneration •  W1,541 million. Salary •  Base salary is set in accordance with the executive compensation regulations established by the board of directors. Monthly payments ofW70 million between January and March andW72 million between April and December were made. •  Position salary is calculated based on the significance of the position and responsibilities of the job. Monthly payments ofW56 million between January and March andW57 million between April and December were made. •  A total ofW4 million of welfare benefits were paid on an annual basis in accordance with welfare benefits standards.

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(4) Remuneration for the five highest paid individuals (among those paid overW500 million per year)

• Individual remuneration amount

(Unit: in millions of Won)

Name	Position	Total remuneration		Payment not included in total remuneration
Sang Beom Han	Former Chief Executive Officer		1,541		—
Yong Kee Hwang	Senior Advisor		3,079		—
Yu Seoung Yin	Advisor		1,826		—
Soo Youle Cha	Advisor		1,793		—
Yong Bum Kim	Former Vice President		753		—

• Method of calculation

Name	Method of calculation
Sang Beom Han	Total remuneration •  W1,541 million. Salary •  Base salary is set in accordance with the executive compensation regulations established by the board of directors. Monthly payments ofW70 million between January and March andW72 million between April and December were made. •  Position salary is calculated based on the significance of the position and responsibilities of the job. Monthly payments ofW56 million between January and March andW57 million between April and December were made. •  A total ofW4 million of welfare benefits were paid on an annual basis in accordance with welfare benefits standards.
Yong Kee Hwang(1)	Total remuneration •  W3,079 million (consisting ofW624 million in salary andW2,455 million in retirement pay). Salary •  Base salary is set in accordance with the executive compensation regulations established by the board of directors. Monthly payments ofW59 million between January and March andW47 million between April and December were made. •  A total ofW20 million of welfare benefits were paid on an annual basis in accordance with welfare benefits standards. Retirement pay •  Retirement pay is calculated in accordance with the applicable provisions of our regulations on compensation for retiring executives and is evaluated by the duration of employment (14 years), monthly base salary at the time of retirement and payment rate per position (2.5 to 4.5%).

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Yu Seoung Yin(1)

Total remuneration •  W1,826 million (consisting ofW277 million in salary andW1,549 million in retirement pay). Salary •  Base salary is set in accordance with the executive compensation regulations established by the board of directors. Monthly payments ofW34 million between January and March andW17 million between April and December were made. •  A total ofW26 million of welfare benefits were paid on an annual basis in accordance with welfare benefits standards. Retirement pay •  Retirement pay is calculated in accordance with the applicable provisions of our regulations on compensation for retiring executives and is evaluated by the duration of employment (16 years), monthly base salary at the time of retirement and payment rate per position (2.5 to 4.5%).

Soo Youle Cha(1)

Total remuneration •  W1,793 million (consisting ofW344 million in salary andW1,449 million in retirement pay). Salary •  Base salary is set in accordance with the executive compensation regulations established by the board of directors. Monthly payments ofW34 million between January and March andW27 million between April and December were made. •  A total ofW3 million of welfare benefits were paid on an annual basis in accordance with regulations of other welfare benefits. Retirement pay •  Retirement pay is calculated in accordance with the applicable provisions of our regulations on compensation for retiring executives and is evaluated by the duration of employment (15 years), monthly base salary at the time of retirement and payment rate per position (2.5 to 4.5%).

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Yong Bum Kim⁽²⁾ Total remuneration   •  W753 million (consisting ofW211 million in salary,W115 million in other earned income andW427 million in retirement pay).   Salary   •  Base salary is set in accordance with the executive compensation regulations established by the board of directors. Monthly payments ofW22 million between January and March andW22.5 million between April and August were made.   •  Position salary is calculated based on the significance of the position and responsibilities of the job. Monthly payments ofW3 million between January and August were made.   •  A total ofW10 million of welfare benefits were paid on an annual basis in accordance with welfare benefits standards.   Other earned income   •  A total ofW115 million in excess was paid for the year in accordance with the retirement pay limit.   Retirement pay   •  Retirement pay is calculated in accordance with the applicable provisions of our regulations on compensation for retiring executives and is evaluated by the duration of employment (4 years), monthly base salary at the time of retirement and payment rate per position (2.5 to 4.5%).

(1) Mssrs. Yong Kee Hwang, Yu Seoung Yin and Soo Youle Cha are former officers who retired from our company effective as of March 31, 2019.

(2) Yong Bum Kim is a former officer who retired from our company effective as of August 10, 2019.

(5) Stock options

Not applicable.

B. Employees

As of December 31, 2019, we had 26,665 employees (excluding our directors). On average, our male employees have served 10.9 years and our female employees have served 8.9 years. The total amount of salary paid to our employees for the year ended December 31, 2019 based on income tax statements submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act wasW1,683,311 million for our male employees andW292,400 million for our female employees. The following table provides details of our employees as of December 31, 2019:

(Unit: person, in millions of Won, year)

	Number of employees(1)		Total salary in 2019(2)(3)(4)		Average salary per capita(5)		Average years of service
Male		22,362		1,683,311		72		10.9
Female		4,270		292,400		53		8.9
Total		26,632		1,975,712		68		10.6

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(1) Includespart-time employees hired for temporary needs or to serve as temporary replacements for employees on parental leave.

(2) Welfare benefits and retirement expenses have been excluded. Total welfare benefit provided to our employees for the year ended December 31, 2019 wasW352,034 million and the per capita welfare benefit provided wasW13.2 million.

(3) Based on income tax statements, which are submitted to the Korean tax authority in accordance with Article 20 of the Income Tax Act.

(4) Includes incentive payments to employees who have transferred from our affiliated companies.

(5) Calculated using the cumulative salary and the average number of employees (male: 23,394, female: 5,479) for the year ended December 31, 2019.

In December 2017, we were audited by the Ministry of Employment and Labor regarding our human resource practices (including in relation to employment contracts, hours of work, outsourcing and employees in pregnancy), and we were found to be in violation of certain provisions of the Labor Standard Act relating to overtime, night and holiday work. As a result, we were issued a corrective order in January 2018 and paid additional overtime wages ofW2,893 million to 16,106 administrative employees of our Paju facilities for their nighttime work between January 1, 2015 to December 31, 2017. In addition, we reviewed nighttime work records of our administrative employees outside of our Paju facilities during the same period and paid additional overtime wages ofW2,166 million to eligible employees. In order to prevent such violation from occurring again, we are periodically monitoring the nighttime work records of our employees.

From December 2017 to January 2018, we were audited by the Ministry of Employment and Labor regarding our human resource practices relating to temporary and part-time employees, and we were found to have omitted certain required information (including the number of break hours and vacation days) in the employment contracts of 82 temporary employees. As a result, we were assessed a fine ofW27 million, which we subsequently paid. In order to prevent such violation from occurring again, we have amended the relevant provisions of the applicable employment contracts.

19. Other Matters

A. Legal proceedings

We are a defendant in three separate civil lawsuits (comprising one damages claim in the United Kingdom filed by private plaintiffs, one damages claim in Israel filed by private plaintiffs and one unjust enrichment claim in the United States filed by the Commonwealth of Puerto Rico) filed against us and certain otherTFT-LCD panel manufacturers in connection with alleged anticompetitive behavior of the defendants. In each of these cases, the amount being sought has not been determined, and no trial has been scheduled. While the expected outcome of each of these cases is unclear, we do not believe that any of these cases would have a material effect on our financial conditions. In August 2019, we also settled a civil lawsuit that was filed against us and certain otherTFT-LCD panel manufacturers in connection with alleged anticompetitive behavior of the defendants by certain plaintiffs in the United Kingdom.

We are also a defendant in two patent infringement lawsuits (one in the United States and the other in Germany) filed against us by Solas OLED Ltd. In each of these cases, the amount being sought has not been determined. A court hearing has been scheduled for each of these cases for May 2020. The expected outcome of each of these cases is currently unclear.

B. Material events subsequent to the reporting period

None.

C. Material change in management

At our annual general meeting of shareholders held on March 20, 2020, Mr. Sang Beom Han resigned as anon-outside director, Mr. James (Hoyoung) Jeong was newly appointed as anon-outside director and Donghee Suh was reappointed for another term as anon-outside director. At our meeting of the board of directors held on March 20, 2020, Mr. James (Hoyoung) Jeong was appointed as our Representative Director.

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LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

For the Years Ended December 31, 2019 and 2018

(With Independent Auditors’ Report Thereon)

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Contents

	Page
Independent Auditors’ Report		54
Consolidated Statements of Financial Position		58
Consolidated Statements of Comprehensive Loss		59
Consolidated Statements of Changes in Equity		60
Consolidated Statements of Cash Flows		61
Notes to the Consolidated Financial Statements		63

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Independent Auditors’ Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Opinion

We have audited the accompanying consolidated financial statements of LG Display Co., Ltd. and its subsidiaries (the “Group”), which comprise the consolidated statements of financial position of the Group as of December 31, 2019 and 2018, the related consolidated statements of comprehensive loss, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2019 and 2018, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean International Financial Reporting Standards(“K-IFRS”).

Basis for Opinion

We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements as of and for the year ended December 31, 2019. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

(i) Assessment of impairment ofnon-financial assets including goodwill

As discussed in Notes 3 (k), 9 and 10, Group’snon-financial assets, including goodwill amounts toW22,961,093 million as of December 31, 2019. Due to the significant changes in the Group’s business during 2019, the Group determined that a change in its cash generating units (“CGU”) is appropriate. As a result, the Group’s CGU was changed from a single CGU to three CGUs, namely Display, Display (AD PO) and Lighting, with goodwill allocated to Display and Lighting CGUs, respectively. For CGUs to which goodwill is allocated, the Group performs impairment test on an annual basis regardless of whether an indicator for impairment exists. For CGUs to which goodwill is not allocated, the Group performs impairment test when there is an indication of impairment. The recoverable amount used in impairment tests as of December 31, 2019 is value in use based on discounted cash flow model which uses the expected future cash flows including assumptions that involved a high degree of management judgment. In 2019, the Group recognized impairment losses ofW1,395,655 million andW230,867 million for the Display (AD PO) CGU and Lighting CGU, respectively.

We identified the assessment of impairment ofnon-financial assets including goodwill as a key audit matter. Determination of change in CGUs as well as allocation of assets among different CGUs require management’s significant judgment. In addition, for the CGUs of Display and Display (AD PO), revenue and operating expense forecasts over the period which management projected, growth rates for subsequent years (“terminal growth rate”) and discount rate used to estimate value in use were challenging to test as minor changes to those assumptions would have a significant effect on the Group’s assessment whether goodwill and machinery and equipment were impaired.

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The primary procedures we performed to address this key audit matter included:

• We tested certain internal controls over the Group’snon-current assets impairment assessment process, including controls related to determination of cash generating units, and the development of revenue and operating expenses forecast, terminal growth rate and discount rate assumptions.

• We evaluated the factors considered in the Group’s determination CGUs against supporting evidence.

• We verified the accuracy of allocation of Group’s assets including corporate assets and goodwill to each CGU.

• We compared the Group’s historical revenue forecasts to actual results to assess the Group’s ability to accurately forecast.

• We evaluated the revenue forecasts and operating expense used to determine the value in use by comparison with the financial budgets approved by the board of directors.

• We performed sensitivity analysis over the terminal growth rate and discount rate assumptions to assess their impact on the Group’s impairment assessment.

• We involved our valuation professionals with specialized skills and knowledge who assisted us in evaluating the appropriateness of the discounted cash flow model used by management, the discount rate by checking the source information underlying the determination of the discount rates, and testing the mathematical accuracy of the calculation.

(ii) Assessment of recoverability of deferred tax assets in Korea

As discussed in Note 24 to the consolidated financial statements, the Group hadW1,715,912 million of deferred tax assets andW549,056 million of unrecognized tax benefit as of December 31, 2019, primarily related to Korea. The deferred tax assets arise primarily due to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as, unused tax losses and tax credit carryforwards. The assessment of the realizability of these deferred tax assets is dependent on the generation of future taxable income of the Group. Changes in assumptions regarding forecasted taxable income could have a significant impact on the amount of deferred tax assets recognized and unrecognized tax benefit.

We identified the assessment of the realizability of the deferred tax assets as a key audit matter because it involves high degree of subjective auditor judgment in assessing the significant assumptions and judgments that are reflected in estimating future taxable profits over the periods in which the above mentioned differences become deductible, or within the periods before the unused tax losses and tax credit forwards expire. This subjectivity is primarily driven by the Group’s assumptions in revenue and operating expense, which are used to estimate the forecasted taxable income in the future.

The primary procedures we performed to address this key audit matter included:

• We tested certain internal controls relating to the Group’s deferred tax assets realizability assessment process, including controls related to the development of assumptions in determining the forecasted taxable income for each year.

• We evaluated the Group’s estimates of revenue and operating expense, by comparing them with the financial budgets approved by the board of directors and historical performance.

• We compared the forecasts of taxable income and timing of utilization of deferred tax assets in prior year to actual results to assess the Group’s ability to accurately forecast.

• We also evaluated the Group’s history of realizing deferred tax assets by evaluating the expiration of unused tax losses

• We involved tax professionals with specialized skills and knowledge who assisted in assessing the Group’s tax adjustments and feasibility of planned tax strategies affecting deferred tax.

Other matter

The procedures and practices utilized in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance withK-IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing these consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

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Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether theses consolidated financial statements as a whole are free from material misstatements, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Korean Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.

• Obtain an understanding of internal control relevant to the audit 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

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, then we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditors’ report is Sang Hyun Han.

56

KPMG Samjong Accounting Corp.

Seoul, Korea

March 11, 2020

This report is effective as of March 11, 2020, 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 the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

57

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Financial Position

As of December 31, 2019 and 2018

(In millions of won)	Note		December 31, 2019			December 31, 2018
Assets
Cash and cash equivalents		4, 26	W	3,336,003			2,365,022
Deposits in banks		4, 26		78,757			78,400
Trade accounts and notes receivable, net		5, 14, 26, 29		3,154,080			2,829,163
Other accounts receivable, net		5, 26		474,048			169,313
Other current financial assets		6, 26		70,945			46,301
Inventories		7		2,051,155			2,691,203
Prepaid income taxes				114,143			4,516
Non-current assets held for sale		31		—			70,161
Other current assets		5		969,184			546,048
Total current assets				10,248,315			8,800,127
Deposits in banks		4, 26		11			11
Investments in equity accounted investees		8		109,611			113,989
Othernon-current accounts receivable, net		5, 26		9,072			11,448
Othernon-current financial assets		6, 26		111,510			144,214
Property, plant and equipment, net		9, 17, 27		22,087,645			21,600,130
Intangible assets, net		10, 17		873,448			987,642
Deferred tax assets		24		1,727,122			1,136,166
Employee benefits assets, net		12		127,252			—
Othernon-current assets		5		280,577			381,983
Totalnon-current assets				25,326,248			24,375,583
Total assets			W	35,574,563			33,175,710
Liabilities
Trade accounts and notes payable		26, 29	W	2,618,261			3,087,461
Current financial liabilities		11, 26, 27		1,977,084			1,553,907
Other accounts payable		26		4,397,121			3,566,629
Accrued expenses				675,270			633,346
Income tax payable				120,034			105,900
Provisions		13		189,525			98,254
Advances received		14		925,662			834,010
Other current liabilities		13		82,019			74,976
Total current liabilities				10,984,976			9,954,483
Non-current financial liabilities		11, 26, 27		11,612,910			7,030,628
Non-current provisions		13		67,118			32,764
Defined benefit liabilities, net		12		1,338			45,360
Long-term advances received		14		320,582			1,114,316
Deferred tax liabilities		24		11,210			15,087
Othernon-current liabilities		13		88,148			96,826
Totalnon-current liabilities				12,101,306			8,334,981
Total liabilities				23,086,282			18,289,464
Equity
Share capital		15		1,789,079			1,789,079
Share premium				2,251,113			2,251,113
Retained earnings				7,503,312			10,239,965
Reserves		15		(203,021	)		(300,968	)
Total equity attributable to owners of the Controlling Company				11,340,483			13,979,189
Non-controlling interests				1,147,798			907,057
Total equity				12,488,281			14,886,246
Total liabilities and equity			W	35,574,563			33,175,710

See accompanying notes to the consolidated financial statements.

58

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss

For the years ended December 31, 2019 and 2018

(In millions of won, except earnings per share)	Note		2019			2018
Revenue		16, 17, 29	W	23,475,567			24,336,571
Cost of sales		7, 18, 29		(21,607,240	)		(21,251,305	)
Gross profit				1,868,327			3,085,266
Selling expenses		19		(1,057,753	)		(832,963	)
Administrative expenses		19		(947,978	)		(938,214	)
Research and development expenses				(1,221,978	)		(1,221,198	)
Operating profit (loss)				(1,359,382	)		92,891
Finance income		22		276,732			254,131
Finance costs		22		(443,247	)		(326,893	)
Othernon-operating income		21		1,267,251			1,003,038
Othernon-operating expenses		21		(3,097,743	)		(1,115,233	)
Equity in income of equity accounted investees, net		8		12,147			700
Loss before income tax				(3,344,242	)		(91,366	)
Income tax expense (benefit)		23		(472,164	)		88,077
Loss for the year				(2,872,078	)		(179,443	)
Other comprehensive income (loss)
Items that will never be reclassified to profit or loss
Remeasurements of net defined benefit liabilities		12, 23		128,640			5,690
Other comprehensive income from associates				238			20
Related income tax		12, 23		(35,235	)		(1,169	)
				93,643			4,541
Items that are or may be reclassified to profit or loss
Foreign currency translation differences for foreign operations		22, 23		106,690			(19,987	)
Other comprehensive income from associates		23		3,925			37
				110,615			(19,950	)
Other comprehensive income (loss) for the year, net of income tax				204,258			(15,409	)
Total comprehensive loss for the year			W	(2,667,820	)		(194,852	)
Profit (loss) attributable to:
Owners of the Controlling Company				(2,829,705	)		(207,239	)
Non-controlling interests				(42,373	)		27,796
Loss for the year			W	(2,872,078	)		(179,443	)
Total comprehensive income (loss) attributable to:
Owners of the Controlling Company				(2,636,948	)		(215,386	)
Non-controlling interests				(30,872	)		20,534
Total comprehensive loss for the year			W	(2,667,820	)		(194,852	)
Loss per share (in won)
Basic and diluted loss per share		25	W	(7,908	)		(579	)

See accompanying notes to the consolidated financial statements.

59

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

For the years ended December 31, 2019 and 2018

	Attributable to owners of the Controlling Company
(In millions of won)	Share capital		Share premium		Retained earnings			Reserves			Sub-total			Non-controlling interests			Total equity
Balances at January 1, 2018	W	1,789,079		2,251,113		10,621,571			(288,280	)		14,373,483			608,027			14,981,510
Total comprehensive income (loss) for the year
Profit (loss) for the year		—		—		(207,239	)		—			(207,239	)		27,796			(179,443	)
Other comprehensive income (loss)
Remeasurements of net defined benefit liabilities, net of tax		—		—		4,521			—			4,521			—			4,521
Foreign currency translation differences		—		—		—			(12,725	)		(12,725	)		(7,262	)		(19,987	)
Other comprehensive income from associates		—		—		20			37			57			—			57
Total other comprehensive income (loss)		—		—		4,541			(12,688	)		(8,147	)		(7,262	)		(15,409	)
Total comprehensive income (loss) for the year	W	—		—		(202,698	)		(12,688	)		(215,386	)		20,534			(194,852	)
Transaction with owners, recognized directly in equity
Dividends to share holders		—		—		(178,908	)		—			(178,908	)		—			(178,908	)
Subsidiaries’ dividends distributed tonon-controlling interests		—		—		—			—			—			(53,107	)		(53,107	)
Capital contribution fromnon-controlling interests		—		—		—			—			—			331,603			331,603
Balances at December 31, 2018	W	1,789,079		2,251,113		10,239,965			(300,968	)		13,979,189			907,057			14,886,246
Balances at January 1, 2019	W	1,789,079		2,251,113		10,239,965			(300,968	)		13,979,189			907,057			14,886,246
Total comprehensive income (loss) for the year
Loss for the year		—		—		(2,829,705	)		—			(2,829,705	)		(42,373	)		(2,872,078	)
Other comprehensive income (loss)
Remeasurements of net defined benefit liabilities, net of tax		—		—		93,405			—			93,405			—			93,405
Foreign currency translation differences		—		—		—			95,189			95,189			11,501			106,690
Other comprehensive income from associates		—		—		238			3,925			4,163			—			4,163
Total other comprehensive income		—		—		93,643			99,114			192,757			11,501			204,258
Total comprehensive income (loss) for the year	W	—		—		(2,736,062	)		99,114			(2,636,948	)		(30,872	)		(2,667,820	)
Transaction with owners, recognized directly in equity
Subsidiaries’ dividends distributed tonon-controlling interests		—		—		—			—			—			(6,541	)		(6,541	)
Capital contribution fromnon-controlling interests and others		—		—		(591	)		(1,167	)		(1,758	)		278,154			276,396
Balances at December 31, 2019	W	1,789,079		2,251,113		7,503,312			(203,021	)		11,340,483			1,147,798			12,488,281

See accompanying notes to the consolidated financial statements.

60

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(In millions of won)	Note		2019			2018
Cash flows from operating activities:
Loss for the year			W	(2,872,078	)		(179,443	)
Adjustments for:
Income tax expense (benefit)		23		(472,164	)		88,077
Depreciation and amortization		9,10,18		3,695,051			3,554,565
Gain on foreign currency translation				(103,460	)		(84,643	)
Loss on foreign currency translation				171,966			138,452
Expenses related to defined benefit plans		12, 20		162,997			179,880
Gain on disposal of property, plant and equipment				(35,788	)		(6,620	)
Loss on disposal of property, plant and equipment				40,897			15,048
Impairment loss on property, plant and equipment				1,550,430			43,601
Gain on disposal of intangible assets				(552	)		(239	)
Loss on disposal of intangible assets				139			—
Impairment loss on intangible assets				249,450			82
Reversal of impairment loss on intangible assets				(960	)		(348	)
Impairment loss on other assets				3,602			—
Gain on disposal ofnon-current assets held for sale				(8,353	)		—
Expense on increase of provisions				419,720			234,928
Finance income				(186,707	)		(101,313	)
Finance costs				338,419			173,975
Equity in income of equity method accounted investees, net		8		(12,147	)		(700	)
Other income				(20,416	)		(3,310	)
Other expenses				4,451			593
				5,796,575			4,232,028
Changes in:
Trade accounts and notes receivable				(1,007,373	)		1,304,963
Other accounts receivable				(49,443	)		(56,870	)
Inventories				632,359			(449,901	)
Lease receivables				6,617			—
Other current assets				(288,770	)		(249,968	)
Othernon-current assets				(38,608	)		(61,164	)
Trade accounts and notes payable				(394,564	)		267,358
Other accounts payable				2,035,750			(111,053	)
Accrued expenses				11,787			(194,394	)
Provisions				(294,096	)		(217,984	)
Other current liabilities				(214,675	)		78,849
Defined benefit liabilities, net				(65,681	)		(224,335	)
Long-term advances received				63,672			948,276
Othernon-current liabilities				7,045			24,510
				404,020			1,058,287
Cash generated from operating activities				3,328,517			5,110,872
Income taxes paid				(252,812	)		(486,549	)
Interests received				47,276			71,819
Interests paid				(416,436	)		(212,019	)
Net cash provided by operating activities			W	2,706,545			4,484,123

See accompanying notes to the consolidated financial statements.

61

LG DISPLAY CO., LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2019 and 2018

(In millions of won)	Note		2019			2018
Cash flows from investing activities:
Dividends received			W	7,502			5,272
Increase in deposits in banks				(114,557	)		(775,239	)
Proceeds from withdrawal of deposits in banks				114,200			1,454,561
Acquisition of financial assets at fair value through profit or loss				(708	)		(431	)
Proceeds from disposal of financial asset at fair value through profit or loss				452			—
Acquisition of financial assets at fair value through other comprehensive income				(21	)		—
Proceeds from disposal of financial assets at fair value through other comprehensive income				107			6
Acquisition of investments in equity accounted investees				—			(14,732	)
Proceeds from disposal of investments in equity accounted investees				16,738			4,527
Acquisition of property, plant and equipment				(6,926,985	)		(7,942,210	)
Proceeds from disposal of property, plant and equipment				335,446			142,088
Acquisition of intangible assets				(540,996	)		(480,607	)
Proceeds from disposal of intangible assets				2,468			960
Government grants received				248,124			1,210
Proceeds from disposal ofnon-current assets held for sale				81,351			—
Receipt from settlement of derivatives				21,752			2,026
Increase in short-term loans				(8,725	)		(7,700	)
Proceeds from collection of short-term loans				19,881			15,968
Increase in long-term loans				(6,465	)		(36,580	)
Increase in deposits				(30,680	)		(58,794	)
Decrease in deposits				5,307			4,136
Proceeds from disposal of emission rights				20,416			10,200
Net cash used in investing activities				(6,755,393	)		(7,675,339	)
Cash flows from financing activities:		28
Proceeds from short-term borrowings				1,841,008			552,164
Repayments of short-term borrowings				(1,154,911	)		(552,884	)
Proceeds from issuance of bonds				1,323,251			828,169
Proceeds from long-term borrowings				4,341,087			3,882,958
Repayments of current portion of long-term borrowings and bonds				(1,567,818	)		(1,859,098	)
Payment of lease liabilities				(64,570	)		—
Capital contribution fromnon-controlling interests				276,396			331,603
Subsidiaries’ dividends distributed tonon-controlling interests				(6,541	)		(51,085	)
Dividends paid				—			(178,908	)
Net cash provided by financing activities				4,987,902			2,952,919
Net increase (decrease) in cash and cash equivalents				939,054			(238,297	)
Cash and cash equivalents at January 1				2,365,022			2,602,560
Effect of exchange rate fluctuations on cash held				31,927			759
Cash and cash equivalents at December 31			W	3,336,003			2,365,022

See accompanying notes to the consolidated financial statements.

62

1. Reporting Entity

(a) Description of the Controlling Company

LG Display Co., Ltd. (the “Controlling Company”) was incorporated in February 1985 and the Controlling Company is a public corporation listed in the Korea Exchange since 2004. The main business of the Controlling Company and its subsidiaries (the “Group”) is to manufacture and sell displays and its related products. As of December 31, 2019, the Group is operating Thin Film Transistor Liquid Crystal Display (“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China andTFT-LCD and OLED module manufacturing plants in Gumi, Paju, China and Vietnam. The Controlling Company is domiciled in the Republic of Korea with its address at 128Yeouidae-ro,Yeongdeungpo-gu, Seoul, the Republic of Korea. As of December 31, 2019, LG Electronics Inc., a major shareholder of the Controlling Company, owns 37.9% (135,625,000 shares) of the Controlling Company’s common stock.

The Controlling Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of December 31, 2019, there are 357,815,700 shares of common stock outstanding. The Controlling Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS representsone-half of one share of common stock. As of December 31, 2019, there are 19,545,920 ADSs outstanding.

63

1. Reporting Entity, Continued

(b) Consolidated Subsidiaries as of December 31, 2019

(In millions)
Subsidiaries	Location	Percentage of ownership			Fiscal year end	Date of incorporation	Business	Capital stocks
LG Display America, Inc.	San Jose, U.S.A.		100	%	December 31	September 24, 1999	Sell display products	USD	411
LG Display Germany GmbH	Eschborn, Germany		100	%	December 31	November 5, 1999	Sell display products	EUR	1
LG Display Japan Co., Ltd.	Tokyo, Japan		100	%	December 31	October 12, 1999	Sell display products	JPY	95
LG Display Taiwan Co., Ltd.	Taipei, Taiwan		100	%	December 31	April 12, 1999	Sell display products	NTD	116
LG Display Nanjing Co., Ltd.	Nanjing, China		100	%	December 31	July 15, 2002	Manufacture display products	CNY	3,020
LG Display Shanghai Co., Ltd.	Shanghai, China		100	%	December 31	January 16, 2003	Sell display products	CNY	4
LG Display Poland Sp. z o.o.(*1)	Wroclaw, Poland		100	%	December 31	September 6, 2005	Manufacture display products	PLN	511
LG Display Guangzhou Co., Ltd.	Guangzhou, China		100	%	December 31	June 30, 2006	Manufacture display products	CNY	1,655
LG Display Shenzhen Co., Ltd.	Shenzhen, China		100	%	December 31	August 28, 2007	Sell display products	CNY	4
LG Display Singapore Pte. Ltd.	Singapore		100	%	December 31	January 12, 2009	Sell display products	USD	1.1
L&T Display Technology (Fujian) Limited	Fujian, China		51	%	December 31	January 5, 2010	Manufacture and sell LCD module and LCD monitor sets	CNY	116
LG Display Yantai Co., Ltd.	Yantai, China		100	%	December 31	April 19, 2010	Manufacture display products	CNY	1,008
Nanumnuri Co., Ltd.	Gumi, South Korea		100	%	December 31	March 21, 2012	Provide janitorial services	KRW	800
LG Display (China) Co., Ltd.	Guangzhou, China		70	%	December 31	December 10, 2012	Manufacture and sell display products	CNY	8,232
Unified Innovative Technology, LLC	Wilmington, U.S.A.		100	%	December 31	March 12, 2014	Manage intellectual property	USD	9
LG Display Guangzhou Trading Co., Ltd.	Guangzhou, China		100	%	December 31	April 28, 2015	Sell display products	CNY	1.2
Global OLED Technology, LLC	Herndon, U.S.A.		100	%	December 31	December 18, 2009	Manage OLED intellectual property	USD	138
LG Display Vietnam Haiphong Co., Ltd.(*2)	Haiphong, Vietnam		100	%	December 31	May 5, 2016	Manufacture display products	USD	600
Suzhou Lehui Display Co., Ltd.	Suzhou, China		100	%	December 31	July 1, 2016	Manufacture and sell LCD module and LCD monitor sets	CNY	637
LG DISPLAY FUND I LLC(*3)	Wilmington, U.S.A.		100	%	December 31	May 1, 2018	Invest in venture business and acquire technologies	USD	6
LG Display High-Tech (China) Co., Ltd. (*4)	Guangzhou, China		75	%	December 31	July 11, 2018	Manufacture and sell display products	CNY	14,570
Money Market Trust	Seoul, South Korea		100	%	December 31	—	Money market trust	KRW	34,700

64

1. Reporting Entity, Continued

(b) Consolidated Subsidiaries as of December 31, 2019, Continued

(*1) On July 1, 2019, LG Display Poland Sp. z o.o. commenced the liquidation process.

(*2) For the year ended December 31, 2019, the Controlling Company contributedW342,680 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”).

(*3) For the year ended December 31, 2019, the Controlling Company contributedW4,073 million in cash for the capital increase of LG DISPLAY FUND I LLC.

(*4) For the year ended December 31, 2019, the Controlling Company contributedW1,045,393 million in cash for the capital increase of LG Display High-Tech (China) Co., Ltd. (“LGDCO”). Meanwhile, additional contribution from LG Display Guangzhou Co., Ltd. andnon-controlling interest amounted toW32,329 million andW276,396 million, respectively. The Group’s ownership percentage in LGDCO increased from 69% to 75% as a result of these additional investments.

W11,120 million andW90,281 million are attributable to the Controlling Company over the distributed dividends from consolidated subsidiaries for the years ended December 31, 2019 and 2018, respectively.

65

1. Reporting Entity, Continued

(c) Summary of financial information of subsidiaries as of and for the years ended December 31, 2019 and 2018 is as follows:

(In millions of won)	December 31, 2019						2019
Subsidiaries	Total assets		Total liabilities		Total shareholders’ equity		Sales		Net income (loss)
LG Display America, Inc.	W	961,070		942,860		18,210		9,669,140		5,366
LG Display Germany GmbH		404,852		392,824		12,028		1,715,627		5,451
LG Display Japan Co., Ltd.		296,106		290,976		5,130		2,268,430		1,641
LG Display Taiwan Co., Ltd.		473,177		457,469		15,708		1,455,596		1,671
LG Display Nanjing Co., Ltd.		1,239,381		575,137		664,244		1,428,020		13,046
LG Display Shanghai Co., Ltd.		297,068		279,362		17,706		1,001,478		7,182
LG Display Poland Sp. z o.o.		160,385		228		160,157		7,904		(3,440	)
LG Display Guangzhou Co., Ltd.		2,893,673		1,949,732		943,941		2,582,137		100,726
LG Display Shenzhen Co., Ltd.		134,575		123,641		10,934		445,691		4,163
LG Display Singapore Pte. Ltd.		517,449		511,962		5,487		1,140,952		2,006
L&T Display Technology (Fujian) Limited		342,450		272,489		69,961		1,153,099		8,008
LG Display Yantai Co., Ltd.		886,198		498,890		387,308		1,273,553		34,044
Nanumnuri Co., Ltd.		5,243		3,537		1,706		22,529		292
LG Display (China) Co., Ltd.		2,026,541		329,133		1,697,408		1,978,487		(164,764	)
Unified Innovative Technology, LLC		3,976		—		3,976		—		(1,104	)
LG Display Guangzhou Trading Co., Ltd.		377,295		370,665		6,630		1,250,110		4,396
Global OLED Technology, LLC		81,481		21,004		60,477		8,380		(5,220	)
LG Display Vietnam Haiphong Co., Ltd.		3,367,337		2,878,707		488,630		1,261,053		(253,694	)
Suzhou Lehui Display Co., Ltd.		219,974		94,615		125,359		350,870		6,682
LG DISPLAY FUND I LLC		589		39		550		—		(3,532	)
LG Display High-Tech (China) Co., Ltd.		6,606,874		4,188,766		2,418,108		40,766		12,503
	W21,295,694		14,182,036		7,113,658		29,053,822		(224,577)

66

1. Reporting Entity, Continued

(In millions of won)	December 31, 2018						2018
Subsidiaries	Total assets		Total liabilities		Total shareholders’ equity		Sales		Net income (loss)
LG Display America, Inc.	W	1,048,112		1,035,975		12,137		8,985,127		7,268
LG Display Germany GmbH		451,328		444,676		6,652		1,780,233		4,322
LG Display Japan Co., Ltd.		374,356		370,860		3,496		2,388,644		2,359
LG Display Taiwan Co., Ltd.		294,103		280,794		13,309		1,558,166		2,653
LG Display Nanjing Co., Ltd.		1,397,886		758,499		639,387		1,738,895		55,623
LG Display Shanghai Co., Ltd.		931,773		921,289		10,484		994,258		5,977
LG Display Poland Sp. z o.o.		165,079		5,308		159,771		38,437		249
LG Display Guangzhou Co., Ltd.		2,689,670		1,860,804		828,866		2,366,355		293,222
LG Display Shenzhen Co., Ltd.		50,337		43,636		6,701		1,370,364		3,386
LG Display Singapore Pte. Ltd.		152,768		149,405		3,363		1,099,288		2,471
L&T Display Technology (Fujian) Limited		293,025		231,955		61,070		1,156,111		(1,937	)
LG Display Yantai Co., Ltd.		1,336,692		989,121		347,571		1,459,165		53,480
Nanumnuri Co., Ltd.		5,171		3,757		1,414		22,964		295
LG Display (China) Co., Ltd.		2,780,364		932,526		1,847,838		2,573,254		106,269
Unified Innovative Technology, LLC		4,898		3		4,895		—		(986	)
LG Display Guangzhou Trading Co., Ltd.		485,800		483,502		2,298		807,536		1,266
Global OLED Technology, LLC		81,922		18,537		63,385		7,962		(5,232	)
LG Display Vietnam Haiphong Co., Ltd.		2,342,774		1,963,922		378,852		871,755		60,923
Suzhou Lehui Display Co., Ltd.		212,138		95,359		116,779		365,914		5,018
LG DISPLAY FUND I LLC		7		—		7		—		(2,242	)
LG Display High-Tech (China) Co., Ltd.		3,258,830		2,208,244		1,050,586		—		(10,152	)
	W	18,357,033		12,798,172		5,558,861		29,584,428		584,232

67

2. Basis of Presenting Financial Statements

(a) Statement of Compliance

In accordance with the Act on External Audits of Stock Companies, Etc., these consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards(“K-IFRS”).

The consolidated financial statements were authorized for issuance by the Board of Directors on January 30, 2020, which will be submitted for approval to the shareholders’ meeting to be held on March 20, 2020.

(b) Basis of Measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the consolidated statement of financial position:

• derivative financial instruments at fair value, financial assets at fair value through profit or loss (“FVTPL”), financial assets at fair value through other comprehensive income (“FVOCI”), financial liabilities at fair value through profit or loss (“FVTPL”), and

• net defined benefit liabilities (employee benefits assets) recognized at the present value of defined benefit obligations less the fair value of plan assets

(c) Functional and Presentation Currency

Each subsidiary’s financial statements within the Group are presented in the subsidiary’s functional currency, which is the currency of the primary economic environment in which each subsidiary operates. The consolidated financial statements are presented in Korean won, which is the Controlling Company’s functional currency.

(d) Use of Estimates and Judgments

The preparation of the consolidated financial statements in conformity withK-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements is included in the following notes:

• Financial instruments (Note 3(f))

• Intangible assets (Note 3(k), 10)

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next 12 months is included in the following notes:

• Provisions (Note 3(m), 13)

• Inventories (Note 3(e), 7)

• Property, Plant and Equipment (Note 9)

• Intangible assets (Note 10)

• Employee benefits (Note 12)

• Deferred tax assets and liabilities (Note 24)

68

3. Summary of Significant Accounting Policies

The significant accounting policies followed by the Group in the preparation of its consolidated financial statements are as follows:

(a) Changes in Accounting Policies

The Group has initially appliedK-IFRS No. 1116,Leases, from January 1, 2019. A number of other new standards are effective from January 1, 2019 but they do not have a material effect on the Group’s consolidated financial statements.

In application ofK-IFRS No. 1116,Leases, from January 1, 2019, the Group used the modified retrospective approach, under whichright-of-use assets and lease liabilities are recognized in equal amount. Accordingly, the comparative information presented for 2018 is presented, as previously reported, underK-IFRS No. 1017 and relative interpretations. The disclosure requirements inK-IFRS No. 1116 have not been applied to comparative information. The details of the changes in accounting policies are disclosed below.

i) Definition of a lease

Previously, the Group determined at contract inception whether an arrangement was or contained a lease underK-IFRS No. 2104,Determining Whether an Arrangement contains a Lease. For contracts entered into or changed on or after January 1, 2019, the Group assesses whether a contract is or contains a lease based on the definition of a lease underK-IFRS No. 1116 as described in Note 27.

On adoption ofK-IFRS No. 1116, as of January 1, 2019, the Group applied the practical expedient to grandfather the assessment of which transactions are leases for existing contracts. The Group appliedK-IFRS No. 1116 only to contracts that were previously identified as leases.

ii) Accounting as a lessee

As a lessee, the Group leases buildings, vehicles, machinery, equipment and others. The Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group. UnderK-IFRS No. 1116, the Group recognizesright-of-use assets and lease liabilities for most of these leases on the consolidated statement of financial position.

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease andnon-lease component on the basis of its relative stand-alone price.

Leases classified as operating leases underK-IFRS No. 1017

The Group classified its leases of buildings, vehicles, machinery, equipment and others as operating leases underK-IFRS No. 1017. On adoption ofK-IFRS No. 1116, for these leases, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at January 1, 2019 (see Note 27).Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid lease payments.

The Group used following practical expedients when applyingK-IFRS No. 1116 to leases previously classified as operating leases underK-IFRS No. 1017:

• did not recognizeright-of-use assets and liabilities for leases for which the lease term ends within 12 months of the date of initial application;

• did not recognizeright-of-use assets and liabilities for leases of low value assets;

• excluded initial direct costs from the measurement of theright-of-use asset at the date of initial application; and

• used hindsight when determining the remaining lease term.

69

3. Summary of Significant Accounting Policies, Continued

(a) Changes in Accounting Policies, Continued

iii) Accounting as a lessor

The Group leases out its own property andright-of-use assets. The Group classified these leases as operating leases or finance leases based on their characteristics.

The Group is not required to make any adjustments on transition for leases as a lessor, except forsub-lease provided with theright-of-use assets.

UnderK-IFRS 1017, the head lease andsub-lease contracts were classified as operating leases. On adoption ofK-IFRS 1116, theright-of-use assets recognized from the head leases are presented in property, plant and equipment, and measured at fair value at that date. The Group assessed the classification of thesub-lease contracts with reference to the underlying asset, and concluded that they are finance leases.

The Group appliedK-IFRS No. 1115 to allocate consideration in the contract to each lease andnon-lease component.

iv) Impact on the consolidated financial statements

Impacts on adoption

On adoption ofK-IFRS No. 1116, the Group recognized additionalright-of-use assets and additional lease liabilities as below:

(In millions of won)
	January 1, 2019
Right-of-use assets presented in property, plant and equipment	W	142,040
Prepaid expenses		(61,570	)
Lease receivable		34,649
Lease liabilities		115,119

When measuring lease liabilities at January 1, 2019 for leases that were classified as operating leases in accordance withK-IFRS No. 1017, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average discount rate applied is 3.36%.

(In millions of won)
	January 1, 2019
Amount of operating lease commitments at December 31, 2018	W	119,659
Discounted using the incremental borrowing rate at January 1, 2019		115,614
Finance lease liabilities recognized as at December 31, 2018		—
— Recognition exemption for lease oflow-value assets		(262	)
— Recognition exemption for leases with less than 12 months of lease term at adoption		(233	)
Lease liabilities recognized at January 1, 2019		115,119

70

3. Summary of Significant Accounting Policies, Continued

(b) Consolidation

(i) Business Combinations

The Group accounts for business combinations using the acquisition method except for a combination of entities or businesses under common control. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. If the aggregate sum of consideration transferred andnon-controlling interest exceeds the fair value of identifiable net asset, the Group recognizes goodwill; if not, then the Group recognizes gain on a bargain purchase. Any goodwill that arises is tested annually for impairment. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities in accordance withK-IFRS No. 1032 andK-IFRS No. 1109. The consideration transferred does not include amounts related to the settlement ofpre-existing relationships. Such amounts are generally recognized in profit or loss.

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.

(iii) Non-controlling interests

Non-controlling interests (“NCI”) are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date. Profit or loss and other comprehensive income (loss) of subsidiaries are attributed to owners of the Controlling Company andnon-controlling interests.

Changes in the Group’s interest in subsidiaries that do not result in a loss of control are accounted for as equity transactions.

(iv) Loss of Control

If the Controlling Company loses control of subsidiaries, the Controlling Company derecognizes the assets and liabilities of the former subsidiaries from the consolidated statement of financial position and recognizes the gain or loss associated with the loss of control attributable to the former controlling interest. Meanwhile, the Controlling Company recognizes any investment retained in the former subsidiaries at its fair value when control is lost.

71

3. Summary of Significant Accounting Policies, Continued

(b) Consolidation, Continued

(v) Associates and joint ventures (equity method investees)

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which the parties have joint control, whereby the parties has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Investments in associates and joint ventures are initially recognized at cost and subsequently accounted for using the equity method of accounting. The carrying amount of investments in associates and joint ventures is increased or decreased to recognize the Group’s share of the profits or losses and changes in the Group’s proportionate interest of the investee after the date of acquisition. Distributions received from an investee reduce the carrying amount of the investment.

If an associate or a joint venture uses accounting policies different from those of the Controlling Company for like transactions and events in similar circumstances, appropriate adjustments are made to the consolidated financial statements. As of and during the periods presented in the consolidated financial statements, no adjustments were made in applying the equity method.

When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

(vi) Transactions eliminated on consolidation

Intra-group balances and transactions, including income and expenses and any unrealized income and expenses and balance of trade accounts and notes receivable and payable arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

72

3. Summary of Significant Accounting Policies, Continued

(c) Foreign Currency Transaction and Translation

Transactions in foreign currencies are translated to the respective functional currencies of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the exchange rate on the reporting date.Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was originally determined. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on an investment in equity securities designated as at FVOCI and a financial asset and liability designated as a cash flow hedge, which are recognized in other comprehensive income. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition are recognized in profit or loss in the period in which they arise. Foreign currency differences arising from assets and liabilities in relation to the investing and financing activities including loans, bonds and cash and cash equivalents are recognized in finance income (costs) in the consolidated statement of comprehensive income (loss) and foreign currency differences arising from assets and liabilities in relation to activities other than investing and financing activities are recognized in othernon-operating income (expense) in the consolidated statement of comprehensive income (loss). Foreign currency differences are presented in gross amounts in the consolidated statement of comprehensive income (loss).

If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial position and financial performance of the foreign operation are translated into the presentation currency using the following methods. The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy are translated to the Group’s functional currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to the Group’s functional currency at exchange rates at the dates of the transactions and foreign currency differences are recognized in other comprehensive income (loss). Relevant proportionate shares of foreign currency differences are allocated to the controlling interests andnon-controlling interests. When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed to NCI. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the at each reporting date’s exchange rate.

(d) Cash and cash equivalents

Cash and cash equivalents include all cash balances and short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash.

73

3. Summary of Significant Accounting Policies, Continued

(e) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling expenses. In the case of manufactured inventories and work-in-process, cost includes an appropriate share of production overheads based on the actual capacity of production facilities. However, the normal capacity is used for the allocation of fixed production overheads if the actual level of production is lower than the normal capacity.

(f) Financial Instruments

(i) Non-derivative financial assets

Recognition and initial measurement

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets are recognized in statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

Classificationand subsequent measurement

i) Financial assets

On initial recognition, a financial asset is classified as measured at: amortized cost; FVOCI – debt investment; FVOCI – equity investments; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the subsequent reporting period following the change in the business model.

A financial asset is measured as at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

• the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

74

3. Summary of Significant Accounting Policies, Continued

(f) Financial Instruments, Continued

On initial recognition of an equity investments that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on aninvestment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured as at FVTPL. This includes all derivative financial assets. At initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

ii) Financial assets: business model

The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

• the stated policies and objectives for the portfolio and the operation of those policies in practice (these include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets);

• how the performance of the portfolio is evaluated and reported to the Group’s management;

• the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; and

• the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

Transfers of financial assets to third parties in transaction that do not qualify for derecognition are not considered sale for this purpose.

A financial asset that is held for trading or is managed and whose performance is evaluated on a fair value basis is measured at FVTPL.

iii) Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest

For the purpose of the assessment, “principal” is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and cost (e.g. liquidity risk and administrative costs), as well as profit margin.

75

3. Summary of Significant Accounting Policies, Continued

(f) Financial Instruments, Continued

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers.

• contingent events that would change the amount or timing of cash flows:

• terms that may adjust the contractual coupon rate, including variable-rate features;

• prepayment and extension features; and

• terms that limit the Group’s claim to cash flows from specified assets (e.g.non-recourse features)

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest or the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract.

Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued but unpaid contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

iv) Financial assets: Subsequent measurement and gains and losses

Financial assets at FVTPL	These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
Financial assets at amortized cost	These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Debt investments at FVOCI	These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

76

3. Summary of Significant Accounting Policies, Continued

(f) Financial Instruments, Continued

Derecognition

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, it transfers the rights to receive the contractual cash flows of the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred, or it transfers or does not retain substantially all the risks and rewards of ownership of a transferred asset, and does not retain control of the transferred asset.

If the Group has retained substantially all the risks and rewards of ownership of the transferred asset, the Group continues to recognize the transferred asset.

Offset

Financial assets and liabilities are offset and the net amount is presented in the consolidated statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

77

3. Summary of Significant Accounting Policies, Continued

(f) Financial Instruments, Continued

(ii) Non-derivative financial liabilities

The Group classifies financial liabilities into two categories, financial liabilities at FVTPL and other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities, and recognizes them in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Financial liabilities at FVTPL include financial liabilities held for trading or designated as such upon initial recognition at FVTPL. After initial recognition, financial liabilities at FVTPL are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issuance of financial liabilities are recognized in profit or loss as incurred.

Non-derivative financial liabilities other than financial liabilities classified as at FVTPL are classified as other financial liabilities and measured initially at fair value minus transaction costs that are directly attributable to the issuance of financial liabilities. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. As of December 31, 2019,non-derivative financial liabilities comprise borrowings, bonds, trade accounts and notes payable, other accounts payable and others.

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

(iii) Share Capital

The Group issued common stocks and they are classified as equity. Incremental costs directly attributable to the issuance of common stocks are recognized as a deduction from equity, net of tax effects. Capital contributed in excess of par value upon issuance of common stocks is classified as share premium within equity.

(iv) Derivative financial instruments

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Hedge Accounting

If necessary, the Group designates derivatives as hedging items to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge).

On initial designation of the hedge, the Group’s management formally designates and documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship, both at the inception of the hedge relationship as well as on an ongoing basis.

78

3. Summary of Significant Accounting Policies, Continued

(f) Financial Instruments, Continued

i) Fair value hedges

Change in the fair value of a derivative hedging instrument designated as a fair value hedge and the hedged item is recognized in profit or loss, respectively. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the statement of comprehensive income (loss). The Group discontinues fair value hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship between them anymore; if the hedging instrument expires or is sold, terminated or exercised; or if the hedge no longer meets the criteria for hedge accounting.

ii) Cash flow hedges

When a derivative designated as a cash flow hedging instrument meets the criteria of cash flow hedge accounting, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and the ineffective portion of changes in the fair value of the derivative is recognized in profit or loss. The Group discontinues cash flow hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship between them anymore; if the hedging instruments expires or is sold, terminated or exercised; or if the hedge no longer meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

Embedded derivative

Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.

Other derivative financial instruments

Other derivative financial instruments are measured at fair value and changes of their fair value are recognized in profit or loss.

79

3. Summary of Significant Accounting Policies, Continued

(g) Property, Plant and Equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes an expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing costs on qualifying assets.

The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and recognized in othernon-operating income or othernon-operating expenses.

(ii) Subsequent costs

Subsequent expenditure on an item of property, plant and equipment is recognized as part of its cost only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The costs of theday-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred.

(iii) Depreciation

Depreciation is recognized in profit or loss on a straight-line basis, reflecting the pattern in which the asset’s future economic benefits are expected to be consumed by the Group. The residual value of property, plant and equipment is zero.

Estimated useful lives of the assets are as follows:

	Useful lives (years)
Buildings and structures	20, 40
Machinery	4, 5
Furniture and fixtures	4
Equipment, tools and vehicles	2, 4, 12
Right-of-use assets	(*)

(*) The Group depreciates theright-of-use assets from the commencement date to the earlier of the end of the useful life of theright-of-use asset or the end of the lease term on a straight-line basis.

80

3. Summary of Significant Accounting Policies, Continued

(h) Borrowing Costs

The Group capitalizes borrowing costs, which includes interests and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs, directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. The Group immediately recognizes other borrowing costs as an expense.

81

3. Summary of Significant Accounting Policies, Continued

(i) Government Grants

In case there is reasonable assurance that the Group will comply with the conditions attached to a government grant, the government grant is recognized as follows:

(i) Grants related to the purchase or construction of assets

A government grant related to the purchase or construction of assets is deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduced depreciation expense and cash related to grant received is presented in investing activities in the statement of cash flows.

(ii) Grants for compensating the Group’s expenses incurred

A government grant that compensates the Group for expenses incurred is recognized in profit or loss as a deduction from relevant expenses on a systematic basis in the periods in which the expenses are recognized.

(iii) Other government grants

A government grant that becomes receivable for the purpose of giving immediate financial support to the Group with no compensation for expenses or losses already incurred or no future related costs is recognized as income of the period in which it becomes receivable.

(j) Intangible Assets

Intangible assets are initially measured at cost. Subsequently, intangible assets are measured at cost less accumulated amortization and accumulated impairment losses.

(i) Goodwill

Goodwill arising from business combinations is recognized as the excess of the acquisition cost of investments in subsidiaries, associates and joint ventures over the Group’s share of the net fair value of the identifiable assets acquired and liabilities assumed. Any deficit is a bargain purchase that is recognized in profit or loss. Goodwill is measured at cost less accumulated impairment losses.

82

3. Summary of Significant Accounting Policies, Continued

(j) Intangible Assets, Continued

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred. Development activities involve a plan or design of the production of new or substantially improved products and processes. Development expenditure is capitalized as intangible assets only if the Group can demonstrate all of the following:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale,

• its intention to complete the intangible asset and use or sell it,

• its ability to use or sell the intangible asset,

• how the intangible asset will generate probable future economic benefits (among other things, the Group can demonstrate the usefulness of the intangible asset by existence of a market for the output of the intangible asset or the intangible asset itself if it is to be used internally),

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and

• its ability to measure reliably the expenditure attributable to the intangible asset during its development.

The expenditure capitalized includes the cost of materials, direct labor and overhead costs that are directly attributable to preparing the asset for its intended use, and borrowing costs on qualifying assets.

(iii) Other intangible assets

Other intangible assets include intellectual property rights, software, customer relationships, technology, memberships and others.

(iv) Subsequent costs

Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific intangible asset to which they relate. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.

83

3. Summary of Significant Accounting Policies, Continued

(j) Intangible Assets, Continued

(v) Amortization

Amortization is calculated on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which condominium and golf club memberships are expected to be available for use, these intangible assets are regarded as having indefinite useful lives and not amortized.

	Estimated useful lives (years)
Intellectual property rights	5, 10
Rights to use electricity, water and gas supply facilities	10
Software	4
Customer relationships	7, 10
Technology	10
Development costs	(*)
Condominium and golf club memberships	Not amortized

(*) Capitalized development costs are amortized over the useful lives considering the life cycle of the developed products. Amortization of capitalized development costs are recognized in research and development expenses in the consolidated statement of comprehensive income (loss).

Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at each financialyear-end. The useful lives of intangible assets that are not being amortized are reviewed each period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. If appropriate, the changes are accounted for as changes in accounting estimates.

(k) Impairment

(i) Financial assets

Financial instruments and contract assets

The Group recognizes loss allowance for financial assets measured at amortized cost and debt investments at FVOCI at the ‘expected credit loss’ (ECL).

The Group recognizes a loss allowance for the life-time expected credit losses except for following, which are measured at12-month ECLs:

• debt securities that are determined to have low credit risk at the reporting date; and

• other debt securities and bank deposits for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both qualitative and quantitative information and analysis, based on the Group’s historical experience and informed credit assessment including forward-looking information.

84

3. Summary of Significant Accounting Policies, Continued

(k) Impairment, Continued

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of the ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

Estimation of expected credit losses

Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured using the present value of the difference between the contractual cash flows and the expected contractual cash flows. The expected credit losses are discounted using effective interest rate of the financial assets.

Credit-impaired financial assets

At each reportingperiod-end, the Group assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

• significant financial difficulty of the issuer or the borrower;

• the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;

• it is probable that the borrower will enter bankruptcy or other financial reorganization; or

• the disappearance of an active market for a security because of financial difficulties.

Presentation of loss allowance for ECL in the statement of financial position

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in OCI instead of reducing the carrying amount of financial assets in the consolidated statement of financial position.

85

3. Summary of Significant Accounting Policies, Continued

(k) Impairment, Continued

Write-off

The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations for recovering the financial asset in its entirety or a portion thereof. The Group assess whether there are reasonable expectations of recovering the contractual cash flows from customers and individually assess the timing and amount ofwrite-off. The Group expects no significant recovery from the amountwritten-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

(ii) Non-financial assets

The carrying amounts of the Group’snon-financial assets, other than assets arising from employee benefits, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, the recoverable amount is estimated each year.

Recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Group determines the recoverable amount of the cash-generating unit to which the asset belongs. The cash-generating unit (“CGU”) is the smallest group of assets that includes the asset and generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or cash-generating unit is determined as the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. Fair value less costs to sell is based on the best information available to reflect the amount that the Group could obtain from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the unit, and then to reduce the carrying amounts of the other assets in the unit on a pro rata basis.

In respect of assets other than goodwill, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of accumulated depreciation or amortization, if no impairment loss had been recognized from the acquisition cost. An impairment loss in respect of goodwill is not reversed.

86

3. Summary of Significant Accounting Policies, Continued

(l) Leases

The Group appliedK-IFRS No. 1116 using the modified retrospective approach and therefore the comparative information is not restated and continues to be reported applyingK-IFRS No. 1017 andK-IFRS No. 2104.

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease inK-IFRS No. 1116.

(i) As a lessee—Policies from January 1, 2019

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease andnon-lease component on the basis of its relative stand-alone price. For certain leases, the Group accounts for the lease andnon-lease components as a single lease component by applying the practical expedient not to separatenon-lease components.

The Group recognizes aright-of-use asset and lease liability at the lease commencement date. Theright-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at of before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located less any lease incentives received.

Theright-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of theright-of-use asset reflects that the Group will exercise a purchase option. In that case, theright-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, theright-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

87

3. Summary of Significant Accounting Policies, Continued

(l) Leases, Continued

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, includingin-substance fixed payments;

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• amounts expected to be payable under a residual value guarantee; and

• the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revisedin-substance fixed lease payment.

When the lease liability is remeasured, the Group recognizes the amount of the remeasurement of the lease liability as an adjustment to theright-of-use asset. However, if the carrying amount of theright-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Group recognizes any remaining amount of the remeasurement in profit or loss.

The Group presentsright-of-use assets in ‘property, plant and equipment’ and lease liabilities in ‘financial liabilities’ in the consolidated statement of financial position.

The Group has elected not to recognizeright-of-use assets and lease liabilities for leases oflow-value assets and short-term leases. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(ii) As a lessor—Policies from January 1, 2019

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

88

3. Summary of Significant Accounting Policies, Continued

(l) Leases, Continued

When the Group is an intermediate lessor, it accounts for its interests in the head lease and thesub-lease separately. It assesses the lease classification of asub-lease with reference to theright-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies thesub-lease as an operating lease.

If an arrangement contains lease andnon-lease components, then the Group appliesK-IFRS No. 1115 to allocate the consideration in the contract.

At the commencement date, the Group recognizes assets held under a finance lease in its statement of financial position and present them as a receivable at an amount equal to the net investment in the lease and recognize finance income over the lease term, based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment in the lease.

The Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other revenue’.

The accounting policies applicable to the Group as a lessor in the comparative period are not different fromK-IFRS No. 1116 except for the classification of thesub-lease entered into during current reporting period that resulted in a finance lease classification.

(m) Provisions

A provision is recognized as a result of a past event, if the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

The risks and uncertainties that inevitably surround events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows. The unwinding of the discount is recognized as finance cost.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

89

3. Summary of Significant Accounting Policies, Continued

(m) Provisions, Continued

The Group recognizes a liability for warranty obligations based on the estimated costs expected to be incurred under its basic limited warranty. This warranty covers defective products and is normally applicable for 18~36 months from the date of purchase. These liabilities are accrued when product revenues are recognized. Factors that affect the Group’s warranty liability include historical and anticipated rates of warranty claims on those repairs and cost per claim to satisfy the Group’s warranty obligation. Warranty costs primarily include raw materials and labor costs. As these factors are impacted by actual experience and future expectations, management periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Accrued warranty obligations are included in the current andnon-current provisions.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources, are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

(n) Non-current Assets Held for Sale

Non-current assets, or disposal groups comprising assets and liabilities, are classified asheld-for-sale if it is highly probable that they will be recovered primarily from sale rather than through continuing use. In order to be classified as held for sale, the asset (or disposal group) is available for immediate sale in its present condition and its sale is highly probable. The assets (or disposal groups) that are classified asnon-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell on initial classification. The Group recognizes an impairment loss for any subsequent decrease in fair value of the asset (or disposal group) for which an impairment loss was recognized on initial classification asheld-for-sale and a gain for any subsequent increase in fair value in profit or losses, up to the cumulative impairment loss previously recognized.

The Group does not depreciate anon-current asset while it is classified as held for sale or while it is part of a disposal group classified as held for sale.

(o) Employee Benefits

(i) Short-term employee benefits

Short-term employee benefits that are due to be settled within twelve months after the end of the period in which the employees render the related service are recognized in profit or loss on an undiscounted basis. The expected cost of profit-sharing and bonus plans and others are recognized when the Group has a present legal or constructive obligation to make payments as a result of past events and a reliable estimate of the obligation can be made.

(ii) Other long-term employee benefits

The Group’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods.

90

3. Summary of Significant Accounting Policies, Continued

(o) Employee Benefits, Continued

(iii) Defined contribution plan

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the period during which services are rendered by employees.

(iv) Defined benefit plan

A defined benefit plan is a post-employment benefit plan other than defined contribution plans. The Group’s net obligation in respect of its defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted.

The calculation is performed annually by an independent actuary using the projected unit credit method. The discount rate is the yield at the reporting date on high quality corporate bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Group recognizes all actuarial gains and losses arising from defined benefit plans in retained earnings immediately.

The Group determines the net interest expense (income) on the net defined benefit liability (employee benefits asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to thethen-net defined benefit liability (employee benefits asset), taking into account any changes in the net defined benefit liability (employee benefits asset) during the period as a result of contributions and benefit payments. Consequently, the net interest on the net defined benefit liability (employee benefits asset) now comprises: interest cost on the defined benefit obligation, interest income on plan assets, and interest on the effect on the asset ceiling.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Group recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(v) Termination benefits

The Group recognizes expense for termination benefits at the earlier of the date when the entity can no longer withdraw the offer of those benefits and when the entity recognizes costs for a restructuring involving the payment of termination benefits. If the termination benefits are not expected to be settled wholly before twelve months after the end of the annual reporting period, the Group measures the termination benefit with present value of future cash payments.

91

3. Summary of Significant Accounting Policies, Continued

(p) Revenue from contracts with customers

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of estimated returns, trade discounts, volume rebates and other cash incentives paid to customers.

The Group recognizes revenue according to the five stage revenue recognition model (① Identifying the contract®② Identifying performance obligations®③ Determining transaction price®④ Allocating the transaction price to performance obligations®⑤ Recognizing revenue for performance obligations).

The Group generates revenue primarily from sale of display panels. Product revenue is recognized when a customer obtains control over the Group’s products, which typically occurs upon shipment or delivery depending on the terms of the contracts with the customer.

The Group includes return option in the sales contract of display panels with its customers and the consideration receivable from the customer is subject to change due to returns. The Group estimates an amount of variable consideration by using the expected value method which the Group expects to better predict the amount of consideration. The Group includes in the transaction price an amount of variable consideration estimated only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur during the return period when the uncertainty associated with the variable consideration is subsequently resolved. The Group recognizes a refund liability and an asset for its right to recover products from customers if the Group receives consideration from a customer and expects to refund some or all of that consideration to the customer. Sales taxes or value-added taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and are excluded from revenues in the consolidated statement of comprehensive income (loss).

(q) Operating Segments

An operating segment is a component of the Group that: 1) engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with other components of the group, 2) whose operating results are reviewed regularly by the Group’s chief operating decision maker (“CODM”) in order to allocate resources and assess its performance, and 3) for which discrete financial information is available. Management has determined that the CODM of the Group is the Board of Directors. The CODM does not receive and therefore does not review discrete financial information for any component of the Group. Consequently, no operating segment information is included in these consolidated financial statements. Entity wide disclosures of geographic and product revenue information are provided in Note 17 to these consolidated financial statements.

(r) Finance Income and Finance Costs

Finance income comprises interest income on funds invested (including debt instruments measured at FVOCI), dividend income, gains on disposal of debt instruments measured at FVOCI, changes in fair value of financial assets at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Group’s right to receive payment is established.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, gain and losses from financial assets measured at FVTPL, impairment losses recognized on financial assets, and losses on hedging instruments that are recognized in profit or loss. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset.

92

3. Summary of Significant Accounting Policies, Continued

(s) Income Tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

(i) Current tax

Current tax comprises the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, andnon-taxable ornon-deductible items from the accounting profit.

(ii) Deferred tax

Deferred tax is recognized, using the liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

The Group recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that the differences relating to investments in subsidiaries, associates and joint ventures will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

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

(t) Earnings (Loss) Per Share

The Controlling Company presents basic and diluted earnings (loss) per share (“EPS”) data for its common stocks. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Controlling Company by the weighted average number of common stocks outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of common stocks outstanding, adjusted for the effects of all dilutive potential common stocks such as convertible bonds and others.

93

3. Summary of Significant Accounting Policies, Continued

(u) New Standards and Amendments Not Yet Adopted, Continued

A number of new standards are effective for annual periods beginning after January 1, 2019 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements:

The following amended standards and interpretations are not expected to have a significant impact on the Group’s consolidated financial statements:

• Amendments to References to Conceptual Framework inK-IFRS Standards.;

• Definition of a Business (Amendments toK-IFRS No. 1103,Business Combinations);

• Definition of Material (Amendments toK-IFRS No. 1001,Presentation of Financial Statements andK-IFRS No. 1008,Accounting Policies, Changes in Accounting Estimates and Errors); and

• K-IFRS No. 1117,Insurance Contracts.

94

4. Cash and Cash Equivalents and Deposits in Banks

Cash and cash equivalents and deposits in banks as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Current assets
Cash and cash equivalents
Demand deposits	W	3,336,003		2,365,022
Deposits in banks
Time deposits	W	1,500		4,318
Restricted deposits (*)		77,257		74,082
	W	78,757		78,400
Non-current assets
Deposits in banks
Restricted deposits (*)	W	11		11
	W	3,414,771		2,443,433

(*) Includes funds deposited under agreements on mutually beneficial cooperation to aid LG Group companies’ suppliers, restricted deposits pledged to enforce the Group’s investment plans upon the receipt of grants from Gumi city andGyeongsangbuk-do, and others.

5. Receivables and Other Assets

(a) Trade accounts and notes receivable as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Due from third parties	W	2,576,391		2,305,368
Due from related parties		577,689		523,795
	W	3,154,080		2,829,163

(b) Other accounts receivable as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Current assets
Non-trade receivables, net	W	463,614		159,238
Accrued income		10,434		10,075
	W	474,048		169,313
Non-current assets
Long-termnon-trade receivables		9,072		11,448
	W	483,120		180,761

Due from related parties included in other accounts receivable, as of December 31, 2019 and 2018 areW19,431 million andW39,092 million, respectively.

95

5. Receivables and Other Assets, Continued

(c) The aging of trade accounts and notes receivable, and other accounts receivable as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)	December 31, 2019
	Book value				Allowance for impairment
	Trade accounts and notes receivable		Other accounts receivable		Trade accounts and notes receivable			Other accounts receivable
Current	W	3,119,914		208,086		(454	)		(3,292	)
1-15 days past due		34,626		3,512		(6	)		(1	)
16-30 days past due		—		598		—			(4	)
31-60 days past due		—		61		—			—
More than 60 days past due		—		274,185		—			(25	)
	W	3,154,540		486,442		(460	)		(3,322	)

(In millions of won)	December 31, 2018
	Book value				Allowance for impairment
	Trade accounts and notes receivable		Other accounts receivable		Trade accounts and notes receivable			Other accounts receivable
Current	W	2,807,598		177,689		(473	)		(816	)
1-15 days past due		21,558		3,148		(4	)		(26	)
16-30 days past due		454		441		—			(4	)
31-60 days past due		30		96		—			(1	)
More than 60 days past due		—		668		—			(434	)
	W	2,829,640		182,042		(477	)		(1,281	)

The movement in the allowance for impairment in respect of trade accounts and notes receivable and other accounts receivable for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)	2019					2018
	Trade accounts and notes receivable			Other accounts receivable		Trade accounts and notes receivable			Other accounts receivable
Balance at the beginning of the period	W	477			1,281		1,632			1,311
(Reversal of) bad debt expense		(17	)		2,041		(1,155	)		(30	)
Balance at the reporting date	W	460			3,322		477			1,281

96

5. Receivables and Other Assets, Continued

(d) Other assets as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)	December 31, 2019		December 31, 2018
Current assets
Advanced payments	W	6,203		13,259
Prepaid expenses		114,145		89,110
Value added tax refundable		826,730		436,190
Right to recover returned goods		22,106		7,489
	W	969,184		546,048
Non-current assets
Long-term prepaid expenses	W	272,835		381,983
Long-term advanced payments		7,742		—
	W	280,577		381,983

97

6. Other Financial Assets

Other financial assets as of December 31, 2019 and 2018 are as follows:

(In millions of won)	December 31, 2019		December 31, 2018
Current assets
Financial assets at fair value through profit or loss
Derivatives(*)	W	34,036		13,059
Financial assets at fair value through other comprehensive income
Debt instruments
Government bonds	W	6		106
Financial asset carried at amortized cost
Deposits	W	9,585		17,020
Short-term loans		21,623		16,116
Lease receivables		5,695		—
	W	36,903		33,136
	W	70,945		46,301
Non-current assets
Financial assets at fair value through profit or loss
Equity instruments
Intellectual Discovery, Ltd.	W	1,104		4,598
Kyulux, Inc.		1,889		2,460
Fineeva Co., Ltd.		4		286
ARCH Venture Fund Vlll, L.P.		6,302		6,337
Sierra Ventures Fund XII, L.P.		580		—
	W	9,879		13,681
Convertible bonds	W	1,544		1,327
Derivatives(*)		15,640		—
	W	27,063		15,008
Financial assets at fair value through other comprehensive income
Debt instruments
Government bonds	W	70		55
Financial assets carried at amortized cost
Deposits	W	21,451		74,103
Long-term loans		40,827		55,048
Lease receivables		22,099		—
	W	84,377		129,151
	W	111,510		144,214

(*) Represents valuation gain from currency interest rate swap contracts related to foreign currency denominated borrowings and bonds. The contracts are not designated as hedging instruments.

Other financial assets issued by related parties as of December 31, 2018 isW2,000 million.

98

7. Inventories

Inventories as of December 31, 2019 and December 2018 are as follows:

(In millions of won)	December 31, 2019		December 31, 2018
Finished goods	W	730,009		1,084,297
Work-in-process		756,744		856,388
Raw materials		405,854		554,720
Supplies		158,548		195,798
	W	2,051,155		2,691,203

For the years ended December 31, 2019 and 2018, the amount of inventories recognized as cost of sales including inventory write-downs and usage of inventory write-downs included in cost of sales are as follows:

(In millions of won)	2019			2018
Inventories recognized as cost of sales	W	21,607,240			21,251,305
Including: inventory write-downs		472,885			313,180
Including: usage of inventory write-downs		(313,180	)		(206,127	)

There were no significant reversals of inventory write-downs recognized during the years ended December 31, 2019 and 2018.

99

8. Investments in Equity Accounted Investees

(a) Associates as of December 31, 2019 are as follows:

(In millions of won)
Associates	Location	Fiscal year end	Date of incorporation	Business		2019					2018
						Percentage of ownership		Carrying amount			Percentage of ownership		Carrying amount
Paju Electric Glass Co., Ltd.	Paju, South Korea	December 31	January 2005	Manufacture glass for display	%		40	W	50,697	%		40	W	47,823
INVENIA Co., Ltd. (*1)	Seongnam, South Korea	December 31	January 2001	Develop and manufacture equipment for display manufacture			—		—			13		4,166
WooRee E&L Co., Ltd. (*2)	Ansan, South Korea	December 31	June 2008	Manufacture LED back light unit packages			14		7,310			14		4,746
YAS Co., Ltd.	Paju, South Korea	December 31	April 2002	Develop and manufacture deposition equipment for OLEDs			15		19,424			15		16,308
AVATEC Co., Ltd. (*3)	Daegu, South Korea	December 31	August 2000	Process and sell glass for display			14		19,929			17		23,441
Arctic Sentinel, Inc.	Los Angeles, U.S.A.	March 31	June 2008	Develop and manufacture tablet for kids			10		—			10		—
CYNORA GmbH (*4)	Bruchsal, Germany	December 31	March 2003	Develop organic emitting materials for displays and lighting devices			12		4,714			14		8,668

100

8. Investments in Equity Accounted Investees, Continued

(In millions of won)

Associates

Location

Fiscal year end

Date of incorporation

Business

2019

2018

Percentage of ownership

Carrying amount

Percentage of ownership

Carrying amount

Material Science Co., Ltd. (*5)

Seoul, South Korea

December 31

January 2014

Develop, manufacture, and sell materials for display

%

10

W

2,354

%

10

W

3,346

Nanosys Inc. (*6)

Milpitas, U.S.A.

December 31

July 2001

Develop, manufacture, and sell materials for display

4

5,183

4

5,491

W

109,611

W

113,989

101

8. Investments in Equity Accounted Investees, Continued

(*1) During 2019, the Controlling Company disposed of the entire investments, 3,000,000 shares of common stock, in INVENIA Co., Ltd and recognizedW4,324 million of gain on disposal as finance income.

(*2) During 2019, the Controlling Company recognized a reversal of impairment loss ofW1,535 million as finance income for the investments in WooRee E&L Co., Ltd.

(*3) During 2019, the Controlling Company disposed of 650,000 shares of common stock in AVATEC Co., Ltd. As of December 31, 2019, the Controlling Company’s ownership percentage in AVATEC Co., LTD. is 14% and the Controlling Company recognizedW207 million of gain on disposal as finance income.

(*4) During 2019, the Controlling Company recognized an impairment loss ofW3,954 million as finance cost for the investments in CYNORA GmbH. As of December 31, 2019, the Controlling Company’s ownership percentage in CYNORA GmbH decreased from 14% to 12% as the Controlling Company did not participate in the capital increase of CYNORA GmbH.

(*5) During 2019, the Controlling Company recognized an impairment loss ofW736 million as finance cost for the investments in Material Science Co., Ltd.

(*6) During 2019, the Controlling Company recognized a reversal of impairment loss ofW209 million as finance income for the investments in Nanosys Inc.

Although the Controlling Company’s respective share interests in WooRee E&L Co., Ltd., YAS Co., Ltd., AVATEC Co., Ltd., Arctic Sentinel, Inc., CYNORA GmbH, Material Science Co., Ltd. and Nanosys Inc. are below 20%, the Controlling Company is able to exercise significant influence through its right to appoint a director to the board of directors of each investee. Accordingly, the investments in these investees have been accounted for using the equity method.

As of December 31, 2019, the market value of the Group’s share in WooRee E&L Co., Ltd., YAS Co., Ltd., and AVATEC Co., Ltd., all of which are listed in KOSDAQ, areW7,310 million,W39,300 million andW15,380 million, respectively.

Dividends income recognized from equity method investees for the years ended December 31, 2019 and 2018 amounted toW7,502 million andW5,272 million, respectively.

102

8. Investments in Equity Accounted Investees, Continued

(b) Summary of financial information as of and for the years ended December 31, 2019 and 2018 of the significant associate is as follows:

(i) Paju Electric Glass Co., Ltd.

(In millions of won)	December 31, 2019		December 31, 2018
Total assets	W	195,815		194,021
Current assets		126,314		128,788
Non-current assets		69,501		65,233
Total liabilities		66,017		72,686
Current liabilities		51,625		66,797
Non-current liabilities		14,392		5,889
Revenue	W	346,434		384,144
Profit for the year		13,672		12,744
Other comprehensive income		9,933		2,612
Total comprehensive income		23,605		15,356

(c) Reconciliation from financial information of the significant associate to its carrying value in the consolidated financial statements as of December 31, 2019 and 2018 is as follows:

(i) As of December 31, 2019

(In millions of won)
Company	Net asset		Ownership interest			Net asset (applying ownership interest)		Goodwill		Intra- group transaction			Impairment loss			Book value
Paju Electric Glass Co., Ltd.	W	129,798		40	%		51,919		—		(789	)		(433	)		50,697

(ii) As of December 31, 2018

(In millions of won)
Company	Net asset		Ownership interest			Net asset (applying ownership interest)		Goodwill		Intra- group transaction			Book value
Paju Electric Glass Co., Ltd.	W	121,335		40	%		48,534		—		(711	)		47,823

103

8. Investments in Equity Accounted Investees, Continued

(d) Book value of other associates, in aggregate, as of December 31, 2019 and 2018 is as follows:

(i) As of December 31, 2019

(In millions of won)
	Book value		Net profit (loss) of associates (applying ownership interest)
			Profit (loss) for the year		Other comprehensive income (loss)		Total comprehensive income (loss)
Other associates	W	58,914		6,756		190		6,946

(ii) As of December 31, 2018

(In millions of won)
	Book value		Net profit (loss) of associates (applying ownership interest)
			Profit (loss) for the year			Other comprehensive income (loss)			Total comprehensive income (loss)
Other associates	W	66,166		(3,739	)		(988	)		(4,727	)

104

8. Investments in Equity Accounted Investees, Continued

(e) Changes in investments in associates accounted for using the equity method for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
		2019
Company		January 1		Acquisition/ Disposal			Dividends received			Equity income (loss) on investments		Other comprehensive income (loss)		Other gain (loss)			December 31
Associates	Paju Electric Glass Co., Ltd.	W	47,823		—			(6,057	)		5,391		3,973		(433	)		50,697
	Others		66,166		(9,807	)		(1,445	)		6,756		190		(2,946	)		58,914
		W	113,989		(9,807	)		(7,502	)		12,147		4,163		(3,379	)		109,611

(In millions of won)
		2018
Company		January 1		Acquisition/ Disposal		Dividends received			Equity income (loss) on investments			Other comprehensive income (loss)			Other gain (loss)			December 31
Associates	Paju Electric Glass Co., Ltd.	W	46,511		—		(4,172	)		4,439			1,045			—			47,823
	Others		75,996		12,592		(1,100	)		(3,739	)		(988	)		(16,595	)		66,166
		W	122,507		12,592		(5,272	)		700			57			(16,595	)		113,989

105

9. Property, Plant and Equipment

(a) Changes in property, plant and equipment for the year ended December 31, 2019 are as follows:

(In millions of won)
	Land			Buildings and structures			Machinery and equipment			Furniture and fixtures			Construction- in-progress (*1)			Right-of-use asset			Others			Total
Acquisition cost as of January 1, 2019	W	461,828			6,528,939			39,825,070			834,628			12,234,824			—			633,220			60,518,509
Accumulated depreciation as of January 1, 2019		—			(2,991,445	)		(34,817,982	)		(692,372	)		—			—			(368,983	)		(38,870,782	)
Accumulated impairment loss as of January 1, 2019		—			(1,706	)		(28,001	)		—			(17,890	)		—			—			(47,597	)
Book value as of January 1, 2019	W	461,828			3,535,788			4,979,087			142,256			12,216,934			—			264,237			21,600,130
Recognition ofright-of-use assets on initial application ofK-IFRS No. 1116		—			—			—			—			—			142,040			—			142,040
Adjusted book value as of January 1, 2019	W	461,828			3,535,788			4,979,087			142,256			12,216,934			142,040			264,237			21,742,170
Additions		—			—			—			—			5,878,369			29,733			—			5,908,102
Depreciation		—			(302,157	)		(2,609,205	)		(66,592	)		—			(51,063	)		(239,762	)		(3,268,779	)
Disposals		(7,861	)		(4,958	)		(559,616	)		(1,622	)		—			(3,594	)		(16,953	)		(594,604	)
Impairment loss (*2)		—			(125,687	)		(1,212,215	)		(8,278	)		(171,439	)		(4,302	)		(28,509	)		(1,550,430	)
Others (*3)		68			1,064,123			6,958,793			70,140			(8,373,047	)		—			279,923			—
Government grants received		—			(83,200	)		(17,028	)		—			(180,448	)		—			—			(280,676	)
Effect of movements in exchange rates		—			21,984			30,957			884			75,958			436			1,643			131,862
Book value as of December 31, 2019	W	454,035			4,105,893			7,570,773			136,788			9,446,327			113,250			260,579			22,087,645
Acquisition cost as of December 31, 2019	W	454,035			7,381,156			43,604,721			899,053			9,618,256			169,133			823,101			62,949,455
Accumulated depreciation as of December 31, 2019	W	—			(3,154,387	)		(34,810,300	)		(753,987	)		—			(51,581	)		(534,013	)		(39,304,268	)
Accumulated impairment loss as of December 31, 2019	W	—			(120,876	)		(1,223,648	)		(8,278	)		(171,929	)		(4,302	)		(28,509	)		(1,557,542	)

(*1) As of December 31, 2019, construction-in-progress mainly relates to construction of manufacturing facilities.

(*2) During 2019, Display (AD PO) and Lighting CGUs were assessed for impairment, and impairment losses amounting toW1,491,292 million (W1,369,371 million andW121,921 million for Display (AD PO) and Lighting CGUs, respectively) are recognized as othernon-operating expenses. Details of the impairment loss is explained in Note 10(e).

(*3) Others are mainly amounts transferred fromconstruction-in-progress.

106

9. Property, Plant and Equipment, Continued

(b) Changes in property, plant and equipment for the year ended December 31, 2018 are as follows:

(In millions of won)
	Land			Buildings and structures			Machinery and equipment			Furniture and fixtures			Construction- in-progress (*1)			Others			Total
Acquisition cost as of January 1, 2018	W	460,511			6,539,506			38,901,158			772,824			5,971,856			205,475			52,851,330
Accumulated depreciation as of January 1, 2018		—			(2,678,970	)		(33,186,118	)		(631,482	)		—			(148,753	)		(36,645,323	)
Accumulated impairment loss as of January 1, 2018		—			(1,757	)		(2,290	)		—			—			—			(4,047	)
Book value as of January 1, 2018	W	460,511			3,858,779			5,712,750			141,342			5,971,856			56,722			16,201,960
Additions		—			—			—			—			8,605,551			—			8,605,551
Depreciation		—			(318,311	)		(2,568,335	)		(67,274	)		—			(169,739	)		(3,123,659	)
Disposals		(15	)		(161	)		(112,752	)		(311	)		—			(2,971	)		(116,210	)
Impairment loss		—			—			(25,711	)		—			(17,890	)		—			(43,601	)
Others (*2)		1,332			55,430			1,959,645			68,177			(2,357,412	)		380,278			107,450
Effect of movements in exchange rates		—			9,809			14,520			359			15,010			312			40,010
Government grants received		—			—			(1,029	)		—			(181	)		—			(1,210	)
Reclassification to assetsheld-for-sale		—			(69,758	)		(1	)		(37	)		—			(365	)		(70,161	)
Book value as of December 31, 2018	W	461,828			3,535,788			4,979,087			142,256			12,216,934			264,237			21,600,130
Acquisition cost as of December 31, 2018	W	461,828			6,528,939			39,825,070			834,628			12,234,824			633,220			60,518,509
Accumulated depreciation as of December 31, 2018	W	—			(2,991,445	)		(34,817,982	)		(692,372	)		—			(368,983	)		(38,870,782	)
Accumulated impairment loss as of December 31, 2018	W	—			(1,706	)		(28,001	)		—			(17,890	)		—			(47,597	)

(*1) As of December 31, 2018, construction-in-progress mainly relates to construction of manufacturing facilities.

(*2) Others are mainly amounts transferred fromconstruction-in-progress.

(c) Capitalized borrowing costs and capitalization rate for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Capitalized borrowing costs	W	283,525			146,607
Capitalization rate		3.74	%		2.80	%

107

10. Intangible Assets andNon-current Asset Impairment

(a) Changes in intangible assets for the year ended December 31, 2019 are as follows:

(In millions of won)	Intellectual property rights			Software			Member- ships			Development costs			Construction- in-progress (software)			Customer relationships			Technology			Good- will			Others (*2)			Total
Acquisition cost as of January 1, 2019	W	926,969			992,139			57,560			2,142,832			36,963			59,176			11,075			104,311			13,077			4,344,102
Accumulated amortization as of January 1, 2019		(696,948	)		(814,540	)		—			(1,775,922	)		—			(34,854	)		(9,598	)		—			(13,077	)		(3,344,939	)
Accumulated impairment loss as of January 1, 2019		—			—			(11,521	)		—			—			—			—			—			—			(11,521	)
Book value as of January 1, 2019	W	230,021			177,599			46,039			366,910			36,963			24,322			1,477			104,311			—			987,642
Additions - internally developed		—			—			—			437,945			—			—			—			—			—			437,945
Additions - external purchases		28,397			—			846			—			90,369			—			—			—			3			119,615
Amortization (*1)		(42,550	)		(82,016	)		—			(297,959	)		—			(2,637	)		(1,108	)		—			(2	)		(426,272	)
Disposals		—			(239	)		(1,816	)		—			—			—			—			—			—			(2,055	)
Impairment loss (*3)(*4)		(29,152	)		(8,905	)		—			(131,713	)		—			(21,685	)		—			(57,995	)		—			(249,450	)
Reversal of impairment loss		—			—			960			—			—			—			—			—			—			960
Transfer fromconstruction-in-progress		—			111,359			—			—			(112,159	)		—			—			—			—			(800	)
Effect of movements in exchange rates		4,318			347			23			—			72			—			—			1,103			—			5,863
Book value as of December 31, 2019	W	191,034			198,145			46,052			375,183			15,245			—			369			47,419			1			873,448
Acquisition cost as of December 31, 2019	W	959,683			1,097,290			56,612			2,580,777			15,245			59,176			11,074			105,414			13,080			4,898,351
Accumulated amortization as of December 31, 2019	W	(739,498	)		(890,281	)		—			(2,073,881	)		—			(37,491	)		(10,705	)		—			(13,079	)		(3,764,935	)
Accumulated impairment loss as of December 31, 2019	W	(29,151	)		(8,864	)		(10,560	)		(131,713	)		—			(21,685	)		—			(57,995	)		—			(259,968	)

(*1) The Group has classified the amortization as manufacturing overhead costs, selling expenses, administrative expenses and research and development expenses.

(*2) Others mainly consist of rights to use electricity and gas supply facilities.

(*3) During 2019, Display (AD PO) and Lighting CGUs were assessed for impairment, and the impairment losses amounting toW131,628 million (W26,284 andW105,344 million for Display (AD PO) and Lighting CGUs, respectively) are recognized as othernon-operating expenses. The impairment amount is allocated to goodwill, customer relationships and others. Details of the impairment loss is explained in Note 10(e)).

(*4) The Group recognized an impairment loss amounting toW117,822 million in connection with development projects that were terminated after the impairment review.

108

10. Intangible Assets andNon-current Asset Impairment, Continued

(b) Changes in intangible assets for the year ended December 31, 2018 are as follows:

(In millions of won)	Intellectual property rights			Software			Member- ships			Development costs			Construction- in-progress (software)			Customer relationships			Technology			Good- will		Others (*2)			Total
Acquisition cost as of January 1, 2018	W	895,721			898,278			54,985			1,769,998			30,933			59,176			11,074			103,048		13,077			3,836,290
Accumulated amortization as of January 1, 2018		(648,755	)		(736,788	)		—			(1,473,238	)		—			(31,337	)		(8,490	)		—		(13,076	)		(2,911,684	)
Accumulated impairment loss as of January 1, 2018		—			—			(11,785	)		—			—			—			—			—		—			(11,785	)
Book value as of January 1, 2018	W	246,966			161,490			43,200			296,760			30,933			27,839			2,584			103,048		1			912,821
Additions - internally developed		—			—			—			372,835			—			—			—			—		—			372,835
Additions - external purchases		24,596			—			2,844			—			100,820			—			—			—		—			128,260
Amortization (*1)		(43,437	)		(80,159	)		—			(302,685	)		—			(3,517	)		(1,107	)		—		(1	)		(430,906	)
Disposals		—			—			(721	)		—			—			—			—			—		—			(721	)
Impairment loss		—			—			(82	)		—			—			—			—			—		—			(82	)
Reversal of impairment loss		—			—			348			—			—			—			—			—		—			348
Transfer fromconstruction-in-progress		—			95,028			449			—			(95,028	)		—			—			—		—			449
Effect of movements in exchange rates		1,896			1,240			1			—			238			—			—			1,263		—			4,638
Book value as of December 31, 2018	W	230,021			177,599			46,039			366,910			36,963			24,322			1,477			104,311		—			987,642
Acquisition cost as of December 31, 2018	W	926,969			992,139			57,560			2,142,832			36,963			59,176			11,075			104,311		13,077			4,344,102
Accumulated amortization as of December 31, 2018	W	(696,948	)		(814,540	)		—			(1,775,922	)		—			(34,854	)		(9,598	)		—		(13,077	)		(3,344,939	)
Accumulated impairment loss as of December 31, 2018	W	—			—			(11,521	)		—			—			—			—			—		—			(11,521	)

(*1) The Group has classified the amortization as manufacturing overhead costs, selling expenses, administrative expenses and research and development expenses.

(*2) Others mainly consist of rights to use electricity and gas supply facilities.

109

10. Intangible Assets andNon-current Asset Impairment, Continued

(c) Development projects are divided into research activities and development activities. Expenditures on research activities are recognized in profit or loss and qualifying development expenditures are capitalized, respectively.

(d) Development costs as of December 31, 2019 and 2018 are as follows:

(i) As of December 31, 2019

(In millions of won and in years)
Classification	Product type	Book Value		Remaining Useful life
Development completed	Mobile	W	53,350		0.4
	TV		22,597		0.4
	Notebook		14,464		0.4
	Others		12,370		0.7
		W	102,781
Development in process	Mobile	W	157,483		—
	TV		42,587		—
	Notebook		46,167		—
	Others		26,165		—
		W	272,402
		W	375,183

(ii) As of December 31, 2018

(In millions of won and in years)
Classification	Product type	Book Value		Remaining Useful life
Development completed	Mobile	W	108,467		0.5
	TV		28,001		0.5
	Notebook		4,458		0.6
	Others		9,475		0.5
		W	150,401
Development in process	Mobile	W	144,679		—
	TV		55,580		—
	Notebook		9,639		—
	Others		6,611		—
		W	216,509
		W	366,910

110

10. Intangible Assets andNon-current Asset Impairment, Continued

(e) Impairment assessment

(i) During 2019, the Group has distinguished Display (AD PO) and Lighting businesses as separate CGUs from the existing Display CGU due to the initiation of independent factory production of Display (AD PO) business and the decision of Lighting business planned discontinuance in response to business environmental changes. As of December 31, 2019 goodwill is allocated to the Display CGU amounts toW47,419 million.

(ii) Impairment on assets belonging to CGUs was assessed due to the decision of planned discontinuance of Lighting business and adverse changes in the business environment of Display (AD PO). The recoverable amount of each CGU is estimated based on its value in use. Value in use is calculated using the estimatedpre-tax cash flow based on5-year business plan approved by management. The estimated sales of the Group’s products used in the forecast was determined considering external sources and the Group’s past experience. Management estimated the futurepre- tax cash flow based on its past performance and forecasts on market growth. The key assumptions used in the estimation of value in use of each CGU as of December 31, 2019 are as follows.

	Lighting(*2)			Display (AD PO)(*3)			Display(*4)
Discount rate(*1)		6.1	%		6.1	%		6.1	%
Terminal growth rate		0.0	%		0.0	%		1.0	%

(*1) The discount rate was calculated using the weighted average cost of equity capital and debt, and the beta of equity capital was calculated as the average of five global listed companies in the same industry and the Group. Cost of debt was calculated by the interest rate of the Group’s publicly issued bonds and debt ratio was determined using the average of the debt ratios of the five global listed companies in the same industry and the Group.

(*2) As a result of impairment test, the carrying amount of Lighting CGU which produces OLED lighting products was fully impaired with impairment loss ofW230,867 million recognized as othernon-operating expense for the year ended December 31, 2019.

(*3) As a result of impairment test, the carrying amount of Display (AD PO) CGU which produces plastic OLED mobile products and commenced mass production in 2019, exceeds the recoverable amount ofW1,729,209 million and an impairment loss ofW1,395,655 million was recognized as othernon-operating expense for the year ended December 31, 2019. The value in use determined for this CGU is sensitive to the discount rate used in the discounted cash flow model. If the discount rate increases by 0.5%, the value in use would have decreased byW259,221 million (15.0%). If the terminal growth rate decreases by 0.5%, the value in use would have decreased byW169,626 million (9.8%).

(*4) As a result of impairment test for Display CGU, the recoverable amount exceeds the carrying amount byW3,568,588 million. The value in use determined for this CGU is sensitive to the discount rate and terminal growth rate used in the discounted cash flow model. The discount rate and terminal growth rate would need to increase by 1.06% and decrease by 1.39%, individually (holding all the other assumptions constant) for the estimated recoverable amount to be equal to the carrying amount.

111

11. Financial Liabilities

(a) Financial liabilities as of December 31, 2019 and 2018 are as follows:

(In millions of won)	December 31, 2019		December 31, 2018
Current
Short-term borrowings	W	696,793		—
Current portion of long-term borrowing and bonds		1,242,904		1,553,907
Lease liabilities		37,387		—
	W	1,977,084		1,553,907
Non-current
Won denominated borrowings	W	2,692,560		2,700,608
Foreign currency denominated borrowings		6,107,117		2,531,663
Bonds		2,741,516		1,772,599
Derivatives(*)		20,592		25,758
Lease liabilities		51,125		—
	W	11,612,910		7,030,628

(*) Represents currency interest rate swap contracts entered by the Group to hedge interest rate risks with respect to foreign currency denominated borrowings and bonds.

(b) Foreign currency denominated short-term borrowings as of December 31, 2019 are as follows. There are none as of December 31, 2018.

(In millions of won and USD, CNY)
Lender	Annual interest rate as of December 31, 2019 (%)(*)	December 31, 2019
Standard Chartered Bank Korea Limited	12ML + 0.78~0.88	W	347,340
Standard Chartered Bank Vietnam and others	3ML + 0.80~0.90		61,613
Standard Chartered Bank (China) Limited and others	PBOC x 1.05 PBOC – 0.05		287,840
Foreign currency equivalent			USD 353
			CNY 1,737
		W	696,793

(*) ML represents Month LIBOR (London Inter-Bank Offered Rates) and PBOC represents the benchmark interest rate of People’s Bank of China.

112

11. Financial Liabilities, Continued

(c) Won denominated long-term borrowings as of December 31, 2019 and 2018 are as follows:

(In millions of won)
Lender	Annual interest rate as of December 31, 2019 (%)(*)	December 31, 2019			December 31, 2018
Woori Bank	2.75	W	608			1,259
Korea Development Bank and others	CD rate (91days) + 1.00~1.39, 2.21~3.25		3,330,000			2,850,000
Less current portion of long-term borrowings			(638,048	)		(150,651	)
		W	2,692,560			2,700,608

(*) CD represents Certificate of Deposit.

(d) Foreign currency denominated long-term borrowings as of December 31, 2019 and 2018 are as follows:

(In millions of won and USD, CNY)
Lender	Annual interest rate as of December 31, 2019 (%)	December 31, 2019			December 31, 2018
The Export-Import Bank of Korea	3ML+0.75~1.70 6ML+1.25~1.35	W	1,696,177			955,975
China Construction Bank and others	USD: 3ML+0.80~1.43 CNY: PBOC X (0.95~1.05)		4,606,094			2,419,286
Foreign currency equivalent			USD 2,767			USD 2,262
			CNY 18,699			CNY 5,198
Less current portion of long-term borrowings		W	(195,154	)		(843,598	)
		W	6,107,117			2,531,663

113

11. Financial Liabilities, Continued

(e) Details of bonds issued and outstanding as of December 31, 2019 and 2018 are as follows:

(In millions of won)
	Maturity		Annual interest rate as of December 31, 2019 (%)		December 31, 2019			December 31, 2018
Won denominated bonds(*1)
Publicly issued bonds		May 2020 ~ February 2024		1.95~2.95	W	1,730,000			1,900,000
Privately issued bonds		May 2025 ~ May 2033		3.25~4.25		110,000			110,000
Less discount on bonds						(3,404	)		(3,949	)
Less current portion						(409,702	)		(559,658	)
					W	1,426,894			1,446,393
Foreign currency denominated bonds (*2)
Publicly issued bonds		November 2021		3.88	W	347,340			335,430
Privately issued bonds		April 2023		3ML + 1.47		115,780			—
Foreign currency equivalent						USD 400			USD 300
Less discount on bonds						(6,883	)		(9,224	)
						456,237			326,206
Financial liabilities at fair value through profit or loss
Foreign currency convertible bonds		August 2024		1.50	W	858,385			—
Foreign currency equivalent						USD 741			—
					W	2,741,516			1,772,599

(*1) Principal of the won denominated bonds is to be repaid at maturity and interests are paid quarterly.

(*2) Principal of the foreign currency denominated bonds is to be repaid at maturity and interests are paid quarterly or semi-annually.

114

11. Financial Liabilities, Continued

(f) Details of the convertible bonds issued and outstanding as of December 31, 2019 are as follows:

(In won, USD)
	Description
Type	Unsecured foreign currency denominated convertible bonds
Issuance amount	USD 687,800,000
Annual interest rate (%)	1.50
Issuance date	August 22, 2019
Maturity date	August 22, 2024
Interest payment	Payable semi-annually in arrear until maturity date in equal installments commencing on issuance
Principal redemption	1.  Redemption at maturity: Redeemed on the maturity date, at their outstanding principal amount, which has not been early redeemed or converted. 2.  Advanced redemption: The Controlling Company has a right to redeem in advance (call option) and the bondholders have a right to require the Controlling Company to redeem in advance (put option). At exercise, the outstanding principal amount together with accrued but unpaid interest are to be redeemed.
Conversion price	W19,845 per common share (subject to adjustment based on diluted effects of certain events)
Conversion period	From August 23, 2020 to August 12, 2024
Redemption at the option of the issuer (Call option)	-   On or at any time after 3 years from the issuance, if the closing price of the shares for any 20 trading days out of the 30 consecutive trading days is at least 130% of the applicable conversion price -   The aggregate principal amount of the convertible bonds outstanding is less than 10% of the aggregate principal amount originally issued, or -   In the event of certain changes in laws and other directives resulting in additional taxes for the holders
Redemption at the option of the bondholders (Put option)	On the day of 3 years from the issuance

The Controlling Company designated the convertible bonds as financial liabilities at fair value through profit of loss and recognized the change in fair value in profit or loss. The Controlling Company measures the convertible bond at fair value using the market price of convertible bonds disclosed on Bloomberg. The number of convertible shares as of December 31, 2019 is as follows:

(In won and No. of shares)
	December 31, 2019
Aggregate outstanding amount of the convertible bonds	W	813,426,670,000
Conversion price	W	19,845
Number of common shares to be issued at conversion		40,988,998

115

12. Employee Benefits

The Controlling Company and certain subsidiaries’ defined benefit plans provide alump-sum payment to an employee based on final salary rates and length of service at the time the employee leaves the Group.

The defined benefit plans expose the Group to actuarial risks, such as the risk associated with expected periods of service, interest rate risk, market (investment) risk, and others.

(a) Net defined benefit liabilities (employee benefits assets) recognized as of December 31 2019 and 2018 are as follows:

(In millions of won)
	December 31, 2019			December 31, 2018
Present value of partially funded defined benefit obligations	W	1,481,339			1,595,423
Fair value of plan assets		(1,607,253	)		(1,550,063	)
	W	(125,914	)		45,360
Defined benefit liabilities, net	W	1,338			45,360
Employee benefits assets	W	127,252			—

(b) Changes in the present value of the defined benefit obligations for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Opening defined benefit obligations	W	1,595,423			1,562,424
Current service cost		194,469			204,668
Past service cost		(32,006	)		(25,749	)
Interest cost		42,360			49,145
Remeasurements (before tax)		(137,464	)		(27,885	)
Benefit payments		(95,675	)		(88,562	)
Curtailment of plans		(80,470	)		(74,459	)
Net transfers from (to) related parties		(5,349	)		(4,217	)
Others		51			58
Closing defined benefit obligations	W	1,481,339			1,595,423

Weighted average remaining maturity of defined benefit obligations as of December 31, 2019 and 2018 are 15.1 years and 14.4 years, respectively.

(c) Changes in fair value of plan assets for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Opening fair value of plan assets	W	1,550,063			1,466,977
Expected return on plan assets		41,826			48,184
Remeasurements (before tax)		(8,824	)		(22,195	)
Contributions by employer directly to plan assets		186,641			212,224
Benefit payments		(82,266	)		(80,690	)
Net transfers from (to) related parties		280			—
Curtailment of plans		(80,467	)		(74,437	)
Closing fair value of plan assets	W	1,607,253			1,550,063

116

12. Employee Benefits, Continued

(d) Plan assets at the reporting date are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Guaranteed deposits in banks	W	1,607,253		1,550,063

As of December 31, 2019, the Group maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., KB Insurance Co., Ltd. and others.

(e) Expenses recognized in profit or loss for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Current service cost	W	194,469			204,668
Past service cost		(32,006	)		(25,749	)
Net interest cost		534			961
	W	162,997			179,880

Expenses are recognized as following in the consolidated statements of comprehensive income (loss):

(In millions of won)
	2019		2018
Cost of sales	W	119,147		134,879
Selling expenses		10,600		11,045
Administrative expenses		18,360		19,472
Research and development expenses		14,890		14,484
	W	162,997		179,880

(f) Remeasurements of net defined benefit liabilities (assets) included in other comprehensive income (loss) for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Balance at January 1	W	(165,969	)		(170,510	)
Remeasurements
Actuarial profit or loss arising from:
Experience adjustment		43,644			56,225
Demographic assumptions		(19,952	)		(15,379	)
Financial assumptions		113,772			(12,961	)
Return on plan assets		(8,824	)		(22,195	)
Group’s share of associates regarding remeasurements		238			20
	W	128,878			5,710
Income tax	W	(35,235	)		(1,169	)
Balance at December 31	W	(72,326	)		(165,969	)

117

12. Employee Benefits, Continued

(g) Principal actuarial assumptions at the reporting date (expressed as weighted averages) are as follows:

	December 31, 2019			December 31, 2018
Expected rate of salary increase		3.4	%		4.3	%
Discount rate for defined benefit obligations		2.4	%		2.8	%

Assumptions regarding future mortality are based on published statistics and mortality tables. The current mortality underlying the values of the liabilities in the defined benefit plans are as follows:

		December 31, 2019			December 31, 2018
Teens	Males		0.00	%		0.01	%
	Females		0.00	%		0.00	%
Twenties	Males		0.01	%		0.01	%
	Females		0.00	%		0.00	%
Thirties	Males		0.01	%		0.01	%
	Females		0.00	%		0.01	%
Forties	Males		0.02	%		0.03	%
	Females		0.01	%		0.02	%
Fifties	Males		0.04	%		0.05	%
	Females		0.02	%		0.02	%

(h) Reasonably possible changes to respective relevant actuarial assumptions would have affected the defined benefit obligations by the following amounts as of December 31, 2019:

(In millions of won)	Defined benefit obligation
	1% increase			1% decrease
Discount rate for defined benefit obligations	W	(194,432	)		237,364
Expected rate of salary increase		233,106			(194,965	)

118

13. Provisions and Other Liabilities

(a) Changes in provisions for the year ended December 31, 2019 are as follows:

(In millions of won)
	Litigations and claims			Warranties (*)			Others		Total
Balance at January 1, 2019	W	—			122,088			8,930		131,018
Additions		3,073			418,942			17,451		439,466
Usage		(3,073	)		(310,768	)		—		(313,841	)
Balance at December 31, 2019	W	—			230,262			26,381		256,643
Current	W	—			163,144			26,381		189,525
Non-current	W	—			67,118			—		67,118

(*) The provision for warranties on defective products is normally applicable for 18~36 months from the date of purchase. The provision is calculated by using historical and anticipated rates of warranty claims, and costs per claim to satisfy the Group’s warranty obligation.

(b) Other liabilities at the reporting date are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Current liabilities
Withholdings	W	28,376		30,970
Unearned revenues		44,333		43,841
Security deposits		9,310		165
	W	82,019		74,976
Non-current liabilities
Long-term accrued expenses	W	78,537		80,817
Long-term other accounts payable		1,069		3,103
Long-term advances received		6,852		2,116
Security deposits		1,690		10,790
	W	88,148		96,826

119

14. Contingent Liabilities and Commitments

(a) Legal Proceedings

Anti-trust litigations

Some individual claimants filed“follow-on” damages claims against the Group and otherTFT-LCD manufacturers alleging violations of EU competition law. While the Group continues its vigorous defense of the various pending proceedings described above, as of December 31, 2019, the final results cannot be predicted.

Solas OLED Ltd. Litigations

In April 2019, Solas OLED Ltd. filed patent infringement actions against the Controlling Company and television manufacturers in the United States District Court for the Western District of Texas as well as the Controlling Company and its subsidiary, LG Display Germany GmbH, and television manufactures in Mannheim District Court in Germany. As of December 31, 2019, the final results cannot be predicted.

Others

The Group is involved in various disputes in addition to pending proceedings described above. The Group cannot reliably estimate the timing and amount of outflows of resources embodying economic benefits relating to the disputes.

120

14. Contingent Liabilities and Commitments, Continued

(b) Commitments

Factoring and securitization of accounts receivable

The Controlling Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,360 million (W1,574,608 million) in connection with the Controlling Company’s export sales transactions with its subsidiaries. As of December 31, 2019, there are no outstanding short-term borrowings that are past due in connection with these agreements. In connection with all of the contracts in this paragraph, the Controlling Company has sold its accounts receivable with recourse.

The Controlling Company and overseas subsidiaries entered into agreements with financial institutions for accounts receivables sales negotiating facilities. The respective maximum amount of accounts receivables that could be sold under the agreement and the amount of sold but not yet due accounts receivables by contract are as follows:

(In millions of USD and KRW)
Classification	Financial institutions	Credit limit				Not yet due
		Contractual amount		KRW equivalent		Contractual amount		KRW equivalent
Controlling Company	Shinhan Bank		KRW 90,000		90,000		—		—
			USD 25		28,945		—		—
	Sumitomo Mitsui Banking Corporation		USD 20		23,156		—		—
	Bank of Tokyo-Mitsubishi UFJ		KRW 130,000		130,000		—		—
			USD 70		81,046		USD 4		4,640
	BNP Paribas		USD 125		144,725		USD 18		20,888
	ING Bank		USD 150		173,670		—		—
			USD 390				USD 22
			KRW 220,000		671,542		—		25,528
Subsidiaries
LG Display Singapore Pte. Ltd.	Standard Chartered Bank		USD 300		347,340		—		—
LG Display Taiwan Co., Ltd.	BNP Paribas		USD 15		17,367		—		—
	Australia and New Zealand Banking Group Ltd.		USD 70		81,046		—		—
	Taishin International Bank		USD 280		324,184		USD 20		23,157	��
LG Display Germany GmbH	Citibank		USD 80		92,624		—		—
	BNP Paribas		USD 75		86,835		—		—
	DZ Bank AG		USD 4		4,229		USD 2		1,859
	Commerzbank AG		USD 3		4,030		USD 4		4,142
	UniCredit Bank		USD 23		26,099		USD 3		3,827
LG Display America, Inc.	Hong Kong & Shanghai Banking Corp.		USD 800		926,240		USD 749		867,424
	Standard Chartered Bank		USD 600		694,680		—		—
	Sumitomo Mitsui Banking Corporation		USD 200		231,560		—		—
			USD 2,450		2,836,234		USD 778		900,409
			USD 2,840				USD 800
			KRW 220,000		3,507,776		—		925,937

121

14. Contingent Liabilities and Commitments, Continued

(b) Commitments, Continued

In connection with all of the contracts in the above table, the Group has sold its accounts receivable without recourse.

Letters of credit

As of December 31, 2019, the Controlling Company has agreements in relation to the opening of letters of credit up to USD 150 million (W173,670 million) with KEB Hana Bank, USD 50 million (W57,890 million) with Sumitomo Mitsui Banking Corporation, USD 100 million (W115,780 million) with Industrial Bank of Korea and USD 100 million (W115,780 million) with Industrial and Commercial Bank of China.

Payment guarantees

The Controlling Company obtained payment guarantees amounting to USD 1,075 million (W1,244,635 million) from KEB Hana Bank and others for advances received related to the long-term supply agreements.The Controlling Company also obtained payment guarantees amounting toUSD 306 million (W354,070 million) fromKorea Development Bank forforeign currency denominated bonds.

LG Display (China) Co., Ltd. and others are provided with payment guarantees from the China Construction Bank and other various banks amounting to CNY 778 million (W128,863 million), JPY 900 million (W9,571 million), EUR 2.5 million (W3,244 million), VND 46,394 million (W2,320 million) and USD 0.5 million (W579 million), respectively, for their local tax payments and utility payments.

License agreements

As of December 31, 2019, the Group has technical license agreements with Hitachi Display, Ltd. and others in relation to its LCD business and patent cross license agreement with Universal Display Corporation in relation to its OLED business. Also, the Group has a trademark license agreement with LG Corp. as of December 31, 2019.

Long-term supply agreement

As of December 31, 2019, in connection withlong-term supply agreements with customers, the Controlling Company recognized USD 875 million (W1,013,075 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter. The Controlling Company received payment guarantees amounting to USD 1,075 million (W1,244,635 million) from KEB Hana Bank and other various banks relating to advances received (see Note 14(b) payment guarantees).

122

15. Capital and Reserves

(a) Share capital

The Controlling Company is authorized to issue 500,000,000 shares of capital stock (par valueW5,000), and as of December 31, 2019 and December 31, 2018, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2018 to December 31, 2019.

(b) Reserves

Reserves consist mainly of the following:

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

Other comprehensive income (loss) from associates

The other comprehensive income (loss) from associates comprises the amount related to change in equity of investments excluding the changes in net income in equity accounted investees.

Reserves as of December 31, 2019 and 2018 are as follows:

(In millions of won)
	December 31, 2019			December 31, 2018
Foreign currency translation differences for foreign operations	W	(178,452	)		(272,474	)
Other comprehensive loss from associates		(24,569	)		(28,494	)
	W	(203,021	)		(300,968	)

123

15. Capital and Reserves, Continued

(b) Reserves, Continued

The movement in reserves for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	Foreign currency translation differences for foreign operations			Other comprehensive income (loss) from associates (excluding remeasurements)			Total
January 1, 2018	W	(259,749	)		(28,531	)		(288,280	)
Change in reserves		(12,725	)		37			(12,688	)
December 31, 2018		(272,474	)		(28,494	)		(300,968	)
January 1, 2019		(272,474	)		(28,494	)		(300,968	)
Change in reserves		94,022			3,925			97,947
December 31, 2019		(178,452	)		(24,569	)		(203,021	)

124

16. Revenue

Details of revenue for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Sales of goods	W	23,434,903		24,293,798
Royalties		14,409		17,513
Others		26,255		25,260
	W	23,475,567		24,336,571

17. Geographic and Other Information

The following is a summary of the Group’s revenue by region based on the location of customers for the years ended December 31, 2019 and 2018.

(a) Revenue by geography

(In millions of won)
	2019		2018
Domestic	W	1,264,639		1,589,452
Foreign
China		15,432,503		15,242,533
Asia (excluding China)		2,404,739		2,481,112
United States		1,940,321		2,462,918
Europe (excluding Poland)		1,475,942		1,496,138
Poland		957,423		1,064,418
	W	22,210,928		22,747,119
	W	23,475,567		24,336,571

Sales to Company A and Company B amount toW8,494,720 million andW4,501,790 million, respectively, for the year ended December 31, 2019 (2018:W7,262,255 million andW5,171,354 million, respectively). The Group’s top tenend-brand customers together accounted for 80% of sales for the year ended December 31, 2019 (2018: 77%).

(b) Non-current assets by geography

(In millions of won)
	December 31, 2019				December 31, 2018
	Property, plant and equipment		Intangible assets		Property, plant and equipment		Intangible assets
Domestic	W	12,764,240		708,047		14,984,688		816,808
Foreign
China		7,391,279		34,337		5,049,216		12,332
Others		1,932,126		131,064		1,566,226		158,502
	W	9,323,405		165,401		6,615,442		170,834
	W	22,087,645		873,448		21,600,130		987,642

125

17. Geographic and Other Information, Continued

(c) Revenue by product and services

(In millions of won)
	2019		2018
Televisions	W	7,998,137		9,727,260
Desktop monitors		4,028,007		4,040,025
Tablet products		2,251,049		1,990,766
Notebook computers		2,783,718		2,836,888
Mobile and others		6,414,656		5,741,632
	W	23,475,567		24,336,571

18. The Nature of Expenses and Others

The classification of expenses by nature for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Changes in inventories	W	640,048		(341,120	)
Purchases of raw materials, merchandise and others		12,580,796		12,863,812
Depreciation and amortization		3,695,051		3,554,565
Outsourcing		865,935		825,393
Labor		3,072,877		3,222,110
Supplies and others		813,262		1,010,352
Utility		896,112		899,075
Fees and commissions		695,245		722,134
Shipping		196,002		240,288
Advertising		193,436		112,400
Warranty		418,942		234,928
Travel		95,074		104,009
Taxes and dues		109,473		123,210
Impairment loss on property, plant, and equipment		1,550,430		43,601
Impairment loss on intangible assets		249,450		82
Others		625,504		713,990
	W	26,697,637		24,328,829

Total expenses consist of cost of sales, selling, administrative, research and development expenses and othernon-operating expenses, excluding foreign exchange differences.

126

19. Selling and Administrative Expenses

Details of selling and administrative expenses for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Salaries(*1)	W	514,736		500,610
Expenses related to defined benefit plans(*2)		29,018		30,724
Other employee benefits		77,690		90,348
Shipping		162,509		200,434
Fees and commissions		219,784		221,050
Depreciation		225,909		174,575
Taxes and dues		49,826		65,621
Advertising		193,436		112,400
Warranty		418,942		234,928
Rent		2,887		26,691
Insurance		11,386		11,584
Travel		23,594		24,659
Training		12,215		13,309
Others		63,799		64,244
	W	2,005,731		1,771,177

(*1) Expenses recognized in relation to employee termination benefits for the years ended December 31, 2019 and 2018 amount toW218,826 million andW184,941 million, respectively.

(*2) Expenses recognized in relation to employee defined contribution plan for the years ended December 31, 2019 and 2018 amount toW58 million andW111 million, respectively.

20. Personnel Expenses

Details of personnel expenses for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Salaries and wages	W	2,553,485		2,720,014
Other employee benefits		473,916		500,169
Contributions to National Pension plan		73,148		75,668
Expenses related to defined benefit plan and defined contribution plan (*)		163,757		180,737
	W	3,264,306		3,476,588

(*) Expenses recognized in relation to employee defined contribution plan for the years ended December 31, 2019 and 2018 amount toW760 million andW857 million, respectively.

127

21. OtherNon-operating Income and OtherNon-operating Expenses

(a) Details of othernon-operating income for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Foreign currency gain	W	1,174,376		970,306
Gain on disposal of property, plant and equipment		35,788		6,620
Gain on disposal of intangible assets		552		239
Reversal of impairment loss on intangible assets		960		348
Rental income		3,098		3,584
Gain on disposal ofnon-current assets held for sale		8,353		—
Others		44,124		21,941
	W	1,267,251		1,003,038

(b) Details of othernon-operating expenses for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Foreign currency loss	W	1,235,054		1,030,084
Other bad debt expense		1,379		4
Loss on disposal of property, plant and equipment		40,897		15,048
Impairment loss on property, plant, and equipment		1,550,430		43,601
Loss on disposal of intangible assets		139		—
Impairment loss on intangible assets		249,450		82
Donations		693		7,698
Others		19,701		18,716
	W	3,097,743		1,115,233

128

22. Finance Income and Finance Costs

(a) Finance income and costs recognized in profit or loss for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Finance income
Interest income	W	53,378		69,020
Foreign currency gain		135,006		160,989
Gain on disposal of investments in equity accounted investees		4,531		—
Reversal of impairment loss of investments in equity accounted investees		1,744		802
Gain on transaction of derivatives		21,752		2,075
Gain on valuation of derivatives		59,781		13,059
Gain on disposal of financial asset at fair value through profit or loss		138		—
Gain on valuation of financial asset at fair value through profit or loss		402		8,186
	W	276,732		254,131
Finance costs
Interest expense	W	172,750		80,517
Foreign currency loss		154,421		184,309
Loss on disposal of investments in equity accounted investees		—		595
Loss on impairment of investments in equity accounted investees		5,123		17,397
Loss on sale of trade accounts and notes receivable		19,728		13,361
Loss on transaction of derivatives		— ��		49
Loss on valuation of derivatives		17,999		26,600
Loss on valuation of financial asset at fair value through profit or loss		4,630		225
Loss on valuation of financial liabilities at fair value through profit or loss		56,384		—
Others		12,212		3,840
	W	443,247		326,893

(b) Finance income and costs recognized in other comprehensive income or loss for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Foreign currency translation differences for foreign operations	W	106,690		(19,987	)
Finance income (costs) recognized in other comprehensive income or loss after tax	W	106,690		(19,987	)

129

23. Income Taxes

(a) Details of income tax expense (benefit) for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Current tax expense
Current year	W	193,691			167,394
Adjustment for prior years		(35,787	)		82,225
	W	157,904			249,619
Deferred tax expense (benefit)
Origination and reversal of temporary differences	W	(963,385	)		(226,360	)
Change in unrecognized deferred tax assets		333,317			64,818
	W	(630,068	)		(161,542	)
Income tax expense (benefit)	W	(472,164	)		88,077

(b) Income taxes recognized directly in other comprehensive income or loss for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)	2019							2018
	Before tax		Tax expense			Net of tax		Before tax			Tax expense			Net of tax
Remeasurements of net defined benefit liabilities (assets)	W	128,640		(35,235	)		93,405		5,690			(1,169	)		4,521
Foreign currency translation differences for foreign operations		106,690		—			106,690		(19,987	)		—			(19,987	)
Change in equity of equity method investee		4,163		—			4,163		57			—			57
	W	239,493		(35,235	)		204,258		(14,240	)		(1,169	)		(15,409	)

130

23. Income Taxes, Continued

(c) Reconciliation of the actual effective tax rate for the years ended December 31, 2019 and 2018 is as follows:

(In millions of won)
		2019					2018
Loss for the year	W				(2,872,078	)				(179,443	)
Income tax expense (benefit)					(472,164	)				88,077
Loss before income tax					(3,344,242	)				(91,366	)
Income tax expense (benefit) using the statutory tax rate of each country			23.94	%	(800,660	)		(33.60	%)	30,695
Non-deductible expenses			(0.95	%)	31,649			(40.07	%)	36,608
Tax credits			1.47	%	(49,269	)		117.27	%	(107,146	)
Change in unrecognized deferred tax assets			(9.97	%)	333,318			(70.94	%)	64,818
Adjustment for prior years (*1)			1.07	%	(35,787	)		(90.00	%)	82,225
Effect on change in tax rate			(0.40	%)	13,353			15.68	%	(14,326	)
Others			(1.05	%)	35,232			5.25	%	(4,797	)
Actual income tax expense (benefit)	W				(472,164	)				88,077
Actual effective tax rate					(*2	)				(*2	)

(*1) Consist of changes in tax credits in amended tax returns and expected amount of income tax adjustment in relation to the transfer price investigation and others

(*2) Actual effective tax rate are not calculated due to loss before income tax.

(d) Tax uncertainties

In June 2019, LG Display Guangzhou Co., Ltd, LG Display Yantai Co., Ltd. and LG Display Nanjing Co., Ltd., subsidiaries of the Controlling Company, were imposed of additional taxes amounting toW127.1 billion, in aggregate, by the Chinese tax authorities in connection with the transfer price investigation initiated in 2015.

OECD Guidelines, the Korea-China tax treaty, and the domestic tax laws of both countries stipulate mutual agreements to resolve double taxation. In July 2019, the Controlling Company registered an application form to initiate a mutual agreement on the estimated amount ofW109.2 billion corporate tax adjustment from the Korea National Tax Service. The application was officially registered as a mutual agreement and the two tax authorities held their first meeting in November 2019 and further consultation will be conducted in 2020.

Meanwhile, the Controlling Company expects that the mutual agreement between tax authorities will be processed and be resolved within a reasonable period and the Controlling Company recognized the estimated income tax refund as current tax asset as of December 31, 2019.

24. Deferred Tax Assets and Liabilities

(a) Unrecognized deferred tax liabilities

As of December 31, 2019, in relation to the taxable temporary differences on investments in subsidiaries amounting toW69,758 million, the Controlling Company did not recognize deferred tax liabilities since the Controlling Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary differences will not reverse in the foreseeable future.

131

24. Deferred Tax Assets and Liabilities, Continued

(b) Unused tax credit carryforwards for which no deferred tax asset is recognized

Realization of deferred tax assets related to tax credit carryforwards which are primarily related to Korea is dependent on whether sufficient taxable income will be generated prior to their expiration. As of December 31, 2019, the amount of unused tax credit carryforwards for which no deferred tax asset is recognized and their expiration dates are as follows:

(In millions of won)
	Total		December 31, 2020		December 31, 2021		December 31, 2022		December 31, 2023		December 31, 2024
Tax credit carryforwards	W	549,056		44,692		70,646		220,135		114,845		98,738

132

24. Deferred Tax Assets and Liabilities, Continued

(c) Deferred tax assets and liabilities are attributable to the following:

(In millions of won)	Assets				Liabilities						Total
	December 31, 2019		December 31, 2018		December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Other accounts receivable, net	W	—		—		(4,364	)		(1,013	)		(4,364	)		(1,013	)
Inventories, net		89,522		60,606		—			—			89,522			60,606
Investments in subsidiaries and associates		—		13,404		(20,015	)		—			(20,015	)		13,404
Accrued expenses		131,196		126,072		—			—			131,196			126,072
Property, plant and equipment		691,599		445,721		(21,690	)		(1,495	)		669,909			444,226
Intangible assets		21,886		3,468		(10,759	)		(14,588	)		11,127			(11,120	)
Provisions		59,875		32,468		(4,446	)		—			55,429			32,468
Gain or loss on foreign currency translation, net		—		13		—			—			—			13
Others		137,667		20,850		(328	)		(7,665	)		137,339			13,185
Tax loss carryforwards		607,432		134,845		—			—			607,432			134,845
Tax credit carryforwards		38,337		308,393		—			—			38,337			308,393
Deferred tax assets (liabilities)	W	1,777,514		1,145,840		(61,602	)		(24,761	)		1,715,912			1,121,079

133

24. Deferred Tax Assets and Liabilities, Continued

(d) Changes in deferred tax assets and liabilities for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)	January 1, 2018			Profit or loss			Other comprehensive loss			December 31, 2018			Profit or loss			Other comprehensive loss			December 31, 2019
Other accounts receivable, net	W	(1,441	)		428			—			(1,013	)		(3,351	)		—			(4,364	)
Inventories, net		34,550			26,056			—			60,606			28,916			—			89,522
Defined benefit liabilities, net		2,375			(1,206	)		(1,169	)		—			35,235			(35,235	)		—
Subsidiaries and associates		29,061			(15,657	)		—			13,404			(33,419	)		—			(20,015	)
Accrued expenses		183,903			(57,831	)		—			126,072			5,124			—			131,196
Property, plant and equipment		409,928			34,298			—			444,226			225,683			—			669,909
Intangible assets		(21,189	)		10,069			—			(11,120	)		22,247			—			11,127
Provisions		27,018			5,450			—			32,468			22,961			—			55,429
Gain or loss on foreign currency translation, net		13			—			—			13			(13	)		—			—
Others		27,562			(14,377	)		—			13,185			124,154			—			137,339
Tax loss carryforwards		—			134,845			—			134,845			472,587			—			607,432
Tax credit carryforwards		268,926			39,467			—			308,393			(270,056	)		—			38,337
Deferred tax assets (liabilities)	W	960,706			161,542			(1,169	)		1,121,079			630,068			(35,235	)		1,715,912

134

25. Loss Per Share Attributable to Owners of the Controlling Company

(a) Basic loss per share for the years ended December 31, 2019 and 2018 are as follows:

(In won and No. of shares)
	2019			2018
Loss attributable to owners of the Controlling Company for the year	W	(2,829,705,069,665	)		(207,239,484,774	)
Weighted-average number of common stocks outstanding		357,815,700			357,815,700
Basic loss per share	W	(7,908	)		(579	)

For the years ended December 31, 2019 and 2018, there were no events or transactions that resulted in changes in the number of common stocks used for calculating loss per share.

(b) The Controlling Company issued potential common stocks as a result of issuance of the convertible bonds on August 22, 2019. Diluted loss per share is not different from basic loss per share due to loss for the year ended December 31, 2019. As of December 31, 2019, 40,988,998 options were excluded from the calculation of weighted-average number of common stocks due to antidilution.

26. Financial Risk Management

The Group is exposed to credit risk, liquidity risk and market risks. The Group identifies and analyzes such risks, and controls are implemented under a risk management system to monitor and manage these risks at below an acceptable level.

(a) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

(i) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Controlling Company, Korean won (KRW). The currencies in which these transactions primarily are denominated are USD, CNY, JPY, etc.

Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group, primarily KRW, USD and CNY.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Group adopts policies to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. Meanwhile, the Group entered into currency interest rate swap contracts to hedge currency risk with respect to foreign currency borrowings and bonds.

135

26. Financial Risk Management, Continued

(a) Market risk, Continued

i) Exposure to currency risk

The Group’s exposure to foreign currency risk based on notional amounts at the reporting date is as follows:

(In millions)	December 31, 2019
	USD			JPY			CNY			TWD			EUR			PLN		VND
Cash and cash equivalents		1,594			68			8,360			33			5			25		28,663
Trade accounts and notes receivable		2,485			19			550			—			—			—		—
Non-trade receivable		276			455			230			3			2			—		13,131
Other assets denominated in foreign currencies		29			526			5,668			369			5			503		4,032
Trade accounts and notes payable		(628	)		(9,043	)		(2,289	)		—			—			—		(291,891	)
Other accounts payable		(488	)		(12,396	)		(3,239	)		(4	)		(10	)		—		(786,356	)
Financial liabilities		(4,255	)		—			(20,436	)		—			—			—		—
Aggregate notional amounts in the consolidated statements of financial position		(987	)		(20,371	)		(11,156	)		401			2			528		(1,032,421	)
Currency swap contracts		2,085			—			—			—			—			—		—
Net exposure		1,098			(20,371	)		(11,156	)		401			2			528		(1,032,421	)

(In millions)	December 31, 2018
	USD			JPY			CNY			TWD			EUR			PLN			VND
Cash and cash equivalents		790			83			5,515			121			8			206			2,070,889
Trade accounts and notes receivable		2,175			7			1,098			—			—			—			—
Non-trade receivable		21			852			201			3			4			—			23,182
Other assets denominated in foreign currencies		33			220			11,157			108			12			23			2,782
Trade accounts and notes payable		(863	)		(12,501	)		(2,862	)		—			—			—			(355,390	)
Other accounts payable		(928	)		(20,326	)		(4,762	)		(6	)		(3	)		(4	)		(1,585,130	)
Financial liabilities		(2,571	)		—			(5,198	)		—			—			—			—
Aggregate notional amounts in the consolidated statements of financial position		(1,343	)		(31,665	)		5,149			226			21			225			156,333
Currency swap contracts		780			—			—			—			—			—			—
Net exposure		(563	)		(31,665	)		5,149			226			21			225			156,333

136

26. Financial Risk Management, Continued

(a) Market risk, Continued

Average exchange rates applied for the years ended December 31, 2019 and 2018 and the exchange rates at December 31, 2019 and December 31, 2018 are as follows:

(In won)	Average rate				Reporting date spot rate
	2019		2018		December 31, 2019		December 31, 2018
USD	W	1,165.46		1,100.21		1,157.80		1,118.10
JPY		10.70		9.96		10.63		10.13
CNY		168.56		166.41		165.74		162.76
TWD		37.74		36.51		38.48		36.58
EUR		1,304.52		1,298.53		1,297.43		1,279.16
PLN		303.62		304.87		304.87		297.33
VND		0.0502		0.0478		0.0500		0.0482

ii) Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Group’s assets or liabilities denominated in a foreign currency as of December 31, 2019 and 2018, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considers to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:

(In millions of won)	December 31, 2019						December 31, 2018
	Equity			Profit or loss			Equity			Profit or loss
USD (5 percent weakening)	W	23,570			105,398			(46,136	)		38,725
JPY (5 percent weakening)		(8,397	)		(6,418	)		(12,060	)		(10,497	)
CNY (5 percent weakening)		(92,454	)		11			41,779			318
TWD (5 percent weakening)		772			—			413			1
EUR (5 percent weakening)		221			(278	)		1,197			390
PLN (5 percent weakening)		8,036			28			3,451			(236	)
VND (5 percent weakening)		(1,871	)		(1,871	)		273			273

A stronger won against the above currencies as of December 31, 2019 and 2018 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

137

26. Financial Risk Management, Continued

(a) Market risk, Continued

(ii) Interest rate risk

Interest rate risk arises principally from the Group’s bonds and borrowings. The Group establishes and applies its policy to reduce uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures. Meanwhile, the Group entered into currency interest rate swap contracts amount of USD 1,785 million (W2,066,673 million) in notional amount to hedge interest rate risk with respect to variable interest rate applied foreign currency denominated borrowings.

i) Profile

The interest rate profile of the Group’s interest-bearing financial instruments at the reporting date is as follows:

(In millions of won)	December 31, 2019			December 31, 2018
Fixed rate instruments
Financial assets	W	3,414,838			2,443,583
Financial liabilities		(6,066,554	)		(5,033,515	)
	W	(2,651,716	)		(2,589,932	)
Variable rate instruments
Financial liabilities	W	(7,414,336	)		(3,525,262	)

ii) Equity and profit or loss sensitivity analysis for variable rate instruments

For the years ended December 31, 2019 and 2018 a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for the respective following years. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

(In millions of won)	Equity					Profit or loss
	1%p increase			1%p decrease		1%p increase			1%p decrease
December 31, 2019
Variable rate instruments (*)	W	(38,774	)		38,774		(38,774	)		38,774
December 31, 2018
Variable rate instruments (*)	W	(25,558	)		25,558		(25,558	)		25,558

(*) Financial instruments related to interest rate swap not qualified for hedging are excluded.

(b) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.

The Group’s exposure to credit risk of trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management believes that the default risk of the country in which each customer operates, do not have a significant influence on credit risk since the majority of the customers are global electronic appliance manufacturers operating in global markets.

The Group establishes credit limits for each customer and each new customer is analyzed quantitatively and qualitatively before determining whether to utilize third party guarantees, insurance or factoring as appropriate.

138

26. Financial Risk Management, Continued

(b) Credit risk, Continued

In relation to the impairment of financial assets subsequent to initial recognition, the Group recognizes the changes in expected credit loss (“ECL”) at each reporting date in order to reflect changes in the credit risks based on ECL model.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of December 31, 2019 and 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Financial assets carried at amortized cost
Cash and cash equivalents	W	3,336,003		2,365,022
Deposits in banks		78,768		78,411
Trade accounts and notes receivable, net		3,154,080		2,829,163
Non-trade receivables		463,614		159,238
Accrued income		10,434		10,075
Deposits		31,036		91,123
Short-term loans		21,623		16,116
Long-term loans		40,827		55,048
Long-termnon-trade receivables		9,072		11,448
Lease receivables		27,794		—
	W	7,173,251		5,615,644
Financial assets at fair value through profit or loss
Convertible bonds	W	1,544		1,327
Derivatives		49,676		13,059
	W	51,220		14,386
Financial assets at fair value through other comprehensive income
Debt instruments	W	76		161
	W	7,224,547		5,630,191

Trade accounts and notes receivables are insured in order to manage credit risk if it does not meet the Group’s internal credit ratings. Uninsured trade accounts and notes receivables are managed by continuous monitoring of internal credit ratings and seeking insurance coverage, if necessary.

139

26. Financial Risk Management, Continued

(c) Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group has historically been able to satisfy its cash requirements from cash flows from operations and debt and equity financing. To the extent that the Group does not generate sufficient cash flows from operations to meet its capital requirements, the Group relies on other financing activities, such as external long-term borrowings and offerings of debt securities, equity-linked and other debt securities. In addition, the Group maintains a line of credit with various banks.

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of December 31, 2019.

(In millions of won)			Contractual cash flows in
	Carrying amount		Total			6 months or less		6-12 months		1-2 years			2-5 years			More than 5 years
Non-derivative financial liabilities
Borrowings	W	10,329,671		11,514,568			1,174,941		723,363		2,173,444			6,471,876			970,944
Bonds		3,151,218		3,306,729			297,649		184,878		908,281			1,780,014			135,907
Trade accounts and notes payable		2,618,261		2,618,261			2,618,261		—		—			—			—
Other accounts payable		2,069,105		2,069,105			2,068,039		1,066		—			—			—
Other accounts payable (enterprise procurement cards)(*)		2,328,016		2,353,355			1,287,023		1,066,332		—			—			—
Long-term other accounts payable		1,069		1,069			—		—		1,069			—			—
Security deposits received		11,000		11,000			3,980		5,330		1,690			—			—
Lease liabilities		88,512		97,562			26,702		14,543		22,931			23,096			10,290
Derivative financial liabilities
Derivatives	W	20,592		(13,101	)		—		—		(4,870	)		(8,231	)		—
	W	20,617,444		21,958,548			7,476,595		1,995,512		3,102,545			8,266,755			1,117,141

(*) Represents the amount of utility expenses and others paid by enterprise procurement cards and the outstanding payables are settled at the end of the billing cycle. The payments to the card company arises from operating activities of purchasing of goods and services thus the related cash flow is disclosed as operating activities.

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

140

26. Financial Risk Management, Continued

(d) Capital Management

Management’s policy is to maintain a capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowings to equity ratio and other financial ratios are used by management to achieve an optimal capital structure. Management also monitors the return on capital as well as the level of dividends to ordinary shareholders.

(In millions of won)
	December 31, 2019			December 31, 2018
Total liabilities	W	23,086,282			18,289,464
Total equity		12,488,281			14,886,246
Cash and deposits in banks (*1)		3,414,760			2,443,422
Borrowings (including bonds)		13,480,889			8,558,777
Total liabilities to equity ratio		185	%		123	%
Net borrowings to equity ratio (*2)		81	%		41	%

(*1) Cash and deposits in banks consist of cash and cash equivalents and current deposits in banks.

(*2) Net borrowings to equity ratio is calculated by dividing total borrowings (including bonds and excluding lease liabilities) less cash and current deposits in banks by total equity.

141

26. Financial Risk Management, Continued

(e) Determination of fair value

(i) Measurement of fair value

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial andnon-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

i) Current assets and liabilities

The carrying amounts approximate their fair value because of the short maturity of these instruments.

ii) Trade receivables and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes. The carrying amounts of current receivables approximate their fair value.

iii) Investments in equity and debt securities

The fair value of marketable financial assets at FVTPL and FVOCI is determined by reference to their quoted closing bid price at the reporting date. The fair value ofnon-marketable instruments is determined using the results of fair value assessment performed by external valuation institution and others.

iv) Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, except for the liabilities at FVTPL, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

142

26. Financial Risk Management, Continued

(e) Determination of fair value, Continued

(ii) Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated statements of financial position as of December 31, 2019 and 2018 are as follows:

(In millions of won)
	December 31, 2019					December 31, 2018
	Carrying amounts		Fair values			Carrying amounts		Fair values
Financial assets carried at amortized cost
Cash and cash equivalents	W	3,336,003		(	*)		2,365,022		(	*)
Deposits in banks		78,768		(	*)		78,411		(	*)
Trade accounts and notes receivable		3,154,080		(	*)		2,829,163		(	*)
Non-trade receivables		463,614		(	*)		159,238		(	*)
Accrued income		10,434		(	*)		10,075		(	*)
Deposits		31,036		(	*)		91,123		(	*)
Short-term loans		21,623		(	*)		16,116		(	*)
Long-term loans		40,827		(	*)		55,048		(	*)
Long-termnon-trade receivables		9,072		(	*)		11,448		(	*)
Lease receivables		27,794		(	*)		—		—
Financial assets at fair value through profit or loss
Equity instruments	W	9,879		9,879			13,681		13,681
Convertible bonds		1,544		1,544			1,327		1,327
Derivatives		49,676		49,676			13,059		13,059
Financial assets at fair value through other comprehensive income
Debt instruments	W	76		76			161		161
Financial liabilities at fair value through profit or loss
Derivatives	W	20,592		20,592			25,758		25,758
Convertible bonds		858,385		858,385			—		—
Financial liabilities carried at amortized cost
Borrowings	W	10,329,671		10,394,498			6,226,520		6,281,996
Bonds		2,292,833		2,345,867			2,332,257		2,384,987
Trade accounts and notes payable		2,618,261		(	*)		3,087,461		(	*)
Other accounts payable		4,397,121		(	*)		3,566,629		(	*)
Long-term other accounts payable		1,069		(	*)		3,103		(	*)
Security deposits received		11,000		(	*)		10,955		(	*)
Lease liabilities		88,512		(	*)		—		—

(*) Excluded from disclosures as the carrying amount approximates fair value.

143

26. Financial Risk Management, Continued

(e) Determination of fair value, Continued

(iii) Fair values of financial assets and liabilities

i) Fair value hierarchy

The table below analyzes financial instruments carried at fair value based on the input variables used in the valuation method to measure fair value of assets and liabilities. The different levels have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

• Level 3: inputs for the asset or liability that are not based on observable market data

ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of December 31, 2019 and 2018 are as follows:

(In millions of won)	December 31, 2019
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss
Equity instruments	W	—		—		9,879		9,879
Convertible bonds		—		—		1,544		1,544
Derivatives		—		—		49,676		49,676
Financial asset at fair value through other comprehensive income
Debt instruments	W	76		—		—		76
Financial liabilities at fair value through profit or loss
Derivatives	W	—		—		20,592		20,592
Convertible bonds		858,385		—		—		858,385
(In millions of won)	December 31, 2018
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss
Equity instruments	W	—		—		13,681		13,681
Convertible bonds		—		—		1,327		1,327
Derivatives		—		—		13,059		13,059
Financial asset at fair value through other comprehensive income
Debt instruments	W	161		—		—		161
Financial liabilities at fair value through profit or loss
Derivatives	W	—		—		25,758		25,758

144

26. Financial Risk Management, Continued

(e) Determination of fair value, Continued

iii) Financial instruments not measured at fair value but for which the fair value is disclosed

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)	December 31, 2019						Valuation technique	Input
Classification	Level 1		Level 2		Level 3
Liabilities
Borrowings	W	—		—		10,394,498	Discounted cash flow	Discount rate
Bonds		—		—		2,345,867	Discounted cash flow	Discount rate
(In millions of won)	December 31, 2018						Valuation technique	Input
Classification	Level 1		Level 2		Level 3
Liabilities
Borrowings	W	—		—		6,281,996	Discounted cash flow	Discount rate
Bonds		—		—		2,384,987	Discounted cash flow	Discount rate

The interest rates applied for determination of the above fair value at the reporting date are as follows:

	December 31, 2019	December 31, 2018
Borrowings, bonds and others	1.87~3.56%	2.09~3.37%

145

27. Leases

Refer to accounting policies in Note 3(l).

(a) Leases as lessee

The Group leases buildings, vehicles, machinery and equipment and others. Information about leases for which the Group is a lessee is presented below.

(i) Right-of-use assets

Right-of-use assets are presented as property, plant and equipment. (See Note 9(a))

(In millions of won)
	Buildings and structures			Land			Machinery and equipment			Vehicles			Others			Total
Balance at January 1, 2019	W	75,777			53,960			1,111			10,800			392			142,040
Addition		19,743			1,890			2,882			4,971			247			29,733
Depreciation		(39,376	)		(2,272	)		(1,305	)		(7,760	)		(350	)		(51,063	)
Derecognition ofright-of-use assets		(3,056	)		—			(538	)		—			—			(3,594	)
Impairment		(248	)		(3,833	)		(20	)		(193	)		(8	)		(4,302	)
Gain or loss on foreign currency translation		373			9			17			30			7			436
Balance at December 31, 2019	W	53,213			49,754			2,147			7,848			288			113,250

(ii) Amounts recognized in profit or loss other thanright-of-use assets

(In millions of won)
	December 31, 2019
Interest on lease liabilities	W	(4,085	)
Income fromsub-leasingright-of-use assets		1,079
Expenses relating to short-term leases		(1,783	)
Expenses relating to leases oflow-value assets		(1,188	)

(iii) Lease liabilities

(In millions of won)
	December 31, 2019
Balance at January 1, 2019	W	115,119
Additions		33,878
Interest expense		4,085
Repayment of liabilities		(64,570	)
Balance at December 31, 2019	W	88,512

146

27. Leases, Continued

(b) Leases as lessor

During 2019, the Groupsub-leased certain right of use assets and classified them as finance leases. During 2019, the Group recognized a gain ofW3,390 million on derecognition of theright-of-use assets pertaining to buildings, machinery and equipment and presented the gain as gain on disposal of property, plant and equipment.

The Group recognized interest income on lease receivables ofW1,079 million.

The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments to be received after the reporting date. UnderK-IFRS No. 1017, the Group did not have any finance leases as a lessor.

(In millions of won)
	December 31, 2019
6 months or less	W	3,282
6-12 months		3,282
1-2 years		6,563
2-5 years		16,956
Total undiscounted lease receivable		30,083
Unearned finance income		(2,289	)
Net Investment in the lease		27,794

28. Changes in liabilities arising from financing activities

Changes in liabilities arising from financing activities for the year ended December 31, 2019 are as follows:

(In millions of won)
	January 1, 2019		Cash flows from financing activities			Non-cash transactions										December 31, 2019
						Reclassification			Gain or loss on foreign currency translation			Effective interest adjustment		Others
Short-term borrowings	W	—		686,097			—			10,696			—		—		696,793
Current portion of long-term borrowings and bonds		1,553,907		(1,567,818	)		1,237,344			18,887			584		—		1,242,904
Long-term borrowings		5,232,271		4,341,087			(827,883	)		54,202			—		—		8,799,677
Bonds		1,772,599		1,323,251			(409,461	)		(20,351	)		10,568		64,910		2,741,516
Lease liabilities		115,119		(64,570	)		—			1,849			4,085		32,029		88,512
	W	8,673,896		4,718,047			—			65,283			15,237		96,939		13,569,402

147

29. Related Parties and Others

(a) Related parties

Related parties as of December 31, 2019 are as follows:

Classification	Description
Associates(*)	Paju Electric Glass Co., Ltd. and others
Entity that has significant influence over the Controlling Company	LG Electronics Inc.
Subsidiaries of the entity that has significant influence over the Controlling Company	Subsidiaries of LG Electronics Inc.

(*) Details of associates are described in Note 8.

148

29. Related Parties and Others, Continued

(b) Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)	2019
	Sales and others				Purchase and others
			Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
INVENIA Co., Ltd.(*1)	W	—		180		1,024		45,580		—		297
AVATEC Co., Ltd.		2,639		265		—		—		73,323		891
Paju Electric Glass Co., Ltd.		—		6,057		342,958		—		—		4,416
WooRee E&L Co., Ltd.		—		—		6,441		—		—		5
YAS Co., Ltd.		—		1,000		6,764		102,316		—		3,655
Material Science Co., Ltd.		—		—		59		—		—		313
	W	2,639		7,502		357,246		147,896		73,323		9,577
Entity that has significant influence over the Controlling Company
LG Electronics Inc.	W	947,409		—		13,240		815,629		—		153,212
Subsidiaries of the entity that has significant influence over the Controlling Company
LG Electronics India Pvt. Ltd.	W	87,116		—		—		—		—		194
LG Electronics Vietnam Haiphong Co., Ltd.		277,743		—		—		3,019		—		924
LG Electronics Nanjing New Technology Co., Ltd.		297,033		—		—		31		—		486
LG Electronics RUS, LLC		100,894		—		—		—		—		1,972

149

29. Related Parties and Others, Continued

(In millions of won)	2019
	Sales and others				Purchase and others
			Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
LG Electronics do Brasil Ltda.	W	145,546		—		—		—		—		289
LG Innotek Co., Ltd.		7,572		—		53,886		—		—		79,162
Qingdao LG Inspur Digital Communication Co., Ltd.		22,563		—		—		—		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		41,858		—		—		—		—		—
LG Electronics Mexicalli, S.A. DE C.V.		114,520		—		—		—		—		85
LG Electronics Mlawa Sp. z o.o.		618,715		—		—		—		—		1,967
LG Hitachi Water Solutions Co., Ltd.(*2)		—		—		—		79,986		—		—
LG Electronics Reynosa, S.A. DE C.V.		722,194		—		—		—		—		1,155
LG ElectronicsAir-Conditioning (Shandong) Co., Ltd.		—		—		444		14,527		—		88
HiEntech Co., Ltd.(*2)		47		—		—		7,264		—		21,576
HiEntech (Tianjin) Co., Ltd.(*2)		—		—		—		32,335		—		15,423
LG Electronics Egypt S.A.E.		97,359		—		—		—		—		241
LG Electronics Alabama Inc.		12,869		—		—		—		—		—
LG Electronics Japan, Inc.		—		—		—		14		—		6,236
P.T. LG Electronics Indonesia		11,200		—		—		—		—		176
Others		12,564		—		—		33		—		6,996
	W	2,569,793		—		54,330		137,209		—		136,970
	W	3,519,841		7,502		424,816		1,100,734		73,323		299,759

(*1) Represents transactions occurred prior to the Group’s disposal of the entire investments

(*2) Represents transactions occurred prior to LG Electronics Inc.’s disposal of the entire investments.

150

29. Related Parties and Others, Continued

(In millions of won)	2018
	Sales and others				Purchase and others
			Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
INVENIA Co., Ltd.	W	—		30		1,608		58,111		—		896
AVATEC Co., Ltd.		—		530		—		—		71,403		905
Paju Electric Glass Co., Ltd.		—		4,172		364,183		—		—		4,411
WooRee E&L Co., Ltd.		—		—		58		—		—		144
YAS Co., Ltd.		—		—		5,281		143,192		—		3,391
LB Gemini New Growth Fund No. 16(*)		1,112		540		—		—		—		—
	W	1,112		5,272		371,130		201,303		71,403		9,747
Entity that has significant influence over the Controlling Company
LG Electronics Inc.	W	1,215,153		—		36,522		1,041,563		—		127,775
Subsidiaries of the entity that has significant influence over the Controlling Company
LG Electronics India Pvt. Ltd.	W	71,798		—		—		—		—		103
LG Electronics Vietnam Haiphong Co., Ltd.		173,051		—		—		4,541		—		166
LG Electronics Nanjing New Technology Co., Ltd.		223,524		—		—		424		—		1,528
LG Electronics RUS, LLC		106,631		—		—		—		—		2,673

151

29. Related Parties and Others, Continued

(In millions of won)	2018
	Sales and others				Purchase and others
			Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
LG Electronics do Brasil Ltda.	W	192,775		—		—		—		—		350
LG Innotek Co., Ltd.		29,267		—		147,453		—		—		39,136
Qingdao LG Inspur Digital Communication Co., Ltd.		37,738		—		—		—		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		131,970		—		—		—		—		1
LG Electronics Mexicalli, S.A. DE C.V.		187,844		—		—		—		—		210
LG Electronics Mlawa Sp. z o.o.		740,784		—		—		—		—		631
LG Electronics Taiwan Taipei Co., Ltd.		12,746		—		—		—		—		330
LG Hitachi Water Solutions Co., Ltd.		9,100		—		—		304,365		—		8,980
LG Electronics Reynosa, S.A. DE C.V.		1,030,414		—		—		—		—		2,021
LG Electronics Almaty Kazakhstan		3,759		—		—		—		—		42
LG ElectronicsAir-Conditioning (Shandong) Co., Ltd.		—		—		330		26,871		—		7,264
HiEntech Co., Ltd.		—		—		—		22,378		—		29,215
Hientech (Tianjin) Co., Ltd.		—		—		—		92,900		—		23,880
LG Electronics S.A. (Pty) Ltd.		7,244		—		—		—		—		20
LG Electronics Egypt S.A.E.		25,491		—		—		—		—		16
Others		5,195		—		28		15		—		11,480
	W	2,989,331		—		147,811		451,494		—		128,046
	W	4,205,596		5,272		555,463		1,694,360		71,403		265,568

(*) Represents transactions occurred prior to the Group’s disposal of the entire investments.

152

29. Related Parties and Others, Continued

(c) Trade accounts and notes receivable and payable as of December 31, 2019 and 2018 are as follows:

(In millions of won)
	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Associates
INVENIA Co., Ltd.(*)		—		2,000		—		30,179
AVATEC Co., Ltd.		—		—		1,029		4,382
Paju Electric Glass Co., Ltd.		—		—		62,853		60,566
WooRee E&L Co., Ltd.		—		—		1,888		7
YAS Co., Ltd.		—		—		27,489		6,145
Material Science Co., Ltd.		—		—		8		—
	W	—		2,000		93,267		101,279
Entity that has significant influence over the Controlling Company
LG Electronics Inc.	W	209,939		247,679		157,713		430,677
Subsidiaries of the entity that has significant influence over the Controlling Company
LG Electronics India Pvt. Ltd.	W	6,113		9,047		—		29
LG Electronics Vietnam Haiphong Co., Ltd.		47,740		25,544		75		—
LG Electronics Nanjing New Technology Co., Ltd.		55,343		43,463		49		139
LG Electronics RUS, LLC		17,600		22,570		83		90
LG Electronics do Brasil Ltda.		14,805		15,608		26		62
LG Innotek Co., Ltd.		267		2,885		36,426		47,382
LG Electronics Mexicali, S.A. DE C.V.	W	11,195		15,305		17		—

153

29. Related Parties and Others, Continued

(In millions of won)
	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
LG Electronics Mlawa Sp. z o.o.	W	124,390		70,236		75		33
LG Electronics Reynosa, S.A. DE C.V.		82,927		69,189		62		134
LG Electronics Egypt S.A.E.		9,432		10,296		—		—
Qingdao LG Inspur Digital Communication Co., Ltd.		7,221		3,530		—		—
P.T. LG Electronics Indonesia		7,696		—		16		—
Others		2,452		27,535		3,548		102,486
	W	387,181		315,208		40,377		150,355
	W	597,120		564,887		291,357		682,311

(*) Excluded from related parties due to the Group’s disposal of equity investments during the year ended December 31, 2019.

154

29. Related Parties and Others, Continued

(d) Details of significant cash transactions such as grant of loans and collection of loans, which occurred in the normal course of business with related parties for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	Loans(*1)
Associates	January 1, 2019		Increase		Decrease(*2)			December 31, 2019
INVENIA Co., Ltd.	W	2,000		1,000		(3,000	)		—

(*1) Loans are presented based on nominal amounts.

(*2) Excluded from related parties due to disposal of equity investments during the year ended December 31, 2019.

(In millions of won)
	Loans(*)
Associates	January 1, 2018		Increase		Decrease			December 31, 2018
INVENIA Co., Ltd.	W	2,375		—		(375	)		2,000
YAS Co., Ltd.		375		—		(375	)		—
	W	2,750		—		(750	)		2,000

(*) Loans are presented based on nominal amounts.

155

29. Related Parties and Others, Continued

(e) Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Group and certain companies and their subsidiaries, which are included in LG Group, one of conglomerates according to the Monopoly Regulation and Fair Trade Act for the years ended December 31, 2019 and 2018 are as follows. These entities are not related parties according toK-IFRS No. 1024,Related Party Disclosures.

(In millions of won)
	For the year ended December 31, 2019				December 31, 2019
	Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
LG International Corp. and its subsidiaries	W	625,609		425,895		93,623		77,721
LG Uplus Corp.		—		2,358		—		208
LG Chem Ltd. and its subsidiaries		82,565		1,123,633		97		128,636
S&I Corp. and its subsidiaries (formerly, Serveone)		867		739,722		21,307		159,202
Silicon Works Co., Ltd.		92		713,484		—		126,856
LG Corp.		—		55,059		8,781		—
LG Management Development Institute		—		8,606		3,480		231
LG CNS Co., Ltd. and its subsidiaries		20		253,056		2		75,850
LG Hausys Ltd.		3		1		—		—
LG Household & Health Care and its subsidiaries		1		214		—		6
LG Holdings Japan Co., Ltd.		—		2,056		2,264		—
G2R Inc. and its subsidiaries		—		74,830		—		29,540
Robostar Co., Ltd.		—		11,384		—		2,332
Others(*)		16		234,121		—		—
	W	709,173		3,644,419		129,554		600,582

(*) Due to S&I Corp.’s disposal of partial investments in Serveone in May 2019, Serveone was reclassified from one of the S&I Corp.’s subsidiaries to associates. Accordingly, transactions with S&I Corp. after the disposal are classified as others. In addition, due to LG Electronics Inc.’s disposal of entire investments in HiEntech Co., Ltd. and its subsidiaries and LG Hitachi Water Solutions Co., Ltd. in September 2019, transactions after the disposal are presented as others.

156

29. Related Parties and Others, Continued

(In millions of won)
	For the year ended December 31, 2018				December 31, 2018
	Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
LG International Corp. and its subsidiaries	W	715,835		578,153		83,011		146,836
LG Uplus Corp.		21		1,745		—		178
LG Chem Ltd. and its subsidiaries		1,648		1,233,945		173		184,357
Serveone and its subsidiaries		401		1,928,820		21,307		510,132
Silicon Works Co., Ltd.		—		713,093		—		140,694
LG Corp.		—		54,434		11,246		—
LG Management Development Institute		—		9,734		3,480		441
LG CNS Co., Ltd. and its subsidiaries		—		278,330		1		95,703
LG Hausys Ltd.		1,111		4		—		3
LG Household & Health Care and its subsidiaries		1		118		—		—
LG Holdings Japan Co., Ltd.		—		1,836		2,037		—
G2R Inc. and its subsidiaries		—		60,978		—		19,773
Robostar Co., Ltd.		—		3,616		—		2,723
	W	719,017		4,864,806		121,255		1,100,840

157

29. Related Parties and Others, Continued

(f) Key management personnel compensation

Compensation costs of key management for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Short-term benefits	W	2,664		2,622
Expenses related to the defined benefit plan		553		794
	W	3,217		3,416

Key management refers to the registered directors who have significant control and responsibilities over the Controlling Company’s operations and business.

30. Supplemental Cash Flow Information

Supplemental cash flow information for the years ended December 31, 2019 and 2018 is as follows:

(In millions of won)
	2019			2018
Non-cash investing and financing activities:
Changes in other accounts payable arising from the purchase of property, plant and equipment	W	(1,333,967	)		516,734
Recognition of right of use assets and lease liabilities		29,733			—

31. Non-current Assets Held for Sale

In prior years, the Group decided to dispose certain tangible assets of LG Display Poland Sp. z o.o. based on the management’s approval and began effort to sell the disposal group. During the year ended December 31, 2019, the Group completed the sale of these assets to LG Chem Poland Sp. z o.o.

Gain from disposal ofnon-current assets held for sale amount toW8,353 million and was recognized as othernon-operating income.

158

LG DISPLAY CO., LTD.

Separate Financial Statements

For the Years Ended December 31, 2019 and 2018

(With Independent Auditors’ Report Thereon)

159

Contents

	Page
Independent Auditors’ Report		161
Separate Statements of Financial Position		165
Separate Statements of Comprehensive Loss		166
Separate Statements of Changes in Equity		167
Separate Statements of Cash Flows		168
Notes to the Separate Financial Statements		170
Independent Auditors’ Report on Internal Control over Financial Reporting
Report on the Operation of Internal Control over Financial Reporting

160

Independent Auditors’ Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders

LG Display Co., Ltd.:

Opinion

We have audited the accompanying separate financial statements of LG Display Co., Ltd. (the “Company”), which comprise the separate statements of financial position of the Company as of December 31, 2019 and 2018, the related separate statements of comprehensive loss, changes in equity and cash flows for the years then ended, and notes to the separate financial statements comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of the Company as of December 31, 2019 and 2018, and its separate financial performance and its separate cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

We also have audited, in accordance with the Standards on Auditing, the Company’s Internal Control over Financial Reporting as of December 31, 2019, based on criteria established in Conceptual Framework for Designing and Operating Internal Control over Financial Reporting issued by the Operating Committee of Internal Control over Financial Reporting in Korea, and our report dated March 11, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Separate Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the separate financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate financial statements as of and for the year ended December 31, 2019. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

(i) Assessment of impairment ofnon-financial assets including goodwill

As discussed in Notes 3 (k), 9 and 10, the Company’snon-financial assets, including goodwill amounts toW13,472,222 million as of December 31, 2019. Due to the significant changes in the Company’s business during 2019, the Company determined that a change in its cash generating units (“CGU”) is appropriate. As a result, the Company’s CGU was changed from a single CGU to three CGUs, namely Display, Display (AD PO) and Lighting, with goodwill allocated to Display and Lighting CGUs, respectively. For CGUs to which goodwill is allocated, the Company performs impairment test on an annual basis regardless of whether an indicator for impairment exists. For CGUs to which goodwill is not allocated, the Company performs impairment test when there is an indication of impairment. The recoverable amount used in impairment tests as of December 31, 2019 is value in use based on discounted cash flow model which uses the expected future cash flows including assumptions that involved a high degree of management judgment. In 2019, the Company recognized impairment losses ofW1,004,229 million andW230,867 million for the Display (AD PO) CGU and Lighting CGU, respectively.

161

We identified the assessment of impairment ofnon-financial assets including goodwill as a key audit matter. Determination of change in CGUs as well as allocation of assets among different CGUs require management’s significant judgment. In addition, for the CGUs of Display and Display (AD PO), revenue and operating expense forecasts over the period which management projected, growth rates for subsequent years (“terminal growth rate”) and discount rate used to estimate value in use were challenging to test as minor changes to those assumptions would have a significant effect on the Company’s assessment whether goodwill and machinery and equipment were impaired.

The primary procedures we performed to address this key audit matter included:

• We tested certain internal controls over the Company’snon-current assets impairment assessment process, including controls related to determination of cash generating units, and the development of revenue and operating expenses forecast, terminal growth rate and discount rate assumptions.

• We evaluated the factors considered in the Company’s determination of CGUs against supporting evidence.

• We verified the accuracy of allocation of Company’s assets including corporate assets and goodwill to each CGU.

• We compared the Company’s historical revenue forecasts to actual results to assess the Company’s ability to accurately forecast.

• We evaluated the revenue forecasts and operating expense used to determine the value in use by comparison with the financial budgets approved by the board of directors.

• We performed sensitivity analysis over the terminal growth rate and discount rate assumptions to assess their impact on the Company’s impairment assessment.

• We involved our valuation professionals with specialized skills and knowledge who assisted us in evaluating the appropriateness of the discounted cash flow model used by management, the discount rate by checking the source information underlying the determination of the discount rates, and testing the mathematical accuracy of the calculation.

(ii) Assessment of recoverability of deferred tax assets

As discussed in Note 24 to the separate financial statements, the Company hadW1,367,714 million of deferred tax assets andW549,056 million of unrecognized tax benefit as of December 31, 2019. The deferred tax assets arise primarily due to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as, unused tax losses and tax credit carryforwards. The assessment of the realizability of these deferred tax assets is dependent on the generation of future taxable income of the Company. Changes in assumptions regarding forecasted taxable income could have a significant impact on the amount of deferred tax assets recognized and unrecognized tax benefit.

We identified the assessment of the realizability of the deferred tax assets as a key audit matter because it involves high degree of subjective auditor judgment in assessing the significant assumptions and judgments that are reflected in estimating future taxable profits over the periods in which the above mentioned differences become deductible, or within the periods before the unused tax losses and tax credit forwards expire. This subjectivity is primarily driven by the Company’s assumptions in revenue and operating expense, which are used to estimate the forecasted taxable income in the future.

162

The primary procedures we performed to address this key audit matter included:

• We tested certain internal controls relating to the Company’s deferred tax assets realizability assessment process, including controls related to the development of assumptions in determining the forecasted taxable income for each year.

• We evaluated the Company’s estimates of revenue and operating expense, by comparing them with the financial budgets approved by the board of directors and historical performance.

• We compared the forecasts of taxable income and timing of utilization of deferred tax assets in prior year to actual results to assess the Company’s ability to accurately forecast.

• We also evaluated the Company’s history of realizing deferred tax assets by evaluating the expiration of unused tax losses.

• We involved tax professionals with specialized skills and knowledge who assisted in assessing the Company’s tax adjustments and feasibility of planned tax strategies affecting deferred tax.

Other matter

The procedures and practices utilized in the Republic of Korea to audit such separate financial statements may differ from those generally accepted and applied in other countries.

Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements

Management is responsible for the preparation and fair presentation of these separate financial statements in accordance with K-IFRS, and for such internal control as management determines is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error.

In preparing these separate financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Separate Financial Statements

Our objectives are to obtain reasonable assurance about whether theses separate financial statements as a whole are free from material misstatements, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance’ is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Korean Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements.

As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

163

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, then we are required to draw attention in our auditors’ report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditors’ report is Sang Hyun Han.

KPMG Samjong Accounting Corp.

Seoul, Korea    

March 11, 2020

This report is effective as of March 11, 2020, 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 separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

164

LG DISPLAY CO., LTD.

Separate Statements of Financial Position

As of December 31, 2019 and 2018

(In millions of won)	Note		December 31, 2019		December 31, 2018
Assets
Cash and cash equivalents		4, 26	W	1,105,245		473,283
Deposits in banks		4, 26		77,257		77,200
Trade accounts and notes receivable, net		5, 14, 26, 29		3,565,860		3,389,108
Other accounts receivable, net		5, 26		439,940		321,963
Other current financial assets		6, 26		55,665		29,281
Inventories		7		1,526,299		1,951,155
Prepaid income tax				111,129		—
Other current assets		5		199,833		136,349
Total current assets				7,081,228		6,378,339
Deposits in banks		4, 26		11		11
Investments		8		4,958,308		3,602,214
Othernon-current accounts receivable, net		5, 26		19,899		25,823
Othernon-current financial assets		6, 26		74,203		77,192
Property, plant and equipment, net		9, 27		12,764,175		14,984,564
Intangible assets, net		10		708,047		816,808
Deferred tax assets		24		1,367,714		851,936
Employee benefits assets		12		127,252		—
Othernon-current assets		5		281,843		325,219
Totalnon-current assets				20,301,452		20,683,767
Total assets			W	27,382,680		27,062,106
Liabilities
Trade accounts and notes payable		26, 29	W	2,682,403		3,186,123
Current financial liabilities		11, 26, 27		1,474,589		1,044,841
Other accounts payable		26		3,329,040		1,746,412
Accrued expenses				520,395		516,970
Income tax payable				—		17,404
Provisions		13		188,238		96,555
Advances received		14		898,447		780,906
Other current liabilities		13		47,371		27,419
Total current liabilities				9,140,483		7,416,630
Non-current financial liabilities		11, 26, 27		7,094,405		5,139,476
Non-current provisions		13		67,118		32,764
Defined benefit liabilities, net		12		—		44,187
Long-term advances received		14		328,677		1,122,015
Othernon-current liabilities		13		85,904		94,453
Totalnon-current liabilities				7,576,104		6,432,895
Total liabilities				16,716,587		13,849,525
Equity
Share capital		15		1,789,079		1,789,079
Share premium				2,251,113		2,251,113
Retained earnings		16		6,625,901		9,172,389
Total equity				10,666,093		13,212,581
Total liabilities and equity			W	27,382,680		27,062,106

See accompanying notes to the separate financial statements.

165

LG DISPLAY CO., LTD.

Separate Statements of Comprehensive Loss

For the years ended December 31, 2019 and 2018

(In millions of won, except earnings per share)	Note	2019			2018
Revenue	17, 29	W	21,658,329			22,371,687
Cost of sales	7, 18, 29		(20,834,648	)		(20,439,681	)
Gross profit			823,681			1,932,006
Selling expenses	19		(728,695	)		(519,804	)
Administrative expenses	19		(674,650	)		(678,861	)
Research and development expenses			(1,204,581	)		(1,206,336	)
Operating loss			(1,784,245	)		(472,995	)
Finance income	22		204,966			148,301
Finance costs	22		(371,856	)		(129,652	)
Othernon-operating income	21		835,514			541,547
Othernon-operating expenses	21		(2,229,160	)		(577,007	)
Loss before income tax			(3,344,781	)		(489,806	)
Income tax benefit	23		(704,888	)		(47,515	)
Loss for the period			(2,639,893	)		(442,291	)
Other comprehensive income (loss)
Items that will never be reclassified to profit or loss
Remeasurements of net defined benefit liabilities	12, 23		128,640			5,690
Related income tax	12, 23		(35,235	)		(1,169	)
Other comprehensive income for the period, net of income tax			93,405			4,521
Total comprehensive loss for the period		W	(2,546,488	)		(437,770	)
Loss per share (In won)
Basic and diluted loss per share	25	W	(7,378	)		(1,236	)

See accompanying notes to the separate financial statements.

166

LG DISPLAY CO., LTD.

Separate Statements of Changes in Equity

For the years ended December 31, 2019 and 2018

(In millions of won)	Share capital		Share premium		Retained earnings			Total equity
Balances at January 1, 2018	W	1,789,079		2,251,113		9,789,067			13,829,259
Total comprehensive loss for the period
Loss for the period		—		—		(442,291	)		(442,291	)
Other comprehensive income (loss)
Remeasurements of net defined benefit liabilities, net of tax		—		—		4,521			4,521
Total comprehensive loss for the period	W	—		—		(437,770	)		(437,770	)
Transaction with owners, recognized directly in equity
Dividends to shareholders		—		—		(178,908	)		(178,908	)
Balances at December 31, 2018	W	1,789,079		2,251,113		9,172,389			13,212,581
Balances at January 1, 2019	W	1,789,079		2,251,113		9,172,389			13,212,581
Total comprehensive loss for the period
Loss for the period		—		—		(2,639,893	)		(2,639,893	)
Other comprehensive income (loss)
Remeasurements of net defined benefit liabilities, net of tax		—		—		93,405			93,405
Total comprehensive loss for the period	W	—		—		(2,546,488	)		(2,546,488	)
Balances at December 31, 2019	W	1,789,079		2,251,113		6,625,901			10,666,093

See accompanying notes to the separate financial statements.

167

LG DISPLAY CO., LTD.

Separate Statements of Cash Flows

For the years ended December 31, 2019 and 2018

(In millions of won)	Note	2019			2018
Cash flows from operating activities:
Loss for the period		W	(2,639,893	)		(442,291	)
Adjustments for:
Income tax benefit	23		(704,888	)		(47,515	)
Depreciation and amortization	9, 10, 18		2,549,770			2,392,768
Gain on foreign currency translation			(60,963	)		(38,724	)
Loss on foreign currency translation			140,683			102,689
Expenses related to defined benefit plans	12, 20		161,056			178,274
Gain on disposal of property, plant and equipment			(54,756	)		(42,864	)
Loss on disposal of property, plant and equipment			25,851			8,615
Impairment loss on disposal of property, plant and equipment			1,140,760			43,601
Gain on disposal of intangible assets			(552	)		(239	)
Loss on disposal of intangible assets			18			—
Impairment loss on intangible assets			240,816			82
Reversal of impairment loss on intangible assets			(960	)		(348	)
Expense on increase of provisions			366,771			207,892
Finance income			(172,260	)		(145,293	)
Finance costs			331,475			119,915
Other income			(20,432	)		(3,400	)
Other expenses			9,078			612
			3,951,467			2,776,065
Changes in
Trade accounts and notes receivable			(830,210	)		1,110,769
Other accounts receivable			(66,057	)		21,444
Inventories			424,856			(355,858	)
Other current assets			(14,579	)		101,812
Othernon-current assets			(37,761	)		(65,166	)
Trade accounts and notes payable			(447,803	)		828,112
Other accounts payable			2,115,555			(223,707	)
Accrued expenses			(23,461	)		(249,579	)
Provisions			(240,734	)		(190,317	)
Other current liabilities			(208,033	)		53,017
Defined benefit liabilities, net			(63,855	)		(222,932	)
Long-term advances received			63,672			957,717
Othernon-current liabilities			7,174			25,745
			678,764			1,791,057
Cash generated from operating activities			1,990,338			4,124,831
Income taxes refunded (paid)			25,342			(313,867	)
Interests received			13,481			19,592
Interests paid			(236,936	)		(145,082	)
Net cash provided by operating activities		W	1,792,225			3,685,474

See accompanying notes to the separate financial statements.

168

LG DISPLAY CO., LTD.

Separate Statements of Cash Flows, Continued

For the years ended December 31, 2019 and 2018

(In millions of won)	Note	2019			2018
Cash flows from investing activities:
Dividends received		W	18,622			24,136
Increase in deposits in banks			(114,257	)		(275,700	)
Proceeds from withdrawal of deposits in banks			114,200			778,915
Acquisition of financial asset at fair value through profit or loss			—			(286	)
Acquisition of financial assets at fair value through other comprehensive income			(21	)		—
Proceeds from disposal of financial assets at fair value through other comprehensive income			107			6
Acquisition of investments			(1,224,836	)		(192,611	)
Proceeds from disposal of investments			16,738			4,527
Acquisition of property, plant and equipment			(2,173,535	)		(5,548,289	)
Proceeds from disposal of property, plant and equipment			384,506			201,222
Acquisition of intangible assets			(511,661	)		(466,496	)
Proceeds from disposal of intangible assets			2,349			960
Government grants received			3,979			1,210
Receipt from settlement of derivatives			21,752			2,026
Proceeds from collection of short-term loans			19,881			11,058
Increase in short-term loans			(8,725	)		(7,700	)
Increase in long-term loans			(6,465	)		(36,580	)
Increase in deposits			(4,949	)		(348	)
Decrease in deposits			5,244			569
Proceeds from disposal of emission rights			20,416			10,200
Net cash used in investing activities			(3,436,655	)		(5,493,181	)
Cash flows from financing activities:	28
Proceeds from short-term borrowings			1,264,915			552,164
Repayments of short-term borrowings			(928,335	)		(552,884	)
Proceeds from issuance of bonds			1,323,251			828,169
Proceeds from long-term borrowings			1,669,148			2,489,560
Repayments of current portion of long-term borrowings and bonds			(1,043,649	)		(1,425,395	)
Payment guarantee fee received			5,068			1,876
Repayments of lease liabilities			(14,006	)		—
Dividends paid			—			(178,908	)
Net cash provided by financing activities			2,276,392			1,714,582
Net increase (decrease) in cash and cash equivalents			631,962			(93,125	)
Cash and cash equivalents at January 1			473,283			566,408
Cash and cash equivalents at December 31		W	1,105,245			473,283

See accompanying notes to the separate interim financial statements.

169

1. Organization and Description of Business

LG Display Co., Ltd. (the “Company”) was incorporated in February 1985 and the Company is a public corporation listed in the Korea Exchange since 2004. The main business of the Company is to manufacture and sell displays and its related products. As of December 31, 2019, the Company is operating Thin Film Transistor Liquid Crystal Display(“TFT-LCD”) and Organic Light Emitting Diode (“OLED”) panel manufacturing plants in Gumi, Paju and China andTFT-LCD and OLED module manufacturing plants in Gumi, Paju, China and Vietnam. The Company is domiciled in the Republic of Korea with its address at 128Yeouidae-ro,Yeongdeungpo-gu, Seoul, the Republic of Korea. As of December 31, 2019, LG Electronics Inc., a major shareholder of the Company, owns 37.9% (135,625,000 shares) of the Company’s common stock.

The Company’s common stock is listed on the Korea Exchange under the identifying code 034220. As of December 31, 2019, there are 357,815,700 shares of common stock outstanding. The Company’s common stock is also listed on the New York Stock Exchange in the form of American Depository Shares (“ADSs”) under the symbol “LPL”. One ADS representsone-half of one share of common stock. As of December 31, 2019, there are 19,545,920 ADSs outstanding.

2. Basis of Presenting Financial Statements

(a) Statement of Compliance

In accordance with the Act on External Audits of Stock Companies, Etc., these separate financial statements have been prepared in accordance with Korean International Financial Reporting Standards(“K-IFRS”).

These financial statements are separate financial statements prepared in accordance withK-IFRS No.1027,Separate Financial Statements, presented by a parent, an investor in an associate or a venture in a joint ventures, in which the investments are accounted for on the basis of the direct equity interest rather than on the basis of the reported results and net assets of the investees.

The separate financial statements were authorized for issuance by the Board of Directors on January 30, 2020, which will be submitted for approval to the shareholders’ meeting to be held on March 20, 2020.

170

2. Basis of Presenting Financial Statements, Continued

(b) Basis of Measurement

The separate financial statements have been prepared on the historical cost basis except for the following material items in the separate statement of financial position:

• derivative financial instruments at fair value, financial assets at fair value through profit or loss(“FVTPL”), financial assets at fair value through other comprehensive income (“FVOCI”), financial liabilities at fair value through profit or loss(“FVTPL”), and

• net defined benefit liabilities (employee benefits assets) recognized at the present value of defined benefit obligations less the fair value of plan assets

(c) Functional and Presentation Currency

The separate financial statements are presented in Korean won, which is the Company’s functional currency.

(d) Use of Estimates and Judgments

The preparation of the separate financial statements in conformity withK-IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the separate financial statements is included in the following notes:

• Financial instruments (Note 3(f))

• Intangible assets (Note 3(k), 10)

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next 12 months is included in the following notes:

• Provisions (Note 3(m), 13)

• Inventories (Note 3(e), 7)

• Property, plant and equipment (Note 9)

• Intangible assets (Note 10)

• Employee benefits (Note 12)

• Deferred tax assets and liabilities (Note 24)

171

3. Summary of Significant Accounting Policies

The significant accounting policies followed by the Company in the preparation of its separate financial statements are as follows:

(a) Changes in Accounting Policies

The Company has initially appliedK-IFRS No. 1116,Leases, from January 1, 2019. A number of other new standards are effective from January 1, 2019 but they do not have a material effect on the Company’s separate financial statements.

In application ofK-IFRS No. 1116,Leases, from January 1, 2019, the Company used the modified retrospective approach, under whichright-of-use assets and lease liabilities are recognized in equal amount. Accordingly, the comparative information presented for 2018 is presented, as previously reported, underK-IFRS No. 1017 and relative interpretations. The disclosure requirements inK-IFRS No. 1116 have not been applied to comparative information. The details of the changes in accounting policies are disclosed below.

i) Definition of a lease

Previously, the Company determined at contract inception whether an arrangement was or contained a lease underK-IFRS No. 2104,Determining Whether an Arrangement contains a Lease. For contracts entered into or changed on or after January 1, 2019, the Company assesses whether a contract is or contains a lease based on the definition of a lease underK-IFRS No. 1116 as described in Note 27.

On adoption ofK-IFRS No. 1116, as of January 1, 2019, the Company applied the practical expedient to grandfather the assessment of which transactions are leases for existing contracts. The Company appliedK-IFRS No. 1116 only to contracts that were previously identified as leases.

ii) Accounting as a lessee

As a lessee, the Company leases buildings, vehicles, machinery, equipment and others. The Company previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Company. UnderK-IFRS No. 1116, the Company recognizesright-of-use assets and lease liabilities for most of these leases on the separate statement of financial position.

At commencement or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease andnon-lease component on the basis of its relative stand-alone price.

172

3. Summary of Significant Accounting Policies, Continued

(a) Changes in Accounting Policies, Continued

Leases classified as operating leases underK-IFRS No. 1017

The Company classified its leases of buildings, vehicles, machinery, equipment and others as operating leases underK-IFRS No. 1017. On adoption ofK-IFRS No. 1116, for these leases, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Company’s incremental borrowing rate as at January 1, 2019 (see Note 27).Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid lease payments.

The Company used following practical expedients when applyingK-IFRS No. 1116 to leases previously classified as operating leases underK-IFRS No. 1017:

• did not recognizeright-of-use assets and liabilities for leases for which the lease term ends within 12 months of the date of initial application;

• did not recognizeright-of-use assets and liabilities for leases of low value assets;

• excluded initial direct costs from the measurement of theright-of-use asset at the date of initial application; and

• used hindsight when determining the remaining lease term.

iii) Accounting as a lessor

The Company leases out its own property andright-of-use assets. The Company classified these leases as operating leases or finance leases based on their characteristics.

iv) Impact on the separate financial statements

Impacts on adoption

On adoption ofK-IFRS No. 1116, the Company recognized additionalright-of-use assets and additional lease liabilities as below.

(In millions of won)	January 1, 2019
Right-of-use assets presented in property, plant and equipment	W	16,332
Lease liabilities		16,332

When measuring lease liabilities at January 1, 2019 for leases that were classified as operating leases in accordance withK-IFRS No. 1017, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average discount rate applied is 2.96%.

(In millions of won)	January 1, 2019
Amount of operating lease commitments at December 31, 2018	W	18,244
Discounted using the incremental borrowing rate at January 1, 2019		16,558
Finance lease liabilities recognized as at December 31, 2018		—
— Recognition exemption for lease oflow-value assets		(115	)
— Recognition exemption for leases with less than 12 months of lease term at adoption		(111	)
Lease liabilities recognized at January 1, 2019		16,332

173

3. Summary of Significant Accounting Policies, Continued

(b) Interest in subsidiaries, associates and joint ventures

These separate financial statements are prepared and presented in accordance withK-IFRS No.1027,Separate Financial Statements. The Company applied the cost method to investments in subsidiaries, associates and joint ventures. Dividends from subsidiaries, associates or joint ventures are recognized in profit or loss when the right to receive the dividend is established.

(c) Foreign Currency Transaction and Translation

Transactions in foreign currencies are translated to the functional currency of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency at the exchange rate on the reporting date.Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was originally determined. Foreign currency differences arising on retranslation are recognized in profit or loss, except for differences arising on an investment in equity securities designated as at FVOCI and a financial asset and liability designated as a cash flow hedge, which are recognized in other comprehensive income. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition are recognized in profit or loss in the period in which they arise. Foreign currency differences arising from assets and liabilities in relation to the investing and financing activities including loans, bonds and cash and cash equivalents are recognized in finance income (costs) in the separate statement of comprehensive income (loss) and foreign currency differences arising from assets and liabilities in relation to activities other than investing and financing activities are recognized in othernon-operating income (expense) in the separate statement of comprehensive income (loss). Foreign currency differences are presented in gross amounts in the separate statement of comprehensive income (loss).

(d) Cash and cash equivalents

Cash and cash equivalents include all cash balances and short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash.

(e) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the weighted-average method, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling expenses. In the case of manufactured inventories andwork-in-process, cost includes an appropriate share of production overheads based on the actual capacity of production facilities. However, the normal capacity is used for the allocation of fixed production overheads if the actual level of production is lower than the normal capacity.

174

3. Summary of Significant Accounting Policies, Continued

(f) Financial Instruments

(i) Non-derivative financial assets

Recognition and initial measurement

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets are recognized in statement of financial position when, and only when, the Company becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

Classification and subsequent measurement

i) Financial assets

On initial recognition, a financial asset is classified as measured at: amortized cost; FVOCI – debt investment; FVOCI – equity investments; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the subsequent reporting period following the change in the business model.

A financial asset is measured as at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

• the contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investments that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on aninvestment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured as at FVTPL. This includes all derivative financial assets. At initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

175

3. Summary of Significant Accounting Policies, Continued

(f) Financial Instruments, Continued

ii) Financial assets: business model

The Company makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

• the stated policies and objectives for the portfolio and the operation of those policies in practice (these include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets);

• how the performance of the portfolio is evaluated and reported to the Company’s management;

• the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; and

• the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

Transfers of financial assets to third parties in transaction that do not qualify for derecognition are not considered sale for this purpose.

A financial asset that is held for trading or is managed and whose performance is evaluated on a fair value basis is measured at FVTPL.

iii) Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest

For the purpose of the assessment, “principal” is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and cost (e.g. liquidity risk and administrative costs), as well as profit margin.

176

3. Summary of Significant Accounting Policies, Continued

(f) Financial Instruments, Continued

In assessing whether the contractual cash flows are solely payments of principal and interest, the Company considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers.

• contingent events that would change the amount or timing of cash flows:

• terms that may adjust the contractual coupon rate, including variable-rate features;

• prepayment and extension features; and

• terms that limit the Company’s claim to cash flows from specified assets (e.g.non-recourse features)

A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest or the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract.

Additionally, for a financial asset acquired at a discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued but unpaid contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the prepayment feature is insignificant at initial recognition.

iv) Financial assets: Subsequent measurement and gains and losses

Financial assets at FVTPL	These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
Financial assets at amortized cost	These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Debt investments at FVOCI	These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

Derecognition

The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, it transfers the rights to receive the contractual cash flows of the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred, or it transfers or does not retain substantially all the risks and rewards of ownership of a transferred asset, and does not retain control of the transferred asset.

If the Company has retained substantially all the risks and rewards of ownership of the transferred asset, the Company continues to recognize the transferred asset.

Offset

Financial assets and liabilities are offset and the net amount is presented in the separate statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

177

3. Summary of Significant Accounting Policies, Continued

(f) Financial Instruments, Continued

(ii) Non-derivative financial liabilities

The Company classifies financial liabilities into two categories, financial liabilities at FVTPL and other financial liabilities in accordance with the substance of the contractual arrangement and the definitions of financial liabilities, and recognizes them in the separate statement of financial position when the Company becomes a party to the contractual provisions of the instrument.

Financial liabilities at FVTPL include financial liabilities held for trading or designated as such upon initial recognition at FVTPL. After initial recognition, financial liabilities at FVTPL are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issuance of financial liabilities are recognized in profit or loss as incurred.

Non-derivative financial liabilities other than financial liabilities classified as at FVTPL are classified as other financial liabilities and measured initially at fair value minus transaction costs that are directly attributable to the issuance of financial liabilities. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest method. As of December 31, 2019,non-derivative financial liabilities comprise borrowings, bonds, trade accounts and notes payable, other accounts payable and others.

The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.

(iii) Share Capital

The Company issued common stocks and they are classified as equity. Incremental costs directly attributable to the issuance of common stocks are recognized as a deduction from equity, net of tax effects. Capital contributed in excess of par value upon issuance of common stocks is classified as share premium within equity.

(iv) Derivative financial instruments

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Hedge Accounting

If necessary, the Company designates derivatives as hedging items to hedge the risk of changes in the fair value of assets, liabilities or firm commitments (a fair value hedge) and foreign currency risk of highly probable forecasted transactions or firm commitments (a cash flow hedge).

On initial designation of the hedge, the Company’s management formally designates and documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship, both at the inception of the hedge relationship as well as on an ongoing basis.

178

3. Summary of Significant Accounting Policies, Continued

(f) Financial Instruments, Continued

i) Fair value hedges

Change in the fair value of a derivative hedging instrument designated as a fair value hedge and the hedged item is recognized in profit or loss, respectively. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss in the same line item of the statement of comprehensive income (loss). The Company discontinues fair value hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship between them anymore; if the hedging instrument expires or is sold, terminated or exercised; or if the hedge no longer meets the criteria for hedge accounting.

ii) Cash flow hedges

When a derivative designated as a cash flow hedging instrument meets the criteria of cash flow hedge accounting, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and the ineffective portion of changes in the fair value of the derivative is recognized in profit or loss. The Company discontinues cash flow hedge accounting if it does not designate the derivative hedging instrument and the hedged item as the hedge relationship between them anymore; if the hedging instruments expires or is sold, terminated or exercised; or if the hedge no longer meets the criteria for hedge accounting. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

Embedded derivative

Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.

Other derivative financial instruments

Other derivative financial instruments are measured at fair value and changes of their fair value are recognized in profit or loss.

179

3. Summary of Significant Accounting Policies, Continued

(g) Property, Plant and Equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes an expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labor, any costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located and borrowing costs on qualifying assets.

The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and recognized in othernon-operating income or othernon-operating expenses.

(ii) Subsequent costs

Subsequent expenditure on an item of property, plant and equipment is recognized as part of its cost only if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The costs of theday-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred

(iii) Depreciation

Depreciation is recognized in profit or loss on a straight-line basis, reflecting the pattern in which the asset’s future economic benefits are expected to be consumed by the Company. The residual value of property, plant and equipment is zero.

Estimated useful lives of the assets are as follows:

	Useful lives (years)
Buildings and structures	20, 40
Machinery	4, 5
Furniture and fixtures	4
Equipment, tools and vehicles	2, 4, 12
Right-of-use assets	(*)

(*) The Company depreciates theright-of-use assets from the commencement date to the earlier of the end of the useful life of theright-of-use asset or the end of the lease term on a straight-line basis.

Depreciation methods, useful lives and residual values are reviewed at each financialyear-end and adjusted if appropriate and any changes are accounted for as changes in accounting estimates.

(h) Borrowing Costs

The Company capitalizes borrowing costs, which includes interests and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs, directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. To the extent that the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. The Company immediately recognizes other borrowing costs as an expense.

(i) Government Grants

In case there is reasonable assurance that the Company will comply with the conditions attached to a government grant, the government grant is recognized as follows:

(i) Grants related to the purchase or construction of assets

A government grant related to the purchase or construction of assets is deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduced depreciation expense and cash related to grant received is presented in investing activities in the statement of cash flows.

(ii) Grants for compensating the Company’s expenses incurred

A government grant that compensates the Company for expenses incurred is recognized in profit or loss as a deduction from relevant expenses on a systematic basis in the periods in which the expenses are recognized.

180

3. Summary of Significant Accounting Policies, Continued

(i) Government Grants, Continued

(iii) Other government grants

A government grant that becomes receivable for the purpose of giving immediate financial support to the Company with no compensation for expenses or losses already incurred or no future related costs is recognized as income of the period in which it becomes receivable.

(j) Intangible Assets

Intangible assets are initially measured at cost. Subsequently, intangible assets are measured at cost less accumulated amortization and accumulated impairment losses.

(i) Goodwill

Goodwill arising from business combinations is recognized as the excess of the acquisition cost of a business over the net fair value of the identifiable assets acquired and liabilities assumed. Any deficit is a bargain purchase that is recognized in profit or loss. Goodwill is measured at cost less accumulated impairment losses.

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as incurred.

Development activities involve a plan or design of the production of new or substantially improved products and processes. Development expenditure is capitalized as intangible assets only if the Company can demonstrate all of the following:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale,

• its intention to complete the intangible asset and use or sell it,

• its ability to use or sell the intangible asset,

• how the intangible asset will generate probable future economic benefits (among other things, the Company can demonstrate the usefulness of the intangible asset by existence of a market for the output of the intangible asset or the intangible asset itself if it is to be used internally),

• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and

• its ability to measure reliably the expenditure attributable to the intangible asset during its development.

The expenditure capitalized includes the cost of materials, direct labor and overhead costs that are directly attributable to preparing the asset for its intended use, and borrowing costs on qualifying assets.

(iii) Other intangible assets

Other intangible assets include intellectual property rights, software, customer relationships, technology, memberships and others.

181

3. Summary of Significant Accounting Policies, Continued

(j) Intangible Assets, Continued

(iv) Subsequent costs

Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific intangible asset to which they relate. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.

(v) Amortization

Amortization is calculated on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The residual value of intangible assets is zero. However, as there are no foreseeable limits to the periods over which condominium and golf club memberships are expected to be available for use, these intangible assets are regarded as having indefinite useful lives and not amortized.

	Estimated useful lives (years)
Intellectual property rights	5, 10
Rights to use electricity, water and gas supply facilities	10
Software	4
Customer relationships	7, 10
Technology	10
Development costs	(*)
Condominium and golf club memberships	Not amortized

(*) Capitalized development costs are amortized over the useful lives considering the life cycle of the developed products. Amortization of capitalized development costs are recognized in research and development expenses in the separate statement of comprehensive income (loss).

Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at each financialyear-end. The useful lives of intangible assets that are not being amortized are reviewed each period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. If appropriate, the changes are accounted for as changes in accounting estimates.

(k) Impairment

(i) Financial assets

Financial instruments and contract assets

The Company recognizes loss allowance for financial assets measured at amortized cost and debt investments at FVOCI at the ‘expected credit loss’ (ECL).

The Company recognizes a loss allowance for the life-time expected credit losses except for following, which are measured at12-month ECLs:

• debt securities that are determined to have low credit risk at the reporting date; and

• other debt securities and bank deposits for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.

182

3. Summary of Significant Accounting Policies, Continued

(k) Impairment, Continued

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both qualitative and quantitative information and analysis, based on the Company’s historical experience and informed credit assessment including forward-looking information.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-month ECLs are the portion of the ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).

The maximum period considered when estimating ECLs is the maximum contractual period over which the Company is exposed to credit risk.

Estimation of expected credit losses

Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured using the present value of the difference between the contractual cash flows and the expected contractual cash flows. The expected credit losses are discounted using effective interest rate of the financial assets.

Credit-impaired financial assets

At each reportingperiod-end, the Company assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

• significant financial difficulty of the issuer or the borrower;

• the lender(s) of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having granted to the borrower a concession(s) that the lender(s) would not otherwise consider;

• it is probable that the borrower will enter bankruptcy or other financial reorganization; or

• the disappearance of an active market for a security because of financial difficulties.

Presentation of loss allowance for ECL in the statement of financial position

Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets. For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognized in OCI instead of reducing the carrying amount of financial assets in the separate statement of financial position.

183

3. Summary of Significant Accounting Policies, Continued

(k) Impairment, Continued

Write-off

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations for recovering the financial asset in its entirety or a portion thereof. The Company assess whether there are reasonable expectations of recovering the contractual cash flows from customers and individually assess the timing and amount ofwrite-off. The Company expects no significant recovery from the amountwritten-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

(ii) Non-financial assets

The carrying amounts of the Company’snon-financial assets, other than assets arising from employee benefits, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, the recoverable amount is estimated each year.

Recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the Company determines the recoverable amount of the cash-generating unit to which the asset belongs. The cash-generating unit (“CGU”) is the smallest group of assets that includes the asset and generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or cash-generating unit is determined as the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. Fair value less costs to sell is based on the best information available to reflect the amount that the Company could obtain from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the unit, and then to reduce the carrying amounts of the other assets in the unit on a pro rata basis.

In respect of assets other than goodwill, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of accumulated depreciation or amortization, if no impairment loss had been recognized from the acquisition cost. An impairment loss in respect of goodwill is not reversed.

184

3. Summary of Significant Accounting Policies, Continued

(l) Leases

The Company appliedK-IFRS No. 1116 using the modified retrospective approach and therefore the comparative information is not restated and continues to be reported applyingK-IFRS No. 1017 andK-IFRS No. 2104.

At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company uses the definition of a lease inK-IFRS No. 1116.

(i) As a lessee—Policies from January 1, 2019

At commencement or on modification of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease andnon-lease component on the basis of its relative stand-alone price. For certain leases, the Company accounts for the lease andnon-lease components as a single lease component by applying the practical expedient not to separatenon-lease components.

The Company recognizes aright-of-use asset and lease liability at the lease commencement date. Theright-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at of before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located less any lease incentives received.

Theright-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Company by the end of the lease term or the cost of theright-of-use asset reflects that the Company will exercise a purchase option. In that case, theright-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, theright-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

The Company determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

185

3. Summary of Significant Accounting Policies, Continued

(l) Lease, Continued

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, includingin-substance fixed payments;

• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

• amounts expected to be payable under a residual value guarantee; and

• the exercise price under a purchase option that the Company is reasonably certain to exercise, lease payments in an optional renewal period if the Company is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Company is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revisedin-substance fixed lease payment.

When the lease liability is remeasured the Company recognizes the amount of the remeasurement of the lease liability as an adjustment to theright-of-use asset. However, if the carrying amount of theright-of-use asset is reduced to zero and there is a further reduction in the measurement of the lease liability, the Company recognizes any remaining amount of the remeasurement in profit or loss.

The Company presentsright-of-use assets in ‘property, plant and equipment’ and lease liabilities in ‘financial liabilities’ in the separate statement of financial position.

The Company has elected not to recognizeright-of-use assets and lease liabilities for leases oflow-value assets and short-term leases. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

(ii) As a lessor—Policies from January 1, 2019

When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

To classify each lease, the Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Company is an intermediate lessor, it accounts for its interests in the head lease and thesub-lease separately. It assesses the lease classification of asub-lease with reference to theright-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Company applies the exemption described above, then it classifies thesub-lease as an operating lease.

186

3. Summary of Significant Accounting Policies, Continued

(l) Lease, Continued

If an arrangement contains lease andnon-lease components, then the Company appliesK-IFRS No. 1115 to allocate the consideration in the contract.

At the commencement date, the Company recognizes assets held under a finance lease in its statement of financial position and present them as a receivable at an amount equal to the net investment in the lease and recognize finance income over the lease term, based on a pattern reflecting a constant periodic rate of return on the lessor’s net investment in the lease.

The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other revenue’.

The accounting policies applicable to the Company as a lessor in the comparative period are not different fromK-IFRS No. 1116.

(m) Provisions

A provision is recognized, as a result of a past event, if the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

The risks and uncertainties that inevitably surround events and circumstances are taken into account in reaching the best estimate of a provision. Where the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows. The unwinding of the discount is recognized as finance cost.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

The Company recognizes a liability for warranty obligations based on the estimated costs expected to be incurred under its basic limited warranty. This warranty covers defective products and is normally applicable for 18~36 months from the date of purchase. These liabilities are accrued when product revenues are recognized. Factors that affect the Company’s warranty liability include historical and anticipated rates of warranty claims on those repairs and cost per claim to satisfy the Company’s warranty obligation. Warranty costs primarily include raw materials and labor costs. As these factors are impacted by actual experience and future expectations, management periodically assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Accrued warranty obligations are included in the current andnon-current provisions.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources, are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated.

187

3. Summary of Significant Accounting Policies, Continued

(n) Employee Benefits

(i) Short-term employee benefits

Short-term employee benefits that are due to be settled within twelve months after the end of the period in which the employees render the related service are recognized in profit or loss on an undiscounted basis. The expected cost of profit-sharing and bonus plans and others are recognized when the Company has a present legal or constructive obligation to make payments as a result of past events and a reliable estimate of the obligation can be made.

(ii) Other long-term employee benefits

The Company’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods.

(iii) Defined contribution plan

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in profit or loss in the period during which services are rendered by employees.

(iv) Defined benefit plan

A defined benefit plan is a post-employment benefit plan other than defined contribution plans. The Company’s net obligation in respect of its defined benefit plan is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted.

The calculation is performed annually by an independent actuary using the projected unit credit method. The discount rate is the yield at the reporting date on high quality corporate bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Company recognizes all actuarial gains and losses arising from defined benefit plans in retained earnings immediately.

The Company determines the net interest expense (income) on the net defined benefit liability (employee benefits asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to thethen-net defined benefit liability (employee benefits asset), taking into account any changes in the net defined benefit liability (employee benefits asset) during the period as a result of contributions and benefit payments. Consequently, the net interest on the net defined benefit liability (employee benefits asset) now comprises: interest cost on the defined benefit obligation, interest income on plan assets, and interest on the effect on the asset ceiling.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. The Company recognizes gains and losses on the settlement of a defined benefit plan when the settlement occurs.

(v) Termination benefits

The Company recognizes expense for termination benefits at the earlier of the date when the entity can no longer withdraw the offer of those benefits and when the entity recognizes costs for a restructuring involving the payment of termination benefits. If the termination benefits are not expected to be settled wholly before twelve months after the end of the annual reporting period, the Company measures the termination benefit with present value of future cash payments.

188

3. Summary of Significant Accounting Policies, Continued

(o) Revenue from contracts with customers

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of estimated returns, trade discounts, volume rebates and other cash incentives paid to customers.

The Company recognizes revenue according to the five-stage revenue recognition model (① Identifying the contractg ② Identifying performance obligationsg ③ Determining transaction priceg ④ Allocating the transaction price to performance obligationsg ⑤ Recognizing revenue for performance obligations).

The Company generates revenue primarily from sale of display panels. Product revenue is recognized when a customer obtains control over the Company’s products, which typically occurs upon shipment or delivery depending on the terms of the contracts with the customer.

The Company includes return option in the sales contract of display panels with its customers and the consideration receivable from the customer is subject to change due to returns. The Company estimates an amount of variable consideration by using the expected value method which the Company expects to better predict the amount of consideration. The Company includes in the transaction price an amount of variable consideration estimated only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur during the return period when the uncertainty associated with the variable consideration is subsequently resolved. The Company recognizes a refund liability and an asset for its right to recover products from customers if the Company receives consideration from a customer and expects to refund some or all of that consideration to the customer. Sales taxes or value-added taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and are excluded from revenues in the separate statement of comprehensive income (loss).

(p) Operating Segments

In accordance withK-IFRS No. 1108,Operating Segments, entity wide disclosures of geographic and product revenue information are provided in the separate financial statements.

(q) Finance Income and Finance Costs

Finance income comprises interest income on funds invested (including debt instruments measured at FVOCI), dividend income, gains on disposal of debt instruments measured at FVOCI, changes in fair value of financial assets at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest method. Dividend income is recognized in profit or loss on the date that the Company’s right to receive payment is established.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, gain and losses from financial assets measured at FVTPL, impairment losses recognized on financial assets, and losses on hedging instruments that are recognized in profit or loss. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset.

189

3. Summary of Significant Accounting Policies, Continued

(r) Income Tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

(i) Current tax

Current tax comprises the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, andnon-taxable ornon-deductible items from the accounting profit.

(ii) Deferred tax

Deferred tax is recognized, using the liability method, in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

The Company recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. A deferred tax asset is recognized for all deductible temporary differences to the extent that it is probable that the differences relating to investments in subsidiaries, associates and joint ventures will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

The Company offsets deferred tax assets and deferred tax liabilities if, and only if, the Company has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority.

190

3. Summary of Significant Accounting Policies, Continued

(s) Earnings (Loss) Per Share

The Company presents basic and diluted earnings (loss) per share (“EPS”) data for its common stocks. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of common stocks outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of common stocks outstanding, adjusted for the effects of all dilutive potential common stocks such as convertible bonds and others.

(t) Business Combinations

The Company accounts for business combinations using the acquisition method when control is transferred to the Company. The consideration transferred in the acquisition and the identifiable net assets acquired from business combinations are measured at fair value. If the consideration transferred exceeds the fair value of identifiable net asset, the Company recognizes goodwill; if not, then the Company recognizes gain on a bargain purchase. Any goodwill that arises is tested annually for impairment. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities in accordance withK-IFRS No. 1032 andK-IFRS No. 1109. The consideration transferred does not include amounts related to the settlement ofpre-existing relationships. Such amounts are generally recognized in profit or loss.

(u) New Standards and Amendments Not Yet Adopted,

A number of new standards are effective for annual periods beginning after January 1, 2019 and earlier application is permitted; however, the Company has not early adopted the new or amended standards in preparing these separate financial statements.

The following amended standards and interpretations are not expected to have a significant impact on the Company’s separate financial statements:

• Amendments to References to Conceptual Framework inK-IFRS Standards;

• Definition of a Business (Amendments toK-IFRS No. 1103,Business Combinations);

• Definition of Material (Amendments toK-IFRS No. 1001,Presentation of Financial Statements and K-IFRS No. 1008,Accounting Policies, Changes in Accounting Estimates and Errors); and

• K-IFRS No. 1117,Insurance Contracts.

191

4. Cash and Cash Equivalents and Deposits in Banks

Cash and cash equivalents and deposits in banks as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Current assets
Cash and cash equivalents
Demand deposits	W	1,105,245		473,283
Deposits in banks
Time deposits	W	—		3,118
Restricted deposits (*)		77,257		74,082
	W	77,257		77,200
Non-current assets
Deposits in banks
Restricted deposits (*)	W	11		11
	W	1,182,513		550,494

(*) Includes funds deposited under agreements on mutually beneficial cooperation to aid LG Group companies’ suppliers, restricted deposits pledged to enforce the Company’s investment plans upon the receipt of grants from Gumi city andGyeongsangbuk-do, and others.

5. Receivables and Other Assets

(a) Trade accounts and notes receivable as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Due from third parties	W	221,243		257,037
Due from related parties		3,344,617		3,132,071
	W	3,565,860		3,389,108

(b) Other accounts receivable as of December, 2019 and December 31, 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Current assets
Non-trade receivables, net	W	438,659		316,069
Accrued income		1,281		5,894
	W	439,940		321,963
Non-current assets
Long-termnon-trade receivables	W	19,899		25,823
	W	459,839		347,786

Due from related parties included in other accounts receivable, as of December 31, 2019 and 2018 areW45,518 million andW247,677 million, respectively.

192

5. Receivables and Other Assets, Continued

(c) The aging of trade accounts and notes receivable, and other accounts receivable as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)	December 31, 2019
	Book value				Allowance for impairment
	Trade accounts and notes receivable		Other accounts receivable		Trade accounts and notes receivable			Other accounts receivable
Current	W	3,565,795		184,991		(5)			(2,952	)
1-15 days past due		70		3,488		—			(1	)
16-30 days past due		—		94		—			—
31-60 days past due		—		61		—			—
More than 60 days past due		—		274,183		—			(25	)
	W	3,565,865		462,817		(5	)		(2,978	)

(In millions of won)	December 31, 2018
	Book value				Allowance for impairment
	Trade accounts and notes receivable		Other accounts receivable		Trade accounts and notes receivable			Other accounts receivable
Current	W	3,387,653		347,669		(5	)		(551	)
1-15 days past due		1,353		274		—			(2	)
16-30 days past due		79		69		—			(1	)
31-60 days past due		28		95		—			(1	)
More than 60 days past due		—		668		—			(434	)
	W	3,389,113		348,775		(5	)		(989	)

The movement in the allowance for impairment in respect of trade accounts and notes receivable and other accounts receivable for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)	2019				2018
	Trade accounts and notes receivable		Other accounts receivable		Trade accounts and notes receivable			Other accounts receivable
Balance at the beginning of the year	W	5		989		570			1,092
(Reversal of) bad debt expense		—		1,989		(565	)		(103	)
Balance at the end of the year	W	5		2,978		5			989

193

5. Receivables and Other Assets, Continued

(d) Other assets as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Current assets
Advanced payments	W	1,849		3,354
Prepaid expenses		100,561		73,254
Value added tax refundable		75,317		52,252
Right to recover returned goods		22,106		7,489
	W	199,833		136,349
Non-current assets
Long-term prepaid expenses	W	274,101		325,219
Long-term advanced payments		7,742		—
	W	281,843		325,219

194

6. Other Financial Assets

Other financial assets as of December 31, 2019 and 2018 are as follows:

(In millions of won)	December 31, 2019		December 31, 2018
Current assets
Financial assets at fair value through profit or loss
Derivatives(*)	W	34,036		13,059
Financial assets at fair value through other comprehensive income
Debt instruments
Government bonds	W	6		106
Financial asset carried at amortized cost
Short-term loans	W	21,623		16,116
	W	55,665		29,281
Non-current assets
Financial assets at fair value through profit or loss
Equity instruments
Intellectual Discovery, Ltd.	W	1,104		4,598
Kyulux, Inc.		1,889		2,460
Fineeva Co., Ltd.		4		286
	W	2,997		7,344
Convertible bonds	W	1,544		1,327
Derivatives(*)		15,640		—
	W	20,181		8,671
Financial assets at fair value through other comprehensive income
Debt instruments
Government bonds	W	70		55
Financial assets carried at amortized cost
Deposits	W	13,125		13,418
Long-term loans		40,827		55,048
	W	53,952		68,466
	W	74,203		77,192

(*) Represents valuation gain from currency interest rate swap contracts related to foreign currency denominated borrowings and bonds. The contracts are not designated as hedging instruments.

Other financial assets issued by related parties as of December 31, 2018 isW2,000 million.

195

7. Inventories

Inventories as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Finished goods	W	394,069		539,859
Work-in-process		696,993		791,396
Raw materials		341,004		500,413
Supplies		94,233		119,487
	W	1,526,299		1,951,155

For the years ended December 31, 2019 and 2018, the amount of inventories recognized as cost of sales including inventory write-downs and usage of inventory write-downs included in cost of sales are as follows:

(In millions of won)
	2019			2018
Inventories recognized as cost of sales	W	20,834,648			20,439,681
Including: inventory write-downs		408,567			280,323
Including: usage of inventory write-downs		(280,323	)		(184,139	)

There were no significant reversals of inventory write-downs recognized during the years ended December 31, 2019 and 2018.

196

8. Investments

(a) Investments in subsidiaries consist of the following:

(In millions of won)			December 31, 2019					December 31, 2018
Subsidiaries	Location	Business	Percentage of ownership			Book Value		Percentage of ownership			Book Value
LG Display America, Inc.	San Jose, U.S.A.	Sell display products		100	%	W	36,815		100	%	W	36,815
LG Display Germany GmbH	Eschborn, Germany	Sell display products		100	%		19,373		100	%		19,373
LG Display Japan Co., Ltd.	Tokyo, Japan	Sell display products		100	%		15,686		100	%		15,686
LG Display Taiwan Co., Ltd.	Taipei, Taiwan	Sell display products		100	%		35,230		100	%		35,230
LG Display Nanjing Co., Ltd.	Nanjing, China	Manufacture display products		100	%		593,726		100	%		593,726
LG Display Shanghai Co., Ltd.	Shanghai, China	Sell display products		100	%		9,093		100	%		9,093
LG Display Poland Sp. z o.o.(*1)	Wroclaw, Poland	Manufacture display products		100	%		160,361		100	%		194,992
LG Display Guangzhou Co., Ltd.	Guangzhou, China	Manufacture display products		100	%		293,557		100	%		293,557
LG Display Shenzhen Co., Ltd.	Shenzhen, China	Sell display products		100	%		3,467		100	%		3,467
LG Display Singapore Pte. Ltd.	Singapore	Sell display products		100	%		1,250		100	%		1,250
L&T Display Technology (Fujian) Limited	Fujian, China	Manufacture and sell LCD module and LCD monitor sets		51	%		10,123		51	%		10,123
LG Display Yantai Co., Ltd.	Yantai, China	Manufacture display products		100	%		169,195		100	%		169,195
Nanumnuri Co., Ltd.	Gumi, South Korea	Provide janitorial services		100	%		800		100	%		800
LG Display (China) Co., Ltd.	Guangzhou, China	Manufacture and sell display products		51	%		723,086		51	%		723,086
Unified Innovative Technology, LLC	Wilmington, U.S.A.	Manage intellectual property		100	%		9,489		100	%		9,489
LG Display Guangzhou Trading Co., Ltd.	Guangzhou, China	Sell display products		100	%		218		100	%		218
Global OLED Technology LLC	Herndon, U.S.A	Manage OLED intellectual property		100	%		164,322		100	%		164,322
LG Display Vietnam Haiphong Co., Ltd.(*2)	Haiphong, Vietnam	Manufacture display products		100	%		672,658		100	%		329,978
Suzhou Lehui Display Co., Ltd.	Suzhou, China	Manufacture and sell LCD module and LCD monitor sets		100	%		121,640		100	%		121,640
LG DISPLAY FUND I LLC(*3)	Wilmington, U.S.A	Invest in venture business and acquire technologies		100	%		6,322		100	%		2,249
LG Display High-Tech (China) Co., Ltd.(*4)	Guangzhou, China	Manufacture and sell display products		74	%		1,794,547		69	%		749,154
Money Market Trust	Seoul, Korea	Money market trust		100	%		34,700		100	%		24,501
						W	4,875,658				W	3,507,944

197

8. Investments, Continued

(*1) On July 1, 2019, LG Display Poland Sp. z o.o. (“LGDWR”) commenced the liquidation process and, for the year ended December 31, 2019, the Company recognized an impairment loss ofW34,631 million as finance cost for the difference between the carrying amount and the recoverable amount of investments in LGDWR.

(*2) For the year ended December 31, 2019, the Company contributedW342,680 million in cash for the capital increase of LG Display Vietnam Haiphong Co., Ltd. (“LGDVN”). There was no change in the Company’s ownership percentage in LGDVN as a result of this additional investment.

(*3) For the year ended December 31, 2019, the Company contributedW4,073 million in cash for the capital increase of LG DISPLAY FUND I LLC. There was no change in the Company’s ownership percentage in LG DISPLAY FUND I LLC as a result of this additional investment.

(*4) For the year ended December 31, 2019, the Company contributedW1,045,393 million in cash and cash equivalents, including the right to receive cash dividends amounting toW177,509 million from LG Display Guangzhou Co., Ltd., for the capital increase of LG Display High-Tech (China) Co., Ltd. (“LGDCO”). The Company’s ownership percentage in LGDCO increased from 69% to 74% as a result.

(b) Investments in associates consist of the following:

(In millions of won)
					December 31, 2019					December 31, 2018
Associates	Location		Business		Percentage of ownership			Book Value		Percentage of ownership			Book Value
Paju Electric Glass Co., Ltd.		Paju, South Korea		Manufacture glass for display		40	%	W	45,089		40	%	W	45,089
INVENIA Co., Ltd.(*1)		Seongnam, South Korea		Develop and manufacture equipment for display manufacture		—			—		13	%		6,330
WooRee E&L Co., Ltd.(*2)		Ansan, South Korea		Manufacture LED back light unit packages		14	%		7,310		14	%		4,746
YAS Co., Ltd.		Paju, South Korea		Develop and manufacture deposition equipment for OLEDs		15	%		10,000		15	%		10,000
AVATEC Co., Ltd.(*3)		Daegu, South Korea		Process and sell glass for display		14	%		8,000		17	%		10,600
Arctic Sentinel, Inc.		Los Angeles, U.S.A.		Develop and manufacture tablet for kids		10	%		—		10	%		—
CYNORA GmbH(*4)		Bruchsal Germany		Develop organic emitting materials for displays and lighting devices		12	%		4,714		14	%		8,668
Material Science Co., Ltd.(*5)		Seoul, South Korea		Develop, manufacture and sell material for display		10	%		2,354		10	%		3,346
Nanosys Inc.(*6)		Milpitas, U.S.A.		Develop, manufacture and sell material for display		4	%		5,183		4	%		5,491
								W	82,650				W	94,270

198

8. Investments, Continued

(*1) During 2019, the Company disposed of the entire investments, 3,000,000 shares of common stock, in INVENIA Co., Ltd. and recognizedW2,770 million of gain on disposal as finance income.

(*2) During 2019, the Company recognized a reversal of impairment loss ofW2,564 million as finance income for the investments in WooRee E&L Co., Ltd.

(*3) During 2019, the Company disposed of 650,000 shares of common stock in AVATEC Co., Ltd. As of December 31, 2019, the Company’s ownership percentage in AVATEC Co., Ltd. is 14% and the Company recognizedW2,638 million of gain on disposal as finance income.

(*4) During 2019, the Company recognized an impairment loss ofW3,954 million as finance cost for the investments in CYNORA GmbH. As of December 31, 2019, the Company’s ownership percentage in CYNORA GmbH decreased from 14% to 12% as the Company did not participate in the capital increase of CYNORA GmbH.

(*5) During 2019, the Company recognized an impairment loss ofW992 million as finance cost for the investments in Material Science Co., Ltd.

(*6) During 2019, the Company recognized a reversal of impairment loss ofW308 million as finance income for the investments in Nanosys Inc.

For the years ended December 31, 2019 and 2018, the aggregate amount of received dividends from subsidiaries and associates areW18,622 million and W95,553 million, respectively.

199

9. Property, Plant and Equipment

(a) Changes in property, plant and equipment for the year ended December 31, 2019 are as follows:

(In millions of won)
	Land			Buildings and structures			Machinery and equipment			Furniture and fixtures			Construction- in-progress (*1)			Right-of- use asset			Others			Total
Acquisition cost as of January 1, 2019	W	461,828			4,860,942			34,433,030			652,723			8,469,901			—			479,594			49,358,018
Accumulated depreciation as of January 1, 2019		—			(2,444,534	)		(31,062,229	)		(569,823	)		—			—			(250,977	)		(34,327,563	)
Accumulated impairment loss as of January 1, 2019		—			—			(28,001	)		—			(17,890	)		—			—			(45,891	)
Book value as of January 1, 2019	W	461,828			2,416,408			3,342,800			82,900			8,452,011			—			228,617			14,984,564
Recognition ofright-of-use assets on initial application ofK-IFRS No. 1116		—			—			—			—			—			16,332			—			16,332
Adjusted book value as of January 1, 2019	W	461,828			2,416,408			3,342,800			82,900			8,452,011			16,332			228,617			15,000,896
Additions		—			—			—						1,647,209			3,874			—			1,651,083
Depreciation		—			(210,827	)		(1,700,851	)		(39,222	)		—			(13,482	)		(190,220	)		(2,154,602	)
Disposals		(7,844	)		(4,947	)		(557,241	)		(1,519	)		—			—			(16,912	)		(588,463	)
Impairment loss(*2)		—			(72,902	)		(960,587	)		(5,037	)		(74,984	)		(309	)		(26,941	)		(1,140,760	)
Others (*3)		51			47,138			5,324,621			25,726			(5,608,483	)		—			210,947			—
Government grants received		—			—			(4,207	)		—			228			—			—			(3,979	)
Book value as of December 31, 2019	W	454,035			2,174,870			5,444,535			62,848			4,415,981			6,415			205,491			12,764,175
Acquisition cost as of December 31, 2019	W	454,035			4,839,806			36,694,704			668,956			4,491,455			19,078			632,773			47,800,807
Accumulated depreciation as of December 31, 2019	W	—			(2,596,845	)		(30,263,872	)		(601,071	)		—			(12,354	)		(400,341	)		(33,874,483	)
Accumulated impairment loss as of December 31, 2019	W	—			(68,091	)		(986,297	)		(5,037	)		(75,474	)		(309	)		(26,941	)		(1,162,149	)

(*1) As of December 31, 2019, construction-in-progress mainly relates to construction of manufacturing facilities.

(*2) During 2019, Display(AD PO) and Lighting CGUs were assessed for impairment, and impairment losses amounting toW1,108,500 million (W986,579 million andW121,921 million for Display (AD PO) and Lighting CGUs, respectively) are recognized as othernon-operating expenses. Details of the impairment loss is explained in Note 10(e)).

(*3) Others are mainly amounts transferred fromconstruction-in-progress.

200

9. Property, Plant and Equipment, Continued

(b) Changes in property, plant and equipment for the year ended December 31, 2018 are as follows:

(In millions of won)
	Land			Buildings and structures			Machinery and equipment			Furniture and fixtures			Construction- in-progress (*1)			Others			Total
Acquisition cost as of January 1, 2018	W	460,511			4,857,328			33,969,092			622,955			5,586,631			139,774			45,636,291
Accumulated depreciation as of January 1, 2018		—			(2,218,404	)		(30,303,595	)		(531,316	)		—			(93,685	)		(33,147,000	)
Accumulated impairment loss as of January 1, 2018		—			—			(2,290	)		—			—			—			(2,290	)
Book value as of January 1, 2018	W	460,511			2,638,924			3,663,207			91,639			5,586,631			46,089			12,487,001
Additions		—			—			—			—			4,943,986			—			4,943,986
Depreciation		—			(225,710	)		(1,584,542	)		(39,522	)		—			(143,359	)		(1,993,133	)
Disposals		(15	)		(22	)		(147,490	)		(305	)		—			(4,434	)		(152,266	)
Impairment loss		—			—			(25,711	)		—			(17,890	)		—			(43,601	)
Others (*2)		1,332			3,216			1,438,365			31,088			(2,060,535	)		330,321			(256,213	)
Government grants received		—			—			(1,029	)		—			(181	)		—			(1,210	)
Book value as of December 31, 2018	W	461,828			2,416,408			3,342,800			82,900			8,452,011			228,617			14,984,564
Acquisition cost as of December 31, 2018	W	461,828			4,860,942			34,433,030			652,723			8,469,901			479,594			49,358,018
Accumulated depreciation as of December 31, 2018	W	—			(2,444,534	)		(31,062,229	)		(569,823	)		—			(250,977	)		(34,327,563	)
Accumulated impairment loss as of December 31, 2018	W	—			—			(28,001	)		—			(17,890	)		—			(45,891	)

(*1) As of December 31, 2018, construction-in-progress mainly relates to construction of manufacturing facilities.

(*2) Others are mainly amounts transferred fromconstruction-in-progress.

(c) Capitalized borrowing costs and capitalization rate for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Capitalized borrowing costs	W	135,004			121,441
Capitalization rate		2.88	%		2.74	%

201

10. Intangible Assets andNon-current Asset Impairment

(a) Changes in intangible assets for the year ended December 31, 2019 are as follows:

(In millions of won)
	Intellectual property rights			Software			Memberships			Development costs			Construction- in-progress (software)			Customer relationships			Technology			Goodwill			Others (*2)			Total
Acquisition cost as of January 1, 2019	W	686,707			895,186			56,959			2,142,832			33,867			59,176			11,074			72,588			13,077			3,971,466
Accumulated amortization as of January 1, 2019		(570,476	)		(739,211	)		—			(1,775,922	)		—			(34,854	)		(9,597	)		—			(13,077	)		(3,143,137	)
Accumulated impairment loss as of January 1, 2019		—			—			(11,521	)		—			—			—			—			—			—			(11,521	)
Book value as of January 1, 2019	W	116,231			155,975			45,438			366,910			33,867			24,322			1,477			72,588			—			816,808
Additions- internally developed		—			—			—			437,945			—			—			—			—			—			437,945
Additions - external purchases		28,397			—			845			—			60,889			—			—			—			2			90,133
Amortization (*1)		(22,679	)		(70,783	)		—			(297,959	)		—			(2,637	)		(1,107	)		—			(2	)		(395,167	)
Disposals		—			—			(1,816	)		—			—			—			—			—			—			(1,816	)
Impairment loss (*3)(*4)		(21,690	)		(7,733	)		—			(131,713	)		—			(21,685	)		—			(57,995	)		—			(240,816	)
Reversal of impairment loss		—			—			960			—			—			—			—			—			—			960
Transfer fromconstruction-in-progress		—			80,553			—			—			(80,553	)		—			—			—			—			—
Book value as of December 31, 2019	W	100,259			158,012			45,427			375,183			14,203			—			370			14,593			—			708,047
Acquisition cost as of December 31, 2019	W	715,104			975,739			55,988			2,580,777			14,203			59,176			11,074			72,588			13,079			4,497,728
Accumulated amortization as of December 31, 2019	W	(593,155	)		(809,994	)		—			(2,073,881	)		—			(37,491	)		(10,704	)		—			(13,079	)		(3,538,304	)
Accumulated impairment loss as of December 31, 2019	W	(21,690	)		(7,733	)		(10,561	)		(131,713	)		—			(21,685	)		—			(57,995	)		—			(251,377	)

202

10. Intangible Assets andNon-current Asset Impairment, Continued

(*1) The Company has classified the amortization as manufacturing overhead costs, selling expenses, administrative expenses, and research and development expenses.

(*2) Others mainly consist of rights to use electricity and gas supply facilities.

(*3) During 2019, Display (AD PO) and Lighting CGUs were assessed for impairment, and the impairment losses amounting toW122,994 million (W17,650 million andW105,344 million for Display (AD PO) and Lighting CGUs, respectively) are recognized as othernon-operating expenses. The impairment amount is allocated to goodwill, customer relationships and others. Details of the impairment loss is explained in Note 10(e).

(*4) The Company recognized an impairment loss amounting toW117,822 million in connection with development projects that were terminated after the impairment review.

203

10. Intangible Assets andNon-current Asset Impairment, Continued

(b) Changes in intangible assets for the year ended December 31, 2018 are as follows:

(In millions of won)
	Intellectual property rights			Software			Memberships			Development costs			Construction- in-progress (software)			Customer relationships			Technology			Goodwill		Others (*2)			Total
Acquisition cost as of January 1, 2018	W	665,645			810,270			54,834			1,769,998			30,722			59,176			11,074			72,588		13,077			3,487,384
Accumulated amortization as of January 1, 2018		(546,105	)		(671,980	)		—			(1,473,238	)		—			(31,338	)		(8,489	)		—		(13,076	)		(2,744,226	)
Accumulated impairment loss as of January 1, 2018		—			—			(11,785	)		—			—			—			—			—		—			(11,785	)
Book value as of January 1, 2018	W	119,540			138,290			43,049			296,760			30,722			27,838			2,585			72,588		1			731,373
Additions- internally developed		—			—			—			372,835			—			—			—			—		—			372,835
Additions - external purchases		21,061			—			2,844			—			88,785			—			—			—		—			112,690
Amortization (*1)		(24,370	)		(67,955	)		—			(302,685	)		—			(3,516	)		(1,108	)		—		(1	)		(399,635	)
Disposals		—			—			(721	)		—			—			—			—			—		—			(721	)
Impairment loss		—			—			(82	)		—			—			—			—			—		—			(82	)
Reversal of impairment loss		—			—			348			—			—			—			—			—		—			348
Transfer fromconstruction-in-progress		—			85,640			—			—			(85,640	)		—			—			—		—			—
Book value as of December 31, 2018	W	116,231			155,975			45,438			366,910			33,867			24,322			1,477			72,588		—			816,808
Acquisition cost as of December 31, 2018	W	686,707			895,186			56,959			2,142,832			33,867			59,176			11,074			72,588		13,077			3,971,466
Accumulated amortization as of December 31, 2018	W	(570,476	)		(739,211	)		—			(1,775,922	)		—			(34,854	)		(9,597	)		—		(13,077	)		(3,143,137	)
Accumulated impairment loss as of December 31, 2018	W	—			—			(11,521	)		—			—			—			—			—		—			(11,521	)

204

10. Intangible Assets andNon-current Asset Impairment, Continued

(*1) The Company has classified the amortization as manufacturing overhead costs, selling expenses, administrative expenses, and research and development expenses.

(*2) Others mainly consist of rights to use electricity and gas supply facilities.

(c) Development projects are divided into research activities and development activities. Expenditures on research activities are recognized in profit or loss and qualifying development expenditures are capitalized, respectively.

(d) Development costs as of December 31, 2019 and 2018 are as follows:

(i) As of December 31, 2019

(In millions of won and in years)
Classification	Product type	Book Value		Remaining Useful life
Development completed	Mobile	W	53,350		0.4
	TV		22,597		0.4
	Notebook		14,464		0.4
	Others		12,370		0.7
		W	102,781
Development in process	Mobile	W	157,483		—
	TV		42,587		—
	Notebook		46,167		—
	Others		26,165		—
		W	272,402
		W	375,183

(ii) As of December 31, 2018

(In millions of won and in years)
Classification	Product type	Book Value		Remaining Useful life
Development completed	Mobile	W	108,467		0.5
	TV		28,001		0.5
	Notebook		4,458		0.6
	Others		9,475		0.5
		W	150,401
Development in process	Mobile	W	144,679		—
	TV		55,580		—
	Notebook		9,639		—
	Others		6,611		—
		W	216,509
		W	366,910

205

10. Intangible Assets andNon-current Asset Impairment, Continued

(e) Impairment assessment

(i) During 2019, the Company has distinguished Display (AD PO) and Lighting businesses as separate CGUs from the existing Display CGU due to the initiation of independent factory production of Display (AD PO) business and the decision of Lighting business planned discontinuance in response to business environmental changes. As of December 31, 2019 goodwill is allocated to the Display CGU amounts toW14,593 million.

(ii) Impairment on assets belonging to CGUs was assessed due to the decision of planned discontinuance of Lighting business and adverse changes in the business environment of Display (AD PO). The recoverable amount of each CGU is estimated based on its value in use. Value in use is calculated using the estimatedpre-tax cash flow based on5-year business plan approved by management. The estimated sales of the Company’s products used in the5-year forecast was determined considering external sources and the Company’s past experience. Management estimated the futurepre-tax cash flows based on its past performance and forecasts on market growth. The key assumptions used in the estimation of value in use of each CGU as of December 31, 2019 are as follows.

Classification	Lighting(*2)			Display (AD PO)(*3)			Display(*4)
Discount rate(*1)		6.1	%		6.1	%		6.1	%
Terminal growth rate		0.0	%		0.0	%		1.0	%

(*1) The discount rate was calculated using the weighted average cost of equity capital and debt and the beta of equity capital was calculated as the average of five global listed companies in the same industry and the Company. Cost of debt was calculated by the interest rate of the Company’s publicly issued bonds and debt ratio was determined using the average of the debt ratios of the five global listed companies in the same industry and the Company.

(*2) As a result of impairment test, the carrying amount of Lighting CGU which produces OLED lighting products was fully impaired with impairment loss ofW230,867 million recognized as other non-operating expense for the year ended December 31, 2019.

(*3) In the Company’s consolidated financial statements, Display (AD PO) CGU, which produces plastic OLED mobile products and commenced mass production in 2019, is comprised of a group of assets of the Company and one subsidiary. The Company performed impairment test for its separate financial statements at the same level of CGU used in consolidated financial statements because the relevant assets in the CGU generate cash inflows largely independently only in combination with certain assets in the subsidiary. As a result of impairment test, the carrying amount of the Company’s assets for the Display (AD PO) exceeds the recoverable amount and an impairment loss ofW1,004,229 million was recognized as othernon-operating expense for the year ended December 31, 2019. The value in use determined for this CGU is sensitive to the discount rate used in the discounted cash flow model.

(*4) As a result of impairment test for Display CGU, the recoverable amount exceeds the carrying value. The value in use determined for this CGU is sensitive to assumptions such as the discount rate and terminal growth rate used in the discounted cash flow model.

206

11. Financial Liabilities

(a) Financial liabilities as of December 31, 2019 and 2018 are as follows:

(In millions of won)	December 31, 2019		December 31, 2018
Current
Short-term borrowings	W	347,340		—
Current portion of long-term borrowings and bonds		1,117,218		1,040,148
Current portion of payment guarantee liabilities		5,674		4,693
Lease liabilities		4,357		—
	W	1,474,589		1,044,841
Non-current
Won denominated borrowings	W	2,692,560		2,700,608
Foreign currency denominated borrowings		1,626,709		626,136
Bonds		2,741,516		1,772,599
Payment guarantee liabilities		10,828		14,375
Derivatives(*)		20,592		25,758
Lease liabilities		2,200		—
	W	7,094,405		5,139,476

(*) Represents currency interest rate swap contracts entered by the Company to hedge interest rate risks with respect to foreign currency denominated borrowings and bonds.

(b) Foreign currency denominated short-term borrowings as of December 31, 2019 are as follows. There are none as of December 31, 2018.

(In millions of won and USD)
Lender	Annual interest rate as of December 31, 2019 (%)(*)	December 31, 2019
Standard Chartered Bank Korea Limited	12ML + 0.78~0.88	W	347,340
Foreign currency equivalent		USD	300

(*) ML represents Month LIBOR (London Inter-Bank Offered Rates).

207

11. Financial Liabilities, Continued

(c) Won denominated long-term borrowings as of December 31, 2019 and 2018 are as follows :

(In millions of won)
Lender	Annual interest rate as of December 31, 2019 (%)(*)		December 31, 2019			December 31, 2018
Woori Bank		2.75	W	608			1,259
Korea Development Bank and others		CD rate (91days) + 1.00~1.39, 2.21~3.25		3,330,000			2,850,000
Less current portion of long-term borrowings				(638,048	)		(150,651	)
			W	2,692,560			2,700,608

(*) CD represents certificate of deposit.

(d) Foreign currency denominated long-term borrowings as of December 31, 2019 and 2018 are as follows :

(In millions of won and USD)
Lender	Annual interest rate as of December 31, 2019 (%)		December 31, 2019			December 31, 2018
The Export-Import Bank of Korea and others		3ML+0.75 ~1.70 6ML+1.25 ~1.35	W	1,696,177			955,975
Foreign currency equivalent			USD	1,465		USD	855
Less current portion of long-term borrowings				(69,468	)		(329,839	)
			W	1,626,709			626,136

208

11. Financial Liabilities, Continued

(e) Details of bonds issued and outstanding as of December 31, 2019 and 2018 are as follows:

(In millions of won)
	Maturity		Annual interest rate as of December 31, 2019 (%)		December 31, 2019			December 31, 2018
Won denominated bonds (*1)
Publicly issued bonds		May 2020~ February 2024		1.95~2.95	W	1,730,000			1,900,000
Privately issued bonds		May 2025~ May 2033		3.25~4.25		110,000			110,000
Less discount on bonds						(3,404	)		(3,949	)
Less current portion						(409,702	)		(559,658	)
					W	1,426,894			1,446,393
Foreign currency denominated bonds (*2)
Publicly issued bonds		November 2021		3.88	W	347,340			335,430
Privately issued bonds		April 2023		3ML+1.47		115,780			—
Foreign currency equivalent					USD	400		USD	300
Less discount on bonds						(6,883	)		(9,224	)
					W	456,237			326,206
Financial liabilities at fair value through profit or loss
Foreign currency convertible bonds		August 2024		1.50	W	858,385			—
Foreign currency equivalent					USD	741			—
					W	2,741,516			1,772,599

(*1) Principal of the won denominated bonds is to be repaid at maturity and interests are paid quarterly.

(*2) Principal of the foreign currency denominated bonds is to be repaid at maturity and interests are paid quarterly or semi-annually.

209

11. Financial Liabilities, Continued

(f) Details of the convertible bonds issued and outstanding as of December 31, 2019 are as follows:

(In won, USD)
	Description
Type	Unsecured foreign currency denominated convertible bonds
Issuance amount	USD 687,800,000
Annual interest rate (%)	1.50
Issuance date	August 22, 2019
Maturity date	August 22, 2024
Interest payment	Payable semi-annually in arrear until maturity date in equal installments commencing on issuance
Principal redemption	1. Redemption at maturity: Redeemed on the maturity date, at their outstanding principal amount, which has not been early redeemed or converted.
	2. Advanced redemption: The Company has a right to redeem in advance (call option) and the bondholders have a right to require the Company to redeem in advance (put option). At exercise, the outstanding principal amount together with accrued but unpaid interest are to be redeemed.
Conversion price	W19,845 per common share (subject to adjustment based on diluted effects of certain events)
Conversion period	From August 23, 2020 to August 12, 2024
Redemption at the option of the issuer (Call option)	—On or at any time after 3 years from the issuance, if the closing price of the shares for any 20 trading days out of the 30 consecutive trading days is at least 130% of the applicable conversion price —The aggregate principal amount of the convertible bonds outstanding is less than 10% of the aggregate principal amount originally issued, or —In the event of certain changes in laws and other directives resulting in additional taxes for the holders
Redemption at the option of the bondholders (Put option)	On the day of 3 years from the issuance

The Company designated the convertible bonds as financial liabilities at fair value through profit of loss and recognized the change in fair value in profit or loss. The Company measures the convertible bond at fair value using the market price of convertible bonds disclosed on Bloomberg. The number of convertible shares as of December 31, 2019 is as follows:

(In won and No. of shares)
	December 31, 2019
Aggregate outstanding amount of the convertible bonds	W	813,426,670,000
Conversion price	W	19,845
Number of common shares to be issued at conversion		40,988,998

210

12. Employee Benefits

The Company’s defined benefit plans provide alump-sum payment to an employee based on final salary rates and length of service at the time the employee leaves the Company.

The defined benefit plans expose the Company to actuarial risks, such as the risk associated with expected periods of service, interest rate risk, market (investment) risk, and others.

(a) Net defined benefit liabilities (employee benefits assets) recognized as of December 31 2019 and 2018 are as follows:

(In millions of won)
	December 31, 2019			December 31, 2018
Present value of partially funded defined benefit obligations	W	1,476,866			1,592,366
Fair value of plan assets		(1,604,118	)		(1,548,179	)
	W	(127,252	)		44,187

(b) Changes in the present value of the defined benefit obligations for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)	2019			2018
Opening defined benefit obligations	W	1,592,366			1,560,525
Current service cost		192,528			203,062
Past service cost		(32,006	)		(25,749	)
Interest cost		42,360			49,145
Remeasurements (before tax)		(137,464	)		(27,885	)
Benefit payments		(95,099	)		(88,056	)
Curtailment of plans		(80,470	)		(74,459	)
Net transfers from (to) related parties		(5,349	)		(4,217	)
Closing defined benefit obligations	W	1,476,866			1,592,366

Weighted average remaining maturity of defined benefit obligations as of December 31, 2019, and 2018 are 15.1 years and 14.4 years, respectively.

211

12. Employee Benefits, Continued

(c) Changes in fair value of plan assets for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Opening fair value of plan assets	W	1,548,179			1,465,990
Expected return on plan assets		41,826			48,184
Remeasurements (before tax)		(8,824	)		(22,195	)
Contributions by employer directly to plan assets		185,000			211,006
Benefit payments		(81,876	)		(80,369	)
Net transfers from (to) related parties		280			—
Curtailment of plans		(80,467	)		(74,437	)
Closing fair value of plan assets	W	1,604,118			1,548,179

(d) Plan assets as of December 31, 2019 and 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Guaranteed deposits in banks	W	1,604,118		1,548,179

As of December 31, 2019, the Company maintains the plan assets primarily with Mirae Asset Daewoo Co., Ltd., KB Insurance Co., Ltd. and others.

(e) Expenses recognized in profit or loss for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Current service cost	W	192,528			203,062
Past service cost		(32,006	)		(25,749	)
Net interest cost		534			961
	W	161,056			178,274

Expenses are recognized as following in the separate statements of comprehensive income (loss):

(In millions of won)
	2019		2018
Cost of sales	W	119,147		134,879
Selling expenses		10,221		10,719
Administrative expenses		16,798		18,193
Research and development expenses		14,890		14,483
	W	161,056		178,274

212

12.Employee Benefits, Continued

(f) Remeasurements of net defined benefit liabilities (assets) included in other comprehensive income (loss) for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Balance at January 1	W	(165,613	)		(170,134	)
Remeasurements
Actuarial profit or loss arising from:
Experience adjustment		43,644			56,225
Demographic assumptions		(19,952	)		(15,379	)
Financial assumptions		113,772			(12,961	)
Return on plan assets		(8,824	)		(22,195	)
	W	128,640			5,690
Income tax	W	(35,235	)		(1,169	)
Balance at December 31	W	(72,208	)		(165,613	)

(g) Principal actuarial assumptions as of December 31, 2019 and 2018 (expressed as weighted averages) are as follows:

	December 31, 2019			December 31, 2018
Expected rate of salary increase		3.4	%		4.3	%
Discount rate for defined benefit obligations		2.4	%		2.8	%

Assumptions regarding future mortality are based on published statistics and mortality tables. The current mortality underlying the values of the liabilities in the defined benefit plans are as follows:

		December 31, 2019	December 31, 2018
Teens	Males Females	0.00% 0.00%	0.01% 0.00%
Twenties	Males Females	0.01% 0.00%	0.01% 0.00%
Thirties	Males Females	0.01% 0.00%	0.01% 0.01%
Forties	Males Females	0.02% 0.01%	0.03% 0.02%
Fifties	Males Females	0.04% 0.02%	0.05% 0.02%

213

12. Employee Benefits, Continued

(h) Reasonably possible changes to respective relevant actuarial assumptions would have affected the defined benefit obligations by the following amounts as of December 31, 2019:

(In millions of won)	Defined benefit obligation
	1% increase			1% decrease
Discount rate for defined benefit obligations	W	(194,432	)		237,364
Expected rate of salary increase		233,106			(194,965	)

13. Provisions and Other Liabilities

(a) Changes in provisions for the year ended December 31, 2019 are as follows:

(In millions of won)
	Litigations and claims			Warranties (*)			Others		Total
Balance at January 1, 2019	W	—			120,389			8,930		129,319
Additions		3,073			365,993			17,451		386,517
Usage		(3,073	)		(257,407	)		—		(260,480	)
Balance at December 31, 2019	W	—			228,975			26,381		255,356
Current	W	—			161,857			26,381		188,238
Non-current	W	—			67,118			—		67,118

(*) The provision for warranties on defective products is normally applicable for 18~36 months from the date of customer’s purchase. The provision is calculated by using historical and anticipated rates of warranty claims and costs per claim to satisfy the Company’s warranty obligation.

(b) Other liabilities as of December 31, 2019 and 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Current liabilities
Withholdings	W	13,049		16,181
Unearned revenues		25,012		11,073
Security deposits		9,310		165
	W	47,371		27,419
Non-current liabilities
Long-term accrued expenses	W	76,300		78,466
Long-term other accounts payable		1,062		3,081
Long-term advances received		6,852		2,116
Security deposits		1,690		10,790
	W	85,904		94,453

214

14. Contingent Liabilities and Commitments

(a) Legal Proceedings

Anti-trust litigations

Some individual claimants filed“follow-on” damages claims against the Company and otherTFT-LCD manufacturers alleging violations of EU competition law. While the Company continues its vigorous defense of the various pending proceedings described above, as of December 31, 2019, the final results cannot be predicted.

Solas OLED Ltd. Litigations

In April 2019, Solas OLED Ltd. filed patent infringement actions against the Company and television manufacturers in the United States District Court for the Western District of Texas as well as the Company and its subsidiary, LG Display Germany GmbH, and television manufacturers in Mannheim District Court in Germany. As of December 31, 2019, the value of litigation has not been finalized, and the final results cannot be predicted.

Others

The Company is involved in various disputes in addition to pending proceedings described above. The Company cannot reliably estimate the timing and amount of outflows of resources embodying economic benefits relating to the disputes.

(b) Commitments

Factoring and securitization of accounts receivable

The Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,360 million (W1,574,608 million) in connection with the Company’s export sales transactions with its subsidiaries. As of December 31, 2019, there are no outstanding short-term borrowings that are past due in connection with these agreements. In connection with all of the contracts in this paragraph, the Company has sold its accounts receivable with recourse.

The Company has a credit facility agreement with Shinhan Bank and several other banks pursuant to which the Company could sell its accounts receivables up to an aggregate ofW671,542 million in connection with its domestic and export sales transactions and, as of December 31, 2019,W25,528 million accounts and notes receivable sold to Shinhan Bank were outstanding in connection with the agreement. In connection with the contract above, the Company has sold its accounts receivable without recourse.

Letters of credit

As of December 31, 2019, the Company has agreements in relation to the opening of letters of credit up to USD 150 million (W173,670 million) with KEB Hana Bank, USD 50 million (W57,890 million) with Sumitomo Mitsui Banking Corporation, USD 100 million (W115,780 million) with Industrial Bank of Korea and USD 100 million (W115,780 million) with Industrial and Commercial Bank of China.

215

14. Contingent Liabilities and Commitments, Continued

Payment guarantees

The Company provides payment guarantees to LG Display Vietnam Haiphong, Co., Ltd. in connection with the principal amount of term loan credit facilities amounting to USD 1,302 million (W1,506,921 million) and payables for facilities amounting to USD 57 million (W66,150 million).

In addition, the Company obtained payment guarantees amounting to USD 1,075 million (W1,244,635 million) from KEB Hana Bank and others for advances received related to the long-term supply agreements. The Company also obtained payment guarantees amounting to USD 306 million (W354,070 million) from Korea Development Bank for foreign currency denominated bonds.

License agreements

As of December 31, 2019, the Company has technical license agreements with Hitachi Display, Ltd. and others in relation to its LCD business and patent cross license agreement with Universal Display Corporation in relation to its OLED business. Also, the Company has a trademark license agreement with LG Corp. as of December 31, 2019.

Long-term supply agreement

As of December 31, 2019, in connection with long-term supply agreements with customers, the Company recognized USD 875 million (W1,013,075 million) in advances received. The advances received will be offset against outstanding accounts receivable balances after a given period of time, as well as those arising from the supply of products thereafter. The Company received payment guarantees amounting to USD 1,075 million (W1,244,635 million) from KEB Hana Bank and other various banks relating to advances received (see Note 14(b) payment guarantees).

216

15. Share Capital

The Company is authorized to issue 500,000,000 shares of capital stock (par valueW5,000), and as of December 31, 2019 and December 31, 2018, the number of issued common shares is 357,815,700. There have been no changes in the capital stock from January 1, 2018 to December 31, 2019.

16. Retained earnings

(a) Retained earnings as of December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Legal reserve	W	212,158			212,158
Other reserve		68,251			68,251
Defined benefit plan actuarial loss		(72,208	)		(165,613	)
Retained earnings		6,417,700			9,057,593
	W	6,625,901			9,172,389

(b) For the years ended December 31, 2019 and 2018, details of the Company’s appropriations of retained earnings are as follows:

(In millions of won, except for cash dividend per common stock)
	2019			2018
Retained earnings before appropriations
Unappropriated retained earnings carried over from prior year	W	9,057,593			9,499,884
Loss for the year		(2,639,893	)		(442,291	)
Unappropriated retained earnings carried forward to the following year	W	6,417,700			9,057,593

For the years ended December 31, 2019 and 2018, the date of appropriation is March 20, 2020 and March 15, 2019, respectively.

217

17. Revenue

Details of revenue for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Sales of goods	W	21,593,333		22,324,003
Royalties		40,271		20,970
Others		24,725		26,714
	W	21,658,329		22,371,687

18. The Nature of Expenses and Others

The classification of expenses by nature for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Changes in inventories	W	424,856		(268,910	)
Purchases of raw materials, merchandise and others		8,616,802		8,875,141
Depreciation and amortization		2,549,770		2,392,768
Outsourcing		6,377,774		6,012,740
Labor		2,398,422		2,592,716
Supplies and others		615,620		795,935
Utility		711,890		728,166
Fees and commissions		466,415		522,328
Shipping		65,986		102,913
Advertising		192,333		111,972
Warranty		365,993		207,892
Travel		85,091		95,003
Taxes and dues		58,899		59,207
Impairment loss on property, plant and equipment		1,140,760		43,601
Impairment loss on intangible assets		240,816		82
Others		560,225		650,483
	W24,871,652		22,922,037

Total expenses consist of cost of sales, selling, administrative, research and development expenses and othernon-operating expenses, excluding foreign exchange differences.

218

19. Selling and Administrative Expenses

Details of selling and administrative expenses for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Salaries(*1)	W	410,355		396,223
Expenses related to defined benefit plans(*2)		27,109		29,023
Other employee benefits		47,976		42,987
Shipping		48,256		72,876
Fees and commissions		129,209		136,417
Depreciation		107,571		111,133
Taxes and dues		2,478		4,777
Advertising		192,333		111,972
Warranty		365,993		207,892
Rent		588		10,597
Insurance		6,026		6,175
Travel		17,338		18,197
Training		9,535		10,910
Others		38,578		39,486
	W	1,403,345		1,198,665

(*1) Expenses recognized in relation to employee termination benefits for the years ended December 31, 2019 and 2018 amount toW218,826 million andW184,941 million, respectively.

(*2) Expenses recognized in relation to employee defined contribution plan for the years ended December 31, 2019 and 2018 amount toW89 million andW111 million, respectively.

20. Personnel Expenses

Details of personnel expenses for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Salaries and wages	W	2,062,943		2,280,341
Other employee benefits		285,794		312,050
Contributions to National Pension plan		73,149		75,668
Expenses related to defined benefit plan and defined contribution plan(*)		161,848		179,137
	W	2,583,734		2,847,196

(*) Expenses recognized in relation to employee defined contribution plan for the year ended December 31, 2019 and 2018 amount toW792 million andW863 million, respectively.

219

21. OtherNon-operating Income and OtherNon-operating Expenses

(a) Details of othernon-operating income for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Foreign currency gain	W	752,629		483,160
Gain on disposal of property, plant and equipment		54,756		42,864
Gain on disposal of intangible assets		552		239
Reversal of impairment loss on intangible assets		960		348
Rental income		1,832		1,764
Others		24,785		13,172
	W	835,514		541,547

(b) Details of othernon-operating expenses for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Foreign currency loss	W	800,082		499,652
Other bad debt expense		1,349		23
Loss on disposal of property, plant and equipment		25,851		8,615
Impairment loss on property, plant and equipment		1,140,760		43,601
Loss on disposal of intangible assets		18		—
Impairment loss on intangible assets		240,816		82
Donations		592		7,294
Others		19,692		17,740
	W	2,229,160		577,007

220

22. Finance Income and Finance Costs

Finance income and costs recognized in profit or loss for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Finance income
Interest income	W	13,633		17,938
Dividend income		18,622		95,553
Foreign currency gain		77,502		10,170
Gain on disposal of investments		5,408		1,111
Reversal of impairment loss of investments		2,564		—
Gain on transaction of derivatives		21,752		2,075
Gain on valuation of derivatives		59,781		13,059
Gain on valuation of financial assets at fair value through profit or loss		402		4,362
Other	W	5,302		4,033
		204,966		148,301
Finance costs
Interest expense	W	134,894		35,108
Foreign currency loss		104,153		39,869
Impairment loss on investments		39,884		23,059
Loss on sale of trade accounts and notes receivable		1,769		875
Loss on valuation of financial assets at fair value through profit or loss		4,531		225
Loss on valuation of financial liabilities at fair value through profit or loss		56,384		—
Loss on transaction of derivatives		—		49
Loss on valuation of derivatives		17,999		26,600
Other		12,242		3,867
	W	371,856		129,652

221

23. Income Taxes

(a) Details of income tax expense for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019			2018
Current tax expense (benefit)
Current year	W	9,328			(3,883	)
Adjustment for prior years		(163,203	)		82,225
	W	(153,875	)		78,342
Deferred tax benefit
Origination and reversal of temporary differences	W	(875,314	)		(190,675	)
Change in unrecognized deferred tax assets		324,301			64,818
	W	(551,013	)		(125,857	)
Income tax benefit	W	(704,888	)		(47,515	)

(b) Income taxes recognized directly in other comprehensive income or loss for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)	2019							2018
	Before tax		Tax expense			Net of tax		Before tax		Tax expense			Net of tax
Remeasurements of net defined benefit liabilities (assets)	W	128,640		(35,235	)		93,405		5,690		(1,169	)		4,521

222

23. Income Taxes, Continued

(c) Reconciliation of the actual effective tax rate for the years ended December 31, 2019 and 2018 is as follows:

(In millions of won)	2019					2018
Loss for the year	W			(2,639,893	)				(442,291	)
Income tax benefit				(704,888	)				(47,515	)
Loss before income tax				(3,344,781	)				(489,806	)
Income tax benefit using the Company’s statutory tax rate		25.67	%	(858,605	)		26.65	%	(130,533	)
Non-deductible expenses		(0.53	%)	17,870			(6.76	%)	33,112
Tax credits		1.35	%	(45,237	)		19.97	%	(97,822	)
Change in unrecognized deferred tax assets		(9.70	%)	324,301			(13.23	%)	64,818
Adjustment for prior years (*1)		4.88	%	(163,203	)		(16.79	%)	82,225
Effect on change in tax rate		(0.66	%)	22,201			0.41	%	(2,007	)
Others		0.07	%	(2,215	)		(0.55	%)	2,692
Actual income tax benefit	W			(704,888	)				(47,515	)
Actual effective tax rate				(*2	)				(*2	)

(*1) Consist of changes in tax credits in amended tax returns and expected amount of income tax adjustment in relation to the transfer price investigation and others.

(*2) Actual effective tax rate are not calculated due to loss before income tax.

(d) Tax uncertainties

In June 2019, LG Display Guangzhou Co., Ltd., LG Display Yantai Co., Ltd. and LG Display Nanjing Co., Ltd., the subsidiaries of the Company, were imposed of additional income taxes amounting toW127.1 billion, in aggregate, by the Chinese tax authorities in connection with the transfer price investigation initiated in 2015.

OECD Guidelines, the Korea-China tax treaty, and the domestic tax laws of both countries stipulate mutual agreements to resolve double taxation. In July 2019, the Company registered an application form to request an initiation of a mutual agreement to receive the estimated amount ofW109.2 billion corporate tax adjustment from the Korea National Tax Service. The application was officially registered and the two tax authorities held their first meeting in November 2019 and further consultation will be conducted in 2020.

Meanwhile, the Company expects that the mutual agreement between tax authorities will be processed and be resolved within a reasonable period in favor of the Company and the Company recognized the estimated income tax refund as current tax asset, as of December 31, 2019.

223

24. Deferred Tax Assets and Liabilities

(a) Unrecognized deferred tax liabilities

As of December 31, 2019, in relation to the taxable temporary differences on investments in subsidiaries amounting toW211,264 million, the Company did not recognize deferred tax liabilities since the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary differences will not reverse in the foreseeable future.

(b) Unused tax credit carryforwards for which no deferred tax asset is recognized

Realization of deferred tax assets related to tax credit carryforwards is dependent on whether sufficient taxable income will be generated prior to their expiration. As of December 31, 2019, the amount of unused tax credit carryforwards for which no deferred tax asset is recognized and their expiration dates are as follows:

(In millions of won)
	Total		December 31, 2020		December 31, 2021		December 31, 2022		December 31, 2023		December 31, 2024
Tax credit carryforwards	W	549,056		44,692		70,646		220,135		114,845		98,738

(c) Deferred tax assets and liabilities are attributable to the following:

(In millions of won)	Assets				Liabilities						Total
	December 31, 2019		December 31, 2018		December 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Other accounts receivable, net	W	—		—		(4,364	)		(1,013	)		(4,364	)		(1,013	)
Inventories, net		78,730		53,882		—			—			78,730			53,882
Accrued expenses		120,854		121,508		—			—			120,854			121,508
Property, plant and equipment		465,883		191,073		—			—			465,883			191,073
Intangible assets		19,422		925		—			—			19,422			925
Provisions		59,875		32,468		—			—			59,875			32,468
Gain or loss on foreign currency translation, net		—		13		—			—			—			13
Others		52,293		17,932		—			—			52,293			17,932
Tax loss carryforwards		536,684		126,755		—			—			536,684			126,755
Tax credit carryforwards		38,337		308,393		—			—			38,337			308,393
Deferred tax assets (liabilities)	W	1,372,078		852,949		(4,364	)		(1,013	)		1,367,714			851,936

224

24. Deferred Tax Assets and Liabilities, Continued

(d) Changes in deferred tax assets and liabilities for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	January 1, 2018			Profit or loss			Other comprehensive income (loss)			December 31, 2018			Profit or loss			Other comprehensive income (loss)			December 31, 2019
Other accounts receivable, net	W	(1,378	)		365			—			(1,013	)		(3,351	)		—			(4,364	)
Inventories, net		30,688			23,194			—			53,882			24,848			—			78,730
Defined benefit liabilities, net		2,375			(1,206	)		(1,169	)		—			35,235			(35,235	)		—
Accrued expenses		179,112			(57,604	)		—			121,508			(654	)		—			120,854
Property, plant and equipment		206,900			(15,827	)		—			191,073			274,810			—			465,883
Intangible assets		1,249			(324	)		—			925			18,497			—			19,422
Provisions		27,018			5,450			—			32,468			27,407			—			59,875
Gain or loss on foreign currency translation, net		13			—			—			13			(13	)		—			—
Others		12,345			5,587			—			17,932			34,361			—			52,293
Tax loss carryforwards		—			126,755			—			126,755			409,929			—			536,684
Tax credit carryforwards		268,926			39,467			—			308,393			(270,056	)		—			38,337
Deferred tax assets (liabilities)	W	727,248			125,857			(1,169	)		851,936			551,013			(35,235	)		1,367,714

225

25. Loss per Share

(a) Basic loss per share for the years ended December 31, 2019 and 2018 are as follows:

(In won and No. of shares)	2019			2018
Loss for the year	W	(2,639,892,599,202	)		(442,291,281,486	)
Weighted-average number of common stocks outstanding		357,815,700			357,815,700
Basic loss per share	W	(7,378	)		(1,236	)

For the years ended December 31, 2019 and 2018, there were no events or transactions that resulted in changes in the number of common stocks used for calculating basic loss per share.

(b) The Company issued potential common stocks as a result of an issuance of the convertible bonds on August 22, 2019. Diluted loss per share is not different from basic loss per share due to loss for the year ended December 31, 2019. As of December 31, 2019, 40,988,998 options were excluded from the calculation of weighted-average number of common stocks due to antidilution.

26. Financial Risk Management

The Company is exposed to credit risk, liquidity risk and market risks. The Company identifies and analyzes such risks, and controls are implemented under a risk management system to monitor and manage these risks at below an acceptable level.

(a) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

(i) Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Company, Korean won (KRW). The currencies in which these transactions primarily are denominated are USD, JPY, etc.

Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Company, primarily KRW and USD.

In respect of other monetary assets and liabilities denominated in foreign currencies, the Company adopts policies to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. Meanwhile, the Company entered into currency interest rate swap contracts to hedge currency risk with respect to foreign currency borrowings and bonds.

226

26. Financial Risk Management, Continued

i) Exposure to currency risk

The Company’s exposure to foreign currency risk based on notional amounts as of December 31, 2019 and 2018 are as follows:

(In millions)	December 31, 2019
	USD			JPY			CNY		PLN			EUR
Cash and cash equivalents		907			3			2		1			2
Trade accounts and notes receivable		2,880			3,974			—		—			—
Non-trade receivable		306			452			—		—			—
Trade accounts and notes payable		(1,035	)		(7,346	)		—		—			—
Other accounts payable		(145	)		(3,619	)		—		—			(9	)
Financial liabilities		(2,900	)		—			—		—			—
Aggregate notional amounts in the separate statements of financial position		13			(6,536	)		2		1			(7	)
Currency swap contracts		2,085			—			—		—			—
Net exposure		2,098			(6,536	)		2		1			(7	)
(In millions)	December 31, 2018
	USD			JPY			CNY		PLN			EUR
Cash and cash equivalents		66			—			54		1			7
Trade accounts and notes receivable		2,809			2,937			—		—			—
Non-trade receivable		48			836			1,018		—			—
Trade accounts and notes payable		(1,392	)		(11,477	)		—		—			—
Other accounts payable		(117	)		(13,982	)		—		(18	)		(2	)
Financial liabilities		(1,163	)		—			—		—			—
Aggregate notional amounts in the separate statements of financial position		251			(21,686	)		1,072		(17	)		5
Currency swap contracts		780			—			—		—			—
Net exposure		1,031			(21,686	)		1,072		(17	)		5

227

26. Financial Risk Management, Continued

Average exchange rates applied for the years ended December 31, 2019 and 2018 and the exchange rates at December 31, 2019 and December 31, 2018 are as follows:

(In won)	Average rate				Reporting date spot rate
	2019		2018		December 31, 2019		December 31, 2018
USD	W	1,165.46		1,100.21	W	1,157.80		1,118.10
JPY		10.70		9.96		10.63		10.13
CNY		168.56		166.41		165.74		162.76
PLN		303.62		304.87		304.87		297.33
EUR		1,304.52		1,298.53		1,297.43		1,279.16

ii) Sensitivity analysis

A weaker won, as indicated below, against the following currencies which comprise the Company’s assets or liabilities denominated in a foreign currency as of December 31, 2019 and 2018, would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Company considers to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, would remain constant. The changes in equity and profit or loss would have been as follows:

(In millions of won)	December 31, 2019						December 31, 2018
	Equity			Profit or loss			Equity			Profit or loss
USD (5 percent weakening)	W	88,054			88,054		W	41,788			41,788
JPY (5 percent weakening)		(2,520	)		(2,520	)		(7,965	)		(7,965	)
CNY (5 percent weakening)		12			12			6,325			6,325
PLN (5 percent weakening)		11			11			(183	)		(183	)
EUR (5 percent weakening)		(329	)		(329	)		232			232

A stronger won against the above currencies as of December 31, 2019 and 2018 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

228

26. Financial Risk Management, Continued

(ii) Interest rate risk

Interest rate risk arises principally from the Company’s bonds and borrowings. The Company establishes and applies its policy to reduce uncertainty arising from fluctuations in the interest rate and to minimize finance cost and manages interest rate risk by monitoring of trends of fluctuations in interest rate and establishing plan for countermeasures. Meanwhile, the Company entered into currency interest rate swap contracts amounting to USD 1,785 million (W2,066,673 million) in notional amount to hedge interest rate risk with respect to variable interest rate applied foreign currency denominated borrowings.

i) Profile

The interest rate profile of the Company’s interest-bearing financial instruments as of December 31, 2019 and 2018 is as follows:

(In millions of won)
	December 31, 2019			December 31, 2018
Fixed rate instruments
Financial assets	W	1,182,579			550,644
Financial liabilities		(6,066,554	)		(5,033,515	)
	W	(4,883,975	)		(4,482,871	)
Variable rate instruments
Financial liabilities	W	(2,458,789	)		(1,105,976	)

ii) Equity and profit or loss sensitivity analysis for variable rate instruments

For the years ended December 31, 2019 and 2018, a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below for the respective following years. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

(In millions of won)
	Equity					Profit or loss
	1%p increase			1%p decrease		1%p increase			1%p decrease
December 31, 2019
Variable rate instruments(*)	W	(2,847	)		2,847		(2,847	)		2,847
December 31, 2018
Variable rate instruments(*)	W	(8,018	)		8,018		(8,018	)		8,018

(*) Financial instruments related to currency interest rate swap not qualified for hedging are excluded.

229

26. Financial Risk Management, Continued

(b) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers.

The Company’s exposure to credit risk of trade and other receivables is influenced mainly by the individual characteristics of each customer. However, management believes that the default risk of the country in which each customer operates, do not have a significant influence on credit risk since the majority of the customers are global electronic appliance manufacturers operating in global markets.

The Company establishes credit limits for each customer and each new customer is analyzed quantitatively and qualitatively before determining whether to utilize third party guarantees, insurance or factoring as appropriate.

In relation to the impairment of financial assets subsequent to initial recognition, the Company recognizes the changes in expected credit loss (“ECL”) at each reporting date in order to reflect changes in the credit risks based on ECL model.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk as of December 31, 2019 and 2018 are as follows:

(In millions of won)
	December 31, 2019		December 31, 2018
Financial assets carried at amortized cost
Cash and cash equivalents	W	1,105,245		473,283
Deposits in banks		77,268		77,211
Trade accounts and notes receivable, net		3,565,860		3,389,108
Non-trade receivables		438,659		316,069
Accrued income		1,281		5,894
Deposits		13,125		13,418
Short-term loans		21,623		16,116
Long-term loans		40,827		55,048
Long-termnon-trade receivables		19,899		25,823
	W	5,283,787		4,371,970
Financial assets at fair value through profit or loss
Convertible bonds	W	1,544		1,327
Derivatives		49,676		13,059
	W	51,220		14,386
Financial assets at fair value through other comprehensive income
Debt instruments	W	76		161
	W	5,335,083		4,386,517

In addition to the financial assets above, as of December 31, 2019, the Company provides payment guarantees in connection with the principal amount of credit facilities amounting to USD 1,302 million (W1,506,921 million) and payables for facility purchases amounting to USD 57 million (W66,150 million), for its subsidiary.

Trade accounts and notes receivables are insured in order to manage credit risk if it does not meet the Company’s internal credit ratings. Uninsured trade accounts and notes receivables are managed by continuous monitoring of internal credit ratings and seeking insurance coverage, if necessary.

230

26. Financial Risk Management, Continued

(c) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or other financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company has historically been able to satisfy its cash requirements from cash flows from operations and debt and equity financing. To the extent that the Company does not generate sufficient cash flows from operations to meet its capital requirements, the Company relies on other financing activities, such as external long-term borrowings and offerings of debt securities, equity-linked and other debt securities. In addition, the Company maintains a line of credit with various banks.

The following are the contractual maturities of financial liabilities, including estimated interest payments, as of December 31, 2019.

(In millions of won)			Contractual cash flows in
	Carrying amount		Total			6 months or less		6-12 months		1-2 years			2-5 years			More than 5 years
Non-derivative financial liabilities
Borrowings	W	5,374,125		5,813,355			691,013		523,231		1,070,782			3,389,181			139,148
Bonds		3,151,218		3,306,729			297,649		184,878		908,281			1,780,014			135,907
Trade accounts and notes payable		2,682,403		2,682,403			2,682,403		—		—			—			—
Other accounts payable		1,001,024		1,001,024			999,958		1,066		—			—			—
Other accounts payable (enterprise procurement cards)(*1)		2,328,016		2,353,355			1,287,023		1,066,332		—			—			—
Long-term other accounts payable		1,062		1,062			—		—		1,062			—			—
Payment guarantee(*2)		16,502		1,637,522			51,094		118,907		316,255			1,079,665			71,601
Security deposits received		11,000		11,000			3,980		5,330		1,690			—			—
Lease liabilities		6,557		6,748			2,889		1,608		1,741			510			—
Derivative financial liabilities
Derivatives	W	20,592		(13,101	)		—		—		(4,870	)		(8,231	)		—
	W	14,592,499		16,800,097			6,016,009		1,901,352		2,294,941			6,241,139			346,656

(*1) Represents the amount of utility expenses and others paid by enterprise procurement cards and the outstanding payables are settled at the end of the billing cycle. The payments to the card company arises from operating activities of purchasing of goods and services thus the related cash flow is disclosed as operating activities.

(*2) Contractual cash flows of payment guarantee is identical to timing of principal payment and represent the maximum amount that the Company could be required to pay the guarantee amount.

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

231

26. Financial Risk Management, Continued

(d) Capital Management

Management’s policy is to maintain a capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Liabilities to equity ratio, net borrowings to equity ratio and other financial ratios are used by management to achieve an optimal capital structure. Management also monitors the return on capital as well as the level of dividends to ordinary shareholders.

(In millions of won)
	December 31, 2019			December 31, 2018
Total liabilities	W	16,716,587			13,849,525
Total equity		10,666,093			13,212,581
Cash and deposits in banks (*1)		1,182,502			550,483
Borrowings (including bonds)		8,525,343			6,139,491
Total liabilities to equity ratio		157	%		105	%
Net borrowings to equity ratio (*2)		69	%		42	%

(*1) Cash and deposits in banks consist of cash and cash equivalents and current deposits in banks.

(*2) Net borrowings to equity ratio is calculated by dividing total borrowings (including bonds and excluding lease liabilities) less cash and current deposits in banks by total equity.

232

26. Financial Risk Management, Continued

(e) Determination of fair value

(i) Measurement of fair value

A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial andnon-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

i) Current Assets and Liabilities

The carrying amounts approximate their fair value because of the short maturity of these instruments.

ii) Trade receivables and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes. The carrying amounts of current receivables approximate their fair value.

iii) Investments in equity and debt securities

The fair value of marketable financial assets at FVTPL and at FVOCI is determined by reference to their quoted closing bid price at the reporting date. The fair value ofnon-marketable instruments is determined using the results of fair value assessment performed by external valuation institution and others.

iv) Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, except for the liabilities at FVTPL, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.

233

26. Financial Risk Management, Continued

(ii) Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the separate statement of financial position as of December 31, 2019 and 2018 are as follows:

(In millions of won)	December 31, 2019				December 31, 2018
	Carrying amounts		Fair values		Carrying amounts		Fair values
Financial assets carried at amortized cost
Cash and cash equivalents	W	1,105,245		(*)		473,283		(*)
Deposits in banks		77,268		(*)		77,211		(*)
Trade accounts and notes receivable		3,565,860		(*)		3,389,108		(*)
Non-trade receivables		438,659		(*)		316,069		(*)
Accrued income		1,281		(*)		5,894		(*)
Deposits		13,125		(*)		13,418		(*)
Short-term loans		21,623		(*)		16,116		(*)
Long-term loans		40,827		(*)		55,048		(*)
Long-termnon-trade receivables		19,899		(*)		25,823		(*)
Financial assets at fair value through profit or loss
Equity instruments	W	2,997		2,997		7,344		7,344
Convertible bonds		1,544		1,544		1,327		1,327
Derivatives		49,676		49,676		13,059		13,059
Financial assets at fair value through other comprehensive income
Debt instruments	W	76		76		161		161
Financial liabilities at fair value through profit or loss
Derivatives	W	20,592		20,592		25,758		25,758
Convertible bonds		858,385		858,385		—		—
Financial liabilities carried at amortized cost
Borrowings	W	5,374,125		5,438,952		3,807,234		3,862,709
Bonds		2,292,833		2,345,867		2,332,257		2,384,987
Trade accounts and notes payable		2,682,403		(*)		3,186,123		(*)
Other accounts payable		3,329,040		(*)		1,746,412		(*)
Long-term other accounts payable		1,062		(*)		3,081		(*)
Payment guarantee liabilities		16,502		(*)		19,068		(*)
Security deposits received		11,000		(*)		10,955		(*)
Lease liabilities		6,557		(*)		—		—

(*) Excluded from disclosures as the carrying amount approximates fair value.

234

26. Financial Risk Management, Continued

(iii) Fair values of financial assets and liabilities

i) Fair value hierarchy

The table below analyzes financial instruments carried at fair value based on the input variables used in the valuation method to measure fair value of assets and liabilities. The different levels have been defined as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

• Level 3: inputs for the asset or liability that are not based on observable market data

ii) Financial instruments measured at fair value

Fair value hierarchy classifications of the financial instruments that are measured at fair value as of December 31, 2019 and 2018 are as follows:

(In millions of won)	December 31, 2019
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss
Equity instruments	W	—		—		2,997		2,997
Convertible bonds		—		—		1,544		1,544
Derivatives		—		—		49,676		49,676
Financial asset at fair value through other comprehensive income
Debt instruments		76		—		—		76
Financial liabilities at fair value through profit or loss
Derivatives		—		—		20,592		20,592
Convertible bonds		858,385		—		—		858,385
(In millions of won)	December 31, 2018
	Level 1		Level 2		Level 3		Total
Financial assets at fair value through profit or loss
Equity instruments	W	—		—		7,344		7,344
Convertible bonds		—		—		1,327		1,327
Derivatives		—		—		13,059		13,059
Financial asset at fair value through other comprehensive income
Debt instruments		161		—		—		161
Financial liabilities at fair value through profit or loss
Derivatives		—		—		25,758		25,758

235

26. Financial Risk Management, Continued

iii) Financial instruments not measured at fair value but for which the fair value is disclosed

Fair value hierarchy classifications, valuation technique and inputs for fair value measurements of the financial instruments not measured at fair value but for which the fair value is disclosed as of December 31, 2019 and December 31, 2018 are as follows:

(In millions of won)	December 31, 2019						Valuation technique		Input
Classification	Level 1		Level 2		Level 3
Liabilities
Borrowings	W	—		—		5,438,952		Discounted cash flow		Discount rate
Bonds		—		—		2,345,867		Discounted cash flow		Discount rate
(In millions of won)	December 31, 2018						Valuation technique		Input
Classification	Level 1		Level 2		Level 3
Liabilities
Borrowings	W	—		—		3,862,709		Discounted cash flow		Discount rate
Bonds		—		—		2,384,987		Discounted cash flow		Discount rate

iv) The interest rates applied for determination of the above fair value as of December 31, 2019 and 2018 are as follows:

	December 31, 2019	December 31, 2018
Borrowings, bonds and others	1.87~3.56%	2.09~3.37%

236

27. Leases

Refer to accounting policies in Note 3(l).

The Company leases buildings, vehicles, machinery and equipment and others. Information about leases for which the Company is a lessee is presented below.

(i) Right-of-use assets

Right-of-use assets are presented as property, plant and equipment (see Note 9(a)).

(In millions of won)
	Buildings			Land			Machinery and equipment			Vehicles			Others			Total
Balance at January 1	W	9,338			—			1,021			5,922			51			16,332
Additions		307			2			1,271			2,253			41			3,874
Depreciation		(8,602	)		(1	)		(1,091	)		(3,726	)		(62	)		(13,482	)
Impairment		(121	)		—			(21	)		(167	)		—			(309	)
Balance at December 31	W	922			1			1,180			4,282			30			6,415

(ii) Amounts recognized in profit or loss not fromright-of-use assets

(In millions of won)
	December 31, 2019
Interest on lease liabilities	W	(357	)
Expenses relating to short-term leases		(417	)
Expenses relating to leases oflow-value assets		(257	)

(iii) Lease liabilities

(In millions of won)
	December 31, 2019
Balance at January 1, 2019	W	16,332
Additions		3,874
Interest expense		357
Repayment of liabilities		(14,006	)
Balance at December 31, 2019	W	6,557

237

28. Changes in liabilities arising from financing activities

Changes in liabilities arising from financing activities for the year ended December 31, 2019 are as follows:

(In millions of won)
	January 1, 2019		Cash flows from financing activities			Non-cash transactions											December 31, 2019
						Reclassification			Gain or loss on foreign currency translation			Effective interest adjustment		Others
Short-term borrowings	W	—		336,580			—			10,760			—		—			347,340
Current portion of long-term borrowings and bonds		1,040,148		(1,043,649	)		1,114,595			5,541			583		—			1,117,218
Payment guarantee liabilities		19,068		5,068			—			—			—		(7,634	)		16,502
Long-term borrowings		3,326,744		1,669,148			(705,134	)		28,511			—		—			4,319,269
Bonds		1,772,599		1,323,251			(409,461	)		(20,351	)		10,568		64,910			2,741,516
Lease liabilities		16,332		(14,006	)		—			—			357		3,874			6,557
	W	6,174,891		2,276,392			—			24,461			11,508		61,150			8,548,402

238

29. Related Parties and Others

(a) Related parties

Related parties as of December 31, 2019 are as follows:

Classification	Description
Subsidiaries(*)	LG Display America, Inc. and others
Associates(*)	Paju Electric Glass Co., Ltd. and others
Entity that has significant influence over the Company	LG Electronics Inc.
Subsidiaries of the entity that has significant influence over the Company	Subsidiaries of LG Electronics Inc.

(*) Details of subsidiaries and associates are described in Note 8.

239

29. Related Parties and Others, Continued

(b) Significant transactions such as sales of goods and purchases of raw material and outsourcing service and others, which occurred in the normal course of business with related parties for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)	2019
	Sales and others		Dividend income		Purchase and others
					Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries
LG Display America, Inc.	W	9,425,243		—		—		—		—		6
LG Display Japan Co., Ltd.		2,229,825		—		—		—		—		5
LG Display Germany GmbH		1,676,418		—		—		—		—		4,452
LG Display Taiwan Co., Ltd.		1,433,672		—		—		—		—		595
LG Display Nanjing Co., Ltd.		9,791		—		3,671		—		1,423,501		28,206
LG Display Shanghai Co., Ltd.		978,886		—		—		—		—		—
LG Display Poland Sp. z o.o.		47		—		—		—		7,535		1,717
LG Display Guangzhou Co., Ltd.		111,242		—		11,987		—		2,105,906		33,014
LG Display Shenzhen Co., Ltd.		407,115		—		—		—		—		—
LG Display Yantai Co., Ltd.		2,156		—		14,047		—		1,250,772		11,175
LG Display (China) Co., Ltd.		15		11,120		1,399,183		—		—		2,550
LG Display Singapore Pte. Ltd.		1,133,923		—		—		—		—		1,305
L&T Display Technology (Fujian) Limited		355,887		—		2		—		—		1,119
Nanumnuri Co., Ltd.		191		—		—		—		—		22,001
Global OLED Technology, LLC		—		—		—		—		—		5,859
LG Display Guangzhou Trading Co., Ltd.		1,181,187		—		—		—		—		—
LG Display Vietnam Haiphong Co., Ltd.		18,797		—		122,807		—		1,114,903		26,668
Suzhou Lehui Display Co., Ltd.		158,065		—		239		—		—		—
LG DisplayHigh-Tech (China) Co., Ltd.		40,951		—		1,190		—		41,612		182
	W	19,163,411		11,120		1,553,126		—		5,944,229		138,854

240

29. Related Parties and Others, Continued

(In millions of won)	2019
	Sales and Others		Dividend income		Purchase and others
					Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
WooRee E&L Co., Ltd.	W	—		—		27		—		—		5
INVENIA Co., Ltd.(*1)		—		180		1,024		8,700		—		297
AVATEC Co., Ltd.		2,639		265		—		—		73,323		891
Paju Electric Glass Co., Ltd.		—		6,057		342,958		—		—		4,416
YAS Co., Ltd.		—		1,000		6,764		13,949		—		3,655
Material Science Co., Ltd.		—		—		59		—		—		313
	W	2,639		7,502		350,832		22,649		73,323		9,577
Entity that has significant influence over the Company
LG Electronics Inc.	W	942,455		—		10,568		224,854		—		138,789

241

29. Related Parties and Others, Continued

(In millions of won)	2019
	Sales and others		Dividend income		Purchase and others
					Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries of the entity that has significant influence over the Company
LG Electronics India Pvt. Ltd.	W	87,116		—		—		—		—		194
LG Electronics Vietnam Haiphong Co., Ltd.		277,743		—		—		—		—		924
LG Electronics Reynosa S.A. DE C.V.		—		—		—		—		—		1,155
LG Electronics S.A. (Pty) Ltd.		2,384		—		—		—		—		21
LG Electronics Mexicalli, S.A. DE C.V.		1,848		—		—		—		—		85
LG Electronics RUS, LLC		770		—		—		—		—		1,698
LG Electronics Egypt S.A.E.		97,359		—		—		—		—		241
LG Electronics (Kunshan) Computer Co., Ltd.		385		—		—		—		—		—
LG Innotek Co., Ltd.		6,954		—		34,194		—		—		79,155
LG Hitachi Water Solutions Co., Ltd.(*2)		—		—		—		68,282		—		—
Inspur LG Digital Mobile Communications Co., Ltd.		36,182		—		—		—		—		—
Qingdao LG Inspur Digital Communication Co., Ltd.		21,377		—		—		—		—		—
Hi Entech Co., Ltd.(*2)		47		—		—		—		—		21,576
Others		41,662		—		—		—		—		12,155
	W	573,827		—		34,194		68,282		—		117,204
	W	20,682,332		18,622		1,948,720		315,785		6,017,552		404,424

(*1) Represents transactions occurred prior to the Company’s disposal of the entire investments

(*2) Represents transactions occurred prior to LG Electronics Inc.’s disposal of the entire investments

242

29. Related Parties and Others, Continued

(In millions of won)	2018
					Purchase and others
	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees			Other costs
Subsidiaries
LG Display America, Inc.	W	8,944,621		—		—		—		—			9
LG Display Japan Co., Ltd.		2,413,437		—		—		—		—			2,158
LG Display Germany GmbH		1,796,479		—		—		—		—	��		5,558
LG Display Taiwan Co., Ltd.		1,488,447		—		—		—		—			568
LG Display Nanjing Co., Ltd.		13,840		—		6,037		—		1,321,700			27,142
LG Display Shanghai Co., Ltd.		963,865		—		—		—		—			52
LG Display Poland Sp. z o.o.		329		—		—		—		37,307			16
LG Display Guangzhou Co., Ltd.		52,168		—		14,043		—		1,930,113			14,194
LG Display Shenzhen Co., Ltd.		1,312,088		—		—		—		—			4
LG Display Yantai Co., Ltd.		23,018		—		25,759		—		1,358,502			13,597
LG Display (China) Co., Ltd.		328		90,281		1,409,953		—		—			1,253
LG Display Singapore Pte. Ltd.		1,087,835		—		—		—		—			38
L&T Display Technology (Fujian) Limited		392,318		—		—		—		8			38
Nanumnuri Co., Ltd.		180		—		—		—		—			21,356
Global OLED Technology, LLC		—		—		—		—		—			6,007
LG Display Guangzhou Trading Co., Ltd.		782,603		—		—		—		—			—
LG Display Vietnam Haiphong Co., Ltd.		39,639		—		36,013		—		830,170			6,175
Suzhou Lehui Display Co., Ltd.		178,357		—		—		—		—			—
LG DisplayHigh-Tech (China) Co., Ltd.		12,434		—		—		—		—			—
	W	19,501,986		90,281		1,491,805		—		5,477,800			98,165

243

29. Related Parties and Others, Continued

(In millions of won)	2018
					Purchase and others
	Sales and Others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Associates and their subsidiaries
WooRee E&L Co., Ltd.	W	—		���		50		—		—		144
INVENIA Co., Ltd.		—		30		1,608		28,657		—		795
AVATEC Co., Ltd.		—		530		—		—		71,403		905
Paju Electric Glass Co., Ltd.		—		4,172		364,183		—		—		4,411
LB Gemini New Growth Fund No.16(*)		1,112		540		—		—		—		—
YAS Co., Ltd.		—		—		5,281		25,422		—		3,391
	W	1,112		5,272		371,122		54,079		71,403		9,646
Entity that has significant influence over the Company
LG Electronics Inc.	W	1,207,372		—		31,161		454,555		—		107,861

244

29. Related Parties and Others, Continued

(In millions of won)	2018
					Purchase and others
	Sales and others		Dividend income		Purchase of raw material and others		Acquisition of property, plant and equipment		Outsourcing fees		Other costs
Subsidiaries of the entity that has significant influence over the Company
LG Electronics India Pvt. Ltd.	W	71,798		—		—		—		—		103
LG Electronics Vietnam Haiphong Co., Ltd.		173,051		—		—		—		—		166
LG Electronics Reynosa S.A. DE C.V.		33,225		—		—		—		—		2,021
LG Electronics Almaty Kazakhstan		3,759		—		—		—		—		42
LG Electronics S.A. (Pty) Ltd.		7,244		—		—		—		—		20
LG Electronics Mexicalli, S.A. DE C.V.		10,296		—		—		—		—		210
LG Electronics RUS, LLC		2,201		—		—		—		—		1,862
LG Electronics Egypt S.A.E.		25,491		—		—		—		—		16
LG Electronics (Kunshan) Computer Co., Ltd.		4,804		—		—		—		—		—
LG Innotek Co., Ltd.		29,148		—		137,949		—		—		38,930
LG Hitachi Water Solutions Co., Ltd.		9,100		—		—		285,514		—		8,980
Inspur LG Digital Mobile Communications Co., Ltd.		69,769		—		—		—		—		1
Qingdao LG Inspur Digital Communication Co., Ltd.		37,738		—		—		—		—		—
HiEntech Co., Ltd.		—		—		—		—		—		29,215
Others		2,185		—		27		—		—		9,498
	W	479,809		—		137,976		285,514		—		91,064
	W	21,190,279		95,553		2,032,064		794,148		5,549,203		306,736

(*) Represents transactions occurred prior to LG Electronics Inc.’s disposal of the entire investments

245

29. Related Parties and Others, Continued

(c) Trade accounts and notes receivable and payable as of December 31, 2019 and 2018 are as follows:

(In millions of won)
	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Subsidiaries
LG Display America, Inc.	W	937,409		1,031,718		—		—
LG Display Japan Co., Ltd.		274,964		349,814		5		5
LG Display Germany GmbH		382,463		433,077		2,794		4,332
LG Display Taiwan Co., Ltd.		454,563		274,860		104		34
LG Display Nanjing Co., Ltd.		1,358		2,448		220,327		272,991
LG Display Shanghai Co., Ltd.		172,259		168,117		3		1
LG Display Poland Sp. z o. o		—		30		—		6,849
LG Display Guangzhou Co., Ltd.		12,465		167,814		313,756		196,070
LG Display Guangzhou Trading Co., Ltd.		351,322		377,145		—		—
LG Display Shenzhen Co., Ltd.		116,494		32,759		2		—
LG Display Yantai Co., Ltd.		—		115		149,715		382,448
LG Display (China) Co., Ltd.		22		—		112,053		187,004
LG Display Singapore Pte. Ltd.		298,132		85,680		21		1
L&T Display Technology (Fujian) Limited		46,375		62,336		199,349		139,171
Nanumnuri Co., Ltd.		—		—		3,866		2,065
Global OLED Technology LLC		—		—		—		1,146
LG Display Vietnam Haiphong Co., Ltd.		24,385		22,113		395,429		340,780
Suzhou Lehui Display Co., Ltd.		24,830		32,641		46		—
LG Display High-Tech (China) Co., Ltd.		1,722		17,333		54,662		3,362
	W	3,098,763		3,058,000		1,452,132		1,536,259

246

29. Related Parties and Others, Continued

(In millions of won)
	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Associates and their subsidiaries
WooRee E&L Co., Ltd.	W	—		—		8		6
INVENIA Co., Ltd. (*1)		—		2,000		—		1,671
AVATEC Co., Ltd.		—		—		1,029		4,382
Paju Electric Glass Co., Ltd.		—		—		62,853		60,566
YAS Co., Ltd.		—		—		4,533		2,709
Material Science Co., Ltd.		—		—		8		—
	W	—		2,000		68,431		69,334
Entity that has significant influence over the Company
LG Electronics Inc.	W	208,870		247,134		110,784		99,574

247

29. Related Parties and Others, Continued

(In millions of won)
	Trade accounts and notes receivable and others				Trade accounts and notes payable and others
	December 31, 2019		December 31, 2018		December 31, 2019			December 31, 2018
Subsidiaries of the entity that has significant influence over the Company
LG Innotek Co., Ltd.	W	4		2,782		29,613			45,815
LG Hitachi Water Solutions Co., Ltd. (*2)		—		9,100		—			47,463
HiEntech Co., Ltd. (*2)		—		—		—	��		4,782
Inspur LG Digital Mobile Communications Co., Ltd		—		6,137		—			—
LG Electronics Reynosa S.A. DE C.V		—		2,572		62			134
LG Electronics India Pvt. Ltd.		6,113		9,047		—			29
LG Electronics Vietnam Haiphong Co., Ltd.		47,740		25,544		29			—
LG Electronics S.A. (Pty) Ltd.		—		896		—			5
LG Electronics RUS, LLC		—		—		67			—
LG Electronics Egypt S.A.E		9,432		10,296		—			—
LG Electronics (Kunshan) Computer Co., Ltd.		—		1,370		—			—
Qingdao LG Inspur Digital Communication Co., Ltd.		6,456		3,530		—			—
Others		12,757		3,340		1,768			1,275
	W	82,502		74,614		31,539			99,503
	W	3,390,135		3,381,748		1,662,886			1,804,670

(*1) Excluded from related parties due to the Company’s disposal of equity investments during the year ended December 31, 2019.

(*2) Excluded from related parties due to LG Electronics Inc.’s disposal of the entire investments during the year ended December 31, 2019.

248

29. Related Parties and Others, Continued

(d) Details of significant cash transactions such as grant of loans and collection of loans, which occurred with related parties for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	Loans (*1)
Associates	January 1, 2019		Increase		Decrease (*2)			December 31, 2019
INVENIA Co., Ltd.	W	2,000		1,000		(3,000	)		—

(*1) Loans are presented based on nominal amounts.

(*2) Excluded from related parties due to disposal of equity investments during the year ended December 31, 2019.

(In millions of won)
	Loans (*)
Associates	January 1, 2018		Increase		Decrease			December 31, 2018
INVENIA Co., Ltd.	W	2,375		—		(375	)		2,000
YAS Co., Ltd.		375		—		(375	)		—
	W	2,750		—		(750	)		2,000

(*) Loans are presented based on nominal amounts.

249

29. Related Parties and Others, Continued

(e) Conglomerate Transactions

Transactions, trade accounts and notes receivable and payable, and others between the Company and certain companies and their subsidiaries, which are included in LG Group, one of the conglomerates according to the Monopoly Regulation and Fair Trade Act for the years ended December 31, 2019 and 2018 are as follows. These entities are not related parties according toK-IFRS No. 1024,Related Party Disclosures.

(In millions of won)
	For the year ended December 31, 2019				December 31, 2019
	Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
LG International Corp. and its subsidiaries	W	625,575		113,913		93,622		45,363
LG Uplus Corp.		—		2,352		—		208
LG Chem Ltd. and its subsidiaries		149		594,264		23		53,428
S&I Corp. and its subsidiaries (formerly, Serveone)		867		360,023		21,307		85,312
Silicon Works Co., Ltd.		92		671,822		—		88,355
LG Corp.		—		55,059		8,781		—
LG Management Development Institute		—		8,606		3,480		231
LG CNS Co., Ltd. and its subsidiaries		—		166,820		—		58,967
LG Hausys Ltd.		3		1		—		—
G2R Inc. and its subsidiaries		—		72,639		—		29,540
Robostar Co., Ltd.		—		2,155		—		—
Others(*)		11		106,045		—		—
	W	626,697		2,153,699		127,213		361,404

(*) Due to S&I Corp.’s disposal of partial investments in Serveone in May 2019, Serveone was reclassified from one of the S&I Corp.’s subsidiaries to associates. Accordingly, transactions with S&I Corp. after the disposal are classified as others. In addition, due to LG Electronics Inc.’s disposal of entire investments in HiEntech Co., Ltd. and its subsidiaries and LG Hitachi Water Solutions Co., Ltd. in September 2019, transactions after the disposal are presented as others.

250

29. Related Parties and Others, Continued

(In millions of won)
	For the year ended December 31, 2018				December 31, 2018
	Sales and others		Purchase and others		Trade accounts and notes receivable and others		Trade accounts and notes payable and others
LG International Corp. and its subsidiaries	W	715,580		190,091		82,965		82,028
LG Uplus Corp.		21		1,739		—		178
LG Chem Ltd. and its subsidiaries		1,648		776,031		14		93,274
Serveone and its subsidiaries		388		1,166,309		21,307		239,091
Silicon Works Co., Ltd.		—		713,093		—		140,694
LG Corp.		—		54,434		11,246		—
LG Management Development Institute		—		9,734		3,480		441
LG CNS Co., Ltd. and its subsidiaries		—		210,344		—		72,694
LG Hausys Ltd.		1,111		4		—		3
G2R Inc. and its subsidiaries		—		57,744		—		19,773
Robostar Co., Ltd.		—		1,374		—		530
	W	718,748		3,180,897		119,012		648,706

251

29. Related Parties and Others, Continued

(f) Key management personnel compensation    

Compensation costs of key management for the years ended December 31, 2019 and 2018 are as follows:

(In millions of won)
	2019		2018
Short-term benefits	W	2,664		2,622
Expenses related to the defined benefit plan		553		794
	W	3,217		3,416

Key management refers to the registered directors who have significant control and responsibilities over the Company’s operations and business.

30. Supplemental Cash Flow Information

Supplemental cash flow information for the years ended December 31, 2019 and 2018 is as follows:

(In millions of won)
	2019			2018
Non-cash investing and financing activities:
Changes in other accounts payable arising from the purchase of property, plant and equipment	W	(661,330	)		(725,744	)
Changes in other receivable arising from the investments of dividends received from subsidiaries		(177,509	)		(405,992	)
Recognition of right of use assets and lease liabilities		3,874			—
Capital contribution of property, plant and equipment in subsidiaries		—			343,163

252

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	LG Display Co., Ltd.
	(Registrant)
Date: March 31, 2020	By:	/s/ Heeyeon Kim
		(Signature)
	Name:	Heeyeon Kim
	Title:	Head of IR / Vice President

253