ACCOUNTING STANDARD

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					        Accounting Standard for Combined Financial Statements of Business Group   1


                           ACCOUNTING STANDARD
                            FOR
      COMBINED FINANCIAL STATEMENTS OF BUSINESS GROUP


                                   CONTENTS


I.          General Provisions
1.     Purpose
2.     Scope of Application
3.     Definitions
4.     Purpose of Combined Financial Statements
5.     Scope of a Business Group
6.     Designation of Business Groups to Prepare Combined Financial
Statements
7.     Scope of Affiliated Companies to Be Combined
8.     Reporting Entity and Preparing Company of Combined Financial
Statements
9.     Reporting Date of Combined Financial Statements
10.    General Principles in Preparing Combined Financial Statements
11.    Components and Formats of Combined Financial Statements
12.    Application of Accounting Policies

II.         Preparation of Combined Financial Statements
13.         Elimination of the Investing Affiliate's Investments and the Investee's
            Stockholders' Equity
14.         Issuance of Preferred Stocks in an Investee Affiliate
15.         Elimination of Intercompany Transactions and Unrealized Gains and
Losses
16.         Changes in the Investing Affiliate's Ownership Interest in the Investee
Affiliate
17.         Exclusion from Affiliated Companies to be Combined
18.         Use of the Equity Method for Investment
19.         Deferred Income Tax




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20.    Combined Statement of Cash Flows
21.    Application of the FAS

III.   Disclosure
22.    Notes to Combined Financial Statements
23.    Documentation of Important Data Necessary for Preparing Combined
       Financial Statements

Addenda




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       Accounting Standard for Combined Financial Statements of Business Group     3
                                                             Enacted on Oct. 21, 1998
                                                      Fully Amended on Dec. 22, 1999
                                                             Amended on May 4, 2001



                              CHAPTER I.
                          GENERAL PROVISIONS

1. Purpose
The purpose of this Standard is to prescribe the matters necessary for preparing
combined financial statements in accordance with [Article 6 paragraph (3)] of the
Financial Accounting Standards for Business Enterprises (hereinafter referred to
as "the FAS")..

2. Scope of Application
This Standard is applied to the case where a company and affiliated companies
prepares combined financial statements as a business group (hereinafter
referred to as combined financial statements).

3. Definitions
Terms used in this Standard are defined as follows:
A. Combined financial statements refer to financial statements which a business
group prepares in order to provide users with financial information such as
financial position, performance and cash flows of the group.
B. A business group refers to a group of companies whose operations are
effectively controlled by a single entity.
   1. In case the single entity is a company, that entity and one or more
   companies which are controlled by the entity; and
   2. In case the single entity is not a company, two or more companies
   which are controlled by that entity.
C. An affiliated company refers to the company that belongs to the same
business group.
D. The business group to prepare combined financial statements refers to a
business group that are required to file combined financial statements.
E. The affiliated company to be combined refers to an affiliated company to be
included in the combined financial statements. The company accounted for




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under the equity method is excluded here.
F. An investing affiliated company refers to an affiliated company that has
provided investment capital to another affiliated company to be combined in a
capital investment transaction.
G. An investee affiliated company refers to an affiliated company that has been
provided with capital by another affiliated company to be combined in a capital
investment transaction .
4. Purpose of Combined Financial Statements
The purpose of combined financial statements is to provide users of the
statements with useful and fair information on a business group's financial
position, results of operations and cash flows, so that they will be able to make a
rational decision concerning the business group.
(4-1) A business group which is effectively controlled by an entity and its related
parties, forms an economic entity with a common fate and an affiliated
company's risk is closely related with those of other affiliated companies in the
same business group through cross guarantees of debts, unreasonable
intercompany loans and borrowings, and other intercompany transactions.
Combined financial statements can provide users with useful information about
the financial position, results of operations, cash flows, guarantees of debts for
other affiliates, collaterals provided for other affiliates, intercompany loans and
borrowings, intercompany investments in capital, and other intercompany
transactions which individual or consolidated financial statements do not show.
With combined financial statements reporting accounting information on a whole
business group, accounting information users would be able to make more
rational economic and strategic decisions concerning the affiliated companies or
the business group as a whole.

5. Scope of a Business Group
In determining the scope of a business group, a company which is effectively
controlled refers to one of the following companies:
A. A company of which 30/100 or more of the total issued stocks(including equity
and excluding non-voting stocks prescribed in [Article 370] of the Commerce Act,
and the same hereinafter) are owned by the single entity alone and/or its related
parties which own(s), which are/is the largest stockholder of the company.
B. A company falling under one of the following categories, on whose




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       Accounting Standard for Combined Financial Statements of Business Group   5

management the single entity and/or its related parties exercise(s) a significant
influence:
   1. A company whose representative director can be appointed or
   discharged or of which 50/100 or more executive officers can be appointed
   by the single entity through the contract or agreement with other influential
   stockholders.
   2. A company upon which the single entity directly or through its related
   parties exercises a controlling influence with respect to the key managerial or
   operational decisions, e.g. decisions about organization changes,
   investments to new projects, etc.
   3. A company which exchanges personnel with the company under the
   control of the single entity as in the following cases.
        a. Concurrent holding of officer posts in the company concerned and
           the company under the control of the single entity.
        b. When an officer of the company concerned returns back to the
           company under the control of the single entity (or to another
           company under the control of the single entity).
        c. When an officer of the company under the control of the single entity
           returns back to the company concerned or its affiliates.
   4. A company which has transactions of funds, assets, commodities,
   services, etc. with the single entity or its related parties, or which provides
   guarantees thereto or receives guarantees therefrom in amount exceeding a
   normal range, or which is generally inferred to be the same economic entity
   with the single entity from its intercompany operation practices.
C. In application of [6A and 6B], the parties related to the single entity refer to
one of the followings:
   1. Spouse, relatives by blood in paternal line within the eighth degree, and
   re1atives by blood in maternal line within the fourth degree (hereafter
   referred to as relatives).
   2. A non-profit corporation or organization (referring to unincorporated
   association or foundation, and the same hereinafter) to which the single
   entity alone and/ or its related parties invest the largest amount, or the
   founder of which is either the single entity or one of its related parties.
   3. A non-profit corporation or organization upon which the single entity
   directly or through its related parties exercises a controlling influence with




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   respect to the composition of officers or business operation.
   4. A company whose business affairs are effectively controlled by the
   single entity under the provisions of [6A and 6B].
   5. Employees of the single entity or the entities mentioned in Items 2
   through 4 above (referring to officers in the case of a corporation, and
   commercial employees and those hired under an employment contract in the
   case of a natural entity).

6. Designation of Business Groups to Prepare Combined Financial Statements
A. The business groups to prepare combined financial statements refer to large
conglomerates designated by the Fair Trade Commission pursuant to [Article
21 ] of the Enforcement Decree of the Act on Monopoly Regulation and Fair
Trade. They include the business groups designated as such in the preceding
year. Thus, even though not designated as large conglomerates in the current
period, the business groups are required to prepare combined financial
statements if they were designated as such in the previous year.
B. Notwithstanding [7A], the business group that meets one of the following
conditions is not required to prepare combined financial statements for reporting.
   1. When the total assets in the consolidated financial statements prepared
   by one of the affiliated companies in a business group account for more than
   80/100 of the total assets of all the affiliated companies that would be
   reported in the combined financial statements for the business group;
   2. When the total assets of affiliated companies which would be excluded
   from the combined financial statements of a business group because they fall
   under [7B], comprise 50/100 or more of the total assets of all the affiliated
   companies to be included in its combined financial statements.
(6-1) In application of [6B], for companies engaging in the financial or insurance
business, the equity should be used instead of the total assets. Here if the equity
is zero (0) or less, the equity is deemed zero(0). When the audit opinion on the
financial statements is qualified or adverse, the amount of the total assets or the
equity corrected as suggested in the audit opinion should be used.
(6-2) The Business group to prepare combined financial statements should be
determined in consideration of all the affiliated companies as of the date of the
combined financial statements.

7. Scope of Affiliated Companies to Be Combined



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        Accounting Standard for Combined Financial Statements of Business Group   7

A. Companies to be combined for financial reporting include all the domestic and
overseas companies affiliated as of the date of combined financial statements,
regardless of its form of organization such as general partnership, limited
partnership, limited company, and corporation.
B. Notwithstanding [7A], a company which the SFC rules to fall under one of the
following categories should not be included in the affiliated companies to be
combined for financial reporting:
   1. An affiliated company that is difficult to be combined for financial
   reporting because of a war, a natural disaster or some other uncontrollable
   reasons.
   2.    A small affiliated company.
   3. An affiliated company in the process of liquidation or in the process of
   merger, for which preparation of reliable financial statements is not feasible,
   and for this reason, it is determined by the SFC that combining the company
   for financial reporting significantly erodes the reliability of the combined
   financial statements.
(7-1) After the SFC designates affiliated companies to be combined for financial
reporting by May 31 of each fiscal year in accordance with [Article 1-5 paragraph
(2)] of the Act on External Audit of Corporations, a change could occur in the
scope of affiliated companies to be combined for financial reporting. In this case
the determination as to the inclusion of an affiliated company should be made as
of the date of the combined financial statements.
(7-2) A small affiliated company refers to a company whose total asset amount is
less than the amount specified in [Article 2 paragraph (1)] of the Enforcement
Decree of the Act on External Audit of Corporations.
(7-3) If an affiliated company is in the first year of its operation, whether to
include or not in the combined financial reporting is based on the larger of the
total assets or stockholders' equity as of the establishment date instead of total
assets at the end of the immediate preceding year.
(7-4) If financial and insurance companies are excluded from combined financial
reporting, their assets and liabilities are omitted from the combined financial
statements and intercompany transactions with them not eliminated. In addition,
financial risk of these companies, although it could have significant impact on the
financial risk of the whole business group, would not reflected in the combined
financial statements, resulting in distortion of the combined financial statements.




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Also comparability would be lowered between business groups with and without
financial and insurance affiliates. Thus, financial and insurance affiliates should
be combined for financial reporting, There is a concern that information
usefulness could be degraded when financial and insurance companies are
combined with non-finance-related companies because of differences in
operating activities and account descriptions, but it could be mitigated by
disclosure of industry-specific financial statements.
(7-5) Forms of business organizations and their names could be different among
countries. For example, most of domestic companies are in the form of
corporation, whereas foreign affiliates might have chosen an organizational form
that is most advantageous to them in consideration of the local relevant laws and
conventions. Therefore, restricting the organizational form of affiliated
companies to be combined for financial reporting to a particular one would result
in excluding several important foreign affiliates from combined financial
statements. Then, the financial position and the performance could be
misrepresented and the comparability of combined financial statements
between business groups could be lowered.

8. Reporting Entity and Preparing Company of Combined Financial Statements
A. The reporting entity of the combined financial statements is a business group
to prepare combined financial statements.
B. The preparing company of combined financial statements is designated by
the SFC after considering the external auditor, month of fiscal year-end, and
total assets of each company among the affiliated companies to be combined for
financial reporting. An affiliated company of a business group may request the
SFC to designate itself as the preparing company of combined financial
statements.

9. Reporting Date of Combined Financial Statements
A. The reporting date of combined financial statements should be the date of the
preparing company`s fiscal year-end.
B. When the fiscal year of the affiliated companies to be combined do not
coincide with that of the preparing company of the combined financial
statements, individual financial statements of those affiliates should be restated
for combining purposes.
C. Notwithstanding [9B], when the fiscal year-end of an affiliate falls within three




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       Accounting Standard for Combined Financial Statements of Business Group    9

(3) months before the reporting date of the combined financial statements, the
affiliate's individual financial statements may be used without restatement for
combining purposes. In this case, important transactions and other events
occurring after the affiliate's fiscal year-end but before the reporting date of the
combined financial statements should be appropriately accounted for when
preparing combined financial statements. In addition, the effect of the
transactions on the combined financial statements should be disclosed in the
accompanying notes
D. Combined financial statements reflect the material events or transactions
after the balance sheet date only if they are reflected in the individual financial
statements of the affiliated companies. Otherwise, they are disclosed in the
footnotes.

10. General Principles in Preparing Combined Financial Statements
Basically combined financial statements should be prepared in accordance with
the general principles provided in the FAS. However, since, unlike individual
financial statements, diverse accounting information of a number of affiliated
companies need to be combined, appropriate trade-off between the materiality
principle and the sufficiency principle should be maintained to ensure usefulness
of combined financial information.
A. Materiality
In preparation of combined financial statements, accounting procedures and
reporting should be determined based on the materiality of the accounting item
involved. An information should be considered material if its omission,
non-disclosure or misstatement would influence the decision making of users of
combined financial statements or would hamper their rational judgement on the
management's responsibility.
B. Sufficiency
Combined financial statements should provide accounting information
concerning a business group sufficient enough to aid the decision making of its
users. Therefore, information such as significant accounting policies, accounting
principles, and the special financial information of a business group should be
sufficiently presented in the combined financial statements
(10-1) Preparation of combined financial statements requires integration of
financial information of a number of companies which might apply different
accounting principles or belong to different industries. Therefore, if perfect



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theoretical justification and disclosure is pursued, preparation of combined
financial statements wou1d become practically too time-consuming and costly.
Thus, to the extent that information users' decision making is not influenced, the
form and content of combined financial statements could be determined in a
practical manner in consideration of the materiality in the amount and the nature
of items.
(10-2) Special financial information concerning a business group such as
guarantees of debts for other affiliates, offerings of collaterals for other affiliates,
intercompany transactions, and intercompany investments is important in
judging the possibility of risk transfers among affiliated companies, and thus their
disclosure is required under the sufficiency principle.

11. Components and Formats of Combined Financial Statements
A. Combined financial statements consist of a combined balance sheet, a
combined statement of income, and a combined statement of cash flows.
B. The combined financial statements of the immediately preceding period
should be presented along with those of the current period for comparative
purposes.
C. The combined balance should be prepared in the report form or in the
account form as illustrated in annexed Forms 1 and 2.
D The combined statement of income should be prepared in the report form as
illustrated in annexed Form 3.
E. The statement of cash flows should be prepared in the form as illustrated in
annexed Forms 4 and 5.
12. Application of Accounting Policies
A. Combined financial statements should be prepared on the basis of the
individual financial statements prepared in conformity with the FAS. Therefore, if
some items on the individual financial statements do not conform with the FAS,
combined financial statements should be prepared based on the individual
financial statements corrected for the departures from the FAS. The information
should be disclosed in a note to the combined financial statements.
B. As for an overseas affiliate, when its financial statements prepared in
conformity with the local accounting standards differ significantly from those
prepared in conformity with the FAS, the financial statements should be restated
in accordance with the FAS in preparing for combined financial reporting.



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      Accounting Standard for Combined Financial Statements of Business Group   11

However, when the differences are immaterial, the financial statements do not
have to be restated.
C. Foreign-currency-denoted financial statements of overseas affiliates to be
combined and companies subject to the equity method should be translated into
won in accordance with the provision [Article 69] of the FAS.
D. The same accounting methods should be applied between affiliated
companies for similar transactions and circumstances. However, if differences
are not significant from applying different accounting methods, those methods
may be allowed.
E. Notwithstanding [12A], if an affiliated company prepares consolidated
financial statements, they may be used in lieu of individual financial statements
for preparation of combined financial statements.
F. When preparing combined financial statements using consolidated financial
statements in accordance with [12E]. minority interest should be treated as
equity, and minority interest in net income (loss) should be treated as net income
(loss) respectively.
(12-1) In case the fiscal-year ends between an overseas affiliate and the
preparing company of combined financial statements differ, the financial
statements of the overseas affiliate should be translated into won using the
exchange rate as of the preparing company's balance sheet date and the
average exchange rate for the fiscal year of the preparing company.


                      CHAPTER II.
     PREPARATION OF COMBINED FINANCIAL STATEMENTS

13. Elimination of the Investing Affiliate's Investments and the Investee's
   Stockholders' Equity
Combined financial statements provide financial information to users for a
business group viewed as an economic entity. Thus, the investments of the
investing affiliate and the corresponding stockholders' equity of the investee
affiliate should be eliminated by offsetting each other.
A. In eliminating the investment of the investing affiliate and the stockholders'
equity of the investee affiliate, the portion of the investee's stockholders' equity
that belongs to minority interest should not be separately presented.
B. The elimination of the investments of the investing affiliate and the



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stockholders' equity of the investee affiliate should be done as of the date of
controlling interest acquisition.
C. When the investments of the investing affiliate differs from the portion of the
investing affiliate's interest in the fair value of the investee affiliate's net assets as
of the date of controlling interest acquisition, the difference (hereinafter referred
to as investment elimination difference) should be accounted for as goodwill or
negative goodwill.
   1. Out of the difference between the fair value and the book value of the
   investee affiliate's net assets, the minorities' portion should be charged to
   combined capital surplus.
   2. Goodwill and negative goodwill should be accounted for in accordance
   with the Accounting Standard for Merge and Acquisition.
   3. The portion of the difference between the fair value and the book value
   of the investee affiliate's assets and liabilities, charged to combined capital
   surplus, should be removed from the combined financial statements in the
   accounting period when the assets are used or disposed and/or the liabilities
   are disposed or redeemed.
   4. Goodwill should be reported below the intangible assets, and negative
   goodwill as a deduction from the intangible assets.
D. When the investing affiliate has adjusted the carrying amount of its
investment after acquisition of the investment, the carrying amount of the
investment should be restored to the original acquisition cost and net earnings
and retained earnings adjusted before combined financial statements are
prepared.
(13-1) The date of controlling interest acquisition refers to the date an affiliated
company became a constituent in a business group. When the date is not clear,
the date the Fair Trade Commission enlisted the company as an affiliate of the
business group should be used. When there are more than one investing affiliate
investing in an investee affiliate, investments of the investing affiliates should be
eliminated altogether as of the date of controlling interest acquisition.
(13-2) When years have passed since the date of controlling interest acquisition
and the date is not clear, a later date determined to be appropriate may be used
for elimination of the investing affiliate`s investment and investee affiliate`s
stockholders` equity.
(13-3) When controlling interest was acquired during an accounting period, the



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        Accounting Standard for Combined Financial Statements of Business Group     13

closest fiscal year end should be considered as the date of controlling interest
acquisition. The rationale behind this is as follows. Unless the investee affiliate
prepares financial statements at the point of the controlling interest acquisition,
the stockholders' equity of the investee affiliate at this date is unknown.
(13-4) Stockholders of an investee affiliate consist of the investing affiliates,
individual large stockholders (referring to the single entity and its related parties
except for the investing affiliates), and external minority stockholders. In
combined financial statements, large stockholders' interest and minority interest
remain in stockholders' equity on the combined financial statements while the
investing affiliates' interests are eliminated. If minority interest is separated out in
combined financial statements, large stockholders' interest which is not
eliminated is in part included in minority interest, leading to the
misrepresentation of minority interest. In addition, since the cost of computing
the minority interest is believed to be greater than the benefit derived from
separate presentation, the minority interest should not be presented separately
on the combined financial statements.
(13-5) Treasury stocks owned by affiliated companies to be combined for
financial reporting should be presented as a deduction from the stockholders`
equity.
(13-6) In the case that a company in the combined entity holds stocks or bonds
of another company in the combined entity through a special money-in-trust,
invested stocks are eliminated against the stockholders' equity accounts of the
investee and bonds are eliminated against the liabilities of the issuer in an
intercompany transaction.

14. Issuance of Preferred Stocks in an Investee Affiliate
In the case that an investee affiliate has preferred stocks outstanding, the
accounts are recorded as follows:
A. The stockholders' equity accounts of the investee affiliate are first allocated
between the common and preferred stockholders before applying combining
procedures.
B. An acquisition of the investee affiliate's preferred stocks by the investing
affiliate would be accounted for as if the investee affiliate retired preferred stocks.
An elimination of investments and stockholders` equity for preferred stocks are
accounted for as follows:
   1.     When the price paid is less than the preferred equity retired, the



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   difference is added to capital surplus of the combined entity.
   2. When the price paid exceeds the preferred equity retired, the difference
   is offset against capital surplus of the combined entity applicable to the
   preferred stocks. If not enough of capital surplus applicable to the preferred
   stocks exists, the remainder is taken from retained earnings of the combined
   entity.
C. In applying the above B, the difference between fair values and book values
of the investee affiliate's assets and liabilities arising from the elimination of
investments and stockholders` equity in excess of the investing affiliate's interest
is recorded in the combined capital surplus.
D. The allocation of the stockholders' equity of the investee affiliate to the
common and preferred stockholder interests is accomplished by the following
procedure. The preferred stockholder interests are the amount as a result of
deducting the common stockholder interests from the stockholders' equity of the
investee affiliate.
   1. Issuance of cumulative and participating preferred stocks in an investee
   affiliate
   When dividends are in arrears, the common stockholder interests are the
   portion of common stocks in the stockholders' equity of the investee affiliate
   in excess of dividends in arrears. Dividends in arrears may be deducted up to
   the amount of unrestricted retained earnings. When no dividends are in
   arrears, the common stockholder interests are the portion of common stocks
   in the total stockholders' equity of the investee affiliate.
   2. Issuance of cumulative and non-participating preferred stocks in an
   investee affiliate
   When dividends are in arrears, the common stockholder interests are the
   sum of i) the portion of common stocks in the stockholders' equity of the
   investee affiliate in excess of retained earnings and ii) retained earnings of
   the investee affiliate in excess of dividends in arrears. Dividends in arrears
   may be deducted up to the amount of unrestricted retained earnings. When
   no dividends are in arrears, the common stockholder interests are the sum of
   the amount described in i) and the investee affiliate's retained earnings.
   3. Issuance of non-cumulative and participating preferred stocks in an
   investee affiliate
   The common stockholder interests are the portion of common stocks in the




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      Accounting Standard for Combined Financial Statements of Business Group    15

   total stockholders' equity of the investee affiliate.
   4. Issuance of non-cumulative and non-participating preferred stocks in an
   investee affiliate
   The common stockholder interests are the sum of i) the portion of common
   stocks in the stockholders' equity of the investee affiliate in excess of retained
   earnings and ii) retained earnings of the investee affiliate.
(14-1) The stockholders' equity of the investee affiliate is accounted for
depending on the residual claim of the preferred stocks. When the preferred and
common stocks have identical residual claims, the stockholders' equity of the
investee affiliate is the amount of the stockholders' equity reflecting the fair
values of the investee affiliate's assets and liabilities. When the preferred stocks
do not have residual claims identical to the common stocks, the stockholders'
equity of the investee affiliate is the book value of the stockholders' equity of the
investee affiliate. The difference between the fair values and book values of the
investee affiliate's assets and liabilities is recorded to the common stockholders
interests.
(14-2) "The portion of common stocks" refers to the par value of the common
stocks to the total par values of the preferred and common stocks.
(14-3) The common stockholder interest in net income of the investee affiliate for
cumulative preferred stocks is determined based on the amount of net income
after the preferred dividends deducted regardless of the declaration of dividends
because the arrearage for prior periods must be met first in the subsequent
periods.
(14-4) When the investee affiliate has non-cumulative preferred stocks
outstanding, the arrearage is ignored in determining the common stockholders'
equity of the investee affiliate.

15. Elimination of Intercompany Transactions, Unrealized Gains and Losses
A. Receivables and payables, revenues and expenses, and unrealized gains
and losses arising from intercompany transactions between affiliated companies
to be combined for financial reporting should be eliminated in the preparation of
the combined financial statements. However, immaterial unrealized gains and
losses resulting from intercompany transactions may be left without elimination:
   1. Even when a transaction between affiliated companies is undertaken
   using an outsider company as an intermediary, if it is apparent that it is in fact
   a transaction between affiliated companies in the business group, the



                                         15
   transaction should be accounted for as an intercompany transaction.
   2. Receivables and payables to be eliminated should include all the
   receivables and payables arising from intercompany transactions. They
   include intercompany determined receivables and payables such as trade
   receivables, trade payables, loans receivable, borrowings and other
   receivables and payables. In addition, intercompany receivables and
   payables recognized in connection with the determination of periodic income
   on an accrual basis, such as accrued revenues, accrued expenses, prepaid
   expenses and unearned revenues, should be eliminated.
   3. Of unrealized gains and losses from previous periods, the amount
   realized in the current period should be appropriately adjusted.
   4. Unrealized gains and losses resulting from transactions before a
   company becomes affiliated should not be eliminated.
B. Trade receivables, trade payables, sales and cost of goods sold arising from
intercompany sales of inventories, and the resulting unrealized gains and losses
should be eliminated:
   1. When a trade note payable issued by an affiliated company to another
   affiliated company is discounted to an external entity such as a financial
   institutions, the discounted note should be accounted for as borrowings. In
   addition, when a note issued from transactions not involving inventory is
   discounted to an external entity, the face amount of the note should be
   accounted for as borrowings;
   2. Allowance for doubtful accounts established for receivables and
   estimated liabilities accrued for product warranties in conjunction with
   intercompany transactions between affiliates should be reversed.
C. Gains and losses on disposition of marketable and investment securities
arising from intercompany transactions between affiliates are not de factor
realized and thus should be eliminated.
D. When there have been intercompany sales of tangible fixed assets,
receivables and payables, related revenues and expenses, and unrealized
gains and losses should be e1iminated by offsetting one another. When
dividends are received and paid between affiliated companies, the investing
affiliate's dividend revenue should be eliminated, the investee affiliate's
dividends payable that is attributable to the investing affiliate should be revoked,
and combined retained earnings are adjusted accordingly.




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      Accounting Standard for Combined Financial Statements of Business Group      17

E. When one affiliate purchases bonds issued by another affiliate, the
transaction should be considered as a redemption of bonds. Thus, any related
receivables and payables, and revenues and expenses should be eliminated,
and any estimated gains and losses on redemption of bonds resulting from the
intercompany transaction should be recognized.
F. For an intercompany operating lease transaction between affiliates, rent
payable and rent expense of the lessee affiliate should be eliminated by
offsetting against rent receivable and rent revenue of the lessor affiliate. In
addition, leased assets on an operating lease and its related accumulated
depreciation should be reclassified into regular tangible fixed assets and its
related accumulated depreciation.
G. For an intercompany finance lease transaction between affiliates, lease
liability and interest expense on a finance lease of the lessee affiliate should be
eliminated against lease receivable and interest revenue of the lessor affiliate. In
addition, a leased asset on a finance lease and its related accumulated
depreciation should be reclassified into regular tangible fixed asset and its
related accumulated depreciation.
(15-1) Intercompany trade receivable and trade payable eliminated should be
the same in amount. When the amounts are not identical between the two
affiliates involved at the date of combined financial statements, they should be
appropriately adjusted to be identical before elimination.
(15-2) When any inventory purchased from an affiliated company by another
affiliated company in the current period remain unsold at the date of combined
financial statements, unrealized intercompany gain or loss contained in the
ending inventory should be eliminated.
(15-3) Unrealized gain or loss to be eliminated with respect to ending inventory
should be computed based upon actual gross margin of the concerned
transaction. However, when the actual gross margin is deemed not materially
different from the industry-specific annual average gross margin and is
practically difficult to figure out, the industry gross margin can be used instead.
(15-4) Unrealized gain or loss from intercompany sale of a depreciable tangible
fixed asset will be realized through a sale of the asset to a non-affiliate third party
or in the process of depreciation. Thus, depreciation expense on the combined
statement of income should be adjusted by subtracting (adding) the overstated
(understated) portion of the depreciation expense increased (decreased) due to
intercompany unrealized gain or loss included in the depreciable tangible fixed



                                         17
asset.
(15-5) When bonds issued by one affiliate has been purchased by another
affiliate, investment in bonds, interest revenue and interest receivable of the
purchaser affiliate should be eliminated against bonds payable, interest expense
and interest payable of the issuer affiliate. When the acquisition cost of an
investment in bonds is not same as the carrying value of the bonds payable, the
difference should be accounted for as estimated gain or loss on the redemption
of bonds. In this case, the difference between interest revenue and interest
expense of affiliates involved should be accounted for by adjusting estimated
gain or loss on redemption of bonds over the remaining period of the bond .

16. Changes in the Investing Affiliate's Ownership Interest in the Investee Affiliate
A. Subsequent to the date of an investee affiliate's admission to a business
group, an investing affiliate may acquire additional stock of the investee affiliate
from outside stockholders. Investment elimination difference resulting from such
additional stock purchase by the investing affiliate should be charged or credited
to capital surplus.
B. When an investing affiliate sells a portion of its investee affiliate's
stockholdings to outsiders, and the investee still remains as an affiliate, the gain
or loss on disposal of stocks should not be recognized but credited or charged
directly to capital surplus.
C. When an investee affiliate issues stocks for considerations, pays stock
dividends, or reclassifying its retained earnings to capital stock (hereafter
referred to as capital increase), the difference between the increase in the
investing affiliate's share in the equity of the investee affiliate and acquisition
cost of new stocks (0 in the case of stock dividends and capital stock increases
without considerations) due to such capital increase should be credited to capital
surplus.
D. When an investing affiliate acquired investee affiliate's stocks before forming
a combined entity, investment elimination difference is determined based on the
sum of the carrying book value of investee affiliate's stocks and the cost of
additional acquisition. In this case, capital adjustments due to mark-to-market
valuation of investee affiliate's stocks are recognized as realized gains or losses
in the fiscal year of forming the combined entity.
E. When a company accounted for under the equity method becomes an affiliate
for combined financial reporting through the acquisition of the additional shares,




                                          18
      Accounting Standard for Combined Financial Statements of Business Group   19

etc., investment elimination difference is determined based on the sum of the
carrying book value under the equity method and the cost of additional
acquisition.
F. The acquisition of the additional shares or partial disposition of an investee
affiliate by the combined entity from or to other affiliates is an intercompany
transaction. Thus, receivables and payables, revenues and expenses, and
unrealized gains and losses corresponding to that intercompany transaction
should be eliminated.
G. When affiliates are merged together during a fiscal year, combined financial
statements would reflect this transaction as if the combined entity acquired
additional interest rather than a merger took place. The net income or loss for
the acquiree as of the merger date should be reflected in the combined income
statement.
H. When the combined entity's interest in the investee affiliate increases as a
result of the acquisition of the additional shares from outside stockholders during
a fiscal year, the merger between affiliates, or the issuance of the new stocks,
the incremental interest in the net income or loss of the investee affiliate is
recorded as "adjustments due to change in interest" in the retained earnings of
the combined statement of changes in equity.
(16-1) In combined financial statements treating a business group of affiliated
companies as an economic entity, the stockholders of the affiliated companies of
the group are the stockholders of the business group. Therefore, gains or losses
on intercompany transactions of an affiliate's capital stocks occurring after the
date of controlling interest acquisition should not be recognized as gains or
losses are not recognized for ordinary capital transactions.
(16-2) When affiliates are merged together during a fiscal year, the economic
entity does not change at the combined entity's stand point. However, the net
income or loss for the acquiree as of the merger date is reflected in the acquirer's
retained earnings but not in the acquirer's income statement. As a result,
combined net income or loss after the merger may not coincide with combined
net income or loss without the merger. In order to mitigate this inconsistency, the
combined financial statements would reflect this transaction as if the combined
entity acquired additional interest rather than a merger took place. In addition,
the net income or loss for the acquiree as of the merger date should be reflected
in the combined income statement.
(16-3) In the above H, the inconsistency between the combined net income and



                                        19
changes in combined retained earnings arises from the elimination of investee
affiliate's net income or loss as of the acquisition date when investing affiliate
acquires additional shares of the investee affiliate during a fiscal year. The
"adjustments due to change in interest" reflected in the retained earnings of the
combined statement of changes in equity is to mitigate this inconsistency to
articulate combined financial statements.

17. Exclusion from Affiliated Companies to be Combined
When an investee affiliate becomes no longer under control and gets excluded
from affiliates to be combined for financial reporting, changes in the investee
affiliate's retained earnings or accumulated deficit from the date of controlling
interest acquisition to the date of exclusion should be reflected in gain or loss on
the disposal of the investment in stocks and the carrying value of the remaining
investment in stocks.
(17-1) When an investee affiliate no longer qualifies as an affiliate to be
combined for financial reporting after an investing affiliate sells its stockholdings
of the investee affiliate to an external third party, gain or loss on the disposal of
investment should be adjusted by a portion, attributable to the ownership
interest sold to the third party, of changes in the investee affiliate's retained
earnings or accumulated deficit since the date of controlling interest acquisition.
(17-2) When the stocks of an invested affiliate is partially disposed or an
investee affiliate is excluded from the affiliates to be combined for financial
reporting without disposal of stocks of the investee affiliate, the investing
affiliate's proportionate share of changes in the retained earnings or
accumulated deficit from the date of controlling interest acquisition to the date of
exclusion should be added to or deducted from the investing affiliate's
investment in stocks.

18. Use of the Equity Method for Investment
When combined affiliates of a business group have significant influence over an
investee company that is not an affiliate to be combined for financial reporting,
that investment in stocks of the investee company should be accounted for by
the equity method.
A. Investing affiliates are presumed to exercise significant influence over a
non-affiliate investee company under one of the following circumstances:
   1.    representation on the board of directors or decision-making bodies




                                        20
        Accounting Standard for Combined Financial Statements of Business Group   21

   2. participation in decision-making processes such as in distribution
   and/or retention of earnings
   3.     participation in decision-making on operating stategy.
   4. material intercompany transaction between investing affiliates and a
   non-affiliate investee company.
   5.     interchanges of managerial personnel
   6.     communications of essential information
   7. Besides 1) through 6), significant influence is effectively exercisable
   and can be demonstrated.
B. When the combined entity in aggregate owns not less than 20 percent of the
voting stocks of a company outside its combined entity, it is presumed that the
combined entity has the ability to exercise significant influence over the
company unless there is clear evidence to the contrary.
C. When the increase (decrease) in the investment account results from
changes in the investee's capital surplus, it should be reported as an increase
(decrease) in combined capital surplus.

19. Deferred Income Tax
Income tax effect for combined financial statements should be recognized in
accordance with the FAS and the Interpretations on the FAS and presented in
the combined balance sheet and the combined statement of income. The
deferred tax credit and charge from individual financial statements of a
combined entity should be reported in a net amount in the combined balance
sheet.

20. Combined Statement of Cash flows
The combined statement of cash flows should be prepared based upon the prior
period's and current period's combined balance sheets and combined
statements of income. Or it may be prepared using individual statements of cash
flows of affiliated companies to be combined after eliminating intercompany
cash flows.
A. The combined statement of cash flows should be prepared in accordance
with the FAS.
B. The following should be noted in applying the FAS:
   1.     Amortization of goodwill, investment loss under the equity method,



                                          21
   dividends in excess of investment income received under the equity method,
   etc. should be included in expenses not involving cash outflows.
   2. Recovery of negative goodwill, investment income (in excess of
   dividends received) under the equity method, etc. should be included in
   revenues not involving cash inflows
(20-1) Increases or decreases in cash due to changes in the combined entity are
reported as cash flows from changes in the combined entity.
(20-2) When combined affiliates purchase additional interest of an affiliate from a
third party or an affiliate still remains as a member of combined affiliates after a
part of their interest on that affiliate is sold to a third party, the purchase or sale
should be reported under cash flows from financing activities.

21. Application of the FAS
The general matters not prescribed in this Standard are governed by the FAS.



                                  CHAPTER Ⅲ.
                                  DISCLOSURE

22. Notes to Combined financial Statements
A. General matters
   1. Names, industry classifications, stockholders' equities, insiders'
   stockholding ratios, locations, and fiscal year ends of affiliated companies
   included in or excluded from the combined financial statements (as illustrated
   in annexed Form 6).
   2. Names of investee companies accounted for by the equity method,
   shares of individual large stockholders and affiliated companies, and the
   reason for using the equity method.
   3. Names and descriptions of affiliated companies that are newly included
   in or excluded from the combined financial statements.
   4. When the fiscal year end of an affiliate is different from the reporting
   date of the combined financial statements, descriptions of significant
   transactions and events that have taken place between the fiscal year end of
   the affiliate and the reporting date of combined financial statements, and any
   adjustments made for them.




                                         22
         Accounting Standard for Combined Financial Statements of Business Group   23

   5. Description of significant transactions between affiliates combined for
   financial reporting and investees accounted for by the equity method and any
   adjustments made for them.
   6. Description of foreign currency assets and liabilities, basis of translation,
   and translation gains and losses.
   7. Redemption schedule of bonds and long-term borrowings (separate
   presentations for the next five years and thereafter).
   8.      Amount and nature of contingent liabilities.
   9. Description of subsequent events that have significant influence on the
   combined financial statements.
   10. Combined statement of changes in capital (as illustrated in annexed
   Form 7).
   11. Other important items on combination policies.
B. Accounting Principles
   1. Accounting methods employed by affiliated companies combined, any
   changes in accounting principles and procedures in preparing for combined
   financial statements, and content and justifications of the changes and their
   effects on the combined financial statements;
   2. Details of amortization of goodwill, recovery of negative goodwill, any
   allocations to certain identifiable assets or liabilities of the investment
   elimination difference, and accounting for the investment elimination
   difference under the equity method.
   3. Description of the valuation of investment accounts under the equity
   method.
   4. Description of any corrective adjustments made to the financial
   statements of an affiliated company combined for financial reporting when
   they are judged not to fairly present financial position and results of
   operations.
   5. Description of the prior year`s criteria and estimation procedures, if any,
   used for preparing the current year's combined financial statements.
C. Disclosure of major transactions among affiliates:
   1.      Domestic insiders' stockholding ratios (as illustrated in annexed Form
   8).
   2.      Details on guarantees of affiliates' obligations, which are restricted



                                           23
   under [Article 10-2] of the Act on Monopoly Regulation and Fair Trade (as
   illustrated in annexed Form 9).
   3. Details on other guarantees of affiliates' obligations (as illustrated in
   annexed Form 10).
   4. Details on assets pledged as collaterals for affiliates (as illustrated in
   annexed Form 11);
   5. Details on intercompany cash loans and borrowings between affiliated
   companies combined (as illustrated in annexed Form 12); and
   6. Details on intercompany sales and purchases of inventories between
   affiliated companies combined (as illustrated in annexed Form 13).
D. Disclosure of segment information of affiliated companies combined:
   1. Combined balance sheets by industry (non-financial, financial and
   insurance) (as illustrated in annexed Form 14).
   2. Combined statements of income by industry (non-financial, financial
   and insurance) (as illustrated in annexed Form 15).
   3.   Details of operations by industry (as illustrated in annexed Form 16).
   4.   Details of operations by region (as illustrated in annexed Form 17).
E. Besides the above disclosures in the note, items material to the combined
financial statements and prescribed in the FAS are subject to additional
disclosure.

23. Documentation of Important Data Necessary for Preparing Combined Financial
    Statements
For preparation of combined financial statements, affiliated companies to be
combined for financial reporting should prepare the following data:
A. Investing affiliated companies with investment in an investee affiliate or an
investee accounted for by the equity method should provide information
concerning their investment stockholdings, the dates of stock acquisition,
dividends received (cash and stock), increases or decreases in the investee's
equity, changes in the investment stockholdings subsequent to the initial
acquisition (additional acquisitions or disposals), and valuation of investment
stockholdings.
B. Affiliated companies to be combined or accounted for by the equity method,
which are owned by other affiliated companies, should provide yearly details on




                                      24
      Accounting Standard for Combined Financial Statements of Business Group   25

stockholders' equity, reclassification of capital surplus and retained earnings to
capital stock, dividend payments, increases and decreases in capital stock. and
list of stockholders.
C. Details on receivables and payables between affiliated companies as of the
reporting date of the combined financial statements (including the amount due to
difference in revenue recognition criteria, and the amount of bill of exchange
discounted in an export transaction).
D. Details on intercompany revenue and expense transactions between
affiliated companies and with an investee accounted for by the equity method
during the fiscal year of combined financial statements.
F. Details on sales and purchase of fixed assets between affiliates.
G. Details on guarantees of affiliates' obligations.
H Details on assets pledged as collaterals for affiliates.
I. Details on notes issued by affiliates discounted and endorsed.
J. Details of accounting policies which differ from those of the preparing
company of combined financial statements.
K. Other details necessary for combination.


                                    Addenda
                               (October 21, 1998)

1. This Standard shall be effective from October 22,1998.
2. This Standard shall be applied from the first fiscal year beginning on or after
January 1,1999.
3. For the fiscal year in which this Standard is initially adopted, the combined
statement of cash flows needs not be prepared, and the combined balance
sheet and the combined statement of income should be prepared for the current
year only.


                                  Addenda
                             (December 22, 1999)

1. Effective Date
This Standard shall be effective from December 23,1999.




                                         25
2. Application in General
This Standard should be applied from the fiscal year to which the effective date
belongs.
3. In the fiscal year when the combined financial statements are initially prepared,
the combined statement of changes in stockholders' equity should be prepared
for the current year only.
4. When consolidated financial statements prepared by an affiliated company
are used for preparation of combined financial statements in accordance with
[12E], adjustments to consolidated assets and liabilities should be presented as
goodwill or negative goodwill.
5. In application of [13C/2)], if the date of controlling interest acquisition is not so
clearly evident or too long ago, negative goodwill may be recovered over the
period within 20 years using the straight-line method.


                                     Addenda
                                   (May 4, 2001)

1. This Standard shall be effective from May 4, 2001.
2. This Standard should be applied from the fiscal year beginning on or after
January 1, 2000.




                                          26