paradise co., ltd. and subsidiaries€¦ · · 2016-08-10paradise co., ltd. and subsidiaries ......

PARADISE CO., LTD. and Subsidiaries

Consolidated Financial Statements December 31, 2015

PARADISE CO., LTD. and Subsidiaries Index December 31, 2015

Page(s)

Independent Auditor’s Report ···················································································· 1 - 2

Consolidated Financial Statements

Consolidated Statement of Financial Position ································································· 3 - 4

Consolidated Statement of Comprehensive Income ··························································· 5

Consolidated Statement of Changes in Equity ································································· 6

Consolidated Statement of Cash Flows ········································································· 7 - 9

Notes to the Consolidated Financial Statements ·························································· 10 – 60

Independent Auditor’s Report

(English Translation of a Report Originally Issued in Korean) To the Board of Directors and Shareholders of PARADISE Co., Ltd.

We have audited the accompanying consolidated financial statements of PARADISE Co., Ltd. and its subsidiaries (collectively “the Group”), which comprise the consolidated statement of financial position as of December 31, 2015, and the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management’s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Korean Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

1

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of PARADISE Co., Ltd. and its subsidiaries as of December 31, 2015, and their financial performance and cash flows for the year then ended in accordance with the Korean IFRS Other Matters The consolidated financial statements of the Company as of and for the year ended December 31, 2014, presented herein for comparative purposes, were audited by other auditors whose report dated March 12, 2015, expressed an unqualified opinion on those statements.

Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries.

March 17, 2016

Seoul, Korea

This report is effective as of March 17, 2016, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

2

3


Consolidated Statements of Financial Position

December 31, 2015 and 2014

(in Korean won) Notes 2015

2014

Assets Current assets Cash and cash equivalents 5,28,29,31 ₩ 338,805,004,141

₩ 332,130,544,184

Short-term financial instrument 5,28,29 286,200,000,000

305,344,055,182

Available-for-sale financial assets 7,28,29 31,000,000,000

6,232,724,000

Held-to-maturity financial assets 8,28,29 300,000

34,185,000

Trade receivables 6,28,29 24,426,530,004

33,622,691,626

Non-trade receivables 6,28,29,30 1,262,435,599

595,808,588

Advance payments

2,912,532,931

1,018,417,056

Prepaid expenses

4,678,994,836

643,975,245

Inventories

2,701,040,263

2,516,623,807

Other receivables 6,28,29 4,603,815,148

2,648,274,010

Other current assets

1,518,009,364

133,104,922

Assets held for sale

-

20,147,743,714

698,108,662,286

705,068,147,334

Non-current assets

Long-term financial instruments 5,28,29 23,117,058,156

11,811,255,062

Available-for-sale financial assets 7,28,29 23,642,080,131

23,413,618,500

Held-to-maturity financial assets 8,28,29 1,885,000

2,185,000

Investments in associates 9 8,749,791

9,364,148

Long-term prepaid expenses

2,758,473,050

4,902,626

Long-term advance payments

2,185,300,000

-

Investment properties 4,10 122,922,567,993

115,793,170,368

Property and equipment, net 4,11 830,878,168,011

550,134,349,937

Intangible assets 4,12,34 279,890,926,493

186,479,509,684

Other non-current accounts receivable 6,28,29 10,355,619,704

9,191,808,850

1,295,760,828,329

896,840,164,175

Total assets

₩ 1,993,869,490,615 ₩ 1,601,908,311,509

Liabilities

Current liabilities

Trade payables 28,29 ₩ 1,518,824,821 ₩ 1,741,499,637

Short-term borrowings 13,28,29 36,400,000,000

44,518,931,000

Current portion of long-term borrowings 13,28,29

10,061,706,664

12,802,916,672

Other payables 28,29,30 30,099,887,982

31,243,270,374

Advance from customers

3,908,819,983

7,541,086,383

Withholdings

38,545,133,328

32,144,083,982

Deposit received for guarantee 28,29 12,352,000,000

12,597,500,000

Income tax payables

3,797,301,054

76,608,337,512

Accrued expenses 28 86,921,497

1,415,991,429

Other current liabilities 14 102,828,329,945

107,720,869,374

Liabilities directly related to assets held for sale

-

6,418,795,145

239,598,925,274

334,753,281,508

4


Consolidated Statements of Financial Position


Non-current liabilities

Long-term borrowings 13,28,29 394,850,814,818

23,092,083,328

Retirement benefit obligation 15 11,959,939,935

11,411,721,082

Long-term deposits received 28,29 67,842,500

5,325,052,500

Deferred income tax liabilities 26 47,684,158,375

42,829,844,373

Other non-current liabilities 16,28,29,30 13,192,458,329

6,292,256,000

467,755,213,957

88,950,957,283

Total liabilities

707,354,139,231

423,704,238,791

Equity attributable to owners of the Parent

Common stock 1,17 47,032,355,000

47,032,355,000

Capital surplus 18 295,020,106,467

295,020,106,467

Retained earnings 19 706,065,592,249

687,210,012,703

Other components of equity 20 (25,435,938,394)

(16,406,256,775)

Capital directly related to assets held for sale

-

(2,494,399,270)

1,022,682,115,322

1,010,361,818,125

Non-controlling interests

263,833,236,062

167,842,254,593

Total equity

1,286,515,351,384

1,178,204,072,718

Total liabilities and equity

₩ 1,993,869,490,615 ₩ 1,601,908,311,509

The accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial statements. 5


Consolidated Statements of Comprehensive Income

Years Ended December 31, 2015 and 2014

(in Korean won) Notes

2015

2014

Sales

4,21,30

₩ 615,357,060,781

₩ 676,154,686,588

Cost of sales

23,30

492,742,473,637

532,082,623,560

Gross profit

122,614,587,144

144,072,063,028

Selling expenses

22,23,30

9,043,253,594

10,470,800,791

Administrative expenses

22,23,30

55,249,604,615

54,553,423,505

Operating income

4

58,321,728,935

79,047,838,732

Finance income

24

12,257,108,161

12,440,233,302

Finance costs

24

2,993,813,522

3,366,578,633

Other income

25

23,161,940,453

47,029,099,882

Other expenses

25

10,602,141,638

16,091,318,902

Losses on valuation of equity method investments

9

(1,000,614,357)

(1,354,441)

Income before income tax

79,144,208,032

119,057,919,940

Income tax expense

26

23,769,718,518

13,611,138,644

Income from continuing operations

55,374,489,514

105,446,781,296

Income from discontinued operations

33

16,457,391,193

379,348,343

Net income

71,831,880,707

105,826,129,639

Other Comprehensive Income(Expenses)

(1,808,426,911)

(2,112,526,389)

Items that will not be reclassified to profit or loss

Remeasurements of defined benefit plans 15

(5,252,498,119)

(4,493,114,422)

Tax effect of items that will not be reclassified to profit or loss

1,271,104,545

1,087,333,690

(3,981,393,574)

(3,405,780,732)

Items that subsequently may be reclassified to profit or loss

Gain (loss) on valuation of available-for-sale financial assets

(334,880,933)

427,696,115

Currency translation differences

2,426,806,410

969,060,688

Tax effect of items that may be subsequently reclassified to profit or loss

81,041,186

(103,502,460)

2,172,966,663

1,293,254,343

Comprehensive Income for the year

₩ 70,023,453,796

₩ 103,713,603,250

Net income attributable to :

Owners of the Parent

₩ 65,238,130,458

₩ 96,372,090,913


6,593,750,249

9,454,038,726

₩ 71,831,880,707

₩ 105,826,129,639

Comprehensive income attributable to :

Owners of the Parent

₩ 63,793,600,897

₩ 94,870,958,327


6,229,852,899

8,842,644,923

₩ 70,023,453,796

₩ 103,713,603,250

Earnings per share :

27

Basic and diluted earnings per share from continuing operations

₩ 571

₩ 1,176

Basic and diluted earnings per share from discontinued operations

193

5

The accompanying notes are an integral part of these consolidated financial statements. 6


Consolidated Statements of Changes in Equity

Years Ended December 31, 2015 and 2014 (in Korean won)

Attributable to equity holders of the company

Non-controlling

Common stock

Capital surplus

Retained earnings

Other components of equity

interests

Total

Balance at January 1, 2014 ₩ 47,032,355,000

₩ 99,230,630,189

₩ 628,666,862,566

₩ (44,283,044,838)

₩ 158,999,609,669

₩ 889,646,412,586

Comprehensive income

Profit for the year

-

-

96,372,090,913

-

9,454,038,726

105,826,129,639

Remeasurements of defined

benefit plans -

-

(2,714,822,476)

-

(690,958,256)

(3,405,780,732)

Gain on valuation of avalialbe-

for-sale financial assets -

-

-

324,193,655

-

324,193,655


-

-

-

889,496,234

79,564,454

969,060,688

Transactions with equity holders of the Company :

Dividends to equity holders of

the company -

-

(35,114,118,300)

-

-

(35,114,118,300)

Disposal of treasury stocks

-

195,789,476,278

-

24,168,698,904

-

219,958,175,182

Balance at December 31, 2014 ￦ 47,032,355,000

￦ 295,020,106,467

￦ 687,210,012,703

￦ (18,900,656,045)

￦ 167,842,254,593

￦ 1,178,204,072,718

Balance at January 1, 2015 ₩ 47,032,355,000

₩ 295,020,106,467

₩ 687,210,012,703

₩ (18,900,656,045)

₩ 167,842,254,593

₩ 1,178,204,072,718

Comprehensive income

Profit for the year

-

-

65,238,130,458

-

6,593,750,249

71,831,880,707

Remeasurements of defined

benefit plans -

-

(3,616,863,912)

-

-364,529,662

(3,981,393,574)

Gain on valuation of avalialbe-

for-sale financial assets -

-

-

(253,839,747)

-

(253,839,747)


-

-

-

(622,333,232)

632,312

(621,700,920)

Disposal of subsidiaries

-

-

-

3,048,507,330

-13,847,635

3,034,659,695

Transactions with equity holders of the Company :

Dividends to equity holders of

the company -

-

(42,765,687,000)

-

-

(42,765,687,000)

Disposal of treasury stocks

-

-

-

(8,707,616,700)

-

(8,707,616,700)

Increase in paid-in capital

-

-

-

-

89,774,976,205

89,774,976,205

Balance at December 31, 2015 ₩ 47,032,355,000

₩ 295,020,106,467

₩ 706,065,592,249

₩ (25,435,938,394)

₩ 263,833,236,062

₩ 1,286,515,351,384

7


Consolidated Statements of Cash Flows


(in Korean won)

Notes

2015 2014

Cash flows from operating activities

Net income

₩ 71,831,880,707

₩ 105,826,129,639

Adsustment for

Retirement benefit expense

11,334,941,842

11,995,418,945

Depreciation of investment properties

704,253,955

921,332,383

Depreciation

21,346,593,806

16,590,148,255

Amortization

5,516,832,610

4,912,110,482

Reversal of bad debt expense

(484,195,199)

(197,305,614)

Other bad debt expense

-

166,394,211

Loss on foreign currency translation

823,400

60,901,833

Loss on disposal of property and equipment

516,982,603

3,552,595,841

Losses on disposal of intangible assets

-

7,608,334

Losses on disposal of inventory

18,956,359

-

Loss on valuation of financial assets at fair value through profit or loss

-

5,484,864

Loss on disposal of financial assets at fair value through profit or loss

-

5,445,828

Impairment loss on investments in subsidiaries

-

945,205,479

Miscellaneous losses

-

871,901,600

Income tax expense

26,347,511,133

16,616,362,013

Interest expenses

3,003,718,071

3,426,617,947

Reversal of financial guarantee liability

(403,287,671)

(451,993,941)

Gain on foreign currency translation

(405,445,703)

(1,040,049,245)

Gain on disposal of property and equipment

(4,174,781,678)

(147,583,518)

Gains on disposal of intangible assets

(33,118,414)

(10,002,579,084)

Gain on disposal of investments in subsidiaries

(17,652,885,072)

-

Gains on assets contributed

(167,380,500)

-

Gains on disposal of financial assets at fair value through profit or loss

-

(1,859,391)

Gain on disposal of available-for-sale financial assets

-

(88,248,371)

Miscellaneous income

-

(11,268,657,662)

Gains on valuation of equity method investments

1,000,614,357

1,354,441

Interest income

(12,257,108,161)

(12,440,233,302)

Dividend income

(39,044,750)

(53,929,099)

34,173,980,988

24,386,443,229

Changes in assets and liabilities resulting from operating activities

Decreas (Increase) in trade receivables

14,675,368,007

(6,105,765,182)

Increase in non-trade receivables

(1,748,852,836)

(243,788,222)

Increase in non-financial receivables

(1,747,192,746)

(60,167,892)

Decrease (Increase) in advance payments

(1,431,890,784)

213,612,346

Decrease in prepaid expenses

286,378,234

596,415,824

Decrease in inventories

(137,898,951)

(155,465,364)

8




Increase in guarantee deposits (873,071,158) (89,310,046)

Decrease (increase) in other deposits 27,028,100 (586,823,000)

Decrease (increase) in long-term prepaid expenses

(2,753,570,424)

6,403,549

Decrease in trade payables

(3,032,330,408)

(790,398,326)

Increase (decrease) in other payables

(453,327,839)

7,009,010,824

Increase (decrease) in non-financial payables

(4,337,408,272)

813,430,440

Increase in accrued expenses

-

8,719,416,123

Increase (decrease) in non-financial accrued expenses

(11,582,127,333)

15,610,788,340

Increase (decrease) in unearned revenue

159,807,809

(40,000,800)

Increase (decrease) in advance receipts

(3,741,818,900)

3,039,088,257

Increase in withholdings

1,491,812,583

16,714,869,129

Decrease in deposits received for guarantee

(245,500,000)

-

Increase (decrease) in security deposits

661,790,000

(163,810,000)

Increase (decrease) in long-term deposit received for guarantee

(15,510,000)

(719,040,000)

Increase in deferred revenues

6,318,987,986

29,766,887

Increase in retirement pension plan assets

(10,453,848,846)

(12,087,771,504)

Transfer from/to affiliates

9,668,862

-

Payments of retirement benefit obligation

(6,303,031,383)

(5,132,871,246)

(25,226,538,299)

26,577,590,137

Cash generated from operating activities

80,779,323,396

156,790,163,005

Interest received

13,134,152,585

10,421,059,693

Interest paid

(2,081,186,334)

(2,826,356,483)

Dividends received

39,044,750

53,929,099

Income tax paid

(92,543,877,996)

(29,174,670,879)

Net cash inflow(outflow) from operating activities

(672,543,599)

135,264,124,435

Cash flows from investing activities

Disposal of short-term investments

251,300,000,000

473,546,600,000

Disposal of financial assets at fair value through profit or loss

-

1,429,670,000

Disposal of held-to-maturity financial assets

34,185,000

128,195,000

Decrease in short-term loans

1,683,657,721

1,846,464,169

Withdrawal of long-term financial instruments

124,740,000

252,450,000

Disposal of available-for-sale financial assets

6,220,000,000

5,111,983,332

Disposal of investments in subsidiaries

210,662,499,875

-

Disposal of property and equipment

7,093,198,716

233,999,447

Disposal of intangible assets

300,000,000

10,204,000,000

Acquisition of short-term investments

(413,835,350,000)

(690,079,405,182)

Acquisition of short-term available-for-sale financial assets

(31,000,000,000)

-

Acquisition of long-term available-for-sale financial assets

(600,000,000)

(15,000,000,000)

Acquisition of long-term financial instruments

(11,430,543,094)

(3,311,243,343)

9




Increase in long-term advance payments

(2,185,300,000)

-

Increase of long-term loans (3,913,672,840) (1,475,057,140)

Acquisition of Investments in associates (1,000,000,000) -

Consideration for business combination (95,583,079,514) -

Acquisition of property and equipment (295,605,284,939) (77,189,381,408)

Acquisition of intangible assets (669,786,980) (2,327,397,883)

Acquisition of investment properties (6,182,210,200) -

Payment of capitalized interest

(13,500,534,224)

-

Net cash outflow from investing activities

(398,087,480,479)

(296,629,123,008)

Cash flows from financing activities

Proceeds from long-term borrowings

381,480,103,838

24,990,000,000

Repayment of short-term borrowings

(8,118,931,000)

(17,958,593,400)

Repayment of current portion of long-term borrowings

(12,802,986,672)

(6,760,250,000)

Repayment of long-term borrowings

-

(322,653,871)

Payment of dividends

(42,765,687,000)

(35,114,118,300)

Acquisition of treasury stock

(8,707,616,700)

-

Disposal of treasury stock

-

282,466,161,012

Additional paid-in capital

89,500,870,392

-

Net cash inflow from financing activities

398,585,752,858

247,300,545,441

Translation gains on cash and cash equivalents

402,640,285

330,429,151

Net increase in cash and cash equivalents

228,369,065

86,265,976,019

Cash and cash equivalents at beginning of year

338,576,635,076

252,310,659,057

Cash and cash equivalents of discontinued operations

-

(6,446,090,892)

Cash and cash equivalents at the end of year

₩ 338,805,004,141

₩ 332,130,544,184

The accompanying notes are an integral part of these consolidated financial statements.

Paradise Co., Ltd. and Subsidiaries Notes to Consolidated Financial Statements


10

1. General Information 1.1 The Company

Paradise Co., Ltd. (the Company) was incorporated on April 27, 1972, to engage in casino facility

operations, property leasing and others. On October 20, 1997, it changed its name to the current

one.

The Company operates a casino facility at the Walkerhill Hotel in Seoul, Maison Glad Hotel in Jeju, and Paradise Hotel in Busan, and a spa and leisure facility in Asan. The Company also leases certain properties in Seoul. The Company listed its shares on Kosdaq of the Korea Exchange on November 5, 2002. It merged with Paradise Jeju Co., Ltd. and the casino operations segment of Paradise Global Co., Ltd. on June 26, 2012 and July 1, 2015, respectively. As of December 31, 2015, the capital stock of the Company is ₩ 47,032,355 thousand, and its major shareholders are as follows:

Number of shares Percentage of

ownership (%)

Paradise Global Co., Ltd.

34,420,619

37.85 Kaywon Educational Foundation 3,720,000 4.09 Others 47,043,838 51.73 85,184,457 93.67 Treasury stock 5,758,215 6.33

90,942,672 100.00

1.2 Consolidated Subsidiaries Details of the consolidated subsidiaries as of December 31, 2015 and 2014, are as follows:

Subsidiaries

Main business Location

Year-end

closing date

Percentage of ownership (%)

2015

2014

Paradise Hotel Pusan Co., Ltd. Hotel Korea December 31 74.49 74.49 Paradise Segasammy Co., Ltd. Hotel and Casino Korea December 31 55.00 55.00 Paradise Safari Park Ltd. Hotel Kenya December 31 - 99.99 Paradise Investment and Development (Kenya) Ltd.

Casino Kenya December 31 - 84.99

Paradise International Co., Ltd. Advertisement Japan December 31 99.38 99.38 MMT (Hanwha Investment & securities Co., Ltd.)

- - - - -



11

1.3 Changes in Scope for Consolidation Subsidiaries excluded from consolidation for the year ended December 31, 2015, are as follows:

Subsidiaries Reasons

Paradise Safari Park Ltd. Loss of control due to disposal of investment Paradise Investment and Development Kenya Ltd. Loss of control due to disposal of investment MMTs Disposal

The Company lost its control over Paradise Safari Park Ltd., and Paradise Investment and

Development Kenya Ltd. as it disposed its entire ownership for ₩34,497 million. Gain on disposal

of investments in subsidiaries amounting to ₩17,653 million is included in income from

discontinued operations.

1.4 Summarized Financial Informations

Summarized statements of financial position for consolidated subsidiaries of December 31, 2015 and 2014, are as follows:

(in thousands of Korean won) 2015

Assets

Liabilities

Equity

Current

Non-current

Current Non-current

Paradise Hotel Pusan Co., Ltd. ₩ 19,665,762 ₩ 264,326,542 ₩ 66,364,249 ₩ 29,469,093 ₩ 188,158,962

Paradise Segasammy Co., Ltd. 445,886,213 443,627,956 23,692,559 386,209,215 479,612,394

Paradise International Co., Ltd. 2,154,624 726,319 768,293 203,430 1,909,219

Total ₩ 467,706,599 ₩ 708,680,817 ₩ 90,825,101 ₩ 415,881,738 ₩ 669,680,575


Assets

Liabilities

Equity

Current

Non-current

Current Non-current

Paradise Hotel Pusan Co., Ltd. ₩ 19,165,882 ₩ 274,574,445 ₩ 77,332,520 ₩ 35,072,547 ₩ 181,335,260

Paradise Segasammy Co., Ltd. 105,168,759 202,980,539 31,681,817 6,329,857 270,137,624

Paradise Safari Park Ltd. 10,342,998 9,651,196 5,432,621 925,746 13,635,827

Paradise Investment and Development (Kenya) Ltd.

132,816 20,735 52,648 7,780 93,123

Paradise International Co., Ltd. 2,006,937 705,481 770,054 180,526 1,761,838

MMT (Hanwha investment&securities Co.,Ltd. etc.)

181,732,365 - 1,281,263 - 180,451,102

Total ₩ 318,549,757 ₩ 487,932,396 ₩ 116,550,923 ₩ 42,516,456 ₩ 647,414,774

Summarized statements financial position above are adjusted for goodwill and fair value adjustment from business combination, and differences in accounting policies between the Company and the consolidated subsidiaries. However, intercompany transactions were not eliminated.



12

Summarized operating results of the Company’s consolidated subsidiaries for the years ended December 31, 2015 and 2014, are as follows:


Sales

Operating Income

Net Income

Total comprehensive

income

Paradise Hotel Pusan Co., Ltd.

₩ 79,033,927 ₩ 11,963,675 ₩ 7,830,740 ₩ 6,823,703

Paradise Segasammy Co., Ltd.

95,157,148 10,469,925 10,213,091 9,973,901

Paradise International Co., Ltd.

6,497,917 118,392 46,212 147,382

Total ₩ 180,688,992 ₩ 22,551,992 ₩ 18,090,043 ₩ 16,944,986


Sales

Operating Income

Net Income

Total comprehensive

income

Paradise Hotel Pusan Co., Ltd.

₩ 75,757,393 ₩ 10,105,740 ₩ 8,002,480 ₩ 7,443,123

Paradise Segasammy Co., Ltd.

108,638,136 16,353,617 16,546,906 15,328,514

Paradise Safari Park Ltd. 18,265,259 3,090,838 600,397 1,193,673 Paradise Investment and Development (Kenya) Ltd.

541,276 158,384 (221,048) 315,777

Paradise International Co., Ltd.

6,804,228 (49,995) (29,058) (191,140)

MMT (Hanwha investment & securities Co.,Ltd. etc.)

- - 451,102 451,102

Total ₩ 210,006,292 ₩ 29,658,584 ₩ 25,350,779 ₩ 24,541,049

The summarized operating results are adjusted for goodwill and fair value adjustment from business combination, and differences in accounting policies between the Company and the consolidated subsidiaries. However, intercompany transactions were not eliminated.

Summarized cash flows of the Company's consolidated subsidiaries for the years ended December 31, 2015 and 2014, are as follows:


Cash flows from operation activities

Cash flows from Investing activities


Paradise Hotel Pusan Co., Ltd. ₩ 20,026,388 ₩ (3,193,998) ₩ (15,546,918)

Paradise Segasammy Co., Ltd. 13,311,613 (510,936,789) 575,605,974

Paradise International Co., Ltd. 321,151 (28,839) -

Total ₩ 33,659,152 ₩ (514,159,626) ₩ 560,059,056



13


Cash flows from operation activities

Cash flows from

Investing activities


Paradise Hotel Pusan Co., Ltd. ₩ 18,154,970 ₩ (34,070,679) ₩ 6,902,407

Paradise Segasammy Co., Ltd. 27,897,967 4,624,852 (1,631,250)

Paradise Safari Park Ltd. 39,143 90,724 (7,188)

Paradise Investment and Development (Kenya) Ltd.

205,226 (4,139) (315,466)

Paradise International Co., Ltd. (24,561) 1,795 -

MMT (Hanwha Investment & securities Co.,Ltd.)

1,679,405 (181,679,405) 180,000,000

Total ₩ 47,952,150 ₩ (211,036,852) ₩ 184,948,503

Details of significant non-controlling interest are as follows:

Paradise Hotel Pusan Co.,

Ltd. Paradise Segasammy Co.,

Ltd.

Ownership percentage of non-controlling interests

25.51% 45.00%

Non-controlling interests 47,999,351 215,821,748

Profit attributable to non-controlling interests

1,997,622 4,595,840

Total comprehensive income to non-controlling interests

1,740,727 4,488,205

Dividends paid to non-controlling interests

- -

2. Significant Accounting Policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 2.1 Basis of Preparation The Group maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with the International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”). The accompanying consolidated financial statements have been condensed, restructured and translated into English from the Korean language financial statements. Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Group's financial position, financial performance or cash flows, is not presented in the accompanying consolidated financial statements. The consolidated financial statements of the Group have been prepared in accordance with Korean IFRS. These are the standards, subsequent amendments and related interpretations issued by the International Accounting Standards Board ("IASB") that have been adopted by the Republic of Korea.



14

The preparation of the consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3. 2.2 Changes in Accounting Policy and Disclosures (a) New and amended standards adopted by the Group The Group newly applied the following amended and enacted standards for the annual period beginning on January 1, 2015:

- Amendment to Korean IFRS 1019, Employee Benefits

Korean IFRS 1019, Employee Benefits, allows a practical expedient for companies that operate

defined benefit plans and when contributions are made by employees or third parties. The

application of this amendment does not have a material impact on the consolidated financial

statements.

- Annual Improvements to Korean IFRS 2010-2012 Cycle

- Amendment to Korean IFRS 1102, Share-based payment

Korean IFRS 1102, Share-based payment, clarifies the definition of a ‘vesting conditions’,

‘performance condition’, and ‘service condition’.

- Amendment to Korean IFRS 1103, Business Combination

Korean IFRS 1103, Business Combination, clarifies the classification and measurement of

contingent consideration in the business combination.

- Amendment to Korean IFRS 1108, Operating Segments

Korean IFRS 1108, Operating Segments, requires disclosures of the judgments made by

management in aggregating operating segments and a reconciliation of the reportable segments’

assets to the entity’s assets.

- Amendment to Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1038,

Intangible assets

Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1038, Intangible assets,

clarify how the gross carrying amount and the accumulated depreciation are treated where an

entity uses the revaluation model.



15

- Amendment to Korean IFRS 1024, Related Party Disclosures

Korean IFRS 1024, Related Party Disclosures, includes, as a related party, an entity that provides

key management personnel services to the reporting entity or to the parent of the reporting entity

(‘the management entity’).

- Annual Improvements to Korean IFRS 2011-2013 Cycle:

- Amendment to Korean IFRS 1103, Business Combination

Korean IFRS 1103, Business Combination, clarifies that Korean IFRS 1103 does not apply to the

accounting for the formation of any joint arrangement.

- Amendment to Korean IFRS 1113, Fair Value Measurement

Korean IFRS 1113, Fair Value Measurement, clarifies that the portfolio exception, which allows an

entity to measure the fair value of a group of financial instruments on a net basis, applies to all

contracts (including non-financial contracts) within the scope of Korean IFRS 1039.

- Amendment to Korean IFRS 1040, Investment property

Korean IFRS 1040, Investment property, clarifies that Korean IFRS 1040 and Korean IFRS 1103

are not mutually exclusive.

Other standards and amendments which are effective for the annual period beginning on January

1, 2015, do not have a material impact on the consolidated financial statements of the Group.

(b) New and amended standards not yet adopted

Amendments issued but not effective for the financial year beginning January 1, 2015, and not

early adopted are enumerated below. The Group expects that these standards and amendments

would not have a material impact on its consolidated financial statements.

- Amendment to Korean IFRS 1001, Presentation of Financial Statements

- Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1041, Agriculture and

fishing: Productive plants

- Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1038, Intangible assets:

Amortization based on revenue

- Korean IFRS 1110, Consolidated Financial Statements, Korean IFRS 1028, Investments in

Associates and Joint Ventures, and Korean IFRS 1112, Disclosures of Interests in Other Entities:

Exemption for consolidation of investee

- Korean IFRS 1111, Joint Agreements



16

- Annual Improvements to Korean IFRS 2012-2014 Cycle

Furthermore, new standards issued, but not effective for the financial year beginning January 1,

2015, and not early adopted are enumerated below:

- Korean IFRS 1109, Financial Instruments

The new Standard issued in December 2015 regarding financial instruments replaces Korean

IFRS 1039, Financial Instruments: Recognition and Measurement.

Korean IFRS 1109, Financial Instruments, requires financial assets to be classified and measured

on the basis of the holder’s business model and the instrument’s contractual cash flow

characteristics. The Standard requires a financial instrument to be classified and measured at

amortized cost, fair value through other comprehensive income, or fair value through profit or loss,

and provides guidance on accounting for related gains and losses. The impairment model is

changed into an expected credit loss model, and changes in those expected credit losses are

recognized in profit or loss. The new Standard is effective for the financial year initially beginning

on or after January 1, 2018, but early adoption is allowed. Early adoption of only the requirements

related to financial liabilities designated at fair value through profit or loss is also permitted. The

Group is in the process of determining the effects resulting from the adoption of the new Standard.

- Korean IFRS 1115, Revenue from Contracts with Customers

The new Standard for the recognition of revenue issued in December 2015 will replace Korean

IFRS1018, Revenue, Korean IFRS 1011, Construction Contracts, and related Interpretations.

Korean IFRS 1115, Revenue from Contracts with Customers, will replace the risk-and-reward model under the current standards and is based on the principle that revenue is recognized when control of goods or services transfer to the customer by applying the five-step process. Key changes to current practices include guidance on separate recognition of distinct goods or services in any bundled arrangement, constraint on recognizing variable consideration, criteria on recognizing revenue over time, and increased disclosures. The new Standard is effective for annual reporting beginning on or after January 1, 2018, but early application is permitted. The Group is in the process of determining the effects resulting from the adoption of the new Standard.

Also, new and amended standards issued after December 31, 2015, and effective for the financial

year beginning January 1, 2016, are as follows:

- Korean IFRS 1011, Construction Contract; Korean IFRS 1037, Provisions, Contingent Liabilities

and Contingent Assets; and Interpretation 2115, Arrangements for Property Construction



17

2.3 Consolidation The Group has prepared the consolidated financial statements in accordance with Korean IFRS 1110, Consolidated financial statements. (a) Subsidiaries Subsidiaries are all entities over which the parent company has control. The parent company controls the corresponding investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of a subsidiary begins from the date the parent company obtains control of a subsidiary and ceases when the parent company loses control of the subsidiary. The Group applies the acquisition method to account for business combinations. The consideration transferred is measured at the fair values of the assets transferred, and identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis in the event of liquidation, either at fair value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets. All other non-controlling interests are measured at their acquisition-date fair values, unless another measurement basis is required by IFRSs. Acquisition-related costs are expensed as incurred. Goodwill is recognized as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree over the identifiable net assets acquired. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss. Balances of receivables and payables, income and expenses and unrealized gains on transactions between the Group subsidiaries are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group

(b) Associates

Associates are entities over which the Group has significant influence, and investments in associates are initially recognized at acquisition cost using the equity method. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. If there is any objective evidence that the investment in the associate is impaired, the Group recognizes the difference between the recoverable amount of the associate and its book value as impairment loss. 2.4 Foreign Currency Translation (a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the each entity operates (the “functional currency’). The consolidated financial statements are presented in Korean won, which is the controlling company’s functional and presentation currency.



18

(b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss.

2.5 Financial Assets (a) Classification and measurement

The Group classifies its financial assets in the following categories: loans and receivables, available-for-sale financial assets, and held-to-maturity financial assets. Regular purchases and sales of financial assets are recognized on trade date. Regular purchases and sales of financial assets are recognized on the trade date. At initial recognition, financial assets are measured at fair value plus, in the case of financial assets not carried at fair value through profit or loss, transaction costs. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the statement of income. After the initial recognition, available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables, and held-to-maturity investments are subsequently carried at amortized cost using the effective interest rate method. Changes in fair value of financial assets at fair value through profit or loss are recognized in profit or loss and changes in fair value of available-for-sale financial assets are recognized in other comprehensive income. When the available-for-sale financial assets are sold or impaired, the fair value adjustments recorded in equity are reclassified into profit or loss. (b) Impairment The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or a group of financial assets that can be reliably estimated. Impairment of loans and receivables is presented as a deduction in an allowance account. Impairment of other financial assets is directly deducted from their carrying amount. The Group writes off financial assets when the assets are determined to be no longer recoverable. The objective evidence that a financial asset is impaired includes significant financial difficulty of the issuer or obligor; a prolonged delinquency in interest or principal payments. A significant decline in the fair value of an available-for-sale equity instrument or a prolonged decline below its cost is also objective evidence of impairment. (c) Derecognition If the Group transfers a financial asset and the transfer does not result in derecognition because the Group has retained substantially of all risks and rewards of ownership of the transferred asset due to a recourse in the event the debtor defaults, the Group continues to recognize the transferred asset in its entirety and recognizes a financial liability for the consideration received.



19

(d) Offsetting of financial instruments Financial assets and liabilities are offset and the net amount reported in the consolidated statements of financial position where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Group or the counterparty.

2.6 Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined using the first-in first-out(FIFO) method. 2.7 Non-current Assets Held-for-sale Non-current assets (or disposal group) are classified as assets held-for-sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. The assets are measured at the lower amount between their carrying amount and the fair value less costs to sell. 2.8 Property and Equipment Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditures that is directly attributable to the acquisition of the items.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate the difference between their cost and their residual values over their estimated useful lives, as follows:

Useful lives

Buildings and structures 15 – 53 years

Supplies 6 – 10

Others 6 – 10

The depreciation method, residual values and useful lives of property, plant and equipment are reviewed at each financial year-end and, if appropriate, accounted for as changes in accounting estimates. 2.9 Borrowing Costs Borrowing costs incurred in the acquisition or construction of a qualifying asset are capitalized in the period when it is prepared for its intended use, and investment income earned on the temporary investment of borrowings made specifically for the purpose obtaining a qualifying asset is deducted from the borrowing costs eligible for capitalization during the period. Other borrowing costs are recognized as expenses for the period in which they are incurred. 2.10 Government Grants Government grants are recognized at their fair values when there is reasonable assurance that the grant will be received and the Group will comply with the conditions attaching to it. Government grants related to assets are presented by deducting the grants in arriving at the carrying amount of the assets, and grants related to income are deferred and presented by deducting the related expenses for the purpose of the government grants.



20

2.11 Intangible Assets Goodwill is stated at cost less accumulated impairment losses. Intangible assets other than goodwill are measured initially at their historical costs, carried at cost less accumulated depreciation and accumulated impairment losses. Membership rights are regarded as intangible assets with indefinite useful life and not amortized because there is no foreseeable limit to the period over which the asset is expected to be utilized. Amortization is calculated using the straight-line method to allocate the cost over their estimated useful lives, as follows:

Useful lives

Other intangible assets 5 – 13 years

2.12 Investment Property Property held to earn rentals or for capital appreciation or both is classified as investment property. Investment property is measured initially at its cost. After recognition as an asset, investment property is carried at cost less accumulated depreciation and impairment losses. Investment property, except for land, is depreciated using the straight-line method over their useful lives from 25 to 53 years. 2.13 Impairment of Non-financial Assets Goodwill or intangible assets with indefinite useful lives are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Non-financial assets, other than goodwill, that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. 2.14 Financial Liabilities (a) Classification and measurement

The Group classifies non-derivative financial liabilities, except for financial liabilities at fair value through profit or loss, financial guarantee contracts and financial liabilities that arise when a transfer of financial assets does not qualify for derecognition, as financial liabilities carried at amortized cost and presented as ‘trade and other payables’ and ‘other payables’ in the statement of financial position. (b) Derecognition Financial liabilities are removed from the statement of financial position when it is extinguished, for example, when the obligation specified in the contract is discharged, cancelled or expired or when the terms of an existing financial liability are substantially modified. 2.15 Financial Guarantee Contract Financial guarantee contracts provided by the Group are initially measured at fair value on the date the guarantee was given. Subsequent to initial recognition, the Group’s liabilities under such guarantees are measured at the higher of the amounts below and recognized as ‘other non-current liabilities’:



21

the amount determined in accordance with Korean IFRS 1037, Provisions, Contingent

Liabilities and Contingent Assets; or the initial amount, less accumulated amortization recognized in accordance with Korean

IFRS1018, Revenue.

The Group recognized financial guarantee contracts provided to the associates at no cost as : (a) additions to investments in associates, (b) current period expenses, or (c) prepaid expenses which are amortized over the guarantee period 2.16 Provisions Provisions are measured at the present value of the expenditures expected to be required to settle the obligation and the increase in the provision due to passage of time is recognized as interest expense. 2.17 Current and Deferred Tax The tax expense for the period consists of current and deferred tax. Tax is recognized on the profit for the period in the statement of income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. The tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates tax policies that are applied in tax returns in which applicable tax regulation is subject to interpretation. The Company recognizes current income tax on the basis of the amount expected to be paid to the tax authorities. Deferred tax is recognized for temporary differences arising between the tax bases of assets and liabilities and their carrying amounts as expected tax consequences at the recovery or settlement of the carrying amounts of the assets and liabilities. However, deferred tax assets and liabilities are not recognized if they arise from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized. Deferred tax liability is recognized for 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 difference and it is probable that the temporary difference will not reverse in the foreseeable future. In addition, deferred tax asset is recognized for deductible temporary differences arising from such investments to the extent that it is probable the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.



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2.18 Employee Benefits The Group has defined benefit plans. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds and that have terms to maturity approximating to the terms of the related pension obligation. The remeasurements of the net defined benefit liability are recognized in other comprehensive income. If any plan amendments, curtailments, or settlements occur, past service costs or any gains or losses on settlement are recognized as profit or loss for the year. 2.19 Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable for the sale of goods or rendering of services arising from the normal activities of the Group. It is stated as net of value added taxes, returns, rebates and discounts, after elimination of intra-company transactions. The Group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group’s activities, as described below. The Group bases its estimate on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. (a) Rendering of services The Group performs physical count of drops and payouts on a daily basis. Casino revenues are measured by the aggregate net difference between gaming wins and losses. When credit is provided, such amount is added to drops. Rooms, entrance fee, and food & beverage revenues are recognized when services are rendered to customers. Revenue from property leasing services is generally recognized on a straight-line basis over the period the service is rendered. (b) Interest income Interest income is recognized using the effective interest method according to the time passed. When a loan and receivable is impaired, the Group reduces the carrying amount to its recoverable amount and continues unwinding the discount as interest income. Interest income on impaired loan and receivables is recognized using the original effective interest rate. (c) Dividend income Dividend income is recognized when the right to receive payment is established.



23

(d) Customer loyalty program The Group operates a customer loyalty program where customers accumulate points (including mileage) for purchases of service made which entitle them to complimentary purchase or discounts. The reward points are recognized as a separately identifiable component of the initial sale transaction. The fair value of the consideration received or receivable in respect of the initial sale is allocated between the reward points and the other components of the sale. The consideration allocated to the reward points are measured by reference to their value. When the Group supplies the rewards itself, or a third party supplies the rewards while the Group collects the consideration on its own account, the Group measures its revenue as the gross consideration allocated to the reward points and recognize the revenue when it fulfils its obligations in respect of the awards. When a third party supplies the rewards and the Group collects the consideration on behalf of the third party, the Group recognizes the difference between the consideration allocated to the reward points and the amount payable to the third party for supplying the reward, as revenue when the third party becomes obliged to supply the awards and entitled to receive consideration for doing so. These events may occur as soon as the award credits are granted. 2.20 Lease A lease is an agreement, whereby the lessor conveys to the lessee, in return for a payment or series of payments, the right to use an asset for an agreed period of time. Leases where all the risks and rewards of ownership are not transferred to the Group are classified as operating leases. Lease payments under operating leases are recognized as expenses on a straight-line basis over the lease term. Leases where the Group has substantially all the risks and rewards of ownership are classified as finance leases and recognized as lease assets and liabilities at the lower of the fair value of the leased property and the present value of the minimum lease payments on the opening date of the lease period. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership at the inception of the lease. A lease other than a finance lease is classified as an operating lease. Lease income from operating leases is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred by the lessor in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income. 2.21 Segment Reporting Information of each operating segment is reported in a manner consistent with the business segment reporting provided to the chief operating decision-maker. 2.22 Approval of Issuance of the Financial Statements The issuance of the December 31, 2015 financial statements of the Company was approved by the Board of Directors on February 18, 2016, which is subject to change with approval at the annual shareholders’ meeting.



24

3. Critical Accounting Estimates and Assumptions

The Group makes estimates and assumptions concerning the future. The estimates and assumptions are continuously evaluated with consideration to factors such as events reasonably predictable in the foreseeable future within the present circumstance according to historical experience. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. (a) Estimated impairment of goodwill The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. (b) Income taxes The Group is operating in numerous countries and the income generated from these operations is subject to income taxes based on tax laws and interpretations of tax authorities in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain. If certain portion of the taxable income is not used for investments, increase in wages, or dividends in accordance with the Tax System For Recirculation of Corporate Income, The Group is liable to pay additional income tax calculated based on the tax laws. The new tax system is effective for three years from 2015. Accordingly, the measurement of current and deferred income tax is affected by the tax effects from the new system. As The Group’s income tax is dependent on the investments, increase in wages and dividends, there exists uncertainty with regard to measuring the final tax effects. (c) Fair value of financial instruments The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. (d) Defined benefit liability The present value of defined benefit liability depends on a number of factors that are determined on an actuarial basis using a number of assumptions including the discount rate (Note 15).

4. Segment Information The Group’s segments are classified at the business unit level, at which the Group generates separately identifiable revenue and costs, and the related information is reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. The Group’s segments, in accordance with K-IFRS 1108, are ‘Casino business,’ ‘Hotel business’ and ‘Others.’



25

The Group’s profit and loss by segment for the years ended December 31, 2015 and 2014, respectively, are as follows:

(in thousands of Korean won)

Segment revenue Depreciation Expense Operating revenue

2015 2014 2015 2014 2015 2014

Casino ₩ 528,202,301 ₩ 587,853,132 ₩ 9,073,710 ₩ 11,993,219 ₩ 44,397,807 ₩ 115,740,575

Hotel 79,033,927 75,757,393 10,831,702 8,377,062 11,963,675 10,105,740

Other 17,963,785 17,611,659 7,548,609 1,515,504 1,960,247 2,551,742

Adjustment1 (9,842,952) (5,067,497) - - - -

Total ₩ 615,357,061 ₩ 676,154,687 ₩ 27,454,021 ₩ 21,885,785 ₩ 58,321,729 ₩ 128,398,057

1 Intra-segment adjustment.

The Group’s assets and liabilities by segment as of December 31, 2015 and 2014, are as follows.

(in thousands

Korean won)

Asset Acquisition of non-current

assets2

Liability

2015 2014 2015 2014 2015 2014

Casino ₩ 1,701,886,672 ₩ 1,100,101,600 ₩ 308,959,057 ₩ 39,898,276 ₩ 607,549,418 ₩ 300,626,099

Hotel 283,992,304 313,734,519 559,119 39,047,357 95,833,342 118,763,433

Other 7,990,515 188,072,192 1,113,965 571,146 3,971,379 4,314,707

Sub Total 1,993,869,491 1,601,908,311 310,632,141 79,516,779 707,354,139 423,704,239

Held for sale

- (20,147,744) - (228,881) - (6,418,795)

Total ₩ 1,993,869,491 ₩ 1,581,760,567 ₩ 310,632,141 ₩ 79,287,898 ₩ 707,354,139 ₩ 417,285,444

2 Sum of property and equipment, investment properties and intangible assets.

Revenue and non-current assets by region where the Group’s entities are located for the years ended December 31, 2015 and 2014, are as follows:

(in thousands Korean won)

Revenue from external customers

Non-current assets3

2015

2014

2015

2014

Korea ₩ 613,397,372 ₩ 674,045,028 ₩ 1,233,630,563 ₩ 852,335,943

Others 1,959,689 2,109,659 61,099 71,087

Total ₩ 615,357,061 ₩ 676,154,687 ₩ 1,233,691,662 ₩ 852,407,030

3 Sum of Property and equipment, investment properties and intangible assets. None of the external customers contributes more than 10% of the Group revenue.

5. Restricted Financial Instruments



26

Restricted financial instruments as of December 31, 2015 and 2014, consist of the following.


Description 2015 2014

Cash and

cash equivalents Collateral

₩ 5,187,928 ₩ -

Short-term financial instruments

Guarantee deposits for Leasehold deposits

1,700,000 1,700,000

Long-term financial instruments

Deposits for checking account

5,000 5,000

Long-term financial instruments

Right of pledge

118,269 118,269

Total ₩ 7,011,197 ₩ 1,823,269

6. Trade, Non-trade, and Other Receivables

Accounts and other receivables as of December 31, 2015 and 2014, are as follows:


2015

2014

Current

Non-current

Current

Non-current

Trade receivables ₩ 25,262,376

₩ -

₩ 35,055,711

₩ -

Less: allowance for doubtful accounts

(835,846)

-

(1,433,019)

-

Net: Trade receivables

24,426,530

-

33,622,692

-

Non-trade receivables

2,062,766

-

1,396,140

-


(800,331)

-

(800,331)

-

Net: Non-trade receivables

1,262,435

-

595,809

-

Short-term loans

3,658,020

-

1,227,155

-


(1,000,000)

-

(1,000,000)

-

Accrued revenues

1,945,795

-

2,421,119

-

Net: short-term loans

4,603,815

-

2,648,274

-

Long-term loans

-

3,155,048

- 3,309,504

Guarantee deposits

-

6,307,112

- 4,966,040

Other deposits

-

893,459

- 916,265

Net: long-term loans

₩

- ₩ 10,355,619

₩

-

₩ 9,191,809

Aging analysis of trade and other receivables as of December 31, 2015 and 2014, are as follows:

(in thousands

2015



27

of Korean won)

Trade

Non-trade

Other

receivables receivables receivables

Receivables not past due

₩ 24,409,535

₩ 1,262,435

₩ 14,959,434

Impaired receivables (past due):

One year to two years

304,559

-

-

Two years to three years

79,040

-

-

Over three years

469,242

800,331

1,000,000

Total

₩ 25,262,376

₩ 2,062,766

₩ 15,959,434


2014

Trade

Non-trade

Other

receivables receivables receivables

Receivables not past due

₩ 33,102,244

₩ 595,809

₩ 11,840,083

Impaired receivables (past due):

-

-

-

One year to two years

1,005,181

-

-

Two years to three years

90,532

178,081

-

Over three years

857,754

622,249

1,000,000

Total

₩ 35,055,711

₩ 1,396,139

₩ 12,840,083

Changes in allowance for doubtful accounts for the years ended December 31, 2015 and 2014, are as follows:


Trade receivables


Other receivables

Beginning balance

₩ 1,433,019

₩ 800,331

₩ 1,000,000

Bad debt expenses

(488,703)

-

-

Write off

(189,217)

-

-

Business combinations

81,634

-

-

Effect of exchange rate changes

(887)

-

-

Ending balance

₩ 835,846

₩ 800,331

₩ 1,000,000


Trade receivables


Other receivables

Beginning balance

₩ 2,633,387

₩ 800,331

₩ 1,000,000

Bad debt expenses

(215,274)

-

-

Write off

(794,580)

-

-


15,946

-

-

Others

(206,460)

-

-

Ending balance

₩ 1,433,019

₩ 800,331

₩ 1,000,000

7. Available-for-sale financial assets

Available-for-sale financial assets as of December 31, 2015 and 2014, are as follows:



28


2015 2014

Current

Non-current

Current

Non-current

Equity securities

Listed equity investments ₩ - ₩ 1,763,904 ₩ -

₩ 1,396,424

Unlisted equity investments - 788,210

-

188,210

Beneficiary certificate - 13,480,050 1,120,000 14,618,700

Debt securities

Corporate bonds 31,000,000 7,609,916

5,112,724

7,210,285

Total ₩ 31,000,000 ₩ 23,642,080 ₩ 6,232,724

₩ 23,413,619

The changes in available-for-sale financial assets for the years ended December 31, 2015 and 2014, are as follows:


2015 2014

Beginning balance ₩ 29,646,343

₩ 19,295,522

Acquisition 31,600,000

15,000,000

Disposal (6,220,000)

(5,123,955)

Net losses reclassified to equity (334,881) 427,696

Amortization (49,382) 47,080

Ending balance ₩ 54,642,080

₩ 29,646,343

Less: Current portion (31,000,000) (6,232,724)

Non-current portion 23,642,080 23,413,619

8. Held-to-maturity investment Held-to-maturity investment as of December 31, 2015 and 2014, are as follows:


2015

2014

Current

Non-current

Current

Non-current

Government bonds ₩ 300 ₩ 1,885

₩ 34,185

₩ 2,185

9. Investments in Associates

Investments in associates as of December 31, 2015 and 2014, are as follows:

Associate

Location

Main business

Year-end closing



29

Coral Resort Co., Ltd. Korea Real estate development and trading December 31

Base Myeongdong Co., Ltd Korea

Real estate development and rental rent

December 31

(in thousands of Korean won) 2015 2014

Associate

Ownership (%)

Book value

Ownership (%)

Book value

Coral Resort Co., Ltd.

20.00 ₩ 8,750 20.00 ₩ 9,364

Base Myeongdong Co., Ltd

29.90 - 19.90 -

Total ₩ 8,750 ₩ 9,364

Changes in the investments in associates for years ended December 31, 2015 and 2014, are as follows.


2015

Beginning balance

Acquisition (disposal)

Gain (loss) on valuation of

equity method investees

Impairment

loss Ending balance

Coral Resort Co., Ltd. ₩ 9,364 ₩ -

₩ (614)

₩ -

₩ 8,750

Base Myeongdong Co., Ltd.

-

1,000,000

(1,000,000)

-

-

Total ₩ 9,364 ₩ 1,000,000

₩ (1,000,614)

₩ -

₩ 8,750


2014

Beginning balance

Acquisition (disposal)

Gain (loss) on valuation of

equity method investees

Impairment

loss Ending balance

Coral Resort Co., Ltd. ₩ 10,719 ₩ -

₩ (1,355)

₩ -

₩ 9,364


945,205

-

-

(945,205)

-

Total ₩ 955,924 ₩ -

₩ (1,355)

₩ (945,205)

₩ 9,364

Summarized financial information of associates as of and for the years ended December 31, 2015 and 2014, are as follows:


2015

Assets Liabilities Sales Net Income

Comprehensive Income

Current Non-current

Current Non-current


₩ 44,155 ₩ - ₩ 406 ₩ - ₩ - ₩ (3,072) ₩ (3,072)


24,529,310 311,997,327 343,401,326 9,600,000 17,534,382 (10,686,197) (10,686,197)

Total ₩ 24,573,465 ₩ 311,997,327 ₩ 343,401,732 ₩ 9,600,000 ₩ 17,534,382 ₩ (10,689,269) ₩ (10,689,269)


2014

Assets Liabilities Sales

Net Income

Comprehensive Income

Current Non-current

Current Non-current


₩ 47,227 ₩ - ₩ 406 ₩ - ₩ - ₩ (6,772) ₩ (6,772)


14,238,946 323,404,327 333,072,731 9,600,000 18,940,224 (4,330,494) (4,330,494)

Total ₩ 14,286,173 ₩ 323,404,327 ₩ 333,073,137 ₩ 9,600,000 ₩ 18,940,224 ₩ (4,337,266) ₩ (4,337,266)



30

10. Investment Properties

Investment properties as of December 31, 2015 and 2014, are as follows:


Acquisition

cost Accumulated depreciation

Book value

Land ₩ 105,516,529 ₩ ₩ 105,516,529

Buildings and structures

25,167,314 (7,761,275) 17,406,039

Total ₩ 130,683,843 ₩ (7,761,275) ₩ 122,922,568


Acquisition

cost

Accumulated depreciation

Book value

Land ₩ 97,950,149 ₩ - ₩ 97,950,149


24,900,042 (7,057,021) 17,843,021

Total ₩ 122,850,191 ₩ (7,057,021) ₩ 115,793,170

Changes in investment properties as of 2015 and 2014, are as follows:


2015

Beginning balance

Acquisition

Disposal

Transfer to Property

Depreciation Ending balance

Land ₩ 97,950,149 ₩ 6,182,210 ₩ - ₩ 1,384,170 ₩ - ₩ 105,516,529


17,843,021 - - 267,272 (704,254) 17,406,039

Total ₩ 115,793,170 ₩ 6,182,210 ₩ - ₩ 1,651,442 ₩ (704,254) ₩ 122,922,568

(in thousands of Korean won

2014

Beginning

balance Acquisition

Disposal

Transfer to

Property Depreciation

Ending balance

Land

₩ 119,124,534 ₩ - ₩ - ₩ (21,174,385) ₩ - ₩ 97,950,149


20,230,877 - (158,643) (1,307,881) (921,332) 17,843,021

Total

₩ 139,355,411 ₩ - ₩ (158,643) ₩ (22,482,266) ₩ (921,332) ₩ 115,793,170

Distributions of depreciation cost for the years ended December 31, 2015 and 2014, are as follows:


2015

2014

Cost of Sales(Hotel) ₩ 504,236

₩ 684,009

Selling and administrative expenses

200,018

237,323

Total ₩ 704,254

₩ 921,332

Income and expenses related to investment properties for the years ended December 31, 2015 and 2014, are as follows:


2015

2014

Rental income

₩ 8,485,403

₩ 8,164,692 Operating and maintenance expenses

(2,494,662)

(2,041,953)

Total

₩ 5,990,741

₩ 6,122,739



31

The details of fair value of investment properties as of December 31, 2015 and 2014, are as follows.


2015

2014

Book value

Fair value

Book value

Fair value

Land

₩ 105,516,529 ₩ 143,221,317 ₩ 97,950,149 ₩ 112,007,185


17,406,039 24,343,894 17,843,022 17,843,022

Total ₩ 122,922,568 ₩ 167,565,211 ₩ 115,793,171 ₩ 129,850,207

The Group assessed the fair value of its investment property through Daeil Appraisal Co., Ltd. The evaluation firm evaluated the land and building based on average of standard published price method and cost approach method. Certain investment properties are pledged as collateral up to ₩ 4,368,078 thousand for lessees' security deposit of ₩ 3,360,060 thousand. Other certain investment properties are pledged as collateral for borrowings(Note 11) 11. Property and Equipment

Property and equipment as of December 31, 2015 and 2014, are as follows:

2015


Acquisition cost


Book value

Land

₩ 338,062,810 ₩ - ₩ 338,062,810 Buildings and structures

192,321,278 (62,026,456) 130,294,822

Tools and equipment

80,114,761 (36,721,588) 43,393,173 Others

45,427,448 (23,177,133) 22,250,315

Trees

1,569,639 - 1,569,639 Construction in progress

295,307,409 - 295,307,409

Total

₩ 952,803,345 ₩ (121,925,177) ₩ 830,878,168

2014


Acquisition cost


Book value

Land

₩ 327,692,193 ₩ - ₩ 327,692,193 Buildings and structures

189,000,527 (52,196,413) 136,804,114

Tools and equipment

75,351,530 (36,946,649) 38,404,881 Others

30,792,994 (19,023,459) 11,769,535

Trees

1,500,062 - 1,500,062 Construction in progress

33,963,565 - 33,963,565

Total

₩ 658,300,871 ₩ (108,166,521) ₩ 550,134,350

Changes in property and equipment for the years ended December 31, 2015 and 2014, as of 2015 and 2014 are as follows:

(in thousands

of 2015



32

Korean won)

Beginning balance

Acquisition 1

Contribute on gain

Disposal Depreciation Transfer Business

combination

Effect of exchange

rate changes

Ending balance

Land ₩ 327,692,193 ₩ - ₩ - ₩ - ₩ - ₩ 10,370,617 ₩ - ₩ - ₩ 338,062,810


136,804,114 239,888 - (366,766) (9,988,816) 1,996,261 1,607,153 2,988 130,294,822

Tools and equipment

38,404,881 10,216,592 167,381 (2,764,254)

(6,612,014)

3,880,598 103,941 (3,952)

43,393,173

Others

11,769,535 3,914,594 - (243,957) (4,632,105) 8,776,168 2,746,913 (80,833) 22,250,315

Trees

1,500,062 40,000 - (60,423) - 90,000 - - 1,569,639

Construction in progress

33,963,565 289,369,071 - - - (28,047,109) 21,882 - 295,307,409

Total ₩ 550,134,350 ₩ 303,780,145 ₩ 167,381 ₩ (3,435,400) ₩ (21,232,935) ₩ (2,933,465) ₩ 4,479,889 ₩ (81,797) ₩ 830,878,168

(in

thousands of

Korean

won)

2014

Beginning balance

Acquisition Disposal Depreciation Transfer from in

progress

Transfer from

Investment properties

Effect of exchange

rate changes

Transfer to assets held

for sale

Ending balance

Land ₩ 306,517,808 ₩ - ₩ - ₩ - ₩ - ₩ 21,174,385 ₩ - ₩ - ₩ 327,692,193


120,811,225 475,751 (2,957,981) (7,511,276) 33,164,087 1,307,881 (148,192) (8,337,381) 136,804,114

Tools and equipment

35,293,989 4,508,411 (529,685)

(6,039,549)

5,380,182 - (13,977) (194,490) 38,404,881

Others

10,560,103 1,177,748 (28,052) (3,039,324) 4,203,786 - (27,776) (1,076,950) 11,769,535

Trees

1,460,062 40,000 - - - - - - 1,500,062

Construction in progress

8,978,080 70,987,471 (3,253,931) - (42,748,055) - - - 33,963,565

Total ₩ 483,621,267 ₩ 77,189,381 ₩ (6,769,649) ₩ (16,590,149) ₩ - ₩ 22,482,266 ₩ (189,945) ₩ (9,608,821) ₩ 550,134,350

1 In 2015, the Group capitalized borrowing costs amounting to ₩ 8,575 million on qualifying assets.

The capitalization rate of borrowings used to determine the amount of borrowing costs eligible for

capitalization is 5.65%.

Distributions of depreciation cost for the years ended December 31, 2015 and 2014, are as

follows:

2015

2014



33

Cost of sales (Casino)

₩ 8,613,859

₩ 6,012,827 Cost of sales (Hotel) 10,058,995 7,438,448 Cost of sales (Others) 1,196,266 1,903,271 Selling and administrative expenses

1,363,815

1,235,603

Total

₩ 21,232,935

₩ 16,590,149

Some of the land and buildings included in property, plant and equipment and investment property are related to loans provided as collateral.

(in thousands of Korean won, Japanese yen)

Assets

Liabilities

Limit

Execution

Mortgagee

Land and Buildings

Borrowings KRW 55,000,000 40,079,513 Shinhan Bank

Leasehold deposits received

KRW 975,000 800,000

Borrowings KRW 46,000,000 4,000,000 KEB Hana Bank Buildings

1 Borrowings JPY 7,930,000 7,000,000 Woori Bank

1 The building is pledged as collateral for borrowings of Paradise Global Co., Ltd. of ₩ 19.5 million

(Note 30).

12. Intangible Assets Details of intangible assets as of December 31, 2015 and 2014, are as follows:


2015

Memberships Other intangible

assets Goodwill Book value

Acquisition cost ₩ 20,266,153 ₩ 58,566,904 ₩ 223,450,230 ₩ 302,283,287 Accumulated amortization and impairment

(1,915,935) (20,476,426) - (22,392,361)

Total ₩ 18,350,218 ₩ 38,090,478 ₩ 223,450,230 ₩ 279,890,926


Memberships Other intangible

assets Goodwill Book value

Acquisition cost ₩ 18,212,246 ₩ 37,669,073 ₩ 147,473,719 ₩ 203,355,038 Accumulated amortization and impairment

(1,915,935) (14,959,593) - (16,875,528)

Total ₩ 16,296,311 ₩ 22,709,480 ₩ 147,473,719 ₩ 186,479,510

Changes in intangible assets for the years ended December 31, 2015 and 2014, are as follows:


2015

Memberships

Other intangible assets

Goodwill

Book value

Beginning balance

₩ 16,296,311

₩ 22,709,480

₩ 147,473,719

₩ 186,479,510 Purchase 619,183 50,604 - 669,787 Disposal (266,882) - - (266,882) Transfer - 1,282,036 - 1,282,036 Business Combinations

1

1,701,606 19,565,191 75,976,511 97,243,308

Amortization

-

(5,516,833)

-

(5,516,833)

Total

₩ 18,350,218

₩ 38,090,478

₩ 223,450,230

₩ 279,890,926


2014

Memberships

Other intangible

assets Goodwill

Book value

Beginning balance

₩ 14,710,967

₩ 27,089,275

₩ 14,710,967

₩ 189,273,961 Purchase 1,789,744 537,654 1,789,744 2,327,398 Disposal (204,400) (5,337) (204,400) (209,737) Amortization - (4,912,110) - (4,912,110)



34


-

(2)

-

(2)

Total

₩ 16,296,311

₩ 22,709,480

₩ 16,296,311

₩ 186,479,510

1 The Group recognized identifiable intangible asset of ₩ 19,499,741 thousand and goodwill of ₩

75,976,511 thousand in the acquisition of Pusan Casino business segment from Paradise Global (Note 34).

Distributions of depreciation cost for the years ended December 31, 2015 and 2014, are as follows.


2015

2014 Cost of sales (Casino)

₩ 459,852

₩ 545,897

Cost of sales (Hotel) 268,472 254,604 Cost of sales (Others) 60,528 16,667 Selling and administrative expenses

4,727,981

4,094,942

Total

₩ 5,516,833

₩ 4,912,110

Impairment test for goodwill

Goodwill is allocated to identifiable cash-generating units(CGU) by operating segments. As of December 31, 2015, Allocation of goodwill are as follows:

(in thousands of Korean won) Busan Casino

Jeju Casino

Incheon Casino

Hotel Busan Total

Goodwill ₩ 75,976,511 ₩ 3,004,204 ₩ 142,423,120 ₩ 2,046,395 ₩ 223,450,230

The recoverable amount of all CGUs has been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the shoe business in which the CGU operates. Management estimated pre-tax cash flow based on past performance, forecasts for market growth, and pre-tax discount rate that reflects the specific risk of business. The discount rate used in value-in-use calculation are as follows:

Busan Casino

Jeju Casino

Incheon Casino

Hotel Busan

Discount rate

10.87% 10.43% 10.77% 7.97%

Nominal perpetual growth 0.00% 1.00% 1.00% 1.00%

There is no impairment loss on goodwill based on the recoverable amount calculated based on value-in-use for CGU.

13. Borrowings Details of borrowings as of December 31, 2015 and 2014, are as follows:


2014

Current

Non-current

Current

Non-current

Short-term borrowings ₩ 36,400,000 ₩ - ₩ 44,518,931 ₩ -



35

Long-term borrowings 10,061,707 394,850,815 12,802,917 23,092,083

Total ₩ 46,401,707 ₩ 394,850,815 ₩ 57,321,848 ₩ 23,092,083

Short-term borrowings as of December 31, 2015 and 2014, are as follows:


Financial Institution

Interest rate

2015

2014

Shinhan Bank 2.86~2.95 ₩ 22,400,000 ₩ 22,400,000 Hana Bank 3.03 3,000,000 3,000,000 Hana Bank 2.92 4,000,000 6,000,000 Woori Bank 2.97 7,000,000 7,000,000 Hana Bank

1 - - 6,118,931

Total ₩ 36,400,000 ₩ 44,518,931

1 Equivalent to JPY 665,000 thousand.

Long-term borrowings as of December 31, 2015 and 2014, are as follows:


Financial Institution

Longest maturity

Interest rate

2015

2014

KEB Hana bank and other 18 financial Institutions

2020.06.16

4.30~6.32

₩ 387,500,000

₩ -

Hi Investment & Securities co.Ltd

2020.12.28

2.8

5,000,000

-

Woori Bank

2024.06.17

2.25

12,112,500

10,787,500

Shinhan Bank

2021.06.15

2.25~2.46

17,679,513

25,107,500

Total

422,292,013

35,895,000

Less : Present Value Discount

(17,379,491)

-

Less : Current portion of long-term borrowings

(10,061,707)

(12,802,917)

Long-term borrowings ₩ 394,850,815

₩ 23,092,083

14. Other Current Liabilities

Other current liabilities as of December 31, 2015 and 2014, are as follows:


2015

2014

Non-financial payables

₩ 2,905,108

₩ 7,228,847

Non-financial accrued expenses 91,711,500 99,422,630

Deferred revenue 8,017,088 1,035,201

Unearned revenue

194,633

34,192

Total

₩ 102,828,329

₩ 107,720,870

According to Article 30, Tourism Promotion Act, the Group pays up to 10% of total revenue as Tourist Development Fund. As of December 31, 2015, ₩ 55,161,457 thousand is recognized as non-financial accrued expenses. According to Article 1, Individual Consumption Tax Law, the Group pays up to 4% of total revenue as individual consumption tax. As of December 31, 2015, ₩ 16,358,333 thousand is recognized as non-financial accrued expenses.



36

15. Retirement Benefit Obligations The Group operates a defined benefit plan for its employees. According to the plan, the employees will be paid his or her average salary of the recent three month multiplied by the number of years vested; adjusted for payment rate and other. The actuarial valuation of plan assets and the defined benefit liability is performed by a reputable actuary, Mirae Asset Life Insurance Co., Ltd. using the pension actuarial method. Details of retirement benefit obligation as of December 31, 2015 and 2014, are as follows:


2015

2014

Present value of defined benefit obligation ₩ 103,179,078 ₩ 82,599,420

Fair value of plan assets (91,219,138) (71,187,699)

Total ₩ 11,959,940 ₩ 11,411,721

Changes in net defined benefit assets and liabilities for the years ended December 31, 2015 and 2014, are as follows:


2015

2014

Beginning of the year ₩ 82,599,420 ₩ 70,237,119

Current service cost 10,876,056 8,559,227

Interest expenses (income) 3,243,966 3,268,463

Past service cost - 2,856,931

Re-measure elements:

- Effect of change in the population of the statistical assumptions

(1,959) (161,809)

- Effects of changes in financial assumptions

1,750,487 5,629,263

- Empirical Effects of Changes in adjustments

2,437,262 (2,647,205)

Severance payments

(6,303,032) (5,132,871)

Transfer from and to related companies

9,669

-

Business Combination

8,603,223

-

Others (36,014) (9,698)

End of the year ₩ 103,179,078 ₩ 82,599,420

Changes in net defined benefit assets for the years ended December 31, 2015 and 2014, are as follows:


2015

2014

Beginning of the year ₩ 71,187,699 ₩ 57,491,493

Interest income 2,785,081 2,689,202

Re-measure elements:



37

- Return on plan assets (excluding interest income)

(1,066,709) (1,105,299)

Contributions by firm 16,340,000 15,590,000

Benefits paid by plan assets (5,942,090) (3,502,227)

Transfer from and to related companies 55,938 -

Business Combination 7,859,219 -

Others - 24,530

End of the year ₩ 91,219,138 ₩ 71,187,699

The fair value of the plan assets as of December 31, 2015 and 2014, consists of the following:


2014

Cash and cash equivalents ₩ 91,219,138 ₩ 71,187,699

Actuarial assumptions used as of December 31, 2015 and 2014, are as follows:

2015

2014

Discount rate 3.07%~3.52% 3.91%

Salary growth rate 4.00%~5.00% 4.30%~5.00%

The sensitivity of the defined benefit obligations as of December 31, 2015, to changes in the weighted principal assumptions is:

(in thousands of Korean won) Increase(1%)

Decrease(1%)

Changes in discount rate ₩ (7,704,470) ₩ 8,963,471

Changes in expected rate of salary increase

8,812,666

(7,728,197)

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. The sensitivity of the defined benefit obligation to changes in principal actuarial assumptions is calculated using the projected unit credit method, the same method applied when calculating the defined benefit obligations recognized on the statement of financial position. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous period.

Less than 1

year Less than 1~2 years

Less than 2~5 years

Over 5 years

Total

Pension benefits

₩ 21,768,742

₩ 8,441,489

₩ 15,972,233

₩ 153,058,655

₩ 199,241,119

The weighted average duration of the defined benefit obligation is from 8.43 to 11.84 years.



38

16. Other Non-current Liabilities

Other non-current liabilities as of December 31, 2015 and 2014, are as follows


2015

2014

Security Deposit ₩ 11,195,746 ₩ 6,292,256

Financial guarantee liabilities 1,996,712 -

Total ₩ 13,192,458 ₩ 6,292,256

17. Capital Stock

Details of capital stock as of December 31, 2015 and 2014, are as follows:


Shares authorized

Shares issued

Par value per share

(in Korean won)

2015

2014

Common stock 1 196,877,962 90,942,672 ₩ 500 ₩ 47,032,355 ₩ 47,032,355

1 The Group retired 3,122,038 shares of common stock using retained earnings in 2003; therefore,

the Group’s capital stock does not agree with the aggregate par value of issued shares. 18. Capital Surplus

Capital surplus as of December 31, 2015 and 2014, are as follows: (in thousands of Korean won)

2015

2014

Paid-in capital in excess of par value ₩ 68,730,444 ₩ 68,731,906 Gain on disposal of treasury stock 199,016,890 199,016,890 Others 27,272,772 27,271,310

Total ₩ 295,020,106 ₩ 295,020,106

19. Retained Earnings and Dividends

Retained earnings as of December 31, 2015 and 2014, are as follows:


2015

2014

Restricted reserves: Legal reserve

1 ₩ 23,516,178 ₩ 23,516,178

Discretionary reserves



39

Business rationalization reserve 41,800,000 41,800,000 Reserve for corporate development 123,448,828 123,448,828

Voluntary reserve 399,839,220 369,628,987 Unappropriated retained earnings 117,461,366 128,816,020

Total ₩ 706,065,592 ₩ 687,210,013

1 The Commercial Code of the Republic of Korea requires the Parent Company to appropriate for each financial period, as a legal reserve, an amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued capital stock. The reserve is not available for cash dividends payment, but may be transferred to capital stock or used to reduce accumulated deficit. When the accumulated legal reserves (the sum of capital reserves and earned profit reserves) are greater than 1.5 times the paid-in capital amount, the excess legal reserves may be distributed (in accordance with a resolution of the shareholders’ meeting).

Changes in retained earnings for the years ended December 31, 2015 and 2014, are as follows:


2015

2014

Beginning balance ₩ 687,210,013 ₩ 628,666,863 Net income attributable to owners 65,238,130 96,372,090 Payment of dividends (42,765,687) (35,114,118) Remeasurements of defined benefit plans (3,616,864) (2,714,822)

Ending balance ₩ 706,065,592 ₩ 687,210,013

Dividends

Details of dividend payments for the years ended December 31, 2015 and 2014, are as follows:


2015

Dividend shares Treasury shares

Dividend shares

Dividend per

share (In Korean won)

Total

dividends

Common stock 90,942,672 5,411,298 85,531,374 ₩ 500 ₩ 42,765,687


2014

Total stocks

issued Treasury shares

Dividend shares

Dividend per

share (In Korean won)

Total

dividends

Common stock 90,942,672 12,911,298 78,031,374 ₩ 450 ₩ 35,114,118

20. Other Component of Capital

Other capital items as of December 31, 2015 and 2014, are as follows:


2014

Treasury stocks1 ₩ (26,145,488) ₩ (17,437,871)

Gain on valuation of Available-for-sale financial assets 2,522,938 1,958,814



40

Loss on valuation of Available-for-sale financial assets (1,188,392) (370,428)

Currency translation differences of foreign operations (624,996) (556,771)

Total ₩ (25,435,938) ₩ (16,406,256)

1In a business combination with Casino segment of Paradise Global Co., Ltd., The Group acquired

346,917 shares of treasury stock for \8,707,617 thousand due to dissenting shareholders' execution of appraisal right.

21. Revenue Revenue excluding other income and financial income for the years ended December 31, 2015 and 2014, is as follows:

(in thousands Korean won) 2015

2014

Revenue from a contract to provide services ₩ 615,357,061 ₩ 676,154,687

22. Selling and Administrative Expenses

Selling expenses for the years ended December 31, 2015 and 2014, are as follows:


2014

Advertisement ₩ 9,043,254 ₩ 10,470,801

Administrative expenses for the years ended December 31, 2015 and 2014, are as follows:


Salaries ₩ 24,056,969 ₩ 22,953,788

Provision for severance benefits 1,769,121 4,568,201

Benefits 3,011,419 2,313,203

Depreciation for investment properties 200,018 237,323

Depreciation 1,363,815 1,235,603



41

Amortization 4,727,981 4,094,943

Taxes and dues 2,625,647 2,277,663

Commission 7,206,956 7,023,273

Training 475,730 353,074

Insurance premium 507,705 456,111

Rent 950,439 1,213,491

Travel and lodging 1,139,562 1,515,341

Communication 237,532 237,746

Utilities 634,811 676,932

Event 228,826 229,703

Entertainment 2,397,711 2,051,786

Maintenance 2,212,680 1,965,315

Bad debt expenses(reversal) (488,703) (215,274)

Vehicles 922,598 624,907

Supplies 236,459 206,451

Publication 746,802 424,548

Others 85,527 109,295

Total ₩ 55,249,605 ₩ 54,553,423

23. Expenses by Nature

Expenses by nature for the years ended December 31, 2015 and 2014, are as follows:


Employee benefit expense ₩ 182,525,250 ₩ 181,097,295

Depreciation, amortization and impairment loss 27,567,680 22,423,591

Operating lease payments 18,170,135 16,320,344

Service fees 39,925,253 33,893,297

Outside order expenses 288,847,014 343,372,321

₩ 557,035,332 ₩ 597,106,848

24. Financial Income and Expenses

Financial income and expenses for the years ended December 31, 2015 and 2014, as follows:


2014 Finance income

Interest income ₩ 12,257,108 ₩ 12,440,233 Finance expense

Interest expense 2,993,814 3,366,579



42

25. Other Income and Expenses

Other income for the years ended December 31, 2015 and 2014, consist of:


2014

Rental income ₩ 1,118,025 ₩ 1,404,012 Currency exchange service income 7,563,279 15,098,906 Gain on foreign currency transactions 6,617,601 5,399,112 Gain on foreign currency translation 405,446 1,040,049 Gain on disposal of property and equipment 4,174,781 111,527 Gain on disposal of intangible assets 33,118 10,002,579 Gain on assets contribution 167,381 - Dividend income 39,045 53,929 Commission income 500,585 252,864 Gain on disposal of financial assets - 90,108 Reversal of financial guarantee liabilities 403,288 451,994 Miscellaneous income 2,139,391 13,124,020

Total ₩ 23,161,940 ₩ 47,029,100

Other expenses for the years ended December 31, 2015 and 2014, are as follows: (in thousands of Korean won) 2015

2014

Other bad debt expenses ₩ - ₩ 166,394 Loss on foreign currency transactions 5,401,369 5,756,604 Loss on foreign currency translation 823 60,902 Donations 3,845,929 3,828,925 Currency deposit fee 39,079 43,766 Loss on disposal of property and equipment 516,983 3,552,596 Loss on sale of intangible assets - 7,608 Loss on sale of inventory 18,956 - Loss on valuation of financial assets - 10,931 Impairment loss of investments in associates - 945,205 Miscellaneous losses 779,003 1,718,388

Total ₩ 10,602,142 ₩ 16,091,319

26. Income Tax Expense

Income tax expense for the years ended December 31, 2015 and 2014, consists of:


Current income taxes

Current tax on profits for the year ₩ 20,014,317 ₩ 91,359,747



43

Adjustments in respect of prior year (4,730,169) (16,719,230)

Income tax charged to equity - (62,507,986)

Deferred income tax

Origination and reversal of temporary differences 7,133,425 494,776

Deferred income tax charged to equity 1,352,146 983,832

Income tax expense ₩ 23,769,719 ₩ 13,611,139

The tax on the Group’s profit (loss) before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:


Profit before tax ₩ 79,144,208 ₩ 119,057,920

Income tax based on statutory rate 18,690,898 28,812,017

Adjustments

Expenses not deductible for tax purposes 954,860 741,401

Adjustments in respect of prior year (4,730,169) (16,719,230)

Others 8,854,130 776,951

Income tax expense ₩ 23,769,719 ₩ 13,611,139

The income tax (charged) / credited directly to equity for the years ended December 31, 2015 and 2014, is as follows:

(In thousands of Korean won)

2015

2014

Gain on sale of treasury stock

₩ - ₩ (62,507,986)

Change in value of available-for-sale financial assets

81,041

(103,502)

Re-measure elements in Retirement Benefit Obligations

1,271,105

1,087,334

Total

₩ 1,352,146 ₩ (61,524,154)

Changes in deferred tax assets and liabilities for the years ended December 31, 2015 and 2014, are as follows:


2015

Beginning balance

Statement of

income Equity

Ending balance

Post-employment benefit obligation

₩ 663,037

₩ (3,202,643)

₩ 1,271,105

₩ (1,268,501)



44

Allowance for doubtful accounts

863,762

(157,863)

-

705,899

Available-for-sale financial assets

1,122,701

7,349

81,041

1,211,091

Investments in associates

1

(2,278,655)

2,760,691

-

482,036

Property and equipment

(50,401,156)

347,067

-

(50,054,089)

individual consumption tax

4,803,132

(4,379,830)

-

423,302

other

2,397,335

(1,581,231)

-

816,104

Total

₩ (42,829,844)

₩ (6,206,460)

₩ 1,352,146

₩ (47,684,158)


2014

Beginning balance

Statement of income

Equity

Ending balance

Post-employment benefit obligation

₩ 267,522

₩ (691,819)

₩ 1,087,334

₩ 663,037

Allowance for doubtful accounts

1,080,713

(216,951)

-

863,762


1,211,028

15,175

(103,502)

1,122,701

Investments in associates

456

(2,279,111)

-

(2,278,655)

Property and equipment

(50,729,295)

328,139

-

(50,401,156)

Litigation settlements

2,736,042

(2,736,042)

-

-

individual consumption tax

-

4,803,132

-

4,803,132

other

3,098,466

(701,131)

-

2,397,335

Total

₩ (42,335,068)

₩ (1,478,608)

₩ 983,832

₩ (42,829,844)

1Decrease in deferred income tax liabilities from discontinued operations amounting to ₩

2,279,111 thousand is recognized as loss from discontinued operations.

The analysis of deferred tax assets and liabilities as of December 31, 2015 and 2014, is as follows:


2015

2014

Deferred tax liabilities

₩ 47,684,158

₩ 42,829,844

Temporary differences not recognized as deferred tax assets (liabilities) are as follows:


2015

2014

Share of associates and subsidiaries

₩ (91,983,767)

₩ (71,441,581)

Goodwill from business combination

8,325,146

8,325,146

Total

₩ (83,658,621)

₩ (63,116,435)

27. Earnings per Share

Basic earnings per share of common stock for the years ended December 31, 2015 and 2014, is calculated as follows:



45

(In thousands Korean won) 2015

2014

Income from continuing operations(attributable to owners of the parent)

₩ 48,782,040,565 ₩ 95,959,563,232

Income from discontinued operations(attributable to owners of the parent)

16,456,089,893 412,527,681

Subtotal ₩ 65,238,130,458 ₩ 96,372,090,913

Weighted-average number of shares outstanding 85,384,053 81,606,716

Continuing operations earnings per share 571 1,176 Discontinued operations earnings per share 193 5

The Group did not issue any potential ordinary shares. Therefore, basic earnings per share is identical to diluted earnings per share.

28. Financial Risk Management

Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including ‘short and long-term borrowings’ as shown in the consolidated statement of financial position) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated statement of financial position plus net debt.

Debt-to-equity ratios as of December 31, 2015 and 2014, are as follows:


2015

2014

Total liabilities ₩ 707,354,139 ₩ 423,704,239

Total equity 1,286,515,351 1,178,204,073

Debt-to-equity ratio 55% 36%

Financial risk management

The Group is exposed to a variety of market risk, including currency risk, interest rate risk, and price risk, because of financial instruments held by the Group. The Group’s risk management program focuses on identifying potential risks that could affect the Group’s financial results and seeks to minimize, eliminate, and avoid them.

Market risk management

The Group is mainly exposed to the financial risks arising from the changes of the foreign exchange rates and the interest rates.

- Foreign exchange risk management



46

The Group is exposed to various foreign currency risks since it makes transactions in foreign currencies, but the degree of risks is not high because transactions occur after exchange of currency. The degree of risks depends on the scale of foreign currency retained. The Group is mainly exposed to the risk on US dollars and Japanese yen. The Group does not allow foreign exchange transaction except exchange for operating activities. Foreign currency risk is managed within the limits approved by the Group’s policy.

Net assets and liabilities denominated in foreign currency as of December 31, 2015 and 2014, are as follows:

(In thousands

of Korean won)

Assets(liabilities) denominated in foreign currency, net

2015

2014

USD ₩ 3,398,998 ₩ 6,099,683 JPY 9,359,457 (769,451) HKD 1,073,806 279,205 CNY 854,663 510,221

Total ₩ 14,686,924 ₩ 6,119,658

① Foreign currency sensitivity analysis

The sensitivity of the profit before tax for the years ended December 31, 2015 and 2014, to 10% changes of currency exchange rates are as follows:

(In thousands of Korean won) 2015 2014

10% increase

10% decrease 10% increase 10% decrease

USD ₩ 339,900 ₩ (339,900) ₩ 609,968 ₩ (609,968) JPY 935,946 (935,946) (76,945) 76,945 HKD 107,381 (107,381) 27,921 (27,921) CNY 85,466 (85,466) 51,022 (51,022)

Variation at 10% ₩ 1,468,693 ₩ (1,468,693) ₩ 611,966 ₩ (611,966)

- Interest rate risk management The Group is exposed to interest rate risk since it borrows funds with fixed and variable interest rates.

① Interest rate sensitivity analysis

Interest rate risk is defined as the risk that the interest income or expenses arising from deposits and borrowings will fluctuate because of changes in future market interest rate. The interest rate risk mainly arises through floating rate deposits and borrowings. The objective of interest rate risk management lies in maximizing corporate value by minimizing uncertainty caused by fluctuations in interest rates and minimizing net interest expense. The impact of 50 basis points higher/lower of interest rate with all other variables held constant on the Group’s profit before tax for the year and on equity as of December 31, 2015 and 2014, is ₩

339,960 thousand and ₩ 402,070 thousand, respectively.

- Price risks



47

The Group is exposed to equity price risks arising from its equity investments. Equity investments are held for strategic rather than trading purposes. The Group does not actively trade these investments.

Credit risk management

Credit risk refers to the risk of financial losses to the Group when the counterpart defaults on the contractual obligation. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to retail customers, including outstanding receivables. As the Group only accepts financial institutions with a sound credit rating, Credit risk from financial institutions is limited. The credit quality of general customer is evaluated taking into account its financial position, past experience and other factors.

Maximum credit risk exposures of financial assets, except financial guarantee contracts, are the book value of the corresponding assets. The maximum exposed amounts to credit risk of the Group as of December 31, 2015 and 2014, are as follows: (In thousands of Korean won)

2015

2014

Financial guarantee contracts1 ₩ 96,000,000 ₩ 65,000,000

1 The Group's maximum exposure is the maximum amount the Group would have to pay if the

guarantee is demanded.

Liquidity risk management

The Group manages liquidity risk by establishing short-term and long-term fund management plans and analyzing and reviewing actual cash outflow and its budget to correspond the maturity of financial liabilities to that of financial assets. Management believes that with proper financial liabilities it will be able to easily access cash when necessary for its operating activities and financial assets.

- Content related to liquidity and interest rate risk

The following tables detail the Group's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay.

(In thousands of Korean won) 2015

Less than one year

One to five years

Total

Non interest bearing financial liabilities

1

₩ 44,057,634

₩ 11,263,589

₩ 55,321,223

Interest liability

46,461,707

394,850,815

441,312,522

Financial guarantee contracts

96,000,000

-

96,000,000

Total ₩ 186,519,341

₩ 406,114,404

₩ 592,633,745


Less than one year

One to five years

Total

Non interest bearing ₩ 46,998,261

₩ 6,292,256

₩ 53,290,517



48

financial liabilities 1

Interest liability

57,321,848

23,092,083

80,413,931

Financial guarantee contracts

65,000,000

-

65,000,000

Total ₩ 169,320,109

₩ 29,384,339

₩ 198,704,448

1Trade and other payables (excluding deposits, income taxes, non-financial liabilities) and rent

deposit are included. The following table details the Group's expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets excluding interest that will be earned on those assets.


Less than one year

One to five years

Total

Non interest bearing financial assets

1

₩ 366,439,765

₩ 7,200,571

₩ 373,640,336

Fixed rate assets2

319,858,320

49,916,072

369,774,392

Total ₩ 686,298,085

₩ 57,116,643

₩ 743,414,728


Less than one year

One to five years

Total

Non interest bearing financial assets

1

₩ 368,770,164

₩ 5,882,305

₩ 374,652,469

Fixed rate assets2

311,838,119

38,536,562

350,374,681

Total ₩ 680,608,283

₩ 44,418,867

₩ 725,027,150

1 Includes cash and cash-equivalents, accounts receivable, accrued income, trade receivables and guaranty money

2 Includes deposit, loans, short-term financial instruments, available-for-sale financial assets, held-to-maturity investment and financial assets at fair value through profit or loss.

29. Financial Instruments

29.1 Carrying Amounts of Financial Instruments by Category

Categorizations of financial assets and liabilities as of December 31, 2015 and 2014, are as

follows:

(In thousands of Korean won) 2015 2014

Fair value

Book value

Fair value

Book value

Financial Assets

Loans and Receivables

Cash and cash equivalents

₩ 338,805,004

₩ 338,805,004

₩ 332,130,544

₩ 332,130,544



49

Short-term Financial Instruments

286,200,000 286,200,000 305,344,055 305,344,055

Long-term Financial Instruments

23,117,058 23,117,058 11,811,255 11,811,255

Trade Receivables

24,426,530 24,426,530 33,622,692 33,622,692

Non-trade Receivables

1,262,436 1,262,436 595,809 595,809

Other Receivables

4,603,815 4,603,815 2,648,274 2,648,274

Other Non-Current Receivables

10,355,620 10,355,620 9,191,809 9,191,809

Available for sale Current Available for sale

31,000,000 31,000,000 6,232,724 6,232,724

Non-Current Available for sale

23,642,080 23,642,080 23,413,619 23,413,619

Held to Maturity Current Held to Maturity

300 300 34,185 34,185

Non-current Held to Maturity

1,885 1,885 2,185 2,185

Financial Liabilities

Financial liabilities carried at amortized cost Trade payables

₩ 1,518,825

₩ 1,518,825

₩ 1,741,500

₩ 1,741,500

Short-term borrowings

36,400,000 36,400,000 44,518,931 44,518,931

Long-term borrowings

404,912,521 404,912,521 35,895,000 35,895,000

Non-trade payables

30,099,888 30,099,888 31,243,270 31,243,270

Deposits received 12,419,843 12,419,843 37,469,136 37,469,136

Other Non-current liabilities

11,195,746 11,195,746 7,708,247 7,708,247

29.2. Fair Value Hierarchy

Assets measured at fair value or for which the fair value is disclosed are categorized within the fair value hierarchy, and the defined levels are 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 (that is, as prices) or indirectly (that is, derived from prices) Level 3 : Inputs for the asset or liability that are not based on observable market data (that is,

unobservable inputs)

Fair value hierarchy classifications of the financial instruments that are measured at recurring fair value as of December 31, 2015 and 2014, are as follows:

2015



50

(In thousands of Korean won) Level 1 Level 2 Level 3 Total


Marketable equity securities ₩ 1, 763,904 ₩ - ₩ - ₩ 1, 763,904

Debt securities - 38,609,916 - 38,609,916

Beneficiary securities - 13,480,050 - 13,480,050

₩ 1, 763,904 ₩ 52,089,966 ₩ - ₩ 53,853,870


Level 1 Level 2 Level 3 Total


Marketable equity securities ₩ 1,396,424 ₩ - ₩ - ₩ 1,396,424

Debt securities - 12,323,009 - 12,323,009

Beneficiary securities - 14,618,700 - 14,618,700

Total ₩ 1,396,424 ₩ 26,941,709 ₩ - ₩ 28,338,133

Financial assets or financial liabilities measured at cost because their fair value cannot be measured

reliably are as follows;.


Accounts Description 2015 2014

Available-for-sale financial assets Unlisted equity 788,210 1,308,210

29.3 . Net gains or net losses on each category of financial instruments Net gains or net losses on each category of financial instruments for the years ended December 31, 2015 and 2014, are as follows


2015

2014

Loans and receivables Bad debt expenses(reversal)

₩ (488,703) ₩ (48,880)

Exchange revenues 7,563,279 15,098,906

Dividends revenue 39,045 53,929

Interest revenues 12,257,108 12,440,233

Currency translation

1,620,854 621,655



51

gains and losses Available-for-sale financial assets

Gain on disposal

-

79,177

Valuation gain (loss)

(253,840)

324,194

Financial liabilities measured at amortized cost

Interest expenses

2,993,814

3,366,579

30. Related Party Transactions

The subsidiaries as of December 31, 2015 and 2014, are as follows:

2015

2014

Investment companies with significant influence

Paradise Global Co., Ltd. Paradise Global Co., Ltd.

Associates

Coral Resort Co., Ltd., Base Myeongdong Co., Ltd.

Coral Resort Co., Ltd., Base Myeongdong Co., Ltd.

Other related parties

Paradise TNL Co., Ltd., Paradise Culture Foundation. Etc

Paradise TNL Co., Ltd., Paradise Culture Foundation. Etc



52

Sales and purchases with related parties for the years ended December 31, 2015 and 2014, are as follows:


2015

Sales

Purchases

Rental

revenues Others

Service

fees others



₩ 1,010,553 ₩ 3,956,158 ₩ 1,242,370 ₩ 199,777

Associates


-

1,131,014

-

-


Doosung Co., Ltd.

-

73,260

-

-

Paradise TNL Co., Ltd.

120,960

25,474

1,726,581

33,489

Vino paradise Co., Ltd.

-

163

4,809

115,625

Paradise Culture Foundation

210,840

18,947

-

3,640,007

Total ₩ 1,342,353 ₩ 5,205,016 ₩ 2,973,760 ₩ 3,988,898


2014

Sales

Purchases

Rental revenues

Others

Rental fees

Others



₩ 2,012,631 ₩ 5,272,349 ₩ 44,397 ₩ 870,338


Doosung Co., Ltd.

-

165,167

-

-


120,820

23,092

-

1,639,734


-

13,117

-

-


203,658

2,582

-

2,764,309

Total ₩ 2,337,109 ₩ 5,476,307 ₩ 44,397 ₩ 5,274,381



53

Year-end balances of receivables and payables arising from sales and purchases of goods and services as of December 31, 2015 and 2014, are as follows:

2015


Receivables

Payables

Accounts receivable

Others

Lease deposits

Accounts payable


Paradise Global Co., Ltd. ₩ 53,358 ₩ 796 ₩ - ₩ 408,527

Associates


1,600,000

-

-

-


Doosung Co., Ltd.

41,498

-

-

-


39,245

-

57,400

212,579


-

-

99,000

755


20,108

-

194,406

42,640

Total ₩ 1,754,209 ₩ 796 ₩ 350,806 ₩ 664,501

2014


Receivables

Payables

Rental revenues

Others

Rental fees

Others


Paradise Global Co., Ltd. ₩ 51,718 ₩ - ₩ - ₩ 794,642


Doosung Co., Ltd.

98,198

-

-

2,729


12,465

-

57,400

692,208


-

-

99,000

-


15,741

-

106,256

-

Total ₩ 178,122 ₩ - ₩ 262,656 ₩ 1,489,579

Fund and equity transactions with a related party for the year ended December 31, 2015, are as follows:


Associate

Transactions

Amount

Base Myeongdong Co., Ltd. Additional investment

1,000,000

The Group acquired the casino business of Paradise Global Co., Ltd in July 1, 2015.(Note 34)



54

Details of payment guarantees and collateral provided by the Group to the related parties as of December 31, 2015, are as follows:


Guarantee Guranteed

amount Guaranteed by

Payment guarantees Base Myeongdong Co., Ltd. 96,000,000

Hi Investment & Securities co. Ltd

Collateral for borrowings Paradise Global Co., Ltd. 19,500,000 Woori Bank

The compensation paid or payable to key management for employee services consists of: (In thousands of Korean won)

2015

2014

Salary and bonuses

₩ 8,416,454

₩ 7,906,421

Severance benefits

1,601,386

1,272,188

Total

₩ 10,017,840

₩ 9,178,609

31. Supplemental Cash Flow Information

Cash and cash equivalents as of December 31, 2015 and 2014, are as follows:

(In thousands Korean won) 2015

2014

Cash and deposits on demand ₩ 278,318,578

₩ 292,296,914

Short-term financial deposits 60,486,426

39,833,630

Total ₩ 338,805,004

₩ 332,130,544

Significant transactions not affecting cash flows for the years ended December 31, 2015 and 2014, are as follows:


2014

Transfer of current portion of held-to-maturity investment ₩ 300

₩ 34,185

Write-off of trade receivables 189,217

773,000

Transfer of construction-in-process to property, plant and equipment

28,047,109

42,748,005

Transfer of construction-in-process to investment property -

22,482,266

Transfer of current portion of available-for-sale financial assets -

6,232,724

Change in value of available-for-sale financial assets 334,881

410,074

Transfer of current portion of short-term loans 5,307

47,358

Transfer of current portion of long-term financial instruments -

1,464,650

Transfer of current portion of long-term borrowings 10,061,777

12,802,917

Amortization of present value discounts 17,719,896

-

Accounts payable for Acquisition of Property and equipment 4,118,650

-

Business combination 15,416,398

-



55

32. Contingent Liabilities and Commitments

Lease contracts of Casino Operations


Contractor

Location

Deposit

Rental Expense

SK Networks Co. Ltd

Seoul ₩ 1,013,200

₩ 955,188

Ora-resort Co. Ltd

Jeju Island

1,500,000

165,000

Kal Hotel Network Co. Ltd

Incheon

400,000

181,104

Incheon International Airport International Business District(IBC) -Ⅰ2nd phase Development

Project

a) Agreements

The Group has entered into a concession agreement with Incheon International Airport Corporation regarding Incheon International Airport IBC-I 2

nd phase development projects on

September 14, 2012 . Details of the agreement are as follows:

- Scope: Design, construction, management and operation of the Project

- Area : Incheon International business area (IBC) -I Phase 2 area, Unseo - dong, Incheon

-Land use Period

Start date : 14 Sep 2012

End date : 50 years from the initial operation date

The Company has provided performance guarantee insurance (Seoul Guarantee Insurance,

Insurance amount: ₩ 20,640 million) in favor of the Incheon International Airport Corporation in

connection with the concession agreement, and also has provided licensing guarantee insurance in favor of Incheon Free Economic Zone Authority (Seoul guarantee Insurance, insured amount of

₩ 3,217 million). On May 22, 2015, the Group awarded a construction contract amounting to ₩

459,258 million to the consortium of POSCO and Kolon Global. As of December 31 2015, the

Group made advance payments of ₩ 120,000 million to the consortium.



56

b) Project finance loan facilities As of December 31, 2015, the Group has entered into two project finance loan agreements for the development projects. The details of the agreements are as follows:

(The first loan facility)

Contract date

2015-06-12

Redemption date

2020-06-15

( bullet payment)

Creditors

Hana Bank and 15 financial Institutions

Maximum limit1

Tranche A

₩ 500 billion

Fixed interest rate(4.3%) and Floating rate(CD + 2.65%)

Tranche B

₩ 200 billion

Floating rate(CD+4.65%)

Total

₩ 700 billion

Others

Pledge of deposits (deposit for interests, deposit for redemption, deposit for withdrawings)

Pledge of insurances for facillities

Business rights and enforce rights waiver and transfer of memorandum

Collateral for facillities

1 As of December 31, 2015. the Group borrowed tranche A of ₩ 188 billion and tranche B of ₩ 200

billion.

(The second loan facility)

Contract date

2015-12-23

Redemption date

2020-12-28

Creditors

Hi-A-one 11th Co., Ltd.

Maximum limit2

₩ 100 billion

Floating rate

2 As of December 31, 2015, the Group borrowed ₩ 5 billion from this loan facility.

For the first loan facility, common shares of Paradise Segasammy Co., Ltd. owned by the Company (26,476,000 shares) and Segasammy Holdings (21,661,711 shares), are pledged as collateral for up

to ₩ 910 billion.



57

Other than project finance, the Group has other commitments for the years ended December 31, 2015 and 2014, as follows: (In thousands of Korean won)

Bank

Categories

Limit

Outstanding

Shinhan Bank

Bank overdrafts ₩ 2,000,000 ₩ -

Tourism Promotion and Development Fund Loan

4,346,180

4,346,180

General Loan

35,733,333

35,733,333

KEB Hana Bank

Rotating loans

3,000,000

3,000,000

Rotating loans

4,000,000

-

General Loan

4,000,000

4,000,000

E- Factoring

10,000

-

Woori Bank

General Loan

7,000,000

7,000,000

Total ₩ 60,089,513 ₩ 54,079,513

33. Discontinued Operations

Profit and loss related to loss of control and discontinuation of business due to disposal of shares of Paradise Safari Park Ltd. and Paradise Investment and Development Kenya Ltd. are presented as discontinued operations. Income and loss from discontinued operations for the years ended December 31, 2015 and 2014, consist of the following:


2015

Description Paradise Safari Park Ltd. Paradise Investment

and Development Ltd.

Total

Income ₩ 21,428,843 ₩ 706,689 ₩ 22,135,532

Expense

(3,004,731)

(95,617)

(3,100,348)

Discontinued operations before Income Tax expense

18,424,112

611,072

19,035,184

Income Tax expense

(2,418,354)

(159,439)

(2,577,793)

Profit after tax from discontinued operations

16,005,758

451,633

16,457,391

Attributable to

Owners of the parent

16,005,758

450,332

16,456,090


-

1,301

1,301



58


2014

Description Paradise Safari Park Ltd. Paradise Investment

and Development Ltd.

Total

Income ₩ 18,265,259 ₩ 541,276 ₩ 18,806,535

Expenses

(15,190,765)

(231,198)

(15,421,963)

Discontinued operations before Income Tax expense

3,074,494

310,078

3,384,572

Income Tax expense

(2,474,097)

(531,126)

(3,005,223)

Profit after tax from discontinued operations

600,397

(221,048)

379,349

Attributable to

Owners of the parent

600,397

(187,869)

412,528


-

(33,179)

(33,179)

The cash flows from discontinued operations for the years ended December 31, 2015 and 2014, are as follows: (in thousands of Korean won)

2015

Description Paradise Safari Park Ltd.

Paradise Investment and Development

Ltd. Total

Cash flows from operating activities ₩ (2,535,838) ₩ 6,904 ₩ (2,528,934)


(86,454)

(2,417)

(88,871)


-

-

-

Total cash flows ₩ (2,622,292) ₩ 4,487 ₩ (2,617,805)


2014

Description Paradise Safari Park Ltd.

Paradise Investment and Development

Ltd. Total

Cash flows from operating activities ₩ 39,143 ₩ 205,226 ₩ 244,369


90,724

(4,139)

86,585


(7,188)

(315,466)

(322,654)

Total cash flows ₩ 122,679 ₩ (114,379) ₩ 8,300



59

34. Business Combination

Details of business combination that occurred in 2015 are as follows:

(in thousands

of Korean won)

Principal activity

Date of acquisition

Consideration transferred


Casino

July 1, 2015

₩ 120,204,000

The identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date are as follows:


Current assets

Cash and cash equivalents ₩ 15,309,570

Trade receivables

3,872,188

Other receivables

71,064

Other assets

479,811

Inventories

296,822

Total

20,029,455

Non-current assets

Properties

4,479,889

Intangible assets

1,767,056

Other non- current assets

1,470,241

Total

7,717,186

Current liabilities

Non-trade payables

1,951,633

Withholdings

5,512,569

Other liabilities

4,143,205

Total

11,607,407

Non-current liabilities

Retirement Benefit Obligations

722,836

Total fair value of identifiable net assets ₩ 15,416,398

Details of goodwill from the business combination are as follows:

(In thousands of Korean won):

Consideration transferred

₩ 120,204,000

Deduction: Settlement of Consideration transferred

(9,311,350)

Deduction: Fair value of net assets acquired

(5,416,398)

Deduction: Fair value of identifiable intangible assets

(19,499,741)

Goodwill

₩ 75,976,511

As a part of acquisition, the Group acquired customer-related information of Paradise Global’s Casino



60

business. These items are identified separately from goodwill because it meets the recognition criteria for intangible assets. Details of net cash outflow during the business combination in 2015 are as follows: (In thousands of Korean won):

Cash consideration ₩ 120,204,000

Deduction: Settlement of Consideration transferred

(9,311,350)

Deduction: Acquired cash and cash equivalents

(15,309,570)

Net Total

₩ 95,583,080

35. Event after the Reporting Period According to decision of board of directors on January 14, 2016, the Company established PARADISE AMERICA, LLC for the purpose of acquisition and operation of the hotel in Orlando, Florida, United States of America. The acquisition of Embassy Suites Orlando Downtown Hotel has been completed in March 2016.

paradise co., ltd. and subsidiaries€¦ · · 2016-08-10paradise co., ltd. and subsidiaries ......

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