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Form 6-K POSCO HOLDINGS INC. For: Mar 16

March 16, 2022 11:04 AM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of March, 2022

Commission File Number: 1-13368

 

 

POSCO HOLDINGS INC.

(Translation of registrant’s name into English)

 

 

POSCO Center, 440 Teheran-ro, Gangnam-gu, Seoul, Korea, 06194

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 


POSCO is furnishing under cover of Form 6-K:

Exhibit 99.1: An English-language translated documents of Separate Financial Statements audited by independent auditors


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

POSCO HOLDINGS INC.

(Registrant)

 

Date: March 16, 2022                 By       /s/    Chung, Kyung-Jin          
    (Signature)
    Name:   Chung, Kyung-Jin
    Title:   Executive Vice President
Table of Contents

Exhibit 99.1

POSCO HOLDINGS INC. (Formerly, POSCO)

Separate Financial Statements

December 31, 2021 and 2020

(With Independent Auditors’ Report Thereon)


Table of Contents


Table of Contents

Independent Auditors’ Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO HOLDINGS INC. (formerly, POSCO):

Opinion

We have audited the separate financial statements of POSCO HOLDINGS INC. (formerly, POSCO, the “Company”), which comprise the separate statements of financial position as of December 31, 2021 and 2020, the separate statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of the Company as of December 31, 2021 and 2020, and its separate financial performance and its separate cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”).

We also have audited, in accordance with Korean Standards on Auditing (“KSAs“), the Company’s Internal Control over Financial Reporting (“ICFR”) as of December 31, 2021 based on the criteria established in Conceptual Framework for Designing and Operating Internal Control over Financial Reporting issued by the Operating Committee of Internal Control over Financial Reporting in the Republic of Korea, and our report dated March 10, 2022 expressed an unmodified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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

Emphasis of matter

We draw attention to Note 1 and Note 39 to the separate financial statements, which describes the spin-off by the former POSCO, the controlling company on March 1, 2022. Upon completion of the spin-off, the surviving company was renamed as POSCO HOLDINGS INC., and a new subsidiary, POSCO, was established. Our opinion is not modified in respect of this matter.


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Key Audit Matters

The key audit matter communicated below is a matter that, in our professional judgment, was of most significance in our audit of the separate financial statements as of and for the year ended December 31, 2021. This matter was addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

Assessment of impairment on investments in subsidiaries, associates and joint ventures

As described in notes 3(14), 11 and 32 to the separate financial statements, the carrying amount of investments in subsidiaries, associates and joint ventures is W16,002,640 million as of December 31, 2021. The Company recognized impairment loss on investments in subsidiaries, associates and joint ventures of W208,732 million during the year ended December 31, 2021.

The Company identifies whether there is any indication for impairment at the end of each reporting period and performs impairment test over investments in subsidiaries, associates and joint ventures when impairment indicator exists. The Company measures the impairment loss as the difference between the recoverable amount and the carrying amount, if the carrying amount exceeds the recoverable amount. Recoverable amount is the greater of value-in-use and fair value less costs to sell. In estimating the value-in-use, management’s judgment is involved in determining the key assumptions such as estimated sales, discount rate and terminal growth rate have significant impacts on the estimated value-in-use. Considering significant degree of management’s judgements required in estimating value-in-use and likelihood of existence of management bias, we identified assessment of impairment on investments in subsidiaries, associates and joint ventures as a key audit matter.

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

 

   

Testing certain internal controls over the Company’s impairment assessment process of investments in subsidiaries, associates and joint ventures;

 

   

Assessing whether the impairment tests have been completely performed on investments of which indication of impairment exists;

 

   

Evaluating the key assumptions (including estimated sales) used to determine the value-in-use by comparison with the latest financial budgets approved by the Board of Directors, historical performance and industry reports;

 

   

Comparing the estimated sales prepared in prior year with the current year’s performance to assess the Company’s ability to accurately forecast;

 

   

Assessing the terminal growth rates by comparison with observable market information;

 

   

Performing sensitivity analysis on the discount rates and terminal growth rates applied to assess the impact of changes in these key assumptions on the results of management’s impairment assessments; and,

 

   

Engaging our valuation specialists to assist us in evaluating the discount rates used in the valuation by comparing it against discount rates that were independently developed using observable information.

Other Matter

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

 

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

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

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

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

Auditors’ Responsibilities for the Audit of the Separate Financial Statements

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

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

 

   

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

 

   

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.

 

   

Evaluate the appropriateness of accounting policies used in the preparation of the separate financial statements and the reasonableness of accounting estimates and related disclosures made by management.

 

   

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

 

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

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

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

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

The engagement partner on the audit resulting in this independent auditors’ report is Se Hong Choi.

Seoul, Korea

March 10, 2022

 

This report is effective as of March 10, 2022, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Separate Statements of Financial Position

As of December 31, 2021 and 2020

 

 

(in millions of Won)    Notes      December 31,
2021
     December 31,
2020
 

Assets

        

Cash and cash equivalents

     4,5,22      W 2,042,274        1,822,660  

Trade accounts and notes receivable, net

     6,22,36        6,017,508        3,693,535  

Other receivables, net

     7,22,36        545,341        279,555  

Other short-term financial assets

     8,22        9,605,522        9,607,632  

Inventories

     9,33        7,623,202        4,093,829  

Assets held for sale

     10        29,789        32,244  

Other current assets

     15        55,244        50,498  
     

 

 

    

 

 

 

Total current assets

        25,918,880        19,579,953  
     

 

 

    

 

 

 

Long-term trade accounts and notes receivable, net

     6,22        5,675        2,456  

Other receivables, net

     7,22        274,253        84,037  

Other long-term financial assets

     8,22        1,326,565        1,072,817  

Investments in subsidiaries, associates and joint ventures

     11,32        16,002,640        14,883,152  

Investment property, net

     12        144,140        149,617  

Property, plant and equipment, net

     13,32        19,772,299        20,216,932  

Intangible assets, net

     14        551,410        621,926  

Defined benefit assets, net

     20        212,531        76,501  

Other non-current assets

     15        34,366        107,578  
     

 

 

    

 

 

 

Total non-current assets

        38,323,879        37,215,016  
     

 

 

    

 

 

 

Total assets

      W 64,242,759        56,794,969  
     

 

 

    

 

 

 

See accompanying notes to the separate financial statements.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Separate Statements of Financial Position, Continued

As of December 31, 2021 and 2020

 

 

(in millions of Won)    Notes      December 31,
2021
    December 31,
2020
 

Liabilities

       

Trade accounts and notes payable

     22,36      W 2,453,068       1,258,470  

Short-term borrowings and current installments of long-term borrowings

     4,16,22,38        2,072,354       2,408,392  

Other payables

     17,22,36,38        1,267,459       1,127,323  

Other short-term financial liabilities

     18,22,38        13,755       12,788  

Current income tax liabilities

     34        1,832,078       137,858  

Liabilities directly associated with the assets held for

     10        185       —    

Provisions

     19        84,409       63,604  

Other current liabilities

     21        144,961       80,676  
     

 

 

   

 

 

 

Total current liabilities

        7,868,269       5,089,111  
     

 

 

   

 

 

 

Long-term borrowings, excluding current installments

     4,16,22,38        6,129,778       5,346,944  

Other payables

     17,22,38        399,144       220,612  

Other long-term financial liabilities

     18,22,38        21,991       122,154  

Deferred tax liabilities

     34        747,653       848,317  

Long-term provisions

     19        36,755       52,602  

Other non-current liabilities

     21        3,744       525  
     

 

 

   

 

 

 

Total non-current liabilities

        7,339,065       6,591,154  
     

 

 

   

 

 

 

Total liabilities

        15,207,334       11,680,265  
     

 

 

   

 

 

 

Equity

       

Share capital

     23        482,403       482,403  

Capital surplus

     23        1,339,289       1,339,289  

Hybrid bonds

     24        199,384       199,384  

Reserves

     25        (211,849     (296,626

Treasury shares

     26        (2,508,294     (2,391,523

Retained earnings

     27        49,734,492       45,781,777  
     

 

 

   

 

 

 

Total equity

        49,035,425       45,114,704  
     

 

 

   

 

 

 

Total liabilities and equity

      W 64,242,759       56,794,969  
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Separate Statements of Comprehensive Income

For the years ended December 31, 2021 and 2020

 

 

(in millions of Won, except per share informations)    Notes      2021     2020  

Revenue

     28,36      W 39,920,201       26,509,920  

Cost of sales

     9,20,30,33,36        (32,136,439     (24,323,352
     

 

 

   

 

 

 

Gross profit

        7,783,762       2,186,568  

Selling and administrative expenses

       

Impairment loss on trade accounts and notes receivable

     22,33        (10     (4,372

Other administrative expenses

     20,29,30,33        (911,841     (807,626

Selling expenses

     29,33        (222,311     (239,373
     

 

 

   

 

 

 

Operating profit

        6,649,600       1,135,197  
     

 

 

   

 

 

 

Finance income and costs

       

Finance income

     22,31        1,694,175       1,230,684  

Finance costs

     22,31        (925,649     (820,201
     

 

 

   

 

 

 

Other non-operating income and expenses

       

Reversal of (impairment loss) on other receivables

     22,33        (363     487  

Other non-operating income

     32        227,008       146,548  

Other non-operating expenses

     32,33        (661,071     (674,835
     

 

 

   

 

 

 

Profit before income tax

        6,983,700       1,017,880  

Income tax expense

     34        (1,802,473     (52,017
     

 

 

   

 

 

 

Profit

        5,181,227       965,863  

Other comprehensive income (loss)

       

Items that will not be reclassified subsequently to profit or loss:

       

Remeasurements of defined benefit plans

     20        32,426       53,816  

Net changes in fair value of equity investments at fair value through other comprehensive income

     8,22,25        83,110       (115,599

Total comprehensive income

      W 5,296,763       904,080  
     

 

 

   

 

 

 

Earnings per share (in W on)

     35       

Basic earnings per share (in Won)

        68,360       12,123  

Diluted earnings per share (in Won)

      W 66,651       12,123  
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Separate Statements of Changes in Equity

For the years ended December 31, 2021 and 2020

 

 

(in millions of Won)    Share capital      Capital
surplus
     Hybrid
bonds
     Reserves     Treasury
shares
    Retained
earnings
    Total  

Balance as of January 1, 2020

   W 482,403        1,252,220        199,384        (183,930     (1,508,303     45,372,411       45,614,185  

Comprehensive income:

                 

Profit

     —          —          —          —         —         965,863       965,863  

Other comprehensive income (loss)

                 

Remeasurements of defined benefit plans, net of tax

     —          —          —          —         —         53,816       53,816  

Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax

     —          —          —          (112,696     —         (2,903     (115,599

Transactions with owners of the Company, recognized directly in equity:

                 

Year-end dividends

     —          —          —          —         —         (320,462     (320,462

Interim dividends

     —          —          —          —         —         (277,723     (277,723

Interest of hybrid bonds

     —          —          —          —         —         (9,225     (9,225

Acquisition of treasury shares

     —          —          —          —         (883,220     —         (883,220

Others

     —          87,069        —          —         —         —         87,069  

Balance as of December 31, 2020

     W482,403        1,339,289        199,384        (296,626)       (2,391,523)       45,781,777       45,114,704  

Balance as of January 1, 2021

   W 482,403        1,339,289        199,384        (296,626     (2,391,523     45,781,777       45,114,704  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income:

                 

Profit

     —          —          —          —         —         5,181,227       5,181,227  

Other comprehensive income (loss)

                 

Remeasurements of defined benefit plans, net of tax

     —          —          —          —         —         32,426       32,426  

Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax

     —          —          —          84,777       —         (1,667     83,110  

Transactions with owners of the Company, recognized directly in equity:

                 

Year-end dividends

     —          —          —          —         —         (342,564     (342,564

Interim dividends

     —          —          —          —         —         (907,507     (907,507

Interest of hybrid bonds

     —          —          —          —         —         (9,200     (9,200

Acquisition of treasury shares

     —          —          —          —         (116,771     —         (116,771
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2021

   W 482,403        1,339,289        199,384        (211,849     (2,508,294     49,734,492       49,035,425  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Separate Statements of Cash Flows

For the years ended December 31, 2021 and 2020

 

 

(in millions of Won)    Notes      2021     2020  

Cash flow s from operating activities

       

Profit

      W 5,181,227       965,863  

Adjustments for :

       

Expenses related to post-employment benefit

        121,059       126,191  

Depreciation

        2,289,507       2,273,633  

Amortization

        107,465       106,926  

Impairment loss on trade and other receivables

        373       3,885  

Finance income

        (1,276,011     (779,150

Finance costs

        514,904       457,851  

Loss on valuation of inventories

        4,854       4,735  

Gain on disposal of property, plant and equipment

        (30,359     (12,340

Loss on disposal of property, plant and equipment

        111,955       181,454  

Impairment loss on property, plant and equipment

        228,171       27,846  

Impairment loss on intangible assets

        7,180       —    

Gain on disposal of investments in subsidiaries, associates and joint ventures

        (56,121     (24,334

Impariment loss on investments in subsidiaries, associates and joint ventures

        208,732       360,894  

Gain on disposal of assets held for sale

        (48,018     (22,734

Loss on disposal of assets held for sale

        —         5,383  

Impairment loss on assets held for sale

        —         9,093  

Gain on disposal of emission rights

        —         (24,566

Loss on disposal of emission rights

        5,843       —    

Increase to provisions

        42,655       73,037  

Income tax expense

        1,802,473       52,017  

Others

        16,436       9,536  

Changes in operating assets and liabilities

     38        (4,980,364     1,550,039  

Interest received

        144,368       197,306  

Interest paid

        (180,743     (230,537

Dividends received

        716,640       232,492  

Income taxes paid

        (151,888     (386,850
     

 

 

   

 

 

 

Net cash provided by operating activities

      W 4,780,338       5,157,670  
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Separate Statements of Cash Flows, Continued

For the years ended December 31, 2021 and 2020

 

 

(in millions of Won)    Notes      2021      2020  

Cash flows from investing activities

        

Decrease in deposits

      W 2,464,819        3,336,891  

Proceeds from disposal of short-term financial instruments

        35,801,788        36,302,634  

Proceeds from disposal of long-term financial instruments

        6        —    

Collection of short-term loans

        7,430        2,709  

Proceeds from disposal of debt securities

        150,070        360,109  

Proceeds from disposal of long-term debt securities

        1,739        —    

Proceeds from disposal of equity securities

        14,066        7,937  

Proceeds from disposal of other securities

        6,049        8,183  

Proceeds from disposal of derivatives

        1,482        —    

Proceeds from disposal of investments in subsidiaries, associates and joint ventures

     

 

3,896

 

  

 

24,247

 

Proceeds from disposal of intangible assets

        727        1,047  

Proceeds from disposal of assets held for sale

        67,264        225,292  

Proceeds from disposal of emission rights

        5,503        66,143  

Increase in deposits

        (2,563,854      (3,380,247

Acquisition of short-term financial instruments

        (35,426,439      (38,160,724

Acquisition of long-term financial instruments

        (272,824      —    

Increase in long-term loans

        (196,101      (21,923

Acquisition of debt securities

        (150,033      (220,110

Acquisition of other securities

        (44,867      (20,795

Acquisition of investments in subsidiaries, associates and joint ventures

        (1,206,424      (236,226

Acquisition of property, plant and equipment

        (1,968,289      (2,450,816

Payment for disposal of property, plant and equipment

        (59,806      (102,354

Acquisition of intangible assets

        (49,478      (101,427
     

 

 

    

 

 

 

Net cash used in investing activities

      W (3,413,276      (4,359,430
     

 

 

    

 

 

 

Cash flows from financing activities

        

Proceeds from borrowings

        5,553,432        3,566,518  

Increase in long-term financial liabilities

        1,396        537  

Proceeds from (payment for) disposals of derivatives

        (9,103      5,873  

Receipt of government grants

        431        954  

Repayment of borrowings

        (5,272,719      (1,941,838

Decrease in long-term financial liabilities

        (1,318      (974

Repayment of lease liabilities

        (46,756      (63,684

Payment of cash dividends

        (1,248,689      (598,627

Acquisition of treasury shares

        (116,771      (883,220

Payment of interest of hybrid bonds

        (9,200      (9,225
     

 

 

    

 

 

 

Net cash provided by (used in) financing activities

     38      W (1,149,297      76,314  
     

 

 

    

 

 

 

Effect of exchange rate fluctuation on cash held

        1,849        (30,033

Net increase in cash and cash equivalents

        219,614        844,521  

Cash and cash equivalents at beginning of the period

     5        1,822,660        978,139  
     

 

 

    

 

 

 

Cash and cash equivalents at end of the period

     5      W 2,042,274        1,822,660  
     

 

 

    

 

 

 

See accompanying notes to the separate financial statements.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements

As of December 31, 2021 and 2020

 

 

1.Reporting Entity

POSCO HOLDINGS INC. (formerly, POSCO), the Company, is the largest steel producer in Korea which was incorporated on April 1, 1968, under the Commercial Code of the Republic of Korea to manufacture and sell steel rolled products and plates in the domestic and foreign markets.

The shares of the Company have been listed on the Korea Exchange since June 10, 1988. The Company owns and operates two steel plants (Pohang and Gwangyang) and one office in Korea, and it also operates internationally through five of its overseas liaison offices.

The Company established a new subsidiary, POSCO, by a vertical spin-off of its steel business on March 1, 2022, and changed the name of the surviving company to POSCO HOLDINGS INC..

As of December 31, 2021, major shareholders are as follows:

 

Shareholder’s name

   Number of shares      Ownership (%)  

National Pension Service

     8,063,521        9.25  

BlackRock Fund Advisors(*1)

     4,312,713        4.95  

Nippon Steel Corporation

     2,894,712        3.32  

The Government of Singapore

     2,889,467        3.31  

Samsung group(*1)

     1,325,407        1.52  

Others

     67,701,015        77.65  
  

 

 

    

 

 

 
     87,186,835        100.00  
  

 

 

    

 

 

 

 

(*1)

Includes shares held by subsidiaries and others.

As of December 31, 2021, the shares of the Company are listed on the Korea Exchange, while its ADRs are listed on the New York Stock Exchanges.

2. Statement of Compliance

Statement of compliance

The separate financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audit of Stock Companies, Etc. in the Republic of Korea.

These financial statements are separate financial statements prepared in accordance with K-IFRS No. 1027 “Separate Financial Statements” presented by a parent, an investor with joint control of, or significant influence over, an investee, in which the investments are accounted for at cost.

The separate financial statements were authorized for issue by the Board of Directors on January 28, 2022, and will be submitted for approval at the shareholders’ meeting to be held on March 18, 2022.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Basis of measurement

The separate financial statements have been prepared on the historical cost basis, except for the following material items in the statement of financial position, as described in the accounting policy below.

 

(a)

Derivatives instruments measured at fair value

 

(b)

Financial instruments measured at fair value through profit or loss

 

(c)

Financial instruments measured at fair value through other comprehensive income

 

(d)

Defined benefit liabilities measured at the present value of the defined benefit obligation less the fair value of the plan assets

Functional and presentation currency

These separate financial statements are presented in Korean Won, which is the Company’s functional currency which is the currency of the primary economic environment in which the Company operates.

Use of estimates and judgments

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

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.

 

(a)

Judgments

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

 

   

Note 11—Investments in subsidiaries, associates and joint ventures

 

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Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(b)

Assumptions and estimation uncertainties

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

 

   

Note 9—Inventories

 

   

Note 11—Investments in subsidiaries, associates and joint ventures

 

   

Note 19—Provisions

 

   

Note 20—Employee benefits

 

   

Note 22—Financial Instruments

 

   

Note 34—Income taxes

 

   

Note 37—Commitments and contingencies

 

(c)

Measurement of fair value

The Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the financial officer.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS including the level in the fair value hierarchy in which such valuation techniques should be classified.

Significant valuation issues are reported to the Company’s Audit Committee.

When measuring the fair value of an asset or a liability, the Company uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

   

Level 1 – unadjusted quoted prices in active markets for identical assets or liabilities.

 

   

Level 2 – inputs other than quoted prices included in Level 1 that are observable for the assets or liability, either directly or indirectly.

 

   

Level 3 – inputs for the assets or liability that are not based on observable market data.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Information about the assumptions made in measuring fair values is included in the following note:

 

   

Note 22 – Financial instruments

Changes in Accounting Policies

Except for the standards and amendments applied for the first time for the reporting period beginning on January 1, 2021 described below, the accounting policies applied by the Company in these separate financial statements are the same as those applied by the Company in its financial statements as of and for the year ended December 31, 2020.

The Company has applied ‘Phase 2 Interest Rate Benchmark Reform’(K-IFRS No. 1109 “Financial Instruments”, K-IFRS No. 1039 “Financial Instruments: Recognition and Measurement” , K-IFRS No. 1107 “Financial Instruments : Disclosures” , K-IFRS No. 1116 “Lease”) for the first time for the reporting period commenced January 1, 2021. The Company believes that the effect of the other standards and amendments applied for the first time for the reporting period commenced January 1, 2021 is not significant.

In relation to ‘Phase 2 Interest Rate Benchmark Reform’, the amendments provide practical expedients to account for modification in financial instruments, lease and hedging relationship.

Information about the accounting policy is included in the note 3(f) to the separate financial statements.

The Company believes that the effect of the amendments to the financial statements is not significant.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

3. Summary of Significant Accounting Policies

The significant accounting policies applied by the Company in preparation of its separate financial statements are included below. The accounting policies set out below have been applied consistently to all periods presented in these financial statements, except for those as disclosed in note 2.

Investments in subsidiaries, associates and joint ventures

These separate financial statements are prepared and presented in accordance with K-IFRS No. 1027 “Separate Financial Statements”. The Company applied the cost method to investments in subsidiaries, associates and joint ventures in accordance with K-IFRS No. 1027. Dividends from a subsidiary, associate or joint venture are recognized in profit or loss when the right to receive the dividend is established.

Foreign currency transactions and translation

Foreign currency transactions are initially recorded using the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. At the end of each reporting period, foreign currency monetary items are translated using the closing rate. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the original transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rate at the date fair value is initially determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous financial statements are recognized in profit or loss in the period in which they arise. When gains or losses on non-monetary items are recognized in other comprehensive income, exchange components of those gains or losses are recognized in other comprehensive income. Conversely, when gains or losses on non-monetary items are recognized in profit or loss, exchange components of those gains or losses are recognized in profit or loss.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, and short-term investments in highly liquid securities that are readily convertible to known amounts of cash with maturities of three months or less from the acquisition date and which are subject to an insignificant risk of changes in value. Equity investments are excluded from cash and cash equivalents.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Non-derivative financial assets

Trade receivables and debt securities issued are initially recognized when they are originated. All other financial assets are initially recognized when the Company becomes a party to the contractual provisions of the instrument.

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

On initial recognition, a financial asset is classified as measured at amortized cost, debt instruments measured at fair value through other comprehensive income, equity instruments measured at fair value through other comprehensive income, or financial assets measured at fair value through profit or loss.

Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the reporting period following the change in the business model.

 

(a)

Financial assets measured at amortized cost

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at fair value through profit or loss.

 

   

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

 

   

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

Financial assets measured at amortized cost are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, gains and losses on foreign currency translation and impairment losses are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.

 

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Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(b)

Debt instruments measured at fair value through other comprehensive income

A debt instrument is measured at fair value through other comprehensive income if it meets both of the following conditions and is not designated as at fair value through profit or loss.

 

   

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

 

   

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

Debt instruments measured at fair value through other comprehensive income are subsequently measured at fair value. Interest income which is calculated using the effective interest method, gains and losses from foreign currency translation and impairment losses are recognized in profit or loss and other net profit or losses are recognized in other comprehensive income. At the time of elimination, other accumulated comprehensive income is reclassified to profit or loss.

 

(c)

Equity instruments measured at fair value through other comprehensive income

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

Equity instruments measured at fair value through other comprehensive income are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognized in other comprehensive income and never reclassified to profit or loss.

 

(d)

Financial assets measured at fair value through profit or loss

All financial assets not classified as measured at amortized cost of fair value through other comprehensive income as described above are measured at fair value through profit or loss. This includes all derivative financial assets. On initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at fair value through other comprehensive income as at fair value through profit or loss if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets measured at fair value through profit or loss are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(e)

Derecognition of financial assets

Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership. If a transfer does not result in derecognition because the Company has retained substantially all the risks and rewards of ownership of the transferred asset, the Company continues to recognize the transferred asset in its entirety and recognizes a financial liability for the consideration received.

 

(f)

Interest rate benchmark reform

The Company reflects the changes in the basis for determining contractual cash flows of financial assets and financial liabilities as a result of interest rate benchmark reform by updating the effective interest rate.

A change in the basis for determining the contractual cash flows is required by the interest rate benchmark reform if the following conditions are met:

(a) the change is necessary as a direct consequence of the reform; and

(b) the new basis for determining the contractual cash flows is economically equivalent to the previous basis – i.e. the basis immediately before the change.

When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Company first updates the effective interest rate, and then applies the policies on accounting for modifications to the additional changes.

 

(g)

Offsetting a financial asset and a financial liability

Financial assets and financial liabilities are offset and the net amount is presented in the separate statement of financial position only when the Company currently has a legally enforceable right to offset the recognized amounts, and there is the intention to settle on a net basis or to realize the asset and settle the liability simultaneously.

Inventories

Inventory costs, except materials-in-transit in which costs are determined by using specific identification method, are determined by using the moving-weighted average method. The cost of inventories comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The allocation of fixed production overheads to the costs of finished goods or work in progress are based on the normal capacity of the production facilities.

 

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Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Inventories are measured at the lower of cost or net realizable value. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period, the write-down or loss occurs. The amount of any reversal of any write-down of inventories arising from an increase in net realizable value is recognized as a reduction in the amount of inventories recognized as a cost of goods sold in the period in which the reversal occurs.

The carrying amount of those inventories is recognized as cost of goods sold in the period in which the related revenue is recognized.

Non-current assets held for sale

Non-current assets or disposal groups comprising assets and liabilities that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. In order to be classified as held for sale, the assets or disposal groups must be available for immediate sale in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell.

The Company recognizes an impairment loss for any initial or subsequent write-down of an asset or disposal group to fair value less costs to sell, and a gain for any subsequent increase in fair value less costs to sell, up to the cumulative impairment loss previously recognized.

A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).

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. Transaction costs are included in the initial measurement. Subsequently, investment property is carried at depreciated cost less any accumulated impairment losses.

Subsequent costs are recognized in the carrying amount of investment property at cost or, if appropriate, as separate items if it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.

Depreciation methods, useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.

 

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Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Property, plant and equipment

Property, plant and equipment are initially measured at cost and after initial recognition, are carried at cost less accumulated depreciation and any accumulated impairment losses. The cost of property, plant and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and, when the Company has an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

The cost of replacing a part of an item is recognized in the carrying amount of the item of property, plant and equipment, if the following recognition criteria are met:

(a) it is probable that future economic benefits associated with the item will flow to the Company and

(b) the cost can be measured reliably.

The carrying amount of the replaced part is derecognized at the time the replacement part is recognized. The costs of the day-to-day servicing of the item are recognized in profit or loss as incurred.

Items of property, plant and equipment are depreciated from the date they are available for use or, in respect of self-constructed assets, from the date that the asset is completed and ready for use. Other than land, the costs of an asset less its estimated residual value are depreciated. Depreciation of property, plant and equipment is recognized in profit or loss on a straight-line basis, which most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset, over the estimated useful lives of each component of an item of property, plant and equipment.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognized.

The estimated useful lives for the current period are as follows:

 

Buildings

     5-40 years  

Structures

     5-40 years  

Machinery and equipment

     15 years  

Vehicles

     4 years  

Tools

     4 years  

Furniture and fixtures

     4 years  

Lease assets

     4-20 years  

The estimated residual value, useful lives and the depreciation method are reviewed at least at the end of each reporting period and, if expectations differ from previous estimates, the changes are accounted for as changes in accounting estimates.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Borrowing costs

The Company capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale. Financial assets and inventories that are manufactured or otherwise produced over a short period of time are not qualifying assets. Assets that are ready for their intended use or sale when acquired are not qualifying assets.

To the extent that the Company borrows funds specifically for the purpose of obtaining a qualifying asset, the Company determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. The Company immediately recognizes other borrowing costs as an expense. To the extent that the Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company shall determine the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate shall be the weighted average of the borrowing costs applicable to the borrowings of the Company that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Company capitalizes during a period shall not exceed the amount of borrowing costs incurred during that period.

Intangible assets

Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.

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

 

Intellectual property rights

     5-7 years  

Development expense

     4 years  

Port facilities usage rights

     4-75 years  

Other intangible assets

     4 years  

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

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Expenditures on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.

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

Government grants

Government grants are not recognized unless there is reasonable assurance that the Company will comply with the grant’s conditions and that the grant will be received.

 

(a)

Grants related to assets

Government grants whose primary condition is that the Company purchase, construct or otherwise acquire long-term assets are deducted from the carrying amount of the assets and recognized in profit or loss on a systematic and rational basis over the life of the depreciable assets.

 

(b)

Grants related to income

Government grants which are intended to compensate the Company for expenses incurred are deducted from the related expenses.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Leases

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for considerations.

 

1)

As a lessee

At inception or reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease and non-lease component on the basis of their relative stand-alone prices.

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

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

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

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

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

 

   

fixed payments

 

   

variable lease payments that depend on an index or a rate

 

   

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

 

   

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

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

The lease liability is measured at amortized cost using the effective interest method. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit of loss if the carrying amount of the right-of-use asset has been reduced to zero. The lease liability is remeasured when there is:

 

   

a revised in-substance fixed lease payment,

 

   

a change in future lease payments arising from a change in an index or rate,

 

   

a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or

 

   

a change in the Company’s assessment of whether it will exercise a purchase, extension or termination option

The Company presents right-of-use assets in the same line item as is presents underlying assets of the same nature that it owns, and lease liabilities are included in other payables on the separate statement of financial position.

The Company has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases, including IT equipment. The Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

 

2)

As a lessor

At inception or the effective date of a modification that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. The classify each lease, the Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

The Company leases out its investment properties. The Company classified these leases as operating leases.

Impairment for financial assets

The Company recognizes loss allowances for expected credit losses on:

 

   

financial assets measured at amortized cost

 

   

debt instruments measured at fair value through other comprehensive income

 

   

lease receivables, contractual assets, loan commitments, and financial guarantee contracts

If credit risk has increased significantly since the initial recognition, a loss allowance for lifetime expected credit loss is required to be measured at the end of every reporting period. If credit risk has not increased significantly since the initial recognition, a loss allowance is measured based on 12-month expected credit loss.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

If the financial instrument has low credit risk at the end of the reporting period, the Company may assume that the credit risk has not increased significantly since initial recognition. However, a loss allowance for lifetime expected credit losses is required for contract assets or trade receivables that do not contain a significant financing component.

 

(a)

Judgments on credit risk

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

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Company considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing security (if any is held). The Company considers a debt security to have low credit risk when its credit risk rating is equivalent to investment grade defined by reliable credit rating agencies.

 

(b)

Measurement of expected credit losses

Lifetime expected credit losses are the expected credit losses that result from all possible default events over the expected life of a financial instrument. 12-month expected credit losses are the portion of lifetime expected credit losses that result from default that are possible within the 12 months after the reporting date. The maximum period considered when estimating expected credit losses is the maximum contractual period over which the Company is exposed to credit risk.

Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls such as the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Expected credit losses for financial assets measured at amortized cost are recognized in profit or loss. Loss allowances for financial assets measured at amortized cost are deducted from carrying amount of the assets. For debt instruments measured at fair value through other comprehensive income, the loss allowance is charged to profit or loss and is recognized in other comprehensive income.

 

(c)

Credit-impaired financial assets

At each reporting date, the Company assesses whether financial assets measured at amortized cost and debt instrument measured at fair value through other comprehensive income are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Objective evidence that a financial asset or group of financial assets are impaired includes:

 

   

significant financial difficulty of the issuer or borrower- a breach of contract, such as a default or delinquency in interest or principal payments

 

   

the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider

 

   

it becoming probable that the borrower will enter bankruptcy or other financial reorganization

 

   

the disappearance of an active market for that financial asset because of financial difficulties

 

(d)

Write-off

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in entirety or a portion. The Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery based on continuous payments and extinct prescriptions. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.

Impairment for non-financial assets

The carrying amounts of the Company’s non-financial assets, other than assets arising from contract assets, contract assets recognized in accordance with revenue from contracts with customers, employee benefits, inventories, deferred tax assets and non-current assets held for sale, are reviewed at the end of the each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amount to their carrying amount.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Management estimates the recoverable amount of an individual asset. If it is impossible to measure the individual recoverable amount of an asset, then management estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.

An impairment loss is recognized if the carrying amount of an asset or a CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss.

Any impairment identified at the CGU level is used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

Derivative financial instruments

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives that is not designated as a hedging instrument are measured at fair value, and changes therein are recognized in profit or loss.

Non-derivative financial liabilities

The Company classifies non-derivative financial liabilities into financial liabilities measured at fair value through profit or loss or financial liabilities measured at amortized cost in accordance with the substance of the contractual arrangement and the definitions of financial liabilities. The Company recognizes financial liabilities in the separate statement of financial position when the Company becomes a party to the contractual provisions of the financial liability.

 

(a)

Financial liabilities measured at fair value through profit or loss

A financial liability is classified as at fair value through profit or loss if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the acquisition are recognized in profit or loss as incurred.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(b)

Financial liabilities measured at amortized cost

Non-derivative financial liabilities other than financial liabilities measured at fair value through profit or loss are classified as financial liabilities measured at amortized cost. At the date of initial recognition, financial liabilities measured at amortized cost are measured at fair value after deducting transaction costs that are directly attributable to the acquisition. Financial liabilities measured at amortized cost are measured at amortized cost using the effective interest method subsequently to initial recognition.

 

(c)

Derecognition of financial liabilities

The Company derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire. The Company also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

Employee benefits

 

(a)

Short-term employee benefits

Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render the related service. When an employee has rendered service to the Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service as profit or loss. If the Company has a legal or constructive obligation which can be reliably measured, the Company recognizes the amount of expected payment for profit-sharing and bonuses payable as liabilities.

 

(b)

Other long-term employee benefits

Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render the related service, and are calculated at the present value of the amount of future benefit that employees have earned in return for their service in the current and prior periods, less the fair value of any related assets. The present value is determined by discounting the expected future cash flows using the interest rate of corporate bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. Any actuarial gains and losses are recognized in profit or loss in the period in which they arise.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(c)

Retirement benefits: Defined contribution plans

For defined contribution plans, when an employee has rendered service to the Company during a period, the Company recognizes the contribution payable to a defined contribution plan in exchange for that service as an accrued expense, after deducting any contributions already paid. If the contributions already paid exceed the contribution due for service before the end of the reporting period, the Company recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.

 

(d)

Retirement benefits: Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation in respect of defined benefit plans is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of plan assets is deducted. The calculation is performed annually by an independent actuary using the projected unit credit method.

The discount rate is the yield at the reporting date on corporate bonds that have maturity dates approximating the terms of the Company’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The Company recognizes all actuarial gains and losses arising from actuarial assumption changes and experiential adjustments in other comprehensive income when incurred.

When the fair value of plan assets exceeds the present value of the defined benefit obligation, the Company recognizes an asset, to the extent of the total of cumulative unrecognized past service cost and present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.

Remeasurements of net defined benefit liabilities, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments, net interest expense and other expenses related to defined benefit plans are recognized in profit or loss.

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

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Provisions

Provisions are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

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

Where some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement shall be recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset.

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

A provision for warranties is recognized when the underlying products or services are sold, based on historical warranty data and a weighting of possible outcomes against their associated probabilities.

Provision for restoration related to contaminated area is recognized when the area meets the Company’s policy and legal standards of contamination.

A provision is used only for expenditures for which the provision was originally recognized.

Emission Rights

The Company accounts for greenhouse gases emission right and the relevant liability as follows pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission which became effective in Korea in 2015.

 

(a)

Greenhouse Gases Emission Right

Greenhouse Gases Emission Right consists of emission allowances which are allocated from the government free of charge and those purchased from the market. The cost includes any directly attributable costs incurred during the normal course of business.

Emission rights held for the purpose of performing the obligation are classified as intangible asset and initially measured at cost and subsequently carried at cost less accumulated impairment losses.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

The Company derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government when the future economic benefits are no longer expected to be probable.

 

(b)

Emission liability

Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. Emission liability is recognized when there is a high possibility of outflows of resources in performing the obligation and the costs required to perform the obligation are reliably estimable. Emission liability is an amount of estimated obligation for emission rights to be submitted to the government for the performing period. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession, and the unit price for such emission rights in the market as of the end of the reporting period. The emission liability is derecognized when submitted to the government.

Equity instruments

 

(a)

Share capital

Common stock is classified as equity and the incremental costs arising directly attributable to the issuance of common stock less their tax effects are deducted from equity.

If the Company reacquires its own equity instruments, the amount of those instruments (“treasury shares”) are presented as a contra equity account. No gain or loss is recognized in profit or loss on the purchase, sale, issuance or cancellation of its own equity instruments. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase to equity, and the resulting surplus or deficit on the transaction is recorded in capital surplus.

 

(b)

Hybrid bonds

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of financial liability and an equity instrument. When the Company has an unconditional right to avoid delivering cash or another financial asset to settle a contractual obligation, the instruments are classified as equity instruments.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Revenue from contracts with customers

Revenue is measured based on the consideration promised in the contract with the customer. The Company recognizes revenue when the control over a good or service is transferred to the customer. The following are the revenue recognition policies for performance obligations in the contracts with customers in accordance with K-IFRS No. 1115.

 

(a)

Steel products

For domestic sales, the control of the product is usually transferred to the customer when the product is delivered to the customer, at which point in time revenue is recognized. Invoices are generally due within 10 to 90 days. When a customer makes payment prior to the due date, they are offered a discount at certain percentage of the invoice amount. Only when the price discount period has passed, only the amount of the cumulative revenue that has already been recognized, income recognized including income.

For export sales, revenue is recognized at the time when control of the product is transferred to the customer based on the “International Incoterms for Interpretation of Trade Terms” prescribed in the respective contracts, and the Company’s export contract generally transfers control to the customer at the shipping of the product. Invoices are usually issued at the date of bill of lading and revenues are recognized based on the terms of Letter of Credit (L / C), Acceptance Condition (D / A), Payment Condition (D / P), Telegraphic Transfer (T / T) and others.

 

(b)

Transportation services

For the performance obligation for transportation services included in the Company’s product sales contracts, revenue is recognized over the period when the services are provided and the revenue is measured by reference to the degree to which the service has been completed. The billing date and payment terms for the service charge are the same as the billing date and payment terms for sale of steel products.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Finance income and finance costs

The Company’s finance income and finance costs include:

 

   

interest income;

 

   

interest expense;

 

   

dividend income;

 

   

the foreign currency gain or loss on financial assets and financial liabilities;

 

   

the net gain or loss on financial assets measured at fair value through profit or loss;

 

   

the net gain or loss on the disposal of investments in debt securities measured at fair value through other comprehensive income.

Interest income or expense is recognized using the effective interest method. Dividend income is recognized in profit or loss on the date on which the Company’s right to receive payment is established. The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:

 

   

the gross carrying amount of the financial asset; or

 

   

the amortized cost of the financial liability.

In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.

Income tax

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

The Company recognizes interest and penalties related to corporate tax as if it is applicable to the income taxes, the Company applies K-IFRS 1012 “Income Taxes”, if it is not applicable to the income taxes, the Company applies K-IFRS 1037 “Provisions Contingent Liabilities and Contingent Assets”.

 

(a)

Current tax

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period and any adjustment to tax payable in respect of previous years. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit of future periods, and non-taxable or non-deductible items from the accounting profit.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

The Company offsets current tax assets and current tax liabilities if, and only if, the Company:

 

   

has a legally enforceable right to set off the recognized amounts, and

 

   

intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.

 

(b)

Deferred tax

The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. The Company recognizes a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries, associates, and joint ventures, except to the extent that the Company 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. The Company recognizes a deferred tax asset for deductible temporary differences arising from investments in subsidiaries, associates and joint ventures, to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized. However, deferred tax is not recognized for the following temporary differences: taxable temporary differences arising on the initial recognition of goodwill, or the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting profit or loss nor taxable income.

A deferred tax asset is recognized for the carryforward of unused tax losses tax credits and deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the unused tax losses, tax credits and deductible temporary differences can be utilized. The future taxable profit depends on reversing taxable temporary differences. When there are insufficient taxable temporary differences, the probability of future taxable profit (including the reversal of temporary differences) should be considered.

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset only if there is a legally enforceable right to offset the related current tax liabilities and assets, and they relate to income taxes levied by the same tax authority and they intend to settle current tax liabilities and assets on a net basis.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Earnings per share

Management calculates basic earnings per share (“EPS”) data for the Company’s common shares, which is presented at the end of the statement of comprehensive income. Basic EPS is calculated by dividing profit attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period, adjusted for own shares held. Diluted earnings per share is calculated by adjusting basic EPS and weighted average number of common shares, concerning the effect of all dilutive potential common shares.

New standards and interpretations not yet adopted

A number of new standards are effective for annual periods beginning after January 1, 2021 and earlier application is permitted but the Company has not early adopted the new or amended standards in preparing these financial statements.

 

(a)

K-IFRS No. 1016 “Property, Plant and Equipment” - Proceeds Before Intended Use

The amendment prohibits an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. Instead, the entity will recognize the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendment is effective for annual periods beginning on or after January 1, 2022. Early application is permitted. The Company does not expect the effect of the amendments to the financial statements to be significant.

 

(b)

K-IFRS No. 1012 “Income Tax”

The amendment clarifies the coverage of initial recognition exemptions accounting for deferred tax related to both assets and liabilities arising from a single transaction. If temporary differences arise, which are offsetting the same amount at the time of transaction, the Company would recognize deferred tax if it is not a business combination and affects neither accounting profit nor taxable profit(tax loss). The amendment is effective for annual periods beginning on or after January 1, 2023. Early application is permitted. The Company does not expect the effect of the amendments to the financial statements to be significant.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(c)

K-IFRS No. 1001 “Presentation of Financial Statements” - Classification of Liabilities as Current or Non-current

The amendment clarifies that in order for the debtor to have the “right to defer settlement of the liability”, the condition of complying with the contract must be met at the end of the reporting period, and the possibility of exercising the right to defer settlement of the liability for more than 12 months after the end of the reporting period does not affect the classification of debt liquidity. The amendment is effective for annual periods beginning on or after January 1, 2023. Early application is permitted. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

4. Financial Risk Management

The Company has exposure to the following risks from its use of financial instruments:

 

   

Credit risk

 

   

Liquidity risk

 

   

Market risk

 

   

Capital risk

This note presents information about the Company’s exposure to each of the above risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Further quantitative disclosures are included throughout these separate financial statements.

(a) Financial risk management

 

  1)

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

  2)

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. In addition, credit risk arises from finance guarantees.

The Company implements a credit risk management policy under which the Company only transacts business with counterparties that have a certain level of credit rate evaluated based on financial condition, historical experience, and other factors. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of a nation or an industry in which a customer operates its business does not have a significant influence on credit risk. The Company has established a credit policy under which each new customer is analyzed individually for creditworthiness.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for companies of similar assets in respect of losses that have been incurred.

Credit risk also arises from transactions with financial institutions, and such transactions include transactions of cash and cash equivalents, various deposits, and financial instruments such as derivative contracts. The Company manages its exposure to this credit risk by only entering into transactions with banks that have high international credit ratings. The Company’s treasury department authorizes, manages, and overseas new transactions with financial institutions with whom the Company has no previous relationship.

Furthermore, the Company limits its exposure to credit risk of financial guarantee contracts by strictly evaluating their necessity based on internal decision making processes, such as the approval of the Board of Directors.

 

  3)

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company’s cash flow from business, borrowing or financing is sufficient to meet the cash requirements for the Company’s strategic investments. Management believes that the Company is capable of raising funds by borrowing or financing if the Company is not able to generate cash flow requirements from its operations. The Company has committed borrowing facilities with various banks.

 

  4)

Market risk

Market risk means that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The goal of market risk management is optimization of profit and controlling the exposure to market risk within acceptable limits.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

 

Interest rate benchmark reform risk

A fundamental reform of major interest rate benchmark is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as “IBOR reform”). The publication of overnight and 1, 3, 6, and 12 months USD LIBOR will cease on June 30, 2023 and all other LIBOR publication has ceased on December 31, 2021.

As of December 31, 2021, only short-term borrowings with USD LIBOR as the benchmark rate are mostly associated with interest rate benchmark reform risk. All 3 months USD LIBORs are used as interest rate benchmark. As of December 31, 2021, the related short-term borrowings are W457,838 million, since all of their maturities come before June 30, 2023, there is no need for modification to alternative interest rate benchmark.

 

 

Currency risk

The Company is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the functional currency of the Company, Korean Won. The Company’s policy in respect of foreign currency risks is a natural hedge whereby foreign currency income is offset with foreign currency expenditures. The remaining net exposures after the natural hedge have been hedged using derivative contracts such as forward exchange contracts. In addition, the Company’s derivative transactions are limited to hedging actual foreign currency transactions and speculative hedging is not permitted. The Company reduces the foreign currency exposure by repayment of foreign currency borrowings subjected to investment in overseas when its maturities come.

 

 

Interest rate risk

The Company manages the exposure to interest rate risk by adjusting of borrowing structure ratio between borrowings at fixed interest rate and variable interest rate. The Company monitors interest rate risks regularly in order to avoid exposure to interest rate risk on borrowings at variable interest rate.

 

 

Other market price risk

Equity price risk arises from fluctuation of market price of listed equity securities. Management of the Company measures regularly the fair value of listed equity securities and the risk of variance in future cash flow caused by market price fluctuations. Significant investments are managed separately and all buy and sell decisions are approved by management of the Company.

 

  (b)

Management of capital

The fundamental goal of capital management is the maximization of shareholders’ value by means of the stable dividend policy and the retirement of treasury shares. The capital structure of the Company consists of equity and net borrowings (after deducting cash and cash equivalents) and current financial instruments from borrowings. The Company applied the same capital risk management strategy that was applied in the previous period.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

Net borrowing-to-equity ratio as of December 31, 2021 and 2020 is as follows:

 

(in millions of Won)    2021     2020  

Total borrowings

   W 8,202,132       7,755,336  

Less: Cash and cash equivalents

     2,042,274       1,822,660  
  

 

 

   

 

 

 

Net borrowings

     6,159,858       5,932,676  

Total equity

   W 49,035,425       45,114,704  

Net borrowings-to-equity ratio

     12.56     13.15

5. Cash and Cash Equivalents

Cash and cash equivalents as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  

Demand deposits and checking accounts

   W 372,915        298,876  

Time deposits

     713,015        900,700  

Other cash equivalents

     956,344        623,084  
  

 

 

    

 

 

 
   W 2,042,274        1,822,660  
  

 

 

    

 

 

 

6. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of December 31, 2021 and 2020 are as follows:

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(in millions of Won)    2021      2020  

Current

     

Trade accounts and notes receivable

   W 6,031,878        3,707,860  

Less: Allowance for doubtful accounts

     (14,370      (14,325
  

 

 

    

 

 

 
   W 6,017,508        3,693,535  
  

 

 

    

 

 

 

Non-current

     

Trade accounts and notes receivable

   W 7,901        3,780  

Less: Present value discount

     (1,555      (344

Less: Allowance for doubtful accounts

     (671      (980
  

 

 

    

 

 

 
   W 5,675        2,456  
  

 

 

    

 

 

 

The Company sold trade accounts and notes receivable with recourse to financial institutions. These trade accounts and notes receivable have not been derecognized from the statement of financial position because the Company retains substantially all of the risks and rewards associated with the transferred assets. The amounts received on transfer have been recognized as secured borrowings. As of December 31, 2021 and 2020, the carrying amount of such secured borrowings are W214,465 million and W520,310 million, respectively, which are presented in the statements of financial position as short-term borrowings.

7. Other Receivables

Other receivables as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  

Current

     

Loans

   W —          2,950  

Other accounts receivable

     506,040        231,051  

Others

     41,361        50,822  

Less: Allowance for doubtful accounts

     (2,060      (5,268
  

 

 

    

 

 

 
   W  545,341        279,555  
  

 

 

    

 

 

 

Non-current

     

Loans

   W 244,895        52,760  

Long-term other accounts receivable

     34,260        35,638  

Others

     4,185        4,001  

Less: Allowance for doubtful accounts

     (9,087      (8,362
  

 

 

    

 

 

 
   W  274,253        84,037  
  

 

 

    

 

 

 

8. Other Financial Assets

(a) Other financial assets as of December 31, 2021 and 2020 are as follows:

 

40


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(in millions of Won)    2021      2020  

Current

     

Debt securities

   W 154,750        153,370  

Deposit instruments(* 1)

     1,436,915        1,337,881  

Short-term financial instruments

     8,013,857        8,116,381  
  

 

 

    

 

 

 
   W  9,605,522        9,607,632  
  

 

 

    

 

 

 

Non-current

     

Long-term derivative assets

   W 170,471        18,549  

Equity securities

     1,084,574        980,706  

Debt securities

     —          6,367  

Other securities

     71,492        67,161  

Deposit instruments(* 2)

     28        34  
  

 

 

    

 

 

 
   W  1,326,565        1,072,817  
  

 

 

    

 

 

 

 

(*1)

As of December 31, 2021 and December 31, 2020, W3,915 million and W4,881million, respectively, are restricted in relation to government assigned project.

(*2)

The Company is required to provide deposits to maintain checking accounts and accordingly the withdrawal of these deposits is restricted.

 

41


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(b)

Equity securities and available-for-sale securities (equity instruments) as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  
     Number
of
shares
     Ownership
(%)
     Acquisition
cost
     Fair
value
     Net changes in
fair value of
equity securities
    Book
value
     Book
value
 

Marketable equity securities

                   

Nippon Steel Corporation

     15,698,500        1.65      W 473,962        303,814        (170,148     303,814        219,788  

KB Financial group Inc.

     3,863,520        0.93        178,839        212,493        33,654       212,493        167,677  

Woori Financial Group Inc.

     20,280,000        2.81        244,447        257,556        13,109       257,556        197,324  

CSN Mineracao S.A. (*1)

     102,186,675        1.83        206,265        146,550        (59,715     146,550        —    

SAMWONSTEEL Co., Ltd.

     5,700,000        14.25        8,930        18,041        9,111       18,041        15,020  

DONGKUK INDUSTRIES COMPANY

     2,611,989        4.82        11,911        9,260        (2,651     9,260        8,868  

Others (8 companies) (*2)

           62,753        51,717        (11,036     51,717        35,939  
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
           1,187,107        999,431        (187,676     999,431        644,616  
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Non-marketable equity securities

                   

CSN Mineracao S.A. (*1, 3)

           —          —          —         —          246,158  

POSCO PLANTEC Co., Ltd.

     18,337,912        10.99        19,437        19,437        —         19,437        19,437  

Korea Nickel CO.LTD

     75,600        14.00        10,194        10,194        —         10,194        10,194  

Poongsan Special Metal Corp.

     315,790        5.00        7,657        7,657        —         7,657        7,657  

HANKUM.CO.LTD

     21,000        4.99        4,599        4,599        —         4,599        4,599  

Core-Industry Co., Ltd.

     490,000        19.84        4,214        4,214        —         4,214        4,214  

AJUSTEEL CO.,LTD (*2)

           —          —          —         —          4,165  

Others (28 companies)

           143,571        39,042        (104,529     39,042        39,666  
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
           189,672        85,143        (104,529     85,143        336,090  
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
         W 1,376,779        1,084,574        (292,205     1,084,574        980,706  
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(*1)

During the year ended December 31, 2021, CSN Mineracao S.A. was listed on the Brazilian stock market, and a stock split of 1:30 was carried out at the same time as the listing. On the other hand, the Company sold 7,565,145 shares in the current year after stock split.

(*2)

During the year ended December 31, 2021, AJUSTEEL CO., LTD was listed on the Korea Stock Exchange and classified as marketable equity securities.

(*3)

As of December 31, 2020, fair value is based on an analysis performed by an external professional evaluation agency.

 

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Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

9. Inventories

 

(a)

Inventories as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  

Finished goods

   W 1,164,685        709,323  

Semi-finished goods

     2,227,433        1,167,330  

By-products

     19,317        3,460  

Raw materials

     1,682,946        885,222  

Fuel and materials

     459,784        518,151  

Materials-in-transit

     2,073,218        814,397  

Others

     673        681  
  

 

 

    

 

 

 
     7,628,056        4,098,564  

Less: Allowance for inventories valuation

     (4,854      (4,735
  

 

 

    

 

 

 
   W  7,623,202        4,093,829  
  

 

 

    

 

 

 

 

(b)

The changes of allowance for inventories valuation for the years ended December 31, 2021 and 2020 were as follows:

 

(in millions of Won)    2021      2020  

Beginning

   W 4,735        7,677  

Loss on Valuation of inventories

     4,854        4,735  

Utilization on sale of inventories

     (4,735      (7,677
  

 

 

    

 

 

 

Ending

   W 4,854        4,735  
  

 

 

    

 

 

 

 

43


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

10. Assets Held for Sale

Assets held for sale as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021(*1, 2)      2020  

Assets

     

Tangible assets(*3,4)

   W 29,236        32,244  

Intangible assets

     553        —    
  

 

 

    

 

 

 
   W 29,789        32,244  
  

 

 

    

 

 

 

Liabilities

     

Others

   W 185        —    

 

(*1)

During the year ended December 31, 2021, the Company sold the land in the Yanghak Neighborhood Park development reserve area that was classified as held for sale and recognized W43,760 million of gain on disposal.

(*2)

During the year ended December 31, 2021, the Company decided to sell the emission rights and reclassified the emission rights to assets held for sale. Upon the sale, the Company recognized W1,316 million loss on disposal of assets held for sale.

(*3)

During the year ended December 31, 2019, the Company decided to dispose individual assets for which use was discontinued, such as CEM Plants, and classified the assets as held for sale. During the year ended December 31, 2020, the Company recognized an impairment loss of W5,030 million for the difference between the fair value less costs to sell and the carrying amount of the assets. During the year ended December 31, 2021, the Company disposed of the assets held for sale for W 25,767 million.

(*4)

During the year ended December 31, 2021, the Company decided to dispose Synthetic Natural Gas (SNG) facility for which use was discontinued, and classified as asset held for sale.

 

44


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

11. Investments in Subsidiaries, Associates and Joint ventures

 

(a)

Investments in subsidiaries, associates and joint ventures as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  

Investment in subsidiaries

   W 13,097,043        12,082,203  

Investment in associates

     859,032        742,710  

Investment in joint ventures

     2,046,565        2,058,239  
  

 

 

    

 

 

 
   W 16,002,640        14,883,152  
  

 

 

    

 

 

 

There are no significant restrictions on the ability of subsidiaries, associates and joint ventures to transfer funds to the controlling company, such as in the forms of cash dividends and repayment of loans or payment of advances.

 

(b)

Details of subsidiaries and carrying amounts as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)          

2021

     2020  
     Country     

Principal operations

   Number of
shares
     Ownership
(%)
     Net asset
value
    Acquisition
cost
     Book
value
     Book
value
 

[Domestic]

                      

POSCO INTERNATIONAL Corporation(*1)

     Korea     

Trading and natural resources exploration

     77,616,018        62.91        W3,142,752       3,610,502        3,156,434        3,223,759  

POSCO ENGINEERING & CONSTRUCTION CO.,LTD.

     Korea     

Engineering and construction

     22,073,568        52.80        3,113,521       1,014,314        1,014,314        1,014,314  

POSCO ENERGY CO., LTD.

     Korea     

Power generation, fuel cell

                
     

manufacturing and sales

     40,234,508        89.02        1,458,597       658,176        658,176        658,176  

POSCO COATED & COLOR STEEL Co., Ltd.

     Korea     

Steel manufacturing and sales

     3,412,000        56.87        315,921       108,421        108,421        108,421  

POSCO Capital

     Korea     

Investment in venture companies

     19,700,000        95.00        181,650       103,780        103,780        103,780  

POSCO CHEMICAL CO., LTD(*2)

     Korea     

Refractory manufacturing and sales

     46,261,601        59.72        2,331,321       985,020        895,707        207,631  

POSCO O&M Co., Ltd(*3)

     Korea     

Business facility maintenance

     902,946        47.17        238,143       73,374        73,374        73,374  

POSCO ICT

     Korea     

Computer hardware

                
     

and software distribution

     99,403,282        65.38        353,566       70,990        70,990        70,990  

POSCO M-TECH(*3)

     Korea     

Packing materials manufacturing

                
     

and sales

     20,342,460        48.85        104,565       107,278        107,278        107,278  

Busan E&E Co., Ltd.(*4)

     Korea     

Municipal solid waste fuel

                
     

and power generation

     6,029,660        70.00        51,349       30,148        30,148        30,148  

POSCO Lithium Solution Co., Ltd.(*5)

     Korea     

Lithium manufacturing and sales

     30,000,000        100.00        148,736       150,000        150,000     

Others (13 companies)

                 633,833       398,116        384,735        110,995  
              

 

 

   

 

 

    

 

 

    

 

 

 
                 12,073,954       7,310,119        6,753,357        5,708,866  
              

 

 

   

 

 

    

 

 

    

 

 

 

[Foreign]

                      

PT. KRAKATAU POSCO

     Indonesia     

Steel manufacturing and sales

     739,900        70.00        224,569       813,431        633,421        633,421  

POSCO WA PTY LTD

     Australia     

Iron ore sales and mine development

     631,160,435        100.00        509,874       646,574        646,574        645,830  

POSCO Maharashtra Steel Private Limited

     India     

Steel manufacturing and sales

     361,789,958        100.00        523,579       722,569        722,569        722,569  

POSCO Canada Ltd.

     Canada     

Coal sales

     1,099,885        100.00        727,144       560,879        560,879        560,879  

POSCO AUSTRALIA PTY LTD

     Australia     

Iron ore sales and mine development

     761,775        100.00        763,720       330,623        330,623        330,623  

POSCO (Zhangjiagang) Stainless Steel Co.,Ltd.

     China     

Stainless steel manufacturing and sales

     2,285,407,454        58.60        738,914       283,845        283,845        283,845  

POSCO Thainox Public Company Limited

     Thailand     

Cold rolled STS manufacturing and sales

     5,812,634,019        74.56        347,764       443,758        178,785        178,785  

POSCO-China Holding Corp.

     China     

Holding company

     —          100.00        537,288       593,841        593,841        593,841  

POSCO-India Private Limited

     India     

Steel manufacturing and sales

     764,999,999        99.99        87,620       184,815        75,567        75,567  

POSCO MEXICO S.A. DE C.V.

     Mexico     

Plate steel manufacturing and sales

     2,686,745,272        83.28        223,202       180,072        180,072        180,072  

POSCO America Corporation

     USA     

Researching and consulting

     437,941        99.45        100,311       192,156        192,156        192,156  

POSCO-VIETNAM Co., Ltd.

     Vietnam     

Steel manufacturing and sales

     —          100.00        51,135       160,572        160,572        160,572  

POSCO VST CO., LTD.

     Vietnam     

Stainless steel manufacturing and sales

     —          95.65        68,357       144,573        144,573        144,573  

POSCO(Guangdong) Automotive Steel Co., Ltd.(*6)

     China     

Plate steel manufacturing and sales

     —          —          —         —          —          52,936  

POSCO COATED STEEL (THAILAND) CO., LTD.

     Thailand     

Plate steel manufacturing and sales

     36,000,000        100.00        82,479       121,592        121,592        121,592  

POSCO Asia Co., Ltd.

    
Hong
Kong
 
 
  

Activities Auxiliary to financial service

     9,360,000        100.00        221,526       117,710        117,710        117,710  

POSCO ASSAN TST STEEL INDUSTRY

     Turkey     

Steel manufacturing and sales

     144,579,160        60.00        34,474       92,800        71,707        71,707  

POSCO JAPAN Co., Ltd.

     Japan     

Steel trading

     90,438        100.00        186,699       68,436        68,436        68,436  

Qingdao Pohang Stainless Steel Co., Ltd.

     China     

Stainless steel manufacturing and sales

     —          70.00        135,178       65,982        65,982        65,982  

POSCO(Suzhou) Automotive Processing Center Co., Ltd.

     China     

Steel manufacturing and sales

     —          90.00        171,545       62,494        62,494        62,494  

POSCO AFRICA (PROPRIETARY) LIMITED

    
South
Africa
 
 
  

Mine development

     1,390        100.00        30,395       50,297        50,297        50,297  

POSCO-Malaysia SDN. BHD.

     Malaysia     

Steel manufacturing and sales

     144,772,000        81.79        (1,860     45,479        45,479        45,479  

POSCO Argentina S.A.U.

     Argentina     

Mineral exploration, manufacturing and sale

     1,328,820        100.00        373,931       376,906        376,906        373,366  

POSCO YAMATO VINA STEEL JOINT STOCK COMPANY

     Vietnam     

Steel manufacturing and sales

     425,606,598        51.00        274,150       453,147        130,526        130,526  

Others (29 companies)

                 1,033,638       529,484        529,080        510,079  
              

 

 

   

 

 

    

 

 

    

 

 

 
                 7,445,632       7,242,035        6,343,686        6,373,337  
              

 

 

   

 

 

    

 

 

    

 

 

 
               W 19,519,586       14,552,154        13,097,043        12,082,203  
              

 

 

   

 

 

    

 

 

    

 

 

 

 

(*1)

As of December 31, 2021, the Company performed the impairment test on investment in POSCO INTERNATIONAL Corporation due to evidences of impairment such as continuous decline in fair value. The recoverable amount was determined based on its value in use, which is estimated from the present value of estimated future cash flows discounted at 8.14%. As a result of the impairment test, the Company has recognized W67,326 million of impairment loss.

 

45


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(*2)

During the year ended December 31, 2021, the Company acquired W688,076 million in additional subsidiary investment shares by participating in POSCO CHEMICAL CO., LTD’s paid-in capital increase.

(*3)

The Company classified POSCO M-TECH and POSCO O&M Co., Ltd. as the investments in a subsidiary, considering additional facts and circumstances, such as the relative size of the voting rights held by the Company and the degree of diversification of other voting rights holders, although the Company holds less than half of the voting rights of POSCO M-TECH and POSCO O&M Co., Ltd.

(*4)

As of December 31, 2020, the investments in a subsidiary amounting to W30,148 million were provided as collateral in relation to the loan agreement of Busan E&E Co., Ltd. On the other hand, during the year ended December 31, 2021, Busan E&E repaid the liability and the collateral is released.

(*5)

During the year ended December 31, 2021, the Company established POSCO Lithium Solution Co., Ltd.

(*6)

During the year ended December 31, 2021, the Company newly acquired interests in HBIS-POSCO Automotive Steel Co., Ltd through investment in kind with shares in POSCO (Guangdong) Automotive Steel Co., Ltd. which was a subsidiary.

 

(c)

Details of associates and carrying amounts as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)               2021      2020  
    Country     

Principal operations

   Number of
shares
     Ownership
(%)
    Net asset
value
     Acquisition
cost
     Book
value
     Book
value
 

[Domestic]

                     

EQP POSCO Global NO1 Natural Resources Private Equity Fund

    Korea      Investment in venture companies      169,316,307,504        40.57       399,765        169,316        169,316        169,316  

SNNC

    Korea      STS material manufacturing and sales      18,130,000        49.00       391,349        100,655        100,655        100,655  

QSONE
Co., Ltd.

    Korea      Real estate rental and facility management      200,000        50.00       172,116        85,550        85,550        85,550  

Others (8 companies)

               120,808        22,158        21,331        22,977  
            

 

 

    

 

 

    

 

 

    

 

 

 
               1,084,038        377,679        376,852        378,498  
            

 

 

    

 

 

    

 

 

    

 

 

 

[Foreign]

                     

Nickel Mining Company SAS

   
New
Caledonia
 
 
   Raw material manufacturing and sales      3,234,698        49.00       168,181        189,197        189,197        189,197  

9404-5515 Quebec Inc.(*1)

    Canada      Investments      114,452,000        10.40       1,317,332        124,341        124,341        124,341  

Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd

    China      Tinplate manufacturing and sales      —          24.00       61,590        11,003        11,003        11,003  

FQM Australia Holdings Pty Ltd(*2)

    Australia      Non ferrous metal mining      186,000,030        30.00       326,508        109,568        109,568        —    

Others (7 companies)

               116,628        56,573        48,071        39,671  
            

 

 

    

 

 

    

 

 

    

 

 

 
               1,990,239        490,682        482,180        364,212  
            

 

 

    

 

 

    

 

 

    

 

 

 
             W  3,074,277        868,361        859,032        742,710  
            

 

 

    

 

 

    

 

 

    

 

 

 
(*1)

As of December 31, 2021, it was classified as an associate even though the Company’s ownership percentage is less than 20% since the Company has significant influence over the investee when considering the structure of its Board of Directors and others.

(*2)

During the year ended December 31, 2021, the Company acquired the shares of FQM Australia Holdings Pty Ltd.

 

46


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(d)

Details of joint ventures and carrying amounts as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)                  2021      2020  
     Country      Principal
operations
     Number of
shares
     Ownership
(%)
     Net asset
value
     Acquisition
cost
     Book value      Book value  
Roy Hill Holdings Pty Ltd(*1)      Australia       

Natural
resources
exploration
 
 
 
     10,494,377        10.00      W 6,938,100        1,225,464        1,225,464        1,225,464  

CSP—Compania Siderurgica do Pecem(*2)

     Brazil       

Steel
manufacturing
and sales
 
 
 
     1,578,377,432        20.00        234,993        676,060        175,990        296,720  

POSCO-NPS Niobium LLC

     USA       

Foreign
investments in
mining
 
 
 
     325,050,000        50.00        787,383        364,609        364,609        364,609  

KOBRASCO

     Brazil       


Steel
materials
manufacturing
and sales
 
 

 
     2,010,719,185        50.00        136,592        98,962        98,962        98,962  

HBIS-POSCO Automotive Steel Co., Ltd(*3)

     China       

Steel
manufacturing
and sales
 
 
 
     —          50.00        240,880        109,057        109,057        —    

Others (3 companies)

                 437,110        72,483        72,483        72,484  
              

 

 

    

 

 

    

 

 

    

 

 

 
                 8,775,058        2,546,635        2,046,565        2,058,239  
              

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

As of December 31, 2021 and December 31, 2020, the investments in joint ventures amounting to W1,225,464 million were provided as collateral in relation to loans from project financing of Roy Hill Holdings Pty Ltd.

(*2)

As of December 31, 2021, the Company performed the impairment test on investment in CSP—Compania Siderurgica do Pecem due to evidences of impairment such as continuous operating losses. Recoverable amount was determined based on its value in use, which is estimated from the present value of estimated future cash flows discounted at 9.98%. As a result of the impairment test, the Company has recognized W139,906 million of impairment loss.

(*3)

During the year ended December 31, 2021, the Company newly acquired interests in HBIS-POSCO Automotive Steel Co., Ltd through investment in kind in shares in POSCO (Guangdong) Automotive Steel Co., Ltd which was a subsidiary.

 

47


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

12. Investment Property, Net

 

(a)

Investment property as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  
     Acquisition
cost
     Accumulated
depreciation
    Accumulated
impairment
    Book
value
     Acquisition
cost
     Accumulated
depreciation
    Accumulated
impairment
    Book
value
 

Land

   W 89,033        —         (1,465     87,568        91,313        —         (1,465     89,848  

Buildings

     157,218        (108,206     (23     48,989        159,429        (107,989     (23     51,417  

Structures

     22,507        (14,924     —         7,583        22,910        (14,558     —         8,352  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 268,758        (123,130     (1,488     144,140        273,652        (122,547     (1,488     149,617  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

The fair value of investment property as of December 31, 2021 is W718,412 million.

 

(b)

Changes in the carrying amount of investment property for the years ended December 31, 2021 and 2020 were as follows:

 

1)

For the year ended December 31, 2021

 

(in millions of Won)    Beginning      Depreciation(*1)      Transfer(*2)      Ending  

Land

   W 89,848        —          (2,280      87,568  

Buildings

     51,417        (3,998      1,570        48,989  

Structures

     8,352        (598      (171      7,583  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 149,617        (4,596      (881      144,140  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

The useful life and depreciation method of investment property are identical to those of property, plant and equipment.

(*2)

Mainly includes assets transferred from property, plant and equipment in relation to changes in rental ratio and the purpose of use.

 

2)

For the year ended December 31, 2020

 

(in millions of Won)    Beginning      Depreciation(*1)      Transfer(*2)      Ending  

Land

   W 91,738        —          (1,890      89,848  

Buildings

     57,228        (4,033      (1,778      51,417  

Structures

     9,111        (609      (150      8,352  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 158,077        (4,642      (3,818      149,617  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

The useful life and depreciation method of investment property are identical to those of property, plant and equipment

(*2)

Mainly includes assets transferred from property, plant and equipment in relation to changes in rental ratio and the purpose of use.

 

48


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

13. Property, Plant and Equipment, Net

 

(a)

Property, plant and equipment as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  
     Acquisition
cost
     Accumulated
depreciation
    Accumulated
impairment
    Government
grants
    Book
value
     Acquisition
cost
     Accumulated
depreciation
    Accumulated
impairment
    Government
grants
    Book
value
 

Land

   W 1,349,266        —         —         —         1,349,266        1,401,605        —         —         —         1,401,605  

Buildings

     6,579,253        (4,384,940     (15,249     (3,773     2,175,291        6,296,762        (4,199,534     (12,551     (3,834     2,080,843  

Structures

     5,003,881        (2,904,479     (2,740     —         2,096,662        4,827,750        (2,745,351     (9,302     —         2,073,097  

Machinery and equipment

     40,618,619        (28,273,986     (45,021     —         12,299,612        39,602,537        (26,871,213     (79,893     —         12,651,431  

Vehicles

     219,191        (200,370     —         (464     18,357        211,444        (196,820     —         (138     14,486  

Tools

     215,682        (190,791     —         —         24,891        211,212        (186,879     —         —         24,333  

Furniture and fixtures

     322,407        (233,794     (5     (84     88,524        269,039        (224,488     (26     (99     44,426  

Lease assets

     616,302        (167,974     —         —         448,328        452,908        (121,320     —         —         331,588  

Construction-in-progress

     1,376,352        —         (99,983     (5,001     1,271,368        2,450,961        —         (850,838     (5,000     1,595,123  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 56,300,953        (36,356,334     (162,998     (9,322     19,772,299        55,724,218        (34,545,605     (952,610     (9,071     20,216,932  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(b)

Changes in the carrying amount of property, plant and equipment for the years ended December 31, 2021 and 2020 were as follows:

 

  1)

For the year ended December 31, 2021

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Depreciation     Impairment(*1,2)     Others(*3)     Ending  

Land

   W 1,401,605        —          (49,131     —         —         (3,208     1,349,266  

Buildings

     2,080,843        5,870        (514     (206,062     (17,406     312,560       2,175,291  

Structures

     2,073,097        1,287        (14,384     (182,926     (3,733     223,321       2,096,662  

Machinery and equipment

     12,651,431        52,534        (27,432     (1,812,571     (42,126     1,477,776       12,299,612  

Vehicles

     14,486        3,290        (5     (7,670     —         8,256       18,357  

Tools

     24,333        4,652        (14     (11,283     —         7,203       24,891  

Furniture and fixtures

     44,426        8,126        (159     (17,745     —         53,876       88,524  

Lease assets

     331,588        130,610        —         (46,654     —         32,784       448,328  

Construction-in-progress

     1,595,123        1,987,316        (6,027     —         (164,906     (2,140,138     1,271,368  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 20,216,932        2,193,685        (97,666     (2,284,911     (228,171     (27,570     19,772,299  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

The Company estimated the recoverable amount of individual assets that it ceased their use due to the disposal plan and others at fair value less costs to sell based on sale price or scrap value, and recognized an impairment loss since recoverable amounts are less than their carrying amounts for the year ended December 31, 2021. During the year ended December 31, 2021, the Company recognized impairment losses on damaged assets caused by the fire.

(*2)

The Company decided to stop the intended use for Synthetic Natural Gas (SNG) facility and sell the related assets. The Company estimated the recoverable amount based on expected sale price and recognized W223,273 million of impairment loss in 2021. The remaining balances were classified as assets held for sale as of December 31, 2021.

(*3)

Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, assets transferred from investment properties, assets transferred to assets held for sale, and others.

 

49


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

  2)

For the year ended December 31, 2020

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Depreciation     Impairment (* 1)     Others (* 2)     Ending  

Land

   W 1,398,081        —          (6     —         —         3,530       1,401,605  

Buildings

     2,100,503        3,144        (2,397     (207,818     (271     187,682       2,080,843  

Structures

     2,030,853        4,037        (6,349     (174,343     (883     219,782       2,073,097  

Machinery and equipment

     12,602,435        48,747        (22,913     (1,796,038     (9,422     1,828,622       12,651,431  

Vehicles

     9,951        1,497        (8     (6,571     —         9,617       14,486  

Tools

     27,288        4,007        (3     (12,052     —         5,093       24,333  

Furniture and fixtures

     38,329        4,399        (179     (11,811     —         13,688       44,426  

Lease assets

     262,368        21,920        —         (60,358     —         107,658       331,588  

Construction-in-progress

     1,662,391        2,406,273        (4,872     —         (17,270     (2,451,399     1,595,123  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 20,132,199        2,494,024        (36,727     (2,268,991     (27,846     (75,727     20,216,932  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

The Company estimated the recoverable amount of individual assets that it ceased their use due to the disposal plan and others at fair value less costs to sell based on sale price or scrap value and recognized an impairment loss since recoverable amounts are less than their carrying amounts for the year ended December 31, 2020. During the year ended December 31, 2020, the Company recognized impairment losses on damaged assets caused by a fire accident.

(*2)

Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, assets transferred from investment properties, assets transferred to assets held for sale, and others.

 

(c)

Borrowing costs capitalized and the capitalized interest rate for the years ended December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021     2020  

Weighted average expenditure

   W 929,976       929,552  

Borrowing costs capitalized

     24,465       29,566  

Capitalization rate

     2.63     3.18

 

50


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(d)

Information on lease agreements for which the Company is a lessee is as follows:

 

  1)

Right-of-use assets

 

 

Changes in the carrying amount of right-of-use assets presented as property, plant and equipment for the year ended December 31, 2021 were as follows:

 

(in millions of Won)    Beginning      Acquisitions      Depreciation     Others (* 1)     Ending  

Land

   W 8,703        —          (301     —         8,402  

Buildings

     71,431        3,471        (7,244     —         67,658  

Structures

     59,221        —          (5,212     —         54,009  

Machinery and equipment

     54,698        —          (8,532     37,124       83,290  

Vehicles

     6,255        —          (500     —         5,755  

Ships

     106,555        120,217        (16,714     —         210,058  

Furniture and fixtures

     24,725        6,922        (8,151     (4,340     19,156  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 331,588        130,610        (46,654     32,784       448,328  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(*1)

Increased due to the revised lease term of machinery and equipment.

 

 

Changes in the carrying amount of right-of-use assets presented as property, plant and equipment for year ended December 31, 2020 were as follows:

 

(in millions of Won)    Beginning      Acquisitions      Depreciation     Others     Ending  

Land

   W —          8,853        (150     —         8,703  

Buildings

     71,921        6,075        (6,565     —         71,431  

Structures

     64,434        —          (5,213     —         59,221  

Machinery and equipment

     60,198        —          (5,500     —         54,698  

Vehicles

     6,755        —          (500     —         6,255  

Ships

     24,082        111,537        (29,064     —         106,555  

Furniture and fixtures

     34,978        6,992        (13,366     (3,879     24,725  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 262,368        133,457        (60,358     (3,879     331,588  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

  2)

Amount recognized in profit or loss

The amount recognized in profit or loss related to leases for the years ended December 31, 2021 and 2020 were as follows:

 

(in millions of Won)    2021      2020  

Interest on lease liabilities

   W 12,353        10,172  

Expenses relating to short-term leases

     3,394        3,544  

Expenses relating to leases of low -value assets

     6,017        6,100  
  

 

 

    

 

 

 
   W 21,764        19,816  
  

 

 

    

 

 

 

 

51


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

14. Intangible Assets, Net

 

(a)

Intangible assets as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  
     Acquisition
cost
     Accumulated
amortization
    Accumulated
impairment
    Book
value
     Acquisition
cost
     Accumulated
amortization
    Accumulated
impairment
    Book
value
 

Intellectual property rights

   W 52,011        (29,165     —         22,846        47,028        (24,270     —         22,758  

Membership

     87,423        —         (2,665     84,758        84,483        —         (2,688     81,795  

Development expense

     647,848        (471,036     —         176,812        619,411        (394,557     —         224,854  

Port facilities usage rights

     682,305        (469,497     —         212,808        682,305        (448,858     —         233,447  

Construction-in-progress

     32,392        —         —         32,392        34,924        —         —         34,924  

Other intangible assets

     312,359        (271,552     (19,013     21,794        303,695        (267,715     (11,832     24,148  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 1,814,338        (1,241,250     (21,678     551,410        1,771,846        (1,135,400     (14,520     621,926  
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

(b)

Changes in the carrying amount of intangible assets for the years ended December 31, 2021 and 2020 were as follows:

 

  1)

For the year ended December 31, 2021

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Amortization     Impairment (*2)     Transfer (*3)     Ending  

Intellectual property rights

   W 22,758        —          (573     (6,145     —         6,806       22,846  

Membership(*1)

     81,795        3,690        (727     —         —         —         84,758  

Development expense

     224,854        2,000        —         (76,588     —         26,546       176,812  

Port facilities usage rights

     233,447        —          —         (20,639     —         —         212,808  

Construction-in-progress

     34,924        28,590        (4,770     —         —         (26,352     32,392  

Other intangible assets

     24,148        15,775        (10,030     (4,093     (7,180     3,174       21,794  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 621,926        50,055        (16,100     (107,465     (7,180     10,174       551,410  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Economic useful life of membership is indefinite.

(*2)

During the year ended December 31, 2021, the Company decided to sell a portion of paid-in emission rights and recognized impairment loss which is the difference between carrying amount and net fair value.

(*3)

Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, and others.

 

  2)

For the year ended December 31, 2020

 

(in millions of Won)    Beginning      Acquisitions      Disposals     Amortization     Transfer(* 2)     Ending  

Intellectual property rights

   W 24,545        —          (3,609     (6,140     7,962       22,758  

Membership(*1)

     82,657        —          (862     —         —         81,795  

Development expense

     86,023        1,579        (16     (50,827     188,095       224,854  

Port facilities usage rights

     278,072        —          —         (44,625     —         233,447  

Construction-in-progress

     137,273        88,376        —         —         (190,725     34,924  

Other intangible assets

     100,345        19,785        (61,446     (5,334     (29,202     24,148  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 708,915        109,740        (65,933     (106,926     (23,870     621,926  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(*1)

Economic useful life of membership is indefinite.

(*2)

Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, and others.

 

52


Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

15. Other Assets

Other current assets and other long-term assets as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  

Current

     

Advance payments

   W 17,398        4,263  

Prepaid expenses

     25,406        26,011  

Emission rights purchased from the market

     12,440        20,224  
  

 

 

    

 

 

 
   W 55,244        50,498  
  

 

 

    

 

 

 

Non-current

     

Long-term prepaid expenses

   W 3,659        4,312  

Others(*1)

     30,707        103,266  
  

 

 

    

 

 

 
   W 34,366        107,578  
  

 

 

    

 

 

 

 

(*1)

As of December 31, 2020, the Company recognized tax assets amounting to W100,852 million based on the Company’s best estimate of the income tax amounts to be refunded when the result of the Company’s appeal in connection with the additional income tax payment in prior years’ tax audits and claim for rectification are finalized. During the year ended December 31, 2021, the tax amounts were refunded.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

16. Borrowings

 

(a)

Borrowings as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  

Short-term borrowings

     

Short-term borrowings

   W 672,303        1,029,363  

Current portion of debentures

     1,402,750        1,379,739  

Less: Current portion of discount on debentures issued

     (2,699      (710
  

 

 

    

 

 

 
   W 2,072,354        2,408,392  
  

 

 

    

 

 

 

Long-term borrowings

     

Long-term borrowings

   W 1,210        1,110  

Debentures

     6,146,233        5,373,840  

Less: Discount on debentures issued

     (17,665      (28,006
  

 

 

    

 

 

 
   W 6,129,778        5,346,944  
  

 

 

    

 

 

 

 

(b)

Short-term borrowings as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    Lenders      Issuance
date
     Maturity
date
     Annual
interest rate (%)
     2021      2020  

Transfers of account receivables
that do not qualify for derecognition

     —          —          —          —        W 214,465        520,310  

Borrowings in foreign trade

     MUFG and others       
2021.10.19~
2021.12.29
 
 
    
2022.01.14~
2022.03.29
 
 
     0.53~0.76        457,838        509,053  
              

 

 

    

 

 

 
               W 672,303        1,029,363  
              

 

 

    

 

 

 

(c) Current portion of debentures as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    Lenders    Issuance
date
     Maturity
date
     Annual
interest rate (%)
     2021      2020  

Debentures

   Domestic debentures 309-1
and the other
    
2019.07.17~
2019.10.16
 
 
    
2022.07.17~
2022.10.14
 
 
     1.56~1.61      W 809,447        459,811  

Foreign debentures

   Global debentures 6      2019.11.12        2022.11.12        2.38        590,604        919,218  
              

 

 

    

 

 

 
               W 1,400,051        1,379,029  
              

 

 

    

 

 

 

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(d)

Long-term borrowings and others excluding current portion, as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    Lenders    Issuance date      Maturity date      Annual interest rate (%)      2021      2020  

Foreign borrowings

   KOREA ENERGY AGENCY     
2007.12.27~
2008.12.29
 
 
     2022.12.29       
3 year
Government bond W

 
     1,210        1,110  

Debentures

   Domestic debentures 306-3
and others
    
2013.10.04~
2021.09.16
 
 
    
2023.10.04~
2029.10.16
 
 
     1.64~3.64        1,736,868        2,046,166  

Foreign debentures

   Global debentures 4 and
others
    
2018.08.01~
2020.01.17
 
 
    
2023.01.17~
2025.01.17
 
 
     0.50~4.00        2,956,507        3,299,668  

Exchangeable bonds(*1)

   Foreign currency
exchangeable bonds
     2021.09.01        2026.09.01        —          1,435,193        —    
              

 

 

    

 

 

 
                 W 6,129,778        5,346,944  
              

 

 

    

 

 

 

(*1) The issuance conditions of the exchangeable bonds issued by the Company are as follows :

 

    

Foreign currency exchangeable bonds

 

Type of bond

   Exchangeable bonds
Aggregate principal amount    EUR 1,065,900,000
Interest rate    - Coupon rate : -
   - Yield to maturity : (0.78%)
Maturity date    September 1, 2026
Redemption    - Redemption at maturity: Outstanding bond principal, which is not repaid early or which call option is not exercised on, is repaid at maturity as a lump sum
   - Prepayment: The issuer has call option and the bondholders have put option
Exchange rate    100%
Exchange price   
(Won/share)    486,539(*1)
Underlying shares    Registered common shares(treasury shares)
Exchange period    From October 12, 2021 to August 22, 2026
Adjustments for
exchange price
   Adjusting the exchang price according to the terms and conditions of the bond in the events of reason for adjusting the exchange price such as, bonus issue, share split, share consolidation, change of share type, issuance of options or warranties to shareholders, share dividend, cash dividend, rights issue under the market price
Put option by
bondholders
   - 3 years(September 1, 2024) from the closing date
   - In the event of a change of control of the Company
   - Where the shares issued by the Company are delisted (or suspended for more than 30
   consecutive trading days)
Call option by the issuer    - Share price(based on closing price) is higher than 130% of exchange price for more than 20 trading days during 30 consecutive trading days in a row, after 3 years (September 1, 2024) from the closing day to 30 business days before the maturity of bonds
   - When the outstanding balance of outstanding bonds is less than 10% of the total issuance(Clean Up Call)
   - Where additional reasons for tax burden arise due to the amendment of relevant laws and regulations, etc

 

(*1)

The exchange price has changed due to cash dividends during the year ended December 31, 2021.

The Company has designated exchangeable bonds listed on the Singapore Stock Exchange as financial liabilities measured at fair value through profit or loss. The quoted transaction price is used in fair value measurement, and changes in fair value are recognized in profit or loss.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

17. Other Payables

Other payables as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  

Current

     

Accounts payable

   W 727,844        606,902  

Accrued expenses

     475,056        412,976  

Dividend payable

     3,237        1,854  

Lease liabilities

     48,062        94,904  

Withholdings

     13,260        10,687  
  

 

 

    

 

 

 
   W 1,267,459        1,127,323  
  

 

 

    

 

 

 

Non-current

     

Long-term accrued expenses

   W 27        54  

Lease liabilities

     398,513        217,458  

Long-term withholdings

     604        3,100  
  

 

 

    

 

 

 
   W 399,144        220,612  
  

 

 

    

 

 

 

18. Other Financial Liabilities

Other financial liabilities as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  

Current

     

Derivative liabilities

   W 3,429        3,087  

Financial guarantee liabilities

     10,326        9,701  
  

 

 

    

 

 

 
   W 13,755        12,788  
  

 

 

    

 

 

 

Non-current

     

Derivative liabilities

   W —          92,273  

Financial guarantee liabilities

     21,991        29,881  
  

 

 

    

 

 

 
   W 21,991        122,154  
  

 

 

    

 

 

 

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

19. Provisions

 

(a)

Provisions as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  
     Current      Non-current      Current      Non-current  

Provision for bonus payments(* 1,2)

   W 21,365        25,155        14,518        34,461  

Provision for restoration(* 3)

     5,902        6,601        5,136        12,425  

Provision for legal contingencies and claims

     —          —          4,937        2,052  

Emission liability(* 4)

     34,059        —          20,224        —    

Provision for product warranties(* 5)

     23,083        4,999        18,789        3,664  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 84,409        36,755        63,604        52,602  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*1)

Represents the provision for bonuses limited to 100% of annual salaries for executives.

(*2)

During the December 31, 2021 and 2020, the Company measured the present value of the estimated future payments based on actuarial evaluations of the Long Term Service Rewards in operation, and provisions were recognized at W29,392 million and W33,146 million, respectively.

(*3)

Due to contamination of land near the Company’s magnesium smelting plant located in Gangneung province and others, the Company recognized present values of estimated costs for recovery as provisions for restoration as of December 31, 2021. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available for now to recover the land. In addition, the Company has applied discount rates of 2.08%~2.34% to assess present value of these costs.

(*4)

The Company has recognized emission liabilities for greenhouse gas emissions exceeding the quantity of free quota emission rights expected to be submitted as of December 31, 2021.

(*5)

As of December 31, 2021, the Company recognized the expected claim cost to be charged as a provision.

 

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POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

(b)

Changes in provisions for the years ended December 31, 2021 and 2020 were as follows:

 

  1)

For the year ended December 31, 2021

 

(in millions of Won)    Beginning      Increase      Reversal     Utilization     Ending  

Provision for bonus payments

   W 48,979        74,240        —         (76,699     46,520  

Provision for restoration

     17,561        291        (186     (5,163     12,503  

Provision for legal contingencies and claims

     6,989        2,500        (2,052     (7,437     —    

Emission liability

     20,224        34,059        (19,391)       (833)       34,059  

Provision for product warranties

     22,453        27,434        —         (21,805)       28,082  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 116,206        138,524        (21,629     (111,937     121,164  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

  2)

For the year ended December 31, 2020

 

(in millions of Won)    Beginning      Increase      Reversal     Utilization     Ending  

Provision for bonus payments

   W 49,836        25,853        —         (26,710     48,979  

Provision for restoration

     22,725        363        (340     (5,187     17,561  

Provision for legal contingencies and claims

     2,388        4,937        (285     (51     6,989  

Emission liability

     —          20,648        (424)       —         20,224  

Provision for product warranties

     —          48,137        —         (25,684)       22,453  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 
   W 74,949        99,938        (1,049     (57,632     116,206  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

20. Employee Benefits

 

(a)

Defined contribution plans

The expense related to post-employment benefit plans under defined contribution plans for the years ended December 31, 2021 and 2020 were as follows:

 

(in millions of Won)    2021      2020  

Expense related to post-employment benefit plans under defined contribution plans

   W 39,686        37,913  

 

(b)

Defined benefit plans

 

  1)

The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  

Present value of funded obligations

   W 1,330,938        1,378,597  

Fair value of plan assets

     (1,543,469)        (1,455,098)  
  

 

 

    

 

 

 

Net defined benefit liabilities

   W (212,531      (76,501
  

 

 

    

 

 

 

 

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Table of Contents

POSCO HOLDINGS INC. (formerly, POSCO)

Notes to the Separate Financial Statements, Continued

As of December 31, 2021 and 2020

 

 

2)

Changes in present value of defined benefit obligations for the years ended December 31, 2021 and 2020 were as follows:

 

(in millions of Won)    2021      2020  

Defined benefit obligation at the beginning of period

   W 1,378,597        1,435,942  

Current service costs

     123,312        125,706  

Interest costs

     28,892        27,712  

Remeasurement :

     (49,259      (74,678

- Loss (gain) from change in financial assumptions

     (103,452      (74,276

- Loss (gain) from change in demographic assumptions

     91        (4,608

- Loss from change in others

     54,102        4,206  

Amount transferred from associate

     —          1,104  

Reclassification to liabilities directly related to assets

     

held for sale

     (5,675      —    

Benefits paid

     (144,929)        (137,189)  
  

 

 

    

 

 

 

Defined benefit obligation at the end of period

   W 1,330,938        1,378,597  
  

 

 

    

 

 

 

 

3)

Changes in the fair value of plan assets for the years ended December 31, 2021 and 2020 were as follows:

 

(in millions of Won)    2021      2020  

Fair value of plan assets at the beginning of period

   W 1,455,098        1,381,796  

Interest on plan assets

     31,145        27,227  

Remeasurement of plan assets

     (4,534      (450

Contributions to plan assets

     200,000        178,000  

Amount transferred from associate

     —          1,104  

Reclassification to liabilities directly related to assets held for sale

     (5,490      —    

Benefits paid

     (132,750      (132,579
  

 

 

    

 

 

 

Fair value of plan assets at the end of period

   W 1,543,469        1,455,098  
  

 

 

    

 

 

 

The Company expects to make an estimated contribution of W50,000 million to the defined benefit plan assets in 2022.

 

4)

The fair value of plan assets as of December 31, 2021 and 2020 are as follows:

 

(in millions of Won)    2021      2020  

Debt instruments

   W 496,936