DOOSAN HEAVY INDUSTRIES & CONSTRUCTION CO., LTD. AND ...

Doosan Heavy Industries & Construction Co., Ltd. and SubsidiariesNotes to the Consolidated Financial StatementsFor the years ended December 31, 2012 and 20113. Significant Accounting Policies, Continued(3) Foreign currencies, continuedForeign currency differences arising on retranslation are recognized in profit or loss, except for differencesarising on the retranslation of available-for-sale equity instruments, a financial liability designated as a hedgeof the net investment in a foreign operation, or qualifying cash flow hedges, which are recognized in othercomprehensive income. Non-monetary items that are measured in terms of historical cost in a foreigncurrency are translated using the exchange rate at the date of the transaction.(ii) Foreign operationsIf the presentation currency of the Group is different from a foreign operation’s functional currency, thefinancial statements of the foreign operation are translated into the presentation currency using the followingmethods:The assets and liabilities of foreign operations, whose functional currency is not the currency of ahyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date.The income and expenses of foreign operations are translated to functional currency at exchange rates at thedates of the transactions. Foreign currency differences are recognized in other comprehensive income.Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carryingamounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets andliabilities of the foreign operation. Thus they are expressed in the functional currency of the foreignoperation and translated at the closing rate.When a foreign operation is disposed of, the relevant amount in the translation is transferred to profit or lossas part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreignoperation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. Inany other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreignoperation, the settlement of which is neither planned nor likely to occur in the foreseeable future and whichin substance is considered to form part of the net investment in the foreign operation, are recognized in othercomprehensive income in the translation reserve.These consolidated financial statements are presented in Korean won, which is the Controlling Company’sfunctional currency, which is the currency of the primary economic environment in which the Group operates.(4) Cash and cash equivalentsCash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquidinvestments that are readily convertible to known amounts of cash and which are subject to an insignificantrisk of changes in value, and are used by the Group in management of its short-term commitments.Generally equity investments are excluded from cash and cash equivalents.(5) Non-derivative financial assetsThe Group recognizes and measures non-derivative financial assets by the following four categories: financialassets at fair value through profit or loss, held-to-maturity investments, loans and receivables and availablefor-salefinancial assets. The Group recognizes financial assets in the consolidated statement of financialposition when the Group becomes a party to the contractual provisions of the instrument.20