AA 11-3 Global Analysis LO P3 Refer to Samsung's statement of cash flows in Appendix A for the year ended December 31, 2017. Required 1. What amount (in millions of Korean won) did Samsung spend to acquire property, plant, and equipment during 2017? 2. Assume the investment in part 1 is expected to generate annual net cash flows of 7,000,000 (in millions of Korean won) per year for the next 10 years. Compute the net present value of the investment, using a discount rate of 9%. (For all requirements, enter your answers in millions of Korean won.) 1. Acquisition cost Net present value millions of Korean won millions of Korean won 2. appendix Financial Statement Information This appendix includes financial information for (1) Apple (2) Google, and (3) Samsung. Apple states that it designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players, and sells a variety of related software, services, peripherals, network- ing solutions, and third-party digital content and applications; it competes with both Google and Samsung in the United States and globally. The information in this appendix is taken from annual 10-K reports for annual report for Samsung) filed with the SEC or other regulatory agency. An annual report is a sum- mary of a company's financial results for the year along with its current financial condition and future plans. This report is directed to external users of financial information, but it also affects the actions and decisions of internal users. A company often uses an annual report to showcase itself and its products. Many annual reports include photos, diagrams, and illustrations related to the company. The primary objective of annual reports, however, is the financial section, which communicates much information about a company, with most data drawn from the accounting information system. The content of a typical annual reports finan cial section follows. Letter to Shareholders Financial History and Highlights Quantitative and Qualitative Disclosures about Risk Factors Management Discussion and Analysis Management's Report on Financial Statements and on Internal Controls Report of Independent Accountants (Auditor's Report) and on Internal Controls Financial Statements Notes to Financial Statements Directors, Officers, and Corporate Governance Executive Compensation Accounting Fees and Services This appendix provides the financial statements for Apple (plus selected notes), Google, and Samsung. The appendix is organized as follows: Apple A-2 through A-9 Google A-10 through A-13 Samsung A-14 through A-17 Many assignments at the end of each chapter refer to information in this appendix. We encourage readers to spend time with these assignments; they are especially useful in showing the relevance and diversity of accounting and reporting APPLE GOOGLE Samsung Special note: The SEC maintains the EDGAR (Electronic Data Gathering, Analysis, and Retrieval database at SEC.gov for U.S.filers. The Form 10-K is the annual report form for most companies. It provides electronically accessible information. The Form 10-KSB is the annual report form filed by small businesses. It requires slightly less information than the Form 10-K. One of these forms must be filled within 90 days after the company's fiscal year-end. (Forms 10-K405, 10-KT, 10-KT405, and 10-KSB405 are slight variations of the usual form due to certain regulations or rules) APPLE September 24, 2016 Apple Inc. CONSOLIDATED BALANCE SHEETS (In millions, except number of shares which are reflected in thousands and par value) September 30, 2017 ASSETS Current assets Cash and cash equivalents 20,289 Short-term marketable securities 53,892 Accounts receivable, less allowances of $58 and $53, respectively 17,874 Inventories 4.855 Vendor non-trade receivables 17.799 Other current assets 13,936 Total current assets 128.645 Long-term marketable securities 194,714 Property, plant and equipment, net 33,783 Goodwill 5,717 Acquired intangible assets, net 2.298 Other non-current assets 10,162 Total assets 20,484 46,671 15.754 2.132 13.545 8.283 106,869 170.430 27.010 5.414 3.206 8.757 321,686 375,319 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable Accrued expenses Deferred revenue Commercial paper Current portion of long-term debt Total current liabilities Deferred reveme, non-current Long-term debt Other non-current liabilities Total liabilities Commitments and contingencies Shareholders' equity Common stock and additional paid-in capital, 50.00001 par value: 12,600,000 shares authorized: 5,126,201 and 5,336,166 shares issued and outstanding, respectively Retained earnings Accumulated other comprehensive income (loss) Total shareholders' equity Total liabilities and shareholders' equity See accompanying Notes to Consolidated Financial Statements. 49,049 25.744 7.548 11.977 6,496 100,814 2.836 97,207 40,415 241,272 37.294 22.027 8.080 8,105 3.500 79,006 2.930 75.427 36,074 193.437 35.867 98,330 (150) 134,047 375,319 31.251 96,364 634 128,249 321.686 APPL September 26, 2015 233,715 140,089 93.626 Apple Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except number of shares which are reflected in thousands and per share amounts) Years ended September 30, 2017 September 24, 2016 Net sales 229.234 215,639 Cost of sales 141,048 131,376 Gross margin 88,186 84.263 Operating expenses Research and development 11.581 10.045 Selling, general and administrative 15.261 14.194 Total operating expenses 26,842 24,239 Operating income 61,344 60,024 Other income (expense), net 2.745 1.348 Income before provision for income taxes 64,089 61,372 Provision for income taxes 15.738 15,685 Net income 48,351 45,687 8,067 14.329 22.396 71.230 1.285 72.515 19.121 53.394 9.27 $ $ 9.28 9.22 Earnings per share: Basic $ 8.35 Diluted 9.21 8.31 Shares used in computing earnings per share: Basic 5,217.242 5.470,820 Diluted 5,251,692 5,500,281 Cash dividends declared per share 2.40 2.18 Se accompanying Notes to Consolidated Financial Statements, 5.753421 5,793,069 1.98 224 1.315 7 Apple Inc. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME In millions) Years ended September 30, 2017 September 24, 2016 September 26, 2015 Net income 48,351 $ 45,687 S 53,394 Other comprehensive income (loss); Change in foreign currency translation, net of tax effects of $(77), S8 and $201, respectively 75 (411) Change in unrealized gains/losses on derivative instruments: Change in fair value of derivatives, net of tax benefit (expense) of $(478), $(7) and (441), respectively 2.905 Adjustment for net (gains) losses realized and included in net income, net of tax expense benefit) of $475, 5131 and 5630, respectively (1,4 (741) 3.497) Total change in unrealized gains/losses on darivative instruments, net of tax (162) (734) (592) Change in unrealized gains/losses on marketable securities: Change in fair value of marketable securities, nct of tax benefit (expense) of $425, 8(863) and $264, respectively (782) 1.582 (483) Adjustment for net (gains) losses realized and included in net income, net of tax expense (benefit) of $35, $(31), and $(32), respectively 56 59 Total change in unrealized gains/losses on marketable securities, net of tax (846) 1.638 (424) Total other comprehensive income (loss) (784) (1,427) Total comprehensive income 474567 46.666 51.967 164) 979 APPLE Apple Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In millions, except number of shares which are reflected in thousands) Accumulated Other Common Stock and Comprehensive Total Additional Paid-In Capital Retained Income Shareholders' Shares Amount Earnings (Loss) Equity Balances as of September 27, 2014 5,866,161 $ 23,313 $ 87,152 $ 1,082 $ 111,547 Net income 53,394 53,394 Other comprehensive income (loss) (1,427) (1,427) Dividends and dividend equivalents declared (11,627) (11,627) Repurchase of common stock (325,032) (36,026) (36,026) Share-based compensation 3,586 3,586 Common stock issued, net of shares withheld for employee taxes 37,624 (231) (609) (840) Tax benefit from equity awards, including transfer pricing adjustments 748 748 Balances as of September 26, 2015 5.578,753 $ 27,416 $ 92,284 $ (345) $ 119,355 Net income 45,687 45,687 Other comprehensive income (loss) 979 979 Dividends and dividend equivalents declared (12,188) (12,188) Repurchase of common stock (279,609) (29,000) (29,000) Share-based compensation 4,262 4.262 Common stock issued, net of shares withheld for employee taxes 37,022 (806) (419) (1,225) Tax benefit from equity awards, including transfer pricing adjustments 379 379 Balances as of September 24, 2016 5,336,166 $ 31,251 $ 96,364 $ 634 128,249 Net income 48,351 48,351 Other comprehensive income (loss) (784) (784) Dividends and dividend equivalents declared (12,803) (12,803) Repurchase of common stock (246,496) (33,001) (33,001) Share-based compensation 4,909 4,909 Common stock issued, net of shares withheld for employee taxes 36,531 (913) (581) (1.494) Tax benefit from equity awards, including transfer pricing adjustments 620 Balances as of September 30, 2017 5,126,201 $ 35,867 $ 98,330 $ (150) $ 134,047 See accompanying Notes to Consolidated Financial Statements. 620 Other Apple Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions Years ended September 30, 2017 September 24, 2016 September 26, 2015 Cash and cash equivalents, beginning of the year 20.484 21,120 $ 13,844 Operating activities: Net income 48,351 45,687 53,394 Adjustments to reconcile net income to cash generated by operating activities Depreciation and amortization 10.157 10.505 11,257 Share-based compensation expense 4,840 4.210 3,586 Deferred income tax expense 5.966 4.938 1.382 (166) 486 385 Changes in operating assets and liabilities: Accounts receivable, net (2,093) 527 417 Inventories (2,723) 217 (238) Vendor non-trade receivables (4.254) (51) (3.735) Other current and non-current assets (5,318) 1,055 (283) Accounts payable 9,618 1.837 5.001 Deferred revenue 1626) (1,554) 1.042 Other current and non-current liabilities (154) (2.033) 9.058 Cash generated by operating activities 63,598 65,824 81.266 Investing activities: Purchases of marketable securities (159.486) (142,428) (166,402) Proceeds from maturities of marketable securities 31.775 21.258 14,538 Proceeds from sales of marketable securities 94,564 90,536 107.447 Payments made in connection with business acquisitions, net (329) (297) (343) Payments for acquisition of property, plant and equipment (12451) (12.734) (11.247) Payments for acquisition of intangible assets (814) (241) Payments for strategic investments, net (395) (1.388) Other 220 (110) (26) Cash used in investing activities (46.446) (45.977) (56,274) Financing activities: Proceeds from issuance of common stock 555 495 543 Excess tax benefits from equity awards 627 407 749 Payments for taxes related to net share settlement of equity awards (1.874) (1.570) (1,499) Payments for dividends and dividend equivalents (12,769) (12.150) (11.561) Repurchases of common stock (32.900) (29,722) (35,253) Proceeds from issuance of term debt, net 28,662 24.954 27.114 Repayments of term debt (3,500) (2,500) Change in commercial paper, net 3,852 (397) 2.191 Cash used in financing activities (17.347) (20.483) (17.716) Increase (decrease) in cash and cash equivalents (195) (636) 7,276 Cash and cash equivalents, end of the year 20,289 20.484 21.120 Supplemental cash flow disclosure: Cash paid for income taxes, net Cash paid for interest S $ $ 11,591 2.092 10,444 1.316 13.252 514 S $ $ See accompanying Notes to Consolidated Financial Statements. Apple Inc. Notes-continued indicated it may from time to time provide future unspeci- Earnings Per Share fied software upgrades to the device's essential software Basic earnings per share is computed by dividing income and/or non-software services free of charge. The Company has identified up to three deliverables regularly included in available to common shareholders by the weighted average number of shares of common stock outstanding during the arrangements involving the sale of these devices. The period. Diluted earnings per share is computed by dividing Company allocates revenue between these deliverables us- ing the relative selling price method. Revenue allocated to income available to common shareholders by the weighted- the delivered hardware and the related essential software is average number of shares of common stock outstanding during the period increased to include the number of addi- recognized at the time of sale, provided the other conditions for revenue recognition have been met. Revenue allocated tional shares of common stock that would have been out- standing if the potentially dilutive securities had been to the embedded unspecified software upgrade rights and the non-software services is deferred and recognized on a issued. straight-line basis over the estimated period the software Cash Equivalents and Marketable Securities upgrades and non-software services are expected to be pro- All highly liquid investments with maturities of three months vided. Cost of sales related to delivered hardware and re- or less at the date of purchase are classified as cash equiva- lated essential software, including estimated warranty costs, are recognized at the time of sale. Costs incurred to provide have been classified and accounted for as available-for-sale. lents. The Company's marketable debt and equity securities non-software services are recognized as cost of sales as in- Management determines the appropriate classification of its curred, and engineering and sales and marketing costs are investments at the time of purchase and reevaluates the clas- recognized as operating expenses as incurred. sifications at each balance sheet date. The Company classi- Shipping Costs fies its marketable debt securities as either short-term or Amounts billed to customers related to shipping and han- long-term based on each instrument's underlying contrac- tual maturity date. Marketable debt securities with maturi- dling are classified as revenue, and the Company's shipping and handling costs are classified as cost of sales. ties of 12 months or less are classified as short-term and marketable debt securities with maturities greater than Warranty Costs 12 months are classified as long-term Marketable equity The Company generally provides for the estimated cost of securities, including mutual funds, are classified as either hardware and software warranties in the period the related short-term or long-term based on the nature of each secu- revenue is recognized. The Company assesses the adequacy rity and its availability for use in current operations. The of its accrued warranty liabilities and adjusts the amounts Company's marketable debt and equity securities are car- as necessary based on actual experience and changes in furied at fair value, with unrealized gains and losses, net of ture estimates. taxes, reported as a component of accumulated other com- prehensive incomelloss) CAOCT") in shareholders' equity, Software Development Costs with the exception of unrealized losses believed to be Research and development ("R&D) costs are expensed as other-than-temporary which are reported in earnings in incurred. Development costs of computer software to be the current period. The cost of securities sold is based upon sold, leased, or otherwise marketed are subject to capital- the specific identification method. ization beginning when a product's technological feasibility Accounts Receivable (Trade Receivables) has been established and ending when a product is available for general release to customers. In most instances, the The Company has considerable trade receivables outstanding Company's products are released soon after technological with its third-party cellular network carriers, wholesalers, re- feasibility has been established and as a result software de- tailers, value-added resellers, small and mid-sized businesses velopment costs were expensed as incurred. and education, enterprise and government customers. As of September 30, 2017, the Company had two cus- Advertising Costs tomers that individually represented 10% or more of total Advertising costs are expensed as incurred and included in trade receivables, each of which accounted for 10%. As of selling general and administrative expenses. September 24, 2016, the Company had one customer that represented 10% or more of total trade receivables, which Other Income and Expense accounted for 10%. The Company's cellular network carri- $ millions 2017 2016 2015 ers accounted for 59% and 63% of trade receivables as of Interest and dividend income $5.201 $3.999 $2,921 September 30, 2017 and September 24, 2016, respectively. Interest expense Allowance for Doubtful Accounts Oher expense, net (133) (1.195 (903) The Company records its allowance for doubtful accounts Total other income (expense), net $ 2.745 $ 1.348 $1 285 based upon its assessment of various factors, including (2.323) (1456) (733) APPL Apple Inc. Notes-continued historical experience, age of the accounts receivable bal The Company does not amortize goodwill and intangi- ances, credit quality of the Company's customers, current ble assets with indefinite useful lives, rather, such assets are economic conditions and other factors that may affect the required to be tested for impairment at least annually or customers' abilities to pay. sooner if events or changes in circumstances indicate that Inventories the assets may be impaired. The Company performs its goodwill and intangible asset impairment tests in the fourth Inventories are stated at the lower of cost, computed using quarter of each year. The Company did not recognize any the first-in, first-out method, and net realizable value. Any impairment charges related to goodwill or indefinite lived adjustments to reduce the cost of inventories to their net real intangible assets during 2017, 2016 and 2015. For purposes izable value are recognized in earnings in the current period of testing goodwill for impairment, the Company estab- Property, Plant and Equipment lished reporting units based on its current reporting struc- ture. Goodwill has been allocated to these reporting units to Property, plant and equipment are stated at cost. the extent it relates to each reporting unit. In 2017 and Depreciation is computed by use of the straight-line method 2016, the Company's goodwill was primarily allocated to over the estimated useful lives of the assets, which for the Americas and Europe reporting units. buildings is the lesser of 30 years or the remaining life of The Company amortizes its intangible assets with defi- the underlying building; between one and five years for ma nite useful lives over their estimated useful lives and re- chinery and equipment, including product tooling and man views these assets for impairment. The Company typically ufacturing process equipment, and the shorter of lease term amortizes its acquired intangible assets with definite useful or useful life for leasehold improvements. The Company lives over periods from three to seven years. capitalizes eligible costs to acquire or develop internal-use software that are incurred subsequent to the preliminary Acquired Intangible Assets project stage. Capitalized costs related to internal-use soft The Company's acquired intangible assets with definite ware are amortized using the straight-line method over the useful lives primarily consist of patents and licenses. The estimated useful lives of the assets, which range from three following table summarizes the components of acquired to five years. Depreciation and amortization expense on intangible asset balances as of September 30, 2017. property and equipment was $8.2 billion, $8.3 billion and Amortization expense related to acquired intangible assets $9.2 billion during 2017, 2016 and 2015, respectively. was $1.2 billion in 2017. Property, Plant and Equipment, Net millions) 2016 Carrying Accumulated Carrying Land and buildings Amount Amortization Amount $ 13,587 $ 10,185 Smilies Machinery, equipment and internal-use software 54,210 Definite-lived and amortizable 44,543 Leasehold improvements acquired intangible assets $ 7,507 $ 65,309) $ 2,198 7.279 6,517 Indefinite-lived and non-amortizable Gross property, plant and equipment 75,076 acquired intangible assets 100 100 Accumulated depreciation and amortization (41,293) (34,235) Total acquired intangible assets $ 7.607 S (5309) $ 2.298 Total property, plant and equipment, net $ 33,783 S 27.010 Fair Value Measurements Long-Lived Assets Including Goodwill and Other The Company applies fair value accounting for all finan- Acquired Intangible Assets cial assets and liabilities and non-financial assets and li- The Company reviews property, plant and equipment, in abilities that are recognized or disclosed at fair value in ventory component prepayments and identifiable intangi the financial statements on a recurring basis. The bles, excluding goodwill and intangible assets with Company defines fair value as the price that would be re- indefinite useful lives, for impairment. Long-lived assets ceived from selling an asset or paid to transfer a liability are reviewed for impairment whenever events or changes in in an orderly transaction between market participants at circumstances indicate the carrying amount of an asset may the measurement date. When determining the fair value not be recoverable. Recoverability of these assets is mea measurements for assets and liabilities that are required sured by comparison of their carrying amounts to future to be recorded at fair value, the Company considers the undiscounted cash flows the assets are expected to gener principal or most advantageous market in which the ate. If property, plant and equipment, inventory component Company would transact and the market-based risk mea- prepayments and certain identifiable intangibles are consid surements or assumptions that market participants would ered to be impaired, the impairment to be recognized equals use to price the asset or liability, such as risks inherent in the amount by which the carrying value of the asset exceeds valuation techniques, transfer restrictions and credit risk. its fair value. Fair value is estimated by applying the following hierarchy, Gruss Net 2017 61.245 UUV $ 0.57 0.52 2.898 19.222 Ma 10.067 Apple Inc. Notes-continued which prioritizes the inputs used to measure fair value Dividends into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available The Company declared and paid cash dividends per share and significant to the fair value measurement: during the periods presented as follows: Level 1 Quoted prices in active markets for identical assets 2017 2016 or liabilities Dividends Amount Dividends Amount Level 2Observable inputs other than quoted prices in ac- Rer Share (in millions) Per Share (in millions) tive markets for identical assets and liabilities, quoted prices Fourth quarter 0.63 $ 3.252 $ 0.57 $ 3,071 for identical or similar assets or liabilities in inactive mar- Third quarter 0.63 3.281 0.57 3.117 kets, or other inputs that are observable or can be corrobo - Second quarter 2.988 2.879 rated by observable market data for substantially the full First quarter 0.57 3,042 0.52 term of the assets or liabilities. Total cash dividends Level 3Inputs that are generally unobservable and typically declared and paid $ 2.40 $ 12,563 $ 2.18 11.965 reflect management's estimate of assumptions that market participants would use in pricing the asset or liability. Segment Information and Geographic Data The Company's valuation techniques used to measure the fair value of money market funds and certain marketable Net sales by product (mil) 2017 2016 2015 equity securities were derived from quoted prices in active iPhone $141,319 S136,700 $155,041 markets for identical assets or liabilities. The valuation iPad 20,628 techniques used to measure the fair value of the Company's 23 227 25,850 22,831 debt instruments and all other financial instruments, all of 25.471 Services 29.980 24,348 which have counterparties with high credit ratings, were 19.909 valued based on quoted market prices or model-driven val- Other Products 12.863 11,132 uations using significant inputs derived from or corrobo Total net sales $229, 234 $215.639 $239,715 rated by observable market data. In accordance with the fair value accounting require Reportable segment (mil) 2017 2016 2015 ments, companies may choose to measure eligible financial Americas instruments and certain other items at fair value. The Net sales $96.600 $86,613 $ 93.864 Company has not elected the fair value option for any eli- Operating income $30,684 $28.172 $ 31,186 gible financial instruments Europe: Accrued Warranty and Indemnification Net sales $54,938 $ 49,952 $ 50,337 The following table shows changes in the Company's ac- Operating income $16,514 $15.348 $ 16,527 crued warranties and related costs for 2017 and 2016: Greater China: Net sales $44,764 $48.492 $ 58,715 $ millions 2017 2016 Operating income $17.032 $18,835 $ 23,002 Beginning accrued warranty and related costs $ 3,702 $ 4,780 Japan: Cost of warranty claims (4.322) (4,663) Net sales $17.733 $ 16,928 $ 15,706 Accruals for product warranty 4454 3,585 Operating income $ 8,097 $ 7.165 $ 7.617 Ending accrued warranty and related costs $ 3,702 Rest of Asia Pacific Net sales $15,199 $ 13,654 $ 15,093 Term Debt Operating income $ 5,304 $ 4,781 As of September 30, 2017, the Company had outstanding A reconciliation of the Company's segment operating in- floating and fixed-rate notes with varying maturities for an aggregate principal amount of $104.0 billion (collectively come to the Consolidated Statements of Operations for 2017, 2016 and 2015 is as follows: the "Notes"), The Notes are senior unsecured obligations, and interest is payable in arrears. $ millions 2017 2016 2015 The Company recognized $2.2 billion, $1.4 billion and Segment operating income $ 77,631 $74,301 $83,850 $722 million of interest expense on its term debt for 2017, 2016 and 2015, respectively. Research and development (11581) expense As of September 30, 2017 and September 24, 2016, the (10.045) (8,067) (4.706) Other corporate expenses, net (4.232) fair value of the Company's Notes, based on Level 2 inputs, Total operating income $ 60,024 $71.230 was $106.1 billion and $81.7 billion, respectively. $ 3834 $ 5518 (4.553 $ 61,344 As of December 31, 2017 10,715 91.156 101.871 18,336 369 749 2.983 124.308 7.813 680 42,383 2.692 16.747 2.672 197,295 $ GOOGLE Google Inc. (Alphabet Inc.) CONSOLIDATED BALANCE SHEETS (In millions, except share and par value amounts which are reflected in thousands, and par value per share amounts) As of December 31, 2016 Assets Current assets Cash and cash equivalents 12.918 Marketable securities 73.415 Total cash, cash equivalents, and marketable securities 86333 Accounts receivable, net of allowance of 5467 and $674 14.137 Income taxes receivable, net 95 Inventory 268 Other current assets 4.575 Total current assets 105,408 Non-marketable investments 5.878 Deferred income taxes 383 Property and equipment, net 34,234 Intangible assets, net 3.307 Goodwil 16,468 Other non-current assets 1,819 Total assets 167,497 Liabilities and Stockholders' Equity Current liabilities Accounts payable s 2.041 Accrued compensation and benefits 3.976 Accrued expenses and other current liabilities 6,144 Accrued revenue share 2.942 Deferred revenue 1.099 Income taxes payable, net 554 Total current liabilities 16.756 Long-term debe 3.935 Deferred revenue, non-current 202 Income taxes payable, non-current 4.677 Deferred income taxes 226 Other long-term liabilities 2,665 Total liabilities 28.461 Commitments and contingencies Stockholders' equity: Convertible preferred stock, 50.001 par value per share, 100,000 shares authorized: no shares issued and outstanding Class A and Class B common stock, and Class Ccapital stock and additional paid-in capital, 50.001 par value per share: 15,000,000 shares authorized (Class A 9,000,000. Class B 3,000,000 Class C 3,000,000): 691 293 (Class A 296,992. Class B 47,437, Class C 346,864) and 694,783 (Class A 298,470, Class B 46,972, Class C 349,341) shares issued and outstanding 36,307 Accumulated other comprehensive loss (2.402) Retained camings 105.131 Total stockholders' equity 139.036 Total liabilities and stockholders' equity 167,497 Google is part of Alphabet, but we loosely refer to Alphabet as "Google" because of its global familiarity and that Google provides 99% of Alphabet's $1 10,855 billion in revenues. See accompanying notes. 3.137 4,581 10.177 3.975 1.432 881 24,183 3.969 340 12.812 430 3.059 44.793 0 40.247 (992) 113,247 152,502 197.295 Appendix A Financial Statement Information A-11 2016 2017 110,855 90.272 Google Inc. (Alphabet Inc.) CONSOLIDATED STATEMENTS OF INCOME (In millions) Year Ended December 31 2015 Revenues 74,989 Costs and expenses Cost of revenues 28.164 Research and development 12.282 Sales and marketing 9.047 General and administrative 6.136 European Commission fine 0 Total costs and expenses 55.629 Income from operations 19.360 Other inco me expense), net 291 Income before income taxes 19.651 Provision for income taxes 3,303 Net income 16.348 Less: Adjustment Payment to Class Ccapital stockholders 522 Net income available to all stockholders 15.826 "Google is part of Alphabet, but we bosely refer to Alphabet as "Google" because of its global familiarity and that Google provides 99% of Alphabet's $110,855 billion in revenues. See accompanying notes 35,138 13.948 10,485 6,985 0 66,556 23,716 434 24.150 4,672 19.478 0 19,478 45,583 16,625 12.893 6,872 2.736 84,709 26,146 1.047 27.193 14,531 12.662 0 12.662 GOOGLE 2016 19,478 2017 12,662 (599) 1.543 Google Inc. (Alphabet Inc.) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions) Year Ended December 31 2015 Net income 16,348 Other comprehensive income (loss): Change in foreign currency translation adjustment (1.067) Available-for-sale investments: Change in net unrealized gains (losses) (715) Less: reclassification adjustment for net (gains) losses included in net income 208 Net change (net of tax effect of $29, 50, and S0) (507) Cash flow hedges: Change in net unrealized gains (losses) 676 Less: reclassification adjustment for net(gains) losses included in net income (1.003) Net change (net of tax effect of $115,564, and $247) (327) Other comprehensive income (loss) (1.901) Comprehensive income 14447 (314) 221 307 105 412 515 (351) 164 (528) 18,950 1638) 93 (545) 1.410 14.072 "Google is part of Alphabet, but we bosely refer to Alphabet as "Google" because of its global familiarity and that Google provides 99% of Alphabet's $110,855 billion in revenues. See accompanying notes 0 0 0 Total Retained Stockholders' Earnings Equity 75,066 $ 103,860 0 664 0 5,151 0 815 0 (2,779) (1,669) (1,780) (522) 16.348 16,348 0 (1,901) 89,223 120,331 0 0 0 0 0 Google Inc. (Alphabet Inc.) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In millions, except share amounts which are reflected in thousands) Class A and Class B Common Stock, Class C Accumulated Capital Stock and Other Additional Paid-In Capital Comprehensive Shares Amount Income (Loss) Balance as of December 31, 2014 680,172 $ 28,767 S 27 $ Common and capital stock issued 8,714 664 Stock-based compensation expense 0 5,151 0 Stock-based compensation tax benefits 815 Tax withholding related to vesting of restricted stock units (2.779) 0 Repurchases of capital stock (2.391) (111) 0 Adjustment Payment to Class C capital stockholders 853 475 Net income 0 Other comprehensive loss (1,901) Balance as of December 31, 2015 687,348 32,982 (1.874) Cumulative effect of accounting change 180 Common and capital stock issued 9.106 298 0 Stock-based compensation expense 6,700 Tax withholding related to vesting of restricted stock units (3,597) Repurchases of capital stock (5.161) (256) 0 Net income 0 Other comprehensive loss (528) Balance as of December 31, 2016 691,293 36,307 (2.402) Cumulative effect of accounting change Common and capital stock issued 8,652 212 Stock-based compensation expense 0 7,694 Tax withholding related to vesting of restricted stock units (4,373) Repurchases of capital stock (5.162) (315) Sale of subsidiary shares 722 Net income 0 Other comprehensive loss 0 1.410 Balance as of December 31, 2017 694,783 $ 40,247 s (992) S 0 0 0 (133) 0 0 0 0 0 0 0 (3.437) 19.478 0 105,131 47 298 6,700 (3,597) (3,693) 19.478 (528) 139,036 0 0 0 0 0 GOOGLE 0 0 0 0 0 0 0 0 (15) 0 0 0 (4,531) 0 12.662 0 113,247 $ (15) 212 7,694 (4.373) (4.846) 722 12,662 1,410 152,502 0 0 0 0 Google is part of Alphabet, but we loosely refer to Alphabet as "Google" because of its global familiarity and that Google provides 99% of Alphabet's $110,855 billion in revenues. See accompanying notes. 2016 2017 19,478 12.662 5.267 877 6.703 (38) 275 174 6,103 812 7,679 258 194 212 137 (2.578) 3,125 312 110 1,515 593 223 36,036 (3,768) 8,211 (2.164) 731 4,891 955 390 37,091 Google Inc. (Alphabet Inc.) CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) Year Ended December 31 2015 Operating activities Net income 16,348 Adjustments: Depreciation and impairment of property and equipment 4.132 Amortization and impairment of intangible assets 931 Stock-based compensation expense 5,203 Deferred income taxes (179) Loss on marketable and non-marketable investments, net 334 Other Changes in assets and liabilities, net of effects of acquisitions: Accounts receivable (2.094) Income taxes, net (179) Other assets (318) Accounts payable 203 Accrued expenses and other liabilities 1,597 Accrued revenue share 339 Deferred revenue 43 Net cash provided by operating activities 26.572 Investing activities Purchases of property and equipment 19.950) Proceeds from disposals of property and equipment 35 Purchases of marketable securities (74,368) Maturities and sales of marketable securities 62.905 Purchases of non-marketable investments (2,326) Maturities and sales of non-marketable investments 154 Cash collateral related to securities lending (350) Investments in reverse repurchase agreements 425 Acquisitions, net of cash acquired, and purchases of intangible assets (236) Proceeds from collection of notes receivable 0 Net cash used in investing activities (23.711) Financing activities Net payments related to stock-based award activities 2.375) Adjustment Payment to Class C capital stockholders Repurchases of capital stock (1.780) Proceeds from issuance of debt, net of costs 13,705 Repayments of debt (13,728) Proceeds from sale of subsidiary shares 0 Net cash used in financing activities (4.225 Effect of exchange rate changes on cash and cash equivalents (434) Net decrease in cash and cash equivalents (1.798) Cash and cash equivalents at beginning of period 18,347 Cash and cash equivalents at end of period 16,549 Supplemental disclosures of cash flow information Cash paid for taxes, net of refunds 3.651 Cash paid for interest, net of amounts capitalized $ 96 (10,212) 240 (84,509) 66,895 (1.109) 494 (2.428) 450 (986) 0 (31,165) (13,184) 99 192,195) 73.959 (1.745) 533 0 0 (287) 1,419 (31,401) UUS (3,304) 0 (3,693) 8,729 (10,064) 0 (8,332) (170) (3,631) 16,549 12,918 (4,166) 0 (4,846) 4.291 (4.377) 800 (8.298) 405 (2.203) 12,918 10,715 $ $ $ $ 1,643 84 $ $ 6,191 84 Google is part of Alphabet, but we loosely refer to Alphabet as "Google" because of its global familiarity and that Google provides 99% of Alphabet's $110,855 billion in revenues. See accompanying notes Samsung Electronics Co., Ltd. and Subsidiaries CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In millions of Korean wome) December 31, 2017 December 31, 2016 Assets KRW KRW Current assets Cash and cash equivalents 30,545,130 32,111,442 Short-term financial instruments 49,447,696 52,432,411 Short-term available-for-sale financial assets 3,191,375 3,638,460 Trade receivables 27,695,995 24,279,211 Non-trade receivables 4,108,961 3.521.197 Advance payments 1,753,673 1.439,938 Prepaid expenses 3,835,219 3.502.083 Inventories 24,983,355 18,353,503 Other current assets 1.421.060) 1,3 15,653 Assets held-for-sale 835,806 Total current assets 146,982,464 141.429,704 Non-current assets Long-term available-for-sale financial assets 7,752,180 6,804.276 Held-to-maturity financial assets 106,751 Investment in associates and joint ventures 6,802,351 5,837,884 Property, plant and equipment 111,665,648 91.473,041 Intangible assets 14,760,483 5.344.020 Long-term prepaid expenses 3,434,375 3,834.831 Net defined benefit assets 825,892 557,091 Deferred income tax assets 5,061,687 5,321.450 Other non-current assets 4,360),259 1.572,027 Total assets 301,752,090 262,174,324 Liabilities and Equity Current Habilities Trade payables 9,083,977 6,485,039 Short-term borrowings 15,767,619 12,746,789 Other payables 13,899,633 11,525,910 Advances received 1,249, 174 1.358,878 Withholdings 793,582 685028 Accred expenses 13,996,273 12,527,300 Income tax payable 7.408,348 2.837.353 Current portion of long-term liabilities 278,619 1.232.817 Provisions 4,294,820 4,597,417 Other current liabilities 403,139 351,176 Liabilities held-for-sale 356,388 Total current liabilities 67,175,114 54,704,095 Non-current liabilities Debentures 953,361 58,542 Long-term borrowings 1,814,446 1.244.238 Long-term other payables 2,043,729 3,317,054 Net defined benefit liabilities 389,922 173,656 Deferred income tax liabilities 11.710,781 7.293,514 Provisions 464.324 358,126 Other non-current liabilities 2,708,985 2,062,066 Total liabilities 87,260,662 69,211,291 Equity attributable to owners of the parent Preference shares 119,467 1 19.467 Ordinary shares 778,047 778,047 Share premium 4.403,893 4.403,893 Retained earnings 215,811,200 193,086,317 Other components of quity (13,899,191) (11.934,586) Accumulated other comprehensive income attributable to assets held for-sale (28,810) 207,213,416 186,424,328 Non-controlling interests 7,278,012 6,538,705 Total equity 214,491,428 192,963,033 Total liabilities and equity 301,752,090 262,174,324 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. Samsung Electronics Co., Ltd. and Subsidiaries CONSOLIDATED STATEMENTS OF PROFIT OR LOSS For the year ended December 31 2017 2016 (In millions of Korean wom) KRW KRW Revenue 239,575,376 201,866,745 Cost of sales 1 29,290,661 120,277,715 Gross profit 110,284,715 81,589,030 Selling and administrative expenses 56,639,677 52,348,358 Operating profit 53,645,038 29,240,672 Other non-operating income 3,010,657 3,238,261 Other non-operating expense 1.419,648 2,463,814 Share of profit of associates and joint ventures 201442 19,501 Financial income 9,737,391 11,385,645 Financial expense 8,978,913 10,706,613 Profit before income tax 56,195,967 30,713,652 Income tax expense 14,009,220 7,987,560 Profit for the period 42,186,747 22,726,092 Profit attributable to owners of the parent 41,344.569 22,415,655 Profit attributable to non-controlling interests 842.178 310,437 Earnings per share -Basic 299,868 157967 -Diluted 299,868 157,967 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. Samsung Electronics Co., Ltd. and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 2016 For the year ended December 31 2017 (In millions of Korean wem) KRW KRW Profit for the period 42,186,747 22,726,092 Other comprehensive income (loss) Items not to be reclassified to profit or loss subsequently: Remeasurement of net defined benefit liabilities, net of tax 414,247 963,662 Shares of other comprehensive income (loss) of associates and joint ventures, net of tax (6,347) 50,438 Items to be reclassified to profit or loss subsequently: Changes in value of available-for-sale financial assets, net of tax 511,207 (23,839) Share of other comprehensive income (loss) of associates and joint ventures, net of tax (49,256) (130,337) Foreign currency translation, net of tax (6,334,987) 1,131,536 Gain (loss) on valuation of derivatives (37,121) Other comprehensive income (Loss) for the period, net of tax (5,502,257) 1,991,400 Total comprehensive income for the period 36,684,490 24,717,492 Comprehensive income attributable to: Owners of the parent 35,887,505 24,310,814 Non-controlling interests 796,985 406,678 The above consolidated statement of financial position should be read in conjunction with the accompanying notes, Samsung Electronics Co., Ltd. and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY II III III Acainsulated other comprehensive income Equity Other attributable to attributabile Non Preference Ordinary Retained Components assets held to WINTS controlling In millions of Korean won premium earnings of equity for sale of the parent interests Total Balance as at January 1, 2016 119,467 778,047 4,403,893 185,132,014 (17,580,451) 23,797 172,876,767 6,183,038 179,059,805 Profit for the period 22,415,655 22,415,655 310,437 22, 7260/92 Changes in value of available-for-sale financial assets, net of tax (87,706) (23,797) (111,503) 87,664 (23.839) Share of other comprehensive income (loss) of associates and joint ventures, net of tax (80,146) 212 (79,934) 35 (79,899) Foreign currency translation, net of tax 1.160,316 1.160,316 (28,780) 1,131,536 Remeasurement of net defined benefit liabilities, net of tax 926,280 926,280 37,322 963,602 Classified as held-for-sale 29,022 (29,022) Total comprehensive income (loss) 22,415,655 1,947,766 (52,607) 24,310,814 406,678 24,717,492 Dividends (3,061,361) (3,061,361) (65,161) 3.126,522) Capital transaction under common control (37) (37) 12.272 12,235 Changes in consolidated entities 1,790) 1.790 Acquisition of treasury stock (7.707.938) (7,707,938) (7.707.938 Retirement of treasury stock (11,399,991) 11,399,991 Others 6,083 6,083 88 6,171 Total transactions with owners (14,461,352) 3,698,099 (10,763,253) (51,011) (10,814,264) Balance as at December 31, 2016 119,467 778,047 4.403,893 193,086,317 (11,934,586) (28,810) 186,424,328 6,538,705 192,963,033 Profit for the period 41.344.569 41.344.569 842,178 42,186,747 Changes in value of available for sale financial assets, niet of tax 489,150 489,150 22,057 $11.207 Share of other comprehensive income (loss) of associates and joint ventures, net of tax (54,300) (54,300) (1,303) (55,603) Foreign currency translation, net of tax (6,289.926) 28,810 (6,261,116) (73,871) (6,334,987) Remeasurement of net defined benefit liabilities, net of tax 406,323 406,323 7,924 414,247 Gain (kos) on valuation of derivatives (37,121) (37.121) (37,121) Total comprehensive income (loss) 41,344,569 (5,485,874) 28,810 35,887,505 796,985 36,684,490 Dividends (6,747,123) (6,747,123) (64,277) (6,811.400) Capital transaction under common control (2.992) (2,992) 15,114 12.122 Changes in consolidated entities (2.699) (2.699) (9,352) (12.051) Acquisition of treasury stock (8,350,424) (8,350,424) (8,350,424) Retirement of treasury stock (11,872,563) 11,872,563 Others 4,821 4,821 837 5,658 Total transactions with owners - (18,619,686) 3,521,269 (15,098,417) (57,678) (15,156,095) Balance as at December 31, 2017 119,467 778,047 4,403,893 215,811,200 (13,899,191) 207,213,416 7,278,012 214,491,428 The above consolidated statement of financial position shoukl be read in conjunction with the accompanying notes 11 2016 KRW KRW 22.726,092 30,754,471 (1.180,953) 52,299,610 1,405,085 (443,838) 256,851 16,132,064) 47,385,614 (6,780,610) 3,010,003 (2,129,551) 789,862 (1.741.547) 2,010,356 (1,498,148) Samsung Electronics Co., Ltd. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the year ended December 31 2017 (In millions of Korean wom) Cash flows from operating activities Profit for the period 42,186,747 Adjustments 36,211,232 Changes in assets and liabilities arising from operating activities (10,620,547) Cash generated from operations 67.777.432 Interest received 1.581.117 Interest paid (542,715) Dividends received 173,305 Income tax paid (6,827,098) Net cash inflow from operating activities 62,162,041 Cash flows from investing activities Net decrease increase) in short-term financial instruments 387,627 Disposal of short-term available-for-sale financial assets 499,856 Acquisition of short-term available-for-sale financial assets Disposal of long-term financial instruments 1,750,221 Acquisition of long-term financial instruments (1,079,355) Disposal of long-term available-for-sale financial assets 191,826 Acquisition of long-term available for sale financial assets (358,497) Acquisition of held-to-maturity financial assets (106,751) Disposal of investment in associates and joint ventures 355,926 Acquisition of investment in associates and joint ventures (25,293) Disposal of property, plant and equipment 308,354 Acquisition of property, plant and equipment (42,792,234) Disposal of intangible assets 733 Acquisition of intangible assets 1983,740) Cash outflow from business combinations (8,754,268) Cash inflow from business transfers 1,248,834 Others (28,455) Net cash outflow from investing activities (49,385,216) Cash flows from financing activities Net increase in short-term borrowings 2,730,676 Acquisition of treasury stock (8,350,424) Proceeds from long-term borrowings and debentures 998,311 Repayment of long-term borrowings and debentures (1.1 40,803) Dividends paid (6,804,297) Net increase in non-controlling interests 5,670 Net cash outflow from financing activities (12,560,867) Effect of exchange rate changes on cash and cash equivalents (1.782,270) Net (decrease) increase in cash and cash equivalents (1,566,312) Cash and cash equivalents Beginning of the period 32,111,442 End of the period 30,545,130 2,280,203 (84,306) 270,874 (24,142,973) 6,944 (1.047,668) (622.050) 19,936 (29,658,675) 1,351,037 17.707,938) 1,041,743 (252,846) (3,114,742) 13,232 (8,669,514) 417,243 9,474,698 22,6.36,744 32,111,442 The above consolidated statements of cash flows should be read in conjunction with the accompanying notes