Enhanced Investments - Financial Portal

Evaluation and

Compensation

Committee

4 Outside Directors

Kim, Shin-Bae

(Chairman)

Kim, Joo-Hyun

Chang, Seung-Wha

Kim, Sung-Jin

• Establishment of management succession and management training plan

• Establishment and execution of management evaluation and compensation plan

• Pre-deliberation on remuneration and retirement allowance of Directors

Finance and Related Party Transactions Committee

3 Outside Directors;

1 Inside Director

Kim, Sung-Jin

(Chairman)

Kim, Shin-Bae

Chang, Seung-Wha

Chang, In-Hwa

• Developing policies for the company’s internal values and financial soundness

• Prior deliberation in case of filing in, KRW 100 billion or more, litigation or arbitration, responding to reconciliation or mediation in the process of trial or taking any equivalent level of legal actions.

• External Investments

• Pre-deliberation on business units other than steel in terms of new external investments, capital increase or investment shares disposal of invested companies (KRW 100 billion or more. Investment and capital increase includes borrowings and liabilities that the company takes)

• Approval of new external investments on business units other than steel in terms of capital increase or investment shares disposal of invested companies (From KRW 10 billion to less than KRW 100 billion. Investment and capital increase includes borrowings and liabilities that the company takes.)

• Deliberation and resolution of donation from over KRW 100 million to KRW 1 billion and pre-deliberation of donation over KRW 1 billion

• Deliberation and resolution of bonds issuance or important borrowings (Including borrowings for refunding over KRW 100 billion)

• Pre-deliberation of bonds issuance or important borrowings (New long-term borrowings over KRW 100 billion)

• Deliberation and resolution on collateral provision of non-current assets

• Deliberation and resolution on debt acquisition of invested company such as security and guarantee (Excludes when the debt is in relation to steel investment)

• Internal transactions under Monopoly Regulation and Fair Trade Act (The act of providing or trading funds, securities, or assets with related party as business counterpart or for related party)

• Review of internal transaction-related problems and improvement measures

• Pre-deliberation of internal transaction (Amount KRW 100 billion or more)

• Deliberation and resolution of internal transaction (Amount from KRW 5 billion to less than KRW 100 billion)

• Appointment of Fair Trade Compliance Manager

Published: 2020-12-15 06:06:02 ET

<<< go to PKX company page

6-K 1 d21808d6k.htm FORM 6-K Form 6-K

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 December, 2020

Commission File Number: 1-13368

POSCO

(Translation of registrant’s name into English)

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

(Address of principal executive office)

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-translated documents of POSCO’s Quarterly Report for the year 2020

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
		(Registrant)

Date: December 15, 2020	By	/s/ Lim, Seung-Kyu
		(Signature)
		Name : Lim, Seung-Kyu
		Title : Executive Vice President

Exhibit 99.1

LOGO

QUARTERLY REPORT

(From January 1, 2020 to September 30, 2020)

THIS IS AN ENGLISH TRANSLATION OF THE QUARTERLY REPORT ORIGINALLY PREPARED IN THE KOREAN LANGUAGE (IN SUCH FORM AS REQUIRED BY THE KOREAN FINANCIAL SERVICES COMMISSION). THIS ENGLISH TRANSLATION IS NOT OFFICIAL AND IS PROVIDED FOR INFORMATION PURPOSES ONLY.

UNLESS EXPRESSLY STATED OTHERWISE, ALL INFORMATION CONTAINED HEREIN IS PRESENTED ON BOTH CONSOLIDATED AND NON-CONSOLIDATED BASIS IN ACCORDANCE WITH THE KOREAN-INTERNATIONAL FINANCIAL REPORTING STANDARDS (K-IFRS) WHICH DIFFER IN CERTAIN RESPECTS FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CERTAIN OTHER COUNTRIES, INCLUDING THE UNITED STATES. WE HAVE MADE NO ATTEMPT TO IDENTIFY OR QUANTIFY THE IMPACT OF THESE DIFFERENCES.

QUARTERLY REPORT

(From January 1, 2020 to September 30, 2020)

To: Korean Financial Services Commission and Korea Exchange

/s/ Chang, In-Hwa

Chang, In-Hwa

President and Representative Director

POSCO

6261 Donghaean-ro (Goedong-dong), Pohang-si, Nam-gu, Gyungsangbuk-do, Korea

Telephone: +82-54-220-0114

/s/ Lim, Seung-Kyu

Lim, Seung Kyu

Executive Vice President

POSCO

6261 Donghaean-ro (Goedong-dong), Pohang-si, Nam-gu, Gyungsangbuk-do, Korea

Telephone: +82-2-3457-0114

TABLE OF CONTENTS


I.	Overview	4

II.	Business	10

III.	Financial Statements	32

IV.	Corporate Governance	36

Attachment: Independent Auditors’ Review Report

(Consolidated and Separate)

I. OVERVIEW

1. Scope of Business

A. POSCO (the “Company”)

The Company’s business scope is as follows:

Business

(1) To manufacture, market, promote, sell and distribute iron, steel and rolled products;

(2) To engage in harbor loading and unloading, transportation and warehousing businesses;

(3) To engage in the management of professional athletic organizations;

(4) To engage in the supply of gas and power generation as well as in the distribution business thereof and in the resources development business;

(5) To engage in leasing of real estate and distribution businesses;

(6) To engage in the supply of district heating business;

(7) To engage in marine transportation, processing and sales of minerals within or outside of Korea;

(8) To engage in educational service and other services related to business;

(9) To engage in manufacture, process and sale of non-ferrous metal;

(10) To engage in technology license sales and engineering business; and

(11) To engage in all other conducts, activities or businesses which are related, directly or indirectly, to the attainment and continuation of the foregoing purposes

B. POSCO Enterprise Group

(1)	Name of the Enterprise Group: POSCO

(2)	Companies Belonging to the Enterprise Group

POSCO, POSCO CHEMICAL CO., LTD, POSCO INTERNATIONAL Corporation, POSCO COATED & COLOR STEEL Co., Ltd., POSCO ICT, POSCO M-TECH, Busan E&E Co., Ltd., Suncheon Eco Trans Co., Ltd., SNNC, eNtoB Corporation, UITrans LRT Co. Ltd., POSCO O&M Co., Ltd., POSCO Humans, POSCO ENGINEERING & CONSTRUCTION., LTD., POSCO Research Institute, POSCO A&C, TANCHEON E&E, Pohang Scrap Recycling Distribution Center Co., Ltd., POSCO NIPPON STEEL RHF JOINT VENTURE CO., Ltd., POSCO-Terminal Co., Ltd., POSCO ENERGY CO., LTD., Gale International Korea, LLC, POSCO Venture Capital Co., Ltd., Pohang Special Welding Co., Ltd., POSCO MITSUBISHI CARBON TECHNOLOGY, Samcheok Blue Power Co.,Ltd. (By change of name from POSPower Co., Ltd), Songdo Posco family Housing, POSCO Group University, POSCO Research & Technology, Pohang Techno Valley PFV Corporation, Songdo Development PMC (Project Management Company) LLC., Korea Fuel-Cell, POSCO SPS, P&O Chemical Co., Ltd.

(3)	Related Laws and Regulations

The Korea Fair Trade Commission has designated POSCO as an Enterprise Group subject to the limitations on Cross Shareholding and Debt Guarantee for Affiliates under the Monopoly Regulation and Fair Trade Act (the “MRFTA”).

LOGO Details

(a)

Prohibition on Cross Shareholdings (Article 9 (1) of the MRFTA)

(b)

Prohibition on Debt Guarantees for Affiliated Corporations (Article 10-2 of the MRFTA)

(c)

Prohibition on Shareholding of Venture Capitals for Subsidiaries (Article 9 (3) of the MRFTA)

(d)

Limitation of Voting Rights of Financial or Insurance Companies (Article 11 of the MRFTA)

(e)

Resolution of the Board of Directors and Publication on Large-Scale Intra-Group Transaction (Article11-2 of the MRFTA)

(f)

Disclosure of Important Facts such as Unlisted Shares (Article 11-3 of the MRFTA)

(g)

Disclosure of a corporate group (Article 11-4 of the MRFTA)

(h)

Report on Status of Shareholding (Article 13 of the MRFTA)

2. Business Organization

A. Highlights of the Company’s Business Organization

(1)	Location of the Headquarters: 6261 Donghaean-ro (Goedong-dong), Nam-gu, Pohang-si, Gyeongsangbuk-do, Korea

(2)	Steel Works and Offices

(a)

Pohang Steel Works: 6262 Donghaean-ro (Dongchon-dong), Nam-gu, Pohang-si, Gyeongsangbuk-do, Korea

(b)

Gwangyang Steel Works: 20-26 Pokposarang-gil (Geumho-dong), Gwangyang-si, Jeollanam-do, Korea

(c)

Seoul Office: POSCO Center, 440 Teheran-ro (Daechi-dong), Gangnam-gu, Seoul, Korea

(d)

Overseas Offices: In order to support international businesses, the Company operates six overseas offices as follows:

United Arab Emirates(Dubai), Iran(Teheran), Brazil(Rio de Janeiro), Argentina(Jujuy), European Union(Germany), and Australia(Perth).

(3)	Major Changes in the Board of Directors (as of March 27, 2020)

(a)

Inside Directors

•

Re-appointment : Chang, In-Hwa (Representative Director, President), Chon, Jung-Son (Senior Executive Vice President), Kim, Hag-Dong (Senior Executive Vice President) and Jeong, Tak (Senior Executive Vice President)

(b)

Outside Directors

•

Re-appointment : Chang, Seung-Wha

(c)

Audit Committee Member

•

New member : Pahk, Heui-Jae (Outside director)

(4)	Changes of the Major Shareholders of POSCO

(a)

Since January 30, 2007, National Pension Service holds the largest number of common shares of POSCO.

(b)

For further reference, please refer to the public disclosures of changes in common shares of the largest shareholder on Financial Supervisory Service website (http://dart.fss.or.kr) with the filing dates given below:

January 30, 2007, July 27, 2007, January 29, 2008, July 25, 2008, January 21, 2009, March 2, 2009, July 22, 2009, October 9, 2009, January 26, 2010, July 20, 2010, January 28, 2011, July 22, 2011, January 31, 2012, August 1, 2012, February 1, 2013, August 1, 2013, January 14, 2014, January 23, 2014, July 29, 2014,January 23, 2015, August 5, 2015, January 6, 2016, January 26, 2016, March 15, 2016, April 12, 2016, July 4, 2016, July 5, 2016, July 21, 2016, October 7, 2016, October 11, 2016, January 10, 2017, April 10, 2017, July 12, 2017, October 13, 2017, January 10, 2018, April 11, 2018, July 9, 2018, October 10, 2018, January 9, 2019, April 9, 2019, July 9, 2019, October 8, 2019, January 8, 2020, February 10, 2020, March 11, 2020, April 7, 2020, May 8, 2020, June 3, 2020, July 7, 2020, August 6, 2020, September 7, 2020, and October 8, 2020)

B. POSCO’s Merger, Acquisition and Handover of Businesses

(1)	March 2016 : Small scale merger of POSHIMETAL Co., Ltd into POSCO

(2)	May 2016 : Small scale merger of POSCO Green Gas Technology into POSCO

(3)	January 2019 : Small scale merger of POSCO Processing & Service Co., Ltd into POSCO

(4)	September 2019 : Small scale merger of By-Product Hydrogen Generation Business from POSCO ENERGY into POSCO after spin-off

C. Major Changes in Production Facilities

Refer to the ‘II. Business (5. Production and Facilities)’

3. Equity Capital

A. New Issuance of Registered Common Stock

[None]

4. Other Information Regarding Shares

A. Total Number of Shares


	(As of September 30, 2020)
Authorized Shares	Issued Shares
200,000,000		87,186,835

Currency of the Republic of Korea is Korean Won (“KRW”).

Par Value: KRW 5,000 per share

B. Treasury Stock Holding and Cancellation


								(As of September 30, 2020)
Method of Purchase	Type	Beginning Balance		Increased		Decreased		Cancelled		Ending Balance
Direct	Common		7,071,194		—		—		—		7,071,194
Trust Contract	Stock		—		1,675,079		—		—		1,675,079

Total			7,071,194		1,675,079		—		—		8,746,273

5. Voting Rights


			(As of September 30, 2020)
Classification	Number of Common Shares		Remarks
(1) Number of Issued Shares		87,186,835		—
(2) Shares without Voting Rights		8,746,273		Treasury stock and trust holding
(3) Shares with Voting Rights		78,440,562		—

6. Earnings and Dividends


					(In millions of KRW)
	2020.3Q		2019		2018
(Consolidated) Profit*		901,132		1,835,087		1,690,612
(Separate) Profit		640,476		1,175,712		1,072,592
Earnings per Share (Consolidated, KRW)		11,232		22,823		20,911
Cash Dividend Paid		277,722		801,156		800,009
Pay-out Ratio (Consolidated, %)		30.8		43.7		47.3
Dividend per Share (KRW)		3,500		10,000		10,000
Dividend Yield (%)		1.8		4.1		4.1

*	(Consolidated) Profit : Profit attributable to owners of the controlling company

7. Stock Prices and Trading Volumes

The stock prices and trading volumes of POSCO for the last 6 months are as follows.

A. The Korean Stock Market


								(KRW/share, In thousands of shares)
		April 2020		May 2020		June 2020		July 2020		August 2020		September 2020
Common share	Highest Price		201,500		184,500		203,000		202,000		210,500		196,000
	Lowest Price		155,000		168,000		174,000		178,500		184,500		185,000
	Average Price		171,200		175,763		188,614		189,522		198,075		189,690
Trading volume	Daily highest		994		899		1,149		810		656		953
	Daily lowest		99		245		205		189		196		200
	Monthly		10,230		9,060		9,582		8,143		7,123		7,250

B. New York Stock Exchange


								*(USD/ADS, In thousands of ADS)*
		April 2020		May 2020		June 2020		July 2020		August 2020		September 2020
American Depositary Share (ADS)	Highest Price		38.6		37.4		42.6		42.1		44.1		42.1
	Lowest Price		31.1		34.3		37.0		37.4		39.1		38.3
	Average Price		34.8		35.9		39.1		39.5		41.8		40.0
Trading volume	Daily highest		375.3		532.9		421.0		295.9		196.2		419.4
	Daily lowest		129.0		91.9		106.6		102.6		74.3		88.2
	Monthly		5,268		4,166		4,902		4,045		2,750		4,142

*	ADS : American Depositary Share representing one-fourth of one share of Common Stock

II. BUSINESS

1. Overview

A. Classification of Business

We classify our business into four segments:

Steel, Trading, Engineering & Construction, and Others.

B. Summary of Financial Status of Segment


									(In millions of KRW)
Segment	2020.3Q				2019				2018
Segment	Sales		Operating Income (Loss)		Sales		Operating Income (Loss)		Sales		Operating Income (Loss)
Steel		20,915,217		690,310		32,078,453		2,786,517		32,358,009		4,536,318
Trading		14,520,691		325,247		22,157,131		542,724		22,407,717		383,934
Engineering & Construction		4,917,113		297,004		6,944,629		338,865		6,769,410		411,489
Others		2,175,564		227,114		3,186,635		200,749		3,442,641		210,859

Total		42,528,585		1,539,675		64,366,848		3,868,855		64,977,777		5,542,600

2. Business Status of Segments

A. Steel

(1) Summary of Business

There are 69 consolidated companies in the steel segment, including 4 domestic companies including POSCO and POSCO C&C, and 65 overseas companies including POSCO (Zhangjiagang) Stainless Co., Ltd. in China and overseas processing centers. POSCO produces steel materials such as hot rolled, cold rolled and stainless steel at Pohang Works and Gwangyang Works. POSCO C&C is a company specializing in manufacturing surface-treated steel products, POSCO (Zhangjiagang) Stainless Co., Ltd., is a stainless steel sheet manufacturer and seller, and there are other overseas processing centers that process and sell steel materials.

The steel industry is a fundamental industry that has taken pivotal roles in the national economic development since the 1970s by supplying basic steel materials to demanding industries such as automobiles, shipbuilding, home appliances, construction, etc. The steel industry is a capital and technology-intensive industry that requires enormous initial investments.

The Korean steel market is tariff-free, and especially within the Northeast Asian region, there is little difference in logistics costs among Korea, China and Japan, so it can be viewed as an open market.

All iron ore and coking coal that are the main raw materials for steel manufacturing, are imported. In order to secure stable raw materials sourcing, the company is continuously increasing purchases through raw material development investments by acquiring shares of overseas raw materials companies.

Environmental regulations for the steel industry are being strengthened. To protect the environment, POSCO has continuously invested in environmental facilities and has been actively responding to future environmental changes such as low-carbon and green growth by commercializing the world’s first eco-friendly steel manufacturing method, FINEX and so on.

In the steel industry, automobiles, shipbuilding, and construction are the main demand industries, and steel products are used as raw materials for these demand industries. In terms of sales, the proportion of domestic sale is 54% of total sales and export sales are around 46%, and by export region, the proportion of China, Southeast Asia, and Japan is high, in the first half of 2020. POSCO maintains order based production and sales system, and to secure stable sales, the proportion of direct sales to customers in domestic sales is maintained at about 60%.

The company will focus on the following management activities:

First, in the steel business, the company will operate flexible production and sales system that can minimize the impact of production cuts along with extreme cost reduction. Second, the POSCO Group businesses will pursue continuous business evolution and focus on core businesses. Third, the company will endeavor to create symbiotic values, the core of realizing the corporate citizenship management philosophy. Fourth, the company will create safe and pleasant workplaces and maintain sound labor-management culture to realize higher labor productivity compared to competitors.

(2) Market Share


									(Millions of Tons, %)
Category	2020.3Q				2019				2018
Category	Production		Market share		Production		Market share		Production		Market share
Crude Steel Production		49.6		100		71.4		100		72.5		100
POSCO		26.4		53.1		38.0		53.2		37.7		52.0
Others		23.2		46.9		33.4		46.7		34.8		48.0

Source: World Steel Association (www.worldsteel.org)

B. Trading

(1) Market Share


			(Millions of US Dollars)
Category	2020.3Q		2019.3Q		Growth rate
All Trading Companies in Korea		370,969		405,875		-8.6	%
POSCO International Corp.		3,949		4,989		-19.4	%

Source: Korea International Trade Association

(2) Summary of Businesses

POSCO International and its consolidated subsidiaries engage in three major businesses; trading, energy and others. In addition, POSCO International maintains a global network of over 100 subsidiaries and branches in major overseas regions. In the case of the trading business, POSCO International has been actively developing and expanding new businesses in fields such as agro-commodities, LNG trading, and industrial materials based on the know-how accumulated over a long period of time in the traditional trading business and through its vast overseas networks. In the energy business, POSCO International conducts businesses such as natural gas and crude oil development, LNG infrastructure, natural resources and power generation infrastructure.

C. Engineering & Construction

POSCO E&C engages in primarily 4 businesses: construction, energy, civil engineering and plant.

In the construction business, based on its know-how in the construction of skyscrapers and commercial complexes, POSCO E&C involves in a new city and private complex development projects. In the energy business, it involves in various power generation plant projects including renewable energy projects. The civil engineering business is about constructing expressways, railroads and bridges. Plant business is the construction of integrated steel mills, EPC projects and industrial plants.

D. Others

(1) POSCO ENERGY

POSCO ENERGY started its commercial operation in February, 1972 as the only privately-owned power plant in Korea. Since the early 1990’s, POSCO ENERGY continuously remodeled and built additional power plants meeting the increased demand for electricity in Korea. POSCO ENERGY acquired the LNG terminal business from POSCO in 2019, providing an opportunity to expand the LNG value chain. The LNG terminal business operates stable business structure through businesses such as tank rental, small scale LNG business, and ship trial run. POSCO ENERGY plans to secure stable profit base through the expansion of the LNG terminal in the future and grow into a general energy company focused on gas and power.

(2) POSCO ICT

Based on the competitiveness in ICT, POSCO ICT has expanded Smart Factory and provided IT solutions to POSCO and POSCO subsidiaries. POSCO ICT has expanded Smart Factory based on the world’s first continuous process platform “PosFrame” and next-generation production optimization system “MES 3.0”. POSCO ICT has been actively applying smart technology for strategic businesses in manufacturing, logistics, trade, and energy sectors, such as building MES at the POSCO CHEMICAL’s anode and cathode material factory, spreading the Smart Management of POSCO International, and spreading the Intelligent Power Plant of POSCO Energy in order to promote the digital transformation of POSCO subsidiaries and other businesses.

(3) POSCO CHEMICAL

POSCO CHEMICAL operates mainly 3 businesses: refractory, quicklime & chemical and energy material. In the refractory business, POSCO CHEMICAL produces and maintains refractories. In the quicklime & chemical business, POSCO CHEMICAL produces quicklime and chemical products such as coal tar and light oil. In the energy material business, POSCO CHEMICAL provides cathode and anode materials which are the main components for secondary cells: cathode, anode, electrolyte and separation membrane. Due to environment-friendly policy with less carbon emission worldwide, demands for Energy Storage System and Electric Vehicle are expected to grow continuously.

(4) POSCO M-TECH

POSCO M-TECH is a specialized supplier of steel products packaging and steel supplementary materials such as aluminum deoxidizers. In the case of steel products packaging, POSCO M-TECH continuously develops packaging automated molding machines and applies environment-friendly packaging materials. In addition, aluminum deoxidizers engage in primarily 3 types : Pellet, Mini-Pellet and Ingot. POSCO M-TECH has expanded the sales of aluminum deoxidizers in overseas markets.

3. Key Products

A. Sales of Key Products (2020.3Q)


			(In hundred millions of KRW, %)
Business Area	Item	Specific Use	Total Sales			Ratio
Steel	Hot-rolled Product (HR)	Steel pipe, Shipbuilding, etc.		55,904			17.36
	Cold-rolled Product (CR)	Automobile , Home appliances, etc.		100,164			31.10
	Stainless Steel Products	Tableware, pipes, etc.		70,299			21.82
	Others	Plates, Wire rods, etc.		95,741			29.72
	Gross Sum			322,108			100.00
	Deduction of Internal Trade			(112,956	)

	Sub Total			209,152

Trading	Steel, Metal			175,147			73.19
	Chemical, Strategic Item, Energy			23,561			9.85
	Others			40,601			16.97
	Gross Sum			239,309			100.00
	Deduction of Internal Trade			(94,102	)

	Sub Total			145,207

Engineering & Construction	Domestic Construction	Architecture		32,427			57.61
		Plant		9,665			17.17
		Civil Engineering		4,253			7.56
		Others		—			0.00
	Overseas Construction			4,884			8.68
	Owned Construction			3,311			5.88
	Others			1,744			3.10
	Gross Sum			56,283			100.00
	Deduction of Internal Trade			(7,112	)

	Sub Total			49,171

Others	Electricity Sales, etc.			41,080
	Deduction of Internal Trade			(19,324	)

	Sub Total			21,756

Total Sum				425,286

B. Price Movement Trends of Key Products


				(In thousands of KRW/ Tons, KRW/kWh)
Business Area	Products	2020.3Q		2019		2018
Steel	Hot-rolled Product (HR)		616		695		707
Steel	Cold-rolled Product (CR)		756		800		807
Others	Electric Power		78		94		100
Others	Refractory		978		1,073		1,073
	Lime		106		111		108

Trade and Engineering & Construction businesses are not reflected on the table above due to difficulties in measuring the price movement trend.

[Steel]

(1) Criteria for Calculation

(a) Subjects for Calculation: Unit sales prices of the standard hot-rolled product and cold-rolled product

(b) Calculation Method and Unit: The average price of each product based on its total sales including the freight costs during the given period.

(2) Factors of Price Changes

Since 2016, prices have continued to rise, but after a slight decline in 2019 as the domestic and overseas demand industry worsened, prices fell sharply due to COVID-19 in 2020.

[Others]

(1) Criteria for Calculation

(a) Electric Power = Price of electric power / Total amount of power generated

(b) Refractory and lime: Average sales price including freight cost

4. Major Raw Materials

A. Current Status of Major Raw Materials


				(In hundred millions of KRW)
Business Area	Type of Purchase	Item	Specific Use	Purchase Amount (Portion, %)	Remarks
Steel	Raw Materials	Materials for Iron-making	Iron Ore for Blast Furnaces	77,206 (60.6)	Iron Ore, Coal
Steel	Raw Materials	Sub-materials	Sub-materials for Iron-making, Steelmaking	22,893 (18.0)	Iron Material, Alloy Iron, Non-ferrous Metal, Limestone, etc.
		Stainless Steel Materials	Key Materials for STS Production	27,325 (21.4)	Nickel, Ferrochrome, STS Scrap Iron, etc.
Engineering & Construction	Raw Materials	Ready-mixed Concrete	Construction of Structure	1,843 (20.5)
		Steel Reinforcement	Strengthening Concrete	1,468 (16.3)
		Cable	Electricity Transfer	169 (1.9)
		Steel Pile	Foundation of Structure	190 (2.1)
		Others	Construction of Pipe and Structure etc.	5,322 (59.2)
Others	Raw Materials	LNG	Material for Power Generation	6,827 (52.0)
		Limestone	Production of Lime	648 (4.9)
		Others	Engineering business etc.	5,666 (43.1)

B. Price Movement Trends of Major Raw Materials


				(In thousands of KRW)
Business Area	Category	2020.3Q		2019		2018
Steel	Iron Ore(per ton)		112		102		76
	Coal(per ton)		155		207		228
	Scrap Iron(per ton)		327		347		395
	Nickel(per ton)		15,666		16,148		15,074
Engineering & Construction	Ready-mixed Concrete (per m³)		63		63		63
	Steel Pile (per m)		102		136		146
	Steel Reinforcement (per kg)		1		1		1
	Cable (per m)		1		1		1
Others	LNG (per ton)		515		668		768
Others	Lime (per ton)		19		20		19

[Steel]

Price Movement Trend of Major Raw Materials

(1) Iron Ore


																			(In US Dollars/ Tons)
	’20.3Q		’20.2Q		’20.1Q		’19.4Q		’19.3Q		’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q
Trend of International Benchmark Price (Free On Board, “FOB”)		110		88		83		80		92		94		77		64		57		58		68		57

(2) Coal


																			(In US Dollars/ Tons)
	’20.3Q		’20.2Q		’20.1Q		’19.4Q		’19.3Q		’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q
Trend of International Benchmark Price (FOB)		115		118		155		140		161		203		206		221		188		190		229		204

(3) Scrap Iron


																			(In US Dollars/ Tons)
	’20.3Q		’20.2Q		’20.1Q		’19.4Q		’19.3Q		’19.2Q		’19.1Q		’18.4Q		’18.3Q		’18.2Q		’18.1Q		’17.4Q
Trend of Purchase Price (Cost and Freight, “CFR”)		289		254		274		270		290		312		325		343		350		364		379		344

(4) Nickel

’20.3Q

’20.2Q

’20.1Q

’19.4Q

’19.3Q

’19.2Q

’19.1Q

’18.4Q

’18.3Q

’18.2Q

’18.1Q

’17.4Q

Trend of London Metal Exchange (“LME”) Cash Price

USD

6.45 /lb

USD

14,210/ton

USD

5.54 /lb

USD

12,215/ton

USD

5.77 /lb

USD

12,723/ton

USD

7.01 /lb

USD

15,450/ton

USD

7.05 /lb

USD

15,540/ton

USD

5.56 /lb

USD

12,258/ton

USD

5.61 /lb

USD

12,369/ton

USD

5.22 /lb

USD

11,516/ton

USD

6.02 /lb

USD

13,266/ton

USD

6.56 /lb

USD

14,467/ton

USD

6.02 /lb

USD

13,276/ton

USD

5.25/lb

USD

11,584/ton

LME : London Metal Exchange

[Engineering and Construction]

(1) Criteria for Calculation


Products		Criteria for Calculation
Ready-mixed Concrete		Standard 25-210-15

Steel Pile		SPIRAL, 609.6, 12T, STP275, KS F 4602

Steel Reinforcement		High Tensile Deformed Bar SD400 D10mm

Cable		TFR-3, 0.6/1KV, 2.5SQ, 2core

[Others]

(1) Criteria for Calculation

LNG: The average price between LNG purchased from Korea Gas Corporation and LNG purchased directly from foreign suppliers

Refractory and lime: Purchase prices including freight costs

5. Production and Facilities

A. Production Capacity

[Steel]

(Thousands of Tons)

Business Area

Products

2020.3Q

2019

2018

Steel

Crude Steel

33,942

47,534

47,590

[Others]


	(Electric Power: MW/year, Lime: Thousands of Tons/year)
Business Area	Products		2020.3Q		2019		2018
Power Generation	Electric Power	Incheon		3,412		3,412		3,412
		Gwangyang		—		284		284
		Pohang		—		290		290
Lime	Lime			1,644		2,190		2,190

*	Lime production capacity is based on the 3^rd quarter of 2020.

B. Production Result and Capacity Utilization Rate

[Steel]

(1) Production


				(Thousands of Tons)
Products		2020.3Q		2019		2018
Crude Steel			29,839		42,948		42,867
Products	Hot-Rolled Steel		6,763		8,739		8,716
	Plate		5,272		7,191		7,432
	Wire Rod		1,953		2,756		2,867
	Pickled-Oiled Steel		1,712		2,967		2,946
	Cold-Rolled Products		5,020		7,416		8,551
	Coated Steel		4,587		6,526		7,163
	Electrical Steel		632		819		1,078
	Stainless Steel		2,942		3,850		3,978
	Others		3,444		5,761		5,903

	Total		32,326		46,025		48,634

The amount of products is the aggregate amount of POSCO’s production and production of POSCO subsidiaries, which may include interested parties’ transactions.

(2) Capacity Utilization Rate


						(Thousands of Tons, %)
	Company	Capacity		Production		Utilization Rate
Crude Steel Production	POSCO		30,454		26,356		86.5
	POSCO (Zhangjiagang) Stainless Co., Ltd.		825		749		90.8
	PT.KRAKATAU POSCO		2,250		2,351		104.5
	POSCO YAMATO VINA STEEL JOINT STOCK COMPANY (Former, SS VINA JOINT STOCK COMPANY)		413		383		92.7

	Total		33,942		29,839		87.9

Trade and Engineering & Construction businesses are not reflected on the table due to difficulties in measuring capacity, production and utilization rate of such businesses.

POSCO YAMATO VINA STEEL JOINT STOCK COMPANY, formerly SS VINA JOINT STOCK COMPANY, had a production capacity of crude steel 1,100 thousand tons/year: section steel 550 thousand tons/year and reinforcing bar 550 thousand tons/year. However, after the exit of the reinforcing bar business in November 2019, the current crude steel production capacity is 550 thousand tons/year.

[Others]

(1) Production Result

(Gwh, Thousands of Tons)

Business Area

Products

2020.3Q

2019

2018

Power Generation

Electric Power

9,831

15,928

15,297

Lime

1,723

2,542

2,511

(2) Capacity Utilization Rate

(Hour, %)

Business Area

Products

2020.3Q
Capacity

2020.3Q
Production

Utilization
Rate

Power Generation

Incheon Power Plant

6,576

3,891

59.2

(Thousands of Tons, %)

Business Area

Products

Capacity

Production

Utilization
Rate

Lime

1,644

1,723

105

C. Production Facilities

(1) The current status of production facilities


[Land]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation		Ending Book Balance
Steel		1,900,252		147,249		(7	)		—		2,047,494
Trade		171,177		877		(120,934	)		—		51,120
Engineering & Construction		25,528		912		(181	)		—		26,259
Others		429,102		17,240		(2,010	)		—		444,332


[Buildings]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		3,312,799		282,245		(24,231	)		(212,670	)		3,358,143
Trade		477,497		9,125		(81,122	)		(9,537	)		395,963
Engineering & Construction		72,102		2,314		—			(1,888	)		72,528
Others		353,056		128,506		(20,603	)		(16,395	)		444,564

[Structures]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		2,418,025		126,056		(11,730	)		(146,030	)		2,386,321
Trade		22,484		465		(20,503	)		(241	)		2,205
Engineering & Construction		13,175		386		(7,531	)		(1,176	)		4,854
Others		450,822		163,408		(2,592	)		(22,112	)		589,526

[Machinery and Equipments]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		15,309,982		1,858,853		(298,986	)		(1,602,668	)		15,267,181
Trade		398,184		8,990		(114,165	)		(22,623	)		270,386
Engineering & Construction		5,267		3,671		(3,028	)		(872	)		5,038
Others		1,504,831		371,203		(22,350	)		(88,288	)		1,765,396


[Vehicles]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		20,095		8,698		(3,330	)		(6,239	)		19,224
Trade		5,852		2,858		(1,526	)		(1,263	)		5,921
Engineering & Construction		783		1,772		(1,016	)		(1,315	)		224
Others		5,555		6,178		(1,955	)		(1,877	)		7,901

[Tools and Fixtures]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		48,984		32,698		(9,434	)		(17,682	)		54,566
Trade		11,647		1,829		(10,313	)		(1,683	)		1,480
Engineering & Construction		599		983		(293	)		(247	)		1,042
Others		9,521		7,085		(1,736	)		(3,196	)		11,674

[Equipment]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		64,739		29,026		(11,164	)		(15,209	)		67,392
Trade		30,675		3,505		(2,240	)		(7,036	)		24,904
Engineering & Construction		4,055		3,421		(2,753	)		(1,634	)		3,089
Others		30,663		12,683		(8,445	)		(4,487	)		30,414

[Financial Lease Assets]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		417,805		171,518		(2,899	)		(62,073	)		524,351
Trade		81,002		71,469		(15,537	)		(26,889	)		110,045
Engineering & Construction		216,170		67,670		(35,327	)		(32,189	)		216,324
Others		59,605		20,612		(3,730	)		(25,044	)		51,443


[Biological Assets]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		—		—		—			—			—
Trade		124,193		40,405		(7,898	)		(5,812	)		150,888
Engineering & Construction		—		—		—			—			—
Others		—		—		—			—			—

[Assets under Construction]								(In millions of KRW)
Business Area	Beginning Book Balance		Increased		Decreased			Depreciation			Ending Book Balance
Steel		1,436,769		1,772,350		(1,915,425	)		(12,811	)		1,280,883
Trade		105,280		23,777		(68,739	)		—			60,318
Engineering & Construction		23,060		45		(1,198	)		—			21,907
Others		364,638		174,554		(463,647	)		—			75,545

(2) New Facility Establishment, Purchase, Etc.

(a) Investments under Construction

[Steel]

(In hundred millions of KRW)

Company

Date

Project

Total
Investment

Invested
Amount

Amount
to Be
Invested

POSCO

Expansion/
Establishment

June 2011

~ December
2023

P) Establishment of by-product gas Power Plant

P) Establishment of #6 Coke plant

14,989

3,001

11,988

February
2017

~ July 2022

G) The renovation of #3 furnace

P) Establishment of coal storage (Silo)

18,097

8,937

9,160

P stands for Pohang Steel Works.

G stands for Gwangyang Steel Works.

Investments over KRW 10 billion are listed on the table.


[Others]				(In hundred millions of KRW)
Company		Date	Project	Total Investment		Invested Amount		Amount to Be Invested
POSCO ICT	Establishment/Expansion	January 2020 ~ December 2020	Expansion of SM server		316		70		246
		January 2020 ~ December 2020	System improvement, IT facility purchase, etc.		182		49		133
POSCO CHEMICAL	Establishment/Expansion	November 2018 ~ November 2020	Expansion of production lines in #2 anode material factory		1,605		1,594		11
	Establishment/Expansion	November 2019 ~ November 2021	The 2^nd stage of production line up expansion in #2 anode material factory		1,657		231		1,426
	Establishment/Expansion	July 2020 ~ November 2022	The 3^rd stage of cathode material factory in Gwangyang		2,895		61		2,834
	Establishment/Expansion	February 2020 ~ May 2024	Establishment of artificial graphite anode factory		2,177		11		2,166
	Establishment/Expansion	November 2019 ~ October 2021	Renovation of refractory factory for production increase		483		87		396
POSCO Energy	Establishment/Expansion	March 2020 ~ December 2021	Expansion of evaporator for Gwangyang LNG Terminal		360		2		358

Investments over KRW 10 billion are listed on the table as of September 30, 2020.

6. Product Sales


[Steel]								(In hundred millions of KRW)
Items		2020.3Q			2019			2018
Domestic	Hot-Rolled Products		27,537			42,605			48,879
	Cold-Rolled Products		27,112			39,716			39,901
	Stainless Steel		16,904			21,167			21,281
	Others		46,598			77,026			77,230
Export	Hot-Rolled Products		28,366			41,064			35,231
	Cold-Rolled Products		73,052			125,658			124,449
	Stainless Steel		53,395			80,181			79,931
	Others		49,144			70,667			77,310
Total	Gross Sum		322,108			498,084			504,212
	Internal Transaction		(112,956	)		(177,299	)		(180,632	)

	Total		209,152			320,785			323,580


[Trading]								(In hundred millions of KRW)
Items		2020.3Q			2019			2018
Domestic	Merchandise		24,569			29,315			33,706
	Product		1,826			5,120			4,702
	Others		202			1,101			1,483
Export	Merchandise		48,218			69,347			87,124
	Product		455			205			768
	Others		1			638			736
Trades among the 3 countries			164,038			270,522			254,670
Gross Sum			239,309			376,247			383,189
Internal Transaction			(94,102	)		(154,677	)		(159,112	)

Total			145,207			221,571			224,077


[Engineering & Construction]					(In hundred millions of KRW)
Items		2020.3Q			2019			2018
Domestic	Building		32,427			44,681			37,363
	Plant		9,665			10,953			10,238
	Civil Engineering		4,253			6,098			5,129
	Others		—			—			337
Overseas			4,884			7,190			9,471
Own Construction			3,343			5,712			7,568
Other Subsidiary company sales			1,713			2,248			3,101
Gross Sum			56,283			76,880			73,207
Internal Transaction			(7,112	)		(7,434	)		(5,513	)

Total			49,171			69,446			67,694


[Others]					(In hundred millions of KRW)
Items		2020.3Q			2019			2018
Electric Power Sales			21,756			31,866			34,427

7. Derivatives

We use forward exchange contracts to hedge against the exchange rate risk for foreign currency loans.

As of September 30, 2020, we assessed the fair value of our forward exchange contracts to be USD 0.7 billion (expiring October 2020), USD 0.55 billion (expiring April 2021), and a currency swap contracts to be USD 0.5 billion(expiring August 2023), USD 0.5 billion(expiring July 2024), USD 0.5 billion(expiring November 2022), USD 0.5 billion(expiring January 2023), USD 0.44 billion(expiring January 2025), and EUR 0.5 billion(expiring January 2024).

We recognized KRW 33,955 million of gain on valuations of forward exchange contracts. Also, we recognized KRW 119,749 million of valuation gain on currency swap contracts. The transaction gain of currency swap contracts is KRW 6,564 million.

8. Significant Contracts


Company	Contract	Date	Remarks
POSCO	Small scale merger with POSHIMETAL Co.,Ltd.	December 2015	1) Purpose: Enhancing the shareholders’ value by increasing operational efficiency and creating synergies between businesses 2) Information: POSCO holds 100% a stake in POSHIMETAL Co.,Ltd. The merger ratio is 1:0, and POSCO will not be issuing new shares 3) Conclusion of a contract: December 23, 2015 4) Date of merger: March 1, 2016 5) Registration of merger: March 15, 2016

	Small scale merger with POSCO GREEN GAS TECHNOLOGY	February 2016	1) Purpose: Enhancing the shareholders’ value by increasing operational efficiency and creating synergies between businesses 2) Information: POSCO holds a 100% stake in POSCO GREEN GAS TECHNOLOGY. The merger ratio is 1:0, and POSCO will not be issuing new shares 3) Conclusion of a contract: February 26, 2016 4) Date of merger: May 1, 2016 5) Registration of merger: May 16, 2016

	JV Agreement for construction of steel mills for cold rolled steel products and plated steel products	April 2016	1) Purpose: Expansion of sales of automotive steel in Southwest province of China 2) Information: POSCO signed JV contracts with Chongqing Iron and Steel by holding 10% stake in Chongqing CISL High Strength Cold Rolling Steel Co.Ltd, and 51% stake in Chongqing POSCO CISL Automotive Steel Co., Ltd 3) Execution of JV Agreements: April 6, 2016 4) Termination JV Agreements: September, 2017 5) Liquidation of Steel mills set off: November 13, 2017 6) Completion of liquidation: June 28, 2018

	Small scale merger of POSCO Processing & Service	August 2018	1) Purpose: To increase operational efficiency 2) Information: POSCO Processing & Service(POSCO P&S) is merged into POSCO • The merger ratio is 1 : 0.1456475 (POSCO : POSCO P&S) • POSCO will distribute its treasury shares to the shareholders of POSCO P&S, and new shares will not be issued. 3) Conclusion of a contract: August 23, 2018 4) Date of merger: January 1, 2019 5) Registration of merger: February 2, 2019

	Small scale merger with By-product Hydrogen Generation Business after spin-off from POSCO ENERGY	April 2019	1) Purpose: To increase operational efficiency 2) Information: By-product Hydrogen Generation Business of POSCO ENERGY will be merged into POSCO • The merger ratio is 1 : 0.1145836 (POSCO : POSCO ENERGY) 3) Conclusion of a contract: April 16, 2019 4) Date of merger: September 1, 2019 5) Registration of merger: September 9, 2019

	LNG Terminal Business Transfer Agreement	April 2019	1) Business transferee: POSCO ENERGY 2) Conclusion of a contract: April 16, 2019 3) Date of transfer: September 1, 2019 4) Transfer amount : KRW 608,019 million 5) Information: LNG Terminal Business of POSCO in Gwangyang will be transferred to POSCO ENERGY


POSCO International Corporation	Investment on the 2^nd stage development of A-1 / A-3 block in Myanmar gas field	June 2018	1) Investment amount: KRW 511,709,005,500 (USD 473,235,000) 2) Development period: August 1, 2017 ~ December 31, 2022 3) Gas production schedule: By additionally developing Shwe gasfield and newly developing Shwe Phyu gasfield, production will start in 2021 from Shwe and 2022 from Shwe Phyu 4) Other Information • Location: North-west offshore, Myanmar • This investment is the 2^nd stage of development, which consists of 3 stages in Myanmar gas field development. The purpose of investment is to maintain current gas production level by completing more drilling and adding more production wells to current Shwe platform. • In July 2018, facility design and construction began, and production is scheduled to start in 2021 in Shwe and in 2022 in She Phyu. But the development period includes the duration of feasibility test and basic design from August 2017 to May 2018. • POSCO International Corporation : 51.0% • ONGC VIDESH(Oil and Natural Gas Corporation Videsh Limited) : 17.0% • MOGE(Myanmar Oil and Gas Enterprise): 15.0% • GAIL (India) Limited : 8.5% • KOGAS(Korea Gas Corporation): 8.5% • Investment size of USD 473,235 thousand, applying the exchange rate of 1USD=1,081.30 KRW, was disclosed on the date of the BOD resolution (May 31, 2018). • Detailed information and future timeline on this resource development investment is subject to change. Disclosure date : May 31, 2018 (Decision on natural resources investment)

	Small scale merger with Steel segment after spinoff from POSCO Processing &Service	November 2016	1) Purpose: Expanding the company’s capabilities in steel trading business and enhancing global competitiveness of the company’s steel business 2) Information: POSCO International merges with the steel segment and others of POSCO P&S at the merger ratio of 1: 0.4387662, after the spin off from POSCO P&S 3) Conclusion of a contract: November 4, 2016 4) Date of merger: March 1, 2017 5) Registration of merger: March 2, 2017

	Split-off of Domestic steel processing businesses	October 2019	1) Purpose : To specialize in steel processing business by splitting-off business division 2) Method : Split-off 3) Resolution date of Board of Directors : October 25, 2019 4) Shareholders’ meeting for approval : March 30, 2020 5) Date of Split-off : March 31, 2020 6) Registration date of Split-off : April 3, 2020

POSCO ENGINEERING & CONSTRUCTION	Small scale merger with POSCO ENGINEERING CO., LTD.	November 2016	1) Purpose: Achieving sustainable profit and growth by enhancing competitiveness 2) Information: POSCO E&C merges with POSCO Engineering at the merger ratio of 1:0, and POSCO E&C will not be issuing new shares 3) Conclusion of a contract: November 23, 2016 4) Date of merger: February 1, 2017 5) Registration of merger: February 14, 2017

POSCO O&M	Small scale merger with Blue O&M and MegaAsset	February 2019	1) Purpose: Enhancing foundation of growth by improving management efficiency and creating synergies among businesses 2) Information: POSCO O&M merges with Blue O&M and MegaAsset 3) Date of merger: February 1, 2019 4) Registration of merger: February 11, 2019


POSCO ENERGY	Contract of Shares Transfer	July 2018	1) Contract Parties: Nonghyup Bank(The third agent of KIAMCO PowerEnergy Private Special Assets Investment Trust), Doosan Heavy Industries & Construction, POSCO E&C, Industrial Bank of Korea(The first agent of Multi Asset POSPower Samcheok coal-fired private investment trust) 2) Signed Date: July, August, 2018 3) Contract Amount : KRW 343,706 million 4) Information: Contract of shares transfer for disposal of 68.5%(July) and 2.5%(August) POSPower shares

	Spin-off By-product Hydrogen Generation Business for merger into POSCO	April 2019	1) Contract counterpart: POSCO 2) Conclusion of a contract: April 16, 2019 3) Date of merger: September 1, 2019 4) Merger payment : KRW 1,163,692 million (No issuance of new shares from POSCO) 5) Information : POSCO merges with Hydrogen Generation Business of POSCO ENERGY at the merger ratio of 1:0.1145836

	LNG Terminal Business Transfer Agreement	April 2019	1) Business transferor: POSCO 2) Conclusion of a contract: April 16, 2019 3) Date of transfer: September 1, 2019 4) Transfer amount : KRW 608,019 million 5) Information: LNG Terminal Business of POSCO in Gwangyang will be transferred to POSCO ENERGY

	Merger	May 2020	1) Contract counterpart : PSC Energy Global Co., Ltd. 2) Signed date : May 26, 2020 3) Date of merger : August 1, 2020 4) Merger ratio : 1.0000000 : 0.0000000 5) Information : POSCO ENERGY merges PSC Energy Global Co., Ltd., a wholly owned subsidiary of POSCO ENERGY

POSCO YAMATO VINA STEEL JOINT STOCK COMPANY (Former, SS VINA JOINT STOCK COMPANY	Joint stock contract with YAMATO KOGYO CO., LTD. and SIAM YAMATO STEEL CO., LTD. to improve business structure	March 2020	1) Purpose: To improve business structure by collaborating with leading company in section steels 2) Information: POSCO’s 100% share of POSCO SS VINA changes to 51% YAMATO KOGYO CO., LTD. takes 30% of shares and SIAM YAMATO STEEL CO., LTD. takes 19% of shares. 3) Conclusion of a contract: March 18, 2020 4) Registration of joint stock company : April 28, 2020

9. Research and Development

A. Research and Development (“R&D”) Organization


Business Area	Company	Organization
Steel	POSCO	Steel Production and Technology Strategy Office
		Safety & Environmental Planning Office
		Technical Research Laboratories
		Steel Product Research Lab
		Process and Engineering Research Lab
		Automotive Steel Research Lab
		Steel Solution Research Lab
	POSCO COATED & COLOR STEEL Co,. Ltd.	R&D Center
	POSCO (Zhangjiagang) Stainless Co., Ltd.	R&D Center
Trading	POSCO SPS	Molding R&D Center
Trading	POSCO SPS	Stainless Quality Technology Group
Engineering & Construction	POSCO Engineering & Construction,. LTD.	R&D Center
Engineering & Construction	POSCO A&C	R&D Center
Others	POSCO ENERGY Co,. LTD	Renewable Energy Business Development Office
	POSCO ICT	R&D Center
	POSCO CHEMICAL	R&D Center
	POSCO CHEMICAL	Energy Material R&D Center
	POSCO M-TECH	R&D Center

B. R&D Expenses in 2020.3Q (In millions of KRW)


Category	Business Area
Category	Steel		Trade		Engineering & Construction		Others			Total
Selling and Administrative Cost		53,454		55		2,978		22,144			78,631
Manufacturing Cost		253,454		45		757		104			254,360
R&D Cost (Intangible Assets)		20,720		—		—		649			21,369
Total*		327,628		100		3,735		22,897			354,360
Government Subsidy		—		—		277		—			277
R&D/Sales Ratio (%)		1.57		0.00		0.08		1.0	%		0.83

*	Total includes government subsidy.

III. Financial Statements

1. Consolidated Financial Statements

A. Summary


							(In millions of KRW)
Account	2020.3Q			2019			2018
	As of September 30, 2020			As of December 31, 2019			As of December 31, 2018
[Total current assets]		38,248,904			34,842,374			33,651,002
Cash and cash equivalents		6,769,118			3,514,872			2,643,865
Other receivables, net		1,522,021			1,581,517			1,385,629
Other short-term financial assets		11,239,316			8,996,049			8,081,096
Trade accounts and notes receivable, net		8,893,533			9,078,351			9,282,609
Inventories		9,020,668			10,920,320			11,499,928
Other current assets		804,248			751,265			757,875
[Total non-current assets]		43,842,342			44,216,287			44,597,263
Other receivables, net		1,203,646			1,140,878			863,240
Other long-term financial assets		1,563,582			1,669,389			1,647,898
Investments in associates and joint ventures		4,001,129			3,927,755			3,650,003
Property, plant and equipment, net		29,850,845			29,925,973			30,018,273
Intangible assets, net		4,722,656			4,908,473			5,170,825
Other non-current assets		2,500,484			2,643,819			3,247,024
Total assets		82,091,246			79,058,661			78,248,265
[Total current liabilities]		18,411,626			16,323,690			18,937,985
[Total non-current liabilities]		15,889,220			14,940,264			12,550,729
Total liabilities		34,300,846			31,263,954			31,488,714
[Equity attributable to owners of the controlling company]		44,436,804			44,471,873			43,371,260
Share capital		482,403			482,403			482,403
Capital surplus		1,316,364			1,376,251			1,410,551
Hybrid bonds		199,384			199,384			199,384
Retained earnings		45,476,229			45,080,118			44,216,018
Other equity attributable to owners of the controlling company		(3,037,576	)		(2,666,283	)		(2,937,096	)
[Non-controlling Interests]		3,353,596			3,322,834			3,388,291
Total equity		47,790,400			47,794,707			46,759,551


	From January 2020 to September 2020		From January 2019 to December 2019		From January 2018 to December 2018
Revenue		42,528,585		64,366,848		64,977,777
Operating profit		1,539,675		3,868,855		5,542,600
Profit		1,053,572		1,982,637		1,892,064
[Profit attributable to owners of the controlling company]		901,132		1,835,086		1,690,612
[Profit attributable to non-controlling interests]		152,440		147,551		201,452
Total comprehensive Income		1,003,856		2,129,105		1,463,535
[Total comprehensive income attributable to owners of the controlling company]		849,730		1,997,731		1,271,495
[Total comprehensive income attributable to non-controlling interests]		154,126		131,374		192,040
Earnings per share(KRW)		11,232		22,823		20,911
Number of Consolidated Companies		167		164		173

B. The Standards Used for Reporting the Financial Statements

The Company prepared its financial statements in accordance with the Korean-International Financial Reporting Standards (the “K-IFRS”) and applied it to each Company’s final financial statements.

C. Consolidated Financial Statements

Refer to the attached Condensed Consolidated Financial Statements for the Condensed Consolidated Statements of Financial Position as of September 30, 2020, Condensed Consolidated Statements of Comprehensive Income (loss), Condensed Consolidated Statements of Changes in Equity, Condensed Consolidated Statements of Cash Flows for the nine-month period ended September 30, 2020, and Notes

2. Separate Financial Statements

A. Summary


							(In millions of KRW)
Account	2020.3Q			2019			2018
	As of September 30, 2020			As of December 31, 2019			As of December 31, 2018
[Total current assets]		20,873,341			18,216,066			16,796,400
Cash and Cash equivalents		2,986,906			978,139			259,219
Trade accounts and notes receivable, net		3,686,876			3,987,041			3,968,372
Other receivables, net		275,300			321,352			206,432
Other short-term financial assets		9,995,881			7,858,979			7,025,143
Inventories		3,852,919			4,988,530			5,288,009
Other current assets		75,459			82,025			49,225
[Total non-current assets]		37,452,398			37,494,700			37,329,580
Other receivables, net		92,904			56,468			57,767
Other long-term financial assets		1,124,502			1,257,896			1,176,757
Investments in Subsidiaries, associates, and joint ventures		15,212,632			15,069,857			15,121,339
Property, plant and equipment, net		20,085,560			20,132,199			20,154,334
Intangible assets, net		667,804			708,915			645,222
Other non-current assets		268,996			269,365			174,161
Total assets		58,325,739			55,710,766			54,125,980
[Total current liabilities]		5,646,184			3,331,446			3,895,973
[Total non-current Liabilities]		7,310,016			6,765,135			4,957,905
Total liabilities		12,956,200			10,096,581			8,853,878
[Share capital]		482,403			482,403			482,403
[Capital surplus]		1,339,289			1,252,220			1,154,775
[Hybrid bonds]		199,384			199,384			199,384
[Retained earnings]		45,521,725			45,372,411			45,175,459
[Other equity]		(2,173,262	)		(1,692,233	)		(1,739,919	)
Total equity		45,369,539			45,614,185			45,272,102


Account	2020.3Q		2019		2018
	From January 2020 to September 2020		From January 2019 to December 2019		From January 2018 to December 2018
Revenue		19,432,566		30,373,511		30,659,425
Operating profit		611,499		2,586,359		3,809,376
Profit		640,476		1,175,712		1,072,592
Earnings per share(KRW)		7,965		14,592		13,186

B. The Standards Used for Reporting the Financial Statements

The company prepared its financial statements in accordance with the Korean—International Financial Reporting Standards (the “K-IFRS”).

C. Separate Financial Statements

Refer to the attached Condensed Separate Financial Statements for the Condensed Separate Statements of Financial Position as of September 30, 2020, Condensed Separate Statements of Comprehensive Income (loss), Condensed Separate Statements of Changes in Equity, Condensed Separate Statements of Cash Flows for the nine-month period ended September 30, 2020, and Notes.

IV. CORPORATE GOVERNANCE

1. Overview of Corporate Governance

A. Board of Directors (“BoD”)

(1) Board of Directors

The Board of Directors consists of five inside directors (Choi, Jeong-Woo, Chang, In-Hwa, Chon, Jung-Son, Kim, Hag-Dong and Jeong, Tak) and seven outside directors (Chung, Moon-Ki, Bahk, Byong-Won, Kim, Joo-Hyun, Kim, Shin-Bae, Chang, Seung-Wha, Kim, Sung-Jin and Pahk, Heui-Jae).

The Board of Directors manages the following five Special Committees:

(a)

Director Candidate Recommendation and Management Committee

(b)

Evaluation and Compensation Committee

(c)

Finance and Related Party Transactions Committee

(d)

Audit Committee

(e)

Executive Management Committee

Composition of the Special Committees under the BoD and their Functions(as of November 16, 2020)

Category

Composition

Directors

Major Functions

Director Candidate Recommendation and Management Committee

3 Outside Directors,

1 Inside Director

Kim, Joo-Hyun

(Chairman)

Bahk, Byong-Won

Pahk, Heui-Jae

Chon, Jung-Son

• Qualification review of Outside Director candidates and recommendation to the general meeting of shareholders

• Preliminary review and qualification review of Inside Director candidates

• Preliminary deliberation on appointment of members of Special Committees

• Pre-deliberation of the appointment of Representative Directors other than the CEO and the Representative Director

• Operation of Outside Director Candidate Recommendation Advisory Panel

• Other matters necessary for recommending candidates for Outside Directors

• Agenda development and establishment of operating standards of the BoD and Special Committees

• Pre-deliberation on revision or repeal of the Board of Directors Regulations

• Pre-deliberation of the composition and operation of the Special Committees under the BoD

(2)	List of Outside Directors (As of September 30, 2020)


Name	Experience	Relation with Majority Shareholder	Remarks
Chung, Moon-Ki	• Professor in Accounting, Sungkyunkwan University (2016~Present) • Partner and Chief Quality Officer, Samil PwC (1981~2012) • Committee Member, Accounting Review Committee of Financial Supervisory Service • Ph.D. in Accounting, Sungkyunkwan University	None	Chairman of the Board of Directors

Bahk, Byong-Won	• Honorary Chairman of Korea Employers Federation (March 2018~Present) • Chairman of Korea Employers Federation (February 2015 ~ February 2018) • Chairman of The Korea Federation of Banks (November 2011 ~ November 2014) • Chairman & CEO Woori Financial Group (March 2007 ~ June 2008) • MA in Economics, University of Washington (1985)	None

Kim, Joo-Hyun	• President & CEO, The Financial News (April 2017 ~ Present) • President, Future Korea Institute, Kookmin University (May 2016 ~ March 2017) • President & CEO, Hyundai Research Institute (January 2004 ~ April 2014) • Ph.D. in Department of Finance, College of Business, Arizona State University (1989)	None

Kim, Shin-Bae	• Vice Chairman, SK Group (January 2010 ~ February 2013) • President, Korea IoT (Internet of Things) Association (March 2005 ~ March 2012) • President and CEO, SK Telecom (March 2004 ~ December 2008) • M.B.A., Wharton School, University of Pennsylvania (1985)	None

Chang, Seung-Wha	• Dean of Seoul National University School of Law (June 2018 ~ Present) • Professor of Law, Seoul National University (1995 ~ Present) • World Trade Organization(WTO) as the Appellate Body Member (May 2012 ~ September 2016) • Member, International Chamber of Commerce(ICC) Court of Arbitration (2000 ~ 2013) • LL.M and Doctorate in International Trade Law from Harvard Law School (1994)	None

Kim, Sung-Jin	• Adjunct Professor at Department of Economics, Seoul National University (2011 ~ Present) • Minister of Maritime Affairs and Fisheries (2006 ~ 2007) • Administrator of the Small and Medium Business Administration (2004 ~ 2006) • Ph.D. in Economics Kansas State University (1991)	None

Pahk, Heui-Jae	• Professor in Mechanical & Aerospace Engineering, Seoul National University (March 1993 ~ Present) • Chairman of the Board, Korea Youth Foundation (May 2016 ~ Present) • Head of R&D Strategic Planning, Ministry of Trade, Industry and Energy (April 2013 ~ April 2016) • SNU Precision CEO (February 1998 ~ December 2016) • Ph.D in Mechanical Engineering, Seoul National University (1990)	None

(3)	List of Key Activities of the Board of Directors (January 1, 2020 ~ November 16, 2020)


No.	Date	Agenda	Approval
1	January 31	• Deliberation Agenda 1. Approval of the 52^nd financial statements and schedule for the general meeting of shareholders • Report Agenda 1. The progress on implementing resolution made by the Board of Directors for the fiscal year of 2019 2. Business performance of the fiscal year of 2019 3. Report on internal control over financial reporting 4. Assessment on the effectiveness of internal control over financial reporting	All 1 Case Approved

2	February 21	• Deliberation Agenda 1. Agendas for the 52^nd general meeting of shareholders 2. Recommendation of inside director candidates (Candidates other than representative director CEO)	All 2 Cases Approved

3	March 27	• Deliberation Agenda 1. Appointment of the Chairman of the Board of Directors 2. Appointment of the Special Committee Members 3. Designation of Representative Directors and presenting positions to Inside Directors 4. Donation to help organizations and institutions against COVID-19 virus	All 4 Cases Approved

4	April 10	• Deliberation Agenda 1. Decision on contract for share repurchase trust	All 1 Case Approved

5	May 8	• Deliberation Agenda 1. Resolution on the 1st quarter dividend for the fiscal year of 2020 2. Transaction Plans with affiliates for the fiscal year of 2020 • Report Agenda 1. The business performance of the first quarter of 2020 2. The progress and plan of venture platform 3. The performance and assessment of Board of Directors for 2019 4. Plan for POSCO Group logistics integration	All 2 Cases Approved

6	August 7	• Deliberation Agenda 1. Resolution on the 2nd quarter dividend for the fiscal year of 2020 • Report Agenda 1. The progress on implementing resolution made by the Board of Directors for the fiscal year of 2020 2. Business performance of the 2^nd quarter of the fiscal year of 2020 and yearly outlook 3. Plans on climate change and climate report publication 4. Plan to build sculptures in Pohang Hwanho Park	All 1 Case Approved

7	November 6	• Deliberation Agenda 1. Resolution on the 3rd quarter dividend for the fiscal year of 2020 2. Participation in POSCO CHEMICAL’s capital increase with consideration 3. Contribution to support for heavy rain damage recovery 4. Operation of the CEO Candidate Recommendation Committee • Report Agenda 1. Business performance of the 3^rd quarter of 2020 and the yearly outlook	All 4 Cases Approved

Major Activities of Outside Directors on the Board of Directors (January 1, 2019 ~ November 16, 2020)


No.	Date	Participation of the Outside Directors (the Number of total Outside Directors)	Remarks
1	January 31	7 (7)	—
2	February 21	7 (7)	—
3	March 27	6 (7)	Absence : Chung, Moon-Ki
4	April 10	6 (7)	Absence : Chung, Moon-Ki
5	May 8	7 (7)	—
6	August 7	7 (7)	—
7	November 6	7 (7)	—

(4) Special Committees under the BoD and Their Activities (From January 1, 2020 to November 16, 2020)

•

Major Activities of Director Candidate Recommendation Committee (January 1, 2020~March 27, 2020 before the Board of Directors meeting)


Date	Agenda	Approval
February 14 & 21, 2020	[Deliberation] Qualification Assessment and Recommendation of Outside Director Candidates	Approved
February 21, 2020	[Preliminary Review] Qualification Assessment of Inside Director Candidates	—
March 27, 2020	[Preliminary Review] 1. Appointment of the Special Committees Members 2. Appointment of the Representative Directors	— —

•

Major Activities of Evaluation and Compensation Committee (January 1, 2020~March 27, 2020 before the Board of Directors meeting)


Date	Agenda	Approval
January 22, 2020	[Deliberation Agenda] Evaluation of the business performance for the fiscal year of 2019	Approved

•

Major Activities of Finance and Related Party Transaction Committee (January 1, 2020~November 16, 2020)


Date	Agenda	Approval
January 31, 2020	1. Contribution to the Internal Labor Welfare Fund 2. Contribution to the Mutual Cooperation Fund 3. Donation to help organizations and institutions against COVID 19 virus	Approved Approved Approved
May 6, 2020	1. Payment guarantee plan for POSUK 2. Payment guarantee plan for POSCO-TCS	Approved Approved
May 6 & 8, 2020	Plan for POSCO Group logistics integration	Approved
August 6, 2020	[Deliberation] Venture fund investment to discover new growth business [Report] Fair Trade Compliance Program Performance and Plan	Approved —
November 5, 2020	[Preliminary Review] Participation in POSCO CHEMICAL’s capital increase with consideration [Deliberation] 1. Partial disposal of shares due to listing of CM, a Brazilian invested company 2. Payment guarantee plan of POSCO-Maharashtra 3. Payment guarantee plan of POSCO ASSAN TST 4. Lease contract for the lime facilities	— Approved Approved Approved Approved

•

Major Activities of Executive Management Committee (January 1, 2020 ~ November 16, 2020)


Date	Agenda	Approval
January 22, 2020	[Preliminary Review] Establishment of #6 Cokes Oven in Pohang works	—
February 18, 2020	Establishment of #6 Cokes Oven in Pohang works	Approved
March 17, 2020	Capital increase for IJPC 3# factory in Indonesia	Approved
May 19, 2020	1. Construction of air pollutant measurement system in both steel works 2. Carbon credit trading plan 3. Gwangyang CEM plant suspension facility disposal	Approved Approved Approved
August 25, 2020	Gwangyang #4 blast furnace 2^nd stage reparation	Approved
October 27, 2020	1. Replacement of the exhaust gas treatment facility on convert furnace in Gwangyang #2 steel-making factory 2. Mass production system establishment in Gwangyang #7CGL Al-HPF	Approved Approved

B. Audit Committee

(1) Composition of the Audit Committee

Name

Qualifications

Remarks

Bahk, Byong-Won

Chung, Moon-Ki

Pahk, Heui-Jae

Satisfies the requirements stipulated in the Korean Commercial Act

Chairman

—

(2) Major Activities of the Audit Committee (January 1, 2020 ~ November 16, 2020)


Session	Date	Agenda	Approval
1	January 30	• Deliberation Agenda 1. Assessment of internal control over financial reporting 2. Approval of audit and non-audit services for POSCO and subsidiaries 3. Assessment of the Audit Committee for the fiscal year of 2019 • Report Agenda 1. Report of operation of internal control over financial reporting in 2019 2. The result of internal audit for the fiscal year of 2019 and audit plans for the fiscal year of 2020 3. The assessment on the executive and employees’ conformity to the code of ethics for the fiscal year of 2019	All 3 Cases Approved
2	February 20	• Deliberation Agenda 1. Approval of audit and non-audit services for POSCO’s subsidiaries abroad 2. Internal audit result for the 52^nd term • Report Agenda 1. External audit result for the 52^nd term	All 2 Cases Approved
3	February 21	Review of agenda for general meeting of shareholders	Approved

•

At the 52^nd general meeting of shareholders held on March 27, 2020, due to Chang, Seung-Wha’s expiration of term in the Audit Committee, a new Audit Committee member, Pahk, Heui-Jae, was elected.


Session	Date	Agenda	Approval
4	April 24	• Deliberation Agenda 1. Appointment of the chairman of the audit committee • Report Agenda 1. Consolidated internal control over financial reporting for the fiscal year of 2019 2. Assessment of the consolidated internal control over financial reporting for the fiscal year of 2019 3. Audit report of 20-F for the fiscal year of 2019	Approved
5	May 7	• Deliberation Agenda 1. Approval of audit service contract on POSCO SPS • Report Agenda 1. Internal audit result on Consolidated financial statements of the 1^st quarter of the fiscal year 2020 2. External review result on Consolidated financial statements of the 1^st quarter of the fiscal year 2020	Approved
6	August 6	• Deliberation Agenda 1. Approval on changes in the audit service contract for POSCO(Guangdong) Automotive Steel Co., Ltd. • Report Agenda 1. Plans to strengthen the operation of the internal accounting management system in 2020 2. Results of internal audit on consolidated financial statements for the 2nd quarter of 2020 3. Results of external review on consolidated financial statements for the 2nd quarter of 2020 4. Internal audit performance for the 1st half of 2020 and plans for the 2nd half of 2020 5. Audit activity evaluation results of the independent auditor for the year 2019	Approved

Session

Date

Agenda

Approval

November 5

• Deliberation Agenda

1. Approval of POSCO audit service contract

• Report Agenda

1. Internal audit result on Consolidated financial statements of the 3^rd quarter of the fiscal year 2020

2. External review result on Consolidated financial statements of the 3^rd quarter of the fiscal year 2020

Approved

C. Voting Rights of Shareholders

(1)	The Cumulative Voting System: The cumulative voting system was introduced at the 36th general meeting of shareholders on March 12, 2004.

(2)	Voting by Mail: The voting-by-mail system was introduced at the 36th general meeting of shareholders on March 12, 2004.

(3)	The Electronic Voting System: The electronic voting system was determined at the Board of Directors meeting on February 20, 2019.

D. Compensation of Directors and Officers

(1)	Directors’ and the Audit Committee members’ Salaries


							(In millions KRW)
Category	Total numbers		Total payment		Average payment (Per person)		Ceiling amount approved at the general meeting of shareholders		Remarks
Inside Director		5		5,547		1,109				—
Outside Director		4		210		53		10,000		—
Members of the Audit Committee		3		157		53				—

Payment Period: January 1, 2020 ~ September 30, 2020

Outside Directors also serving as the members of the Audit Committee are excluded in the count for the Outside Directors.

Average payment per person is calculated based on the paid amount to the current directors and Audit Committee members as of September 30, 2020.

POSCO

and Subsidiaries

Condensed Consolidated Interim Financial Statements

(Unaudited)

September 30, 2020

(With Independent Auditors’ Review Report Thereon)

Table of Contents


	Page
Independent Auditors’ Review Report		1

Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Statements of Financial Position		3

Condensed Consolidated Interim Statements of Comprehensive Income		5

Condensed Consolidated Interim Statements of Changes in Equity		6

Condensed Consolidated Interim Statements of Cash Flows		8

Notes to the Condensed Consolidated Interim Financial Statements		10

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed consolidated interim financial statements of POSCO and its subsidiaries (the “Company”), which comprise the condensed consolidated interim statement of financial position as of September 30, 2020, the condensed consolidated interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2020 and 2019, the condensed consolidated interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2020 and 2019, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed consolidated interim financial statements in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed consolidated interim financial statements free of material misstatements due to error or fraud.

Auditors’ review responsibility

Our responsibility is to issue a report on the condensed consolidated interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial statements consists of making inquiries primarily of persons responsible for financial and accounting matters and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No. 1034 “Interim Financial Reporting”.

Other matters

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

The consolidated statement of financial position of the Company as of December 31, 2019, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 12, 2020, expressed an unqualified opinion. The accompanying condensed consolidated statement of financial position of the Company as of December 31, 2019, presented for comparative purposes, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

LOGO

Seoul, Korea

November 13, 2020

This report is effective as of November 13, 2020, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed consolidated interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position

As of September 30, 2020 and December 31, 2019

(Unaudited)


(in millions of Won)	Notes		September 30, 2020		December 31, 2019
Assets
Cash and cash equivalents		21	W	6,769,118		3,514,872
Trade accounts and notes receivable, net		4,21,26,27,34		8,893,533		9,078,351
Other receivables, net		5,21,34		1,522,021		1,581,517
Other short-term financial assets		6,21		11,239,316		8,996,049
Inventories		7		9,020,668		10,920,320
Current income tax assets				65,701		45,930
Assets held for sale		8		33,165		74,158
Other current assets		14		705,382		631,177

Total current assets				38,248,904		34,842,374

Long-term trade accounts and notes receivable, net		4,21		105,500		198,785
Other receivables, net		5,21		1,203,646		1,140,879
Other long-term financial assets		6,21		1,563,582		1,669,389
Investments in associates and joint ventures		9		4,001,129		3,927,755
Investment property, net		11		872,824		878,227
Property, plant and equipment, net		12		29,850,845		29,925,973
Intangible assets, net		13		4,722,656		4,908,473
Defined benefit assets, net		19		8,252		4,280
Deferred tax assets				1,246,444		1,237,285
Other non-current assets		14		267,464		325,241

Total non-current assets				43,842,342		44,216,287

Total assets			W	82,091,246		79,058,661

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Financial Position, Continued

As of September 30, 2020 and December 31, 2019

(Unaudited)


(in millions of Won)	Notes		September 30, 2020			December 31, 2019
Liabilities
Trade accounts and notes payable		21,34	W	3,269,505			3,422,922
Short-term borrowings and current installments of long-term borrowings		4,15,21		10,560,958			8,548,212
Other payables		16,21,34		1,780,673			1,879,508
Other short-term financial liabilities		17,21		97,993			77,827
Current income tax liabilities				386,092			396,616
Liabilities directly associated with the assets held for sale		8		—			8
Provisions		18,35		325,886			360,495
Other current liabilities		20,26,27		1,990,519			1,638,102

Total current liabilities				18,411,626			16,323,690

Long-term trade accounts and notes payable		21		26,561			20,067
Long-term borrowings, excluding current installments		15,21		13,021,040			11,893,401
Other payables		16,21		578,672			585,129
Other long-term financial liabilities		17,21		20,008			31,494
Defined benefit liabilities, net		19		267,577			181,011
Deferred tax liabilities				1,501,945			1,691,498
Long-term provisions		18,35		432,226			458,154
Other non-current liabilities		20,26		41,191			79,510

Total non-current liabilities				15,889,220			14,940,264

Total liabilities				34,300,846			31,263,954

Equity
Share capital		22		482,403			482,403
Capital surplus		22		1,316,364			1,376,251
Hybrid bonds		23		199,384			199,384
Reserves		24		(1,199,596	)		(1,157,980	)
Treasury shares		25		(1,837,980	)		(1,508,303	)
Retained earnings				45,476,228			45,080,117

Equity attributable to owners of the controlling company				44,436,803			44,471,872
Non-controlling interests		23		3,353,597			3,322,835

Total equity				47,790,400			47,794,707

Total liabilities and equity			W	82,091,246			79,058,661

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Comprehensive Income

For the three-month and nine-month periods ended September 30, 2020 and 2019

(Unaudited)


			For the three-month periods ended September 30						For the nine-month periods ended September 30
(in millions of Won, except per share information)	Notes		2020			2019			2020			2019
Revenue		26,27,34,37	W	14,261,218			15,988,227			42,528,585			48,323,799
Cost of sales		7,27,31,34		(13,054,079	)		(14,375,600	)		(39,277,221	)		(43,283,629	)

Gross profit				1,207,139			1,612,627			3,251,364			5,040,170
Selling and administrative expenses		31,34
Reversal of (impairment loss) on trade accounts and notes receivable				15,560			5,944			(19,764	)		13,942
Other administrative expenses		28		(466,257	)		(490,770	)		(1,399,864	)		(1,473,389	)
Selling expenses		28		(89,734	)		(88,024	)		(292,061	)		(269,487	)

Operating profit				666,708			1,039,777			1,539,675			3,311,236
Share of profit of equity-accounted investees, net		9		88,894			88,668			109,028			230,197
Finance income and costs		21,29
Finance income				341,431			602,717			1,871,524			1,629,594
Finance costs				(385,199	)		(691,922	)		(1,962,525	)		(1,852,447	)
Other non-operating income and expenses		34
Reversal of (impairment loss) on other receivables				18,224			(10,695	)		17,437			(26,112	)
Other non-operating income		30		66,268			114,913			233,172			272,281
Other non-operating expenses		30,31		(84,170	)		(290,207	)		(301,605	)		(594,076	)

Profit before income tax		37		712,156			853,251			1,506,706			2,970,673
Income tax expense		32,37		(198,110	)		(356,441	)		(453,134	)		(1,013,999	)

Profit				514,046			496,810			1,053,572			1,956,674
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans		19		2,225			(7,269	)		(427	)		(28,150	)
Net changes in fair value of equity investments at fair value through other comprehensive income		21		11,495			(81,552	)		(154,471	)		(63,708	)
Items that are or may be reclassified subsequently to profit or loss:
Capital adjustment arising from investments in equity-accounted investees				(12,539	)		32,091			69,157			104,929
Foreign currency translation differences				(29,387	)		103,200			36,755			322,863
Gains or losses on valuation of derivatives		21		111			20			(730	)		(81	)

Other comprehensive income (loss), net of tax				(28,095	)		46,490			(49,716	)		335,853

Total comprehensive income			W	485,951			543,300			1,003,856			2,292,527

Profit attributable to:
Owners of the controlling company			W	465,457			430,875			901,132			1,784,414
Non-controlling interests				48,589			65,935			152,440			172,260

Profit			W	514,046			496,810			1,053,572			1,956,674

Total comprehensive income attributable to :
Owners of the controlling company			W	436,989			466,171			849,730			2,120,940
Non-controlling interests				48,962			77,129			154,126			171,587

Total comprehensive income			W	485,951			543,300			1,003,856			2,292,527

Basic and diluted earnings per share (in Won)		33		5,854			5,357			11,232			22,211

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity

For the nine-month periods ended September 30, 2020 and 2019

(Unaudited)


(in millions of Won)	Attributable to owners of the controlling company																			Non- controlling interests			Total
	Share capital		Capital surplus			Hybrid bonds		Reserves			Treasury shares			Retained earnings			Subtotal			Non- controlling interests			Total
Balance as of January 1, 2019	W	482,403		1,410,551			199,384		(1,404,368	)		(1,532,728	)		44,216,018			43,371,260			3,388,291			46,759,551
Comprehensive income:
Profit		—		—			—		—			—			1,784,414			1,784,414			172,260			1,956,674
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—		—			—			(15,065	)		(15,065	)		(13,085	)		(28,150	)
Capital adjustment arising from investments in equity-accounted investees, net of tax		—		—			—		92,533			—			—			92,533			12,396			104,929
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—		(42,911	)		—			(20,859	)		(63,770	)		62			(63,708	)
Foreign currency translation differences, net of tax		—		—			—		322,905			—			—			322,905			(42	)		322,863
Gains or losses on valuation of derivatives, net of tax		—		—			—		(77	)		—			—			(77	)		(4	)		(81	)

Total comprehensive income		—		—			—		372,450			—			1,748,490			2,120,940			171,587			2,292,527

Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—		—			—			(400,006	)		(400,006	)		(60,274	)		(460,280	)
Interim dividends		—		—			—		—			—			(320,462	)		(320,462	)		—			(320,462	)
Changes in subsidiaries		—		—			—		—			—			—			—			(874	)		(874	)
Changes in ownership interest in subsidiaries		—		(53,871	)		—		—			—			—			(53,871	)		(114,153	)		(168,024	)
Interest of hybrid bonds		—		—			—		—			—			(6,881	)		(6,881	)		(5,456	)		(12,337	)
Disposal of treasury shares		—		12,576			—		—			24,425			—			37,001			—			37,001
Others		—		1,974			—		(37,422	)		—			43,822			8,374			(7,293	)		1,081

Total transactions with owners of the controlling company		—		(39,321	)		—		(37,422	)		24,425			(683,527	)		(735,845	)		(188,050	)		(923,895	)

Balance as of September 30, 2019	W	482,403		1,371,230			199,384		(1,069,340	)		(1,508,303	)		45,280,981			44,756,355			3,371,828			48,128,183

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Changes in Equity, Continued

For the nine-month periods ended September 30, 2020 and 2019

(Unaudited)


(in millions of Won)	Attributable to owners of the controlling company																			Non- controlling interests			Total
	Share capital		Capital surplus			Hybrid bonds		Reserves			Treasury shares			Retained earnings			Subtotal			Non- controlling interests			Total
Balance as of January 1, 2020	W	482,403		1,376,251			199,384		(1,157,980	)		(1,508,303	)		45,080,117			44,471,872			3,322,835			47,794,707
Comprehensive income:
Profit		—		—			—		—			—			901,132			901,132			152,440			1,053,572
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—			—		—			—			(1,433	)		(1,433	)		1,006			(427	)
Capital adjustment arising from investments in equity-accounted investees, net of tax		—		—			—		69,304			—			—			69,304			(147	)		69,157
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—			—		(151,486	)		—			(2,985	)		(154,471	)		—			(154,471	)
Foreign currency translation differences, net of tax		—		—			—		35,888			—			—			35,888			867			36,755
Gains or losses on valuation of derivatives, net of tax		—		—			—		(690	)		—			—			(690	)		(40	)		(730	)

Total comprehensive income		—		—			—		(46,984	)		—			896,714			849,730			154,126			1,003,856

Transactions with owners of the controlling company, recognized directly in equity:
Year-end dividends		—		—			—		—			—			(320,462	)		(320,462	)		(60,517	)		(380,979	)
Interim dividends		—		—			—		—			—			(160,062	)		(160,062	)		—			(160,062	)
Changes in subsidiaries		—		—			—		—			—			—			—			24,197			24,197
Changes in ownership interest in subsidiaries		—		(27,716	)		—		—			—			—			(27,716	)		166,744			139,028
Repayment of redeemable convertible preferred shares		—		(33,581	)		—		—			—			—			(33,581	)		(245,000	)		(278,581	)
Interest of hybrid bonds		—		—			—		—			—			(6,906	)		(6,906	)		(5,496	)		(12,402	)
Acquisition of treasury shares		—		—			—		—			(329,677	)		—			(329,677	)		—			(329,677	)
Others		—		1,410			—		5,368			—			(13,173	)		(6,395	)		(3,292	)		(9,687	)

Total transactions with owners of the controlling company		—		(59,887	)		—		5,368			(329,677	)		(500,603	)		(884,799	)		(123,364	)		(1,008,163	)

Balance as of September 30, 2020	W	482,403		1,316,364			199,384		(1,199,596	)		(1,837,980	)		45,476,228			44,436,803			3,353,597			47,790,400

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows

For the nine-month periods ended September 30, 2020 and 2019

(Unaudited)


(in millions of Won)	Notes		September 30, 2020			September 30, 2019
Cash flows from operating activities
Profit			W	1,053,572			1,956,674
Adjustments for:
Depreciation				2,348,977			2,269,280
Amortization				336,624			316,947
Finance income				(848,936	)		(842,951	)
Finance costs				972,462			1,082,320
Income tax expense				453,134			1,013,999
Impairment loss on property, plant and equipment				21,684			194,688
Gain on disposal of property, plant and equipment				(9,542	)		(21,929	)
Loss on disposal of property, plant and equipment				105,440			61,222
Impairment loss on other intangible assets				1,225			125,696
Gain on disposal of investments in subsidiaries, associates and joint ventures				(43,421	)		(20,750	)
Loss on disposal of investments in subsidiaries, associates and joint ventures				13,659			5,867
Share of profit of equity-accounted investees				(109,028	)		(230,197	)
Impairment loss on assets held for sale				5,030			40,943
Expenses related to post-employment benefit				183,414			176,071
Impairment loss on trade and other receivables				2,327			12,170
Loss on valuation of inventories				65,575			80,988
Increase to provisions				33,787			98,109
Others, net				(28,398	)		(67,187	)

				3,504,013			4,295,286

Changes in operating assets and liabilities		36		2,023,340			(914,733	)
Interest received				286,899			228,018
Interest paid				(463,028	)		(547,833	)
Dividends received				149,159			218,155
Income taxes paid				(566,782	)		(1,295,222	)

Net cash provided by operating activities			W	5,987,173			3,940,345

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Condensed Consolidated Interim Statements of Cash Flows, Continued

For the nine-month periods ended September 30, 2020 and 2019

(Unaudited)


(in millions of Won)	Notes		September 30, 2020			September 30, 2019
Cash flows from investing activities
Acquisitions of short-term financial instruments			W	(32,406,269	)		(27,411,573	)
Proceeds from disposal of short-term financial instruments				30,171,470			27,842,901
Increase in loans				(589,994	)		(173,717	)
Collection of loans				574,267			282,778
Acquisitions of securities				(436,237	)		(377,942	)
Proceeds from disposal of securities				478,633			171,793
Acquisitions of investment in associates and joint ventures				(103,176	)		(101,609	)
Proceeds from disposal of investment in associates and joint ventures				11,841			11,293
Acquisitions of investment property				(908	)		(18,232	)
Proceeds from disposal of investment property				250			1,106
Acquisitions of property, plant and equipment				(2,175,383	)		(1,609,725	)
Proceeds from disposal of property, plant and equipment				(28,412	)		27,912
Acquisitions of intangible assets				(241,819	)		(242,000	)
Proceeds from disposal of intangible assets				74,966			13,256
Proceeds from disposal of assets held for sale				36,514			311
Collection of lease receivables				45,805			29,008
Payment for acquisition of business, net of cash acquired				—			(33,961	)
Cash received from disposal of business, net of cash transferred				77,488			37,776
Others, net				(4,001	)		12,969

Net cash used in investing activities				(4,514,965	)		(1,537,656	)

Cash flows from financing activities
Proceeds from borrowings				3,686,119			2,622,141
Repayment of borrowings				(1,648,402	)		(2,458,779	)
Proceeds from (repayment of) short-term borrowings, net				918,477			(1,466,477	)
Capital contribution from non-controlling interests				165,934			23,582
Payment of cash dividends				(540,709	)		(785,551	)
Acquisition of treasury shares				(329,677	)		—
Payment of interest of hybrid bonds				(12,407	)		(12,362	)
Repayment of lease liabilities				(150,822	)		(107,703	)
Repayment of redeemable convertible preferred shares				(278,581	)		—
Others, net				(18,195	)		(112,086	)

Net cash provided by (used in) financing activities				1,791,737			(2,297,235	)

Effect of exchange rate fluctuation on cash held				(10,073	)		91,767

Net increase in cash and cash equivalents				3,253,872			197,221
Cash and cash equivalents at beginning of the period		8		3,515,246			2,643,865

Cash and cash equivalents at end of the period			W	6,769,118			2,841,086

See accompanying notes to the condensed consolidated interim financial statements.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements

As of September 30, 2020

(Unaudited)

1. General Information

General information about POSCO, its 34 domestic subsidiaries including POSCO ENGINEERING & CONSTRUCTION CO., LTD., 132 foreign subsidiaries including POSCO America Corporation (collectively “the Company”) and its 137 associates and joint ventures are as follows:

(a)	The controlling company

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

As of September 30, 2020, the shares of the POSCO are listed on the Korea Exchange, while its American Depository Receipts (ADRs) are listed on the New York Stock Exchange.

(b)	Consolidated subsidiaries newly included during the nine-month period ended September 30, 2020, were as follows:


Company	Date of inclusion	Ownership (%)	Reason
Posco International (Thailand) Co., Ltd.	January 2020	100.00	New establishment
PT POSCO INTERNATIONAL INDONESIA	January 2020	100.00	New establishment
POSCO SPS Corporation	April 2020	100.00	Spun off from POSCO INTERNATIONAL Corporation
P&O Chemical Co., Ltd.	July 2020	51.00	New establishment
POSCO New Growth I Specialized Private Equity Investment Trust	August 2020	100.00	New establishment
IMP Fund I	August 2020	98.04	New establishment
PEC POWERCON SDN. BHD.	August 2020	100.00	New establishment

(c)	Subsidiaries excluded from consolidation during the nine-month period ended September 30, 2020, were as follows:


Company	Date of exclusion	Reason
LA-SRDC	April 2020	Liquidation
POSCO China Dalian Plate Processing Center Co., Ltd.	June 2020	Disposal
PSC Energy Global Co., Ltd.	August 2020	Merged into POSCO ENERGY CO., LTD.
POSCO Family Strategy Fund	September 2020	Liquidation

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

2. Statement of Compliance

Statement of compliance

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

These condensed consolidated interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual consolidated financial statements as of and for the year ended December 31, 2019. These condensed consolidated interim financial statements do not include all of the disclosures required for full annual financial statements.

Use of estimates and judgments

(a)	Judgments, assumptions and estimation uncertainties

The preparation of the condensed consolidated interim 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.

The significant judgments made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.

With the outbreak of COVID-19 pandemic, governments around the globe have implemented measures such as mandatory factory shutdown, shelter-in-place orders, border closures, and travel restrictions. The ultimate impact of COVID-19 pandemic on the Company’s operations is not yet known and will depend on future developments. The duration and significance of COVID-19 is highly uncertain and unpredictable, and the protective measures by the governments around the globe or the Company may lead to substantial business interruption and decrease in business scale. The financial impact of this cannot be reasonably estimated, but management expects the Company to be partially affected to the most areas where it operates. The extent and duration of COVID-19’s impact on the Company’s business cannot yet be reasonably estimated.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(b)	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 liabilities, either directly or indirectly.

•

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

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.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed consolidated interim financial statements are the same as those applied by the Company in its consolidated financial statements as of and for the year ended December 31, 2019. The Company also expects to apply the accounting policies set out below for their annual reporting period ending December 31, 2020.

(a)	K-IFRS No. 1001 “Presentation of Financial Statements” and K-IFRS No. 1008 “Accounting Policies, Changes in Accounting Estimates and Errors”

The definition of materiality has been clarified, and K-IFRS No. 1001 “Presentation of Financial Statements” and K-IFRS No. 1008 “Accounting Policies, Changes in Accounting Estimates and Errors” have been amended according to the clarified definition. In determining the materiality, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

(b)	K-IFRS No. 1103 “Business Combinations”

The amendment clarifies the definition of business when it includes input and process together significantly contribute to ability to create output and requires a simplified assessment that result in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. The Company does not expect the effect of the amendment to the consolidated financial statements to be significant.

(c)	K-IFRS No. 1109 “Financial Instruments”, K-IFRS No. 1039 “Financial Instruments: Recognition and Measurement”, K-IFRS No. 1107 “Financial Instruments: Disclosures”

The amendments require the application of exceptions to the analysis of future prospects in relation to the application of hedge accounting while uncertainty exists due to the interest rate benchmark reform. The exception assumes that when assessing whether the expected cash flows based on existing interest rate indicators are highly probable, whether there is an economic relationship between the hedged item and the hedging instrument, or whether the hedge relationship between the hedged item and the hedging instrument is highly probable, the interest rate benchmark that the hedged item and the hedging instrument comply with does not change as a result of the interest rate benchmark reform. The Company does not expect the effect of the amendments to the consolidated financial statements to be significant.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Current
Trade accounts and notes receivable	W	8,135,300			8,352,968
Finance lease receivables		44,761			221
Due from customers for contract work		1,090,837			1,136,436
Less: Allowance for doubtful accounts		(377,365	)		(411,274	)

	W	8,893,533			9,078,351

Non-current
Trade accounts and notes receivable	W	151,819			209,310
Finance lease receivables		88			43,725
Less: Allowance for doubtful accounts		(46,407	)		(54,250	)

	W	105,500			198,785

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 September 30, 2020 and December 31, 2019, the carrying amounts of such secured borrowings are W177,517 million and W244,305 million, respectively, which are included in the short-term borrowings.

5. Other Receivables

Other receivables as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Current
Loans	W	270,891			367,580
Other accounts receivable		815,739			971,845
Accrued income		341,419			272,528
Deposits		100,094			86,519
Others		15,602			14,510
Lease receivables		73,259			48,744
Less: Allowance for doubtful accounts		(94,983	)		(180,209	)

	W	1,522,021			1,581,517

Non-current
Loans	W	726,080			701,529
Other accounts receivable		230,889			209,039
Accrued income		88,520			65,275
Deposits		243,841			238,261
Lease receivables		153,944			179,315
Less: Allowance for doubtful accounts		(239,628	)		(252,540	)

	W	1,203,646			1,140,879

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

6. Other Financial Assets

Other financial assets as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Current
Derivatives assets	W	121,832		47,541
Debt securities		157,568		342,371
Deposit instruments(*1,2)		2,053,119		1,744,895
Short-term financial instruments(*2)		8,906,797		6,861,242

	W	11,239,316		8,996,049

Non-current
Derivatives assets	W	132,374		64,737
Equity securities(*3)		1,030,599		1,204,902
Debt securities		12,106		25,555
Other securities(*3)		360,899		340,008
Deposit instruments(*2)		27,604		34,187

	W	1,563,582		1,669,389

(*1)	As of September 30, 2020 and December 31, 2019, W5,659 million and W4,524 million, respectively, are restricted for the use in government projects.

(*2)	As of September 30, 2020 and December 31, 2019, financial instruments amounting to W85,802 million and W73,525 million, respectively, are restricted for use in financial arrangements, pledge and others.

(*3)	As of September 30, 2020 and December 31, 2019, W108,682 million and W109,395 million of equity and other securities, respectively, have been provided as collateral for borrowings, construction projects and others.

7. Inventories

Inventories as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Finished goods	W	1,362,145			1,655,228
M erchandise		827,888			1,058,874
Semi-finished goods		1,641,269			2,097,289
Raw materials		2,025,447			2,656,341
Fuel and materials		906,932			1,026,133
Construction inventories		939,470			734,649
M aterials-in-transit		1,400,997			1,824,044
Others		70,794			83,905

		9,174,942			11,136,463

Less: Allowance for inventories valuation		(154,274	)		(216,143	)

	W	9,020,668			10,920,320

The amounts of loss on valuation of inventories recognized in cost of sales during the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were W65,575 million and W96,201 million, respectively.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

8. Assets Held for Sale

Details of assets held for sale as of September 30, 2020 and December 31, 2019 are as follows:


	September 30, 2020						December 31, 2019
(in millions of Won)	The controlling company(*1)		Subsidiaries		Total		The controlling company(*1)		Subsidiaries		Total
Asset
Cash and cash equivalents(*2)	W	—		—		—		—		374		374
Other financial assets		—		—		—		—		185		185
Property, plant and equipment		31,634		388		32,022		36,321		32,972		69,293
Others		1,143		—		1,143		—		4,306		4,306

	W	32,777		388		33,165		36,321		37,837		74,158

Liability
Others	W	—		—		—		—		8		8

(*1)

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 nine-month period ended September 30, 2020, the Company recognized W5,030 million of impairment loss for the difference between the fair value less costs to sell and the carrying amount of the assets.

(*2)	Cash and cash equivalents in the statement of cash flows at beginning of the nine-month period ended September 30, 2020, include cash and cash equivalents that are classified as assets held for sale.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

9. Investments in Associates and Joint ventures

(a)	Details of investments in associates as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020								December 31, 2019
Company	Number of shares		Ownership (%)		Acquisition cost		Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund		178,691,901,565		36.34	W	178,787	W	176,283		175,907
Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*1,2)		4,507,138		34.00		179,410		149,803		161,280
SNNC		18,130,000		49.00		90,650		149,875		142,602
QSONE Co.,Ltd.		200,000		50.00		84,395		86,015		85,887
Chun-cheon Energy Co., Ltd(*1)		17,308,143		49.10		86,541		48,143		56,679
Western Inland highway CO.,LTD.		8,818,236		29.80		44,091		43,421		5,115
Nextrain Co., Ltd.(*1)		9,904,000		32.00		49,520		47,288		41,447
Keystone NO. 1. Private Equity Fund		22,523,123		52.58		22,523		18,683		19,438
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		2,008,000		29.53		10,040		16,737		17,824
Daesung Steel(*3)		108,038		17.54		14,000		15,298		15,375
PCC Amberstone Private Equity Fund 1(*3)		8,657,610,240		8.80		8,540		9,151		9,570
Others (62 companies)(*1)								113,496		114,490

								874,193		845,614

[Foreign]
South-East Asia Gas Pipeline Company Ltd.		135,219,000		25.04		135,899		224,137		225,933
AES-VCM Mong Duong Power Company Limited(*1)		—		30.00		164,303		177,299		178,892
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*3,4)		114,452,000		10.40		124,341		134,040		131,529
Eureka Moly LLC		—		20.00		240,123		86,465		85,349
AMCI (WA) PTY LTD		49		49.00		209,664		73,207		72,937
NCR LLC		—		29.40		49,744		46,298		46,391
KOREA LNG LTD.		2,400		20.00		135,205		45,544		46,557
Nickel Mining Company SAS		3,234,698		49.00		157,585		39,542		37,940
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		134,400,000		40.00		22,423		23,076		22,356
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		10,200,000		34.00		9,517		15,778		15,128
PT. Wampu Electric Power(*1)		8,708,400		20.00		10,054		12,900		13,363
PT. Batutua Tembaga Raya		128,285		22.00		21,824		8,461		14,717
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		50		25.00		4,723		7,260		6,755
Others (27 companies)(*1)								100,698		121,048

								994,705		1,018,895

							W	1,868,898		1,864,509

(*1)	As of September 30, 2020 and December 31, 2019, investments in associates amounting to W457,720 million and W437,646 million, respectively, are provided as collateral in relation to the associates’ borrowings.

(*2)	During the nine-month period ended September 30, 2020, POSPower Co., Ltd changed its name to Samcheok Blue Power Co.,Ltd.

(*3)	As of September 30, 2020, it was classified as an associate even though the Company’s ownership percentage is less than 20% of ownership percentage since the Company has significant influence over the investee when considering its structure of the Board of Directors and others.

(*4)	During the nine-month period ended September 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(b)	Details of investments in joint ventures as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020								December 31, 2019
Company	Number of shares		Ownership (%)		Acquisition cost		Book value		Book value
[Domestic]
POSCO MITSUBISHI CARBON TECHNOLOGY		11,568,000		60.00	W	115,680	W	147,191		182,648
Others (7 companies)								12,143		10,305

								159,334		192,953

[Foreign]
Roy Hill Holdings Pty Ltd(*1)		13,117,972		12.50		1,528,672		1,363,407		1,235,682
POSCO-NPS Niobium LLC		325,050,000		50.00		364,609		381,515		376,410
KOBRASCO		2,010,719,185		50.00		32,950		53,407		115,641
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—		25.00		61,961		93,137		88,935
DMSA/AMSA(*1,2)		—		4.21		406,556		48,490		12,189
CSP—Compania Siderurgica do Pecem		1,367,314,532		20.00		631,796		—		—
Others (10 companies)								32,941		41,436

								1,972,897		1,870,293

							W	2,132,231		2,063,246

(*1)	As of September 30, 2020 and December 31, 2019, the investments in joint ventures are provided as collateral in relation to the joint ventures’ borrowings.

(*2)

All investors of the joint venture have entered into an agreement to extend the due date for loans made to the joint venture as a means of financial support. However, the Company believes the above agreement for financial support is invalid and is currently in arbitration process for annulment. The Company’s obligation to provide financial support is currently on hold and may change depending on the result of the arbitration.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(c)	The movements of investments in associates and joint ventures for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:

For the nine-month period ended September 30, 2020


(in millions of Won)
Company	December 31, 2019 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(*1)			September 30, 2020 Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	175,907		—		—			376			—			176,283
Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)		161,280		—		—			(3,331	)		(8,146	)		149,803
SNNC		142,602		—		(2,901	)		8,257			1,917			149,875
QSONE Co.,Ltd.		85,887		—		(1,140	)		1,268			—			86,015
Chun-cheon Energy Co., Ltd		56,679		—		—			(9,093	)		557			48,143
Western Inland highway CO.,LTD.		5,115		38,670		—			(367	)		3			43,421
Nextrain Co., Ltd.		41,447		7,910		—			(2,052	)		(17	)		47,288
Keystone NO. 1. Private Equity Fund		19,438		—		—			(755	)		—			18,683
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		17,824		—		—			(1,087	)		—			16,737
Daesung Steel		15,375		—		—			(77	)		—			15,298
PCC Amberstone Private Equity Fund 1		9,570		—		(520	)		316			(215	)		9,151
POSCO MITSUBISHI CARBON TECHNOLOGY		182,648		—		(19,401	)		(16,056	)		—			147,191
Others (69 companies)		124,795		18,973		(685	)		(13,452	)		(3,992	)		125,639

		1,038,567		65,553		(24,647	)		(36,053	)		(9,893	)		1,033,527

[Foreign]
South-East Asia Gas Pipeline Company Ltd.		225,933		—		(40,044	)		34,803			3,445			224,137
AES-VCM Mong Duong Power Company Limited		178,892		—		(16,053	)		28,629			(14,169	)		177,299
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)		131,529		—		(11,672	)		12,126			2,057			134,040
Eureka Moly LLC		85,349		—		—			(42	)		1,158			86,465
AMCI (WA) PTY LTD		72,937		—		—			(3,207	)		3,477			73,207
NCR LLC		46,391		—		—			(904	)		811			46,298
KOREA LNG LTD.		46,557		—		(6,519	)		6,463			(957	)		45,544
Nickel Mining Company SAS		37,940		—		—			(803	)		2,405			39,542
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		22,356		—		—			(111	)		831			23,076
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		15,128		—		—			(16	)		666			15,778
PT. Wampu Electric Power		13,363		—		(559	)		899			(803	)		12,900
PT. Batutua Tembaga Raya		14,717		—		—			(6,533	)		277			8,461
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		6,755		—		—			92			413			7,260
Roy Hill Holdings Pty Ltd		1,235,682		—		(48,890	)		132,552			44,063			1,363,407
POSCO-NPS Niobium LLC		376,410		—		(6,061	)		6,064			5,102			381,515
KOBRASCO		115,641		—		(37,922	)		8,246			(32,558	)		53,407
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		88,935		—		—			1,066			3,136			93,137
DMSA/AMSA		12,189		60,278		—			(23,595	)		(382	)		48,490
CSP—Compania Siderurgica do Pecem		—		37,623		—			(42,126	)		4,503			—
Others (37 companies)		162,484		—		(10,472	)		(8,522	)		(9,851	)		133,639

		2,889,188		97,901		(178,192	)		145,081			13,624			2,967,602

	W	3,927,755		163,454		(202,839	)		109,028			3,731			4,001,129

(*1)	Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals and change in capital adjustments effect from translations of financial statements of foreign investees and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

For the year ended December 31, 2019


(in millions of Won)
Company	December 31, 2018 Book value		Acquisition		Dividends			Share of profits (losses)			Other increase (decrease)(*1)			December 31, 2019 Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	174,123		—		—			(976	)		2,760			175,907
Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)(*2)		161,477		—		—			(4,744	)		4,547			161,280
SNNC		116,922		—		(1,450	)		27,655			(525	)		142,602
QSONE Co.,Ltd.		85,550		—		(950	)		1,287			—			85,887
Chun-cheon Energy Co., Ltd		62,478		6,050		—			(11,849	)		—			56,679
Western Inland highway CO.,LTD.		1,494		3,752		—			(167	)		36			5,115
Nextrain Co., Ltd.		10		41,600		—			(163	)		—			41,447
Keystone NO. 1. Private Equity Fund		11,183		8,723		—			(342	)		(126	)		19,438
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		17,382		—		—			442			—			17,824
Daesung Steel		15,644		—		—			(269	)		—			15,375
PCC Amberstone Private Equity Fund 1		9,693		—		(723	)		1,079			(479	)		9,570
POSCO MITSUBISHI CARBON TECHNOLOGY		180,192		—		(16,369	)		19,377			(552	)		182,648
Others (62 companies)		143,578		27,221		(669	)		(24,448	)		(20,887	)		124,795

		979,726		87,346		(20,161	)		6,882			(15,226	)		1,038,567

[Foreign]
South-East Asia Gas Pipeline Company Ltd.		179,459		—		(24,267	)		63,749			6,992			225,933
AES-VCM Mong Duong Power Company Limited		209,936		—		(18,099	)		24,126			(37,071	)		178,892
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*3)		126,885		—		(9,902	)		9,912			4,634			131,529
Eureka Moly LLC		82,447		—		—			(25	)		2,927			85,349
AMCI (WA) PTY LTD		71,086		—		—			(4,377	)		6,228			72,937
NCR LLC		37,602		9,605		—			(822	)		6			46,391
KOREA LNG LTD.		43,554		—		(13,404	)		13,501			2,906			46,557
Nickel Mining Company SAS		41,712		—		—			(4,250	)		478			37,940
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		—		22,423		—			61			(128	)		22,356
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		14,796		—		—			10			322			15,128
PT. Wampu Electric Power		14,120		—		—			(1,247	)		490			13,363
PT. Batutua Tembaga Raya		20,479		—		—			(6,209	)		447			14,717
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		6,478		—		—			80			197			6,755
Roy Hill Holdings Pty Ltd		1,041,600		—		—			158,562			35,520			1,235,682
POSCO-NPS Niobium LLC		363,506		—		(24,933	)		24,543			13,294			376,410
KOBRASCO		133,449		—		(74,716	)		56,474			434			115,641
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		88,391		—		(1,574	)		665			1,453			88,935
DMSA/AMSA		26,709		23,682		—			(40,415	)		2,213			12,189
CSP—Compania Siderurgica do Pecem		24,832		35,352		—			(57,647	)		(2,537	)		—
Others (38 companies)		143,236		552		(19,430	)		30,168			7,958			162,484

		2,670,277		91,614		(186,325	)		266,859			46,763			2,889,188

	W	3,650,003		178,960		(206,486	)		273,741			31,537			3,927,755

(*1)	Other increase or decrease represents the changes in investments in associates and joint ventures due to disposals and change in capital adjustments effect from translations of financial statements of foreign investees and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(d)	Summarized financial information of associates and joint ventures as of and for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 are as follows:

September 30, 2020


(in millions of Won)
Company	Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	474,344		559		473,785			—		9,475
Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)		1,062,978		583,667		479,311			—		(3,934	)
SNNC		564,403		236,474		327,929			498,495		14,184
QSONE Co.,Ltd.		251,048		79,018		172,030			12,733		2,535
Chun-cheon Energy Co., Ltd		609,233		510,751		98,482			176,714		(18,987	)
Western Inland highway CO.,LTD.		146,037		1,196		144,841			—		(1,231	)
Nextrain Co., Ltd.		156,829		5,397		151,432			—		(2,044	)
Keystone NO. 1. Private Equity Fund		181,608		134,107		47,501			12,286		(1,255	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		59,530		33,161		26,369			4,197		(3,679	)
Daesung Steel		165,476		109,647		55,829			61,032		(438	)
PCC Amberstone Private Equity Fund 1		104,037		—		104,037			9,757		3,592
POSCO MITSUBISHI CARBON TECHNOLOGY		436,292		190,989		245,303			82,260		(26,071	)
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		1,703,857		808,751		895,106			338,649		138,988
AES-VCM Mong Duong Power Company Limited		1,830,346		1,255,950		574,396			293,674		93,434
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)		1,301,003		2		1,301,001			—		116,595
KOREA LNG LTD.		228,057		338		227,719			33,685		32,315
Nickel Mining Company SAS		479,473		347,461		132,012			156,042		(15,666	)
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		75,130		17,619		57,511			355		(403	)
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		80,595		28,596		51,999			72,464		(47	)
PT. Wampu Electric Power		210,213		148,733		61,480			14,403		4,496
PT. Batutua Tembaga Raya		420,619		418,351		2,268			37,209		(30,219	)
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		65,224		35,940		29,284			53,550		389
Roy Hill Holdings Pty Ltd		8,807,942		2,255,669		6,552,273			3,628,425		1,322,590
POSCO-NPS Niobium LLC		762,826		—		762,826			—		16,822
KOBRASCO		152,358		45,544		106,814			29,838		16,492
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		901,463		555,779		345,684			933,497		4,957
DMSA/AMSA		5,442,457		2,862,041		2,580,416			214,068		(578,920	)
CSP—Compania Siderurgica do Pecem		2,743,759		3,970,986		(1,227,227	)		997,431		(1,350,722	)

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

December 31, 2019


(in millions of Won)
Company	Assets		Liabilities		Equity (deficit)			Sales		Net income (loss)
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund	W	516,659		786		515,873			—		7,479
Samcheok Blue Power Co.,Ltd. (Formerly, POSPower Co., Ltd)		707,051		199,846		507,205			—		(5,294	)
SNNC		677,508		357,843		319,665			738,977		63,269
QSONE Co.,Ltd.		250,364		78,589		171,775			17,591		2,576
Chun-cheon Energy Co., Ltd		610,089		492,620		117,469			313,438		(24,677	)
Western Inland highway CO.,LTD.		21,980		5,165		16,815			—		(528	)
Nextrain Co., Ltd.		136,203		7,322		128,881			—		(509	)
Keystone NO. 1. Private Equity Fund		187,156		138,219		48,937			18,342		(887	)
CHUNGJU ENTERPRISE CITY DEVELOPMENT Co.,Ltd		53,019		22,971		30,048			17,824		1,497
Daesung Steel		164,708		108,441		56,267			85,537		(1,536	)
PCC Amberstone Private Equity Fund 1		108,797		5		108,792			14,787		12,280
POSCO MITSUBISHI CARBON TECHNOLOGY		474,387		170,678		303,709			216,648		32,334
[Foreign]
South-East Asia Gas Pipeline Company Ltd.		1,808,529		906,254		902,275			555,075		254,582
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)		1,276,857		1		1,276,856			—		95,306
KOREA LNG LTD.		232,935		147		232,788			69,577		67,507
Nickel Mining Company SAS		471,377		331,194		140,183			245,509		2,432
ZHEJIANG HUAYOU-POSCO ESM CO., LTD		73,604		17,765		55,839			641		153
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		65,413		15,232		50,181			101,101		28
PT. Wampu Electric Power		222,266		158,451		63,815			18,163		(6,233	)
PT. Batutua Tembaga Raya		423,608		392,226		31,382			112,568		(28,360	)
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		61,847		33,989		27,858			77,371		327
Roy Hill Holdings Pty Ltd		11,143,705		5,718,152		5,425,553			5,037,471		1,660,577
POSCO-NPS Niobium LLC		752,617		—		752,617			—		47,521
KOBRASCO		268,139		36,857		231,282			167,022		112,949
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		969,280		637,478		331,802			1,145,794		1,704
DMSA/AMSA		5,703,501		4,202,704		1,500,797			638,797		(504,077	)
CSP—Compania Siderurgica do Pecem		3,959,365		4,249,083		(289,718	)		1,623,843		(465,853	)

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

10. Joint Operations

Details of significant joint operations that the Company is participating in as a party to a joint arrangement as of September 30, 2020 are as follows:


Joint operations	Operation	Ownership (%)	Location
Myanmar A-1/A-3 mine	Mine development and gas production	51.00	Myanmar
Offshore Midstream	Gas transportation facility	51.00	Myanmar
Greenhills Mine	Mine development	20.00	Canada
Arctos Anthracite Coal Project	Mine development	50.00	Canada
Mt. Thorley J/V	Mine development	20.00	Australia
POSMAC J/V	Mine development	20.00	Australia
RUM J/V	Mine development	10.00	Australia
Hanam-Gamil package public housing project	Construction	7.70	Korea
Hanam-Gamil district B6, C2, C3 Block public housing lot development project	Construction	27.00	Korea
Yangsan-Sasong district public housing project(private-participation)	Construction	13.08	Korea
Yangsan-Sasong district public housing project	Construction	49.00	Korea
Sejong 2-1 P3 Block public housing project	Construction	37.00	Korea
Yongin-Giheung Station area city development project	Construction	61.00	Korea
Korean wave world complex land multi-purpose building development project	Construction	33.30	Korea
Sejong 4-1 P3 Block public housing project	Construction	60.00	Korea

11. Investment Property, Net

Changes in the carrying amount of investment property for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:

(a)	For the nine-month period ended September 30, 2020


(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			*Others(1)**			Ending
Land	W	278,465		2,814		(183	)		—			(4,890	)		276,206
Buildings		598,159		317		—			(19,002	)		14,869			594,343
Structures		1,178		—		—			(459	)		416			1,135
Right-of-use assets		425		—		(56	)		(7	)		778			1,140

	W	878,227		3,131		(239	)		(19,468	)		11,173			872,824

(*1)	Includes reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences, and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(b)	For the year ended December 31, 2019


(in millions of Won)	Beginning		Acquisitions		Disposals			*Depreciation(1)**			*Others(2)**			Ending
Land	W	278,585		—		(5,921	)		—			5,801			278,465
Buildings		571,335		1,548		(5,343	)		(52,416	)		83,035			598,159
Structures		1,408		—		(50	)		(625	)		445			1,178
Right-of-use assets		—		—		—			—			425			425
Construction-in-progress		77,287		18,644		—			—			(95,931	)		—

	W	928,615		20,192		(11,314	)		(53,041	)		(6,225	)		878,227

(*1)	Includes impairment loss on investment property recognized in relation to the office for rent of POSCO(Dalian) IT Center Development Co., Ltd. amounting to W32,642 million.

(*2)	Includes reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences, and others.

12. Property, Plant and Equipment, Net

(a)	Changes in the carrying amount of property, plant and equipment for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:

For the nine-month period ended September 30, 2020


(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			Impairment loss(*1)			*Others(2)**			Ending
Land	W	2,526,059		20,148		(1,964	)		—			—			24,962			2,569,205
Buildings		4,215,454		12,112		(4,001	)		(240,222	)		(268	)		288,123			4,271,198
Structures		2,904,506		78,586		(3,147	)		(168,700	)		(860	)		172,521			2,982,906
Machinery and equipment		17,218,264		98,582		(16,780	)		(1,707,247	)		(7,205	)		1,722,387			17,308,001
Vehicles		32,285		5,298		(506	)		(10,694	)		—			6,887			33,270
Tools		70,751		13,097		(62	)		(22,800	)		(9	)		7,785			68,762
Furniture and fixtures		130,132		13,025		(2,908	)		(27,839	)		(526	)		13,915			125,799
Lease assets		774,582		124,593		(7,671	)		(146,195	)		—			156,854			902,163
Bearer plants		124,193		118		—			(5,812	)		—			32,389			150,888
Construction-in-progress		1,929,747		1,896,194		(8,279	)		—			(12,812	)		(2,366,197	)		1,438,653

	W	29,925,973		2,261,753		(45,318	)		(2,329,509	)		(21,680	)		59,626			29,850,845

(*1)

The Company estimated recoverable amount for individual assets that ceased operations due to the disposal plan and others at fair value less costs to sell based on sale price or scrap value and recognized impairment loss since recoverable amounts are less than their carrying amounts for the nine-month period ended September 30, 2020. In addition, during the nine-month period ended September 30, 2020, the Company recognized impairment loss on certain assets due to damage from fire.

(*2)	Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

For the year ended December 31, 2019


(in millions of Won)	Beginning		Acquisitions		Business Combination		Disposals			Depreciation			Impairment loss(*1,2)			*Others(3)**			Ending
Land	W	2,548,002		6,550		—		(2,128	)		—			—			(26,365	)		2,526,059
Buildings		4,402,452		39,551		22,836		(10,376	)		(314,107	)		(90,036	)		165,134			4,215,454
Structures		2,917,924		49,931		2		(3,350	)		(228,616	)		(27,217	)		195,832			2,904,506
Machinery and equipment		18,518,129		175,743		1,216		(78,236	)		(2,250,022	)		(309,604	)		1,161,038			17,218,264
Vehicles		31,341		8,027		189		(742	)		(15,057	)		(559	)		9,086			32,285
Tools		66,164		19,178		5,792		(1,340	)		(28,537	)		(2,106	)		11,600			70,751
Furniture and fixtures		136,287		34,618		252		(1,630	)		(36,309	)		(1,808	)		(1,278	)		130,132
Lease assets(*4)		137,564		72,640		490		(8,401	)		(130,905	)		—			703,194			774,582
Bearer plants		80,771		—		—		—			(5,916	)		—			49,338			124,193
Construction-in-progress		1,179,639		2,261,663		17,697		(24,840	)		—			(10,150	)		(1,494,262	)		1,929,747

	W	30,018,273		2,667,901		48,474		(131,043	)		(3,009,469	)		(441,480	)		773,317			29,925,973

(*1)

The Company estimated recoverable amount for individual assets related to CEM and Fe-Si factories, etc. that ceased operations due to the disposal plan and others using fair value less costs to sell based on the appraisal value or scrap value. The Company recognized impairment losses of W205,396 million since recoverable amounts are less than their carrying amounts.

(*2)	As of December 31, 2019, POSCO YAMATO VINA STEEL JOINT STOCK COMPANY (formerly, POSCO SS VINA JOINT STOCK COMPANY), a subsidiary, performed the impairment test due to the consecutive operating losses and recognized impairment losses amounting to W204,546 million.

(*3)	Represents assets transferred from construction-in-progress to intangible assets and other property, plant and equipment, reclassifications resulting from changing purpose of use, adjustments of foreign currency translation differences and others.

(*4)	On the date of initial application of K-IFRS No.1116 (January 1, 2019), recognition of W704,458 million of right-of-use assets is included in others.

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

Right-of-use assets

①

Changes in the carrying amount of right of use assets presented as investment property and property, plant and equipment for the nine-month period ended September 30, 2020 were as follows:


(in millions of Won)	Beginning		Acquisitions		Depreciation			Others			Ending
Land	W	341,767		18,388		(13,891	)		12,542			358,806
Buildings and structures		171,112		41,117		(31,249	)		(19,933	)		161,047
Machinery and equipment		215,828		20,185		(46,248	)		5,948			195,713
Vehicles		14,105		4,708		(7,694	)		1,568			12,687
Ships		24,082		111,537		(20,739	)		—			114,880
Others		8,113		40,194		(26,381	)		38,244			60,170

	W	775,007		236,129		(146,202	)		38,369			903,303

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

②

Changes in the carrying amount of right of use assets presented as investment property and property, plant and equipment for the year ended December 31, 2019 were as follows:


(in millions of Won)	The date of initial application (January 1, 2019)		Acquisitions		Depreciation			Others			Ending
Land	W	340,107		22,850		(11,461	)		(9,729	)		341,767
Buildings and structures		209,455		23,015		(38,853	)		(22,505	)		171,112
Machinery and equipment		219,877		14,610		(33,751	)		15,092			215,828
Vehicles		20,555		8,735		(10,050	)		(5,135	)		14,105
Ships		26,499		—		(2,417	)		—			24,082
Others		25,529		3,430		(34,373	)		13,527			8,113

	W	842,022		72,640		(130,905	)		(8,750	)		775,007

The amounts recognized in profit or loss related to leases for the three-month and nine-month periods ended, September 30, 2020 and 2019 were as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(in millions of Won)	2020		2019		2020		2019
Interest on lease liabilities	W	9,720		7,682		27,550		25,653
Expenses relating to short-term leases		2,672		16,156		11,522		30,369
Expenses relating to leases of low-value assets		2,035		4,288		9,959		10,960

	W	14,427		28,126		49,031		66,982

13. Goodwill and Other Intangible Assets, Net

Changes in the carrying amount of goodwill and other intangible assets for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:

(a)	For the nine-month period ended September 30, 2020


(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			Impairment loss			*Others(2)**			Ending
Goodwill	W	1,097,809		—		—			—			(761	)		(2,241	)		1,094,807
Intellectual property rights		2,279,210		109,178		(1,360	)		(208,709	)		—			22,662			2,200,981
Membership(*1)		148,078		449		(8,653	)		(136	)		488			(84	)		140,142
Development expense		94,339		485		—			(34,076	)		—			12,791			73,539
Port facilities usage rights		281,398		—		—			(33,790	)		—			56			247,664
Exploratation and evaluation assets		77,271		9,445		—			—			—			(31,969	)		54,747
Customer relationships		374,875		—		—			(33,359	)		—			(100	)		341,416
Other intangible assets		555,493		137,068		(61,432	)		(26,554	)		—			(35,215	)		569,360

	W	4,908,473		256,625		(71,445	)		(336,624	)		(273	)		(34,100	)		4,722,656

(*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, adjustments of foreign currency translation difference and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(b)	For the year ended December 31, 2019


(in millions of Won)	Beginning		Acquisitions		Business Combination		Disposals			Amortization			Impairment loss(*2)			*Others(3)**			Ending
Goodwill	W	1,125,149		—		26,256		—			—			(55,445	)		1,849			1,097,809
Intellectual property rights		2,399,525		127,479		—		(6,566	)		(271,694	)		(2	)		30,468			2,279,210
Membership(*1)		134,793		15,636		—		(3,326	)		(181	)		24			1,132			148,078
Development expense		99,163		4,484		—		(35	)		(44,418	)		(666	)		35,811			94,339
Port facilities usage rights		305,081		—		—		(4,674	)		(22,923	)		—			3,914			281,398
Exploratation and evaluation assets		192,130		9,642		—		—			—			(123,888	)		(613	)		77,271
Customer relationships		421,773		—		—		—			(51,768	)		—			4,870			374,875
Other intangible assets		493,211		141,578		74		(10,718	)		(40,263	)		(10,111	)		(18,278	)		555,493

	W	5,170,825		298,819		26,330		(25,319	)		(431,247	)		(190,088	)		59,153			4,908,473

(*1)	Economic useful life of membership is indefinite.

(*2)

In connection with exploration and evaluation of the AD-7 block in Myanmar, POSCO INTERNATIONAL Corporation failed to find economic gas. The Company recognized impairment loss of W118,140 million for the excess of the carrying amounts of related assets over the special energy loan which may be forgiven the case of project failure.

(*3)	Represents assets transferred from construction-in-progress to intangible assets and assets transferred from property, plant and equipment, adjustments of foreign currency translation difference and others.

14. Other Assets

Other assets as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Current
Advance payments	W	371,583		453,538
Prepaid expenses		291,910		145,834
Firm commitment assets		8,318		17,490
Others		33,571		14,315

	W	705,382		631,177

Non-current
Long-term advance payments	W	21,558		21,950
Long-term prepaid expenses		82,173		41,256
Others(*1)		163,733		262,035

	W	267,464		325,241

(*1)

As of September 30, 2020 and December 31, 2019, the Company recognized tax assets amounting to W128,980 million and W213,071 million, respectively, 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.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

15. Borrowings

(a)	Short-term borrowings and current portion of long-term borrowings as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	Lenders	Interest rate (%)		September 30, 2020			December 31, 2019
Short-term borrowings
Bank overdrafts	JP Morgan and others		0.20 ~ 8.35	W	179,142			159,075
Short-term borrowings	HSBC and others		0.17 ~ 12.50		6,219,844			5,327,258

					6,398,986			5,486,333

Current portion of long-term liabilities
Current portion of long-term borrowings	Export-Import Bank of Korea and others		0.40 ~ 6.60		1,410,540			1,491,934
Current portion of debentures	The Goldman Sachs Group, Inc. and others		0.75 ~ 5.25		2,752,900			1,571,194
Less: Current portion of discount on debentures issued					(1,468	)		(1,249	)

					4,161,972			3,061,879

				W	10,560,958			8,548,212

(b)	Long-term borrowings, excluding current portion as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	Lenders	Interest rate (%)		September 30, 2020			December 31, 2019
Long-term borrowings	Export-Import Bank of Korea and others		0.19 ~ 8.50	W	3,602,365			3,827,152
Less: Present value discount					(17,541	)		(24,374	)
Bonds	KB SECURITIES CO., LTD. and others		0.50 ~ 4.30		9,478,235			8,124,194
Less: Discount on debentures issued					(42,019	)		(33,571	)

				W	13,021,040			11,893,401

(c)	Assets pledged as collateral in regards to the borrowings as of September 30, 2020 are as follows:


(in millions of Won)	Lenders	Book value		Pledged amount
Cash and cash equivalents	Shinhan Bank and others	W	22,967		23,189
Property, plant and equipment and Investment property	Korea Development Bank and others		4,709,725		5,253,011
Trade accounts and notes receivable	Korea Development Bank and others		224,229		222,918
Inventories	Export-Import Bank of Korea and others		101,563		12,650
Financial instruments	KOOKMIN BANK and others		48,475		47,275

		W	5,106,959		5,559,043

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

16. Other Payables

Other payables as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Current
Accounts payable	W	728,844		832,845
Accrued expenses		671,235		742,370
Dividend payable		3,432		3,106
Lease liabilities		265,892		149,176
Withholdings		111,270		152,011

	W	1,780,673		1,879,508

Non-current
Accounts payable	W	5,499		2,718
Accrued expenses		3,892		4,805
Lease liabilities		515,750		526,294
Long-term withholdings		53,531		51,312

	W	578,672		585,129

17. Other Financial Liabilities

Other financial liabilities as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Current
Derivative liabilities	W	45,517		28,021
Financial guarantee liabilities		52,476		49,806

	W	97,993		77,827

Non-current
Derivative liabilities	W	14,981		17,033
Financial guarantee liabilities		5,027		14,461

	W	20,008		31,494

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

18. Provisions

(a)	Provisions as of September 30, 2020 and December 31, 2019 are as follows:


	September 30, 2020				December 31, 2019
(in millions of Won)	Current		Non-current		Current		Non-current
Provision for bonus payments	W	57,098		41,267		76,432		47,237
Provision for construction warranties		6,875		185,949		7,655		162,773
Provision for legal contingencies and claims(*1)		4,763		60,627		6,996		77,488
Provision for the restoration(*2)		5,174		89,093		6,783		80,520
Others(3,4)		251,976		55,290		262,629		90,136

	W	325,886		432,226		360,495		458,154

(*1)	The Company recognized probable outflow of resources amounting to W39,727 million and W54,228 million as provisions for legal contingencies and asserted claim in relation to lawsuits against the Company as of September 30, 2020 and December 31, 2019, respectively.

(*2)

Due to contamination of lands near the Company’s magnesium smelting plant located in Gangneung province and others, the Company recognized present values of estimated costs for recovery, W18,938 million as provisions for restoration as of September 30, 2020. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available currently to restore the land to its original condition. In addition, the Company has applied a discount rate of 1.29%~1.40% to measure present value of these costs.

(*3)	As of September 30, 2020 and December 31, 2019, POSCO ENERGY CO., LTD., and Korea Fuel Cell recognized W83,947 million and W178,959 million of provisions for warranties, respectively, for the service contract on fuel cell based on its estimate of probable outflow of resources.

(*4)	As of September 30, 2020, the Company has recognized emission liabilities of W48,101 million for greenhouse gas emissions in excess of the quantity of free quota emission rights received, which is expected to be submitted.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(b)	Changes in provisions for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:

For the nine-month period ended September 30, 2020


(in millions of Won)	Beginning		Increase		Utilization			Reversal			*Others(1)**			Ending
Provision for bonus payments	W	123,669		66,658		(95,124	)		(3,889	)		7,051			98,365
Provision for construction warranties		170,428		41,286		(14,232	)		(4,066	)		(592	)		192,824
Provision for legal contingencies and claims		84,484		2,405		(16,116	)		(6,229	)		846			65,390
Provision for the restoration		87,303		15,777		(4,901	)		(15,837	)		11,925			94,267
Others		352,765		169,572		(106,497	)		(88,888	)		(19,686	)		307,266

	W	818,649		295,698		(236,870	)		(118,909	)		(456	)		758,112

(*1)	Includes adjustments of foreign currency translation differences and others.

For the year ended December 31, 2019


(in millions of Won)	Beginning		Increase		Utilization			Reversal			*Others(1)**		Ending
Provision for bonus payments	W	73,478		122,714		(86,084	)		(3,077	)		16,638		123,669
Provision for construction warranties		142,233		53,203		(22,858	)		(3,444	)		1,294		170,428
Provision for legal contingencies and claims		111,150		26,407		(37,087	)		(18,098	)		2,112		84,484
Provision for the restoration		89,168		23,559		(13,411	)		(14,379	)		2,366		87,303
Others		316,287		95,747		(38,260	)		(86,458	)		65,449		352,765

	W	732,316		321,630		(197,700	)		(125,456	)		87,859		818,649

(*1)	Includes adjustments of foreign currency translation differences and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

19.

Employee Benefits

(a)	Defined contribution plans

The expenses related to post-employment benefit plans under defined contribution plans for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:

For the three-month periods
ended September 30

For the nine-month periods
ended September 30

(in millions of Won)

2020

2019

2020

2019

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

10,682

11,469

35,729

35,527

(b)	Defined benefit plan

The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Present value of funded obligations	W	2,457,895			2,416,203
Fair value of plan assets(*1)		(2,215,797	)		(2,255,149	)
Present value of non-funded obligations		17,226			15,677

Net defined benefit liabilities	W	259,324			176,731

(*1)	As of September 30, 2020 and December 31, 2019, the Company recognized net defined benefit assets amounting to W8,252 million and W4,280 million respectively, since there are consolidated entities whose fair value of plan assets exceeded the present value of defined benefit obligations.

Changes in present value of defined benefit obligations for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Defined benefit obligation at the beginning of period	W	2,431,880			2,137,161
Current service costs		181,204			236,735
Interest costs		35,397			51,900
Remeasurements		301			152,713
Benefits paid		(174,151	)		(152,275	)
Others		490			5,646

Defined benefit obligation at the end of period	W	2,475,121			2,431,880

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

Changes in fair value of plan assets for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Fair value of plan assets at the beginning of period	W	2,255,149			1,997,717
Interest on plan assets		22,152			48,210
Remeasurement of plan assets		20			(8,692	)
Contributions to plan assets		88,297			342,915
Benefits paid		(136,625	)		(124,962	)
Others		5,099			(39	)

Fair value of plan assets at the end of period	W	2,234,092			2,255,149

The amounts recognized in condensed consolidated interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


	For the three-month periods				For the nine-month periods
	ended September 30				ended September 30
(in millions of Won)	2020		2019		2020		2019
Current service costs	W	58,693		58,679		181,204		173,669
Net interest costs		733		168		2,211		2,403

	W	59,426		58,847		183,415		176,072

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

20.

Other Liabilities

Other liabilities as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Current
Due to customers for contract work	W	1,020,373		676,054
Advances received		479,943		487,526
Unearned revenue		63,114		61,795
Withholdings		397,753		388,486
Firm commitment liabilities		21,752		15,637
Others		7,584		8,604

	W	1,990,519		1,638,102

Non-current
Unearned revenue	W	18,409		27,161
Others		22,782		52,349

	W	41,191		79,510

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

21.

Financial Instruments

(a)	Classification and fair value of financial instruments

The carrying amount and fair values of financial assets and financial liabilities by fair value hierarchy as of September 30, 2020 and December 31, 2019 are as follows:

●

September 30, 2020


			Fair value
(in millions of Won)	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets	W	232,877		—		232,877		—		232,877
Short-term financial instruments		8,906,797		—		8,906,797		—		8,906,797
Debt securities		13,663		—		—		13,663		13,663
Other securities		360,899		4,355		680		355,864		360,899
Other receivables		2,000		—		—		2,000		2,000
Derivative hedging instruments(*2)		21,329		—		21,329		—		21,329
Fair value through other comprehensive income
Equity securities		1,030,599		548,709		—		481,890		1,030,599
Debt securities		4,864		—		—		4,864		4,864
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		6,769,118		—		—		—		—
Trade accounts and notes receivable		7,985,303		—		—		—		—
Other receivables		2,340,278		—		—		—		—
Debt securities		151,147		—		—		—		—
Deposit instruments		2,080,723		—		—		—		—

	W	29,899,597		553,064		9,161,683		858,281		10,573,028

Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	49,382		—		49,382		—		49,382
Derivative hedging instruments(*2)		11,116		—		11,116		—		11,116
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		3,296,066		—		—		—		—
Borrowings		23,581,998		—		23,937,695		—		23,937,695
Financial guarantee liabilities		57,503		—		—		—		—
Others		2,192,610		—		—		—		—

	W	29,188,675		—		23,998,193		—		23,998,193

(*1)	Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

(*2)

The Company applies hedge accounting which uses forward contracts as hedging instruments in order to hedge the risk of changes in fair value of product prices regarding firm commitments or purchase commitments. Also, the Company applies cash flow hedge accounting which uses currency swap as hedging instruments in order to hedge the risk of changes in foreign currency which influences cash flow from borrowings.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

●

December 31, 2019


			Fair value
(in millions of Won)	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets	W	106,104		—		106,104		—		106,104
Short-term financial instruments		6,861,242		—		6,861,242		—		6,861,242
Debt securities		28,087		—		—		28,087		28,087
Other securities		340,008		1,222		3,330		335,456		340,008
Other receivables		2,000		—		—		2,000		2,000
Derivative hedging instruments		6,174		—		6,174		—		6,174
Fair value through other comprehensive income
Equity securities		1,204,902		782,108		73		422,721		1,204,902
Debt securities		5,686		—		—		5,686		5,686
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		3,514,872		—		—		—		—
Trade accounts and notes receivable		8,214,459		—		—		—		—
Other receivables		2,193,700		—		—		—		—
Debt securities		334,153		—		—		—		—
Deposit instruments		1,779,082		—		—		—		—

	W	24,590,469		783,330		6,976,923		793,950		8,554,203

Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	32,193		—		32,193		—		32,193
Derivative hedging instruments		12,861		—		12,861		—		12,861
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		3,442,989		—		—		—		—
Borrowings		20,441,613		—		20,666,476		—		20,666,476
Financial guarantee liabilities		64,267		—		—		—		—
Others		2,401,382		—		—		—		—

	W	26,395,305		—		20,711,530		—		20,711,530

(*1)	Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

Finance income and costs by category of financial instrument for the nine-month periods ended September 30, 2020 and 2019 were as follows:

●

For the nine-month period ended September 30, 2020


	Finance income and costs
(in millions of Won)	Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive loss
Financial assets at fair value through profit or loss	W	127,564			33,765			—			10,591			985			172,905			—
Derivatives assets		—			185,405			—			195,304			—			380,709			—
Financial assets at fair value through other comprehensive income		—			—			—			—			31,075			31,075			(154,471	)
Financial assets measured at amortized cost		168,721			—			229,538			(12,309	)		(203	)		385,747			—
Derivatives liabilities		—			(29,170	)		—			(255,418	)		—			(284,588	)		(730	)
Financial liabilities measured at amortized cost		(505,797	)		—			(265,300	)		—			(5,752	)		(776,849	)		—

	W	(209,512	)		190,000			(35,762	)		(61,832	)		26,105			(91,001	)		(155,201	)

●

For the nine-month period ended September 30, 2019


	Finance income and costs
(in millions of Won)	Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive loss
Financial assets at fair value through profit or loss	W	105,893			(8,395	)		—			9,931			630			108,059			—
Derivatives assets		—			203,729			—			143,072			—			346,801			—
Financial assets at fair value through other comprehensive income		—			—			—			—			66,041			66,041			(63,708	)
Financial assets measured at amortized cost		122,398			—			528,105			(29,504	)		(309	)		620,690			—
Derivatives liabilities		—			(24,038	)		—			(180,061	)		—			(204,099	)		(81	)
Financial liabilities measured at amortized cost		(571,024	)		—			(569,715	)		(2,431	)		(17,175	)		(1,160,345	)		—

	W	(342,733	)		171,296			(41,610	)		(58,993	)		49,187			(222,853	)		(63,789	)

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

Finance income and costs by category of financial instrument for the three-month periods ended September 30, 2020 and 2019 were as follows:

●

For the three-month period ended September 30, 2020


	Finance income and costs
(in millions of Won)	Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive loss
Financial assets at fair value through profit or loss	W	45,561			25,961			—			7,737			(13	)		79,246			—
Derivatives assets		—			(79,082	)		—			57,127			—			(21,955	)		—
Financial assets at fair value through other comprehensive income		—			—			—			—			5,507			5,507			11,495
Financial assets measured at amortized cost		46,722			—			(67,335	)		(2,689	)		(43	)		(23,345	)		—
Derivatives liabilities		—			9,899			—			(78,551	)		—			(68,652	)		111
Financial liabilities measured at amortized cost		(158,998	)		—			150,310			—			(5,882	)		(14,570	)		—

	W	(66,715	)		(43,222	)		82,975			(16,376	)		(431	)		(43,769	)		11,606

●

For the three-month period ended September 30, 2019


	Finance income and costs
(in millions of Won)	Interest income (expense)			Gain and loss on valuation			Gain and loss on foreign currency			Gain and loss on disposal			Others			Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	37,796			(7,023	)		—			3,507			—			34,280			—
Derivatives assets		—			95,751			—			60,483			—			156,234			—
Financial assets at fair value through other comprehensive income		—			—			—			—			15,293			15,293			(81,552	)
Financial assets measured at amortized cost		36,518			—			242,400			(10,264	)		(94	)		268,560			—
Derivatives liabilities		—			(21,193	)		—			(69,027	)		—			(90,220	)		19
Financial liabilities measured at amortized cost		(179,820	)		—			(285,364	)		—			(8,167	)		(473,351	)		—

	W	(105,506	)		67,535			(42,964	)		(15,301	)		7,032			(89,204	)		(81,533	)

(b)	Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as of and for the year ended December 31, 2019.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

22.

Share Capital and Capital Surplus

(a)	Share capital as of September 30, 2020 and December 31, 2019 are as follows:


(Share, in Won)	September 30, 2020		December 31, 2019
Authorized shares		200,000,000		200,000,000
Par value	W	5,000		5,000
Issued shares(*1)		87,186,835		87,186,835
Shared capital(*2)	W	482,403,125,000		482,403,125,000

(*1)	As of September 30, 2020, total number of ADRs of 26,190,824 outstanding in overseas stock market are equivalent to 6,547,706 of common stock.

(*2)	As of September 30, 2020, the difference between the ending balance of common stock and the aggregate par value of issued common stock is W46,469 million due to retirement of 9,293,790 treasury stocks.

(b)	Capital surplus as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Share premium	W	463,825		463,825
Gain on disposal of treasury shares		796,623		796,623
Other capital surplus		55,916		115,803

	W	1,316,364		1,376,251

(c)

On February 25, 2017, POSCO ENERGY CO., LTD., a subsidiary of the Company, issued redeemable convertible preferred shares amounting to W245,000 million (8,643,193 shares) which were classified as non-controlling interests in the consolidated financial statements. Repayments of shares were made on February 25, 2020 (4,477,246 shares) and March 30, 2020 (4,165,947 shares).

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

23.

Hybrid Bonds

(a)	Hybrid bonds classified as equity as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	Date of issue		Date of maturity		Interest rate (%)		September 30, 2020			December 31, 2019
Hybrid bond 1-2(*1)		2013-06-13		2043-06-13		4.60	W	200,000			200,000
Issuance cost								(616	)		(616	)

							W	199,384			199,384

(*1)	Details of hybrid bonds issued by the Company as of September 30, 2020 are as follows:


		Hybrid bond 1-2
Maturity		30 years (The Company has a right to extend the maturity)

Interest rate		Issue date ~ 2023-06-12 : 4.60% Reset every 10 years as follows; · After 10 years: return on government bond (10 years) + 1.40% · After 10 years: additionally +0.25% according to Step-up clauses · After 30 years: additionally +0.75%

Interest payments condition		Quarterly (Optional deferral of interest payment is available to the Company)

Others		The Company can call the hybrid bond at 10th anniversary of issuance and interest payment date afterwards

The hybrid bond holders’ preference in the event of liquidation is senior to the common stockholders, but subordinate to other creditors. The interest accumulated but not paid on the hybrid bonds as of September 30, 2020 amounts to W454 million.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(b)	POSCO ENERGY CO., LTD., a subsidiary of the Company, issued hybrid bonds which are classified as non-controlling interests in the consolidated financial statements. Hybrid bonds as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	Date of issue		Date of maturity		Interest rate (%)		September 30, 2020			December 31, 2019
Hybrid bond 1-4(*1)		2013-08-29		2043-08-29		5.21	W	140,000			140,000
Issuance cost								(429	)		(429	)

							W	139,571			139,571

(*1)	Details of hybrid bonds of POSCO ENERGY CO., LTD. as of September 30, 2020 are as follows:


		Hybrid bond 1-4
Maturity		30 years (The issuer has a right to extend the maturity)

Interest rate		Issue date ~ 2023-08-29 : 5.21% Reset every 10 years as follows; · After 10 years: return on government bond (10 years) + 1.55% · After 10 years: additionally + 0.25% according to Step-up clauses · After 30 years: additionally +0.75%

Interest payments condition		Quarterly (Optional deferral of interest payment is available to the Company)

Others		The issuer can call the hybrid bond at 10th anniversary of issuance and interest payment date afterwards

24.

Reserves

Reserves as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Accumulated comprehensive loss of investments in associates and joint ventures	W	(607,112	)		(676,416	)
Changes in fair value of equity investments at fair value through other comprehensive income		(436,559	)		(285,073	)
Foreign currency translation differences		(166,748	)		(202,636	)
Gains or losses on valuation of derivatives		(1,127	)		(438	)
Others		11,950			6,583

	W	(1,199,596	)		(1,157,980	)

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

25.

Treasury Shares

During the nine-month period ended September 30, 2020, the Company entered into a trust contract of acquiring treasury shares following approval of the Board of Directors. The amount committed to purchase treasury shares by this trust contract is W1,000 billion, and the contract period is from April 13, 2020 to April 12, 2021. The number of treasury shares acquired according to the contract is 1,739,881 during the nine-month period ended September 30, 2020.

As of September 30, 2020, the Company holds 8,811,075 treasury shares for share price stabilization and other purposes in accordance with the Board of Director’s resolution.

26.

Revenue

(a)	Disaggregation of revenue

Details of revenue disaggregated by types of revenue and timing of revenue recognition for the nine-month periods ended September 30, 2020 and 2019 were as follows:

①

For the nine-month period ended September 30, 2020


(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	20,545,012		14,108,407		—		611,217		35,264,636
Revenue from services		343,393		293,983		33,882		1,377,614		2,048,872
Revenue from construction contract		—		—		4,878,088		20,467		4,898,555
Others		26,812		118,301		5,143		166,266		316,522

	W	20,915,217		14,520,691		4,917,113		2,175,564		42,528,585

Timing of revenue recognition
Revenue recognized at a point in time	W	20,571,824		14,226,708		120,754		777,483		35,696,769
Revenue recognized over time		343,393		293,983		4,796,359		1,398,081		6,831,816

	W	20,915,217		14,520,691		4,917,113		2,175,564		42,528,585

②

For the nine-month period ended September 30, 2019


(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	23,988,855		16,121,940		—		517,833		40,628,628
Revenue from services		451,076		288,736		37,055		1,718,722		2,495,589
Revenue from construction contract		—		—		4,859,983		22,602		4,882,585
Others		37,705		105,798		4,427		169,067		316,997

	W	24,477,636		16,516,474		4,901,465		2,428,224		48,323,799

Timing of revenue recognition
Revenue recognized at a point in time	W	24,026,560		16,227,738		15,859		692,162		40,962,319
Revenue recognized over time		451,076		288,736		4,885,606		1,736,062		7,361,480

	W	24,477,636		16,516,474		4,901,465		2,428,224		48,323,799

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

Details of revenue disaggregated by types of revenue and timing of revenue recognition for the three-month periods ended September 30, 2020 and 2019 were as follows:

①

For the three-month period ended September 30, 2020


(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	7,317,057		4,370,071		—		243,250		11,930,378
Revenue from services		110,529		102,730		11,034		492,283		716,576
Revenue from construction contract		—		—		1,509,453		6,260		1,515,713
Others		8,213		31,269		1,124		57,945		98,551

	W	7,435,799		4,504,070		1,521,611		799,738		14,261,218

Timing of revenue recognition
Revenue recognized at a point in time	W	7,325,270		4,401,340		16,216		301,194		12,044,020
Revenue recognized over time		110,529		102,730		1,505,395		498,544		2,217,198

	W	7,435,799		4,504,070		1,521,611		799,738		14,261,218

②

For the three-month period ended September 30, 2019


(in millions of Won)	Steel		Trading		Construction		Others		Total
Types of revenue
Revenue from sales of goods	W	8,068,894		5,184,949		—		176,097		13,429,940
Revenue from services		139,345		92,265		12,487		563,946		808,043
Revenue from construction contract		—		—		1,637,441		5,505		1,642,946
Others		14,767		36,896		975		54,660		107,298

	W	8,223,006		5,314,110		1,650,903		800,208		15,988,227

Timing of revenue recognition
Revenue recognized at a point in time	W	8,083,661		5,221,845		10,131		230,756		13,546,393
Revenue recognized over time		139,345		92,265		1,640,772		569,452		2,441,834

	W	8,223,006		5,314,110		1,650,903		800,208		15,988,227

(b)	Details of contract assets and liabilities from contracts with customers as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Receivables
Account receivables	W	7,985,303		8,214,459
Contract assets
Due from customers for contract work		1,013,730		1,062,677
Contract liabilities
Advances received		484,027		489,658
Due to customers for contract work		1,020,373		676,054
Unearned revenue		81,325		88,733

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

27.

Revenue – Contract Balances

(a)	Details of ongoing contracts as of September 30, 2020 and December 31, 2019 are as follows:


	September 30, 2020						December 31, 2019
(in millions of Won)	Construction segment			Others			Construction segment			Others
Accumulated cost	W	29,726,857			247,797			29,106,218			249,751
Accumulated contract profit		2,885,866			50,467			2,863,207			47,107
Accumulated contract loss		(1,209,350	)		(1,987	)		(1,182,989	)		(2,211	)
Accumulated contract revenue		31,403,373			296,277			30,786,436			294,647

(b)	Details of due from customers for contract work and due to customers for contract work as of September 30, 2020 and December 31, 2019 are as follows:


	September 30, 2020						December 31, 2019
(in millions of Won)	Construction segment			Others			Construction segment			Others
Due from customers for contract work	W	1,045,721			45,116			1,087,119			49,317
Due to customers for contract work		(997,738	)		(22,635	)		(639,130	)		(36,924	)

	W	47,983			22,481			447,989			12,393

(c)	Details of the provisions of construction loss as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Construction segment	W	24,779		35,526
Others		388		406

	W	25,167		35,932

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(d)

Due to the factors causing the variation of costs for the nine-month period ended September 30, 2020, the estimated total contract costs have changed. Details of changes in estimated total contract costs and the impact on profit before income taxes for the nine-month period ended September 30, 2020 and future periods are as follows:


	Changes in estimated		Changes in profit (loss) of contract
(in millions of Won)	total contract costs		Net income		Future income		Total
Construction segment	W	115,032		61,433		169,756		231,189
Others		13,570		4,098		583		4,681

	W	128,602		65,531		170,339		235,870

The effect on the current and future profit is estimated based on the circumstances that have occurred from the commencement date of the contract to September 30, 2020. The estimation is evaluated for the total contract costs and expected total contract revenue as of the end of the period, which is subject to change in future periods.

(e)	Uncertainty of estimates

Total contract revenues

Total contract revenues are measured based on contractual amount initially agreed. However, the contract revenues can increase due to additional contract work, claims and incentive payments, or decrease due to penalty when the completion of contract is delayed due to the Company’s fault. Therefore, this measurement of contract revenues is affected by the uncertainty of the occurrence of future events.

Total contract costs

Contract revenues are recognized based on the percentage of completion, which is measured on the basis of the gross cost amount incurred to date. Total contract costs are estimated based on estimates of future material costs, labor costs, outsourcing cost and others. There is uncertainty in estimates on future contract costs due to various internal and external factors such as fluctuation of market, the risk of business partner and the experience of project performance and others. The significant assumptions including uncertainty of the estimate of total contract costs are as follows:


		Method of significant assumption
Material cost		Assumption based on recent purchasing price and quoted market price
Labor cost		Assumption based on standard monthly and daily labor cost
Outsourcing cost		Assumption based on the past experience rate of similar project and market price

Management reviews the assumptions used in estimated contract costs at each reporting period end and adjusts them, if necessary.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

28.

Selling and Administrative Expenses

(a)	Other administrative expenses

Other administrative expenses for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(in millions of Won)	2020		2019		2020		2019
Wages and salaries	W	210,874		210,590		621,394		616,453
Expenses related to post-employment benefits		18,197		24,774		60,078		64,844
Other employee benefits		43,253		42,701		129,004		131,822
Travel		3,719		10,250		13,609		31,431
Depreciation		36,393		33,761		109,250		99,381
Amortization		26,113		28,110		80,746		84,912
Communication		2,305		2,517		7,106		7,546
Electricity		2,055		2,480		6,085		6,511
Taxes and public dues		11,311		15,574		43,386		47,430
Rental		6,733		9,420		22,998		30,097
Repairs		2,463		3,107		5,701		9,731
Entertainment		1,911		2,738		5,456		8,379
Advertising		16,842		21,276		51,495		63,241
Research & development		29,083		26,839		78,354		83,521
Service fees		36,957		37,417		113,732		125,005
Vehicles maintenance		1,179		1,685		3,678		5,932
Industry association fee		1,502		1,738		7,541		7,155
Conference		2,922		3,462		8,247		11,272
Increase to provisions		1,728		2,126		3,610		4,608
Others		10,717		10,205		28,394		34,118

	W	466,257		490,770		1,399,864		1,473,389

(b)	Selling expenses

Selling expenses for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(in millions of Won)	2020		2019		2020		2019
Freight and custody	W	49,434		42,775		135,537		130,312
Operating expenses for distribution center		1,589		2,201		5,276		7,452
Sales commissions		13,795		18,565		81,714		57,164
Sales advertising		64		341		634		945
Sales promotion		1,897		2,202		5,133		7,217
Sample		318		503		1,190		1,631
Sales insurance premium		6,735		8,208		22,364		24,133
Contract cost		11,420		8,605		27,170		24,684
Others		4,482		4,624		13,043		15,949

	W	89,734		88,024		292,061		269,487

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

29.

Finance Income and Costs

Details of finance income and costs for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


	For the three-month periods ended September 30					For the nine-month periods ended September 30
(in millions of Won)	2020			2019		2020		2019
Finance Income
Interest income(*1)	W	92,283			74,314		296,285		228,291
Dividend income		5,494			15,293		32,060		66,671
Gain on foreign currency transactions		174,109			258,433		810,396		638,199
Gain on foreign currency translations		35,923			77,820		255,900		277,437
Gain on derivatives transactions		67,552			63,843		212,192		148,443
Gain on valuations of derivatives		(72,513	)		97,054		208,687		243,923
Others		38,583			15,960		56,004		26,630

	W	341,431			602,717		1,871,524		1,629,594

Finance costs
Interest expenses	W	158,998			179,820		505,797		571,024
Loss on foreign currency transactions		206,255			219,368		691,009		534,666
Loss on foreign currency translations		(79,198	)		159,849		411,049		422,580
Loss on derivatives transactions		88,976			72,387		272,306		185,432
Loss on valuation of derivatives		(3,330	)		22,496		52,452		64,232
Loss on disposal of trade accounts and notes receivable		2,689			10,264		12,345		29,504
Others		10,809			27,738		17,567		45,009

	W	385,199			691,922		1,962,525		1,852,447

(*1)	Interest income calculated using the effective interest method for the nine-month periods ended September 30, 2020 and 2019 were W168,721 million and W122,398 million, respectively.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

30.

Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(in millions of Won)	2020		2019		2020		2019
Other non-operating income
Gain on disposals of assets held for sale	W	—		—		299		8,536
Gain on disposals of investments in subsidiaries, associates and joint ventures		2,082		4,929		43,421		20,750
Gain on disposals of property, plant and equipment		2,196		5,567		9,542		21,929
Gain on valuation of firm commitment		17,396		22,952		55,062		51,920
Gain on valuation of emission rights		—		—		—		25,440
Gain on disposals of emission rights		285		11,141		24,851		11,141
Reversal of other provisions		2,735		29,120		3,574		35,291
Others		41,574		41,204		96,423		97,274

	W	66,268		114,913		233,172		272,281

Other non-operating expenses
Impairment loss on assets held for sale	W	—		37,597		5,030		40,943
Loss on disposals of investments in subsidiaries, associates and joint ventures		3,586		281		13,659		5,867
Loss on disposals of property, plant and equipment		26,451		23,826		105,440		61,222
Impairment losses on property, plant and equipment		284		45,029		21,684		194,688
Impairment losses on intangible assets		41		124,525		1,225		125,696
Loss on valuation of firm commitment		21,154		11,704		57,229		30,276
Idle tangible assets expenses		4,181		8,192		14,866		26,619
Increase to provisions		6,452		5,801		7,676		13,172
Donations		8,137		12,935		24,845		24,129
Others		13,884		20,317		49,951		71,463

	W	84,170		290,207		301,605		594,075

31.

Expenses by Nature

Expenses that are recorded by nature as cost of sales, selling and administrative expenses, impairment loss on other receivables and other non-operating expenses in the statements of comprehensive income for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows (excluding finance costs and income tax expense):


	For the three-month periods ended September 30				For the nine-month periods ended September 30
(in millions of Won)	2020		2019		2020		2019
Raw material used, changes in inventories and others	W	8,809,612		9,417,705		25,757,893		28,674,400
Employee benefits expenses		906,728		942,398		2,678,926		2,688,563
Outsourced processing cost		1,771,108		2,067,057		5,857,897		5,829,808
Electricity and water		168,788		247,474		482,046		726,188
Depreciation(*1)		793,940		746,172		2,348,977		2,269,280
Amortization		106,230		113,214		336,624		316,947
Freight and custody		376,397		353,335		1,058,528		1,084,969
Sales commissions		13,795		18,565		81,714		57,164
Loss on disposal of property, plant and equipment		26,451		23,826		105,440		61,222
Impairment loss on property, plant and equipment		284		45,029		21,684		194,688
Donations		8,137		12,935		24,845		24,129
Other expenses		696,028		1,266,875		2,544,668		3,712,577

	W	13,677,498		15,254,585		41,299,242		45,639,935

(*1)	Includes depreciation expense of investment property.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

32.

Income Taxes

The effective tax rates of the Company for the nine-month periods ended September 30, 2020 and 2019 were 30.07% and 34.13%, respectively.

33.

Earnings per Share

Basic earnings per share for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


(in Won except per share information)	For the three-month periods ended September 30						For the nine-month periods ended September 30
(in Won except per share information)	2020			2019			2020			2019
Profit attributable to controlling interest	W	465,457,487,777			430,875,315,211			901,132,036,554			1,784,414,381,573
Interests of hybrid bonds		(1,681,205,479	)		(1,681,205,479	)		(5,007,068,492	)		(4,988,794,519	)
Weighted-average number of common shares outstanding (*1)		79,230,216			80,115,641			79,784,098			80,113,124

Basic earnings per share	W	5,854			5,357			11,232			22,211

(*1)	The weighted-average number of common shares used to calculate basic and diluted earnings per share are as follows:


(Share)	For the three-month periods ended September 30						For the nine-month periods ended September 30
(Share)	2020			2019			2020			2019
Total number of common shares issued		87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(7,956,619	)		(7,071,194	)		(7,402,737	)		(7,073,711	)

Weighted-average number of common shares outstanding		79,230,216			80,115,641			79,784,098			80,113,124

Since there were no potential shares of common stock which had dilutive effects as of September 30, 2020 and 2019, diluted earnings per share is equal to basic earnings per share.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

34.

Related Party Transactions

(a)	Significant transactions between the controlling company and related companies for the nine-month periods ended September 30, 2020 and 2019 were as follows:

For the nine-month period ended September 30, 2020


(in millions of Won)	*Sales and others(1)**				*Purchase and others(2)**
(in millions of Won)	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
*Subsidiaries(3)**
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	5,168		11,107		15		543,484		60		17,773
POSCO COATED & COLOR STEEL Co., Ltd.		309,338		1,819		—		—		21,466		249
POSCO ICT(*4)		2,088		4,992		—		248,039		30,951		131,887
eNtoB Corporation		11		60		160,906		24,852		55		17,884
POSCO CHEMICAL CO., LTD		200,730		29,911		342,948		16,219		226,595		4,551
POSCO ENERGY CO., LTD.		2,196		2,117		12,374		3		—		16,709
POSCO INTERNATIONAL Corporation		4,246,418		55,558		233,450		—		11,371		3,293
POSCO Thainox Public Company Limited		226,231		137		3,454		—		—		—
POSCO America Corporation		120,956		—		—		—		—		505
POSCO Canada Ltd.		—		978		129,666		—		—		—
POSCO Asia Co., Ltd.		1,161,489		1,002		114,796		3,229		1,174		2,765
Qingdao Pohang Stainless Steel Co., Ltd.		105,037		66		—		—		—		196
POSCO JAPAN Co., Ltd.		776,819		—		29,582		4,947		—		2,428
POSCO-VIETNAM Co., Ltd.		182,844		239		—		—		—		59
POSCO MEXICO S.A. DE C.V.		107,763		158		—		—		—		304
POSCO Maharashtra Steel Private Limited		210,679		1,543		—		—		—		282
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		82,663		—		—		—		—		—
POSCO VST CO., LTD.		163,085		204		—		—		—		123
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		1,039		395,961		—		—		—
Others		913,036		20,393		55,641		33,263		197,496		91,565

		8,816,551		131,323		1,478,793		874,036		489,168		290,573

*Associates and joint ventures(3)**
POSCO PLANTEC Co., Ltd.(*5)		65		41		916		84,839		4,086		12,431
SNNC		4,333		4,103		372,068		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		29,429		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		39,112		940,725		—		—		—
Others		25,649		61,949		46,788		—		—		23,714

		59,476		105,205		1,360,497		84,839		4,086		36,145

	W	8,876,027		236,528		2,839,290		958,875		493,254		326,718

(*1)	Sales and others mainly consist of sales of steel products to subsidiaries, associates and joint ventures.

(*2)	Purchases and others mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products.

(*3)	As of September 30, 2020, the Company provided guarantees to related parties (Note 35).

(*4)	Others (purchase) mainly consist of service fees related to maintenance and repair of ERP System.

(*5)	During the nine-month period ended September 30, 2020, POSCO PLANTEC Co., Ltd. was excluded from associates due to the Company’s loss of significant influence over the investee.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

For the nine-month period ended September 30, 2019


(in millions of Won)	Sales and others				Purchase and others
(in millions of Won)	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	5,151		11,110		—		226,604		25		12,064
POSCO COATED & COLOR STEEL Co., Ltd.		354,046		1,942		95		—		13,595		586
POSCO ICT		2,213		4,990		—		226,456		26,235		131,522
eNtoB Corporation		11		66		231,896		28,678		72		18,443
POSCO CHEMICAL CO., LTD		289,090		30,298		389,598		12,396		236,114		3,084
POSCO ENERGY CO., LTD.		147,124		1,252		1,090		—		—		1,672
POSCO INTERNATIONAL Corporation		4,426,067		46,572		459,705		—		38,067		4,516
POSCO Thainox Public Company Limited		188,527		13,795		6,706		—		—		3
POSCO America Corporation		232,724		—		—		—		—		1,682
POSCO Canada Ltd.		340		751		245,123		—		—		—
POSCO Asia Co., Ltd.		1,300,580		975		323,203		72		1,484		5,093
Qingdao Pohang Stainless Steel Co., Ltd.		99,757		—		—		—		—		—
POSCO JAPAN Co., Ltd.		1,134,448		36		29,843		3,685		—		2,898
POSCO-VIETNAM CO., Ltd.		222,692		263		—		—		—		37
POSCO MEXICO S.A. DE C.V.		238,357		89		—		—		—		246
POSCO Maharashtra Steel Private Limited		513,467		266		—		—		—		256
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		81,829		1		2,189		—		—		—
POSCO VST CO., LTD.		217,034		—		—		—		—		62
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		285		514,751		—		—		—
Others		685,845		17,396		106,193		19,147		182,202		119,078

		10,139,302		130,087		2,310,392		517,038		497,794		301,242

Associates and joint ventures
POSCO PLANTEC Co., Ltd.		412		70		2,009		183,351		12,994		16,430
SNNC		4,121		3,910		420,720		—		—		10
POSCO-SAMSUNG-Slovakia Processing Center		50,894		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		841,866		—		—		—
Others		11,830		107,865		43,088		—		—

		67,257		111,845		1,307,683		183,351		12,994		16,440

	W	10,206,559		241,932		3,618,075		700,389		510,788		317,682

(b)	Significant transactions between the controlling company and related companies for the three-month periods ended September 30, 2020 and 2019 were as follows:

For the three-month period ended September 30, 2020


(in millions of Won)	Sales and others				Purchase and others
(in millions of Won)	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	1,620		11		—		101,179		—		4,938
POSCO COATED & COLOR STEEL Co., Ltd.		103,572		124		—		—		6,290		41
POSCO ICT		659		1		—		63,729		10,010		44,219
eNtoB Corporation		4		—		47,528		6,004		27		5,391
POSCO CHEMICAL CO., LTD		56,264		5,141		113,227		3,389		72,171		189
POSCO ENERGY CO., LTD.		643		901		2,379		—		—		5,599
POSCO INTERNATIONAL Corporation		1,450,981		1,227		122,652		—		—		1,210
POSCO Thainox Public Company Limited		119,514		—		—		—		—		—
POSCO America Corporation		24,690		—		—		—		—		502
POSCO Canada Ltd.		—		162		38,861		—		—		—
POSCO Asia Co., Ltd.		441,511		37		33,125		957		12		1,346
Qingdao Pohang Stainless Steel Co., Ltd.		34,269		—		—		—		—		20
POSCO JAPAN Co., Ltd.		227,977		—		13,162		1,988		—		1,340
POSCO-VIETNAM Co., Ltd.		81,739		16		—		—		—		39
POSCO MEXICO S.A. DE C.V.		39,189		59		—		—		—		—
POSCO Maharashtra Steel Private Limited		56,925		696		—		—		—		97
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		25,018		—		—		—		—		—
POSCO VST CO., LTD.		30,869		148		—		—		—		103
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		235		104,312		—		—		—
Others		339,973		2,209		14,535		7,683		68,939		33,500

		3,035,417		10,967		489,781		184,929		157,449		98,534

Associates and joint ventures
SNNC		1,432		625		153,008		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		12,275		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		39,112		315,180		—		—		—
Others		11,317		7,016		17,834		—		—		10,366

		25,024		46,753		486,022		—		—		10,366

	W	3,060,441		57,720		975,803		184,929		157,449		108,900

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

For the three-month period ended September 30, 2019


(in millions of Won)	Sales and others				Purchase and others
(in millions of Won)	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	1,543		21		—		87,255		4		6,831
POSCO COATED & COLOR STEEL Co., Ltd.		120,638		235		95		—		5,911		95
POSCO ICT		704		1		—		77,639		9,180		42,684
eNtoB Corporation		4		6		72,320		11,742		13		5,012
POSCO CHEMICAL CO., LTD		91,297		5,169		134,299		4,818		79,731		1,074
POSCO ENERGY CO., LTD.		40,522		628		1,090		—		—		1,610
POSCO INTERNATIONAL Corporation		1,584,691		—		129,661		—		12,030		1,947
POSCO Thainox Public Company Limited		68,495		120		2,973		—		—		—
POSCO America Corporation		48,207		—		—		—		—		1,643
POSCO Canada Ltd.		—		147		93,231		—		—		—
POSCO Asia Co., Ltd.		438,809		390		74,772		72		497		2,297
Qingdao Pohang Stainless Steel Co., Ltd.		40,347		—		—		—		—		—
POSCO JAPAN Co., Ltd.		378,091		36		8,290		664		—		1,411
POSCO-VIETNAM Co., Ltd.		81,157		82		—		—		—		—
POSCO MEXICO S.A. DE C.V.		84,591		58		—		—		—		241
POSCO Maharashtra Steel Private Limited		179,859		79		—		—		—		—
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		38,516		1		708		—		—		—
POSCO VST CO., LTD.		80,009		—		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		105		192,541		—		—		—
Others		260,530		2,836		25,138		8,575		48,620		58,287

		3,538,010		9,914		735,118		190,765		155,986		123,132

Associates and joint ventures
POSCO PLANTEC Co., Ltd.		229		5		610		72,737		3,668		7,068
SNNC		1,374		530		176,094		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		19,130		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		359,018		—		—		—
Others		4,845		21,828		15,961		—		—		—

		25,578		22,363		551,683		72,737		3,668		7,068

	W	3,563,588		32,277		1,286,801		263,502		159,654		130,200

(c)	The related account balances from significant transactions between the controlling company and related companies as of September 30, 2020 and December 31, 2019 are as follows:

September 30, 2020


(in millions of Won)	Receivables						Payables
(in millions of Won)	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	4,507		5		4,512		—		37,871		261		38,132
POSCO COATED & COLOR STEEL Co., Ltd.		60,497		—		60,497		—		5		3,630		3,635
POSCO ICT		184		—		184		2,206		42,204		24,993		69,403
eNtoB Corporation		—		—		—		2,977		28,664		—		31,641
POSCO CHEMICAL CO., LTD		35,943		3,485		39,428		11,926		44,963		16,921		73,810
POSCO ENERGY CO., LTD.		188		248		436		—		3,082		12,979		16,061
POSCO INTERNATIONAL Corporation		569,861		—		569,861		4,098		323		—		4,421
POSCO Thainox Public Company Limited		83,853		—		83,853		—		—		—		—
POSCO America Corporation		1,173		—		1,173		—		—		—		—
POSCO Asia Co., Ltd.		300,471		1,433		301,904		5,275		—		—		5,275
Qingdao Pohang Stainless Steel Co., Ltd.		16,230		—		16,230		—		—		—		—
POSCO MEXICO S.A. DE C.V.		41,612		701		42,313		—		—		—		—
POSCO Maharashtra Steel Private Limited		183,492		471		183,963		—		—		—		—
Others		608,868		34,530		643,398		31,409		37,624		84,148		153,181

		1,906,879		40,873		1,947,752		57,891		194,736		142,932		395,559

Associates and joint ventures
SNNC		294		229		523		36,262		—		—		36,262
Roy Hill Holdings Pty Ltd		—		39,112		39,112		194,818		32		—		194,850
Others		755		38,003		38,758		2,660		—		—		2,660

		1,049		77,344		78,393		233,740		32		—		233,772

	W	1,907,928		118,217		2,026,145		291,631		194,768		142,932		629,331

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

December 31, 2019


(in millions of Won)	Receivables						Payables
(in millions of Won)	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	5,702		65		5,767		—		78,512		385		78,897
POSCO COATED & COLOR STEEL Co., Ltd.		57,792		—		57,792		—		11		3,828		3,839
POSCO ICT		225		1		226		1,147		129,424		42,844		173,415
eNtoB Corporation		—		—		—		3,459		27,431		—		30,890
POSCO CHEMICAL CO., LTD		35,102		3,578		38,680		17,839		52,710		19,369		89,918
POSCO ENERGY CO., LTD.		1,876		4		1,880		—		3,229		14,912		18,141
POSCO INTERNATIONAL Corporation		633,073		—		633,073		345		2,218		3,839		6,402
POSCO Thainox Public Company Limited		52,826		2		52,828		916		—		—		916
POSCO America Corporation		8,448		—		8,448		—		—		—		—
POSCO Asia Co., Ltd.		508,962		748		509,710		12,784		171		—		12,955
Qingdao Pohang Stainless Steel Co., Ltd.		29,842		—		29,842		—		—		—		—
POSCO MEXICO S.A. DE C.V.		90,351		702		91,053		—		—		—		—
POSCO Maharashtra Steel Private Limited		235,917		444		236,361		—		—		—		—
Others		470,734		33,851		504,585		14,397		40,233		87,652		142,282

		2,130,850		39,395		2,170,245		50,887		333,939		172,829		557,655

Associates and jointventures
POSCO PLANTEC Co., Ltd.		84		10		94		471		49,511		—		49,982
SNNC		297		65		362		19,769		—		—		19,769
Roy Hill Holdings Pty Ltd		—		—		—		93,383		—		—		93,383
Others		942		706		1,648		3,447		586		—		4,033
		1,323		781		2,104		117,070		50,097		—		167,167

	W	2,132,173		40,176		2,172,349		167,957		384,036		172,829		724,822

(d)	Significant transactions between the Company, excluding the controlling company, and related companies for the nine-month periods ended September 30, 2020 and 2019 were as follows:

For the nine-month period ended September 30, 2020


(in millions of Won)	Sales and others					Purchase and others
(in millions of Won)	Sales			Others		Purchase of material		Others
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	2,558			—		5		—
New Songdo International City Development, LLC		81,806			26,451		—		107
SNNC		44,485			—		35,684		118,925
Chuncheon Energy Co., Ltd.		(2,656	)		211		—		—
Noeul Green Energy Co., Ltd.		4,587			—		—		582
CSP—Compania Siderurgica do Pecem		21,943			6,883		141,883		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		35,696			—		32,147		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—			—		4,555		—
POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd		5,909			—		—		—
PT. Batutua Tembaga Raya		—			1,111		23,379		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		19,578			—		210		—
DMSA/AMSA		—			—		29,198		—
South-East Asia Gas Pipeline Company Ltd.		7			51,793		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		24,154			19,475		2,704		602
Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)		153,824			—		—		—
TK CHEMICAL CORPORATION		82,834			—		23,339		—
Others		108,943			54,438		29,890		27,193

	W	583,668			160,362		322,994		147,409

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

For the nine-month period ended September 30, 2019


(in millions of Won)	Sales and others				Purchase and others
(in millions of Won)	Sales		Others		Purchase of material		Others
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	10,134		—		34		12,206
New Songdo International City Development, LLC		5,276		4,471		—		18
SNNC		58,663		—		26,910		51,967
Chuncheon Energy Co., Ltd.		1,227		—		—		—
Noeul Green Energy Co., Ltd.		4,906		—		—		1,217
USS-POSCO Industries		2		—		1,710		—
CSP—Compania Siderurgica do Pecem		90,310		7,419		324,947		26,755
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		25,543		—		32,731		—
LLP POSUK Titanium		—		—		272		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		7		—		2,948		—
POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd		8,035		—		—		—
PT. Batutua Tembaga Raya		—		631		31,980		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		22,264		—		263		—
Sebang Steel		—		—		4,862		—
DMSA/AMSA		—		—		50,723		—
South-East Asia Gas Pipeline Company Ltd.		49		37,984		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		67,073		16,369		3,714		1,629
Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)		117,851		—		—		—
TK CHEMICAL CORPORATION		131,016		—		50,766		—
Others		168,928		46,136		22,256		22,151

	W	711,284		113,010		554,116		115,943

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(e)	Significant transactions between the Company, excluding the controlling company, and related companies for the three-month periods ended September 30, 2020 and 2019 were as follows:

For the three-month period ended September 30, 2020


(in millions of Won)	Sales and others					Purchase and others
(in millions of Won)	Sales			Others		Purchase of material		Others
Associates and joint ventures
New Songdo International City Development, LLC	W	29,943			1		—		61
SNNC		17,283			—		10,402		11,418
Chuncheon Energy Co., Ltd.		(2,943	)		—		—		—
Noeul Green Energy Co., Ltd.		1,548			—		—		582
CSP - Compania Siderurgica do Pecem		3,632			1,958		18,515		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		16,768			—		7,365		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		—			—		2,162		—
POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd		2,615			—		—		—
PT. Batutua Tembaga Raya		—			—		6,804		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		7,447			—		45		—
South-East Asia Gas Pipeline Company Ltd.		—			13,276		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		8,193			37		816		150
Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)		63,914			—		—		—
TK CHEMICAL CORPORATION		23,082			—		4,596		—
Others		47,244			24,665		12,176		10,340

	W	218,726			39,937		62,881		22,551

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

For the three-month period ended September 30, 2019


(in millions of Won)	Sales and others				Purchase and others
(in millions of Won)	Sales		Others		Purchase of material		Others
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	4,475		—		13		4,449
New Songdo International City Development, LLC		4,525		—		—		5
SNNC		14,638		—		7,949		20,811
Chuncheon Energy Co., Ltd.		82		—		—		—
Noeul Green Energy Co., Ltd.		1,545		—		—		—
USS-POSCO Industries		—		—		394		—
CSP—Compania Siderurgica do Pecem		5,712		—		104,405		16,169
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		8,998		—		10,576		—
LLP POSUK Titanium		—		—		—		—
BX STEEL POSCO Cold Rolled Sheet Co., Ltd.		4		—		1,140		—
POS-SEAHSTEELWIRE(TIANJIN)CO.,Ltd		2,737		—		—		—
PT. Batutua Tembaga Raya		—		136		10,346		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		8,513		—		90		—
Sebang Steel		—		—		—		—
DMSA/AMSA		—		—		20,110		—
South-East Asia Gas Pipeline Company Ltd.		22		28,597		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		22,424		—		1,094		509
Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)		38,579		—		—		—
TK CHEMICAL CORPORATION		44,029		—		11,312		—
Others		65,503		8,112		10,606		13,105

	W	221,786		36,845		178,035		55,048

(f)	The related account balances from significant transactions between the Company, excluding the controlling company, and related companies as of September 30, 2020 and December 31, 2019 are as follows:

September 30, 2020


(in millions of Won)	Receivables								Payables
(in millions of Won)	Trade accounts and notes receivable		Loans		Others		Total		Trade accounts and notes payable		Others		Total
Associates and joint ventures
New Songdo International City Development, LLC	W	9,911		—		20,592		30,503		—		—		—
Chuncheon Energy Co., Ltd.		—		—		—		—		3,312		—		3,312
Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)		78,150		—		—		78,150		—		50,059		50,059
Nickel Mining Company SAS		—		63,874		146		64,020		—		—		—
CSP - Compania Siderurgica do Pecem		149,591		—		9,696		159,287		—		—		—
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		16,486		—		—		16,486		2,012		—		2,012
PT. Batutua Tembaga Raya		—		38,133		962		39,095		—		—		—
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		9,948		—		—		9,948		96		—		96
South-East Asia Gas Pipeline Company Ltd.		—		110,957		—		110,957		—		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		3,515		—		—		3,515		738		—		738
TK CHEMICAL CORPORATION		23,081		—		—		23,081		1,743		—		1,743
Others		64,559		167,814		112,490		344,863		7,563		13,309		20,872

	W	355,241		380,778		143,886		879,905		15,464		63,368		78,832

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

December 31, 2019


(in millions of Won)	Receivables								Payables
(in millions of Won)	Trade accounts and notes receivable		Loans		Others		Total		Trade accounts and notes receivable		Others		Total
Associates and joint ventures
POSCO PLANTEC Co., Ltd.	W	4,121		—		205		4,326		791		8		799
New Songdo International City Development, LLC		23,626		—		20,592		44,218		—		10		10
Chuncheon Energy Co., Ltd.		—		8,234		—		8,234		657		—		657
Samcheok Blue Power Co., Ltd. (Formarly, POSPower Co., Ltd.)		34,945		—		—		34,945		—		67,543		67,543
Nickel Mining Company SAS		—		60,516		120		60,636		—		—		—
CSP - Compania Siderurgica do Pecem		244,700		—		14,264		258,964		—		33		33
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		10,273		—		—		10,273		633		—		633
PT. Batutua Tembaga Raya		—		36,291		19,993		56,284		56		—		56
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		7,035		—		—		7,035		101		—		101
DMSA/AMSA		—		57,999		1,672		59,671		—		—		—
South-East Asia Gas Pipeline Company Ltd.		14		147,367		—		147,381		—		—		—
POSCO MITSUBISHI CARBON TECHNOLOGY		8,078		—		—		8,078		916		—		916
TK CHEMICAL CORPORATION		37,373		—		—		37,373		110		—		110
Others		94,914		138,663		97,804		331,381		7,128		13,379		20,507

	W	465,079		449,070		154,650		1,068,799		10,392		80,973		91,365

(g)	Significant financial transactions between the Company, excluding the controlling company, and related companies for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:

September 30, 2020


(in millions of Won)	Beginning		Lend		Collect			*Others(2)**			Ending
Associates and joint ventures
UITrans LRT Co., Ltd.	W	10,579		9,471		—			—			20,050
DMSA/AMSA(*1)		57,999		—		—			(57,999	)		—
South-East Asia Gas Pipeline Company Ltd.		147,367		—		(36,026	)		(384	)		110,957
PT. Batutua Tembaga Raya		36,291		—		—			1,842			38,133
PT. Tanggamus Electric Power		4,580		—		—			62			4,642
PT. Wampu Electric Power		5,519		—		—			75			5,594
PT. POSMI Steel Indonesia		2,316		—		—			31			2,347
Nickel Mining Company SAS		60,516		—		—			3,358			63,874
KRAKATAU POS-CHEM DONG-SUH CHEMICAL		6,947		—		(1,239	)		160			5,868
POS-SeAH Steel Wire (Thailand) Co., Ltd.		6,947		—		—			94			7,041
AMCI (WA) PTY LTD		78,553		3,121		—			2,107			83,781
POS-AUSTEM YANTAI AUTOMOTIVE CO.,LTD		5,789		—		—			79			5,868
POS-AUSTEM WUHAN AUTOMOTIVE CO.,LTD		9,262		—		—			126			9,388
Hyo-chun Co., Ltd.		2,382		—		—			—			2,382
Chun-cheon Energy Co., Ltd.		8,234		—		(8,234	)		—			—
POS-AUSTEM Suzhou Automotive Co., Ltd		5,789		12,005		—			(191	)		17,603
CAML RESOURCES PTY LTD		—		3,174		—			76			3,250

	W	449,070		27,771		(45,499	)		(50,564	)		380,778

(*1)	During the nine-month period ended September 30, 2020, loans amounting to W60,278 million have been converted to ordinary shares of DMSA/AMSA, and its amount is included in others.

(*2)	Includes adjustments of foreign currency translation differences and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

December 31, 2019


(in millions of Won)	Beginning		Lend		Collect			*Others(2)**			Ending
Associates and jointventures
UITrans LRT Co., Ltd.	W	5,695		4,884		—			—			10,579
DMSA/AMSA(*1)		64,297		15,451		—			(21,749	)		57,999
South-East Asia Gas Pipeline Company Ltd.		191,107		—		(48,027	)		4,287			147,367
PT. Batutua Tembaga Raya		35,100		—		—			1,191			36,291
PT. Tanggamus Electric Power		4,423		—		—			157			4,580
PT. Wampu Electric Power		5,330		—		—			189			5,519
PT. POSMI Steel Indonesia		2,236		—		—			80			2,316
Nickel Mining Company SAS		59,664		—		—			852			60,516
KRAKATAU POS-CHEM DONG-SUH CHEMICAL		6,709		—		—			238			6,947
POSCO SeAH Steel Wire(Nantong) Co., Ltd.		3,354		—		(3,354	)		—			—
POS-SeAH Steel Wire (Thailand) Co., Ltd.		6,709		—		—			238			6,947
AMCI (WA) PTY LTD		90,480		4,669		—			(16,596	)		78,553
POS-AUSTEM YANTAI AUTOMOTIVE CO.,LTD		5,590		—		—			199			5,789
POS-AUSTEM WUHAN AUTOMOTIVE CO.,LTD		8,945		—		—			317			9,262
Hyo-chun Co., Ltd.		—		—		—			2,382			2,382
Chun-cheon Energy Co., Ltd.		—		8,234		—			—			8,234
POS-AUSTEM Suzhou Automotive Co., Ltd		—		5,827		—			(38	)		5,789

	W	489,639		39,065		(51,381	)		(28,253	)		449,070

(*1)	During the year ended December 31, 2019, loans amounting to W23,682 million have been converted to ordinary shares of DMSA/AMSA, and its amount is included in others.

(*2)	Includes adjustments of foreign currency translation differences and others.

(h)	For the nine-month periods ended September 30, 2020 and 2019, details of compensation to key management officers were as follows:


(in millions of Won)	September 30, 2020		September 30, 2019
Short-term benefits	W	80,244		86,850
Long-term benefits		11,936		11,365
Retirement benefits		11,031		14,031

	W	103,211		112,246

Key management officers include directors (including non-standing directors), executive officials and fellow officials who have significant influences and responsibilities in the Company’s business and operations.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

35.

Commitments and Contingencies

(a)	Details of guarantees

Contingent liabilities on outstanding guarantees provided by the Company as of September 30, 2020 are as follows:


(in millions of Won)			Guarantee limit					Guarantee amount
Guarantor	Guarantee beneficiary	Financial institution	Foreign currency			Won equivalent		Foreign currency		Won equivalent
[The Company]
POSCO	POSCO Asia Co., Ltd.	Credit Agricole and others		USD	100,000,000		117,350		100,000,000		117,350
	POSCO-VIETNAM Co., Ltd.	SMBC and others		USD	156,000,000		183,066		156,000,000		183,066
	POSCO MEXICO S.A. DE C.V.	BOA and others		USD	120,000,000		140,820		120,000,000		140,820
	POSCO COATED STEEL (THAILAND) CO., LTD.	SMBC and others		THB	5,501,000,000		204,089		5,501,000,000		204,089
	POSCO Maharashtra Steel Private Limited	ING and others		USD	83,784,000		98,321		83,784,000		98,321
	PT. KRAKATAU POSCO	Export-Import Bank of Korea and others		USD	1,350,300,000		1,584,580		862,114,318		1,011,691
	POSCO ASSAN TST STEEL INDUSTRY	SMBC and others		USD	146,527,500		171,950		131,874,750		154,755
POSCO INTERNATIONAL Corporation	Daewoo Global Development. Pte., Ltd	Export-Import Bank of Korea and others		USD	186,625,000		219,004		178,750,000		209,763
	POSCO INTERNATIONAL POWER (PNGLAE) LIMITED	KDB bank		USD	48,317,404		56,700		37,167,234		43,616
	GOLDEN LACE POSCO INTERNATIONAL CO., LTD.	Shinhan Bank and others		USD	11,000,000		12,909		11,000,000		12,909
	PT. Bio Inti Agrindo	Export-Import Bank of Korea and others		USD	147,159,352		172,691		145,144,866		170,328
	POSCO ASSAN TST STEEL INDUSTRY	ING		USD	14,652,750		17,195		14,652,750		17,195
	POSCO INTERNATIONAL AMERICA Corp.	Bank Mendes Gans		USD	50,000,000		58,675		38,812,382		45,546
	POSCO INTERNATIONAL SINGAPORE Pte. Ltd..
	POSCO INTERNATIONAL MEXICO S.A. de C.V.
	POSCO INTERNATIONAL Japan Corp.
	POSCO INTERNATIONAL Malaysia SDN BHD
	POSCO INTERNATIONAL Deutschland GmbH
	POSCO INTERNATIONAL Italia S.R.L.
	GRAIN TERMINAL HOLDING PTE. LTD.	Black Sea Trade and Development Bank		USD	27,000,000		31,685		27,000,000		31,685
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	POSCO E&C Vietnam Co., Ltd.	Export-Import Bank of Korea and others		USD	42,000,000		49,287		42,000,000		49,287
	POSCO Engineering and Construction India Private Limited	Hana bank		INR	221,000,000		3,516		148,661,567		2,365
	Songdo Posco family Housing	Shinyoung securities		KRW	20,000		20,000		20,000		20,000
	JB CLARK HILLS	KOREA INVESTMENT&SECURITIES Co., Ltd.		KRW	60,000		60,000		60,000		60,000
	PT.POSCO E&C INDONESIA	POSCO Asia Co., Ltd. and others		USD	10,900,000		12,791		10,900,000		12,791
	HONG KONG POSCO E&C (CHINA) INVESTMENT Co., Ltd.	POSCO Asia Co., Ltd. and others		USD	160,000,000		187,760		154,024,000		180,747
POSCO ICT	PT.POSCO ICT INDONESIA	POSCO Asia Co., Ltd. and others		USD	1,200,000		1,408		1,200,000		1,408
POSCO CHEMICAL CO., LTD	PT.Krakatau Posco Chemical Calcination (formerly, PT.Krakatau Posco Chemtech Calcination)	POSCO Asia Co., Ltd. and others		USD	15,200,000		17,837		12,000,000		14,082
POSCO COATED & COLOR STEEL Co., Ltd.	Myanmar POSCO C&C Company, Limited.	POSCO Asia Co., Ltd.		USD	13,986,947		16,414		13,986,947		16,414
POSCO ENERGY CO., LTD	PT. KRAKATAU POSCO ENERGY	Export-Import Bank of Korea and others		USD	193,900,000		227,542		96,985,535		113,813
POSCO Asia Co., Ltd.	POSCO America Corporation	SMBC		USD	70,000,000		82,145		70,000,000		82,145

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)


(in millions of Won)			Guarantee limit					Guarantee amount
Guarantor	Guarantee beneficiary	Financial institution	Foreign currency			Won equivalent		Foreign currency		Won equivalent
[Associates and joint ventures]
POSCO	CSP—Compania Siderurgica do Pecem	Export-Import Bank of Korea and others		USD	420,000,000		492,872		372,140,666		436,707
		BNDES		BRL	464,060,000		96,190		464,060,000		96,190
	LLP POSUK Titanium	SMBC		USD	13,500,000		15,842		13,500,000		15,842
	Nickel Mining Company SAS	SMBC		EUR	46,000,000		62,993		46,000,000		62,993
POSCO INTERNATIONAL Corporation	GLOBAL KOMSCO Daewoo LLC	Hana Bank		USD	8,225,000		9,652		7,700,000		9,036
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	New Songdo International City Development, LLC	Others		KRW	386,000		386,000		386,000		386,000
	POHANG E&E Coi., LTD	Heungkuk Life Insurance Co., Ltd.		KRW	71,930		71,930		60,716		60,716
	UITrans LRT Co., Ltd.	Kookmin Bank and others		KRW	125,845		125,845		103,508		103,508
	Incheon-Gimpo Expressway Co, Ltd.	Kookmin Bank and others		KRW	311,468		311,468		288,417		288,417
	RPSD	Plan-up Sinsajeilcha Co., Ltd		KRW	45,000		45,000		37,000		37,000
	Metropolitan Outer Ring Expressway Co., ltd	Woori Bank and others		KRW	275,989		275,989		14,486		14,486
	Pureun Tongyeong Enviro Co., Ltd.	KDB Bank and others		KRW	22,714		22,714		15,312		15,312
	Pure Gimpo.Co.,Ltd	KDB Bank and others		KRW	44,740		44,740		31,508		31,508
	Clean Iksan Co.,Ltd	SAMSUNG FIRE & MARINE INSURANCE CO.,LTD and others		KRW	44,054		44,054		30,200		30,200
	NEXTRAIN Co., Ltd	Kookmin Bank and others		KRW	634,752		634,752		—		—
	Chun-cheon Energy Co., Ltd.	Kookmin Bank and others		KRW	149,200		149,200		145,300		145,300
POSCO ICT	UITrans LRT Co., Ltd.	Kookmin Bank		KRW	76,000		76,000		76,000		76,000
	Hyochun Co., Ltd.	Kyobo Securities		KRW	39,575		39,575		39,575		39,575
	Incheon-Gimpo Expressway Co., Ltd.	Kookmin Bank and others		KRW	100,000		100,000		100,000		100,000
	Shinahn wind power generation	NH INVESTMENT & SECURITIES CO.,LTD. and others		KRW	17,860		17,860		17,860		17,860
	Western Inland highway CO., LTD.	Kookmin Bank		KRW	964,100		964,100		964,100		964,100
	Metropolitan Outer Ring Expressway Co., Ltd	Woori Bank		KRW	193,700		193,700		193,700		193,700
POSCO CHEMICAL CO., LTD	KRAKATAU POS-CHEM DONG-SUH CHEMICAL	Hana Bank		USD	1,140,000		1,338		506,667		595
POSCO(Suzhou) Automotive Processing Center Co.,Ltd.	POS-InfraAuto (Suzhou) Co., Ltd	KDB bank		USD	364,500		428		81,000		95
[Others]
POSCO INTERNATIONAL Corporation	Sherritt International Corporation	Export-Import Bank of Korea		USD	21,818,182		25,604		3,019,552		3,543
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	Ecocity CO.,LTD and others	Kookmin Bank and others		KRW	3,977,656		3,977,656		2,013,615		2,013,615
POSCO ICT	BLT Enterprise and others	Hana Bank and others		KRW	1,179,464		1,179,464		1,179,464		1,179,464
POSCO AUSTRALIA PTY LTD	Department of Trade and Investment (NSW Government) and others	Woori Bank and others		AUD	11,637,263		9,674		11,637,263		9,674
PT. Bio lnti Agrindo	KSU Mandob	Bank Muamalat		IDR	80,000,000,000		6,304		80,000,000,000		6,304
POSCO Maharashtra Steel Private Limited	MAHARASHTRA STATE ELECTRICITY and others	HSBC and others		INR	188,156,806		2,994		188,156,806		2,994

				USD	3,413,600,635		4,005,866		2,704,344,667		3,173,550
				KRW	8,740,047		8,740,047		5,776,761		5,776,761
				IDR	80,000,000,000		6,304		80,000,000,000		6,304
				INR	409,156,806		6,510		336,818,373		5,359
				THB	5,501,000,000		204,089		5,501,000,000		204,089
				EUR	46,000,000		62,993		46,000,000		62,993
				AUD	11,637,263		9,674		11,637,263		9,674
				BRL	464,060,000		96,190		464,060,000		96,190

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(b)	Other commitments

Details of other commitments of the Company as of September 30, 2020 are as follows:


Company		Description
POSCO		POSCO entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of September 30, 2020, 70 million tons of iron ore and 10 million tons of coal remained to be purchased under such long-term contracts.

		POSCO entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.

		POSCO entered into consecutive voyage charter (CVC) contracts for the transportation of raw materials. As of September 30, 2020, there are 39 vessels under CVC contracts and the average remaining contract period is about 9 years.

		As of September 30, 2020, POSCO entered into commitments with KOREA ENERGY AGENCY for long-term foreign currency borrowings up to the amount of USD 4.12 million. The borrowing is related to the exploration of gas hydrates in Western Fergana-Chinabad. The repayment of the borrowings depends on the success of the project. POSCO is not liable for the repayment in full or part of borrowings if the project fail. POSCO has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreement. As of September 30, 2020, the ending balance of the borrowing amounts to USD 1.02 million.

		POSCO has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Norddeutsche Landesbank, for seamless funding to the construction of new power plant by POSCO ENERGY CO., LTD.

		POSCO provides a supplementary fund of up to W9.8 billion to the Company’s subsidiary, Busan E&E Co., Ltd., at the request of creditors such as the Korea Development Bank.

POSCO INTERNATIONAL Corporation		POSCO INTERNATIONAL Corporation operates a ship-to-ship business in which ships are chartered from ship’s owners and leased out to shippers. The Company has entered into a ship purchase agreement with the ship owners and the shippers, which obliges the shippers to pay the agreed amount either at the end of the contract terms or at the agreed termination and to take over the ownership of the vessel from the ship owners. Only if the shipper fails to fulfill its obligation including payment obligation for the purchase of the vessel, the Company is obliged to take over the ship based on the condition that the shipper’s contractual obligations and rights are transferred to the Company. As of September 30, 2020, the amount which is exposed to the ship purchase agreements entered into is USD 208 million.

		The Company invested in the Ambatovy Nickel Project (DMSA/ASMA) in Madagascar through the Korea Ambatovy Consortium (KAC) formed with Korea Mineral Resources Corporation (KORES) and STX Corporation. SHERRITT INTERNATIONAL CORP., the operator, transferred a portion of the project’s interests to Sumitomo and AHL (Ambatovy Holdings Limited) in November 2017, and transferred the remaining interests of the project to Sumitomo and the new corporation AHL2 (Ambatovy Holdins II Limited) in August 2020. KAC has the rights and obligations to the 18.33% stake held by AHL and AHL2.

POSCO ENGINEERING & CONSTRUCTION CO., LTD.		As of September 30, 2020, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has foreign currency guarantees of up to USD 2,464 million provided by financial institutions and uses USD 766 million with Woori Bank and others.

		The Company is responsible for completion of a project, including The Sharp First Park in Pangyo. As of September 30, 2020, the outstanding amount of loans related to the responsible completion arrangement is W202 billion which may be assumed in the case of non-performance of developers. If the responsibility is not fulfilled, there is an obligation to compensate the principal and interest.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)


Company		Description

POSCO ICT		As of September 30, 2020, in relation to fulfillment of project contract, POSCO ICT was provided with W137,484 million, W3,914 million and W305 million guaranties from Korea Software Financial Cooperative, Seoul Guarantee Insurance and Engineering Guarantee Insurance, respectively.

		The Company is responsible for completion of 8 projects, including the construction of Bundang Center of Doosan Group. As of September 30, 2020, the outstanding amount of loans related to the responsible completion arrangements is W760.5 billion. If the responsiblility is not fulfilled, there are duties such as compensation for principal and interest to lenders or conditional acquisition of bonds.

(c)	Litigation in progress

In March 2019, regarding the Songdo International City Development Project in Incheon, NSC Investment and TGC (the “applicant”), former partners of joint venture of POSCO ENGINEERING & CONSTRUCTION CO., LTD. (“POSCO E&C”), have applied to the International Chamber of Commerce of Singapore for arbitration in relation to the POSCO E&C’s alleged contract violation (approximately USD 2 billion). In addition, the applicant filed a confirmation suit with the New York Southern District Court in March 2019 against the fact that all claims listed in the above arbitration application must be settled by ICC arbitration. The claimants are seeking damages allegedly resulting from POSCO E&C’s purported wrongful seizure. As of September 30, 2020, the Company believes that the applicant’s claims are not legally valid and that the present obligation for the above arbitration event does not exist and therefore did not recognize a provision.

The Company is involved in 323 lawsuits aggregating to W1,126.7 billion as defendant as of September 30, 2020, which arise from ordinary course of business such as claim for confirmation of employee status. The Company has recognized provisions amounting to W39.7 billion for 83 lawsuits based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for the other lawsuits and claims since the Company believes that it does not have a present obligation as of September 30, 2020.

(d)	Other contingencies


Company		Description
POSCO		POSCO has provided 3 blank checks to Korea Energy Agency as collateral for long-term foreign currency borrowings.

POSCO INTERNATIONAL Corporation		As of September 30, 2020, POSCO INTERNATIONAL Corporation has provided 33 blank promissory notes and 17 blank checks to Korea Energy Agency and others as collateral for the guarantee on performance for contracts and others.

POSCO ENGINEERING & CONSTRUCTION CO., LTD.		As of September 30, 2020, POSCO ENGINEERING & CONSTRUCTION CO., LTD. has provided 29 blank checks and 4 blank promissory notes as collateral for agreements and outstanding loans, and has provided joint guarantee of W7,225,398 million for guarantee that partners had issued from Korea Housing & Urban Guarantee Corporation and others.

POSCO ICT		As of September 30, 2020, POSCO ICT has provided 6 blank checks to financial institutions as collateral for the guarantee on performance for contracts and others.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

36.

Cash Flows from Operating Activities

Changes in operating assets and liabilities for the nine-month periods ended September 30, 2020 and 2019 were as follows:


(in millions of Won)	September 30, 2020			September 30, 2019
Trade accounts and notes receivable	W	119,743			(59,239	)
Other receivables		203,637			(313,908	)
Inventories		2,026,615			20,276
Other current assets		(74,404	)		(6,444	)
Other non-current assets		(74,021	)		40,745
Trade accounts and notes payable		(145,465	)		(673,278	)
Other payables		(119,043	)		(41,756	)
Other current liabilities		342,705			254,770
Provisions		(174,100	)		(61,304	)
Payments of severance benefits		(174,151	)		(113,214	)
Plan assets		76,381			71,691
Other non-current liabilities		15,443			(33,072	)

	W	2,023,340			(914,733	)

37.

Operating Segments

The Company’s operating businesses are organized based on the nature of markets and customers. The Company has four reportable operating segments - steel, construction, trading and others. The steel segment includes production of steel products and revenue of such products. The construction segment includes planning, designing and construction of industrial plants, civil engineering projects and commercial and residential buildings, both in Korea and overseas. The trading segment consists of exporting and importing a wide range of steel products and raw materials that are both obtained from and supplied to POSCO, as well as between other suppliers and purchasers in Korea and overseas. Other segments include power generation, network and system integration and logistics. The policies of classification and measurement on operating segments were the same as those that applied to the consolidated financial statements as of and for the year ended December 31, 2019.

Segment assets, liabilities and profit (loss) are generally measured based on separate financial statements in accordance with K-IFRS of the subsidiaries that constitute reportable operating segments.

POSCO and Subsidiaries

Notes to the Condensed Consolidated Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(a)	Information about reportable segments for the nine-month periods ended September 30, 2020 and 2019 were as follows:

For the nine-month period ended September 30, 2020


(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	W	20,915,217		14,520,691		4,917,113		2,175,564		42,528,585
Internal revenues		11,295,551		9,410,203		711,221		1,932,408		23,349,383
Inter segment revenue		7,902,278		4,575,959		658,178		1,818,184		14,954,599
Total revenues		32,210,768		23,930,894		5,628,334		4,107,972		65,877,968
Segment profits		341,083		207,849		272,740		308,403		1,130,075

For the nine-month period ended September 30, 2019


(in millions of Won)	Steel		Trading		Construction		Others		Total
External revenues	W	24,477,636		16,516,474		4,901,465		2,428,224		48,323,799
Internal revenues		13,312,742		11,876,420		496,770		2,004,097		27,690,029
Inter segment revenue		9,103,854		6,397,294		452,377		1,903,252		17,856,777
Total revenues		37,790,378		28,392,894		5,398,235		4,432,321		76,013,828
Segment profits		1,549,538		169,160		91,376		419,889		2,229,963

(b)	Reconciliations of total segment profit or loss, to their respective consolidated financial statement line items for the nine-month periods ended September 30, 2020 and 2019 were as follows:


(in millions of Won)	September 30, 2020			September 30, 2019
Total profit for reportable segments	W	1,130,075			2,229,963
Corporate fair value adjustments		(56,976	)		(60,575	)
Elimination of inter-segment profits		(19,527	)		(212,714	)
Income tax expense		453,134			1,013,999

Profit before income tax expense	W	1,506,706			2,970,673

38.

Events after the Reporting Period

Pursuant to the resolution of the Board of Directors on November 6, 2020, the Company decided to pay interim cash dividends of W1,500 per common share (total dividend: W117.7 billion).

POSCO

Condensed Separate Interim Financial Statements

(Unaudited)

September 30, 2020

(With Independent Auditors’ Review Report Thereon)

Table of Contents


	Page
Independent Auditors’ Review Report		1

Condensed Separate Interim Financial Statements

Condensed Separate Interim Statements of Financial Position		3

Condensed Separate Interim Statements of Comprehensive Income		5

Condensed Separate Interim Statements of Changes in Equity		6

Condensed Separate Interim Statements of Cash Flows		7

Notes to the Condensed Separate Interim Financial Statements		9

Independent Auditors’ Review Report

Based on a report originally issued in Korean

The Board of Directors and Shareholders

POSCO:

Reviewed financial statements

We have reviewed the accompanying condensed separate interim financial statements of POSCO (the “Company”), which comprise the condensed separate interim statement of financial position as of September 30, 2020, the condensed separate interim statements of comprehensive income for the three-month and nine-month periods ended September 30, 2020 and 2019, the condensed separate interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2020 and 2019, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s responsibility

Management is responsible for the preparation and fair presentation of these condensed separate interim financial statements in accordance with Korean International Financial Reporting Standard (“K-IFRS”) No. 1034 “Interim Financial Reporting”. The Company’s management is also responsible for the internal controls determined necessary to prepare condensed separate interim financial statements free of material misstatements due to error or fraud.

Auditors’ review responsibility

Our responsibility is to issue a report on the condensed separate interim financial statements based on our reviews.

We conducted our reviews in accordance with the Review Standards for Quarterly and Semiannual Financial Statements established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial statements consists of making inquiries primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that causes us to believe that the accompanying condensed separate interim financial statements referred to above are not prepared, in all material respects, in accordance with K-IFRS No. 1034 “Interim Financial Reporting”.

Other matters

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

The separate statement of financial position of the Company as of December 31, 2019, and the related separate statements of comprehensive income, changes in equity and cash flows for the year then ended, which are not accompanying this report, were audited by us in accordance with Korean Standards on Auditing and our report thereon, dated March 12, 2020, expressed an unqualified opinion. The accompanying condensed separate statement of financial position of the Company as of December 31, 2019, presented for comparative purposes, is consistent, in all material respect, with the audited separate financial statements from which it has been derived.

LOGO

Seoul, Korea

November 13, 2020

This report is effective as of November 13, 2020, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying condensed separate interim financial statements. Accordingly, the readers of the review report should understand that the above review report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

POSCO

Condensed Separate Interim Statements of Financial Position

As of September 30, 2020 and December 31, 2019

(Unaudited)


(in millions of Won)	Notes		September 30, 2020		December 31, 2019
Assets
Cash and cash equivalents		20	W	2,986,906		978,139
Trade accounts and notes receivable, net		4,14,20,25,32		3,686,876		3,987,041
Other receivables, net		5,20,32		275,300		321,352
Other short-term financial assets		6,20		9,995,881		7,858,979
Inventories		7,29		3,852,919		4,988,530
Assets held for sale		8		32,776		53,924
Other current assets		13		42,683		28,101

Total current assets				20,873,341		18,216,066

Long-term trade accounts and notes receivable, net		4,20		6,000		6,014
Other receivables, net		5,20		92,904		56,468
Other long-term financial assets		6,20		1,124,502		1,257,896
Investments in subsidiaries, associates and joint ventures		9		15,212,632		15,069,857
Investment property, net		10		155,208		158,077
Property, plant and equipment, net		11		20,085,560		20,132,199
Intangible assets, net		12		667,804		708,915
Other non-current assets		13		107,788		105,274

Total non-current assets				37,452,398		37,494,700

Total assets			W	58,325,739		55,710,766

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Financial Position, Continued

As of September 30, 2020 and December 31, 2019

(Unaudited)


(in millions of Won)	Notes		September 30, 2020			December 31, 2019
Liabilities
Trade accounts and notes payable		20,32	W	1,147,094			667,551
Short-term borrowings and current installments of long-term borrowings		4,14,20		3,178,594			1,146,476
Other payables		15,20,32		948,155			1,113,003
Other short-term financial liabilities		16,20		11,125			10,969
Current income tax liabilities				152,819			237,293
Provisions		17		39,898			21,007
Other current liabilities		19,25		168,499			135,147

Total current liabilities				5,646,184			3,331,446

Long-term borrowings, excluding current installments		14,20		5,893,351			5,191,537
Other payables		15,20		231,617			222,802
Other long-term financial liabilities		16,20		32,564			46,925
Defined benefit liabilities, net		18		80,575			54,146
Deferred tax liabilities				1,021,937			1,190,553
Long-term provisions		17,33		49,440			53,942
Other non-current liabilities		19,25		532			5,230

Total non-current liabilities				7,310,016			6,765,135

Total liabilities				12,956,200			10,096,581

Equity
Share capital		21		482,403			482,403
Capital surplus		21,30		1,339,289			1,252,220
Hybrid bonds		22		199,384			199,384
Reserves		23		(335,281	)		(183,930	)
Treasury shares		24		(1,837,980	)		(1,508,303	)
Retained earnings				45,521,724			45,372,411

Total equity				45,369,539			45,614,185

Total liabilities and equity			W	58,325,739			55,710,766

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Comprehensive Income

For the three-month and nine-month periods ended September 30, 2020 and 2019

(Unaudited)


			For the three-month periods ended September 30						For the nine-month periods ended September 30
(in millions of Won, except per share informations)	Notes		2020			2019			2020			2019
Revenue		25,32	W	6,577,887			7,735,895			19,432,566			23,028,220
Cost of sales		7,29,32		(6,064,351	)		(6,812,557	)		(18,037,570	)		(20,024,140	)

Gross profit				513,536			923,338			1,394,996			3,004,080
Selling and administrative expenses		29,32
Reversal of (impairment loss) on trade accounts and notes receivable				31			2			(4,936	)		4,638
Other administrative expenses		26		(196,051	)		(203,058	)		(587,582	)		(619,488	)
Selling expenses		26		(55,653	)		(57,806	)		(190,979	)		(169,989	)

Operating profit				261,863			662,476			611,499			2,219,241

Finance income and costs		20,27
Finance income				90,469			260,782			875,321			835,976
Finance costs				(28,342	)		(197,574	)		(526,062	)		(465,867	)

Other non-operating income and expenses		32
Reversal of (impairment loss) on other receivables				208			(340	)		(119	)		(612	)
Other non-operating income		28		8,840			71,158			114,563			127,998
Other non-operating expenses		28,29		(52,782	)		(103,543	)		(228,726	)		(356,236	)

Profit before income tax				280,256			692,959			846,476			2,360,500
Income tax expense		30		(99,446	)		(193,914	)		(206,000	)		(644,900	)

Profit				180,810			499,045			640,476			1,715,600
Other comprehensive income (loss)
Items that will not be reclassified subsequently to profit or loss:
Remeasurements of defined benefit plans		18		(437	)		(2,384	)		(830	)		(4,266	)
Net changes in fair value of equity investments at fair value through other comprehensive income		6,20,23		6,396			(67,564	)		(154,254	)		(41,974	)
Total comprehensive income			W	186,769			429,097			485,392			1,669,360

Basic and diluted earnings per share (in Won)		31	W	2,261			6,208			7,965			21,352

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Changes in Equity

For the nine-month periods ended September 30, 2020 and 2019

(Unaudited)


(in millions of Won)	Share capital		Capital surplus		Hybrid bonds		Reserves			Treasury shares			Retained earnings			Total
Balance as of January 1, 2019	W	482,403		1,154,775		199,384		(207,191	)		(1,532,728	)		45,175,459			45,272,102
Comprehensive income:
Profit		—		—		—		—			—			1,715,600			1,715,600
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—		—		—			—			(4,266	)		(4,266	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—		—		(33,581	)		—			(8,393	)		(41,974	)
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—		—		—			—			(400,006	)		(400,006	)
Interim dividends		—		—		—		—			—			(320,462	)		(320,462	)
Interest of hybrid bonds		—		—		—		—			—			(6,881	)		(6,881	)
Disposal of treasury shares		—		12,576		—		—			24,425			—			37,001
Business combination		—		84,869		—		—			—			—			84,869

Balance as of September 30, 2019	W	482,403		1,252,220		199,384		(240,772	)		(1,508,303	)		46,151,051			46,335,983

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		—		—		—		—			—			640,476			640,476
Other comprehensive income (loss)
Remeasurements of defined benefit plans, net of tax		—		—		—		—			—			(830	)		(830	)
Net changes in fair value of equity investments at fair value through other comprehensive income, net of tax		—		—		—		(151,351	)		—			(2,903	)		(154,254	)
Transactions with owners of the Company, recognized directly in equity:
Year-end dividends		—		—		—		—			—			(320,462	)		(320,462	)
Interim dividends		—		—		—		—			—			(160,062	)		(160,062	)
Interest of hybrid bonds		—		—		—		—			—			(6,906	)		(6,906	)
Acquisition of treasury shares		—		—		—		—			(329,677	)		—			(329,677	)
Others (Note 30)		—		87,069		—		—			—			—			87,069

Balance as of September 30, 2020	W	482,403		1,339,289		199,384		(335,281	)		(1,837,980	)		45,521,724			45,369,539

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Cash Flows

For the nine-month periods ended September 30, 2020 and 2019

(Unaudited)


(in millions of Won)	Notes		September 30, 2020			September 30, 2019
Cash flows from operating activities
Profit			W	640,476			1,715,600
Adjustments for :
Expenses related to post-employment benefit				93,872			88,362
Depreciation				1,698,104			1,608,237
Amortization				74,002			57,776
Impairment loss (reversal of) on trade and other receivables				5,055			(4,026	)
Finance income				(573,676	)		(623,502	)
Finance costs				315,516			312,416
Loss on valuation of inventories				7,236			—
Gain on disposal of property, plant and equipment				(7,211	)		(18,748	)
Loss on disposal of property, plant and equipment				125,031			63,409
Impairment losses on property, plant and equipment				22,997			209,910
Gain on disposal of intangible assets				(197	)		(1,013	)
Gain on disposal of investments in subsidiaries, associates and joint ventures				(24,354	)		(4,689	)
Impairment losses on investments in subsidiaries, associates and joint ventures				1,000			10,422
Gain on disposal of assets held for sale				(22,488	)		(29,341	)
Loss on disposal of assets held for sale				5,383			—
Impairment loss on assets held for sale				9,093			5,179
Gain on disposal of emission rights				(24,566	)		(6,122	)
Gain on valuation of emission rights				—			(25,440	)
Increase to provisions				45,626			(10,013	)
Income tax expense				206,000			644,900
Others				(2,618	)		(91	)
Changes in operating assets and liabilities		34		1,792,321			(363,768	)
Interest received				156,619			117,263
Interest paid				(161,098	)		(105,868	)
Dividends received				163,905			231,798
Income taxes paid				(316,862	)		(984,991	)

Net cash provided by operating activities			W	4,229,166			2,887,660

See accompanying notes to the condensed separate interim financial statements.

POSCO

Condensed Separate Interim Statements of Cash Flows, Continued

For the nine-month periods ended September 30, 2020 and 2019

(Unaudited)


(in millions of Won)	Notes	September 30, 2020			September 30, 2019
Cash flows from investing activities
Decrease in deposits		W	2,923,219			2,250,082
Proceeds from disposal of short-term financial instruments			26,654,572			25,153,652
Collection of short-term loans			1,798			—
Proceeds from disposal of equity securities			7,938			22,752
Proceeds from disposal of current portion of debt security			426,214			11
Proceeds from disposal of other securities			8,183			3,111
Proceeds from disposal of investments in subsidiaries, associates and joint ventures			21,820			13,783
Proceeds from disposal of intangible assets			1,016			5,587
Proceeds from disposal of emission rights			66,143			12,693
Proceeds from disposal of assets held for sale			224,546			463,657
Proceeds from business combination			—			2,171
Increase in deposits			(2,939,354	)		(2,276,163	)
Acquisition of short-term financial instruments			(28,773,711	)		(24,591,354	)
Increase in long-term loans			(19,127	)		(1,773	)
Acquisition of debt securities			(361,599	)		(290,100	)
Acquisition of other securities			(13,107	)		(110	)
Acquisition of investment in subsidiaries, associates and joint ventures			(204,601	)		(81,667	)
Acquisition of property, plant and equipment			(1,817,307	)		(1,128,329	)
Proceeds from disposal of property, plant and equipment			(64,431	)		(17,927	)
Acquisition of intangible asstes			(119,000	)		(120,666	)
Payment for acquisition of business, net of cash acquired			—			(1,156,953	)

Net cash used in investing activities		W	(3,976,788	)		(1,737,543	)

Cash flows from financing activities
Proceeds from borrowings			3,045,576			1,379,550
Increase in long-term financial liabilities			251			3,237
Proceeds from disposals of derivatives			—			9,683
Receipt of government grants			897			—
Repayment of borrowings			(414,574	)		(996,544	)
Repayment of lease liabilities			(46,913	)		(29,247	)
Decrease in long-term financial liabilities			(330	)		(1,471	)
Payment of cash dividends			(480,541	)		(720,505	)
Acquisition of treasury shares			(329,677	)		—
Payment of interest of hybrid bonds			(6,932	)		(6,906	)

Net cash provided by (used in) financing activities		W	1,767,757			(362,203	)

Effect of exchange rate fluctuation on cash held			(11,368	)		1,744
Net increase in cash and cash equivalents			2,008,767			789,658
Cash and cash equivalents at beginning of the period			978,139			259,219

Cash and cash equivalents at end of the period		W	2,986,906			1,048,877

See accompanying notes to the condensed separate interim financial statements.

POSCO

Notes to the Condensed Separate Interim Financial Statements

As of September 30, 2020

(Unaudited)

1. Reporting Entity

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 six of its overseas liaison offices.

As of September 30, 2020, the shares of the Company are listed on the Korea Exchange, while its American Depository Receipts (ADRs) are listed on the New York Stock Exchange.

2. Statement of Compliance

Statement of compliance

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

These condensed separate interim financial statements have been prepared in accordance with K-IFRS No. 1034 “Interim Financial Reporting” as part of the period covered by the Company’s K-IFRS annual financial statements. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the last annual separate financial statements as of and for the year ended December 31, 2019. These condensed separate interim financial statements do not include all of the disclosures required for full annual financial statements.

These condensed interim financial statements are separate interim 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.

Use of estimates and judgments

(a)	Judgments, assumptions and estimation uncertainties

The preparation of the condensed interim 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.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

With the outbreak of COVID-19 pandemic, governments around the globe have implemented measures such as mandatory factory shutdown, shelter-in-place orders, border closure, and travel restrictions. The ultimate impact of COVID-19 pandemic on the Company’s operations is not yet known and will depend on future developments. The duration and significance of COVID-19 is highly uncertain and unpredictable, and the protective measures by the governments around the globe or the Company may lead to substantial business interruption and decrease in business scale. The financial impact of this cannot be reasonably estimated, but management expects the Company to be partially affected to the most areas where it operates. The extent and duration of COVID-19’s impact on the Company’s business cannot yet be reasonably estimated.

(b)	Measurement of fair value

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


•	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 liabilities, either directly or indirectly.

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

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

3. Summary of Significant Accounting Policies

Except as described in K-IFRS No. 1034 “Interim Financial Reporting” and below, the accounting policies applied by the Company in these condensed separate interim financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2019. The Company also expects to apply the accounting policies set out below for their annual reporting period ending December 31, 2020.

(a)	K-IFRS No. 1001 “Presentation of Financial Statements” and K-IFRS No. 1008 “Accounting Policies, Changes in Accounting Estimates and Errors”

(b)	K-IFRS No. 1103 “Business Combinations”

The amendments clarifies the definition of business when it includes input and process together significantly contribute to ability to create output and requires a simplified assessment that result in an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. The Company does not expect the effect of the amendments to the financial statements to be significant.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

4. Trade Accounts and Notes Receivable

Trade accounts and notes receivable as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Current
Trade accounts and notes receivable	W	3,701,798			3,999,991
Less: Allowance for doubtful accounts		(14,922	)		(12,950	)

	W	3,686,876			3,987,041

Non-current
Trade accounts and notes receivable	W	9,513			9,530
Less: Present value discount		(2,501	)		(2,501	)
Less: Allowance for doubtful accounts		(1,012	)		(1,015	)

	W	6,000			6,014

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 September 30, 2020 and December 31, 2019, the carrying amount of such secured borrowings are W497,045 million and W167,021 million, respectively, which are included in the short-term borrowings.

5. Other Receivables

Other receivables as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Current
Loans	W	2,950			2,950
Other accounts receivable		226,814			279,093
Others		50,774			47,257
Less: Allowance for doubtful accounts		(5,238	)		(7,948	)

	W	275,300			321,352

Non-current
Loans	W	52,653			34,224
Long-term other accounts receivable		45,358			27,570
Others		3,891			3,555
Less: Allowance for doubtful accounts		(8,998	)		(8,881	)

	W	92,904			56,468

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

6. Other Financial Assets

(a)	Other financial assets as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Current
Short-term derivative assets	W	78,017		15,603
Debt securities		154,355		290,559
Deposit instruments(*1)		1,310,658		1,294,525
Short-term financial instruments		8,452,851		6,258,292

	W	9,995,881		7,858,979

Non-current
Long-term derivative assets	W	128,453		64,072
Equity securities		927,383		1,128,641
Debt securities		5,346		9,177
Other securities		63,286		55,972
Deposit instruments(*2)		34		34

	W	1,124,502		1,257,896

(*1)	As of September 30, 2020 and December 31, 2019, W5,659 million and W4,524 million, respectively, are restricted in use in relation to government assigned projects.

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

(b)	Equity securities as of September 30, 2020 and December 31, 2019 are as follows:


	September 30, 2020													December 31, 2019
(in millions of Won)	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		172,744		(301,218	)		172,744		276,133
KB Financial Group Inc.		3,863,520		0.93		178,839		145,075		(33,764	)		145,075		184,097
Woori Financial Group Inc.		20,280,000		2.81		244,447		174,002		(70,445	)		174,002		235,248
SAMWONSTEEL Co., Ltd.		5,700,000		14.25		8,930		13,737		4,807			13,737		17,214
DONGKUK INDUSTRIES COMPANY		2,611,989		4.82		11,911		8,698		(3,213	)		8,698		6,778
DONGKUK STEEL MILL CO., LTD		—		—		—		—		—			—		8,571
Others (7 companies)						55,759		30,747		(25,012	)		30,747		34,157

						973,848		545,003		(428,845	)		545,003		762,198

Non-marketable equity securities
CSN Mineracao S.A.		3,658,394		2.02		221,535		292,453		70,918			292,453		292,453
POSCO PLANTEC CO., LTD(*1)		18,337,912		10.99		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		17,000		4.36		4,165		4,165		—			4,165		4,165
Others (28 companies)		—				144,191		39,661		(104,530	)		39,661		43,161

						415,992		382,380		(33,612	)		382,380		366,443

					W	1,389,840		927,383		(462,457	)		927,383		1,128,641

(*1)	Fair value is based on an analysis performed by an external professional evaluation agency.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

7. Inventories

Inventories as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Finished goods	W	737,637			868,012
Semi-finished goods		1,156,261			1,474,153
By-products		7,831			10,763
Raw materials		765,630			1,139,517
Fuel and materials		548,042			646,396
Materials-in-transit		644,048			856,706
Others		706			660

		3,860,155			4,996,207
Less: Allowance for inventories valuation		(7,236	)		(7,677	)

	W	3,852,919			4,988,530

The amount of loss on valuation of inventories recognized in cost of sales during the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were W7,236 million and W7,677 million, respectively.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

8. Assets Held for Sale

Assets held for sale as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Assets
Investments in subsidiaries(*1,2)	W	—		17,603
Property, plant and equipment(*3,4)		31,634		36,321
Intangible assets		1,142		—

	W	32,776		53,924

(*1)

The Company determined to dispose a part of its interest in of POSCO Thainox Public Company Limited, a subsidiary of the Company, and classified it as assets held for sale. During the nine-month period ended September 30, 2020, the Company recognized W4,063 million of impairment loss for the difference between book value and net fair value of the interest. And, in addition, recognized W1,068 million of loss on disposal for the difference between the carrying amount and the proceeds from sale.

(*2)

During the nine-month period ended September 30, 2020, the Company classified its investment in POSCO Family Strategy Fund, a subsidiary of the Company, as assets held for sale and completed liquidation and distribution of residual proceeds during the nine-month period ended September 30, 2020. The Company recognized W4,305 million of loss on disposal for the difference between the carrying amount and the proceeds of sale during the nine-month period ended September 30, 2020.

(*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 nine-month period ended September 30, 2020, the Company recognized W5,030 million of impairment loss for the difference between the fair value less costs to sell and the carrying amount of the assets.

(*4)

During the year ended December 31, 2019, the Company completed the disposal of all assets, liabilities and rights other than LNG tanks under construction, which were to be disposed of, related to a LNG terminal business of the Company to POSCO ENERGY CO., LTD. The construction and disposal were completed during the nine-month period ended September 30, 2020 and the Company recognized W22,179 million of gain on disposal for the difference between the carrying amount and the sale price.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

9. Investments in Subsidiaries, Associates and Joint ventures

(a)	Details of subsidiaries and their carrying amounts as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)				September 30, 2020				December 31, 2019
	Country		Principal operations	Ownership (%)		Book value		Book value
[Domestic]
POSCO INTERNATIONAL Corporation		Korea	Trading		62.91	W	3,383,745		3,383,745
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.		Korea	Engineering and construction		52.80		1,014,314		1,014,314
POSCO ENERGY CO., LTD.		Korea	Power generation		89.02		658,176		658,176
POSCO COATED & COLOR STEEL Co., Ltd.		Korea	Coated steel manufacturing and sales		56.87		108,421		108,421
POSCO Venture Capital Co., Ltd.		Korea	Investment in venture companies		95.00		103,780		103,780
POSCO CHEMICAL CO., LTD		Korea	Refractory manufacturing and sales		61.26		207,631		207,631
POSCO O&M Co., Ltd(*1)		Korea	Business facility maintenance		47.17		73,374		73,374
POSCO ICT		Korea	Computer hardware and software distribution		65.38		70,990		70,990
POSCO M-TECH(*1)		Korea	Packing materials manufacturing and sales		48.85		107,278		107,278
POSCO Family Strategy Fund(*2)		Korea	Investment in venture companies		—		—		29,596
Busan E&E Co,. Ltd.(*3)		Korea	Municipal solid waste fuel and power generation		70.00		30,148		30,148
Others (12 companies)							110,494		117,393

							5,868,351		5,904,846

[Foreign]
PT. KRAKATAU POSCO		Indonesia	Steel manufacturing and sales		70.00		707,509		707,509
POSCO WA PTY LTD		Australia	Iron ore sales and mine development		100.00		644,109		640,720
POSCO Maharashtra Steel Private Limited		India	Steel manufacturing and sales		100.00		722,569		722,569
POSCO Canada Ltd.		Canada	Coal mine development		100.00		560,879		560,879
POSCO AUSTRALIA PTY LTD		Australia	Iron ore sales and mine development		100.00		330,623		330,623
POSCO (Zhangjiagang) Stainless Steel Co.,Ltd.		China	Stainless steel manufacturing and sales		58.60		283,845		283,845
POSCO Thainox Public Company Limited		Thailand	Stainless steel manufacturing and sales		74.56		211,592		212,339
POSCO-China Holding Corp.		China	Investment management		100.00		593,841		593,841
POSCO-India Private Limited		India	Steel manufacturing and sales		99.99		75,567		75,567
POSCO MEXICO S.A. DE C.V.		Mexico	Plate steel manufacturing and sales		83.28		180,072		180,072
POSCO America Corporation		USA	Steel trading		99.45		192,156		192,156
POSCO-VIETNAM Co., Ltd.		Vietnam	Steel manufacturing and sales		100.00		160,572		160,572
POSCO VST CO., LTD.		Vietnam	Stainless steel manufacturing and sales		95.65		144,573		144,573
POSCO(Guangdong) Automotive Steel Co., Ltd.		China	Plate steel manufacturing and sales		83.64		52,936		52,936
POSCO COATED STEEL (THAILAND) CO., LTD.		Thailand	Plate steel manufacturing and sales		100.00		121,592		121,592
POSCO Asia Co., Ltd.		Hong Kong	Steel and raw material trading		100.00		117,710		117,710
POSCO ASSAN TST STEEL INDUSTRY		Turkey	Steel manufacturing and sales		60.00		92,800		92,800
POSCO JAPAN Co., Ltd.		Japan	Steel trading		100.00		68,436		68,436
Qingdao Pohang Stainless Steel Co., Ltd.		China	Stainless steel manufacturing and sales		70.00		65,982		65,982
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		China	Steel manufacturing and sales		90.00		62,494		62,494
POSCO AFRICA (PROPRIETARY) LIMITED		South Africa	Mine development		100.00		50,297		50,297
POSCO-Malaysia SDN. BHD.		Malaysia	Steel manufacturing and sales		81.79		45,479		45,479
POSCO Argentina S.A.U.		Argentina	Mineral exploration, manufacturing and sale		100.00		370,250		370,250
POSCO YAMATO VINA STEEL JOINT STOCK COMPANY (Formerly, POSCO SS VINA JOINT STOCK COMPANY)(*4)		Vietnam	Steel manufacturing and sales		51.00		130,526		—
Others (28 companies)(*5)							510,080		485,668

							6,496,489		6,338,909

						W	12,364,840		12,243,755

(*1)

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

(*2)	During the nine-month period ended September 30, 2020, the Company classified its investment in POSCO Family Strategy Fund, a subsidiary of the Company, as assets held for sale and completed liquidation and distribution of residual proceeds during the nine-month period ended September 30, 2020.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(*3)	As of September 30, 2020 and December 31, 2019, 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.

(*4)	During the nine-month period ended September 30, 2020, POSCO SS VINA JOINT STOCK COMPANY changed its name to POSCO YAMATO VINA STEEL JOINT STOCK COMPANY. The Company sold 49% of POSCO YAMATO VINA STEEL JOINT STOCK COMPANY and invested W130,526 million in cash.

(*5)	During the nine-month period ended September 30, 2020, the Company sold the investment in POSCO China Dalian Plate Processing Center Co., Ltd., a subsidiary.

(b)	Details of associates and their carrying amounts as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)				September 30, 2020				December 31, 2019
	Country		Principal operations	Ownership (%)		Book value		Book value
[Domestic]
EQP POSCO Global NO1 Natural Resources Private Equity Fund		Korea	Investment in mines		34.43	W	169,316		169,316
SNNC		Korea	STS material manufacturing and sales		49.00		100,655		100,655
QSONE Co.,Ltd.		Korea	Real estate rental business		50.00		85,550		85,550
Others (9 companies)(*1)							22,976		22,468

							378,497		377,989

[Foreign]
Nickel Mining Company SAS		New Caledonia	Raw material manufacturing and sales		49.00		189,197		189,197
9404-5515 Quebec Inc. (Formerly, 7623704 Canada Inc.)(*2)		Canada	Investment in mines		10.40		124,341		124,341
Zhongyue POSCO (Qinhuangdao) Tinplate Industrial Co., Ltd		China	Tinplate manufacturing and sales		24.00		11,003		11,003
Others (6 companies)							39,682		39,590

							364,223		364,131

						W	742,720		742,120

(*1)

During the nine-month period ended September 30, 2020, the investment in POSCO PLANTEC Co., Ltd., an associate, was reclassified from associates to equity securities as the paid-in capital increase of POSCO PLANTEC Co., Ltd. reduced the Company’s ownership percentage to less than 20%, resulting in a loss of significant influence over the investee.

(*2)

As of September 30, 2020, 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 its structure of the Board of Directors and others. During the nine-month period ended September 30, 2020, 7623704 Canada Inc. changed its name to 9404-5515 Quebec Inc.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(c)	Details of joint ventures and their carrying amounts as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)				September 30, 2020				December 31, 2019
	Country		Principal operations	Ownership (%)		Book value		Book value
Roy Hill Holdings Pty Ltd(*1)		Australia	Mine development		10.00	W	1,225,464		1,225,464
CSP—Compania Siderurgica do Pecem		Brazil	Steel manufacturing and sales		20.00		343,553		322,463
POSCO-NPS Niobium LLC		USA	Mine development		50.00		364,609		364,609
KOBRASCO		Brazil	Steel materials manufacturing and sales		50.00		98,962		98,962
Others (3 companies)							72,484		72,484


						W	2,105,072		2,083,982

(*1)	As of September 30, 2020 and December 31, 2019, 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.

10. Investment Property, Net

Changes in the carrying amount of investment property for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:

(a)	For the nine-month period ended September 30, 2020


(in millions of Won)	Beginning		*Depreciation(1)**			*Transfer(2)**		Ending
Land	W	91,738		—			232		91,970
Buildings		57,228		(3,050	)		388		54,566
Structures		9,111		(458	)		19		8,672

	W	158,077		(3,508	)		639		155,208

(*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.

(b)	For the year ended December 31, 2019


(in millions of Won)	Beginning		Business *Combination(1)**		*Depreciation(2)**			*Transfer(3)**		Ending
Land	W	44,637		41,195		—			5,906		91,738
Buildings		54,277		25		(4,070	)		6,996		57,228
Structures		9,301		—		(620	)		430		9,111

	W	108,215		41,220		(4,690	)		13,332		158,077

(*1)	These increases were due to business combination with POSCO Processing&Service.

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

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

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

11. Property, Plant and Equipment, Net

Changes in the carrying amount of property, plant and equipment for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:

(a)	For the nine-month period ended September 30, 2020


(in millions of Won)	Beginning		Acquisitions		Disposals			Depreciation			*Impairment(1)**			*Others(2)**			Ending
Land	W	1,398,081		—		(6	)		—			—			1,409			1,399,484
Buildings		2,100,503		2,659		(2,128	)		(155,198	)		(268	)		133,947			2,079,515
Structures		2,030,853		1,501		(2,857	)		(129,646	)		(860	)		77,333			1,976,324
Machinery and equipment		12,602,435		24,915		(14,105	)		(1,343,006	)		(9,057	)		1,381,669			12,642,851
Vehicles		9,951		974		(3	)		(4,831	)		—			3,682			9,773
Tools		27,288		1,191		(3	)		(9,054	)		—			3,363			22,785
Furniture and fixtures		38,329		2,114		(174	)		(8,543	)		—			10,066			41,792
Lease assets		262,368		14,928		—			(44,318	)		—			109,211			342,189
Construction-in-progress		1,662,391		1,717,122		(3,951	)		—			(12,812	)		(1,791,903	)		1,570,847

	W	20,132,199		1,765,404		(23,227	)		(1,694,596	)		(22,997	)		(71,223	)		20,085,560

(*1)

The Company estimated recoverable amount for individual assets that ceased operations due to the disposal plan and others at fair value less costs to sell based on sale price or scrap value and recognized impairment loss since recoverable amounts are less than their carrying amounts as of September 30, 2020. During the nine-month period ended September 30, 2020, the Company recognized impairment loss on certain assets due to damage from fire.

(*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.

(b)	For the year ended December 31, 2019


(in millions of Won)	Beginning		Acquisitions		business *combination(5)**		Disposals			Depreciation			*Impairment(1)**			*Others(2,4)**			Ending
Land	W	1,458,632		—		—		(1,805	)		—			—			(58,746	)		1,398,081
Buildings		2,199,429		7,157		67,751		(7,706	)		(202,171	)		(25,869	)		61,912			2,100,503
Structures		2,244,099		10,777		39,783		(3,125	)		(173,181	)		(9,585	)		(77,915	)		2,030,853
Machinery and equipment		12,911,467		92,136		696,204		(21,616	)		(1,717,864	)		(176,295	)		818,403			12,602,435
Vehicles		7,340		747		40		—			(6,244	)		—			8,068			9,951
Tools		23,864		5,348		138		(24	)		(11,499	)		—			9,461			27,288
Furniture and fixtures		36,287		4,781		94		(9	)		(9,805	)		(137	)		7,118			38,329
Lease assets(*3)		142,801		27,376		—		—			(34,669	)		—			126,860			262,368
Construction-in-progress		1,130,415		1,838,490		696		—			—			(10,150	)		(1,297,060	)		1,662,391

	W	20,154,334		1,986,812		804,706		(34,285	)		(2,155,433	)		(222,036	)		(401,899	)		20,132,199

(*1)

The Company estimated recoverable amount for individual assets related to CEM and Fe-Si factories, etc. that ceased operations due to the disposal plan and others using fair value less costs to sell based on the appraisal value or scrap value and recognized an impairment loss since recoverable amounts are less than their carrying amounts for the year ended December 31, 2019.

(*2)

During the year ended December 31, 2019, the Company decided to sell the rights related to the operation of LNG Terminal to POSCO ENERGY CO., LTD. and reclassified to assets held for sale and liabilities directly associated with the assets held for sale. As of December 31, 2019, the Company recognized W28,626 million of gain on disposal for the difference between the carrying amount and the sale price.

(*3)	Right-of-use assets of W128,610 million recognized on the date of initial application (January 1, 2019) of the K-IFRS No. 1116 “Leases” are included in other changes.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(*4)	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.

(*5)	This has increased due to the business combination between the company and POSCO ENERGY’s by-product power generation business.

(c)	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 nine-month period ended September 30, 2020 were as follows.


(in millions of Won)	Beginning		Acquisitions		Depreciation			Others			Ending
Land	W	—		8,853		(75	)		—			8,778
Buildings		71,921		6,075		(4,897	)		—			73,099
Structures		64,434		—		(3,910	)		—			60,524
Machinery and equipment		60,198		—		(4,125	)		—			56,073
Vehicles		6,755		—		(375	)		—			6,380
Ships		24,082		111,537		(20,739	)		—			114,880
Furniture and fixtures		34,978		—		(10,197	)		(2,326	)		22,455

	W	262,368		126,465		(44,318	)		(2,326	)		342,189

Changes in the carrying amount of right-of-use assets presented as property, plant and equipment for the year ended December 31, 2019 were as follows.


(in millions of Won)	The date of initial application (January 1, 2019)		Acquisitions		Depreciation			Others			Ending
Buildings	W	78,384		—		(6,463	)		—			71,921
Structures		53,761		13,502		(2,829	)		—			64,434
Machinery and equipment		65,698		—		(5,500	)		—			60,198
Vehicles		7,256		—		(501	)		—			6,755
Ships		26,499		—		(2,417	)		—			24,082
Furniture and fixtures		39,813		13,874		(16,959	)		(1,750	)		34,978

	W	271,411		27,376		(34,669	)		(1,750	)		262,368

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

2) Amount recognized in profit or loss

The amounts recognized in profit or loss related to leases for the three-month and the nine-month periods ended September 30, 2020 and 2019 were as follows:


(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2020		2019		2020		2019
Interest on lease liabilities	W	2,675		2,124		7,731		6,584
Expenses related to short-term leases		821		1,039		2,711		2,976
Expenses related to leases of low-value assets		1,459		1,304		4,848		4,031

	W	4,955		4,467		15,290		13,591

12. Intangible Assets, Net

Changes in the carrying amount of intangible assets for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:

(a) For the nine-month period ended September 30, 2020


(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			*Transfer(2)**			Ending
Intellectual property rights	W	24,545		—		(1,360	)		(4,563	)		5,726			24,348
Membership(*1)		82,657		—		(862	)		—			—			81,795
Development expense		86,023		233		—			(31,540	)		12,728			67,444
Port facilities usage rights		278,072		—		—			(33,822	)		—			244,250
Construction-in-progress		137,273		73,289		—			—			(16,204	)		194,358
Other intangible assets		100,345		19,725		(61,302	)		(4,077	)		918			55,609

	W	708,915		93,247		(63,524	)		(74,002	)		3,168			667,804

(*1)	Economic useful life of membership is indefinite.

(*2)	Represents assets transferred from construction-in-progress and property, plant and equipment and to intangible assets and to assets held for sale and others.

(b) For the year ended December 31, 2019


(in millions of Won)	Beginning		Acquisitions		Disposals			Amortization			*Transfer(2)**			Ending
Intellectual property rights	W	24,377		—		(1,270	)		(5,678	)		7,116			24,545
Membership(*1)		73,183		9,204		(6	)		—			276			82,657
Development expense		91,758		2,205		—			(41,793	)		33,853			86,023
Port facilities usage rights		305,710		—		(4,674	)		(22,964	)		—			278,072
Construction-in-progress		58,561		114,638		—			—			(35,926	)		137,273
Other intangible assets		91,633		615		(4,568	)		(6,755	)		19,420			100,345

	W	645,222		126,662		(10,518	)		(77,190	)		24,739			708,915

(*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.

13. Other Assets

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

Other assets as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Current
Advance payments	W	4,071		6,252
Prepaid expenses		38,612		21,849

	W	42,683		28,101

Non-current
Long-term prepaid expenses	W	4,522		5,088
Others(*1)		103,266		100,186

	W	107,788		105,274

(*1)

As of September 30, 2020 and December 31, 2019, the Company recognized tax assets amounting to W100,852 million and W97,185 million, respectively, 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.

14. Borrowings

(a) Borrowings as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Short-term borrowings
Short-term borrowings	W	1,066,676			167,021
Current portion of debentures		2,112,900			980,460
Less: Current portion of discount on debentures issued		(982	)		(1,005	)

	W	3,178,594			1,146,476

Long-term borrowings
Long-term borrowings	W	1,198			1,181
Debentures		5,924,859			5,216,681
Less: Discount on debentures issued		(32,706	)		(26,325	)

	W	5,893,351			5,191,537

(b) Short-term borrowings as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	Lenders		Issuance date		Maturity date		Annual interest rate (%)		September 30, 2020		December 31, 2019
Transfers of account receivables that do not qualify for derecognition		—		—		—		—	W	497,045		167,021
Borrowings in foreign trade		MUFG and others		2020.07.15~2020.09.29		2020.10.13~2020.12.28		0.62~1.12		569,631		—

									W	1,066,676		167,021

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(c)	Current portion of long-term borrowings as of September 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)

Lenders

Issuance
date

Maturity
date

Annual
interest rate (%)

September 30, 2020

December 31, 2019

Debentures

Domestic debentures 306-2 and others

2013.10.04~
2018.07.05

2020.10.04~
2021.07.05

1.88~3.50

469,818

169,930

Foreign debentures

Global debentures 2
and other

2010.10.28~
2011.04.14

2020.10.28~
2021.04.14

4.25~5.25

1,642,100

809,525

2,111,918

979,455

(d)	Long-term borrowings excluding current portion, as of September 30, 2020 and December 31, 2019 are as follows:

(in millions of Won)

Lenders

Issuance
date

Maturity
date

Annual
Interest rate (%)

September 30, 2020

December 31, 2019

Foreign borrowings

KOREA ENERGY AGENCY

2007.12.27~
2008.12.29

2022.12.29

3 year
Government bond

1,198

1,181

Debentures

Domestic debentures 304-2 and others

2011.11.28~
2019.10.16

2021.11.28~
2029.10.16

1.56~4.12

2,205,686

2,504,194

Foreign debentures

Japan Yen private bond and others

2011.12.22~
2020.01.17

2021.12.22~
2025.01.17

0.50~4.00

3,686,467

2,686,162

5,893,351

5,191,537

15. Other Payables

Other payables as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Current
Accounts payable	W	423,764		630,162
Accrued expenses		409,083		432,835
Dividend payable		2,254		2,296
Lease liabilities		101,946		40,463
Withholdings		11,108		7,247

	W	948,155		1,113,003

Non-current
Long-term accrued expenses	W	48		842
Lease liabilities		228,532		216,508
Long-term withholdings		3,037		5,452

	W	231,617		222,802

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

16. Other Financial Liabilities

Other financial liabilities as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Current
Derivative liabilities	W	1,903		—
Financial guarantee liabilities		9,222		10,969

	W	11,125		10,969

Non-current
Derivative liabilities	W	—		8,285
Financial guarantee liabilities		32,564		38,640

	W	32,564		46,925

17. Provisions

(a) Provisions as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020				December 31, 2019
	Current		Non-current		Current		Non-current
Provision for bonus payments(*1,2)	W	12,292		28,865		14,020		35,816
Provision for restoration(*3)		5,004		13,934		6,783		15,942
Provision for legal contingencies and claims(*4)		—		2,052		204		2,184
Provision for product warranties(*5)		22,602		4,589		—		—

	W	39,898		49,440		21,007		53,942

(*1)	Represents the provision for bonuses limited to 33%~67% of annual salaries for executives.

(*2)	The Company estimated the present value of estimated future cash payments about the long-term service reward, based on actuarial measurement.

(*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 September 30, 2020. In order to determine the estimated costs, the Company has assumed that it would use all of technologies and materials available currently to restore the land to its original condition. In addition, the Company has applied discount rates of 1.29%~1.40% to assess present value of these costs.

(*4)	The Company has recognized provisions for certain litigations and other contingencies as of September 30, 2020.

(*5)	As of September 30, 2020, the Company recognized the expected claim cost to be charged as a provision.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

(b)	Changes in provisions for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:

1) For the nine-month period ended September 30, 2020


(in millions of Won)	Beginning		Increase		Reversal			Utilization			Ending
Provision for bonus payments	W	49,836		12,009		—			(20,688	)		41,157
Provision for restoration		22,725		322		(340	)		(3,769	)		18,938
Provision for legal contingencies and claims		2,388		424		(709	)		(51	)		2,052
Provision for product warranties		—		45,928		—			(18,737	)		27,191

	W	74,949		58,683		(1,049	)		(43,245	)		89,338

2) For the year ended December 31, 2019


(in millions of Won)	Beginning		Increase		Reversal			Utilization			Transfer		Ending
Provision for bonus payments	W	36,749		23,523		—			(18,038	)		7,602		49,836
Provision for restoration		29,703		549		(277	)		(7,250	)		—		22,725
Provision for legal contingencies and claims		46,432		538		(11,207	)		(33,375	)		—		2,388

	W	112,884		24,610		(11,484	)		(58,663	)		7,602		74,949

18. Employee Benefits

(a)	Defined contribution plans

The expense related to post-employment benefit plans under defined contribution plans for the three-month and the nine-month periods ended September 30, 2020 and 2019 were as follows:

(in millions of Won)

For the three-month periods
ended September 30

For the nine-month periods
ended September 30

2020

2019

2020

2019

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

8,789

8,900

27,696

26,521

(b)	Defined benefit plans

1) The amounts recognized in relation to net defined benefit liabilities in the statements of financial position as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Present value of funded obligations	W	1,444,837			1,435,942
Fair value of plan assets		(1,364,262	)		(1,381,796	)

Net defined benefit liabilities	W	80,575			54,146

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

Changes in present value of defined benefit obligations for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Defined benefit obligation at the beginning of period	W	1,435,942			1,265,675
Current service costs		93,508			119,957
Interest costs		20,784			31,567
Remeasurement(*1)		—			104,442
Business combination		—			317
Reclassification to liabilities directly associated with the assets held for sale		—			(1,448	)
Benefits paid		(105,397	)		(84,568	)

Defined benefit obligation at the end of period	W	1,444,837			1,435,942

(*1)	The Company does not remeasure the defined benefit plans for the purpose of interim reporting.

3)	Changes in the fair value of plan assets for the nine-month period ended September 30, 2020 and the year ended December 31, 2019 were as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Fair value of plan assets at the beginning of period	W	1,381,796			1,264,812
Interest on plan assets		20,420			32,347
Remeasurement of plan assets		(1,143	)		(6,668	)
Contributions to plan assets		73,730			161,500
Business combination		—			670
Reclassification to liabilities directly associated with the assets held for sale		—			(1,448	)
Benefits paid		(110,541	)		(69,417	)

Fair value of plan assets at the end of period	W	1,364,262			1,381,796

4)	The amounts recognized in the statements of comprehensive income for the three-month and the nine-month periods ended September 30, 2020 and 2019 were as follows:


(in millions of Won)	For the three-month periods ended September 30					For the nine-month periods ended September 30
	2020		2019			2020		2019
Current service costs	W	29,949		28,808			93,508		88,947
Net interest costs		121		(195	)		364		(585	)

	W	30,070		28,613			93,872		88,362

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

19. Other Liabilities

Other liabilities as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Current
Advances received	W	42,011		5,112
Withholdings		108,317		106,474
Unearned revenue		18,171		23,561

	W	168,499		135,147

Non-current
Unearned revenue	W	532		5,230

20. Financial Instruments

(a) Classification and fair value of financial instruments

The carrying amount and the fair values of financial assets and financial liabilities by fair value hierarchy as of September 30, 2020 and December 31, 2019 are as follows:

•

September 30, 2020


			Fair value
(in millions of Won)	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets	W	206,470		—		206,470		—		206,470
Short-term financial instruments		8,452,851		—		8,452,851		—		8,452,851
Debt securities		8,050		—		—		8,050		8,050
Other securities		63,286		—		—		63,286		63,286
Other receivables		2,000		—		—		2,000		2,000
Fair value through other comprehensive income
Equity securities		927,383		545,003		—		382,380		927,383
Debt securities		1,651		—		—		1,651		1,651
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		2,986,906		—		—		—		—
Trade accounts and notes receivable		3,685,351		—		—		—		—
Debt securities		150,000		—		—		—		—
Other receivables		265,751		—		—		—		—
Deposit instruments		1,310,692		—		—		—		—

	W	18,060,391		545,003		8,659,321		457,367		9,661,691

Financial liabilities
Fair value through profit or loss
Derivatives liabilities	W	1,903		—		1,903		—		1,903
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		1,147,094		—		—		—		—
Borrowings		9,071,945		—		9,365,488		—		9,365,488
Financial guarantee liabilities		41,786		—		—		—		—
Others		1,074,870		—		—		—		—

	W	11,337,598		—		9,367,391		—		9,367,391

(*1)	Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

•

December 31, 2019


			Fair value
(in millions of Won)	Book value		Level 1		Level 2		Level 3		Total
Financial assets
Fair value through profit or loss
Derivative assets	W	79,675		—		79,675		—		79,675
Short-term financial instruments		6,258,292		—		6,258,292		—		6,258,292
Debt securities		8,050		—		—		8,050		8,050
Other securities		55,972		—		—		55,972		55,972
Other receivables		2,000		—		—		2,000		2,000
Fair value through other comprehensive income
Equity securities		1,128,641		762,198		—		366,443		1,128,641
Debt securities		1,686		—		—		1,686		1,686
Financial assets measured at amortized cost(*1)
Cash and cash equivalents		978,139		—		—		—		—
Trade accounts and notes receivable		3,983,573		—		—		—		—
Debt securities		290,000		—		—		—		—
Other receivables		202,819		—		—		—		—
Deposit instruments		1,294,559		—		—		—		—

	W	14,283,406		762,198		6,337,967		434,151		7,534,316

Financial liabilities
Fair value through profit or loss
Derivative liabilities	W	8,285		—		8,285		—		8,285
Financial liabilities measured at amortized cost(*1)
Trade accounts and notes payable		667,551		—		—		—		—
Borrowings		6,338,012		—		6,525,464		—		6,525,464
Financial guarantee liabilities		49,609		—		—		—		—
Others		1,325,336		—		—		—		—

	W	8,388,793		—		6,533,749		—		6,533,749

(*1)	Fair value of financial assets and liabilities measured at amortized cost except borrowings approximates their carrying amounts.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

Financial liabilities were recognized in connection with financial guarantee contracts as of September 30, 2020. The details of the amount of guarantees provided are as follows:


(in millions of Won)			Guarantee limit					Guarantee amount
Guarantee beneficiary	Financial institution		Foreign currency			Won equivalent		Foreign currency		Won equivalent
Subsidiaries
POSCO Maharashtra		SCB		USD	33,784,000		39,646		33,784,000		39,646
Steel Private Limited		ING		USD	50,000,000		58,675		50,000,000		58,675
POSCO ASSAN TST		SMBC		USD	62,527,500		73,376		56,274,750		66,038
STEEL INDUSTRY		ING		USD	60,000,000		70,410		54,000,000		63,369
		BNP		USD	24,000,000		28,164		21,600,000		25,348
POSCO Asia Co., Ltd.		Credit Agricole		USD	50,000,000		58,675		50,000,000		58,675
		Mizuho		USD	50,000,000		58,675		50,000,000		58,675
POSCO MEXICO S.A. DE C.V		CITI BANAMEX		USD	30,000,000		35,205		30,000,000		35,205
		BOA		USD	30,000,000		35,205		30,000,000		35,205
		SMBC		USD	20,000,000		23,470		20,000,000		23,470
		MIZUHO		USD	20,000,000		23,470		20,000,000		23,470
		ANZ		USD	20,000,000		23,470		20,000,000		23,470
POSCO-VIETNAM Co., Ltd.		SMBC		USD	50,000,000		58,675		50,000,000		58,675
		Credit Agricole		USD	40,000,000		46,940		40,000,000		46,940
		BTMU		USD	26,000,000		30,511		26,000,000		30,511
		Citi		USD	20,000,000		23,470		20,000,000		23,470
		MIZUHO		USD	20,000,000		23,470		20,000,000		23,470
PT. KRAKATAU POSCO		Export-Import Bank of Korea		USD	567,000,000		665,375		363,264,797		426,291
		SMBC		USD	140,000,000		164,290		89,832,217		105,418
		BTMU		USD	119,000,000		139,647		75,125,217		88,159
		MIZUHO		USD	105,000,000		123,218		66,286,957		77,788
		SCB		USD	107,800,000		126,503		69,504,217		81,563
		Credit Suisse AG		USD	91,000,000		106,789		57,448,696		67,416
		HSBC		USD	91,000,000		106,789		57,448,696		67,416
		ANZ		USD	73,500,000		86,252		47,850,478		56,153
		BOA		USD	35,000,000		41,073		22,095,652		25,929
		The Tokyo Star Bank, Ltd		USD	21,000,000		24,644		13,257,391		15,558
POSCO COATED STEEL		Citi		THB	801,000,000		29,717		801,000,000		29,717
(THAILAND) CO., LTD.		ANZ		THB	1,175,000,000		43,593		1,175,000,000		43,593
		MUFG		THB	1,175,000,000		43,593		1,175,000,000		43,593
		SC		THB	1,175,000,000		43,593		1,175,000,000		43,593
		SMBC		THB	1,175,000,000		43,593		1,175,000,000		43,593
Associates
LLP POSUK Titanium		SMBC		USD	13,500,000		15,842		13,500,000		15,842
Nickel Mining Company SAS		SMBC		EUR	46,000,000		62,993		46,000,000		62,993
Joint ventures
CSP - Compania		Export-Import Bank of Korea		USD	182,000,000		213,577		162,772,945		191,014
Siderurgica do Pecem		Santander		USD	47,600,000		55,859		41,873,544		49,139
		BNP		USD	47,600,000		55,859		41,873,544		49,139
		MIZUHO		USD	47,600,000		55,859		41,873,544		49,139
		Credit Agricole		USD	20,000,000		23,470		17,593,933		20,646
		SOCIETE GENERALE		USD	20,000,000		23,470		17,593,933		20,646
		KfW		USD	20,000,000		23,470		17,593,933		20,646
		BBVA Seoul		USD	17,600,000		20,654		15,482,645		18,169
		ING		USD	17,600,000		20,654		15,482,645		18,169
		BNDES		BRL	464,060,000		96,190		464,060,000		96,190

				USD	2,390,111,500		2,804,801		1,839,413,734		2,158,552
				EUR	46,000,000		62,993		46,000,000		62,993
				THB	5,501,000,000		204,089		5,501,000,000		204,089
				BRL	464,060,000		96,190		464,060,000		96,190

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

Finance income and costs by category of financial instrument for the nine-month periods ended September 30, 2020 and 2019 were as follows:

For the nine-month period ended September 30, 2020


(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend income(*1)		Gain and loss on foreign currency			Gain and loss on disposal		Gain and loss on valuation		Others		Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	121,351			—		—			8,148		136,514		—		266,013			—
Financial assets at fair value through other comprehensive income		—			29,363		—			—		—		—		29,363			(154,254	)
Financial assets measured at amortized cost		35,972			—		47,008			1		—		—		82,981			—
Financial liabilities at fair value through profit or loss		—			—		—			722		15,287		—		16,009			—
Financial liabilities measured at amortized cost		(171,974	)		—		(76,908	)		—		—		11,271		(237,611	)		—

	W	(14,651	)		29,363		(29,900	)		8,871		151,801		11,271		156,755			(154,254	)

(*1)

Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W192,504 million for the nine-month period ended September 30, 2020.

For the nine-month period ended September 30, 2019


(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend income(*1)		Gain and loss on foreign currency			Gain and loss on disposal		Gain and loss on valuation		Others		Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	98,218			—		—			525		160,715		—		259,458			—
Financial assets at fair value through other comprehensive income		—			53,690		—			—		—		—		53,690			(41,974	)
Financial assets measured at amortized cost		27,060			—		153,367			—		—		—		180,427			—
Financial liabilities at fair value through profit or loss		—			—		—			805		34,743		—		35,548			—
Financial liabilities measured at amortized cost		(114,716	)		—		(260,504	)		—		—		6,415		(368,805	)		—

	W	10,562			53,690		(107,137	)		1,330		195,458		6,415		160,318			(41,974	)

(*1)

Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W209,791 million for the nine-month period ended September 30, 2019.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

Finance income and costs by category of financial instrument for the three-month periods ended September 30, 2020 and 2019 were as follows:

For the three-month period ended September 30, 2020


(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend income(*1)		Gain and loss on foreign currency			Gain and loss on disposal		Gain and loss on valuation			Others			Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	44,192			—		—			7,663		(86,637	)		—			(34,782	)		—
Financial assets at fair value through other comprehensive income		—			4,880		—			—		—			—			4,880			6,396
Financial assets measured at amortized cost		11,765			—		(47,907	)		1		—			—			(36,141	)		—
Financial liabilities at fair value through profit or loss		—			—		—			275		1,310			—			1,585			—
Financial liabilities measured at amortized cost		(58,166	)		—		140,540			—		—			(569	)		81,805			—

	W	(2,209	)		4,880		92,633			7,939		(85,327	)		(569	)		17,347			6,396

(*1)

Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W44,780 million for the three-month period ended September 30, 2020.

For the three-month period ended September 30, 2019


(in millions of Won)	Finance income and costs
	Interest income (expense)			Dividend income(*1)		Gain and loss on foreign currency			Gain and loss on disposal		Gain and loss on valuation		Others		Total			Other comprehensive income (loss)
Financial assets at fair value through profit or loss	W	33,545			—		—			64		92,169		—		125,778			—
Financial assets at fair value through other comprehensive income		—			12,602		—			—		—		—		12,602			(67,564	)
Financial assets measured at amortized cost		10,112			—		69,118			—		—		—		79,230			—
Financial liabilities at fair value through profit or loss		—			—		—			786		—		—		786			—
Financial liabilities measured at amortized cost		(41,127	)		—		(137,661	)		—		—		1,749		(177,039	)		—

	W	2,530			12,602		(68,543	)		850		92,169		1,749		41,357			(67,564	)

(*1)

Finance income in the statement of comprehensive income includes the dividends from subsidiaries, associates and joint ventures of W21,850 million for the three-month period ended September 30, 2019.

(b)	Financial risk management

The Company is exposed to credit risk, liquidity risk and market risk arising from financial assets and liabilities. The Company’s financial risk management objectives and policies are consistent with those disclosed in the separate financial statements as of and for the year ended December 31, 2019.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

21. Share Capital and Capital Surplus

(a) Share capital as of September 30, 2020 and December 31, 2019 are as follows:


(in Won, except share information)	September 30, 2020		December 31, 2019
Authorized shares		200,000,000		200,000,000
Par value	W	5,000		5,000
Issued shares(*1)		87,186,835		87,186,835
Share capital(*2)	W	482,403,125,000		482,403,125,000

(*1)

As of September 30, 2020, total number of ADRs of 26,190,824 outstanding in overseas stock market is equivalent to 6,547,706 shares of common stock.

(*2)

As of September 30, 2020, the difference between the ending balance of common stock and the aggregate par value of issued common stock is W46,469 million due to retirement of 9,293,790 treasury stocks.

(b) Capital surplus as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Share premium	W	463,825			463,825
Gain on disposal of treasury shares		796,623			796,623
Loss on disposal of hybrid bonds		(1,787	)		(1,787	)
Gain (loss) from merger		80,628			(6,441	)

	W	1,339,289			1,252,220

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

22. Hybrid Bonds

Hybrid bonds classified as equity as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	Date of issue		Date of maturity		Rate of Interest (%)		September 30, 2020			December 31, 2019
Hybrid bond 1-2(*1)		6/13/2013		6/13/2043		4.60	W	200,000			200,000
Issuance cost								(616	)		(616	)

							W	199,384			199,384

(*1)

Details of hybrid bonds issued by the Company as of September 30, 2020 are as follows:


		Hybrid bond 1-2
Maturity date		30 years (The Company has a right to extend the maturity date)
Interest rate		Issue date ~ 2023-06-12 : 4.60% Reset every 10 years as follows; · After 10 years : return on government bond of the Republic of Korea (10 years) + 1.40% · After 10 years : additionally + 0.25% according to Step-up clauses · After 30 years : additionally + 0.75%
Interest payments condition		Quarterly (Optional deferral of interest payment is available to the Company)
Others		The Company can call the hybrid bond at 10th anniversary of issuance and interest payment date afterwards

23. Reserves

Reserves as of September 30, 2020 and December 31, 2019 were as follows:


(in millions of Won)	September 30, 2020			December 31, 2019
Changes in fair value of equity investments at fair value through other comprehensive income	W	(335,281	)		(183,930	)

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

24. Treasury Shares

As of September 30, 2020, the Company holds 8,811,075 treasury shares for share price stabilization and other purposes in accordance with the Board of Director’s resolution.

25. Revenue

(a)	Details of revenue disaggregated by types of revenue and timing of revenue recognition for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2020		2019		2020		2019
Types of revenue
Sales of steel product	W	6,367,587		7,479,188		18,789,752		22,250,287
Transportation services		168,014		196,848		516,065		586,683
Others		42,286		59,859		126,749		191,250

	W	6,577,887		7,735,895		19,432,566		23,028,220

Timing of revenue recognition
Revenue recognized at a point in time	W	6,393,320		7,522,544		18,870,603		22,389,289
Revenue recognized over time		184,567		213,351		561,963		638,931

	W	6,577,887		7,735,895		19,432,566		23,028,220

(b) Details of contract assets and liabilities from contracts with customers as of September 30, 2020 and December 31, 2019 are as follows:


(in millions of Won)	September 30, 2020		December 31, 2019
Receivables
Accounts receivable	W	3,685,351		3,983,573
Contract assets
Accounts receivable		7,525		9,482
Contract liabilities
Advance received		42,011		5,112
Unearned income		18,471		28,484

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

26. Selling and Administrative Expenses

(a)	Other administrative expenses

Other administrative expenses for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2020		2019		2020		2019
Wages and salaries	W	58,543		60,295		174,233		173,602
Expenses related to post-employment benefits		4,960		6,290		19,142		21,483
Other employee benefits		12,780		12,691		36,067		39,184
Travel		1,806		3,397		6,413		10,211
Depreciation		6,974		5,780		20,636		18,708
Amortization		8,382		9,163		26,838		27,451
Rental		11,809		12,155		36,013		30,607
Repairs		2,340		3,234		6,171		9,051
Advertising		13,804		17,637		43,188		50,540
Research & development		16,304		15,037		47,696		57,313
Service fees		43,755		40,239		121,196		122,966
Supplies		162		234		522		3,325
Vehicles maintenance		1,032		1,532		3,480		4,649
Industry association fee		997		1,202		4,217		3,833
Training		5,524		6,430		13,706		18,193
Conference		908		1,202		2,875		4,193
Others		5,971		6,540		25,189		24,179

	W	196,051		203,058		587,582		619,488

(b)	Selling expenses

Selling expenses for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


(in millions of Won)	For the three-month periods ended September 30				For the nine-month periods ended September 30
	2020		2019		2020		2019
Freight and custody	W	34,557		33,956		97,659		97,641
Operating expenses for distribution center		1,458		1,969		4,616		6,712
Sales commissions		17,711		18,973		82,499		56,404
Sales advertising		55		230		360		851
Sales promotion		286		896		982		3,157
Sample		94		187		427		732
Sales insurance premium		1,492		1,595		4,436		4,492

	W	55,653		57,806		190,979		169,989

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

27. Finance Income and Costs

Details of finance income and costs for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


(in millions of Won)	For the three-month periods ended September 30						For the nine-month periods ended September 30
	2020			2019			2020		2019
Finance income
Interest income(*1)	W	55,957			43,657			157,323		125,278
Dividend income		49,660			34,452			221,867		263,481
Gain on foreign currency transactions		62,252			93,597			295,081		212,474
Gain on foreign currency translations		(2,711	)		(7,322	)		24,628		28,617
Gain on valuation of derivatives		(83,424	)		90,961			153,704		193,749
Others		8,735			5,437			22,718		12,377

	W	90,469			260,782			875,321		835,976

Finance costs
Interest expenses	W	58,166			41,127			171,974		114,716
Loss on foreign currency transactions		71,772			61,415			207,969		151,220
Loss on foreign currency translations		(104,864	)		93,403			141,640		197,008
Loss on valuation of derivatives		1,903			—			1,903		—
Others		1,365			1,629			2,576		2,923

	W	28,342			197,574			526,062		465,867

(*1)	Interest income calculated using the effective interest method for the nine-month periods ended September 30, 2020 and 2019 were W35,972 million and W27,060 million, respectively.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

28. Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


(in millions of Won)	For the three-month periods ended September 30					For the nine-month periods ended September 30
	2020			2019		2020		2019
Other non-operating income
Gain on disposals of property, plant and equipment	W	1,157			4,063		7,211		18,748
Gain on disposals of investment in subsidiaries, associates and joint ventures		2,447			3,496		24,354		4,689
Gain on disposals of assets held for sale		(4,454	)		28,626		22,488		29,341
Reversal of other provisions		—			11,207		284		11,484
Gain on insurance proceeds		2,882			4		9,768		262
Gain on valuation of emission rights		—			—		—		25,440
Gain on disposals of emission rights		—			6,122		24,566		6,122
Others		6,808			17,640		25,892		31,912

	W	8,840			71,158		114,563		127,998

Other non-operating expenses
Loss on disposals of property, plant and equipment	W	30,797			24,872		125,031		63,409
Impairment loss on property, plant and equipment		309			48,414		22,997		209,910
Impairment loss on investment in subsidiaries, associates and joint ventures		1,000			—		1,000		10,422
Donations		5,600			12,000		17,309		20,400
Impairment loss on assets held for sale		148			3,385		9,093		5,179
Loss on disposals of assets held for sale		5,383			—		5,383		—
Others		9,545			14,872		47,913		46,916

	W	52,782			103,543		228,726		356,236

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

29. Expenses by Nature


(in millions of Won)	For the three-month periods ended September 30					For the nine-month periods ended September 30
	2020		2019			2020		2019
Changes in inventories(*1)	W	63,477		(14,341	)		450,758		(12,660	)
Raw materials and consumables used		4,216,703		4,779,807			11,940,849		13,798,396
Employee benefits expenses		455,160		466,011			1,352,294		1,334,671
Outsourced processing cost		560,791		602,538			1,788,247		1,829,634
Depreciation(*2)		571,557		536,323			1,698,104		1,608,237
Amortization		23,151		19,350			74,002		57,776
Electricity and water		59,686		118,066			176,237		406,686
Service fees		63,710		61,267			183,338		186,129
Rental		20,986		17,858			63,894		44,427
Advertising		13,804		17,637			43,188		50,540
Freight and custody expenses		178,593		216,143			559,097		656,434
Sales commissions		17,711		18,973			82,499		56,404
Loss on disposals of property, plant and equipment		30,797		24,871			125,031		63,409
Impairment loss on property, plant and equipment		310		48,414			22,997		209,910
Impairment loss on investments in subsidiaries, associates and joint ventures		1,000		—			1,000		10,422
Other expenses		91,161		264,384			488,377		865,435

	W	6,368,597		7,177,301			19,049,912		21,165,850

(*1)	Changes in inventories are the changes in product, semi-finished products and by-products.

(*2)	Includes depreciation of investment property.

30. Income Taxes

The effective tax rates of the Company for the nine-month periods ended September 30, 2020 and 2019 were 24.34% and 27.32%, respectively.

During the year ended December 31, 2019, the Company acquired Off-gas Power Station Business Sector of POSCO ENERGY CO., LTD., which is a subsidiary of the Company. During the nine-month period ended September 30, 2020, the Company changed its estimation about the availability of deductible temporary differences due from the acquisition, and recognized additional W87,068 million of deferred tax assets. The tax effect was reflected on gain from merger directly in equity in the statement of financial position.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

31. Earnings per Share

Basic earnings per share for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:


(in Won, except share information)	For the three-month periods ended September 30						For the nine-month periods ended September 30
	2020			2019			2020			2019
Profit for the period	W	180,809,542,496			499,044,928,266			640,475,843,825			1,715,599,641,115
Interests of hybrid bonds, net of tax		(1,681,205,479	)		(1,681,205,479	)		(5,007,068,492	)		(4,988,794,519	)
Weighted-average number of common shares outstanding(*1)		79,230,216			80,115,641			79,784,098			80,113,124
Basic earnings per share	W	2,261			6,208			7,965			21,352

(*1)	The weighted-average number of common shares used to calculate basic earnings per share are as follows:


(in share)	For the three-month periods ended September 30						For the nine-month periods ended September 30
	2020			2019			2020			2019
Total number of common shares issued		87,186,835			87,186,835			87,186,835			87,186,835
Weighted-average number of treasury shares		(7,956,619	)		(7,071,194	)		(7,402,737	)		(7,073,711	)

Weighted-average number of common shares outstanding		79,230,216			80,115,641			79,784,098			80,113,124

Since there were no potential shares of common stock which had dilutive effects as of September 30, 2020 and 2019, diluted earnings per share is equal to basic earnings per share.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

32. Related Party Transactions

(a)	Significant transactions with related companies for the nine-month periods ended September 30, 2020 and 2019 were as follows:

For the nine-month period ended September 30, 2020


(in millions of Won)	*Sales and others(1)**				*Purchase and others(2)**
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
*Subsidiaries(3)**
POSCO ENGINEERING & CONSTRUCTION CO.,LTD.	W	5,168		11,107		15		543,484		60		17,773
POSCO COATED & COLOR STEEL Co., Ltd.		309,338		1,819		—		—		21,466		249
POSCO ICT(*4)		2,088		4,992		—		248,039		30,951		131,887
eNtoB Corporation		11		60		160,906		24,852		55		17,884
POSCO CHEMICAL CO., LTD		200,730		29,911		342,948		16,219		226,595		4,551
POSCO ENERGY CO., LTD.		2,196		2,117		12,374		3		—		16,709
POSCO INTERNATIONAL Corporation		4,246,418		55,558		233,450		—		11,371		3,293
POSCO Thainox Public Company Limited		226,231		137		3,454		—		—		—
POSCO America Corporation		120,956		—		—		—		—		505
POSCO Canada Ltd.		—		978		129,666		—		—		—
POSCO Asia Co., Ltd.		1,161,489		1,002		114,796		3,229		1,174		2,765
Qingdao Pohang Stainless Steel Co., Ltd.		105,037		66		—		—		—		196
POSCO JAPAN Co., Ltd.		776,819		—		29,582		4,947		—		2,428
POSCO-VIETNAM Co., Ltd.		182,844		239		—		—		—		59
POSCO MEXICO S.A. DE C.V.		107,763		158		—		—		—		304
POSCO Maharashtra Steel Private Limited		210,679		1,543		—		—		—		282
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		82,663		—		—		—		—		—
POSCO VST CO., LTD.		163,085		204		—		—		—		123
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		1,039		395,961		—		—		—
Others		913,036		20,393		55,641		33,263		197,496		91,565

		8,816,551		131,323		1,478,793		874,036		489,168		290,573

*Associates and joint ventures(3)**
POSCO PLANTEC Co., Ltd.(*5)		65		41		916		84,839		4,086		12,431
SNNC		4,333		4,103		372,068		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		29,429		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		39,112		940,725		—		—		—
Others		25,649		61,949		46,788		—		—		23,714

		59,476		105,205		1,360,497		84,839		4,086		36,145

	W	8,876,027		236,528		2,839,290		958,875		493,254		326,718

(*1)	Sales and others mainly consist of sales of steel products to subsidiaries, associates and joint ventures.

(*2)	Purchases and others mainly consist of subsidiaries’ purchases of construction services and purchases of raw materials to manufacture steel products.

(*3)	As of September 30, 2020, the Company provided guarantees to related companies (Note 20).

(*4)	Others (purchase) mainly consist of service fees related to maintenance and repair of ERP System.

(*5)	During the nine-month period ended September 30, 2020, POSCO PLANTEC Co., Ltd. was excluded from associates due to the Company’s loss of significant influence over the investee.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

For the nine-month period ended September 30, 2019


(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	5,151		11,110		—		226,604		25		12,064
POSCO COATED & COLOR STEEL Co., Ltd.		354,046		1,942		95		—		13,595		586
POSCO ICT		2,213		4,990		—		226,456		26,235		131,522
eNtoB Corporation		11		66		231,896		28,678		72		18,443
POSCO CHEMICAL CO., LTD		289,090		30,298		389,598		12,396		236,114		3,084
POSCO ENERGY CO., LTD.		147,124		1,252		1,090		—		—		1,672
POSCO INTERNATIONAL Corporation		4,426,067		46,572		459,705		—		38,067		4,516
POSCO Thainox Public Company Limited		188,527		13,795		6,706		—		—		3
POSCO America Corporation		232,724		—		—		—		—		1,682
POSCO Canada Ltd.		340		751		245,123		—		—		—
POSCO Asia Co., Ltd.		1,300,580		975		323,203		72		1,484		5,093
Qingdao Pohang Stainless Steel Co., Ltd.		99,757		—		—		—		—		—
POSCO JAPAN Co., Ltd.		1,134,448		36		29,843		3,685		—		2,898
POSCO-VIETNAM Co., Ltd.		222,692		263		—		—		—		37
POSCO MEXICO S.A. DE C.V.		238,357		89		—		—		—		246
POSCO Maharashtra Steel Private Limited		513,467		266		—		—		—		256
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		81,829		1		2,189		—		—		—
POSCO VST CO., LTD.		217,034		—		—		—		—		62
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		285		514,751		—		—		—
Others		685,845		17,396		106,193		19,147		182,202		119,078

		10,139,302		130,087		2,310,392		517,038		497,794		301,242

Associates and joint ventures
POSCO PLANTEC Co., Ltd.		412		70		2,009		183,351		12,994		16,430
SNNC		4,121		3,910		420,720		—		—		10
POSCO-SAMSUNG-Slovakia Processing Center		50,894		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		841,866		—		—		—
Others		11,830		107,865		43,088		—		—		—

		67,257		111,845		1,307,683		183,351		12,994		16,440

	W	10,206,559		241,932		3,618,075		700,389		510,788		317,682

(b)	Significant transactions with related companies for the three-month periods ended September 30, 2020 and 2019 were as follows:

For the three-month period ended September 30, 2020


(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	1,620		11		—		101,179		—		4,938
POSCO COATED & COLOR STEEL Co., Ltd.		103,572		124		—		—		6,290		41
POSCO ICT		659		1		—		63,729		10,010		44,219
eNtoB Corporation		4		—		47,528		6,004		27		5,391
POSCO CHEMICAL CO., LTD		56,264		5,141		113,227		3,389		72,171		189
POSCO ENERGY CO., LTD.		643		901		2,379		—		—		5,599
POSCO INTERNATIONAL Corporation		1,450,981		1,227		122,652		—		—		1,210
POSCO Thainox Public Company Limited		119,514		—		—		—		—		—
POSCO America Corporation		24,690		—		—		—		—		502
POSCO Canada Ltd.		—		162		38,861		—		—		—
POSCO Asia Co., Ltd.		441,511		37		33,125		957		12		1,346
Qingdao Pohang Stainless Steel Co., Ltd.		34,269		—		—		—		—		20
POSCO JAPAN Co., Ltd.		227,977		—		13,162		1,988		—		1,340
POSCO-VIETNAM Co., Ltd.		81,739		16		—		—		—		39
POSCO MEXICO S.A. DE C.V.		39,189		59		—		—		—		—
POSCO Maharashtra Steel Private Limited		56,925		696		—		—		—		97
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		25,018		—		—		—		—		—
POSCO VST CO., LTD.		30,869		148		—		—		—		103
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		235		104,312		—		—		—
Others		339,973		2,209		14,535		7,683		68,939		33,500

		3,035,417		10,967		489,781		184,929		157,449		98,534

Associates and joint ventures
SNNC		1,432		625		153,008		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		12,275		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		39,112		315,180		—		—		—
Others		11,317		7,016		17,834		—		—		10,366

		25,024		46,753		486,022		—		—		10,366

	W	3,060,441		57,720		975,803		184,929		157,449		108,900

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

For the three-month period ended September 30, 2019


(in millions of Won)	Sales and others				Purchase and others
	Sales		Others		Purchase of material		Purchase of fixed assets		Outsourced processing cost		Others
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	1,543		21		—		87,255		4		6,831
POSCO COATED & COLOR STEEL Co., Ltd.		120,638		235		95		—		5,911		95
POSCO ICT		704		1		—		77,639		9,180		42,684
eNtoB Corporation		4		6		72,320		11,742		13		5,012
POSCO CHEMICAL CO., LTD		91,297		5,169		134,299		4,818		79,731		1,074
POSCO ENERGY CO., LTD.		40,522		628		1,090		—		—		1,610
POSCO INTERNATIONAL Corporation		1,584,691		—		129,661		—		12,030		1,947
POSCO Thainox Public Company Limited		68,495		120		2,973		—		—		—
POSCO America Corporation		48,207		—		—		—		—		1,643
POSCO Canada Ltd.		—		147		93,231		—		—		—
POSCO Asia Co., Ltd.		438,809		390		74,772		72		497		2,297
Qingdao Pohang Stainless Steel Co., Ltd.		40,347		—		—		—		—		—
POSCO JAPAN Co., Ltd.		378,091		36		8,290		664		—		1,411
POSCO-VIETNAM Co., Ltd.		81,157		82		—		—		—		—
POSCO MEXICO S.A. DE C.V.		84,591		58		—		—		—		241
POSCO Maharashtra Steel Private Limited		179,859		79		—		—		—		—
POSCO(Suzhou) Automotive Processing Center Co., Ltd.		38,516		1		708		—		—		—
POSCO VST CO., LTD.		80,009		—		—		—		—		—
POSCO INTERNATIONAL SINGAPORE PTE LTD.		—		105		192,541		—		—		—
Others		260,530		2,836		25,138		8,575		48,620		58,287

		3,538,010		9,914		735,118		190,765		155,986		123,132

Associates and joint ventures
POSCO PLANTEC Co., Ltd.		229		5		610		72,737		3,668		7,068
SNNC		1,374		530		176,094		—		—		—
POSCO-SAMSUNG-Slovakia Processing Center		19,130		—		—		—		—		—
Roy Hill Holdings Pty Ltd		—		—		359,018		—		—		—
Others		4,845		21,828		15,961		—		—		—

		25,578		22,363		551,683		72,737		3,668		7,068

	W	3,563,588		32,277		1,286,801		263,502		159,654		130,200

(c)	The related account balances from significant transactions with related companies as of September 30, 2020 and December 31, 2019 are as follows:

September 30, 2020


(in millions of Won)	Receivables						Payables
	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	4,507		5		4,512		—		37,871		261		38,132
POSCO COATED & COLOR STEEL Co., Ltd.		60,497		—		60,497		—		5		3,630		3,635
POSCO ICT		184		—		184		2,206		42,204		24,993		69,403
eNtoB Corporation		—		—		—		2,977		28,664		—		31,641
POSCO CHEMICAL CO., LTD		35,943		3,485		39,428		11,926		44,963		16,921		73,810
POSCO ENERGY CO., LTD.		188		248		436		—		3,082		12,979		16,061
POSCO INTERNATIONAL Corporation		569,861		—		569,861		4,098		323		—		4,421
POSCO Thainox Public Company Limited		83,853		—		83,853		—		—		—		—
POSCO America Corporation		1,173		—		1,173		—		—		—		—
POSCO Asia Co., Ltd.		300,471		1,433		301,904		5,275		—		—		5,275
Qingdao Pohang Stainless Steel Co., Ltd.		16,230		—		16,230		—		—		—		—
POSCO MEXICO S.A. DE C.V.		41,612		701		42,313		—		—		—		—
POSCO Maharashtra Steel Private Limited		183,492		471		183,963		—		—		—		—
Others		608,868		34,530		643,398		31,409		37,624		84,148		153,181

		1,906,879		40,873		1,947,752		57,891		194,736		142,932		395,559

Associates and joint ventures
SNNC		294		229		523		36,262		—		—		36,262
Roy Hill Holdings Pty Ltd		—		39,112		39,112		194,818		32		—		194,850
Others		755		38,003		38,758		2,660		—		—		2,660

		1,049		77,344		78,393		233,740		32		—		233,772

	W	1,907,928		118,217		2,026,145		291,631		194,768		142,932		629,331

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

December 31, 2019


(in millions of Won)	Receivables						Payables
	Trade accounts and notes receivable		Others		Total		Trade accounts and notes payable		Accounts payable		Others		Total
Subsidiaries
POSCO ENGINEERING & CONSTRUCTION CO., LTD.	W	5,702		65		5,767		—		78,512		385		78,897
POSCO COATED & COLOR STEEL Co., Ltd.		57,792		—		57,792		—		11		3,828		3,839
POSCO ICT		225		1		226		1,147		129,424		42,844		173,415
eNtoB Corporation		—		—		—		3,459		27,431		—		30,890
POSCO CHEMICAL CO., LTD		35,102		3,578		38,680		17,839		52,710		19,369		89,918
POSCO ENERGY CO., LTD.		1,876		4		1,880		—		3,229		14,912		18,141
POSCO INTERNATIONAL Corporation		633,073		—		633,073		345		2,218		3,839		6,402
POSCO Thainox Public Company Limited		52,826		2		52,828		916		—		—		916
POSCO America Corporation		8,448		—		8,448		—		—		—		—
POSCO Asia Co., Ltd.		508,962		748		509,710		12,784		171		—		12,955
Qingdao Pohang Stainless Steel Co., Ltd.		29,842		—		29,842		—		—		—		—
POSCO MEXICO S.A. DE C.V.		90,351		702		91,053		—		—		—		—
POSCO Maharashtra Steel Private Limited		235,917		444		236,361		—		—		—		—
Others		470,734		33,851		504,585		14,397		40,233		87,652		142,282

		2,130,850		39,395		2,170,245		50,887		333,939		172,829		557,655

Associates and joint ventures
POSCO PLANTEC Co., Ltd.		84		10		94		471		49,511		—		49,982
SNNC		297		65		362		19,769		—		—		19,769
Roy Hill Holdings Pty Ltd		—		—		—		93,383		—		—		93,383
Others		942		706		1,648		3,447		586		—		4,033

		1,323		781		2,104		117,070		50,097		—		167,167

	W	2,132,173		40,176		2,172,349		167,957		384,036		172,829		724,822

(d)	For the nine-month periods ended September 30, 2020 and 2019, details of compensation to key management officers were as follows:


(in millions of Won)	September 30, 2020		September 30, 2019
Short-term benefits	W	31,687		36,012
Long-term benefits		3,192		4,538
Retirement benefits		5,425		7,998

	W	40,304		48,548

Key management officers include directors (including non-standing directors), executive officials and fellow officials who have significant influence and responsibilities in the Company’s business and operations.

33. Commitments and Contingencies

(a)	Commitments

The Company entered into long-term contracts to purchase iron ore, coal, nickel and others. The contracts of iron ore and coal generally have terms of more than three years and the contracts of nickel have terms of more than one year. These contracts provide for periodic price adjustments based on the market price. As of September 30, 2020, 70 million tons of iron ore and 10 million tons of coal remained to be purchased under such long-term contracts.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

The Company entered into an agreement with Tangguh Liquefied Natural Gas (LNG) Consortium in Indonesia to purchase 550 thousand tons of LNG annually for 20 years commencing in August 2005. The purchase price is subject to change, based on changes of the monthly standard oil price (JCC) and with a price ceiling.

The Company entered into consecutive voyage charter (CVC) contracts for the transportation of raw materials. As of September 30, 2020, there are 39 vessels under CVC contract and the average remaining contract period is about 9 years.

The Company entered into commitments with KOREA ENERGY AGENCY for long-term foreign currency borrowings up to the amount of USD 4.12 million. The borrowing is related to the exploration of gas hydrates in Western Fergana-Chinabad. The repayment of the borrowings depends on the success of the project. The Company is not liable for the repayment in full or part of borrowings if the project fail. The Company has agreed to pay a certain portion of its profits under certain conditions, as defined by the borrowing agreement. As of September 30, 2020, the ending balance of the borrowing amounts to USD 1.02 million.

The Company has provided a supplemental funding agreement, as the largest shareholder, as requested from the creditors, including Norddeutsche Landesbank, for seamless funding to the construction of new power plant by POSCO ENERGY CO., LTD.

The Company provides a supplementary fund of up to W9.8 billion to the Company’s subsidiary, Busan E&E Co,. Ltd., at the request of creditors such as the Korea Development Bank.

(b)	As of September 30, 2020, the Company has provided three blank checks to KOREA ENERGY AGENCY as collateral for long-term foreign currency borrowings.

(c)	Litigation in progress

The Company is involved in 32 lawsuits aggregating to W45.0 billion as defendant as of September 30, 2020, which arise from the ordinary course of business such as claim for confirmation of employee status. The Company has recognized provisions amounting to W2.1 billion for one of 32 lawsuits based on its reliable estimate of outflow of resources. However, the Company has not recognized any provisions for the other lawsuits and claims since the Company does not believe it has a present obligation as of September 30, 2020.

POSCO

Notes to the Condensed Separate Interim Financial Statements, Continued

As of September 30, 2020

(Unaudited)

34. Cash Flows from Operating Activities

Changes in operating assets and liabilities for the nine-month periods ended September 30, 2020 and 2019 were as follows:


(in millions of Won)	September 30, 2020			September 30, 2019
Trade accounts and notes receivable, net	W	278,234			(20,168	)
Other accounts receivable		111,238			(187,091	)
Inventories		1,138,481			(21,600	)
Prepaid expenses		(16,945	)		(18,765	)
Other current assets		(2,821	)		(477	)
Long-term guarantee deposits		(318	)		(299	)
Derivative assets		9,719			—
Other non-current assets		1,329			1,182
Trade accounts and notes payable		485,595			(129,738	)
Other accounts payable		(72,903	)		806
Accrued expenses		(48,006	)		(25,224	)
Advances received		1,680			(1,250	)
Withholdings		1,844			80,571
Unearned revenue		(5,414	)		2,280
Other current liabilities		(22,760	)		(21,827	)
Derivative liabliities		8,905			—
Payments of severance benefits		(105,397	)		(61,890	)
Plan assets		36,811			42,819
Other non-current liabilities		(6,951	)		(3,097	)

	W	1,792,321			(363,768	)

35. Events after the reporting period

Pursuant to the resolution of the Board of Directors on November 6, 2020, the Company decided to pay interim cash dividends of W1,500 per common share (total dividend: W117.7 billion).