HD Hyundai Infracore : 23th Audit Report (Consolidated)

Hyundai Doosan Infracore Co., Ltd. and Subsidiaries

Consolidated Financial Statements

December 31, 2022 and 2021

Hyundai Doosan Infracore Co., Ltd. and Subsidiaries

Index

December 31, 2022 and 2021

Independent Auditor's Report

(English Translation of a Report Originally Issued in Korean)

To the Board of Directors and Shareholders of

Hyundai Doosan Infracore Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of Hyundai Doosan Infracore Co., Ltd. and its subsidiaries (collectively referred to as the "Group"), which comprise the consolidated statements of financial position as at December 31, 2022 and 2021, and the consolidated statements of profit or loss, and the consolidated statements of comprehensive income, and consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS).

Basis for Opinion

We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the consolidated financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter

Without modifying our opinion, we draw attention to Note 45 to the consolidated financial statements of the Group. As discussed in Note 45, the operating results of the investment business segment that are to be transferred to the newly established corporation due to the spin-off during the year ended December 31, 2021 are presented as discontinued operations.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

(1) Impairment assessment of capitalized development costs

Why it is determined to be a key audit matter

As at December 31, 2022, the carrying amount of development costs capitalized as intangible asset is 100,985 million. The Group operates several R&D centers in Korea, Europe and other regions, and invests significant amounts to develop new products and technologies. Given the extent of judgement of management required, we consider impairment assessment of capitalized development costs to be a key audit matter (Note 16).

How our audit addressed the key audit matter

Key audit procedures we have performed in relation to impairment assessment of capitalized development costs are as follows.

1. • Obtained an understanding on Group's accounting policies for impairment assessment of development costs, and tested design and operating effectiveness of related internal controls
   • Obtained the details of capitalized development costs and reconciled the total amount to the amount recorded in the general ledger
   • Tested development costs capitalized by examining management's assessment documentation and assessing whether the criteria set out in the relevant accounting standards have been met on a sampling basis
   • Obtained an understanding and evaluated the development progress and prospect of the projects selected as a sample by interviewing with appropriate project manager and performing other procedures, and assessed appropriateness of management's conclusion on impairment analysis
   • Examined whether the actual sales have been generated from the projects selected and evaluated reasonableness of sales and profitability forecasts to assess future economic benefits of the projects capitalized
2. Evaluation of provision for warranty

Why it is determined to be a key audit matter

As at December 31, 2022, the carrying amount of provision for warranty amounts to 142,829 million. The Group provides product warranties for certain periods after sales of products and recognizes provision for warranty by estimating expected repair expenses. The performance obligation of warranty is determined based on diverse assumptions such as warranty periods, expected warranty expenses and the nature and extent of the Group provides. We drew attention to the adequacy of the warranty evaluation considering the fact that the management's estimation is intervened in measuring the provision for warranty (Note 24).

How the matter was addressed in the audit

We performed the following audit procedures in relation to the evaluation of provision for warranty of the Group. We:

• Obtained an understanding of Group's accounting policies for valuation of provision for warranty, and tested design and operating effectiveness of related internal controls
• Verified the accuracy of basic information for accounting estimation used by the management
• Compared reasons for the major assumptions, that management used for estimating the relevant liabilities, with the past performance
• Independently recalculated the balance of liabilities as at December 31, 2022

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Other Matter

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

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

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

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

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

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

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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