LG Display (LPL)

Accounts Receivable and Allowance for Doubtful Accounts

We evaluate our outstanding accounts receivable balance on a regular basis to determine whether to record an allowance for doubtful accounts. When establishing an allowance for doubtful accounts, we consider our historical losses adjusted to take into account the current market conditions and the financial condition of our customers, the amount of accounts receivable in dispute, the number of days outstanding for each account receivable and the current payment patterns. We provide an allowance for doubtful accounts based on the aggregate estimated collectibility of our accounts receivable. Beginning in June 2008, we entered into accounts receivable insurance programs with Korea Export Insurance Corporation and Atradius Trade Credit Insurance Company to reduce credit risks on accounts receivable from certain customers. The accounts receivable insurance programs cover 90 to 95% of the insured customers’ outstanding accounts receivable balance. The insurance premiums are expensed as incurred in selling, general and administrative expenses. Allowance for doubtful accounts increased from (Won)3.6 billion in 2006 to (Won)10.3 billion in 2007 mainly as a result of a significant increase in accounts receivable. However, in 2008, allowance for doubtful accounts decreased to (Won)1.3 billion mainly due to the effect of having entered into such accounts receivable insurance programs.