POSCO (PKX) | Analysis of Investments

Investment Accounting Policy

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, investment in highly liquid securities that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Financial assets at fair value through profit or loss

Financial assets are classified at fair value through profit or loss if they are held for trading or designated as such upon initial recognition. Upon initial recognition, transaction costs are recognized in profit or loss when incurred. Financial assets at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

Held-to-maturity financial assets

A non-derivative financial asset with a fixed or determinable payment and fixed maturity, for which the Company has the positive intention and ability to hold to maturity, is classified as held-to-maturity. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method.

Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as financial assets at fair value through profit or loss, held-to-maturity securities or loans and receivables. Subsequent to initial recognition, they are measured at fair value, with changes in fair value, net of any tax effect, recorded in other comprehensive income in equity. Securities in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments are measured at cost. When a financial asset is derecognized or impairment losses are recognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. Dividends on an available-for-sale equity instrument are recognized in profit or loss when the Company's right to receive payment is established.

Source: POSCO, Annual Report

Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

POSCO, adjustment to Profit Attributable To Owners Of The Controlling Company

	12 months ended	Dec 31, 2011	Dec 31, 2010
	Profit attributable to owners of the controlling company (as reported)
	Add: Net changes in fare value of available-for-sale investments
	Profit attributable to owners of the controlling company (adjusted)

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

POSCO, adjusted ratios

		Dec 31, 2011	Dec 31, 2010
	Net Profit Margin
	Reported net profit margin	%	%
	Adjusted net profit margin	%	%
	Return on Equity (ROE)
	Reported ROE	%	%
	Adjusted ROE	%	%
	Return on Assets (ROA)
	Reported ROA	%	%
	Adjusted ROA	%	%

Adjusted Net Profit Margin

		Dec 31, 2011	Dec 31, 2010
	As Reported
	Profit attributable to owners of the controlling company (USD $ in millions, translated from KRW ₩)
	Revenue (USD $ in millions, translated from KRW ₩)
	Net profit margin1	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted profit attributable to owners of the controlling company (USD $ in millions, translated from KRW ₩)
	Revenue (USD $ in millions, translated from KRW ₩)
	Adjusted net profit margin2	%	%

2011 Calculations

Adjusted Return On Equity (ROE)

		Dec 31, 2011	Dec 31, 2010
	As Reported
	Profit attributable to owners of the controlling company (USD $ in millions, translated from KRW ₩)
	Equity attributable to owners of the controlling company (USD $ in millions, translated from KRW ₩)
	ROE1	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted profit attributable to owners of the controlling company (USD $ in millions, translated from KRW ₩)
	Equity attributable to owners of the controlling company (USD $ in millions, translated from KRW ₩)
	Adjusted ROE2	%	%

2011 Calculations

Adjusted Return On Assets (ROA)

		Dec 31, 2011	Dec 31, 2010
	As Reported
	Profit attributable to owners of the controlling company (USD $ in millions, translated from KRW ₩)
	Total assets (USD $ in millions, translated from KRW ₩)
	ROA1	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted profit attributable to owners of the controlling company (USD $ in millions, translated from KRW ₩)
	Total assets (USD $ in millions, translated from KRW ₩)
	Adjusted ROA2	%	%

2011 Calculations