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 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF MARCH 2021
Commission File Number: 333-04906
SK Telecom Co., Ltd.
(Translation of registrants name into English)
65 Euljiro, Jung-gu
Seoul 04539, Korea
(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): ☐
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): ☐
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.
SK Telecom Co., Ltd. | ||
(Registrant) | ||
By: | /s/ Joong Suk Oh | |
(Signature) | ||
Name: | Joong Suk Oh | |
Title: | Senior Vice President |
Date: March 12, 2021
SK TELECOM CO., LTD. AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 2020 and 2019
(With Independent Auditors Report Thereon)
Contents
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14 |
Based on a report originally issued in Korean
To the Board of Directors and Shareholders of
SK Telecom Co., Ltd.:
Opinion
We have audited the accompanying consolidated financial statements of SK Telecom Co., Ltd. and its subsidiaries (the Group) which comprise the consolidated statements of financial position as of December 31, 2020 and 2019 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (K-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 Auditors 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 that are relevant to our audit of the consolidated financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
Without qualifying our opinion, we draw attention to the following:
As described in Note 3 to the consolidated financial statements, the Group retrospectively applied changes in accounting policies regarding the method of determining lease term and restated the comparative financial statements as of and for the year ended December 31, 2019.
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 as of and for the year ended December 31, 2020. 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. | Revenue Recognition |
As described in note 4 (21) and 5 (2) of the consolidated financial statements, the Groups revenue from cellular services is primarily generated from the
provision of a variety of telecommunications services at various rate plans and products. Revenue from wireless service amounted to 9,801,194 million in 2020. It is recognized based on data from complex
information technology systems that process large volume of transactions with subscribers. Therefore, we have identified revenue recognition related to the Groups wireless service as a key audit matter due to the complexity of information
technology systems involved and the revenue recognition standard applied. W
1
The primary procedures we performed to address this key audit matter included:
| Testing certain internal controls relating to the Groups revenue recognition process, including information technology (IT) systems used for the purposes of revenue recognition. Specifically, we assessed the IT system environment for data records, rating and billing systems, which aggregate data used for revenue recognition for voice usage, text and mobile data services, generate customer bills and support measurement of revenue. |
| Comparing a sample of revenue transactions to supporting evidence, such as customer bills, rating system information, subscriber contracts, and cash received, where applicable. |
| Inspecting major contracts with subscribers to assess the Groups revenue recognition policies based on the terms and conditions as set out in the contracts, with reference to the requirements of K-IFRS No. 1115. |
2. | Evaluation of impairment analysis for goodwill in the security services cash generating unit |
As described in notes 4 (11) and 16 of the consolidated financial statements, the Group performs impairment test for goodwill at
least annually or when there is an indication of possible impairment by comparing the recoverable amount and the carrying amount of a cash generating unit (CGU) to which goodwill is allocated. The Groups security services-related
operating segments included security services and information security services. The amount of goodwill that is allocated to the security services CGU is W1,176,274 million as of December 31, 2020. No goodwill is allocated
to the information security services CGU.
In carrying out the impairment assessment of goodwill, management determined the recoverable amount based on the value in use (VIU). Determining the VIU of the security services CGU involves significant judgments in estimating the expected future cash flows including the estimates of revenue growth rate, labor costs, perpetual growth rate and discount rate. In the Groups impairment test as of December 31, 2019, the VIU of security services CGU approximated its carrying value. In its impairment test as of December 31, 2020, while the Group does not expect the total carrying amount of the CGU will exceed the VIU due to reasonably possible changes in certain assumptions, there is still a high degree of uncertainty on the other significant assumptions applied, which may impact the goodwill impairment result. As such we have identified the evaluation of goodwill impairment in the security services CGU as a key audit matter.
The primary procedures we performed to address this key audit matter included:
| Involving our internal valuation professionals to assist us in evaluating estimated revenue growth rate, labor costs and perpetual growth rate by comparison with industry reports as well as historical performance and evaluating the discount rate by comparing with the discount rate that was independently developed using publicly available market data for comparable entities. |
| Performing sensitivity analysis for both the discount rate and the perpetual growth rate applied to the discounted cash flow forecasts to assess the impact of changes in these key assumptions on the conclusion reached in managements impairment assessment. |
| Evaluating estimated revenue growth rate and labor costs by comparison with the financial budgets approved by the Group and comparing the cash flow forecasts prepared in prior year with the actual results to assess the Groups ability to accurately forecast. |
3. | Evaluation of fair value for intangible assets Customer relationships |
As described in note 12 of the consolidated financial statements, as a result of the merger between SK Broadband Co., Ltd., a
subsidiary of SK Telecom Co., Ltd., and Tbroad Co., Ltd., the Group recognized the acquired customer relationships arising from the business combination as an identifiable intangible asset. The fair value of customer relationships amounts to
W374,019 million as of April 30, 2020, the acquisition date.
2
The Group estimated the fair value of customer relationships using the multi-period excess earnings method (MPEEM). In applying MPEEM, the Group estimates revenue and cash flows derived from the acquired customer relationships based on estimated revenue per subscriber, estimated customer attrition rate and discount rate. Considering the significant degree of the judgment in measuring the fair value of customer relationships, we identified the evaluation of fair value for customer relationships as a key audit matter.
The primary procedures we performed to address this key audit matter included:
| Involving our internal valuation professionals to assist us in: |
| Assessing the MPEEM model used for the fair value estimate considering the nature of the intangible assets and requirement by K-IFRS |
| Assessing the revenue per subscriber and customer attrition rate used in the cashflow estimate by comparing with the aquirees historical performance; and |
| Evaluating the discount rate by comparing with the discount rate that was independently developed using publicly available market data. |
| For historical performance used in evaluating the reasonableness of the above assumptions, evaluating the accuracy by agreeing or recalculating using public or audited information, as applicable. |
Other Matter
The procedures and practices utilized 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 these consolidated financial statements in accordance with K-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 Groups 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, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Groups financial reporting process.
3
Auditors 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 auditors 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 Groups internal control. |
| Evaluate the appropriateness of accounting policies used in the preparation of the consolidated financial statements and the reasonableness of accounting estimates and related disclosures made by management. |
| Conclude on the appropriateness of managements 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 Groups ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors 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 auditors 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. |
| Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
4
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditors report is In Hye Kang.
KPMG Samjong Accounting Corp.
Seoul, Korea
March 11, 2021
This report is effective as of March 11, 2021, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.
5
SK TELECOM CO., LTD. (the Parent Company) AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2020, AND DECEMBER 31, 2019, AND
FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019
The accompanying consolidated financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Parent Company.
Park, Jung-Ho
Chief Executive Officer
6
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Financial Position
As of December 31, 2020 and 2019
(In millions of won) | Note | December 31, 2020 |
December 31, 2019 |
|||||||||
Assets |
||||||||||||
Current Assets: |
||||||||||||
Cash and cash equivalents |
36,37 | 1,270,824 | ||||||||||
Short-term financial instruments |
6,36,37,39 | 1,426,952 | 830,647 | |||||||||
Short-term investment securities |
11,36,37 | 150,392 | 166,666 | |||||||||
Accounts receivable - trade, net |
7,36,37,38 | 2,188,893 | 2,230,979 | |||||||||
Short-term loans, net |
7,36,37,38 | 97,464 | 66,123 | |||||||||
Accounts receivable - other, net |
3,7,36,37,38,39 | 979,044 | 903,509 | |||||||||
Contract assets |
9,37 | 100,606 | 127,499 | |||||||||
Prepaid expenses |
3,8 | 2,128,349 | 2,018,690 | |||||||||
Prepaid income taxes |
33 | 1,984 | 63,748 | |||||||||
Derivative financial assets |
22,36,37,40 | 8,704 | 26,253 | |||||||||
Inventories, net |
10 | 171,443 | 162,882 | |||||||||
Advanced payments and others |
3,7,36,37 | 151,602 | 220,687 | |||||||||
|
|
|
|
|||||||||
8,775,086 | 8,088,507 | |||||||||||
|
|
|
|
|||||||||
Non-Current Assets: |
||||||||||||
Long-term financial instruments |
6,36,37 | 893 | 990 | |||||||||
Long-term investment securities |
11,36,37 | 1,648,837 | 857,215 | |||||||||
Investments in associates and joint ventures |
13 | 14,354,113 | 13,385,264 | |||||||||
Property and equipment, net |
3,14,15,38,39 | 13,377,077 | 12,933,460 | |||||||||
Goodwill |
12,16 | 3,357,524 | 2,949,530 | |||||||||
Intangible assets, net |
17 | 4,436,194 | 4,866,092 | |||||||||
Long-term contract assets |
9,37 | 47,675 | 64,359 | |||||||||
Long-term loans, net |
7,36,37,38 | 40,233 | 33,760 | |||||||||
Long-term accounts receivable - other |
3,7,36,37,38,39 | 332,803 | 351,663 | |||||||||
Long-term prepaid expenses |
3,8 | 1,063,711 | 1,239,865 | |||||||||
Guarantee deposits |
3,7,36,37,38 | 172,474 | 164,652 | |||||||||
Long-term derivative financial assets |
22,36,37,40 | 155,991 | 124,707 | |||||||||
Deferred tax assets |
33 | 105,088 | 109,057 | |||||||||
Defined benefit assets |
21 | 3,557 | 1,125 | |||||||||
Other non-current assets |
7,36,37 | 35,701 | 32,122 | |||||||||
|
|
|
|
|||||||||
39,131,871 | 37,113,861 | |||||||||||
|
|
|
|
|||||||||
45,202,368 | ||||||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
7
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Financial Position, Continued
As of December 31, 2020 and 2019
(In millions of won) | Note | December 31, 2020 |
December 31, 2019 |
|||||||||
Liabilities and Shareholders Equity |
||||||||||||
Current Liabilities: |
||||||||||||
Accounts payable - trade |
36,37,38 | 438,297 | ||||||||||
Accounts payable - other |
36,37,38 | 2,484,466 | 2,521,474 | |||||||||
Withholdings |
36,37,38 | 1,410,239 | 1,350,244 | |||||||||
Contract liabilities |
9 | 229,892 | 191,225 | |||||||||
Accrued expenses |
3,36,37 | 1,554,889 | 1,424,833 | |||||||||
Income tax payable |
33 | 219,766 | 5,450 | |||||||||
Short-term derivative financial liabilities |
22,36,37,40 | 77 | | |||||||||
Provisions |
3,20,39 | 69,363 | 86,320 | |||||||||
Short-term borrowings |
18,36,37,40 | 109,998 | 20,603 | |||||||||
Current installments of long-term debt, net |
18,36,37,40 | 939,237 | 1,017,327 | |||||||||
Current installments of long-term payables - other |
19,36,37,40 | 424,600 | 423,839 | |||||||||
Lease liabilities |
3,36,37,38,40 | 359,936 | 371,742 | |||||||||
Other current liabilities |
2,595 | 319 | ||||||||||
|
|
|
|
|||||||||
8,177,967 | 7,851,673 | |||||||||||
|
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|
|||||||||
Non-Current Liabilities: |
||||||||||||
Debentures, excluding current installments, net |
18,36,37,40 | 7,690,169 | 7,253,894 | |||||||||
Long-term borrowings, excluding current installments, net |
18,36,37,39,40 | 1,979,261 | 1,972,149 | |||||||||
Long-term payables - other |
19,36,37,40 | 1,142,354 | 1,550,167 | |||||||||
Long-term lease liabilities |
3,36,37,38,40 | 1,076,841 | 919,265 | |||||||||
Long-term contract liabilities |
9 | 30,704 | 32,231 | |||||||||
Defined benefit liabilities |
21 | 154,944 | 172,258 | |||||||||
Long-term derivative financial liabilities |
22,36,37,40 | 375,083 | 1,043 | |||||||||
Long-term provisions |
3,20,39 | 81,514 | 78,841 | |||||||||
Deferred tax liabilities |
3,33 | 2,709,075 | 2,463,861 | |||||||||
Other non-current liabilities |
3,36,37,38 | 92,802 | 90,052 | |||||||||
|
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|
|||||||||
15,332,747 | 14,533,761 | |||||||||||
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|
|||||||||
Total Liabilities |
23,510,714 | 22,385,434 | ||||||||||
|
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|
|||||||||
Shareholders Equity: |
||||||||||||
Share capital |
1,23 | 44,639 | 44,639 | |||||||||
Capital surplus and others |
12,23,24,25,26 | 677,203 | 1,006,481 | |||||||||
Retained earnings |
3,27 | 22,981,913 | 22,228,683 | |||||||||
Reserves |
28 | 40,139 | (329,576 | ) | ||||||||
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|
|
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Equity attributable to owners of the Parent Company |
23,743,894 | 22,950,227 | ||||||||||
Non-controlling interests |
652,349 | (133,293 | ) | |||||||||
|
|
|
|
|||||||||
Total Shareholders Equity |
24,396,243 | 22,816,934 | ||||||||||
|
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|
|
|||||||||
45,202,368 | ||||||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
8
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Income
For the years ended December 31, 2020 and 2019
(In millions of won) | Note | 2020 | 2019 | |||||||||
Operating revenue: |
3,5,38 | |||||||||||
Revenue |
17,740,716 | |||||||||||
|
|
|
|
|||||||||
Operating expenses: |
3,38 | |||||||||||
Labor |
3,006,172 | 2,822,673 | ||||||||||
Commissions |
8 | 5,347,086 | 5,002,066 | |||||||||
Depreciation and amortization |
3,5 | 3,991,083 | 3,856,662 | |||||||||
Network interconnection |
770,712 | 752,334 | ||||||||||
Leased lines |
3 | 294,722 | 263,367 | |||||||||
Advertising |
431,679 | 434,561 | ||||||||||
Rent |
3 | 173,294 | 154,843 | |||||||||
Cost of goods sold |
1,608,470 | 1,833,362 | ||||||||||
Others |
30 | 1,652,109 | 1,512,671 | |||||||||
|
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|
|||||||||
17,275,327 | 16,632,539 | |||||||||||
|
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|
|
|||||||||
Operating profit |
5 | 1,349,324 | 1,108,177 | |||||||||
Finance income |
3,5,32 | 241,196 | 142,155 | |||||||||
Finance costs |
3,5,32 | (497,193 | ) | (437,955 | ) | |||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net |
5,13 | 1,028,403 | 449,543 | |||||||||
Other non-operating income |
3,5,31 | 99,051 | 102,731 | |||||||||
Other non-operating expenses |
3,5,31 | (343,741 | ) | (203,650 | ) | |||||||
|
|
|
|
|||||||||
Profit before income tax |
5 | 1,877,040 | 1,161,001 | |||||||||
Income tax expense |
3,33 | 376,502 | 300,268 | |||||||||
|
|
|
|
|||||||||
Profit for the year |
860,733 | |||||||||||
|
|
|
|
|||||||||
Attributable to: |
||||||||||||
Owners of the Parent Company |
888,698 | |||||||||||
Non-controlling interests |
(3,814 | ) | (27,965 | ) | ||||||||
Earnings per share |
3,34 | |||||||||||
Basic earnings per share (in won) |
12,127 | |||||||||||
|
|
|
|
|||||||||
Diluted earnings per share (in won) |
20,459 | 12,127 |
See accompanying notes to the consolidated financial statements.
9
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2020 and 2019
(In millions of won) | Note | 2020 | 2019 | |||||||||
Profit for the year |
860,733 | |||||||||||
Other comprehensive income (loss): |
||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: |
||||||||||||
Remeasurement of defined benefit liabilities |
21 | (2,637 | ) | (72,605 | ) | |||||||
Net change in other comprehensive income (loss) of investments in associates and joint ventures |
13,28 | 271 | (19,269 | ) | ||||||||
Valuation gain (loss) on financial assets at fair value through other comprehensive income |
28,32 | 579,678 | (17,943 | ) | ||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: |
||||||||||||
Net change in other comprehensive income (loss) of investments in associates and joint ventures |
13,28 | (114,478 | ) | 75,763 | ||||||||
Net change in unrealized fair value of derivatives |
22,28,32 | 19,138 | 40,681 | |||||||||
Foreign currency translation differences for foreign operations |
28 | (20,150 | ) | (5,618 | ) | |||||||
|
|
|
|
|||||||||
Other comprehensive income for the year, net of taxes |
461,822 | 1,009 | ||||||||||
|
|
|
|
|||||||||
Total comprehensive income |
861,742 | |||||||||||
|
|
|
|
|||||||||
Total comprehensive income (loss) attributable to: |
||||||||||||
Owners of the Parent Company |
891,051 | |||||||||||
Non-controlling interests |
93,285 | (29,309 | ) |
See accompanying notes to the consolidated financial statements.
10
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Changes in Equity
For the years ended December 31, 2020 and 2019
(In millions of won) | ||||||||||||||||||||||||||||||||
Controlling interests | Non- controlling interests |
Total equity |
||||||||||||||||||||||||||||||
Note | Share capital | Capital surplus and others |
Retained earnings |
Reserves | Sub-total | |||||||||||||||||||||||||||
Balance, January 1, 2019(As reported) |
44,639 | 655,084 | 22,120,355 | (373,442 | ) | 22,446,636 | (122,075 | ) | 22,324,561 | |||||||||||||||||||||||
Changes in accounting policies |
3 | | | (5,393 | ) | | (5,393 | ) | | (5,393 | ) | |||||||||||||||||||||
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Balance, January 1, 2019(Restated) |
44,639 | 655,084 | 22,114,962 | (373,442 | ) | 22,441,243 | (122,075 | ) | 22,319,168 | |||||||||||||||||||||||
Total comprehensive income (loss): |
||||||||||||||||||||||||||||||||
Profit (loss) for the year |
| | 888,698 | | 888,698 | (27,965 | ) | 860,733 | ||||||||||||||||||||||||
Other comprehensive income (loss) |
13,21,22,28,32 | | | (41,513 | ) | 43,866 | 2,353 | (1,344 | ) | 1,009 | ||||||||||||||||||||||
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| | 847,185 | 43,866 | 891,051 | (29,309 | ) | 861,742 | |||||||||||||||||||||||||
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Transactions with owners: |
||||||||||||||||||||||||||||||||
Annual dividends |
35 | | | (646,828 | ) | | (646,828 | ) | (21,150 | ) | (667,978 | ) | ||||||||||||||||||||
Interim dividends |
35 | | | (71,870 | ) | | (71,870 | ) | (8,650 | ) | (80,520 | ) | ||||||||||||||||||||
Share option |
26 | | 295 | | | 295 | 764 | 1,059 | ||||||||||||||||||||||||
Interest on hybrid bonds |
25 | | | (14,766 | ) | | (14,766 | ) | | (14,766 | ) | |||||||||||||||||||||
Disposal of treasury shares |
24 | | 300,000 | | | 300,000 | | 300,000 | ||||||||||||||||||||||||
Changes in ownership in subsidiaries |
12 | | 51,102 | | | 51,102 | 47,127 | 98,229 | ||||||||||||||||||||||||
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|
|||||||||||||||||||
| 351,397 | (733,464 | ) | | (382,067 | ) | 18,091 | (363,976 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance, December 31, 2019 |
1,006,481 | 22,228,683 | (329,576 | ) | 22,950,227 | (133,293 | ) | 22,816,934 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance, January 1, 2020 |
1,006,481 | 22,228,683 | (329,576 | ) | 22,950,227 | (133,293 | ) | 22,816,934 | ||||||||||||||||||||||||
Total comprehensive income (loss): |
||||||||||||||||||||||||||||||||
Profit (loss) for the year |
| | 1,504,352 | | 1,504,352 | (3,814 | ) | 1,500,538 | ||||||||||||||||||||||||
Other comprehensive income (loss) |
13,21,22,28,32 | | | (4,992 | ) | 369,715 | 364,723 | 97,099 | 461,822 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| | 1,499,360 | 369,715 | 1,869,075 | 93,285 | 1,962,360 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Transactions with owners: |
||||||||||||||||||||||||||||||||
Annual dividends |
35 | | | (658,228 | ) | | (658,228 | ) | (5,771 | ) | (663,999 | ) | ||||||||||||||||||||
Interim dividends |
35 | | | (73,136 | ) | | (73,136 | ) | | (73,136 | ) | |||||||||||||||||||||
Share option |
26 | | 179 | | | 179 | 1,256 | 1,435 | ||||||||||||||||||||||||
Interest on hybrid bonds |
25 | | | (14,766 | ) | | (14,766 | ) | | (14,766 | ) | |||||||||||||||||||||
Acquisition of treasury shares |
24 | | (426,664 | ) | | | (426,664 | ) | | (426,664 | ) | |||||||||||||||||||||
Changes in ownership in subsidiaries |
12 | | 97,207 | | | 97,207 | 696,872 | 794,079 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| (329,278 | ) | (746,130 | ) | | (1,075,408 | ) | 692,357 | (383,051 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Balance, December 31, 2020 |
677,203 | 22,981,913 | 40,139 | 23,743,894 | 652,349 | 24,396,243 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the consolidated financial statements.
11
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2020 and 2019
(In millions of won) | Note | 2020 | 2019 | |||||||||
Cash flows from operating activities: |
||||||||||||
Cash generated from operating activities: |
||||||||||||
Profit for the year |
860,733 | |||||||||||
Adjustments for income and expenses |
40 | 4,256,654 | 4,435,039 | |||||||||
Changes in assets and liabilities related to operating activities |
40 | 302,458 | (856,130 | ) | ||||||||
|
|
|
|
|||||||||
6,059,650 | 4,439,642 | |||||||||||
Interest received |
41,832 | 56,392 | ||||||||||
Dividends received |
166,019 | 241,117 | ||||||||||
Interest paid |
(397,351 | ) | (360,439 | ) | ||||||||
Income tax paid |
(48,274 | ) | (341,728 | ) | ||||||||
|
|
|
|
|||||||||
Net cash provided by operating activities |
5,821,876 | 4,034,984 | ||||||||||
|
|
|
|
|||||||||
Cash flows from investing activities: |
||||||||||||
Cash inflows from investing activities: |
||||||||||||
Decrease in short-term financial instruments, net |
| 253,971 | ||||||||||
Decrease in short-term investment securities, net |
17,684 | 29,503 | ||||||||||
Collection of short-term loans |
77,114 | 113,345 | ||||||||||
Decrease in long-term financial instruments |
99 | 231 | ||||||||||
Proceeds from disposals of long-term investment securities |
46,065 | 234,683 | ||||||||||
Proceeds from disposals of investments in associates and joint ventures |
2,715 | 220 | ||||||||||
Proceeds from disposals of property and equipment |
102,526 | 18,478 | ||||||||||
Proceeds from disposals of intangible assets |
39,654 | 7,327 | ||||||||||
Collection of long-term loans |
4,608 | 4,435 | ||||||||||
Decrease in deposits |
16,244 | 9,180 | ||||||||||
Proceeds from settlement of derivatives |
845 | 601 | ||||||||||
Collection of lease receivables |
| 27,712 | ||||||||||
Proceeds from disposals of subsidiaries |
165 | 4,802 | ||||||||||
Cash inflow from business combinations |
115,834 | 5,016 | ||||||||||
Cash inflow from transfers of business |
5,395 | 45,658 | ||||||||||
|
|
|
|
|||||||||
428,948 | 755,162 | |||||||||||
Cash outflows for investing activities: |
||||||||||||
Increase in short-term financial instruments, net |
(596,025 | ) | | |||||||||
Increase in short-term loans |
(103,604 | ) | (116,320 | ) | ||||||||
Increase in long-term loans |
(11,044 | ) | (11,541 | ) | ||||||||
Increase in long-term financial instruments |
(2 | ) | | |||||||||
Acquisitions of long-term investment securities |
(95,474 | ) | (383,976 | ) | ||||||||
Acquisitions of investments in associates and joint ventures |
(170,292 | ) | (264,015 | ) | ||||||||
Acquisitions of property and equipment |
(3,557,800 | ) | (3,375,883 | ) | ||||||||
Acquisitions of intangible assets |
(129,976 | ) | (141,010 | ) | ||||||||
Increase in deposits |
(12,175 | ) | (6,164 | ) | ||||||||
Cash outflow for business combinations |
(2,958 | ) | (36,910 | ) | ||||||||
Cash outflow for disposal of subsidiaries |
| (927 | ) | |||||||||
|
|
|
|
|||||||||
(4,679,350 | ) | (4,336,746 | ) | |||||||||
|
|
|
|
|||||||||
Net cash used in investing activities |
(3,581,584 | ) | ||||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
12
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Cash Flows, Continued
For the years ended December 31, 2020 and 2019
(In millions of won) | Note | 2020 | 2019 | |||||||||
Cash flows from financing activities: |
||||||||||||
Cash inflows from financing activities: |
||||||||||||
Proceeds from short-term borrowings, net |
| |||||||||||
Proceeds from issuance of debentures |
1,420,962 | 1,633,444 | ||||||||||
Proceeds from long-term borrowings |
1,947,848 | | ||||||||||
Cash inflows from settlement of derivatives |
36,691 | 12,426 | ||||||||||
Proceeds from disposal of treasury shares |
| 300,000 | ||||||||||
Transactions with non-controlling shareholders |
17,766 | 101,398 | ||||||||||
|
|
|
|
|||||||||
3,499,642 | 2,047,268 | |||||||||||
Cash outflows for financing activities: |
||||||||||||
Repayments of short-term borrowings, net |
| (59,860 | ) | |||||||||
Repayments of long-term payables - other |
(428,100 | ) | (428,153 | ) | ||||||||
Repayments of debentures |
(975,500 | ) | (940,000 | ) | ||||||||
Repayments of long-term borrowings |
(1,950,874 | ) | (89,882 | ) | ||||||||
Payments of dividends |
(742,136 | ) | (718,698 | ) | ||||||||
Payments of interest on hybrid bonds |
(14,766 | ) | (14,766 | ) | ||||||||
Repayments of lease liabilities |
(412,666 | ) | (443,238 | ) | ||||||||
Acquisition of treasury shares |
(426,664 | ) | | |||||||||
Transactions with non-controlling shareholders |
(6,515 | ) | (39,345 | ) | ||||||||
|
|
|
|
|||||||||
(4,957,221 | ) | (2,733,942 | ) | |||||||||
|
|
|
|
|||||||||
Net cash used in financing activities |
(1,457,579 | ) | (686,674 | ) | ||||||||
|
|
|
|
|||||||||
Net increase (decrease) in cash and cash equivalents |
113,895 | (233,274 | ) | |||||||||
Cash and cash equivalents at beginning of the year |
1,270,824 | 1,506,699 | ||||||||||
Effects of exchange rate changes on cash and cash equivalents |
(15,066 | ) | (2,601 | ) | ||||||||
|
|
|
|
|||||||||
Cash and cash equivalents at end of the year |
1,270,824 | |||||||||||
|
|
|
|
See accompanying notes to the consolidated financial statements.
13
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
1. | Reporting Entity |
SK Telecom Co., Ltd. (the Parent Company) was incorporated in March 1984 under the laws of the Republic of Korea (Korea) to provide cellular telephone communication services in Korea. The Parent Company mainly provides wireless telecommunications services in Korea. The head office of the Parent Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.
The Parent Companys common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of December 31, 2020, the Parent Companys total issued shares are held by the following shareholders:
Number of shares |
Percentage of total shares issued (%) |
|||||||
SK Holdings Co., Ltd. |
21,624,120 | 26.78 | ||||||
National Pension Service |
8,853,906 | 10.97 | ||||||
Institutional investors and other shareholders |
39,582,507 | 49.02 | ||||||
Kakao Co., Ltd. |
1,266,620 | 1.57 | ||||||
Treasury shares |
9,418,558 | 11.66 | ||||||
|
|
|
|
|||||
80,745,711 | 100.00 | |||||||
|
|
|
|
These consolidated financial statements comprise the Parent Company and its subsidiaries (together referred to as the Group and individually as Group entity). SK Holdings Co., Ltd. is the ultimate controlling entity of the Parent Company.
14
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
1. | Reporting Entity, Continued |
(2) | List of subsidiaries |
The list of subsidiaries as of December 31, 2020 and 2019 is as follows:
Ownership (%)(*1) | ||||||||||||||
Subsidiary |
Location | Primary business |
Dec. 31, 2020 |
Dec. 31, 2019 |
||||||||||
Subsidiaries owned by the Parent Company |
SK Telink Co., Ltd. | Korea | Telecommunication and Mobile Virtual Network Operator service |
100.0 | 100.0 | |||||||||
SK Communications Co., Ltd. | Korea | Internet website services | 100.0 | 100.0 | ||||||||||
SK Broadband Co., Ltd.(*2) | Korea | Telecommunication services | 74.3 | 100.0 | ||||||||||
PS&Marketing Corporation | Korea | Communications device retail business | 100.0 | 100.0 | ||||||||||
SERVICE ACE Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SERVICE TOP Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SK O&S Co., Ltd. | Korea | Base station maintenance service | 100.0 | 100.0 | ||||||||||
SK Telecom China Holdings Co., Ltd. |
China | Investment (Holdings company) | 100.0 | 100.0 | ||||||||||
SK Global Healthcare Business Group, Ltd. |
Hong Kong | Investment | 100.0 | 100.0 | ||||||||||
YTK Investment Ltd. | Cayman Islands | Investment association | 100.0 | 100.0 | ||||||||||
Atlas Investment | Cayman Islands | Investment association | 100.0 | 100.0 | ||||||||||
SKT Americas, Inc. | USA | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
One Store Co., Ltd.(*3) | Korea | Telecommunication services | 52.1 | 52.7 | ||||||||||
SK Planet Co., Ltd. | Korea | Telecommunication services, system software development and supply services |
98.7 | 98.7 | ||||||||||
Eleven Street Co., Ltd.(*4) | Korea | E-commerce | 80.3 | 80.3 | ||||||||||
DREAMUS COMPANY | Korea | Manufacturing digital audio players and other portable media devices |
51.4 | 51.4 | ||||||||||
SK Infosec Co., Ltd.(*5) | Korea | Information security service | 62.6 | 100.0 | ||||||||||
Life & Security Holdings Co., Ltd.(*5,6) | Korea | Investment (Holdings company) | | 55.0 | ||||||||||
Quantum Innovation Fund I | Korea | Investment | 59.9 | 59.9 | ||||||||||
SK Telecom Japan Inc. | Japan | Information gathering and consulting |
100.0 | 100.0 | ||||||||||
id Quantique SA(*7) | Switzerland | Quantum information and communications service |
68.1 | 66.8 | ||||||||||
SK Telecom TMT Investment Corp. | USA | Investment | 100.0 | 100.0 | ||||||||||
FSK L&S Co., Ltd. | Korea | Freight and logistics consulting business |
60.0 | 60.0 | ||||||||||
Incross Co., Ltd. | Korea | Media representative business | 34.6 | 34.6 | ||||||||||
Happy Hanool Co., Ltd. | Korea | Service | 100.0 | 100.0 | ||||||||||
SK stoa Co., Ltd.(*8) | Korea | Other telecommunication retail business |
100.0 | | ||||||||||
Broadband Nowon Co., Ltd.(*6) | Korea | Cable broadcasting services | 55.0 | | ||||||||||
T map Mobility Co., Ltd.(*6) | Korea | Mobility business | 100.0 | |
15
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
1. | Reporting Entity, Continued |
(2) | List of subsidiaries, Continued |
The list of subsidiaries as of December 31, 2020 and 2019 is as follows, Continued:
Ownership (%)(*1) | ||||||||||||||
Subsidiary |
Location | Primary business |
Dec. 31, 2020 |
Dec. 31, 2019 |
||||||||||
Subsidiaries owned by |
SK m&service Co., Ltd. | Korea | Database and Internet website service |
100.0 | 100.0 | |||||||||
SK Planet Global Holdings Pte. Ltd. | Singapore | Investment (Holdings company) | 100.0 | 100.0 | ||||||||||
SKP America LLC. | USA | Digital contents sourcing service | 100.0 | 100.0 | ||||||||||
K-net Culture and Contents Venture Fund |
Korea | Capital investing in startups | 59.0 | 59.0 | ||||||||||
Subsidiaries owned by |
iriver Enterprise Ltd. | Hong Kong | Management of Chinese subsidiaries |
100.0 | 100.0 | |||||||||
iriver China Co., Ltd. | China | Sales and manufacturing of MP3 and 4 |
100.0 | 100.0 | ||||||||||
Dongguan iriver Electronics Co., Ltd. | China | Sales and manufacturing of e-book devices |
100.0 | 100.0 | ||||||||||
LIFE DESIGN COMPANY Inc. | Japan | Sales of goods in Japan | 100.0 | 100.0 | ||||||||||
Subsidiary owned by |
SKinfosec Information Technology(Wuxi) Co., Ltd. |
China | System software development and supply services |
100.0 | 100.0 | |||||||||
ADT CAPS Co., Ltd. | Korea | Unmanned security | 100.0 | 100.0 | ||||||||||
CAPSTEC Co., Ltd. | Korea | Manned security | 100.0 | 100.0 | ||||||||||
ADT SECURITY Co., Ltd.(*6) | Korea | Sales and trade of anti-theft devices and surveillance devices |
| 100.0 | ||||||||||
Subsidiary owned by |
SK TELINK VIETNAM Co., Ltd.(*6) | Vietnam | Communications device retail business |
| 100.0 | |||||||||
Subsidiaries owned by |
Home & Service Co., Ltd. | Korea | Operation of information and communication facility |
100.0 | 100.0 | |||||||||
SK stoa Co., Ltd.(*8) | Korea | Other telecommunication retail business |
| 100.0 | ||||||||||
Subsidiary owned by |
PanAsia Semiconductor Materials LLC (*6, 9) |
Korea | Investment | 66.4 | | |||||||||
Subsidiary owned by |
SK Planet Japan, K. K. | Japan | Digital contents sourcing service | 79.8 | 79.8 | |||||||||
Subsidiary owned by |
Id Quantique LLC | Korea | Quantum information and communications service |
100.0 | 100.0 | |||||||||
Subsidiaries owned by |
FSK L&S(Shanghai) Co., Ltd. | China | Logistics business | 66.0 | 66.0 | |||||||||
FSK L&S(Hungary) Co., Ltd. | Hungary | Logistics business | 100.0 | 100.0 | ||||||||||
FSK L&S VIETNAM COMPANY LIMITED(*6) |
Vietnam | Logistics business | 100.0 | | ||||||||||
Subsidiaries owned by |
Infra Communications Co., Ltd. | Korea | Service operation | 100.0 | 100.0 | |||||||||
Mindknock Co., Ltd. | Korea | Software development | 100.0 | 100.0 | ||||||||||
Others(*10) |
SK Telecom Innovation Fund, L.P. | USA | Investment | 100.0 | 100.0 | |||||||||
SK Telecom China Fund I L.P. | Cayman Islands |
Investment | 100.0 | 100.0 |
16
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
1. | Reporting Entity, Continued |
(2) | List of subsidiaries, Continued |
The list of subsidiaries as of December 31, 2020 and 2019 is as follows, Continued:
(*1) | The ownership interest represents direct ownership interest in subsidiaries either by the Parent Company or subsidiaries of the Parent Company. |
(*2) | On April 30, 2020, SK Broadband Co., Ltd. merged with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting
Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. to strengthen competitiveness and enhance synergy as a comprehensive media company. The Parent Companys ownership interest of SK Broadband Co., Ltd. has changed as SK Broadband Co., Ltd.
issued new shares to the shareholders of the merged companies as the consideration for the merger. The Parent Company has entered into a shareholders agreement with the acquirees shareholders and |
(*3) | The ownership interest has changed as third-party share option of One Store Co., Ltd. was exercised during the year ended December 31, 2020. |
(*4) | 80.3% of the shares issued by Eleven Street Co., Ltd. are owned by the Parent Company and 18.2% of redeemable
convertible preferred shares with voting rights by non-controlling shareholders. For the year ended December 31, 2019, Eleven Street Co., Ltd. acquired 1.5% of its outstanding shares from SK Planet Co.,
Ltd., which is currently held as treasury shares as of December 31, 2020. The Parent Company is obliged to guarantee dividend of at least 1% per annum of the preferred shares issue price to the investor by the date on which Eleven Street
Co., Ltd. is publicly listed or at the end of qualifying listing period, whichever occurs first. The present value of obligatory dividends amounting to |
(*5) | SK Infosec Co., Ltd. merged with Life & Security Holdings Co., Ltd., a subsidiary of the Parent Company, to improve business management efficiency on December 30, 2020. The Group acquired 34,200,560 shares of SK Infosec Co., Ltd. based on the exchange ratio on December 30, 2020. As a result of merger, the Groups ownership interest of SK Infosec Co., Ltd. has changed from 100% to 62.6%. |
(*6) | Details of changes in the consolidation scope for year ended December 31, 2020 are presented in note 1-(4). |
(*7) | The Parent Company participated in a third-party allotment offering and acquired 4,166,667 shares on July 23, 2020. |
(*8) | The Parent Company acquired 3,631,355 shares (100%) of SK stoa Co., Ltd. from SK Broadband Co., Ltd., a
subsidiary of the Parent Company, at |
(*9) | PanAsia Semiconductor Materials LLC increased its capital by a third-party allotment, which has changed the Groups ownership interest for the year ended December 31, 2020. |
(*10) | Others are owned by Atlas Investment and another subsidiary of the Parent Company. |
17
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
1. | Reporting Entity, Continued |
(3) | Condensed financial information of subsidiaries |
1) Condensed financial information of significant subsidiaries as of and for the year ended December 31, 2020 is as follows:
(In millions of won) | ||||||||||||||||||||
As of December 31, 2020 | 2020 | |||||||||||||||||||
Subsidiary |
Total assets | Total liabilities |
Total equity |
Revenue | Profit (loss) |
|||||||||||||||
SK Telink Co., Ltd. |
60,702 | 116,170 | 351,334 | 18,010 | ||||||||||||||||
Eleven Street Co., Ltd. |
999,225 | 542,534 | 456,691 | 545,556 | (29,623 | ) | ||||||||||||||
SK m&service Co., Ltd. |
129,738 | 74,962 | 54,776 | 214,949 | 2,759 | |||||||||||||||
SK Broadband Co., Ltd. |
5,765,808 | 3,119,489 | 2,646,319 | 3,713,021 | 150,694 | |||||||||||||||
K-net Culture and Contents Venture Fund |
377,683 | 65,896 | 311,787 | | (44,737 | ) | ||||||||||||||
PS&Marketing Corporation |
470,521 | 257,809 | 212,712 | 1,427,218 | (847 | ) | ||||||||||||||
SERVICE ACE Co., Ltd. |
96,258 | 71,890 | 24,368 | 206,612 | 2,905 | |||||||||||||||
SERVICE TOP Co., Ltd. |
69,496 | 51,584 | 17,912 | 195,479 | 2,592 | |||||||||||||||
SK O&S Co., Ltd. |
88,663 | 54,012 | 34,651 | 278,948 | 778 | |||||||||||||||
SK Planet Co., Ltd. |
536,981 | 214,846 | 322,135 | 276,462 | 1,305 | |||||||||||||||
DREAMUS COMPANY(*1) |
172,443 | 76,642 | 95,801 | 226,329 | (23,068 | ) | ||||||||||||||
SK Infosec Co., Ltd.(*2) |
2,927,396 | 2,550,936 | 376,460 | 1,327,150 | 14,227 | |||||||||||||||
One Store Co., Ltd. |
243,442 | 99,943 | 143,499 | 155,218 | 1,952 | |||||||||||||||
Home & Service Co., Ltd. |
124,197 | 88,740 | 35,457 | 397,754 | (20 | ) | ||||||||||||||
SK stoa Co., Ltd. |
107,982 | 79,339 | 28,643 | 268,693 | 17,154 | |||||||||||||||
FSK L&S Co., Ltd.(*3) |
66,117 | 35,192 | 30,925 | 205,623 | 3,022 | |||||||||||||||
Incross Co., Ltd.(*4) |
179,308 | 104,778 | 74,530 | 39,440 | 12,307 |
(*1) | The condensed financial information of DREAMUS COMPANY is consolidated financial information including iriver Enterprise Ltd. and three other subsidiaries of DREAMUS COMPANY. |
(*2) | The condensed financial information of SK Infosec Co., Ltd. is consolidated financial information including SKinfosec Information Technology (Wuxi) Co., Ltd. and two other subsidiaries of SK Infosec Co., Ltd. and including profit and loss which Life Security & Holdings Co., Ltd. recognized prior to the merger. |
(*3) | The condensed financial information of FSK L&S Co., Ltd. is consolidated financial information including FSK L&S (Shanghai) Co., Ltd. and two other subsidiaries of FSK L&S Co., Ltd. |
(*4) | The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary of Incross Co., Ltd. |
18
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
1. | Reporting Entity, Continued |
(3) | Condensed financial information of subsidiaries, Continued |
2) Condensed financial information of significant subsidiaries as of and for the year ended December 31, 2019 is as follows:
(In millions of won) | ||||||||||||||||||||
As of December 31, 2019 | 2019 | |||||||||||||||||||
Subsidiary |
Total assets | Total liabilities |
Total equity |
Revenue | Profit (loss) |
|||||||||||||||
SK Telink Co., Ltd.(*1) |
77,378 | 188,347 | 363,627 | 3,010 | ||||||||||||||||
Eleven Street Co., Ltd. |
923,424 | 446,432 | 476,992 | 530,489 | (5,077 | ) | ||||||||||||||
SK m&service Co., Ltd. |
109,699 | 58,605 | 51,094 | 218,848 | 2,448 | |||||||||||||||
SK Broadband Co., Ltd. |
4,565,732 | 2,930,482 | 1,635,250 | 3,170,691 | 47,701 | |||||||||||||||
K-net Culture and Contents Venture Fund |
151,493 | 21,163 | 130,330 | | (294 | ) | ||||||||||||||
PS&Marketing Corporation |
439,947 | 225,942 | 214,005 | 1,684,576 | 96 | |||||||||||||||
SERVICE ACE Co., Ltd. |
80,844 | 55,133 | 25,711 | 206,080 | 3,906 | |||||||||||||||
SERVICE TOP Co., Ltd. |
66,932 | 50,060 | 16,872 | 193,377 | 2,230 | |||||||||||||||
SK O&S Co., Ltd. |
96,446 | 62,086 | 34,360 | 281,634 | 1,724 | |||||||||||||||
SK Planet Co., Ltd. |
595,838 | 278,438 | 317,400 | 275,544 | 1,214 | |||||||||||||||
DREAMUS COMPANY(*2) |
171,586 | 53,669 | 117,917 | 196,961 | (48,006 | ) | ||||||||||||||
Life & Security Holdings Co., Ltd.(*3) |
2,639,781 | 2,330,920 | 308,861 | 913,301 | 12,703 | |||||||||||||||
SK Infosec Co., Ltd. (*4) |
158,424 | 61,644 | 96,780 | 270,423 | 18,520 | |||||||||||||||
One Store Co., Ltd. |
236,329 | 93,625 | 142,704 | 135,116 | (5,415 | ) | ||||||||||||||
Home & Service Co., Ltd. |
121,202 | 84,378 | 36,824 | 351,154 | (427 | ) | ||||||||||||||
SK stoa Co., Ltd. |
70,754 | 59,207 | 11,547 | 196,063 | 875 | |||||||||||||||
FSK L&S Co., Ltd.(*5) |
47,550 | 19,651 | 27,899 | 130,872 | 306 | |||||||||||||||
Incross Co., Ltd.(*6) |
144,263 | 78,519 | 65,744 | 19,787 | 5,756 |
(*1) | The condensed financial information of SK Telink Co., Ltd. is consolidated financial information including SK TELINK VIETNAM Co., Ltd. |
(*2) | The condensed financial information of DREAMUS COMPANY is consolidated financial information including iriver Enterprise Ltd. and three other subsidiaries of DREAMUS COMPANY. |
(*3) | The condensed financial information of Life & Security Holdings Co., Ltd. is consolidated financial information including ADT CAPS Co., Ltd. and two other subsidiaries of Life & Security Holdings Co., Ltd. |
(*4) | The condensed financial information of SK Infosec Co., Ltd. is consolidated financial information including SKinfosec Information Technology (Wuxi) Co., Ltd. |
(*5) | The condensed financial information of FSK L&S Co., Ltd. is consolidated financial information including FSK L&S (Shanghai) Co., Ltd. and another subsidiary of FSK L&S Co., Ltd. |
(*6) | The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary from the date of acquisition to December 31, 2019. |
19
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
1. | Reporting Entity, Continued |
(4) | Changes in subsidiaries |
1) The list of subsidiaries that were newly included in consolidation during the year ended December 31, 2020 is as follows:
Subsidiary |
Reason | |
Broadband Nowon Co., Ltd. | Acquired by the Parent Company | |
FSK L&S VIETNAM COMPANY LIMITED | Established by FSK L&S Co., Ltd. | |
Pan Asia Semiconductor Materials LLC | Established by Quantum Innovation Fund I | |
T map Mobility Co., Ltd. | Spin-off from the Parent Company |
2) The list of subsidiaries that were excluded from consolidation during the year ended December 31, 2020 is as follows:
Subsidiary |
Reason | |
ADT SECURITY Co., Ltd. |
Merged into ADT CAPS Co., Ltd. | |
SK TELINK VIETNAM Co., Ltd. |
Disposed | |
Life & Security Holdings Co., Ltd. |
Merged into SK Infosec Co., Ltd. |
20
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
1. | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
DREAMUS COMPANY |
One Store Co., Ltd. | Eleven Street Co., Ltd. | SK Infosec Co., Ltd.(*) | Incross Co., Ltd. | SK Broadband Co., Ltd. | |||||||||||||||||||
Ownership of non-controlling interests (%) |
48.6 | 47.4 | 18.2 | 37.4 | 55.2 | 24.9 | ||||||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||
Current assets |
215,672 | 896,828 | 306,520 | 165,668 | 1,179,743 | |||||||||||||||||||
Non-current assets |
26,165 | 27,770 | 102,397 | 2,620,876 | 13,640 | 4,586,065 | ||||||||||||||||||
Current liabilities |
(72,762 | ) | (96,139 | ) | (508,427 | ) | (417,194 | ) | (101,065 | ) | (1,279,132 | ) | ||||||||||||
Non-current liabilities |
(3,880 | ) | (3,804 | ) | (34,107 | ) | (2,133,742 | ) | (3,713 | ) | (1,840,357 | ) | ||||||||||||
Net assets |
95,801 | 143,499 | 456,691 | 376,460 | 74,530 | 2,646,319 | ||||||||||||||||||
Fair value adjustment and others |
| | (14,297 | ) | (1,227,442 | ) | | | ||||||||||||||||
Net assets on the consolidated financial statements |
95,801 | 143,499 | 442,394 | (850,982 | ) | 74,530 | 2,646,319 | |||||||||||||||||
Carrying amount of non-controlling interests |
47,452 | 68,573 | 81,754 | (318,267 | ) | 46,010 | 665,020 | |||||||||||||||||
2020 | ||||||||||||||||||||||||
Revenue |
155,218 | 545,556 | 1,327,150 | 39,440 | 3,713,021 | |||||||||||||||||||
Profit (loss) for the year |
(23,068 | ) | 1,952 | (29,623 | ) | 14,227 | 12,307 | 150,694 | ||||||||||||||||
Depreciation of the fair value adjustment and others |
| | (492 | ) | (19,229 | ) | | | ||||||||||||||||
Profit (loss) for the year on the consolidated financial statements |
(23,068 | ) | 1,952 | (30,115 | ) | (5,002 | ) | 12,307 | 150,694 | |||||||||||||||
Total comprehensive income (loss) |
(22,740 | ) | 2,278 | (15,793 | ) | (3,758 | ) | 12,145 | 151,417 | |||||||||||||||
Profit (loss) attributable to non-controlling interests |
(10,770 | ) | 930 | (5,565 | ) | (12,432 | ) | 7,568 | 27,240 | |||||||||||||||
Net cash provided by operating activities |
38,006 | 65,499 | 248,524 | 24,629 | 1,035,474 | |||||||||||||||||||
Net cash used in investing activities |
(2,471 | ) | (62,816 | ) | (71,644 | ) | (229,130 | ) | (2,284 | ) | (844,454 | ) | ||||||||||||
Net cash provided by (used in) financing activities |
(2,329 | ) | (2,499 | ) | (18,059 | ) | 11,134 | (4,278 | ) | (93,259 | ) | |||||||||||||
Effects of exchange rate changes on cash and cash equivalents |
(2,053 | ) | | (385 | ) | (554 | ) | | | |||||||||||||||
Net increase (decrease) in cash and cash equivalents |
8,370 | (27,309 | ) | (24,589 | ) | 29,974 | 18,067 | 97,761 | ||||||||||||||||
Dividends paid to non-controlling interests during the year ended December 31, 2020 |
| 5,000 | 17,273 | | |
(*) | The condensed financial information of SK Infosec Co., Ltd. includes profit and loss, cash flows which Life Security & Holdings Co., Ltd. recognized prior to the merger. |
21
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
1 | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||
DREAMUS COMPANY |
One Store Co., Ltd. | Eleven Street Co., Ltd. | Life & Security Holdings Co., Ltd. | Incross Co., Ltd. | ||||||||||||||||
Ownership of non-controlling interests (%) |
48.6 | 47.3 | 18.2 | 45.0 | 65.4 | |||||||||||||||
As of December 31, 2019 | ||||||||||||||||||||
Current assets |
208,527 | 779,568 | 126,437 | 133,741 | ||||||||||||||||
Non-current assets |
35,317 | 27,802 | 143,856 | 2,513,344 | 10,522 | |||||||||||||||
Current liabilities |
(49,776 | ) | (88,842 | ) | (420,022 | ) | (279,403 | ) | (77,530 | ) | ||||||||||
Non-current liabilities |
(3,893 | ) | (4,783 | ) | (26,410 | ) | (2,051,517 | ) | (989 | ) | ||||||||||
Net assets |
117,917 | 142,704 | 476,992 | 308,861 | 65,744 | |||||||||||||||
Fair value adjustment and others |
| | (18,805 | ) | (1,219,701 | ) | | |||||||||||||
Net assets on the consolidated financial statements |
117,917 | 142,704 | 458,187 | (910,840 | ) | 65,744 | ||||||||||||||
Carrying amount of non-controlling interests |
57,175 | 67,742 | 84,673 | (409,878 | ) | 41,074 | ||||||||||||||
2019 | ||||||||||||||||||||
Revenue |
135,116 | 530,489 | 913,301 | 19,787 | ||||||||||||||||
Profit (loss) for the year |
(48,006 | ) | (5,415 | ) | (5,077 | ) | 12,703 | 5,756 | ||||||||||||
Depreciation of the fair value adjustment and others |
| | (614 | ) | (14,913 | ) | | |||||||||||||
Profit (loss) for the year on the consolidated financial statements |
(48,006 | ) | (5,415 | ) | (5,691 | ) | (2,210 | ) | 5,756 | |||||||||||
Total comprehensive income (loss) |
(47,971 | ) | (5,856 | ) | (13,590 | ) | (5,413 | ) | 5,396 | |||||||||||
Profit (loss) attributable to non-controlling interests |
(23,281 | ) | (2,256 | ) | (1,064 | ) | (978 | ) | 3,630 | |||||||||||
Net cash provided by (used in) operating activities |
14,426 | 7,980 | 238,378 | (9,331 | ) | |||||||||||||||
Net cash provided by (used in) investing activities |
(2,596 | ) | (87,275 | ) | 102,366 | (194,472 | ) | 5,053 | ||||||||||||
Net cash provided by (used in) financing activities |
(2,965 | ) | 96,189 | (72,686 | ) | (51,129 | ) | (4,644 | ) | |||||||||||
Effects of exchange rate changes on cash and cash equivalents |
197 | 2 | 35 | | | |||||||||||||||
Net increase (decrease) in cash and cash equivalents |
(6,751 | ) | 23,342 | 37,695 | (7,223 | ) | (8,922 | ) | ||||||||||||
Dividends paid to non-controlling interests during the year ended December 31, 2019 |
| 17,500 | 28,786 | |
22
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
2. | Basis of Preparation |
These consolidated financial statements were prepared in accordance with Korean International Financial Reporting Standards (K-IFRS), as prescribed in the Act on External Audits of Stock Companies, Etc in the Republic of Korea.
The accompanying consolidated financial statements comprise the Group and the Groups investments in associates and joint ventures.
The consolidated financial statements were authorized for issuance by the Board of Directors on February 2, 2021, which will be submitted for approval at the shareholders meeting to be held on March 25, 2021.
(1) | Basis of measurement |
The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the consolidated statement of financial position:
| derivative financial instruments measured at fair value; |
| financial instruments measured at fair value through profit or loss (FVTPL); |
| financial instruments measured at fair value through other comprehensive income (FVOCI); |
| liabilities (assets) for defined benefit plans recognized at the total present value of defined benefit obligations less the net of the fair value of plan assets |
(2) | Functional and presentation currency |
Financial statements of Group entities within the Group are prepared in functional currency of each group entity, which is the currency of the primary economic environment in which each entity operates. Consolidated financial statements of the Group are presented in Korean won, which is the Parent Companys functional and presentation currency.
(3) | Use of estimates and judgments |
The preparation of the consolidated 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.
1) Critical judgments
Information about critical judgments in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in notes for the following areas: consolidation (whether the Group has de facto control over an investee), and determination of stand-alone selling prices.
23
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
2. | Basis of Preparation, Continued |
(3) | Use- of estimates and judgments, Continued |
2) Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: loss allowance (notes 7 and 37), estimated useful lives of costs to obtain a contract (notes 8), property and equipment and intangible assets (notes 4 (7), (9), 14 and 17), impairment of goodwill (notes 4 (11) and 16), recognition of provision (notes 4 (16) and 20), measurement of defined benefit liabilities (notes 4 (15) and 21), and recognition of deferred tax assets (liabilities) (notes 4 (23) and 33).
3) Fair value measurement
A number of the Groups accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group has an established policies and processes with respect to the measurement of fair values including Level 3 fair values, and the measurement of fair values is reviewed and is directly reported to the finance executives.
The Group 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 Group 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 valuations should be classified.
When measuring the fair value of an asset or a liability, the Group 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: quoted prices (unadjusted) in active markets for identical assets or liabilities; |
| Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and |
| Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
If the inputs used to measure the fair value of an asset or a liability fall into 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 Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Information about assumptions used for fair value measurements are included in note 22 and note 37.
24
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
3. | Changes in Accounting Policies |
The Group has initially adopted the amendments to the Definition of a Business(Amendments to K-IFRS No. 1103, Business Combination) and Interest Rate Benchmark Reform(Amendments to K-IFRS No. 1109, Financial Instruments, K-IFRS No. 1039, Financial Instrument Recognition and Measurement, K-IFRS No. 1107, Financial Instruments Disclosures) from January 1, 2020. A number of other amended standards are effective from January 1, 2020, but they do not have a material effect on the Groups consolidated financial statements.
The Group applied Definition of a Business (Amendments to K-IFRS No. 1103) to business combinations whose acquisition dates are on or after January 1, 2020 in assessing whether it had acquired a business or a group of assets. Details of the accounting policies are summarized in Note 4 (2).
The Group applied the interest rate benchmark reform amendments retrospectively to hedging relationships that existed at January 1, 2020 or were designated thereafter and that are directly affected by interest rate benchmark reform. The amendment also applied to the gain or loss accumulated in the cash flow hedging reserve that existed at January 1, 2020. The details of the accounting policies are disclosed in Note 4 (6). See also Note 37 for related disclosures about risks and hedge accounting.
During the annual period ended December 31, 2020, the Group changed its accounting policy by applying agenda decision, Lease Term and Useful Life of Leasehold Improvements (IFRS 16 Leases and IAS 16 Property, Plant and Equipment)November 2019, published by International Financial Reporting Interpretations Committee (IFRIC) on December 16, 2019.
Prior to the change in accounting policy, the Group determined the lease term based on the assumption that the right to extent or terminate the lease is no longer enforceable if a lease contract requires the counterpartys consent to be extended. The Group now determines the lease term as the non-cancellable period of a lease, together with both: periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. In the assessing the periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option, the Company considered if it would incur a penalty on termination that is more than insignificant.
The Group has retrospectively applied the changes in its accounting policies in connection with the IFRIC agenda decision in accordance with K-IFRS No. 1008 Accounting Policies, Changes in Accounting Estimates and Errors and restated its comparative consolidated financial statements.
25
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
3. | Changes in Accounting Policies, Continued |
The following table summarizes the impacts of the change in accounting policies on the Groups consolidated financial statements on the current and prior periods.
(1) | Consolidated statements of financial position |
(In millions of won) | ||||||||||||
(Unaudited) | As of September 30, 2020 (*) | |||||||||||
As reported | Adjustments | Restated | ||||||||||
Assets |
||||||||||||
Accounts receivable other, net |
12,919 | 1,238,317 | ||||||||||
Prepaid expenses and others |
3,511,068 | (13,086 | ) | 3,497,982 | ||||||||
Property and equipment, net |
12,190,268 | 827,569 | 13,017,837 | |||||||||
|
|
|
|
|
|
|||||||
827,402 | 17,754,136 | |||||||||||
|
|
|
|
|
|
|||||||
Liabilities |
||||||||||||
Accrued expenses |
(273 | ) | 1,557,160 | |||||||||
Provisions |
130,181 | 24,279 | 154,460 | |||||||||
Lease liabilities |
641,334 | 818,652 | 1,459,986 | |||||||||
Deferred tax liabilities |
2,733,327 | (4,061 | ) | 2,729,266 | ||||||||
|
|
|
|
|
|
|||||||
838,597 | 5,900,872 | |||||||||||
|
|
|
|
|
|
|||||||
Shareholders Equity |
||||||||||||
Retained earnings |
(11,195 | ) | 22,584,521 |
(*) | Subsequent to the adoption of the change in accounting policy, the Group does not maintain the information necessary to prepare financial statements using the previous accounting policy. Therefore, the Group presented the impact on unaudited interim financial information using available information. |
(In millions of won) | ||||||||||||
As of December 31, 2019 | ||||||||||||
As reported | Adjustments | Restated | ||||||||||
Assets |
||||||||||||
Accounts receivable other, net |
5,074 | 1,255,172 | ||||||||||
Prepaid expenses and others |
3,619,033 | (13,506 | ) | 3,605,527 | ||||||||
Property and equipment, net |
12,334,280 | 599,180 | 12,933,460 | |||||||||
|
|
|
|
|
|
|||||||
590,748 | 17,794,159 | |||||||||||
|
|
|
|
|
|
|||||||
Liabilities |
||||||||||||
Accrued expenses |
(415 | ) | 1,514,885 | |||||||||
Provisions |
143,229 | 21,932 | 165,161 | |||||||||
Lease liabilities |
712,740 | 578,267 | 1,291,007 | |||||||||
Deferred tax liabilities |
2,466,295 | (2,434 | ) | 2,463,861 | ||||||||
|
|
|
|
|
|
|||||||
597,350 | 5,434,914 | |||||||||||
|
|
|
|
|
|
|||||||
Shareholders Equity |
||||||||||||
Retained earnings |
(6,602 | ) | 22,228,683 |
26
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
3. | Changes in Accounting Policies, Continued |
(1) | Consolidated statements of financial position, Continued |
(In millions of won) | As of January 1, 2019 | |||||||||||
As reported(*) | Adjustments | Restated | ||||||||||
Assets |
||||||||||||
Accounts receivable other, net |
12,803 | 1,256,048 | ||||||||||
Prepaid expenses and others |
2,944,245 | (39,010 | ) | 2,905,235 | ||||||||
Property and equipment, net |
11,371,690 | 218,320 | 11,590,010 | |||||||||
|
|
|
|
|
|
|||||||
192,113 | 15,751,293 | |||||||||||
|
|
|
|
|
|
|||||||
Liabilities |
||||||||||||
Accrued expenses |
(1,388 | ) | 1,355,951 | |||||||||
Provisions |
187,208 | 20,319 | 207,527 | |||||||||
Lease liabilities |
663,827 | 180,456 | 844,283 | |||||||||
Deferred tax liabilities |
2,260,433 | (1,881 | ) | 2,258,552 | ||||||||
|
|
|
|
|
|
|||||||
197,506 | 4,666,313 | |||||||||||
|
|
|
|
|
|
|||||||
Shareholders Equity |
||||||||||||
Retained earnings |
(5,393 | ) | 22,114,962 |
(*) | Includes impact of initial adoption of K-IFRS No.1116. |
(2) | Consolidated statement of income |
(In millions of won) | For the nine-month period ended September 30, 2020 (*) |
|||||||||||
(Unaudited) | As reported | Adjustments | Restated | |||||||||
Operating revenue |
1,322 | 13,785,373 | ||||||||||
Operating expenses: |
||||||||||||
Depreciation and amortization |
2,948,492 | 40,383 | 2,988,875 | |||||||||
Rent |
148,437 | (31,272 | ) | 117,165 | ||||||||
Leased lines |
206,577 | (1,857 | ) | 204,720 | ||||||||
Others |
9,457,494 | | 9,457,494 | |||||||||
|
|
|
|
|
|
|||||||
12,761,000 | 7,254 | 12,768,254 | ||||||||||
|
|
|
|
|
|
|||||||
Operating profit |
1,023,051 | (5,932 | ) | 1,017,119 | ||||||||
Finance income |
90,985 | 46 | 91,031 | |||||||||
Finance costs |
324,952 | 7,780 | 332,732 | |||||||||
Other non-operating income |
55,506 | (641 | ) | 54,865 | ||||||||
Other non-operating expenses |
78,309 | (8,087 | ) | 70,222 | ||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net |
673,800 | | 673,800 | |||||||||
|
|
|
|
|
|
|||||||
Profit before income tax |
(6,220 | ) | 1,433,861 | |||||||||
Income tax expense |
305,405 | (1,907 | ) | 303,498 | ||||||||
|
|
|
|
|
|
|||||||
Profit for the year |
(4,313 | ) | 1,130,363 | |||||||||
|
|
|
|
|
|
|||||||
Earnings per share: |
||||||||||||
Basic earnings per share (in won) |
(59 | ) | 15,159 | |||||||||
Diluted earnings per share (in won) |
15,215 | (59 | ) | 15,156 |
27
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
3. | Changes in Accounting Policies, Continued |
(2) | Consolidated statement of income, Continued |
(*) | Subsequent to the adoption of the change in accounting policy, the Group does not maintain the information necessary to continue to prepare financial statements using the previous accounting policy. Therefore, the Group presented the impact on unaudited interim financial information using available information. |
(In millions of won) | 2019 | |||||||||||
As reported | Adjustments | Restated | ||||||||||
Operating revenue |
(2,986 | ) | 17,740,716 | |||||||||
Operating expenses: |
||||||||||||
Depreciation and amortization |
3,771,486 | 85,176 | 3,856,662 | |||||||||
Rent |
231,934 | (77,091 | ) | 154,843 | ||||||||
Leased lines |
272,616 | (9,249 | ) | 263,367 | ||||||||
Others |
12,357,686 | (19 | ) | 12,357,667 | ||||||||
|
|
|
|
|
|
|||||||
16,633,722 | (1,183 | ) | 16,632,539 | |||||||||
|
|
|
|
|
|
|||||||
Operating profit |
1,109,980 | (1,803 | ) | 1,108,177 | ||||||||
Finance income |
141,977 | 178 | 142,155 | |||||||||
Finance costs |
429,758 | 8,197 | 437,955 | |||||||||
Other non-operating income |
103,140 | (409 | ) | 102,731 | ||||||||
Other non-operating expenses |
212,227 | (8,577 | ) | 203,650 | ||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net |
449,543 | | 449,543 | |||||||||
|
|
|
|
|
|
|||||||
Profit before income tax |
(1,654 | ) | 1,161,001 | |||||||||
Income tax expense |
300,713 | (445 | ) | 300,268 | ||||||||
|
|
|
|
|
|
|||||||
Profit for the year |
(1,209 | ) | 860,733 | |||||||||
|
|
|
|
|
|
|||||||
Earnings per share: |
||||||||||||
Basic earnings per share (in won) |
(17 | ) | 12,127 | |||||||||
Diluted earnings per share (in won) |
12,144 | (17 | ) | 12,127 |
(3) | Consolidated statement changes in equity |
The consolidated statement of changes in equity has been restated as a result of restated consolidated statement of financial position and statement of income.
(4) | Consolidated statements of cash flows |
(In millions of won) | For the nine-month period ended September 30, 2020 (*1) |
|||||||||||
(Unaudited) | As reported | Adjustments | Restated | |||||||||
Cash flows from operating activities(*2) |
21,102 | 4,546,778 | ||||||||||
Cash flows from investing activities |
(3,047,428 | ) | | (3,047,428 | ) | |||||||
Cash flows from financing activities(*3) |
(870,621 | ) | (21,102 | ) | (891,723 | ) |
(*1) | Subsequent to the adoption of the change in accounting policy, the Group does not maintain the information necessary to continue prepare financial statements using the previous accounting policy. Therefore, the Group presented the impact on unaudited interim financial information using available information. |
28
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
3. | Changes in Accounting Policies, Continued |
(4) | Consolidated statements of cash flows, Continued |
(*2) | Adjustments within operating activities are mainly due to increase in depreciation expense and decrease in prepaid expense. |
(*3) | The effect of changes in accounting policies resulted in an increase in repayment of lease liabilities from
|
(In millions of won) | ||||||||||||
2019 | ||||||||||||
As reported | Adjustments | Restated | ||||||||||
Cash flows from operating activities(*1) |
48,902 | 4,034,984 | ||||||||||
Cash flows from investing activities(*2) |
(3,582,523 | ) | 939 | (3,581,584 | ) | |||||||
Cash flows from financing activities(*3) |
(636,834 | ) | (49,840 | ) | (686,674 | ) |
(*1) | Adjustments within operating activities are mainly due to increase in depreciation expense and decrease in prepaid expense. |
(*2) | The effect of changes in accounting policies resulted in an increase in lease receivables from
|
(*3) | The effect of changes in accounting policies resulted in an increase in repayment of lease liabilities from
|
4. | Significant Accounting Policies |
The significant accounting policies applied by the Group in the preparation of its consolidated financial statements in accordance with K-IFRS are included below. The significant accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2019, except for the changes in accounting policies described in note 3.
(1) | Operating segments |
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Groups other components. The Groups operating segments have been determined to be each business unit, for which the Group generates separately identifiable financial information that is regularly reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. The Group has five reportable segments as described in note 5. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
29
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(2) | Basis of consolidation |
1) Business combination
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.
Consideration transferred is generally measured at fair value, as are the identifiable net assets acquired. The amount of consideration in excess of the fair value of identifiable net assets acquired is recognized as goodwill. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Acquisition-related costs are expensed in the periods in which the costs are incurred and the services are received, except if related to the costs to issue debt or equity securities recognized based on K-IFRS No. 1032 and 1109.
Consideration transferred does not include the amount settled in relation to the pre-existing relationship. Such amounts are generally recognized through profit or loss.
Contingent consideration is measured at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. If contingent consideration is not classified as equity, the Group subsequently recognizes changes in fair value of contingent consideration through profit or loss.
2) Non-controlling interests
Non-controlling interests are measured at their proportionate share of the acquirees identifiable net assets at the date of acquisition.
Changes in a Controlling Companys ownership interest in a subsidiary that do not result in the Controlling Company losing control of the subsidiary are accounted for as equity transactions.
3) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of an investee begins from the date the Group obtains control of the investee and cease when the Group loses control of the investee.
4) Loss of control
If the Group loses control of a subsidiary, the Group derecognizes the assets and liabilities of the former subsidiary from the consolidated statement of financial position and recognizes gain or loss associated with the loss of control attributable to the former controlling interest. Any investment retained in the former subsidiary is recognized at its fair value when control is lost.
30
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(2) | Basis of consolidation, Continued |
5) Interest in investees accounted for using the equity method
Interest in investees accounted for using the equity method composed of interest in associates and joint ventures. An associate is an entity in which the Group has significant influence, but not control, over the entitys financial and operating policies. A joint venture is a joint arrangement whereby the Group that has joint control of the arrangement has rights to the net assets of the arrangement.
The investment in an associate and a joint venture is initially recognized at cost including transaction costs and the carrying amount is increased or decreased to recognize the Groups share of the profit or loss and changes in equity of the associate or the joint venture after the date of acquisition.
6) Intra-group transactions
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The Groups share of unrealized gain incurred from transactions with investees accounted for using the equity method are eliminated and unrealized loss are eliminated using the same basis if there are no evidence of asset impairments.
7) Business combinations under common control
SK Holdings Co., Ltd. is the ultimate controlling entity of the Group. The assets and liabilities acquired under business combination under common control are recognized at the carrying amounts in the ultimate controlling shareholders consolidated financial statements. The difference between consideration and carrying amount of net assets acquired is added to or subtracted from capital surplus and others.
(3) | Cash and cash equivalents |
Cash and cash equivalents comprise cash balances, call deposits and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.
(4) | Inventories |
Inventories are initially recognized at the acquisition cost and subsequently measured using the weighted average method. During the period, a perpetual inventory system is used to track inventory quantities, which is adjusted based on the physical inventory counts performed at the period end. When the net realizable value of inventories is less than cost, the carrying amount is reduced to the net realizable value, and any difference is charged to current period as operating expenses.
31
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets |
1) Recognition and initial measurement
Accounts receivable trade and debt investments issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument.
A financial asset (unless an accounts receivable trade without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. An accounts receivable trade without a significant financing component is initially measured at the transaction price.
2) Classification and subsequent measurement
On initial recognition, a financial asset is classified as measured at:
| FVTPL |
| FVOCI equity investment |
| FVOCI debt investment |
| Financial assets at amortized cost |
A financial asset is classified based on the business model in which a financial asset is managed and its contractual cash flow characteristics.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:
| it is held within a business model whose objective is to hold assets to collect contractual cash flows; and |
| its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. |
32
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets, Continued |
2) Classification and subsequent measurement, Continued
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
| it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and |
| its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. |
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investments fair value in other comprehensive income (OCI). This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
The following accounting policies are applied to the subsequent measurement of financial assets.
|
Financial assets at FVTPL |
These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss. | ||
Financial assets at amortized cost |
These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. | |||
Debt investments at FVOCI |
These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. | |||
Equity investments at FVOCI |
These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss. |
33
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets, Continued |
3) Impairment
The Group estimates the expected credit losses (ECL) for the debt instruments measured at amortized cost and FVOCI based on the Groups historical experience and informed credit assessment that includes forward-looking information. The impairment approach is decided based on the assessment of whether the credit risk of a financial asset has increased significantly since initial recognition. However, the Group applies a practical expedient and recognizes impairment losses equal to lifetime ECLs for accounts receivable trade and lease receivables from the initial recognition.
ECL is a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).
At each reporting date, the Group assesses whether financial assets measured at amortized cost and debt investments at FVOCI are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Loss allowance on financial assets measured at amortized cost is deducted from the carrying amount of the respective assets, while loss allowance on debt instruments at FVOCI is recognized in OCI, instead of reducing the carrying amount of the transferred assets.
4) Derecognition
Financial assets are derecognized if the Groups contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or transfers substantially all of the risks and rewards of asset.
The transferred assets are not derecognized when the Group enters into transactions whereby it transfers assets recognized in its statement of financial position but retains substantially all of the risks and rewards of the transferred assets.
5) Offsetting
Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position when the Group currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to settle the liability and realize the asset simultaneously.
A financial asset and a financial liability are offset only when the right to set off the amount is not contingent on future event and legally enforceable even on the event of default, insolvency or bankruptcy.
34
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(6) | Derivative financial instruments and hedge accounting |
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value at the end of each reporting period, and changes therein are accounted for as described below.
1) Hedge accounting
The Group holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Group designates derivatives as hedging instruments to hedge the variability in cash flow associated with highly probable forecasted transactions or firm commitments (a cash flow hedge).
On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.
Hedges directly affected by interest rate benchmark reform
For the purpose of evaluating whether there is an economic relationship between the hedged items and the hedging instruments, the Group assumes that the interest rate benchmark on which the hedged items and the hedging instruments are based is not altered as a result of interest rate benchmark reform.
For a cash flow hedge of a forecast transaction, the Group assumes that the benchmark interest rate will not be altered as a result of interest rate benchmark reform for the purpose of assessing whether the forecast transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit and loss. In determining whether a previously designated forecast transaction in a discontinued cash flow hedge is still expected to occur, the Group assumes that the interest rate benchmark cash flows designated as a hedge will not be altered as a result of interest rate benchmark reform.
The Group will cease applying the specific policy for assessing the economic relationship between the hedged item and the hedging instrument (i) to a hedged item or hedging instrument when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the respective item or instrument or (ii) when the hedging relationship is discontinued.
For its highly probable assessment of the hedged item, the Group will no longer apply the specific policy when the uncertainty arising from interest rate benchmark reform about the timing and the amount of the interest rate benchmark-based future cash flows of the hedged item is no longer present, or when the hedging relationship is discontinued.
35
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(6) | Derivative financial instruments and hedge accounting, Continued |
1) Hedge accounting, Continued
Cash flow hedge
When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.
2) Other derivative financial instruments
Other derivative financial instrument not designated as a hedging instrument are measured at fair value, and the changes in fair value of the derivative financial instrument is recognized immediately in profit or loss.
(7) | Property and equipment |
Property and equipment are initially measured at cost. The cost of property and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Property and equipment, subsequently, are carried at cost less accumulated depreciation and accumulated impairment losses.
Subsequent costs are recognized in the carrying amount of property and equipment at cost or, if appropriate, as a separate item if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be reliably measured. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.
Property and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the assets future economic benefits are expected to be consumed. A component that is significant compared to the total cost of property and equipment is depreciated over its separate useful life.
Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognized as other non-operating income (loss).
36
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(7) | Property and equipment, Continued |
The estimated useful lives of the Groups property and equipment are as follows:
Useful lives (years) | ||
Buildings and structures | 15 ~ 40 | |
Machinery | 3 ~ 15, 30 | |
Other property and equipment | 2 ~10 |
Depreciation methods, useful lives, and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.
(8) | Borrowing costs |
The Group capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale. Financial assets are not qualifying assets, and assets that are ready for their intended use or sale when acquired are not qualifying assets either.
To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Group capitalizes during a period do not exceed the amount of borrowing costs incurred during the period.
(9) | Intangible assets |
Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.
Intangible assets, except for goodwill, are amortized on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, club memberships and brand are expected to be available for use as there are no foreseeable limits to the periods. These intangible assets are determined as having indefinite useful lives and, therefore, not amortized.
37
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(9) | Intangible assets, Continued |
The estimated useful lives of the Groups intangible assets are as follows:
Useful lives (years) | ||
Frequency usage rights |
5 ~ 10 | |
Land usage rights |
5 | |
Industrial rights |
5, 10 | |
Development costs |
3 ~ 5 | |
Facility usage rights |
10, 20 | |
Customer relations |
3 ~ 20 | |
Other |
3 ~ 20 |
Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes, if appropriate, are accounted for as changes in accounting estimates.
Expenditures on research activities are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be reliably measured, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.
Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.
(10) | Government grants |
Government grants are not recognized unless there is reasonable assurance that the Group will comply with the grants conditions and that the grant will be received.
1) Grants related to assets
Government grants whose primary condition is that the Group purchases, constructs, or otherwise acquires a long-term asset are deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduction to depreciation expense.
2) Grants related to income
Government grants which are intended to compensate the Group for expenses incurred are deducted from the related expenses.
38
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4 | Significant Accounting Policies, Continued |
(11) | Impairment of non-financial assets |
The carrying amounts of the Groups non-financial assets other than contract assets recognized for revenue arising from contracts with a customer, assets recognized for the costs to obtain or fulfill a contract with a customer, employee benefits, inventories, deferred tax assets, and non-current assets held for sale are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the assets recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amounts to their carrying amounts.
The Group estimates the recoverable amount of an individual asset, and if it is impossible to measure the individual recoverable amount of an asset, the Group estimates the recoverable amount of cash-generating unit (CGU). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.
An impairment loss is recognized in profit or loss to the extent the carrying amount of the asset exceeds its recoverable amount.
Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergy arising from the business acquired. Any impairment identified at the CGU level will first reduce the carrying amount of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
39
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4 | Significant Accounting Policies, Continued |
(12) | Leases |
A contract is or contains, a lease if the contract transfers a right to control the identified asset for a period of time in exchange for consideration.
1) As a lessee
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at of before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Groups incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
| fixed payments, including in-substance fixed payments; |
| variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; |
| amounts expected to be payable under a residual value guarantee; and |
| the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. |
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Groups estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension of termination option of if there is a revised in-substance fixed lease payment.
40
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4 | Significant Accounting Policies, Continued |
(12) | Leases, Continued |
1) As a lessee, Continued
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in property and equipment in the statement of financial position.
The Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognizes the lease payments associated with lease as an expense on a straight-line basis over the lease term.
2) As a lessor
At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operation lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Group is an intermediate lessor, is accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, then the Group applies K-IFRS No. 1115 to allocate the consideration in the contract.
The Group applies derecognition and impairment requirements in K-IFRS No. 1109 to the net investment in the lease. The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.
The Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of other revenue.
41
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4 | Significant Accounting Policies, Continued |
(13) | Non-current assets held for sale |
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sales rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the assets (or disposal groups) must be available for immediate sale in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amounts and fair value less cost to sell. The Group recognizes an impairment loss for any initial or subsequent write-down of assets (or disposal groups) to fair value less costs to sell and a gain for any subsequent increase in fair value less costs to sell up to the cumulative impairment loss previously recognized in accordance with K-IFRS No. 1036, Impairment of Assets.
A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).
(14) | Non-derivative financial liabilities |
The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement. The Group recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liabilities.
1) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, these liabilities are measured at fair value. The amount of change in fair value of financial liability that is attributable to changes in the credit risk of that liability shall be presented in other comprehensive income, and the remaining amount of change in the fair value of the liability shall be presented in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issue of the financial liability are recognized in profit or loss as incurred.
2) Other financial liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the issue of the financial liabilities. Subsequent to initial recognition, other financial liabilities are measured at amortized cost and the interest expenses are recognized using the effective interest method.
3) Derecognition of financial liability
The Group extinguishes a financial liability only when the contractual obligation is fulfilled, canceled or expires. The Group recognizes new financial liabilities at fair value based on new contracts and eliminates existing liabilities when the contractual terms of the financial liabilities change and the cash flows change substantially.
When a financial liability is derecognized, the difference between the carrying amount and the consideration paid (including any transferred non-cash assets or liabilities assumed) is recognized in profit or loss.
42
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4 | Significant Accounting Policies, Continued |
(15) | Employee benefits |
1) Short-term employee benefits
Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
2) Other long-term employee benefits
Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render related services. The Groups net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.
3) Retirement benefits: defined contribution plans
When an employee has rendered a service to the Group during a period, the Group recognizes the contribution payable to a defined contribution plan in exchange for that service as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Group recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.
4) Retirement benefits: defined benefit plans
At the end of reporting period, defined benefit liabilities relating to defined benefit plans are recognized at present value of defined benefit obligations net of fair value of plan assets.
The calculation is performed annually by an independent actuary using the projected unit credit method. When the fair value of plan assets exceeds the present value of the defined benefit obligation, the Group recognizes an asset, to the extent of the present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.
Remeasurements of the net defined benefit liability (asset), which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Group determines net interests on net defined benefit liability (asset) by multiplying discount rate determined at the beginning of the annual reporting period and considers changes in net defined benefit liability (asset) from contributions and benefit payments. Net interest costs and other costs relating to the defined benefit plan are recognized through profit or loss.
When the plan amendment or curtailment occurs, gains or losses on amendment or curtailment in benefits for the past service provided are recognized through profit or loss. The Group recognizes a gain or loss on a settlement when the settlement of defined benefit plan occurs.
43
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(15) | Employee benefits, Continued |
5) Termination benefits
The Group recognizes a liability and expense for termination benefits at the earlier of the period when the Group can no longer withdraw the offer of those benefits and the period when the Group recognizes costs for a restructuring that involves the payment of termination benefits. If benefits are payable more than 12 months after the reporting period, they are discounted to their present value.
(16) | Provisions |
Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. If the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.
If some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement is recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
A provision is used only for expenditures for which the provision was originally recognized.
(17) | Transactions in foreign currencies |
1) Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency using the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Foreign currency differences arising on retranslation are recognized in profit or loss, except for the differences arising on the retranslation of available-for-sale equity instruments.
44
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(17) | Transactions in foreign currencies, Continued |
2) Foreign operations
If the presentation currency of the Group is different from a foreign operations functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:
The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the closing rate at the reporting date.
When a foreign operation is disposed, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.
(18) | Share capital |
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
When the Parent Company repurchases its own shares, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The gains or losses from the purchase, disposal, reissue, or retirement of treasury shares are directly recognized in equity being as transaction with owners.
(19) | Hybrid bond |
The Group recognizes a financial instrument issued by the Group as an equity instrument if it does not include contractual obligation to deliver financial assets including cash to the counter party.
(20) | Share-based Payment |
For equity-settled share-based payment transaction, if the fair value of the goods or services received cannot be reliably estimated, the Group measures the value indirectly by reference to the fair value of the equity instruments granted. The related expense with a corresponding increase in capital surplus and others is recognized over the vesting period of the awards.
The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
45
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(20) | Share-based Payment, Continued |
The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share appreciation rights. Any changes in the liability are recognized in profit or loss.
(21) | Revenue |
1) Identification of performance obligations in contracts with customers
The Group identifies the distinct services or goods as performance obligations in contracts with customers such as (1) providing wireless telecommunications services, (2) sale of handsets and (3) providing other goods and services. In the case of providing both wireless telecommunications service and selling a handset together to one customer, the Group allocates considerations from the customer between the separate performance obligations for handset sale and wireless telecommunications service. The handset sale revenue is recognized when handset is delivered, and the wireless telecommunications service revenue is recognized over the period of the contract term as stated in the subscription contract.
2) Allocation of the transaction price to each performance obligation
The Group allocates the transaction price of a contract to each performance obligation identified on a relative stand-alone selling price basis. The Group uses adjusted market assessment approach for estimating the stand-alone selling price of a good or service. As an exception, the Group uses expected cost plus a margin approach for insignificant transactions.
3) Incremental costs of obtaining a contract
The Group pays commissions to its retail stores and authorized dealers in connection with acquiring service contracts. The commissions paid to these parties constituted a significant portion of the Groups operating expenses. These commissions would not have been paid if there have been no binding contracts with subscribers and, therefore, the Group capitalizes certain costs associated with commissions paid to obtain new customer contracts and amortize them over the expected contract periods.
4) Customer loyalty programs
The Group provides customer loyalty points to customers based on the usage of the service to which the Group allocates a portion of consideration received as a performance obligation distinct from wireless telecommunications services. The amount to be allocated to the loyalty program is measured according to the relative stand-alone selling price of the customer loyalty points. The amount allocated to the loyalty program is deferred as a contract liability and is recognized as revenue when loyalty points are redeemed.
46
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(21) | Revenue, Continued |
5) Consideration payable to a customer
Based on the subscription contract, a customer who uses the Groups wireless telecommunications services may receive a discount for purchasing goods or services from a designated third party. The Group pays a portion of the price discounts that the customer receives to the third party which is viewed as consideration payable to a customer.
The Group accounts for the amounts payable to the third party as a reduction of the wireless telecommunications service revenue.
(22) | Finance income and finance costs |
Finance income comprises interest income on funds invested (including financial assets measured at fair value), dividend income, gains on disposal of financial assets at FVTPL, changes in fair value of financial instruments at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss when the right to receive the dividend is established.
Finance costs comprise interest expense on borrowings, changes in fair value of financial instruments at FVTPL, and losses on hedging instruments that are recognized in profit or loss. Interest expense on borrowings and debentures is recognized as it accrues in profit or loss using the effective interest rate method.
(23) | Income taxes |
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.
The Group pays income tax in accordance with the tax-consolidation system when the Parent Company and its subsidiaries are economically unified.
1) Current tax
Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and includes interests and fines related to income taxes paid or payable. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.
47
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(23) | Income taxes, Continued |
2) Deferred tax
Deferred tax is recognized by using the asset-liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Group recognizes a deferred tax liability for all taxable temporary differences, except for the difference associated with investments in subsidiaries and associates that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Group recognizes a deferred tax asset for all deductible temporary differences to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
A deferred tax asset is recognized for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. Future taxable profit is dependent on the reversal of taxable temporary differences. If there are insufficient taxable temporary differences to recognize the deferred tax asset, the business plan of the Group and the reversal of existing temporary differences are considered in determining the future taxable profit.
The Group reviews the carrying amount of a deferred tax asset at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized, or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if the Group has a legally enforceable right to offset the amount recognized and intends to settle the current tax liabilities and assets on a net basis. Income tax expense in relation to dividend payments is recognized when liabilities relating to the dividend payments are recognized.
3) Uncertainty over income tax treatments
The Group assesses the uncertainty over income tax treatments pursuant to K-IFRS No. 1012. If the Group concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Group reflects the effect of uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the entity expects to better predict the resolution of the uncertainty:
| The most likely amount: the single most likely amount in a range of possible outcomes. |
| The expected value: the sum of the probability-weighted amounts in a range of possible outcomes. |
48
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(24) | Earnings per share |
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees, if any.
(25) | Standards issued but not yet effective |
The following new standards are effective for annual periods beginning after January 1, 2020 and earlier application is permitted. However, the Group has not adopted the following new standards early in preparing the accompanying consolidated financial statements.
Interest Rate Benchmark Reform Phase 2
(Amendments to K-IFRS No. 1109, Financial Instruments, K-IFRS No. 1039, Financial Instrument-Recognition and Measurement, K-IFRS No. 1107, Financial Instruments-Disclosures, K-IFRS No. 1104 Insurance Contracts and K-IFRS No. 1116, Leases)
The amendments address issues that might affect financial reporting as a result of the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate. The amendments provide practical relief from certain requirements in K-IFRS No. 1109, Financial Instruments, K-IFRS No. 1039, Financial Instrument-Recognition and Measurement, K-IFRS No. 1107, Financial Instruments-Disclosures, K-IFRS No. 1104 Insurance Contracts and K-IFRS No. 1116, Lease.
The amendments will require the Group to account for a change in the basis for determining the contractual cash flows of a financial asset or financial liability that is required by interest rate benchmark reform by updating the effective interest rate of the financial asset or financial liability.
As of December 31, 2020, the Group has LIBOR floating rate notes amounting to W326,400 million that will be subject
to IBOR reform. The Group has not determined an alternative interest rate benchmark to LIBOR for these notes as of December 31, 2020 and these amendments are not expected to have a significant impact on the Groups statement of income.
The amendments provide exceptions to the hedge accounting requirements in the following areas.
| Allow amendment of the designation of a hedging relationship to reflect changes that are required by the reform. |
| When a hedged item in a cash flow hedge is amended to reflect the changes that are required by the reform, the amount accumulated in the cash flow hedge reserve will be deemed to be based on the alternative benchmark rate on which the hedged future cash flows are determined. |
| When a group of items is designated as a hedged item and an item in the Group is amended to reflect the changes that are required by the reform, the hedged items are allocated to sub- groups based on the benchmark rates being hedged. |
| If an entity reasonably expects that an alternative benchmark rate will be separately identifiable within a period of 24 months, it is not prohibited from designating the rate as a non-contractually specified risk component if it is not separately identifiable at the designation date. |
49
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
4. | Significant Accounting Policies, Continued |
(25) | Standards issued but not yet effective, Continued |
As of December 31, 2020, the Group has cash flow hedges of LIBOR risk. The Group has not identified the alternative interest rate benchmark to LIBOR for indexation of the hedged items and hedging instruments. When LIBOR is replaced by the alternative interest rate, the Group expects to apply the amendments related to hedge accounting. However, there is uncertainty about when and how replacement may occur. When the change occurs to the hedged item or the hedging instrument, the Group will remeasure the cumulative change in fair value of the hedged item or the fair value of the interest rate swap, respectively, based on the alternative interest rate to LIBOR. Hedging relationships may experience hedge ineffectiveness if there is a timing or other mismatch between the transition. The Group does not expect that the amounts accumulated in the cash flow hedge reserve will be immediately reclassified to profit or loss because of IBOR transition.
The amendments will require the Group to disclose additional information about the Groups exposure to risks arising from interest rate benchmark reform and related risk management activities.
The Group plans to apply the amendments from January 1, 2021. Application will not impact amounts reported for 2020 or prior periods.
The following new and amended standards are not expected to have a significant impact on the Groups separate financial statements.
| COVID-19-Related Rent Concessions (Amendment to K-IFRS No. 1116). |
| Property, Plant and Equipment: Proceeds before Intended Use (Amendments to K-IFRS No. 1016). |
| Reference to Conceptual Framework (Amendments to K-IFRS No. 1103). |
| Classification of Liabilities as Current or Non-current (Amendments to K-IFRS No. 1001). |
| K-IFRS No. 1117 Insurance Contracts and amendments to K-IFRS No. 1117 Insurance Contracts. |
5. | Operating Segments |
The Groups operating segments have been identified to be each business unit, by which the Group provides independent services and merchandise. The Groups reportable segments are cellular services, which include cellular voice service, wireless data service and wireless internet services; fixed-line telecommunication services, which include telephone services, internet services, and leased line services; security services, which include unmanned security services, manned security services and system software development; commerce services, the open marketplace platform; and all other businesses, which include the Groups internet portal services and other immaterial operations, each of which does not meet the quantitative threshold to be considered as a reportable segment and are presented collectively as others.
50
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
5. | Operating Segments, Continued |
(1) | Segment information for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||||||||
Cellular services |
Fixed-line telecommu- nication services |
Security services |
Commerce services |
Others | Sub-total | Adjustments | Total | |||||||||||||||||||||||||||
Total revenue |
4,467,863 | 1,332,363 | 814,250 | 1,186,015 | 21,653,765 | (3,029,114 | ) | 18,624,651 | ||||||||||||||||||||||||||
Inter-segment revenue |
1,557,590 | 1,062,187 | 85,846 | 21,399 | 302,092 | 3,029,114 | (3,029,114 | ) | | |||||||||||||||||||||||||
External revenue |
12,295,684 | 3,405,676 | 1,246,517 | 792,851 | 883,923 | 18,624,651 | | 18,624,651 | ||||||||||||||||||||||||||
Depreciation and amortization |
2,892,460 | 874,562 | 210,092 | 35,742 | 62,403 | 4,075,259 | (84,176 | ) | 3,991,083 | |||||||||||||||||||||||||
Operating profit (loss) |
1,031,887 | 258,973 | 137,830 | 11,000 | (21,299 | ) | 1,418,391 | (69,067 | ) | 1,349,324 | ||||||||||||||||||||||||
Finance income and costs, net |
|
(255,997 | ) | |||||||||||||||||||||||||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net |
|
1,028,403 | ||||||||||||||||||||||||||||||||
Other non-operating income and expense, net |
|
(244,690 | ) | |||||||||||||||||||||||||||||||
Profit before income tax |
|
1,877,040 |
(In millions of won) | ||||||||||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||||||||
Cellular services |
Fixed-line telecommu- nication services(*) |
Security services(*) |
Commerce services(*) |
Others(*) | Sub-total | Adjustments | Total | |||||||||||||||||||||||||||
Total revenue |
3,944,260 | 1,183,724 | 726,552 | 1,069,685 | 20,711,230 | (2,970,514 | ) | 17,740,716 | ||||||||||||||||||||||||||
Inter-segment revenue |
1,609,467 | 1,004,193 | 74,247 | 15,899 | 266,708 | 2,970,514 | (2,970,514 | ) | | |||||||||||||||||||||||||
External revenue |
12,177,542 | 2,940,067 | 1,109,477 | 710,653 | 802,977 | 17,740,716 | | 17,740,716 | ||||||||||||||||||||||||||
Depreciation and amortization |
2,828,285 | 792,334 | 193,247 | 35,939 | 63,765 | 3,913,570 | (56,908 | ) | 3,856,662 | |||||||||||||||||||||||||
Operating profit (loss) |
963,207 | 144,739 | 153,843 | 1,840 | (77,892 | ) | 1,185,737 | (77,560 | ) | 1,108,177 | ||||||||||||||||||||||||
Finance income and costs, net |
|
(295,800 | ) | |||||||||||||||||||||||||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net |
|
449,543 | ||||||||||||||||||||||||||||||||
Other non-operating income and expense, net |
|
(100,919 | ) | |||||||||||||||||||||||||||||||
Profit before income tax |
|
1,161,001 |
(*) | During the year ended December 31, 2019, due to the change in the categorization of information reviewed by the chief operating decision maker in 2019, the Group reclassified SK stoa Co., Ltd. from Fixed-line telecommunication Service segment to Commerce Services segment. In addition, operating segment for Life & Security Holdings Co., Ltd. and SK Infosec Co., Ltd. was separately presented as a reportable segment (Security Services) and no longer included in Others segment. |
In addition, as a result of change in accounting policy in connection with the determination of lease term (note 3), the Group restated the segment information for the year ended December 31, 2019.
Since there are no intersegment sales of inventory or depreciable assets, there is no unrealized intersegment profit to be eliminated on consolidation. The Group principally operates its businesses in Korea and the revenue amounts earned outside of Korea are immaterial. Therefore, no entity-wide geographical information is presented.
No single customer contributed 10% or more to the Groups total revenue for the years ended December 31, 2020 and 2019.
51
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
5. | Operating Segments, Continued |
(2) | Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Groups revenue and future cash flows is as follows: |
(In millions of won) | ||||||||||
2020 | 2019 | |||||||||
Goods and Services transferred at a point in time: |
||||||||||
Cellular revenue |
Goods(*1) | 1,142,868 | ||||||||
Fixed-line telecommunication revenue |
Goods | 90,459 | 145,314 | |||||||
Commerce services revenue |
Goods | 71,519 | 56,699 | |||||||
Commerce | 218,468 | 151,690 | ||||||||
Security services revenue |
Goods | 136,504 | 79,732 | |||||||
Other revenue |
Goods | 60,002 | 86,793 | |||||||
Products | 37,657 | 44,336 | ||||||||
Others(*2) | 505,076 | 497,768 | ||||||||
|
|
|
|
|||||||
2,094,932 | 2,205,200 | |||||||||
|
|
|
|
|||||||
Goods and Services transferred over time: |
| |||||||||
Cellular revenue |
Wireless service(*3) | 9,801,194 | 9,532,377 | |||||||
Cellular interconnection | 472,215 | 494,267 | ||||||||
Other(*4) |
1,047,028 | 1,008,030 | ||||||||
Fixed-line telecommunication revenue |
Fixed-line service | 215,827 | 224,453 | |||||||
Cellular interconnection | 85,130 | 92,396 | ||||||||
Internet Protocol Television(*5) | 1,623,095 | 1,285,831 | ||||||||
International calls | 160,293 | 137,902 | ||||||||
Internet service and miscellaneous(*6) | 1,230,872 | 1,054,171 | ||||||||
Commerce services revenue |
Commerce service | 502,864 | 502,264 | |||||||
Security services revenue |
Service(*7) | 1,110,013 | 1,029,745 | |||||||
Other revenue |
Miscellaneous(*2) | 281,188 | 174,080 | |||||||
|
|
|
|
|||||||
16,529,719 | 15,535,516 | |||||||||
|
|
|
|
|||||||
17,740,716 | ||||||||||
|
|
|
|
(*1) | Cellular revenue includes revenue from sales of handsets and other electronic accessories. |
(*2) | Miscellaneous other revenue includes revenue from considerations received for the development and maintenance of system software, and digital contents platform services. |
(*3) | Wireless service includes revenue from wireless voice and data transmission services principally derived from usage charges to wireless subscribers. |
(*4) | Other revenue includes revenue from billing and collection services as well as other miscellaneous services. |
(*5) | IPTV service revenue includes revenue from IPTV services principally derived from usage charges to IPTV subscribers. |
52
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
5. | Operating Segments, Continued |
(2) | Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Groups revenue and future cash flows is as follows, Continued: |
(*6) | Internet service includes revenue from the high speed broadband internet service principally derived from usage charges to subscribers as well as other miscellaneous services. |
(*7) | Security service includes revenue from rendering security services. |
6. | Restricted Deposits |
Deposits which are restricted in use as of December 31, 2020 and 2019 are summarized as follows:
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Short-term financial instruments(*) |
95,034 | |||||||
Long-term financial instruments(*) |
890 | 988 | ||||||
|
|
|
|
|||||
96,022 | ||||||||
|
|
|
|
(*) | Financial instruments include charitable trust fund established by the Group where profits from the fund are donated to charitable institutions. As of December 31, 2020, the funds cannot be withdrawn before maturity. |
7. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | December 31, 2020 | |||||||||||
Gross amount |
Loss allowance |
Carrying amount |
||||||||||
Current assets: |
||||||||||||
Accounts receivable trade |
(264,256 | ) | 2,188,893 | |||||||||
Short-term loans |
98,366 | (902 | ) | 97,464 | ||||||||
Accounts receivable other(*) |
1,034,119 | (55,075 | ) | 979,044 | ||||||||
Accrued income |
3,418 | (166 | ) | 3,252 | ||||||||
Guarantee deposits (Other current assets) |
112,733 | | 112,733 | |||||||||
|
|
|
|
|
|
|||||||
3,701,785 | (320,399 | ) | 3,381,386 | |||||||||
Non-current assets: |
||||||||||||
Long-term loans |
84,355 | (44,122 | ) | 40,233 | ||||||||
Long-term accounts receivable other(*) |
332,803 | | 332,803 | |||||||||
Guarantee deposits |
172,774 | (300 | ) | 172,474 | ||||||||
Long-term accounts receivable trade (Other non-current assets) |
25,702 | (242 | ) | 25,460 | ||||||||
|
|
|
|
|
|
|||||||
615,634 | (44,664 | ) | 570,970 | |||||||||
|
|
|
|
|
|
|||||||
(365,063 | ) | 3,952,356 | ||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable other as of December 31, 2020 include
|
53
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
7. | Trade and Other Receivables, Continued |
(1) | Details of trade and other receivables as of December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | December 31, 2019 | |||||||||||
Gross amount |
Loss allowance |
Carrying amount |
||||||||||
Current assets: |
||||||||||||
Accounts receivable trade |
(249,440 | ) | 2,230,979 | |||||||||
Short-term loans |
66,706 | (583 | ) | 66,123 | ||||||||
Accounts receivable other(*) |
951,888 | (48,379 | ) | 903,509 | ||||||||
Accrued income |
3,977 | (166 | ) | 3,811 | ||||||||
Guarantee deposits (Other current assets) |
145,039 | | 145,039 | |||||||||
|
|
|
|
|
|
|||||||
3,648,029 | (298,568 | ) | 3,349,461 | |||||||||
Non-current assets: |
||||||||||||
Long-term loans |
81,231 | (47,471 | ) | 33,760 | ||||||||
Long-term accounts receivable other(*) |
351,663 | | 351,663 | |||||||||
Guarantee deposits |
164,951 | (299 | ) | 164,652 | ||||||||
Long-term accounts receivable trade (Other non-current assets) |
16,977 | (61 | ) | 16,916 | ||||||||
|
|
|
|
|
|
|||||||
614,822 | (47,831 | ) | 566,991 | |||||||||
|
|
|
|
|
|
|||||||
(346,399 | ) | 3,916,452 | ||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable other as of December 31, 2019 include
|
(2) | Changes in the loss allowance on accounts receivable trade measured at amortized costs during the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
Beginning balance |
Impairment | Write-offs(*) | Collection of receivables previously written-off |
Business combination and others |
Ending Balance |
|||||||||||||||||||
2020 |
48,625 | (48,278 | ) | 12,771 | 1,879 | 264,498 | ||||||||||||||||||
2019 |
260,157 | 28,841 | (55,756 | ) | 14,772 | 1,487 | 249,501 |
(*) | The Group writes off the trade and other receivables that are determined to be uncollectable due to reasons such as termination of operations or bankruptcy. |
54
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
7. | Trade and Other Receivables, Continued |
(3) | The Group applies the practical expedient that allows the Group to estimate the loss allowance for accounts receivable trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Group uses its historical credit loss experience over the past three years and classified the accounts receivable trade by their credit risk characteristics and days overdue. Details of loss allowance on accounts receivable trade as of December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||||||||
Less than 6 months |
6 months ~ 1 year |
1 ~ 3 years |
More than 3 years |
|||||||||||||||
Telecommunications service revenue |
Expected credit loss rate | 2.04 | % | 70.29 | % | 86.21 | % | 99.18 | % | |||||||||
Gross amount | 49,583 | 127,275 | 25,195 | |||||||||||||||
Loss allowance | 28,574 | 34,854 | 109,727 | 24,988 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Other revenue |
Expected credit loss rate | 2.82 | % | 77.52 | % | 61.76 | % | 56.19 | % | |||||||||
Gross amount | 6,753 | 8,250 | 59,398 | |||||||||||||||
Loss allowance | 22,652 | 5,235 | 5,095 | 33,373 | ||||||||||||||
|
|
|
|
|
|
|
|
As the Group is a wireless and fixed-line telecommunications service provider, the Groups financial assets measured at amortized cost primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.
Receivables related to other revenue mainly consist of receivables from corporate customers. The Group transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Group is not exposed to significant credit concentration risk as the Group regularly assesses their credit risk by monitoring their credit rating. While the contract assets are under the impairment requirements, no significant credit risk has been identified.
55
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
8. | Prepaid expenses |
The Group pays commissions to its retail stores and authorized dealers for wireless and fixed-line telecommunication services. The Group capitalized certain costs associated with commissions paid to retail stores and authorized dealers to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Group expects to maintain its customers.
(1) | Details of prepaid expenses as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Current assets: |
| |||||||
Incremental costs of obtaining contracts |
1,897,233 | |||||||
Others |
111,779 | 121,457 | ||||||
|
|
|
|
|||||
2,128,349 | 2,018,690 | |||||||
|
|
|
|
|||||
Non-current assets: |
| |||||||
Incremental costs of obtaining contracts |
982,952 | 1,152,748 | ||||||
Others |
80,759 | 87,117 | ||||||
|
|
|
|
|||||
1,239,865 | ||||||||
|
|
|
|
(2) | Incremental costs of obtaining contracts |
The amortization and impairment losses in connection with incremental costs of obtaining contracts recognized during the years ended December 31, 2020 and 2019 are as follows:
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Amortization and impairment losses recognized |
2,193,333 |
56
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
9. | Contract assets and liabilities |
In case of providing both wireless telecommunication services and sales of handsets, the Group allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Group recognized receipts in advance for prepaid telecommunications services and unearned revenue for customer loyalty programs as contract liabilities.
(1) | Details of contract assets and liabilities as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Contract assets: |
||||||||
Allocation of consideration between performance obligations |
191,858 | |||||||
Contract liabilities: |
||||||||
Wireless service contracts |
22,026 | 20,393 | ||||||
Customer loyalty programs |
16,709 | 21,945 | ||||||
Fixed-line service contracts |
106,916 | 65,315 | ||||||
Security services |
30,597 | 32,026 | ||||||
Others |
84,348 | 83,777 | ||||||
|
|
|
|
|||||
223,456 | ||||||||
|
|
|
|
(2) | The amount of revenue recognized during the year ended December 31, 2020 related to the contract
liabilities carried forward from the prior period is |
(In millions of won) | ||||||||||||||||
Less than 1 year |
1 ~ 2 years | More than 2 years |
Total | |||||||||||||
Wireless service contracts |
| | 22,026 | |||||||||||||
Customer loyalty programs |
13,704 | 2,123 | 882 | 16,709 | ||||||||||||
Fixed-line service contracts |
91,966 | 9,687 | 5,263 | 106,916 | ||||||||||||
Security services |
22,953 | 5,764 | 1,880 | 30,597 | ||||||||||||
Others |
79,243 | 1,798 | 3,307 | 84,348 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
19,372 | 11,332 | 260,596 | ||||||||||||||
|
|
|
|
|
|
|
|
57
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
10. | Inventories |
(1) | Details of inventories as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2020 | December 31, 2019 | |||||||||||||||||||||||
Acquisition cost |
Write-down | Carrying amount |
Acquisition cost |
Write-down | Carrying amount |
|||||||||||||||||||
Merchandise |
(10,566 | ) | 162,196 | 162,485 | (14,557 | ) | 147,928 | |||||||||||||||||
Finished goods |
3,730 | (1,879 | ) | 1,851 | 4,264 | (2,265 | ) | 1,999 | ||||||||||||||||
Work in process |
2,579 | (818 | ) | 1,761 | 2,674 | (539 | ) | 2,135 | ||||||||||||||||
Raw materials |
11,921 | (6,905 | ) | 5,016 | 12,369 | (7,967 | ) | 4,402 | ||||||||||||||||
Supplies |
619 | | 619 | 7,112 | (694 | ) | 6,418 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(20,168 | ) | 171,443 | 188,904 | (26,022 | ) | 162,882 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(2) | Inventories recognized as operating expenses for the years ended December 31, 2020 and 2019 are
|
11. | Investment Securities |
(1) | Details of short-term investment securities as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||
Category | December 31, 2020 | December 31, 2019 | ||||||||
Beneficiary certificates |
FVTPL | 166,666 |
(2) | Details of long-term investment securities as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||
Category | December 31, 2020 | December 31, 2019 | ||||||||||
Equity instruments |
FVOCI | (*) | 710,272 | |||||||||
FVTPL | 67,833 | 1,011 | ||||||||||
|
|
|
|
|||||||||
1,522,194 | 711,283 | |||||||||||
Debt instruments |
FVOCI | 1,080 | 4,627 | |||||||||
FVTPL | 125,563 | 141,305 | ||||||||||
|
|
|
|
|||||||||
126,643 | 145,932 | |||||||||||
|
|
|
|
|||||||||
857,215 | ||||||||||||
|
|
|
|
58
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
11. | Investment Securities, Continued |
(2) | Details of long-term investment securities as of December 31, 2020 and 2019 are as follows, Continued: |
(*) | The Group designated investment in equity instruments that are not held for trading as financial assets at
FVOCI, the amounts to those FVOCI as of December 31, 2020 and 2019 are |
12. | Business Combinations |
(1) | 2020 |
1) | Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd. |
On April 30, 2020, SK Broadband Co., Ltd., a subsidiary of the Parent Company, merged with Tbroad Co., Ltd., Tbroad Dongdaemun
Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. in order to strengthen the competitiveness and enhance the synergy as a comprehensive media company. The considerations transferred included shares of SK Broadband Co., Ltd
transferred based on the merger ratio and the obligations and rights due to shareholders agreement with the acquirees shareholders, both measured at fair value as of April 30, 2020. The Group recognized the difference between the
fair value of net assets acquired and the consideration transferred amounting to W405,639 million as goodwill.
The
Groups consolidated revenue and profit for the year would have been W18,831,147 million and W1,516,857 million, respectively, if the acquisition has occurred on January 1, 2020. The Group cannot
reasonably identify the acquirees revenue and profit for the year included in the consolidated statement of income, as the business of Tbroad Co., Ltd. and the other two companies were merged with the Groups subsidiary, SK Broadband Co.,
Ltd, and no separate financial information post acquisition is available.
59
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
12. | Business Combinations, Continued |
(1) | 2020, Continued |
1) | Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd., Continued |
Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows:
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: |
||||
Fair value of shares of SK Broadband Co., Ltd. |
||||
Fair value of derivative liability (*1) |
320,984 | |||
II. Fair value of identifiable assets acquired and liabilities assumed: |
||||
Cash and cash equivalents |
110,644 | |||
Short-term financial instruments |
6 | |||
Accounts receivable trade and other |
66,241 | |||
Prepaid expenses |
36,324 | |||
Contract assets |
14,033 | |||
Long-term investment securities |
6,239 | |||
Investments in associates and joint ventures |
13,637 | |||
Property and equipment, net |
245,654 | |||
Intangible assets, net(*2) |
423,515 | |||
Other assets |
3,261 | |||
Deferred tax assets |
1,296 | |||
Accounts payable trade and other |
(105,179 | ) | ||
Contract liabilities |
(1,674 | ) | ||
Income tax payable |
(18,065 | ) | ||
Provisions |
(2,755 | ) | ||
Defined benefit liabilities |
(30 | ) | ||
Other liabilities |
(15,655 | ) | ||
|
|
|||
|
|
|||
III. Goodwill(I-II) |
405,639 | |||
|
|
60
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
12. | Business Combination, Continued |
(1) | 2020, Continued |
1) | Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd., Continued |
(*1) | The Parent Company has recognized fair value of obligations and rights in connection with the shareholders agreement with the acquirees shareholders as consideration for the business combination. (See note 22) |
(*2) | Identifiable intangible assets recognized by the Group in the business combination included customer
relationships measured at fair value on the acquisition date of |
Type |
Valuation technique |
Siginificant unobservable inputs |
Interrelationship between key unobservable | |||
Customer relationship |
MPEEM | Estimated revenue per user Future churn rates Weighted average cost of capital (WACC) (7.7% for Tbroad Co., Ltd. and 8.3% for Tbroad Dongdaemun Broadcasting Co., Ltd.) |
The fair value of customer relationship will increase if expected revenue per subscriber increases and customer churn rate in the future and WACC decrease. The fair value of customer relationship will decrease if expected revenue per subscriber decreases and customer churn rate in the future and WACC increase. |
61
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
12. | Business Combination, Continued |
(1) | 2020, Continued |
2) | Acquisition of Broadband Nowon Co., Ltd. by the Parent Company |
The Parent Company has obtained control by acquiring 627,000 shares(55%) of Tbroad Nowon Broadcasting Co., Ltd., and Tbroad Nowon Broadcasting
Co., Ltd. changed its name to Broadband Nowon Co., Ltd. during the year ended December 31, 2020. The consideration transferred was W10,421 million in cash and the difference between the fair value of net assets acquired
and the consideration transferred amounting to W733 million was recognized as other non-operating income. Subsequent to the acquisition, Broadband Nowon Co., Ltd. recognized revenue of
W5,756 million, and net profit of W426 million.
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name |
Broadband Nowon Co., Ltd. | |
Location |
21, 81gil, Dobong-ro, Gangbuk-gu, Seoul, Korea | |
CEO |
Yoo, Chang-Wan | |
Industry |
Cable broadcasting services |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: |
||||
Cash and cash equivalents |
||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
Cash and cash equivalents |
18,106 | |||
Accounts receivable trade and other |
1,122 | |||
Property and equipment, net |
1,784 | |||
Intangible assets, net |
360 | |||
Other assets |
595 | |||
Accounts payable trade and other |
(1,351 | ) | ||
Other liabilities |
(336 | ) | ||
|
|
|||
20,280 | ||||
III. Non-controlling interests: |
||||
Non-controlling interests |
9,126 | |||
|
|
|||
IV. Gain on bargain purchase(I-II+III) |
||||
|
|
62
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
12. | Business Combination, Continued |
(1) | 2020, Continued |
3) | Acquisition of security equipment construction and security services business of SK hystec inc. by ADT CAPS Co., Ltd. |
ADT CAPS Co., Ltd., a subsidiary of the Parent Company, acquired the security equipment construction and
security services business from SK hystec inc., a related party of the Group, in order to strengthen the expertise and the competitiveness of security business during the year ended December 31, 2020. The consideration transferred was
W8,047 million, among which W2,958 million was paid in cash during the year ended December 31, 2020 and the remaining balance will be paid at W3,000 million annually in July 2021
and July 2022. The Group recognized the difference between the fair value of net assets acquired and the consideration transferred amounting to W2,892 million as goodwill.
Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows:
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: |
||||
Cash and cash equivalents |
||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
Accounts receivable trade and other |
6,787 | |||
Property and equipment, net |
363 | |||
Intangible assets, net |
6,460 | |||
Other assets |
4 | |||
Accounts payable trade and other |
(5,306 | ) | ||
Defined benefit liabilities |
(1,227 | ) | ||
Deferred tax liabilities |
(1,554 | ) | ||
Other liabilities |
(372 | ) | ||
|
|
|||
5,155 | ||||
|
|
|||
III. Goodwill (I-II) |
||||
|
|
4) | Business combination under common control: Merger of Life & Security Holdings Co., Ltd. by SK Infosec Co., Ltd. |
SK Infosec Co., Ltd. merged with Life & Security Holdings Co., Ltd., a subsidiary of the Parent Company, to improve business management efficiency on December 30, 2020. As this transaction is a business combination under common control, the acquired assets and liabilities were recognized at the carrying amounts in the ultimate controlling entitys consolidated financial statements and there is no effect on the assets and liabilities of consolidated financial statements. As a result of the merger, the Parent Companys ownership interest of SK Infosec Co., Ltd. has changed from 100% to 62.6%.
63
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
12. | Business Combination, Continued |
(2) | 2019 |
1) | Acquisition of Incross Co., Ltd. by the Parent Company |
The Parent Company acquired 2,786,455 shares of Incross Co., Ltd. at W53,722 million in cash during the year ended
December 31, 2019 in order to expand digital advertising business through the integration of the Groups technological capabilities. Although the Parent Company owns less than 50% of the investee, the management has determined that the
Parent Company controls Incross Co., Ltd. considering the level of dispersion of remaining voting rights and voting patterns at previous shareholders meetings, and the fact that the Parent Company has a right to appoint the majority of the
members of board of directors by the virtue of an agreement with the investees other shareholders. Incross Co., Ltd. reported W19,787 million of revenue and W5,756 million of profit since the Group
obtained control.
(i) | Summary of the acquiree |
Information of Acquiree | ||
Corporate name |
Incross Co., Ltd. | |
Location |
5th floor, 1926, Nambusunhwan-ro, Gwanak-gu, Seoul, Korea | |
CEO |
Lee Jae won | |
Industry |
Media representative business |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows: |
(In millions of won) | ||||
Amount | ||||
I. Considerations transferred: |
||||
Cash and cash equivalents |
||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
Cash and cash equivalents |
17,400 | |||
Short-term financial instruments |
24,941 | |||
Accounts receivable trade and other |
67,259 | |||
Property and equipment, net |
2,411 | |||
Intangible assets, net |
2,709 | |||
Other assets |
9,254 | |||
Trade and other payables |
(57,309 | ) | ||
Other liabilities |
(1,984 | ) | ||
|
|
|||
64,681 | ||||
III. Non-controlling interests: |
40,592 | |||
|
|
|||
IV. Goodwill(I-II+III) |
||||
|
|
64
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
13. | Investments in Associates and Joint Ventures |
(1) | Investments in associates and joint ventures accounted for using the equity method as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | December 31, 2020 | December 31, 2019 | ||||||||||||||||||
Country | Ownership (%) |
Carrying amount |
Ownership (%) |
Carrying amount |
||||||||||||||||
Investments in associates: |
||||||||||||||||||||
SK China Company Ltd. |
China | 27.3 | 27.3 | |||||||||||||||||
Korea IT Fund(*1) |
Korea | 63.3 | 323,294 | 63.3 | 311,552 | |||||||||||||||
KEB HanaCard Co., Ltd.(*2) |
Korea | 15.0 | 314,930 | 15.0 | 294,756 | |||||||||||||||
SK Telecom CS T1 Co., Ltd.(*1) |
Korea | 54.9 | 53,010 | 54.9 | 60,305 | |||||||||||||||
NanoEnTek, Inc.(*3) |
Korea | 28.4 | 43,190 | 28.6 | 42,127 | |||||||||||||||
UniSK |
China | 49.0 | 15,700 | 49.0 | 14,342 | |||||||||||||||
SK Technology Innovation Company |
Cayman Islands | 49.0 | 41,579 | 49.0 | 43,997 | |||||||||||||||
SK MENA Investment B.V. |
Netherlands | 32.1 | 14,043 | 32.1 | 14,904 | |||||||||||||||
SK hynix Inc. |
Korea | 20.1 | 12,251,861 | 20.1 | 11,425,325 | |||||||||||||||
SK Latin America Investment S.A. |
Spain | 32.1 | 13,930 | 32.1 | 13,698 | |||||||||||||||
Grab Geo Holdings PTE. LTD. |
Singapore | 30.0 | 30,063 | 30.0 | 31,269 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*4) |
Singapore | 20.0 | 311,990 | 20.0 | 250,034 | |||||||||||||||
Pacific Telecom Inc.(*2) |
USA | 15.0 | 39,723 | 15.0 | 40,016 | |||||||||||||||
S.M. Culture & Contents Co., Ltd.(*5) |
Korea | 23.3 | 62,248 | 23.4 | 63,469 | |||||||||||||||
Content Wavve Co., Ltd. |
Korea | 30.0 | 75,803 | 30.0 | 83,640 | |||||||||||||||
Hello Nature Co., Ltd.(*6) |
Korea | 49.9 | 11,969 | 49.9 | 13,620 | |||||||||||||||
Digital Games International Pte. Ltd.(*7) |
Singapore | 33.3 | 6,449 | | | |||||||||||||||
Invites Healthcare Co., Ltd.(*8) |
Korea | 43.5 | 25,536 | | | |||||||||||||||
Nam Incheon Broadcasting Co., Ltd.(*9) |
Korea | 27.3 | 10,902 | | | |||||||||||||||
NANO-X IMAGING LTD.(*2,10) |
Israel | 5.6 | 28,484 | | | |||||||||||||||
Home Choice Corp.(*2,9) |
Korea | 17.8 | 3,585 | | | |||||||||||||||
Carrot General Insurance Co., Ltd. (Formerly, Carrot Co., Ltd)(*11) |
Korea | 21.4 | 13,469 | 9.9 | 6,459 | |||||||||||||||
12CM JAPAN and others(*2,8,12) |
| | 65,750 | | 58,884 | |||||||||||||||
|
|
|
|
|||||||||||||||||
14,312,641 | 13,336,856 | |||||||||||||||||||
|
|
|
|
|||||||||||||||||
Investments in joint ventures: |
||||||||||||||||||||
Dogus Planet, Inc.(*13) |
Turkey | 50.0 | 15,071 | 50.0 | 15,921 | |||||||||||||||
Finnq Co., Ltd. (*13) |
Korea | 49.0 | 13,342 | 49.0 | 22,880 | |||||||||||||||
NEXTGEN BROADCAST SERVICES CO, LLC(*13) |
USA | 50.0 | 5,850 | 50.0 | 7,961 | |||||||||||||||
NEXTGEN ORCHESTRATION, LLC(*13) |
USA | 50.0 | 1,600 | 50.0 | 1,646 | |||||||||||||||
Techmaker GmbH(*13) |
Germany | 50.0 | 5,609 | | | |||||||||||||||
|
|
|
|
|||||||||||||||||
41,472 | 48,408 | |||||||||||||||||||
|
|
|
|
|||||||||||||||||
|
|
|
|
65
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
13. | Investments in Associates and Joint Ventures, Continued |
(1) | Investments in associates and joint ventures accounted for using the equity method as of December 31, 2020 and 2019 are as follows, Continued: |
(*1) | Investments in Korea IT Fund and SK Telecom CS T1 Co., Ltd. were classified as investment in associates as the Group does not have control over the investee under the contractual agreement with other shareholders. |
(*2) | These investments were classified as investments in associates as the Group can exercise significant influence through its right to appoint the members of the board of directors even though the Group has less than 20% of equity interests. |
(*3) | The ownership interest has changed as third-party share option was exercised and convertible bonds were converted during the year ended December 31, 2020. |
(*4) | The Group additionally contributed |
(*5) | The ownership interest has changed as S.M. Culture & Contents Co., Ltd. issued 549,094 shares of common stock as a result of the merger with Hoteltrees Co., Ltd. during the year ended December 31, 2020. |
(*6) | The Group additionally contributed |
(*7) | The Group newly invested |
(*8) | The Group transferred the entire shares of Health Connect Co., Ltd. and assets related to the digital disease
management business during the year ended December 31, 2020. The Group acquired 279,999 shares of common stock and 140,000 shares of convertible preferred stock of Invites Healthcare Co., Ltd. in consideration of the transfer and recognized
|
(*9) | The Group acquired the shares of Nam Incheon Broadcasting Co., Ltd. and Home Choice Corp. from the merger with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. |
(*10) | The Group obtained significant influence by contributing |
(*11) | Group acquired 1,360,000 shares of common stock and 2,640,000 shares of preferred stock of Carrot General
Insurance Co., Ltd. (formerly, Carrot Co., Ltd.) at |
66
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
13. | Investments in Associates and Joint Ventures, Continued |
(1) | Investments in associates and joint ventures accounted for using the equity method as of December 31, 2020 and 2019 are as follows, Continued: |
(*12) | The Group disposed the entire shares of SK Telecom Smart City Management Co., Ltd. and recognized
|
(*13) | These investments were classified as investments in joint ventures as the Group has a joint control pursuant to the agreement with the other shareholders. |
(2) | The market value of investments in listed associates as of December 31, 2020 and 2019 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||
December 31, 2020 | December 31, 2019 | |||||||||||||||||||||||
Market price per share (in won) |
Number of shares |
Market value |
Market price per share (in won) |
Number of shares |
Market value |
|||||||||||||||||||
NanoEnTek, Inc. |
7,600,649 | 65,518 | 5,620 | 7,600,649 | 42,716 | |||||||||||||||||||
SK hynix Inc. |
118,500 | 146,100,000 | 17,312,850 | 94,100 | 146,100,000 | 13,748,010 | ||||||||||||||||||
S.M.Culture & Contents Co.,Ltd. |
1,630 | 22,033,898 | 35,915 | 1,530 | 22,033,898 | 33,712 | ||||||||||||||||||
NANO-X IMAGING LTD. |
49,678 | 2,607,466 | 129,534 | | | |
(3) | The condensed financial information of significant associates as of and for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||
SK hynix Inc. | KEB HanaCard Co., Ltd. |
Korea IT Fund |
SK China Company Ltd. |
SK South East Asia Investment Pte. Ltd. |
||||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||
Current assets |
7,910,517 | 107,652 | 380,413 | 797,045 | ||||||||||||||||
Non-current assets |
54,602,900 | 298,438 | 402,812 | 1,706,634 | 1,672,412 | |||||||||||||||
Current liabilities |
9,072,360 | 897,594 | | 51,025 | 67 | |||||||||||||||
Non-current liabilities |
10,192,396 | 5,531,968 | | 308,606 | | |||||||||||||||
2020 | ||||||||||||||||||||
Revenue |
1,231,815 | 52,330 | 107,791 | | ||||||||||||||||
Profit (loss) for the year |
4,758,914 | 154,521 | 36,615 | 20,369 | (158,680 | ) | ||||||||||||||
Other comprehensive income (loss) |
(107,378 | ) | (4,283 | ) | 9,647 | 42,921 | (390,851 | ) | ||||||||||||
Total comprehensive income (loss) |
4,651,536 | 150,238 | 46,262 | 63,290 | (549,531 | ) |
67
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
13. | Investments in Associates and Joint Ventures, Continued |
(3) | The condensed financial information of significant associates as of and for the years ended December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||
SK hynix Inc. | KEB HanaCard Co., Ltd. |
Korea IT Fund |
SK China Company Ltd. |
SK South East Asia Investment Pte. Ltd. |
||||||||||||||||
As of December 31, 2019 | ||||||||||||||||||||
Current assets |
7,974,407 | 113,233 | 615,028 | 81,065 | ||||||||||||||||
Non-current assets |
50,331,892 | 207,284 | 378,691 | 1,442,748 | 1,797,239 | |||||||||||||||
Current liabilities |
7,874,033 | 1,015,657 | | 59,395 | 94 | |||||||||||||||
Non-current liabilities |
8,972,266 | 5,537,850 | | 215,354 | | |||||||||||||||
2019 | ||||||||||||||||||||
Revenue |
1,236,678 | 70,565 | 116,269 | | ||||||||||||||||
Profit for the year |
2,016,391 | 56,281 | 53,867 | 23,474 | 1,190 | |||||||||||||||
Other comprehensive income (loss) |
94,023 | (4,458 | ) | 6,132 | (15,093 | ) | 97,508 | |||||||||||||
Total comprehensive income |
2,110,414 | 51,823 | 59,999 | 8,381 | 98,698 |
(4) | The condensed financial information of significant joint ventures as of and for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
Dogus Planet, Inc. | Finnq Co., Ltd. | |||||||
As of December 31, 2020 | ||||||||
Current assets |
26,781 | |||||||
Cash and cash equivalents |
9,083 | 23,936 | ||||||
Non-current assets |
30,408 | 8,530 | ||||||
Current liabilities |
46,186 | 7,367 | ||||||
Accounts payable, other payables and provisions |
28,145 | 5,094 | ||||||
Non-current liabilities |
10,031 | 879 | ||||||
2020 | ||||||||
Revenue |
3,937 | |||||||
Depreciation and amortization |
(4,642 | ) | (4,417 | ) | ||||
Interest income |
1,878 | 29 | ||||||
Interest expense |
(555 | ) | (51 | ) | ||||
Profit (loss) for the year |
7,030 | (19,426 | ) | |||||
Total comprehensive loss |
(1,659 | ) | (19,426 | ) |
68
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
13. | Investments in Associates and Joint Ventures, Continued |
(4) | The condensed financial information of significant joint ventures as of and for the years ended December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | ||||||||
Dogus Planet, Inc. | Finnq Co., Ltd. | |||||||
As of December 31, 2019 | ||||||||
Current assets |
42,995 | |||||||
Cash and cash equivalents |
13,422 | 40,619 | ||||||
Non-current assets |
25,247 | 11,389 | ||||||
Current liabilities |
52,238 | 6,756 | ||||||
Accounts payable, other payables and provisions |
35,459 | 5,062 | ||||||
Non-current liabilities |
800 | 1,099 | ||||||
2019 | ||||||||
Revenue |
1,968 | |||||||
Depreciation and amortization |
(5,487 | ) | (4,769 | ) | ||||
Interest income |
1,455 | 12 | ||||||
Interest expense |
(92 | ) | (198 | ) | ||||
Profit (loss) for the year |
9,294 | (17,079 | ) | |||||
Total comprehensive income (loss) |
9,294 | (17,361 | ) |
(5) | Reconciliations of financial information of significant associates to carrying amounts of investments in associates in the consolidated financial statements as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||
Net assets | Ownership interests (%) |
Net assets attributable to the ownership interests |
Cost-book value differentials |
Carrying amount |
||||||||||||||||
SK hynix Inc.(*1,2) |
20.1 | 11,082,048 | 1,169,813 | 12,251,861 | ||||||||||||||||
KEB HanaCard Co., Ltd. |
1,779,393 | 15.0 | 266,909 | 48,021 | 314,930 | |||||||||||||||
Korea IT Fund |
510,464 | 63.3 | 323,294 | | 323,294 | |||||||||||||||
SK China Company Ltd.(*1) |
1,725,949 | 27.3 | 470,687 | 84,446 | 555,133 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*1) |
1,559,951 | 20.0 | 311,990 | | 311,990 |
69
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
13. | Investments in Associates and Joint Ventures, Continued |
(5) | Reconciliations of financial information of significant associates to carrying amounts of investments in associates in the consolidated financial statements as of December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||
Net assets | Ownership interests (%) |
Net assets attributable to the ownership interests |
Cost-book value differentials |
Carrying amount |
||||||||||||||||
SK hynix Inc.(*1,2) |
20.1 | 10,237,314 | 1,188,011 | 11,425,325 | ||||||||||||||||
KEB HanaCard Co., Ltd. |
1,628,184 | 15.0 | 244,228 | 50,528 | 294,756 | |||||||||||||||
Korea IT Fund |
491,924 | 63.3 | 311,552 | | 311,552 | |||||||||||||||
SK China Company Ltd.(*1) |
1,772,419 | 27.3 | 483,360 | 85,099 | 568,459 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*1) |
1,250,168 | 20.0 | 250,034 | | 250,034 |
(*1) | Net assets of these entities represent net assets excluding those attributable to their non-controlling interests. |
(*2) | The ownership interest is based on the number of shares owned by the Parent Company divided by the total shares issued by the investee company. The Group applied the equity method using the effective ownership interest which is based on the number of shares owned by the Parent Company and the investees total shares outstanding. The effective ownership interest applied for the equity method is 21.36%. |
70
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
13. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | 2020 | |||||||||||||||||||||||||||
Beginning balance |
Acquisition and Disposal |
Share of profits (losses) |
Other compre- hensive income (loss) |
Other increase (decrease) |
Business Combina- tion |
Ending balance |
||||||||||||||||||||||
Investments in associates: |
||||||||||||||||||||||||||||
SK China Company Ltd. |
| 3,752 | (17,078 | ) | | | 555,133 | |||||||||||||||||||||
Korea IT Fund(*1) |
311,552 | | 23,189 | 6,110 | (17,557 | ) | | 323,294 | ||||||||||||||||||||
KEB HanaCard Co., Ltd. |
294,756 | | 20,671 | (497 | ) | | | 314,930 | ||||||||||||||||||||
SK Telecom CS T1 Co., Ltd. |
60,305 | | (7,282 | ) | (13 | ) | | | 53,010 | |||||||||||||||||||
NanoEnTek, Inc. |
42,127 | 143 | 830 | 90 | | | 43,190 | |||||||||||||||||||||
UniSK(*1) |
14,342 | | 1,403 | 168 | (213 | ) | | 15,700 | ||||||||||||||||||||
SK Technology Innovation Company |
43,997 | | 184 | (2,602 | ) | | | 41,579 | ||||||||||||||||||||
SK MENA Investment B.V. |
14,904 | | | (861 | ) | | | 14,043 | ||||||||||||||||||||
SK hynix Inc.(*1) |
11,425,325 | | 995,117 | (22,481 | ) | (146,100 | ) | | 12,251,861 | |||||||||||||||||||
SK Latin America Investment S.A. |
13,698 | | (40 | ) | 272 | | | 13,930 | ||||||||||||||||||||
Grab Geo Holdings PTE. LTD. |
31,269 | | (425 | ) | (781 | ) | | | 30,063 | |||||||||||||||||||
SK South East Asia Investment Pte. Ltd. |
250,034 | 119,770 | 11,250 | (69,064 | ) | | | 311,990 | ||||||||||||||||||||
Pacific Telecom Inc.(*1) |
40,016 | | 2,307 | (1,621 | ) | (979 | ) | | 39,723 | |||||||||||||||||||
S.M. Culture & Contents Co., Ltd. |
63,469 | (162 | ) | (813 | ) | (246 | ) | | | 62,248 | ||||||||||||||||||
Contents Wavve Co., Ltd. |
83,640 | | (7,837 | ) | | | | 75,803 | ||||||||||||||||||||
Hello Nature Co., Ltd.(*2) |
13,620 | 9,980 | (11,118 | ) | (79 | ) | (434 | ) | | 11,969 | ||||||||||||||||||
Digital Games International Pte. Ltd. |
| 8,810 | (2,038 | ) | (323 | ) | | | 6,449 | |||||||||||||||||||
Invites Healthcare Co., Ltd. |
| 28,000 | (2,645 | ) | 181 | | | 25,536 | ||||||||||||||||||||
Nam Incheon Broadcasting Co., Ltd. |
| | 676 | | | 10,226 | 10,902 | |||||||||||||||||||||
NANO-X IMAGING LTD.(*3) |
| 28,515 | (747 | ) | | 716 | | 28,484 | ||||||||||||||||||||
Home Choice Corp. |
| | 174 | | | 3,411 | 3,585 | |||||||||||||||||||||
Carrot General Insurance Co., Ltd. |
6,459 | 31 | (6,188 | ) | (33 | ) | 13,200 | | 13,469 | |||||||||||||||||||
12CM JAPAN and others(*5) |
58,884 | (1,508 | ) | (2,134 | ) | (2,302 | ) | 12,810 | | 65,750 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
13,336,856 | 193,579 | 1,018,286 | (111,160 | ) | (138,557 | ) | 13,637 | 14,312,641 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Investments in joint ventures: |
||||||||||||||||||||||||||||
Dogus Planet, Inc. |
15,921 | | 3,453 | (4,303 | ) | | | 15,071 | ||||||||||||||||||||
Finnq Co., Ltd. |
22,880 | | (9,538 | ) | | | | 13,342 | ||||||||||||||||||||
NEXTGEN BROADCAST SERVICES CO, LLC |
7,961 | | (1,769 | ) | | (342 | ) | | 5,850 | |||||||||||||||||||
NEXTGEN ORCHESTRATION, LLC |
1,646 | | 57 | | (103 | ) | | 1,600 | ||||||||||||||||||||
Techmaker GmbH |
| 5,609 | | | | | 5,609 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
48,408 | 5,609 | (7,797 | ) | (4,303 | ) | (445 | ) | | 41,472 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
199,188 | 1,010,489 | (115,463 | ) | (139,002 | ) | 13,637 | 14,354,113 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
13. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2020 and 2019 are as follows, Continued: |
(*1) | Dividends received from the associates are deducted from the carrying amount during the year ended December 31, 2020. |
(*2) | The Group recognized |
(*3) | As the Group obtained significant influence, |
(*4) | The Group acquired 1,360,000 of common shares and 2,640,000 of preferred shares of Carrot General Insurance
Co., Ltd.(Formerly, Carrot Co., Ltd.) at |
(*5) | The acquisitions for the year ended December 31, 2020 include |
72
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
13. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | 2019 | |||||||||||||||||||||||
Beginning balance |
Acquisition and Disposal |
Share of profits (losses) |
Other compre- hensive income (loss) |
Other increase (decrease) |
Ending balance |
|||||||||||||||||||
Investments in associates: |
||||||||||||||||||||||||
SK China Company Ltd. |
| 4,916 | 11,995 | | 568,459 | |||||||||||||||||||
Korea IT Fund(*1) |
281,684 | | 34,116 | 3,884 | (8,132 | ) | 311,552 | |||||||||||||||||
KEB HanaCard Co., Ltd. |
288,457 | | 6,827 | (528 | ) | | 294,756 | |||||||||||||||||
SK Telecom CS T1 Co.,Ltd. |
| 60,305 | | | | 60,305 | ||||||||||||||||||
NanoEnTek, Inc. |
40,974 | (43 | ) | 1,220 | (24 | ) | | 42,127 | ||||||||||||||||
UniSK(*1) |
13,486 | | 728 | 347 | (219 | ) | 14,342 | |||||||||||||||||
SK Technology Innovation Company |
42,469 | | 89 | 1,439 | | 43,997 | ||||||||||||||||||
SK MENA Investment B.V. |
14,420 | | 4 | 480 | | 14,904 | ||||||||||||||||||
SK hynix Inc.(*1) |
11,208,315 | | 416,168 | 20,008 | (219,166 | ) | 11,425,325 | |||||||||||||||||
SK Latin America Investment S.A. |
13,313 | | 74 | 311 | | 13,698 | ||||||||||||||||||
Grab Geo Holdings PTE. LTD. |
| 30,518 | (17 | ) | 768 | | 31,269 | |||||||||||||||||
SK South East Asia Investment Pte. Ltd. |
111,000 | 113,470 | 6,062 | 19,502 | | 250,034 | ||||||||||||||||||
Pacific Telecom Inc. |
37,075 | | 2,689 | 252 | | 40,016 | ||||||||||||||||||
S.M.Culture & Contents Co., Ltd. |
63,801 | | 464 | (796 | ) | | 63,469 | |||||||||||||||||
Contents Wavve Co., Ltd. |
| 90,858 | (7,218 | ) | | | 83,640 | |||||||||||||||||
Hello Nature Ltd.(*2) |
28,549 | | (6,580 | ) | (16 | ) | (8,333 | ) | 13,620 | |||||||||||||||
Health Connect Co., Ltd. and others(*1,3) |
96,522 | 7,444 | (17,142 | ) | 3,101 | (24,582 | ) | 65,343 | ||||||||||||||||
|
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|
|||||||||||||
12,791,613 | 302,552 | 442,400 | 60,723 | (260,432 | ) | 13,336,856 | ||||||||||||||||||
|
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|
|
|
|
|
|
|||||||||||||
Investments in joint ventures: |
|
|||||||||||||||||||||||
Dogus Planet, Inc. |
12,487 | (81 | ) | 4,628 | (1,113 | ) | | 15,921 | ||||||||||||||||
Finnq Co., Ltd. |
7,671 | 24,500 | (8,441 | ) | (850 | ) | | 22,880 | ||||||||||||||||
NEXTGEN BROADCAST SERVICES CO, LLC |
| 8,160 | (144 | ) | | (55 | ) | 7,961 | ||||||||||||||||
NEXTGEN ORCHESTRATION, LLC |
| 1,748 | (91 | ) | | (11 | ) | 1,646 | ||||||||||||||||
Celcom Planet(*4) |
| 6,141 | (6,141 | ) | | | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
20,158 | 40,468 | (10,189 | ) | (1,963 | ) | (66 | ) | 48,408 | ||||||||||||||||
|
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|
|
|
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|
|
|
|
|
|
|||||||||||||
343,020 | 432,211 | 58,760 | (260,498 | ) | 13,385,264 | |||||||||||||||||||
|
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|
|
|
|
73
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
13. | Investments in Associates and Joint Ventures, Continued |
(6) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2020 and 2019 are as follows, Continued: |
(*1) | Dividends received from the associates are deducted from the carrying amount during the year ended December 31, 2019. |
(*2) | The Group recognized |
(*3) | The acquisition for the year ended December 31, 2019 includes |
(*4) | Investment in Celcom Planet was disposed during year ended December 31, 2019. |
(7) | The Group discontinued the application of equity method to the following investees due to their carrying amounts being reduced to zero. The details of cumulative unrecognized equity method losses as of December 31, 2020 are as follows: |
(In millions of won) | Unrecognized loss | Unrecognized change in equity | ||||||||||||||
2020 | Cumulative loss |
2020 | Cumulative loss |
|||||||||||||
Wave City Development Co., Ltd. |
2,400 | | | |||||||||||||
Daehan Kanggun BcN Co., Ltd. and others |
295 | 10,947 | 14 | (124 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
13,347 | 14 | (124 | ) | |||||||||||||
|
|
|
|
|
|
|
|
14. | Property and Equipment |
(1) | Property and equipment as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | December 31, 2020 | |||||||||||||||
Acquisition cost | Accumulated depreciation |
Accumulated impairment loss |
Carrying amount |
|||||||||||||
Land |
| | 1,039,323 | |||||||||||||
Buildings |
1,747,445 | (888,389 | ) | (450 | ) | 858,606 | ||||||||||
Structures |
913,102 | (594,098 | ) | (1,601 | ) | 317,403 | ||||||||||
Machinery |
36,152,031 | (27,761,449 | ) | (14,370 | ) | 8,376,212 | ||||||||||
Other |
2,047,405 | (1,391,201 | ) | (2,588 | ) | 653,616 | ||||||||||
Right-of-use assets |
1,961,346 | (489,311 | ) | | 1,472,035 | |||||||||||
Construction in progress |
659,882 | | | 659,882 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
(31,124,448 | ) | (19,009 | ) | 13,377,077 | ||||||||||||
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|
74
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
14. | Property and Equipment, Continued |
(1) | Property and equipment as of December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | December 31, 2019 | |||||||||||||||
Acquisition cost | Accumulated depreciation |
Accumulated impairment loss |
Carrying amount |
|||||||||||||
Land |
| | 981,389 | |||||||||||||
Buildings |
1,715,619 | (847,761 | ) | (450 | ) | 867,408 | ||||||||||
Structures |
910,049 | (561,379 | ) | (1,601 | ) | 347,069 | ||||||||||
Machinery |
34,120,057 | (26,161,923 | ) | (33,742 | ) | 7,924,392 | ||||||||||
Other |
2,079,265 | (1,345,074 | ) | (3,125 | ) | 731,066 | ||||||||||
Right-of-use assets |
1,665,923 | (339,295 | ) | | 1,326,628 | |||||||||||
Construction in progress |
755,508 | | | 755,508 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
(29,255,432 | ) | (38,918 | ) | 12,933,460 | ||||||||||||
|
|
|
|
|
|
|
|
(2) | Changes in property and equipment for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||||||
Beginning balance |
Acquisition | Disposal | Transfer | Depreciation | Impair- ment(*1) |
Business combination(*2) |
Ending balance |
|||||||||||||||||||||||||
Land |
525 | (20,415 | ) | 37,532 | | | 40,292 | 1,039,323 | ||||||||||||||||||||||||
Buildings |
867,408 | 3,034 | (21,811 | ) | 48,160 | (55,215 | ) | | 17,030 | 858,606 | ||||||||||||||||||||||
Structures |
347,069 | 2,542 | (4,417 | ) | 9,167 | (36,995 | ) | | 37 | 317,403 | ||||||||||||||||||||||
Machinery |
7,924,392 | 553,052 | (32,369 | ) | 2,180,445 | (2,419,522 | ) | (1,745 | ) | 171,959 | 8,376,212 | |||||||||||||||||||||
Other |
731,066 | 945,499 | (6,486 | ) | (817,819 | ) | (203,376 | ) | | 4,732 | 653,616 | |||||||||||||||||||||
Right-of-use assets |
1,326,628 | 736,157 | (163,217 | ) | | (436,231 | ) | | 8,698 | 1,472,035 | ||||||||||||||||||||||
Construction in progress |
755,508 | 1,625,218 | (16,162 | ) | (1,709,735 | ) | | | 5,053 | 659,882 | ||||||||||||||||||||||
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|
|||||||||||||||||
3,866,027 | (264,877 | ) | (252,250 | ) | (3,151,339 | ) | (1,745 | ) | 247,801 | 13,377,077 | ||||||||||||||||||||||
|
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|
|
|
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|
|
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|
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|
|
(*1) | The Group recognized impairment losses for obsolete assets during the year ended December 31, 2020. |
(*2) | Includes assets from the acquisition of Broadband Nowon Co., Ltd. and from the merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd., a subsidiary of the Parent Company. |
75
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
14. | Property and Equipment, Continued |
(2) | Changes in property and equipment for the years ended December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||||||||||
Beginning balance |
Acquisition | Disposal | Transfer | Depreciation | Impair- ment(*1) |
Business combination(*2) |
Disposal of subsidiaries |
Ending balance |
||||||||||||||||||||||||||||
Land |
3,297 | (275 | ) | 39,454 | | | 569 | | 981,389 | |||||||||||||||||||||||||||
Buildings |
863,294 | 8,117 | (2,886 | ) | 52,775 | (54,100 | ) | (450 | ) | 658 | | 867,408 | ||||||||||||||||||||||||
Structures |
356,039 | 18,246 | (48 | ) | 10,582 | (36,149 | ) | (1,601 | ) | | | 347,069 | ||||||||||||||||||||||||
Machinery |
7,129,154 | 821,576 | (25,595 | ) | 2,349,133 | (2,316,598 | ) | (33,278 | ) | | | 7,924,392 | ||||||||||||||||||||||||
Other |
847,483 | 1,443,327 | (5,816 | ) | (1,355,232 | ) | (199,106 | ) | (147 | ) | 557 | | 731,066 | |||||||||||||||||||||||
Right-of-use assets |
890,339 | 1,141,349 | (257,226 | ) | | (448,817 | ) | | 1,080 | (97 | ) | 1,326,628 | ||||||||||||||||||||||||
Construction in progress |
565,357 | 1,515,617 | (22,338 | ) | (1,303,128 | ) | | | | | 755,508 | |||||||||||||||||||||||||
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|
|||||||||||||||||||
4,951,529 | (314,184 | ) | (206,416 | ) | (3,054,770 | ) | (35,476 | ) | 2,864 | (97 | ) | 12,933,460 | ||||||||||||||||||||||||
|
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|
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|
|
|
|
|
|
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|
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|
|
(*1) | The Group recognized impairment losses for obsolete assets during the year ended December 31, 2019. |
(*2) | Includes assets from the acquisitions of FSK L&S Co., Ltd. and Incross Co.,Ltd. |
15. | Lease |
(1) | As a lessee |
1) | Details of the right-of-use assets as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 |
December 31, 2019 |
|||||||
Land, buildings and structures |
1,131,035 | |||||||
Others |
202,282 | 195,593 | ||||||
|
|
|
|
|||||
1,326,628 | ||||||||
|
|
|
|
76
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
15. | Lease, Continued |
(1) | As a lessee, Continued |
2) Details of amounts recognized in the consolidated statements of income for the years ended December 31, 2020 and 2019 as a lessee are as follows:
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Depreciation of right-of-use assets: |
||||||||
Land, buildings and structures |
359,755 | |||||||
Others |
89,065 | 89,062 | ||||||
|
|
|
|
|||||
448,817 | ||||||||
|
|
|
|
|||||
Interest expense on lease liabilities |
25,981 | |||||||
Expenses related to short-term leases |
20,193 | 19,098 | ||||||
Expenses related to leases of low-value assets except for short-term leases |
3,297 | 2,550 |
3) The total cash outflows due to lease payments for the years ended December 31, 2020 and 2019 amounted
to 459,132 million and W489,440 million. W
(2) | As a lessor |
1) Finance lease
The Group
recognized interest income of 2,223 million and W1,712 million on lease receivables for the years ended December 31, 2020 and 2019. W
The following table sets out a maturity analysis for lease receivables, presenting the undiscounted lease payments to be received subsequent to December 31, 2020.
(In millions of won) | ||||
Amount | ||||
Less than 1 year |
||||
1 ~ 2 years |
15,732 | |||
2 ~ 3 years |
6,794 | |||
3 ~ 4 years |
3,044 | |||
4 ~ 5 years |
678 | |||
More than 5 year |
13 | |||
|
|
|||
Undiscounted lease payments |
||||
|
|
|||
Unrealized finance income |
1,941 | |||
Net investment in the lease |
50,324 |
77
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
15. | Lease, Continued |
(2) | As a lessor, Continued |
2) Operating lease
The Group recognized lease income of 238,545 million and
W168,482 million for the years ended December 31, 2020 and 2019, respectively, of which variable lease payment received are W21,715 million and
W25,228 million, respectively. W
The following table sets out a maturity analysis of lease payments, presenting the undiscounted lease payments to be received subsequent to December 31, 2020.
(In millions of won) | ||||
Amount | ||||
Less than 1 year |
||||
1 ~ 2 years |
125,681 | |||
2 ~ 3 years |
40,474 | |||
3 ~ 4 years |
1,211 | |||
4 ~ 5 years |
12 | |||
More than 5 year |
5 | |||
|
|
|||
|
|
16. | Goodwill |
(1) | Goodwill as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 |
December 31, 2019 |
|||||||
Goodwill related to merger of Shinsegi Telecom, Inc. |
1,306,236 | |||||||
Goodwill related to acquisition of SK Broadband Co., Ltd. |
764,082 | 358,443 | ||||||
Goodwill related to acquisition of Life & Security Holdings Co., Ltd. |
1,155,037 | 1,155,037 | ||||||
Other goodwill |
132,169 | 129,814 | ||||||
|
|
|
|
|||||
2,949,530 | ||||||||
|
|
|
|
78
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
16. | Goodwill, Continued |
(2) | Details of the impairment testing of Goodwill as of December 31, 2020 is as follows: |
Goodwill is allocated to the following CGUs for the purpose of impairment testing.
| goodwill related to Shinsegi Telecom, Inc.(*1): Cellular services; |
| goodwill related to SK Broadband Co., Ltd.(*2): Fixed-line telecommunication services; |
| goodwill related to Life & Security Holdings Co., Ltd.(*3): Security services; and |
| other goodwill: Security services and other. |
(*1) | Goodwill related to merger of Shinsegi Telecom, Inc. |
The recoverable amount of the CGU is based on its value in use calculated by applying the annual discount rate of 6.3%(4.9% in prior year) to the estimated future cash flows based on financial budgets for the next five years. An annual growth rate of (-)0.2%((-)0.6% in prior year) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the long-term wireless telecommunication industry growth rate. Management of the Group does not expect the total carrying amount of the CGU will exceed the total recoverable amount due to reasonably possible changes from the major assumptions used to estimate the recoverable amount.
(*2) | Goodwill related to acquisition of SK Broadband Co., Ltd. |
The recoverable amount of the CGU is based on its value in use calculated by applying the annual discount rate of 6.9%(5.0% in prior year) to the estimated future cash flows based on financial budgets for the next five years. An annual growth rate of 1.0%(1.0% in prior year) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the long-term fixed-line telecommunication industry growth rate. Management of the Group does not expect the total carrying amount of the CGU will exceed the total recoverable amount due to reasonably possible changes from the major assumptions used to estimate the recoverable amount.
(*3) | Goodwill related to acquisition of Life & Security Holdings Co., Ltd. |
The recoverable amount of the CGU is based on its value in use, which is estimated based on using key assumptions including estimated revenue growth rates, labor costs, annual growth rate applied for the cash flows expected to be incurred after five years (perpetual growth rate), and discount rate. The discount rate applied for future cash flows based on financial budgets for the next five years is 7.1% (7.29% in 2019). The estimated revenue growth rates and labor costs are based on past performance, business plans and its expectation of future market changes.
In addition, an annual growth rate of 1.0% (1.0% in 2019) was applied for the cash flows expected to be incurred after five years and does not exceed the long-term growth rate in the security service industry. Management of the Group does not expect the total carrying amount of the CGU will exceed the total recoverable amount as a result of reasonably possible changes to these assumptions.
79
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
16. | Goodwill, Continued |
(3) | Details of the changes in goodwill for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Beginning balance |
2,938,563 | |||||||
Acquisition(*1) |
408,531 | 30,962 | ||||||
Impairment loss(*2) |
(519 | ) | (21,065 | ) | ||||
Other |
(18 | ) | 1,070 | |||||
|
|
|
|
|||||
Ending balance |
2,949,530 | |||||||
|
|
|
|
(*1) | It consists of goodwill recognized as SK Broadband Co., Ltd., a subsidiary of the Parent Company, merged with Tbroad Co., Ltd. and two other companies and goodwill recognized from ADT CAPS Co., Ltd.s acquisition of security equipment construction and security services business from SK hystec inc. during the year ended December 31, 2020. (See Note 12) |
(*2) | As a result of the impairment test on DREAMUS COMPANY and Incross Co., Ltd., the carrying value of the CGU
exceeds the recoverable amount, thus the Group recognized |
As of December 31, 2020 and 2019, accumulated impairment losses are 85,764 million and
W85,245 million, respectively. W
80
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
17. | Intangible Assets |
(1) | Intangible assets as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | December 31, 2020 | |||||||||||||||
Acquisition cost | Accumulated amortization |
Accumulated impairment |
Carrying amount |
|||||||||||||
Frequency usage rights(*1) |
(4,079,729 | ) | (198,388 | ) | 1,932,765 | |||||||||||
Land usage rights |
50,503 | (45,783 | ) | | 4,720 | |||||||||||
Industrial rights |
116,889 | (45,300 | ) | (147 | ) | 71,442 | ||||||||||
Development costs |
67,989 | (54,771 | ) | (3,854 | ) | 9,364 | ||||||||||
Facility usage rights |
159,865 | (137,985 | ) | | 21,880 | |||||||||||
Customer relations |
1,091,146 | (171,283 | ) | | 919,863 | |||||||||||
Club memberships(*2) |
139,349 | | (32,484 | ) | 106,865 | |||||||||||
Brands(*2) |
374,096 | | | 374,096 | ||||||||||||
Other(*3) |
4,604,077 | (3,586,596 | ) | (22,282 | ) | 995,199 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
(8,121,447 | ) | (257,155 | ) | 4,436,194 | ||||||||||||
|
|
|
|
|
|
|
|
(In millions of won) | December 31, 2019 | |||||||||||||||
Acquisition cost | Accumulated amortization |
Accumulated impairment |
Carrying amount |
|||||||||||||
Frequency usage rights |
(3,563,381 | ) | | 2,647,501 | ||||||||||||
Land usage rights |
53,265 | (45,916 | ) | | 7,349 | |||||||||||
Industrial rights |
110,380 | (43,522 | ) | (34 | ) | 66,824 | ||||||||||
Development costs |
63,840 | (50,127 | ) | (2,567 | ) | 11,146 | ||||||||||
Facility usage rights |
157,664 | (131,832 | ) | | 25,832 | |||||||||||
Customer relations |
607,435 | (16,064 | ) | | 591,371 | |||||||||||
Club memberships(*2) |
112,571 | | (32,161 | ) | 80,410 | |||||||||||
Brands(*2) |
374,096 | | | 374,096 | ||||||||||||
Other(*3) |
4,397,319 | (3,313,263 | ) | (22,493 | ) | 1,061,563 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
(7,164,105 | ) | (57,255 | ) | 4,866,092 | ||||||||||||
|
|
|
|
|
|
|
|
81
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
17. | Intangible Assets, Continued |
(1) | Intangible assets as of December 31, 2020 and 2019 are as follows, Continued: |
(*1) | During the year ended December 31, 2020, the Ministry of Science and Information and Communication
Technology approved the discontinuance of 2G service. The Group recognized an impairment loss of |
(*2) | Club memberships and Brands are classified as intangible assets with indefinite useful lives and are not amortized. |
(*3) | Other intangible assets primarily consist of computer software and others. |
(2) | Changes in intangible assets for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||||||
Beginning balance |
Acquisition | Disposal | Transfer | Amortization | Impairment (*1) |
Business Combina tion(*2) |
Ending balance |
|||||||||||||||||||||||||
Frequency usage rights |
| | | (516,348 | ) | (198,388 | ) | | 1,932,765 | |||||||||||||||||||||||
Land usage rights |
7,349 | 550 | (100 | ) | | (3,079 | ) | | | 4,720 | ||||||||||||||||||||||
Industrial rights |
66,824 | 1,836 | (513 | ) | 8,281 | (4,825 | ) | (161 | ) | | 71,442 | |||||||||||||||||||||
Development costs |
11,146 | 1,141 | (294 | ) | 3,302 | (4,644 | ) | (1,287 | ) | | 9,364 | |||||||||||||||||||||
Facility usage rights |
25,832 | 1,810 | (3 | ) | 434 | (6,193 | ) | | | 21,880 | ||||||||||||||||||||||
Customer relations |
591,371 | 2,014 | (1,604 | ) | 491 | (52,849 | ) | | 380,440 | 919,863 | ||||||||||||||||||||||
Club memberships |
80,410 | 11,821 | (35,432 | ) | 544 | | (323 | ) | 49,845 | 106,865 | ||||||||||||||||||||||
Brands(*3) |
374,096 | | | | | | | 374,096 | ||||||||||||||||||||||||
Other |
1,061,563 | 112,011 | (13,729 | ) | 272,433 | (430,719 | ) | (6,410 | ) | 50 | 995,199 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
131,183 | (51,675 | ) | 285,485 | (1,018,657 | ) | (206,569 | ) | 430,335 | 4,436,194 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*1) | The Group recognized the difference between recoverable amount and the carrying amount of intangible assets
amounting to |
(*2) | Includes assets from the acquisition of Broadband Nowon Co., Ltd. and from the merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd., a subsidiary of the Parent Company. |
(*3) | Brands are recognized in connection with the acquisition of Life & Security Holdings Co., Ltd. and are tested for impairment by comparing the recoverable amounts of CGU to the carrying amounts. (See note 16) |
82
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
17. | Intangible Assets, Continued |
(2) | Changes in intangible assets for the years ended December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) |
2019 | ||||||||||||||||||||||||||||||||||||
Beginning balance |
Acquisition | Disposal | Transfer | Amortization | Impairment (*1) |
Business Combina tion(*2) |
Disposal of subsidiaries |
Ending balance |
||||||||||||||||||||||||||||
Frequency usage rights |
| | | (492,477 | ) | | | | 2,647,501 | |||||||||||||||||||||||||||
Land usage rights |
10,511 | 2,017 | (442 | ) | | (4,737 | ) | | | | 7,349 | |||||||||||||||||||||||||
Industrial rights |
83,627 | 1,409 | (1,540 | ) | 2,491 | (4,696 | ) | | 158 | (14,625 | ) | 66,824 | ||||||||||||||||||||||||
Development costs |
8,990 | 2,218 | | 1,468 | (5,359 | ) | (961 | ) | 4,790 | | 11,146 | |||||||||||||||||||||||||
Facility usage rights |
31,027 | 2,093 | (25 | ) | 236 | (7,499 | ) | | | | 25,832 | |||||||||||||||||||||||||
Customer relations |
625,091 | 250 | (367 | ) | 304 | (33,907 | ) | | | | 591,371 | |||||||||||||||||||||||||
Club memberships |
80,475 | 2,437 | (1,574 | ) | (1,200 | ) | | (916 | ) | 1,188 | | 80,410 | ||||||||||||||||||||||||
Brands |
374,096 | | | | | | | | 374,096 | |||||||||||||||||||||||||||
Other |
1,157,441 | 134,911 | (5,154 | ) | 209,322 | (417,571 | ) | (7,517 | ) | 1,100 | (10,969 | ) | 1,061,563 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
145,335 | (9,102 | ) | 212,621 | (966,246 | ) | (9,394 | ) | 7,236 | (25,594 | ) | 4,866,092 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*1) | The Group recognized the difference between recoverable amount and the carrying amount of intangible assets
amounting to |
(*2) | Includes assets from the Parent Companys acquisitions of FSK L&S Co., Ltd. and Incross Co., Ltd. |
(3) | Research and development expenditures recognized as expense for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Research and development costs expensed as incurred |
391,327 |
(4) | Details of frequency usage rights as of December 31, 2020 are as follows: |
(In millions of won) | ||||||||||
Amount | Description |
Commencement of amortization |
Completion of amortization | |||||||
800MHz license |
CDMA and LTE service | Jul. 2011 | Jun. 2021 | |||||||
1.8GHz license |
125,620 | LTE service | Sept. 2013 | Dec. 2021 | ||||||
2.6GHz license |
728,510 | LTE service | Sept. 2016 | Dec. 2026 | ||||||
2.1GHz license |
94,963 | W-CDMA and LTE service | Dec. 2016 | Dec. 2021 | ||||||
3.5GHz license(*) |
953,474 | 5G service | Apr. 2019 | Nov. 2028 | ||||||
28GHz license(*) |
16,683 | 5G service | | Nov. 2023 | ||||||
|
|
|||||||||
|
|
83
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
17. | Intangible Assets, Continued |
(4) | Details of frequency usage rights as of December 31, 2020 are as follows, Continued: |
(*) | The Group participated in the frequency license allocation auction hosted by Ministry of Science and
Information and Communication Technology and was assigned the 3.5GHz and 28GHz bands of frequency licenses during the year ended December 31, 2018. The considerations payable for the bands of frequency are
|
18. | Borrowings and Debentures |
(1) | Short-term borrowings as of December 31, 2020 and 2019 are as follows: |
(In millions of won and thousands of foreign currency) | ||||||||||||||
Lender | Annual interest rate (%) |
December 31, 2020 |
December 31, 2019 |
|||||||||||
Short-term borrowings |
Citibank | 2.45 | | |||||||||||
KEB Hana Bank(*1) | FTP 1M +1.51 | 27,000 | | |||||||||||
KEB Hana Bank(*2) | 6M financial I (bank) + 1.59 |
5,000 | | |||||||||||
Shinhan Bank(*2) | 6M financial I (bank) + 1.35 |
15,000 | | |||||||||||
Shinhan Bank(*2) | 6M financial I (bank) + 1.60 |
| 15,000 | |||||||||||
KEB Hana Bank(*3) | 3M CD + 1.75 | | 5,000 | |||||||||||
Hana Financial Investment Co., Ltd. | 4.50 | 4,642 | | |||||||||||
DB Financial Investment Co., Ltd. | 4.50 | 2,785 | | |||||||||||
Shinhan Financial Investment Co., Ltd. | 4.50 | 5,571 | | |||||||||||
Woori Bank | 603 | |||||||||||||
7.50 | | (VND 12,068,234 | ) | |||||||||||
|
|
|
|
|||||||||||
20,603 | ||||||||||||||
|
|
|
|
(*1) | 1M FTP rate is 1.14% as of December 31, 2020. |
(*2) | 6M financial I (bank) rate are 0.92% and 1.52% as of December 31, 2020 and 2019, respectively. |
(*3) | 3M CD rate is 1.53% as of December 31, 2019. |
84
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
18. | Borrowings and Debentures, Continued |
(2) | Long-term borrowings as of December 31, 2020 and 2019 are as follows: |
(In millions of won and thousands of other currencies) | ||||||||||||||
Lender |
Annual interest rate (%) |
Maturity |
December 31, 2020 |
December 31, 2019 |
||||||||||
Korea Development Bank(*1,2) |
3M CD + 0.61 | Dec. 20, 2021 | 12,250 | 24,500 | ||||||||||
Korea Development Bank(*1,3) |
3M CD + 0.71 | Dec. 21, 2022 | 25,000 | 37,500 | ||||||||||
Credit Agricole CIB(*1,4) |
3M CD + 0.82 | Dec. 14, 2023 | 37,500 | 50,000 | ||||||||||
Shinhan Bank and others(*5) |
4.21 | Sept. 30, 2023 | | 1,750,000 | ||||||||||
KDB Capital and others(*5) |
7.20 | Sept. 30, 2023 | | 150,000 | ||||||||||
Export Kreditnamnden(*6) |
1.70 | Apr. 29, 2022 | |
18,726 (USD 17,211 |
) |
|
33,266 (USD 28,732 |
) | ||||||
Shinhan Bank and others |
3.20 | Oct. 5, 2025 | 1,950,000 | | ||||||||||
UBS |
0.00 | Mar. 28, 2025 | |
617 (CHF 500 |
) |
| ||||||||
FAE |
0.00 | May. 7, 2025 | |
617 (CHF 500 |
) |
| ||||||||
|
|
|
|
|||||||||||
2,044,710 | 2,045,266 | |||||||||||||
Less present value discount |
(15,786 | ) | (22,729 | ) | ||||||||||
|
|
|
|
|||||||||||
2,028,924 | 2,022,537 | |||||||||||||
Less current installments |
(49,663 | ) | (50,388 | ) | ||||||||||
|
|
|
|
|||||||||||
1,972,149 | ||||||||||||||
|
|
|
|
(*1) | 3M CD rate are 0.66% and 1.53% as of December 31, 2020 and 2019, respectively. |
(*2) | The long-term borrowings are to be repaid by installments on an annual basis from 2017 to 2021. |
(*3) | The long-term borrowings are to be repaid by installments on an annual basis from 2018 to 2022. |
(*4) | The long-term borrowings are to be repaid by installments on an annual basis from 2020 to 2023. |
(*5) | The long-term borrowings were repaid before maturity during the year ended December 31, 2020. |
(*6) | The long-term borrowings are to be repaid by installments on an annual basis from 2014 to 2022. |
85
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
18. | Borrowings and Debentures, Continued |
(3) | Debentures as of December 31, 2020 and 2019 are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||||
Purpose |
Maturity | Annual interest rate (%) |
December 31, 2020 |
December 31, 2019 |
||||||||||||
Unsecured corporate bonds |
Operating fund | 2021 | 4.22 | 190,000 | ||||||||||||
Unsecured corporate bonds |
Operating and | 2022 | 3.30 | 140,000 | 140,000 | |||||||||||
Unsecured corporate bonds |
refinancing fund | 2032 | 3.45 | 90,000 | 90,000 | |||||||||||
Unsecured corporate bonds |
Operating fund | 2023 | 3.03 | 230,000 | 230,000 | |||||||||||
Unsecured corporate bonds |
2033 | 3.22 | 130,000 | 130,000 | ||||||||||||
Unsecured corporate bonds |
2024 | 3.64 | 150,000 | 150,000 | ||||||||||||
Unsecured corporate bonds |
Refinancing fund | 2021 | 2.66 | 150,000 | 150,000 | |||||||||||
Unsecured corporate bonds |
2024 | 2.82 | 190,000 | 190,000 | ||||||||||||
Unsecured corporate bonds |
Operating and | 2022 | 2.40 | 100,000 | 100,000 | |||||||||||
Unsecured corporate bonds |
refinancing fund | 2025 | 2.49 | 150,000 | 150,000 | |||||||||||
Unsecured corporate bonds |
2030 | 2.61 | 50,000 | 50,000 | ||||||||||||
Unsecured corporate bonds |
Operating fund | 2025 | 2.66 | 70,000 | 70,000 | |||||||||||
Unsecured corporate bonds |
2030 | 2.82 | 90,000 | 90,000 | ||||||||||||
Unsecured corporate bonds |
Operating and | 2025 | 2.55 | 100,000 | 100,000 | |||||||||||
Unsecured corporate bonds |
refinancing fund | 2035 | 2.75 | 70,000 | 70,000 | |||||||||||
Unsecured corporate bonds |
Operating fund | 2021 | 1.80 | 100,000 | 100,000 | |||||||||||
Unsecured corporate bonds |
2026 | 2.08 | 90,000 | 90,000 | ||||||||||||
Unsecured corporate bonds |
2036 | 2.24 | 80,000 | 80,000 | ||||||||||||
Unsecured corporate bonds |
2021 | 1.71 | 50,000 | 50,000 | ||||||||||||
Unsecured corporate bonds |
2026 | 1.97 | 120,000 | 120,000 | ||||||||||||
Unsecured corporate bonds |
2031 | 2.17 | 50,000 | 50,000 | ||||||||||||
Unsecured corporate bonds |
Refinancing fund | 2020 | 1.93 | | 60,000 | |||||||||||
Unsecured corporate bonds |
2022 | 2.17 | 120,000 | 120,000 | ||||||||||||
Unsecured corporate bonds |
2027 | 2.55 | 100,000 | 100,000 | ||||||||||||
Unsecured corporate bonds |
Operating and refinancing fund | 2032 | 2.65 | 90,000 | 90,000 | |||||||||||
Unsecured corporate bonds |
Refinancing fund | 2020 | 2.39 | | 100,000 | |||||||||||
Unsecured corporate bonds |
Operating and refinancing fund | 2022 | 2.63 | 80,000 | 80,000 | |||||||||||
Unsecured corporate bonds |
Refinancing fund | 2027 | 2.84 | 100,000 | 100,000 | |||||||||||
Unsecured corporate bonds |
2021 | 2.57 | 110,000 | 110,000 | ||||||||||||
Unsecured corporate bonds |
2023 | 2.81 | 100,000 | 100,000 | ||||||||||||
Unsecured corporate bonds |
2028 | 3.00 | 200,000 | 200,000 | ||||||||||||
Unsecured corporate bonds |
2038 | 3.02 | 90,000 | 90,000 | ||||||||||||
Unsecured corporate bonds |
Operating and | 2021 | 2.10 | 100,000 | 100,000 | |||||||||||
Unsecured corporate bonds |
refinancing fund | 2023 | 2.33 | 150,000 | 150,000 | |||||||||||
Unsecured corporate bonds |
2038 | 2.44 | 50,000 | 50,000 | ||||||||||||
Unsecured corporate bonds |
Operating fund | 2022 | 2.03 | 180,000 | 180,000 | |||||||||||
Unsecured corporate bonds |
2024 | 2.09 | 120,000 | 120,000 | ||||||||||||
Unsecured corporate bonds |
2029 | 2.19 | 50,000 | 50,000 | ||||||||||||
Unsecured corporate bonds |
2039 | 2.23 | 50,000 | 50,000 | ||||||||||||
Unsecured corporate bonds |
Operating and refinancing fund | 2022 | 1.40 | 120,000 | 120,000 | |||||||||||
Unsecured corporate bonds |
2024 | 1.49 | 60,000 | 60,000 | ||||||||||||
Unsecured corporate bonds |
2029 | 1.50 | 120,000 | 120,000 | ||||||||||||
Unsecured corporate bonds |
2039 | 1.52 | 50,000 | 50,000 | ||||||||||||
Unsecured corporate bonds |
2049 | 1.56 | 50,000 | 50,000 |
86
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
18. | Borrowings and Debentures, Continued |
(3) | Debentures as of December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||||||
Purpose |
Maturity | Annual interest rate (%) |
December 31, 2020 | December 31, 2019 |
||||||||||||||
Unsecured corporate bonds |
Operating fund | 2022 | 1.69 | 230,000 | 230,000 | |||||||||||||
Unsecured corporate bonds |
2024 | 1.76 | 70,000 | 70,000 | ||||||||||||||
Unsecured corporate bonds |
2029 | 1.79 | 40,000 | 40,000 | ||||||||||||||
Unsecured corporate bonds |
2039 | 1.81 | 60,000 | 60,000 | ||||||||||||||
Unsecured corporate bonds |
Operating and refinancing fund | 2023 | 1.64 | 170,000 | | |||||||||||||
Unsecured corporate bonds |
Operating fund | 2025 | 1.75 | 130,000 | | |||||||||||||
Unsecured corporate bonds |
2030 | 1.83 | 50,000 | | ||||||||||||||
Unsecured corporate bonds |
2040 | 1.87 | 70,000 | | ||||||||||||||
Unsecured corporate bonds |
Refinancing fund | 2025 | 1.40 | 140,000 | | |||||||||||||
Unsecured corporate bonds |
2030 | 1.59 | 40,000 | | ||||||||||||||
Unsecured corporate bonds |
2040 | 1.76 | 110,000 | | ||||||||||||||
Unsecured corporate bonds(*1) |
Operating fund | 2020 | 2.49 | | 160,000 | |||||||||||||
Unsecured corporate bonds(*1) |
2020 | 2.43 | | 140,000 | ||||||||||||||
Unsecured corporate bonds(*1) |
2020 | 2.18 | | 130,000 | ||||||||||||||
Unsecured corporate bonds(*1) |
Operating and refinancing fund | 2021 | 1.77 | 120,000 | 120,000 | |||||||||||||
Unsecured corporate bonds(*1) |
Operating fund | 2022 | 2.26 | 150,000 | 150,000 | |||||||||||||
Unsecured corporate bonds(*1) |
Refinancing fund | 2020 | 2.34 | | 30,000 | |||||||||||||
Unsecured corporate bonds(*1) |
Operating and | 2022 | 2.70 | 140,000 | 140,000 | |||||||||||||
Unsecured corporate bonds(*1) |
refinancing fund | 2021 | 2.59 | 70,000 | 70,000 | |||||||||||||
Unsecured corporate bonds(*1) |
2023 | 2.93 | 80,000 | 80,000 | ||||||||||||||
Unsecured corporate bonds(*1) |
Refinancing fund | 2022 | 2.00 | 50,000 | 50,000 | |||||||||||||
Unsecured corporate bonds(*1) |
2024 | 2.09 | 160,000 | 160,000 | ||||||||||||||
Unsecured corporate bonds(*1) |
Operating and | 2022 | 1.71 | 80,000 | 80,000 | |||||||||||||
Unsecured corporate bonds(*1) |
refinancing fund | 2024 | 1.71 | 100,000 | 100,000 | |||||||||||||
Unsecured corporate bonds(*1) |
2026 | 1.86 | 50,000 | 50,000 | ||||||||||||||
Unsecured corporate bonds(*1) |
Refinancing fund | 2023 | 1.48 | 100,000 | | |||||||||||||
Unsecured corporate bonds(*1) |
Operating and refinancing fund | 2025 | 1.64 | 100,000 | | |||||||||||||
Unsecured corporate bonds(*1) |
Refinancing fund | 2025 | 1.41 | 160,000 | | |||||||||||||
Private placement corporate bonds(*2) |
Operating fund | 2023 | | 6,292 | 6,292 | |||||||||||||
Private placement corporate bonds(*2) |
Operating fund | 2023 | | 6,222 | 6,222 | |||||||||||||
Private placement corporate bonds(*2) |
Operating fund | 2023 | | 6,168 | | |||||||||||||
Private placement corporate bonds(*2) |
Operating fund | 2023 | | 6,100 | | |||||||||||||
Unsecured global bonds |
Operating fund | 2027 | 6.63 | |
435,200 (USD 400,000 |
) |
|
463,120 (USD 400,000 |
) | |||||||||
Unsecured global bonds |
2023 | 3.75 | |
544,000 (USD 500,000 |
) |
|
578,900 (USD 500,000 |
) | ||||||||||
Unsecured global bonds(*1) |
Refinancing fund | 2023 | 3.88 | |
326,400 (USD 300,000 |
) |
|
347,340 (USD 300,000 |
) | |||||||||
Floating rate notes(*3) |
Operating fund | 2020 | 3M LIBOR + 0.88 | | |
347,340 (USD 300,000 |
) |
87
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
18. | Borrowings and Debentures, Continued |
(3) | Debentures as of December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||||
Purpose |
Maturity | Annual interest rate (%) |
December 31, 2020 |
December 31, 2019 |
||||||||||||
Floating rate notes(*3) |
Operating fund | 2025 | 3M LIBOR + 0.91 | |
326,400 (USD 300,000 |
) |
| |||||||||
|
|
|
|
|||||||||||||
8,606,782 | 8,249,214 | |||||||||||||||
Less discounts on bonds |
(27,039 | ) | (28,381 | ) | ||||||||||||
|
|
|
|
|||||||||||||
8,579,743 | 8,220,833 | |||||||||||||||
Less current installments of bonds |
(889,574 | ) | (966,939 | ) | ||||||||||||
|
|
|
|
|||||||||||||
7,690,169 | 7,253,894 | |||||||||||||||
|
|
|
|
(*1) | Unsecured corporate bonds were issued by SK Broadband Co., Ltd., a subsidiary of the Parent Company. |
(*2) | Private placement corporate bonds were issued by SK Infosec Co., Ltd., a subsidiary of the Parent Company. |
(*3) | 3M LIBOR rates are 0.24% and 1.91% as of December 31, 2020 and 2019, respectively. |
19. | Long-term Payables other |
(1) | Long-term payables other as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 |
December 31, 2019 |
|||||||
Payables related to acquisition of frequency usage rights |
1,544,699 | |||||||
Other |
631 | 5,468 | ||||||
|
|
|
|
|||||
1,550,167 | ||||||||
|
|
|
|
(2) | As of December 31, 2020 and 2019, details of long-term payables other which consist of payables related to the acquisition of frequency usage rights are as follows (See Note 17): |
(In millions of won) | ||||||||
December 31, 2020 |
December 31, 2019 |
|||||||
Long-term payables other |
2,051,389 | |||||||
Present value discount on long-term payables other |
(59,717 | ) | (82,851 | ) | ||||
Current installments of long-term payables other |
(424,600 | ) | (423,839 | ) | ||||
|
|
|
|
|||||
Carrying amount at December 31 |
1,544,699 | |||||||
|
|
|
|
88
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
19. | Long-term Payables other, Continued |
(3) | The principal amounts of the long-term payables other repaid during the year ended December 31,
2020 and 2019 are |
(In millions of won) | ||||
Amount | ||||
Less than 1 year |
||||
1~3 years |
444,480 | |||
3~5 years |
382,290 | |||
More than 5 years |
373,921 | |||
|
|
|||
|
|
20. | Provisions |
Changes in provisions for the years ended December 31, 2020 and 2019 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2020 | As of December 31, 2020 | |||||||||||||||||||||||||||||||||||
Beginning balance |
Increase | Utilization | Reversal | Other | Business Combination |
Ending balance |
Current | Non-current | ||||||||||||||||||||||||||||
Provision for restoration |
15,616 | (3,610 | ) | (1,492 | ) | (6 | ) | 626 | 113,653 | 42,348 | 71,305 | |||||||||||||||||||||||||
Emission allowance |
5,257 | 7,400 | | (5,233 | ) | | | 7,424 | 7,424 | | ||||||||||||||||||||||||||
Other provisions (*) |
57,385 | 3,250 | (30,861 | ) | (1,904 | ) | (199 | ) | 2,129 | 29,800 | 19,591 | 10,209 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
26,266 | (34,471 | ) | (8,629 | ) | (205 | ) | 2,755 | 150,877 | 69,363 | 81,514 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
|
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2019 | As of December 31, 2019 | |||||||||||||||||||||||||||||||||||
Beginning balance |
Increase | Utilization | Reversal | Other | Business Combination |
Ending balance |
Current | Non-current | ||||||||||||||||||||||||||||
Provision for restoration |
9,424 | (3,409 | ) | (1,711 | ) | 115 | 40 | 102,519 | 48,391 | 54,128 | ||||||||||||||||||||||||||
Emission allowance |
2,238 | 5,037 | (1,086 | ) | (932 | ) | | | 5,257 | 5,257 | | |||||||||||||||||||||||||
Other provisions (*) |
107,229 | 7,609 | (45,260 | ) | (163 | ) | (12,030 | ) | | 57,385 | 32,672 | 24,713 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
22,070 | (49,755 | ) | (2,806 | ) | (11,915 | ) | 40 | 165,161 | 86,320 | 78,841 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
|
89
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
21. | Defined Benefit Liabilities (Assets) |
(1) | Details of defined benefit liabilities (assets) as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 |
December 31, 2019 |
|||||||
Present value of defined benefit obligations |
1,136,787 | |||||||
Fair value of plan assets |
(1,127,163 | ) | (965,654 | ) | ||||
|
|
|
|
|||||
Defined benefit assets(*) |
(3,557 | ) | (1,125 | ) | ||||
|
|
|
|
|||||
Defined benefit liabilities |
154,944 | 172,258 | ||||||
|
|
|
|
(*) | Since the Group entities neither have legally enforceable right nor intention to settle the defined benefit obligations of Group entities with defined benefit assets of other Group entities, defined benefit assets of Group entities have been separately presented from defined benefit liabilities. |
(2) | Principal actuarial assumptions as of December 31, 2020 and 2019 are as follows: |
December 31, 2020 |
December 31, 2019 | |||
Discount rate for defined benefit obligations | 1.83 ~ 3.14% | 1.77 ~ 3.04% | ||
Expected rate of salary increase | 2.04 ~ 6.00% | 1.53 ~ 6.00% |
Discount rate for defined benefit obligation is determined based on market yields of high-quality corporate bonds with similar maturities for estimated payment term of defined benefit obligation. Expected rate of salary increase is determined based on the Groups historical promotion index, inflation rate and salary increase ratio.
(3) | Changes in defined benefit obligations for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | For the year ended December 31 |
|||||||
2020 | 2019 | |||||||
Beginning balance |
926,302 | |||||||
Current service cost |
193,078 | 171,197 | ||||||
Past service cost |
815 | | ||||||
Interest cost |
25,958 | 23,685 | ||||||
Remeasurement - Demographic assumption |
2,071 | 19,344 | ||||||
- Financial assumption |
(18,266 | ) | 56,265 | |||||
- Adjustment based on experience |
17,364 | 14,363 | ||||||
Business combinations |
1,742 | 3,653 | ||||||
Benefit paid |
(76,987 | ) | (84,098 | ) | ||||
Others(*) |
(4,012 | ) | 6,076 | |||||
|
|
|
|
|||||
Ending balance |
1,136,787 | |||||||
|
|
|
|
(*) | Others include changes of liabilities due to employees transfers among affiliates for the years ended December 31, 2020 and 2019. |
90
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
21. | Defined Benefit Liabilities (Assets), Continued |
(4) | Changes in plan assets for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | For the year ended December 31 | |||||||
2020 | 2019 | |||||||
Beginning balance |
816,699 | |||||||
Interest income |
21,057 | 19,717 | ||||||
Remeasurement |
(1,385 | ) | (5,366 | ) | ||||
Contributions |
213,298 | 204,186 | ||||||
Benefit paid |
(68,084 | ) | (73,396 | ) | ||||
Business combinations |
485 | 3,207 | ||||||
Others |
(3,862 | ) | 607 | |||||
|
|
|
|
|||||
Ending balance |
965,654 | |||||||
|
|
|
|
The Group expects to contribute W214,088 million to the defined benefit plans in 2021.
(5) | Total cost of benefit plan, which is recognized in profit and loss (included in labor in the statement of income) and capitalized into construction-in-progress, for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | For the year ended December 31 | |||||||
2020 | 2019 | |||||||
Current service cost |
171,197 | |||||||
Past service cost |
815 | | ||||||
Net interest cost |
4,901 | 3,968 | ||||||
|
|
|
|
|||||
175,165 | ||||||||
|
|
|
|
Costs related to the defined benefit except for the amounts transferred to construction in progress are included labor expenses and Research and development expenses.
(6) | Details of plan assets as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Equity instruments |
29,489 | |||||||
Debt instruments |
228,839 | 207,504 | ||||||
Short-term financial instruments, etc. |
882,554 | 728,661 | ||||||
|
|
|
|
|||||
965,654 | ||||||||
|
|
|
|
(7) | As of December 31, 2020, effects on defined benefit obligations if each of significant actuarial assumptions changes within expectable and reasonable range are as follows: |
(In millions of won) | ||||||||
0.5% Increase | 0.5% Decrease | |||||||
Discount rate |
65,732 | |||||||
Expected salary increase rate |
65,338 | (59,315 | ) |
The sensitivity analysis does not consider dispersion of all cash flows that are expected from the plan and provides approximate values of sensitivity for the assumptions used.
A weighted average duration of defined benefit obligations as of December 31, 2020 and 2019 are 9.49 years and 9.52 years, respectively.
91
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
22. | Derivative Instruments |
(1) | Currency and interest rate swap contracts under cash flow hedge accounting as of December 31, 2020 are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||
Borrowing |
Hedging Instrument (Hedged item) |
Hedged risk |
Financial institution |
Duration of | ||||
Jul. 20, 2007 |
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000) |
Foreign currency risk | Morgan Stanley and four other banks | Jul. 20, 2007 ~ Jul. 20, 2027 | ||||
Dec. 16, 2013 |
Fixed-to-fixed cross currency (U.S. dollar borrowing amounting to USD 17,211) |
Foreign currency risk | Deutsche bank | Dec.16, 2013 ~ Apr. 29, 2022 | ||||
Apr. 16, 2018 |
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 500,000) |
Foreign currency risk | The Export-Import Bank of Korea and three other banks | Apr. 16, 2018~ Apr. 16, 2023 | ||||
Mar. 4, 2020 |
Floating-to-fixed cross-currency interest rate swap (U.S. dollar-denominated bonds face value of USD 300,000) |
Foreign currency risk and Interest rate risk | Citibank | Mar. 4, 2020~ Jun. 4, 2025 | ||||
Aug. 13, 2018 |
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 300,000) |
Foreign currency risk | Citibank | Aug. 13, 2018~ Aug. 13, 2023 | ||||
Dec. 20, 2016 |
Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 12,250) |
Interest rate risk | Korea Development Bank | Dec. 20, 2016~ Dec. 20, 2021 | ||||
Dec. 21, 2017 |
Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 25,000) |
Interest rate risk | Korea Development Bank | Dec. 21, 2017~ Dec. 21, 2022 | ||||
Dec. 19, 2018 |
Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 37,500) |
Interest rate risk | Credit Agricole CIB | Mar.19, 2019~ Dec.14, 2023 |
(2) | SK Broadband Co., Ltd., a subsidiary of the Parent Company, entered into Total Return Swap(TRS) contract
amounting to |
(3) | The Group has entered into an agreement regarding a share in order to establish a partnership for the growth of
e-commerce business operated by Eleven Street Co., Ltd., a subsidiary of the Parent Company, whereby the Group is allowed to grant right to the counterparty to acquire new preferred shares when conditions of
business performance or a stock listing are met. Exercise period of the right is 5 years from July 1, 2020, which is the date of the agreement. The Group determined the agreement is a derivative financial liability in accordance with K-IFRS No.1109 and recognized the liability amounting to |
92
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
22. | Derivative Instruments, Continued |
(4) | In relation to the business acquisition by SK Broadband Co., Ltd. (see note 12 (1)) in 2020, the Parent Company
has entered into a shareholders agreement with the shareholders of the acquirees. Pursuant to the agreement, when certain conditions are met within a period of time subsequent to the business combination, the shareholders of the acquirees can
exercise their drag-along rights and require the Parent Company to sell its shares in SK Broadband Co., Ltd. Should the shareholders exercise their drag-along rights, the Parent Company also can exercise its call options over the shares held by
those shareholders. The Group recognized a derivative financial liability of |
The fair value of SK Broadband Co., Ltd.s common stock (post-merger) was estimated using 5-year projected cash flows discounted at 6.9% per annum. The fair value of the derivative financial liability was determined by using the Binomial Model based on various assumptions including the price of common stock and its price fluctuations. The difference in fair values between the acquisition date and December 31, 2020 is insignificant. The significant unobservable inputs used in the fair value measurement and inter-relationship between significant unobservable inputs and fair value measurement are as below:
Significant unobservable inputs |
Correlations between inputs and fair value measurements | |
Fair value of SK Broadband Co., Ltd.s common stock | The estimated fair value of derivative liabilities would decrease (increase) if the fair value of common stock would increase (decrease) | |
Volatility | The estimated fair value of derivative liabilities would decrease (increase) if the volatility of stock price increase (decrease) |
(5) | The Group has entered into the agreement with Newberry Global Limited, whereby the Group has been granted
subscription right and contingent subscription right to acquire Newberry series-C redeemable convertible preferred stock. The Group recognized long-term derivative financial assets of
|
(6) | The Group has been granted subscription right to acquire 2,262,443 shares of
NANO-X IMAGING LTD., an associate, and recognized derivative financial assets of |
93
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
22. | Derivative Instruments, Continued |
(7) | The fair value of derivative financial instruments to which the Group applies cash flow hedge is recorded in the financial statements as long-term derivative financial assets, derivative financial liabilities and long-term derivative financial liabilities. As of December 31, 2020, details of fair values of the derivatives assets and liabilities are as follows: |
(In millions of won and thousands of foreign currency) | ||||||||
Hedging instrument (Hedged item) |
Cash flow hedge |
Fair value | ||||||
Non-current assets: |
||||||||
Fixed-to-fixed
cross currency swap |
32,059 | |||||||
Fixed-to-fixed
cross currency swap |
30,247 | 30,247 | ||||||
Fixed-to-fixed
cross currency swap |
2,830 | 2,830 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Current liabilities: |
||||||||
Floating-to-fixed
interest rate swap |
(77 | ) | ||||||
Non-current liabilities: |
||||||||
Fixed-to-fixed
cross currency swap |
(453 | ) | ||||||
Floating-to-fixed
cross currency interest rate swap |
(40,565 | ) | (40,565 | ) | ||||
Floating-to-fixed
interest rate swap |
(360 | ) | (360 | ) | ||||
Floating-to-fixed
interest rate swap |
(606 | ) | (606 | ) | ||||
|
|
|
|
|||||
|
|
|
|
94
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
22. | Derivative Instruments, Continued |
(8) | The fair value of derivatives held for trading is recorded in the financial statements as derivative financial assets, long-term derivative financial assets and long-term derivative financial liabilities. As of December 31, 2020, details of fair values of the derivative assets and liabilities are as follows: |
(In millions of won) | ||||||||
Held for trading |
Fair value | |||||||
Current assets: |
||||||||
Contingent subscription right |
8,704 | |||||||
Non-current assets: |
||||||||
Total return swap |
5,488 | |||||||
Subscription right |
85,367 | 85,367 | ||||||
|
|
|
|
|||||
|
|
|
|
|||||
Non-current liabilities: |
||||||||
Drag-along and call option right |
(320,984 | ) | ||||||
Contingent subscription right |
(12,115 | ) | (12,115 | ) | ||||
|
|
|
|
|||||
|
|
|
|
23. | Share Capital and Capital Surplus and Others |
The Parent Companys outstanding share capital consists entirely of common shares with a par value of
500. The number of authorized, issued and outstanding common shares and the details of capital surplus and others as of December 31, 2020 and 2019 are as follows: W
(In millions of won, except for share data) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Number of authorized shares |
220,000,000 | 220,000,000 | ||||||
Number of issued shares(*1) |
80,745,711 | 80,745,711 | ||||||
Share capital: |
||||||||
Common share |
44,639 | |||||||
Capital surplus and others: |
||||||||
Paid-in surplus |
2,915,887 | 2,915,887 | ||||||
Treasury shares(note 24) |
(2,123,661 | ) | (1,696,997 | ) | ||||
Hybrid bonds(note 25) |
398,759 | 398,759 | ||||||
Share option(note 26) |
1,481 | 1,302 | ||||||
Others(*2) |
(515,263 | ) | (612,470 | ) | ||||
|
|
|
|
|||||
1,006,481 | ||||||||
|
|
|
|
(*1) | In 2002 and 2003, the Parent Company retired treasury shares with reduction of retained earnings before appropriation. As a result, the Parent Companys outstanding shares have decreased without change in share capital. |
(*2) | Others primarily consist of the excess of the consideration paid by the Group over the carrying amount of net assets acquired from entities under common control. |
95
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
23. | Share Capital and Capital Surplus and Others, Continued |
There were no changes in share capital during the years ended December 31, 2020 and 2019 and details of shares outstanding as of December 31, 2020 and 2019 are as follows:
(In shares) | 2020 | 2019 | ||||||||||||||||||||||
Issued shares |
Treasury shares |
Outstanding shares |
Issued shares |
Treasury shares |
Outstanding shares |
|||||||||||||||||||
Shares outstanding |
80,745,711 | 9,418,558 | 71,327,153 | 80,745,711 | 7,609,263 | 73,136,448 |
24. | Treasury Shares |
Treasury shares as of December 31, 2020 and 2019 are as follows:
(In millions of won, except for share data) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Number of shares(*) |
9,418,558 | 7,609,263 | ||||||
Acquisition cost |
1,696,997 |
(*) | The Parent Company acquired 1,809,295 of its treasury shares for
|
96
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
25. | Hybrid Bonds |
Hybrid bonds classified as equity as of December 31, 2020 and 2019 are as follows:
(In millions of won) | ||||||||||||||||||||||
Type |
Issuance date | Maturity (*1) |
Annual interest rate(%)(*2) |
December 31, 2020 |
December 31, 2019 |
|||||||||||||||||
Series 2-1 hybrid bonds |
Unsecured subordinated bearer bond | June 7, 2018 | June 7, 2078 | 3.70 | 300,000 | |||||||||||||||||
Series 2-2 hybrid bonds |
Unsecured subordinated bearer bond | June 7, 2018 | June 7, 2078 | 3.65 | 100,000 | 100,000 | ||||||||||||||||
Issuance costs |
(1,241 | ) | (1,241 | ) | ||||||||||||||||||
|
|
|
|
|||||||||||||||||||
398,759 | ||||||||||||||||||||||
|
|
|
|
As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Group classified the hybrid bonds as equity.
These are subordinated bonds which rank before common shares in the event of a liquidation or reorganization of the Parent Company.
(*1) | The Parent Company has a right to extend the maturity without any notice or announcement. |
(*2) | Annual interest rate is determined as yield rate of 5 year national bond plus premium. According to the step-up clause, additional premium of 0.25% and 0.75%, respectively, after 10 years and 25 years from the issuance date are applied. |
26. | Share option |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows: |
Parent Company | ||||||||||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3(*) | 4 | 5 | ||||||||||||||||
Grant date |
March 24, 2017 | February 20, 2018 | February 22, 2019 | March 26, 2019 | March 26, 2020 | |||||||||||||||||
Types of shares to be issued |
Registered common shares | |||||||||||||||||||||
Grant method |
Reissue of treasury shares, cash settlement | |||||||||||||||||||||
Number of shares (in shares) |
22,168 | 22,168 | 22,168 | 1,358 | 4,177 | 1,734 | 127,643 | |||||||||||||||
Exercise price (in won) |
246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | |||||||||||||||
Exercise period |
Mar. 25, 2019 ~ Mar. 24, 2022 |
Mar. 25, 2020 ~ Mar. 24, 2023 |
Mar. 25, 2021 ~ Mar. 24, 2024 |
|
Feb. 21, 2020 ~ Feb. 20, 2023 |
|
|
Feb. 23, 2021 ~ Feb. 22, 2024 |
|
|
Mar. 27, 2021 ~ Mar. 26, 2024 |
|
|
Mar. 27, 2023 ~ Mar. 26, 2027 |
| |||||||
Vesting conditions |
2 years service from the grant date |
3 years service from the grant date |
4 years service from the grant date |
|
2 years service from the grant date |
|
|
2 years service from the grant date |
|
|
2 years service from the grant date |
|
|
3 years service from the grant date |
|
97
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
26. | Share option, Continued |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows, Continued: |
(*) | Parts of the grant that have not met the vesting conditions have been forfeited during the year ended December 31, 2019. |
DREAMUS COMPANY | ||||||||
One Store Co., Ltd. | 1-1 | 1-2 | 1-3 | |||||
Grant date |
April 27, 2018 | March 28, 2019 | March 28, 2019 | March 28, 2019 | ||||
Types of shares to be issued |
Common shares of One Store Co., Ltd. |
Common shares of DREAMUS COMPANY | ||||||
Grant method |
Issuance of new shares | Issuance of new shares, reissue of treasury shares, cash settlement | ||||||
Number of shares (in shares)(*1) |
712,150 | 366,679 | 366,672 | 366,649 | ||||
Exercise price (in won) |
5,390 | 9,160 | 9,160 | 9,160 | ||||
Exercise period |
Apr. 28, 2020 ~ Apr. 27, 2024 |
Mar. 29, 2021 ~ Mar. 28, 2024 |
Mar. 29, 2022 ~ Mar. 28, 2025 |
Mar. 29, 2023 ~ Mar. 28, 2026 | ||||
Vesting conditions |
2 years service from the grant date |
(a) 2 years service from the grant date (b) Average |
(a) 3 years service from the grant date (b) Average |
(a) 4 years service from the grant date (b) Average |
Incross Co., Ltd. | ||||||||||||||||||||||||||||
3 | 4 | 5 | 6 | 7 | 8 | 9 | ||||||||||||||||||||||
Grant date |
March 30, 2016 | March 7, 2017 | March 7, 2018 | March 7, 2019 | October 15, 2019 | March 10, 2020 | October 20, 2020 | |||||||||||||||||||||
Types of shares to be issued |
Common shares of Incross Co., Ltd. | |||||||||||||||||||||||||||
Grant method |
Issuance of new shares, reissue of treasury shares, cash settlement | |||||||||||||||||||||||||||
Number of shares (in shares)(*1) |
5,000 | 29,625 | 9,900 | 6,600 | 59,225 | 19,800 | 3,300 | |||||||||||||||||||||
Exercise price (in won) |
10,571 | 17,485 | 25,861 | 16,895 | 22,073 | 26,291 | 45,280 | |||||||||||||||||||||
Exercise period |
|
Mar. 30, 2019 ~ Mar. 30, 2022 |
|
|
Mar. 7, 2020 ~ Mar. 6, 2023 |
|
|
Mar. 7, 2021 ~ Mar. 6, 2024 |
|
|
Mar. 7, 2022 ~ Mar. 6, 2025 |
|
|
Oct. 15, 2022 ~ Oct. 14, 2025 |
|
|
Mar. 10, 2023 ~ Mar. 9, 2026 |
|
|
Oct.20, 2023 ~ Oct. 19, 2026 |
| |||||||
Vesting conditions |
|
3 years service from the grant date |
|
|
3 years service from the grant date |
|
|
3 years service from the grant date |
|
|
3 years service from the grant date |
|
|
3 years service from the grant date |
|
|
3 years service from the grant date |
|
|
3 years service from the grant date |
|
98
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
26. | Share option, Continued |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows, Continued: |
SK Infosec Co., Ltd.(*2) | ||||||||
1-1 | 1-2 | 1-3 | 1-4 | |||||
Grant date |
August 22, 2019 | |||||||
Types of shares to be issued |
Registered common shares of SK Infosec. Co., Ltd. | |||||||
Grant method |
Cash settlement | |||||||
Number of shares (in shares)(*1) |
161,541 | 87,562 | 230,581 | 203,223 | ||||
Exercise price (in won) |
20,579 | 20,579 | 22,225 | 24,003 | ||||
Exercise period |
1st exercise: Applied to 50% of the granted shares and exercisable 6 months after the listing (June 30, 2022) of SK Infosec Co., Ltd. | |||||||
2nd exercise: Applied to 25% of the granted shares and exercisable 12 months after the listing (June 30, 2022) of SK Infosec Co., Ltd. | ||||||||
3rd exercise: Applied to 25% of the granted shares and exercisable 18 months after the listing (June 30, 2022) of SK Infosec Co., Ltd. | ||||||||
Vesting conditions |
Service provided until December 31, 2019 |
Service provided until December 31, 2020 |
Service provided until December 31, 2020 |
Service provided until December 31, 2021 |
SK Infosec Co., Ltd.(*2) | FSK L&S Co., Ltd. | |||||||||
2-1 | 2-2 | 2-3 | 2-4 | |||||||
Grant date |
December 30, 2020 | May 31, 2019 | ||||||||
Types of shares to be issued |
Registered common shares of SK Infosec. Co., Ltd. | Common shares of FSK L&S Co., Ltd. | ||||||||
Grant method |
Cash settlement | Issuance of new shares | ||||||||
Number of shares (in shares)(*1) |
23,097 | 9,648 | 32,744 | 23,094 | 43,955 | |||||
Exercise price (in won) |
20,807 | 20,807 | 22,472 | 24,270 | 10,000 | |||||
Exercise period |
1st exercise: Applied to 50% of the granted shares and exercisable 6 months after the listing(June 30, 2022) of SK Infosec Co., Ltd. |
June 1, 2022 ~ May 31, 2025 | ||||||||
2nd exercise: Applied to 25% of the granted shares and exercisable 12 months after the listing(June 30, 2022) of SK Infosec Co., Ltd. |
||||||||||
3rd exercise: Applied to 25% of the granted shares and exercisable 18 months after the listing(June 30, 2022) of SK Infosec Co., Ltd. |
||||||||||
Vesting conditions |
Service provided until December 31, 2020 |
Service provided until December 31, 2021 |
Service provided until December 31, 2021 |
Service provided until December 31, 2022 |
3 years service from the grant date |
(*1) | Some of stock options granted by One Store Co., Ltd., DREAMUS COMPANY and SK Infosec Co., Ltd. that have not met the vesting conditions have been forfeited, and some of the stock options granted by One Store Co., Ltd. and Incross Co., Ltd. have been exercised during the year ended December 31, 2020. Some of stock options granted by One Store Co., Ltd. and DREAMUS COMPANY that have not met the vesting conditions have been forfeited during the year ended December 31, 2019. |
(*2) | The share option has transferred from Life & Security Holdings Co., Ltd. due to the business combination. As a result of the business combination, number of shares and exercise price of the share option and the expected listing date have changed. |
99
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
26. | Share option, Continued |
(2) | Share compensation expense recognized during the year ended December 31, 2020 and the remaining share compensation expense to be recognized in subsequent periods are as follows: |
(In millions of won) |
||||
Share compensation expense |
||||
As of December 31, 2019 |
||||
During the year ended December 31, 2020 |
4,313 | |||
In subsequent periods |
2,259 | |||
|
|
|||
|
|
(3) | The Group used binomial option pricing model or Monte-Carlo simulation in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows: |
(In won) | Parent Company | |||||||||||||||||||||||||||
Series | ||||||||||||||||||||||||||||
1-1 | 1-2 | 1-3 | 2 | 3 | 4 | 5 | ||||||||||||||||||||||
Risk-free interest rate |
1.86 | % | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | 1.52 | % | ||||||||||||||
Estimated options life |
5 years | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | |||||||||||||||||||||
Share price (Closing price on the preceding day) |
262,500 | 262,500 | 262,500 | 243,500 | 259,000 | 253,000 | 174,500 | |||||||||||||||||||||
Expected volatility |
13.38 | % | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | 8.10 | % | ||||||||||||||
Expected dividends |
3.80 | % | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | 5.70 | % | ||||||||||||||
Exercise price |
246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | 192,260 | |||||||||||||||||||||
Per-share fair value of the option |
27,015 | 20,240 | 15,480 | 23,988 | 8,600 | 8,111 | 962 |
(In won) | One Store Co., Ltd. |
DREAMUS COMPANY | ||||||||||||||
1-1 | 1-2 | 1-3 | ||||||||||||||
Risk-free interest rate |
2.58 | % | 1.73 | % | 1.77 | % | 1.82 | % | ||||||||
Estimated options life |
6 years | | | | ||||||||||||
Share price (Closing price on the preceding day) |
4,925 | 8,950 | 8,950 | 8,950 | ||||||||||||
Expected volatility |
9.25 | % | 32.34 | % | 32.34 | % | 32.34 | % | ||||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||
Exercise price |
5,390 | 9,160 | 9,160 | 9,160 | ||||||||||||
Per-share fair value of the option |
566 | 1,976 | 2,189 | 2,356 |
(In won) | Incross Co., Ltd. | FSK L&S Co., Ltd. |
||||||||||||||||||||||||||||||
3 | 4 | 5 | 6 | 7 | 8 | 9 | ||||||||||||||||||||||||||
Risk-free interest rate |
2.09 | % | 1.35 | % | 1.50 | % | 1.76 | % | 1.41 | % | 1.16 | % | 1.23 | % | 1.64 | % | ||||||||||||||||
Estimated options life |
6 years | 6 years | 6 years | 6 years | 6 years | 6 years | 6 years | | ||||||||||||||||||||||||
Share price (Closing price on the preceding day) |
17,993 | 43,843 | 27,300 | 17,000 | 22,050 | 21,800 | 40,300 | 10,455 | ||||||||||||||||||||||||
Expected volatility |
20.67 | % | 18.67 | % | 21.28 | % | 25.58 | % | 42.37 | % | 41.69 | % | 51.16 | % | 16.20 | % | ||||||||||||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||||||
Exercise price |
10,571 | 17,485 | 25,861 | 16,895 | 22,073 | 26,291 | 45,280 | 10,000 | ||||||||||||||||||||||||
Per-share fair value of the option |
1,965 | 9,423 | 7,277 | 4,887 | 9,209 | 7,813 | 18,491 | 1,420 |
100
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
26. | Share option, Continued |
(3) | The Group used binomial option pricing model or Monte-Carlo simulation in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows, Continued: |
(In won) | SK Infosec. Co., Ltd.(*) | |||||||||||
1-1, 1-2 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate |
0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated options life |
2 years | 2.5 years | 3 years | |||||||||
Share price |
26,787 | 26,787 | 26,787 | |||||||||
Expected volatility |
27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price |
20,579 | 20,579 | 20,579 | |||||||||
Per-share fair value of the option |
6,051 | 7,448 | 7,571 |
(In won) | SK Infosec. Co., Ltd.(*) | |||||||||||
1-3 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate |
0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated options life |
2 years | 2.5 years | 3 years | |||||||||
Share price |
26,787 | 26,787 | 26,787 | |||||||||
Expected volatility |
27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price |
22,225 | 22,225 | 22,225 | |||||||||
Per-share fair value of the option |
5,521 | 6,531 | 6,720 |
(In won) | SK Infosec. Co., Ltd.(*) | |||||||||||
1-4 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate |
0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated options life |
2 years | 2.5 years | 3 years | |||||||||
Share price |
26,787 | 26,787 | 26,787 | |||||||||
Expected volatility |
27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price |
24,003 | 24,003 | 24,003 | |||||||||
Per-share fair value of the option |
4,948 | 5,663 | 5,909 |
(In won) | SK Infosec. Co., Ltd.(*) | |||||||||||
2-1, 2-2 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate |
0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated options life |
2 years | 2.5 years | 3 years | |||||||||
Share price |
26,787 | 26,787 | 26,787 | |||||||||
Expected volatility |
27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price |
20,807 | 20,807 | 20,807 | |||||||||
Per-share fair value of the option |
5,977 | 7,321 | 7,454 |
101
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
26. | Share option, Continued |
(3) | The Group used binomial option pricing model or Monte-Carlo simulation in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows, Continued: |
(In won) | SK Infosec. Co., Ltd.(*) | |||||||||||
2-3 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate |
0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated options life |
2 years | 2.5 years | 3 years | |||||||||
Share price |
26,787 | 26,787 | 26,787 | |||||||||
Expected volatility |
27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price |
22,472 | 22,472 | 22,472 | |||||||||
Per-share fair value of the option |
5,441 | 6,393 | 6,592 |
(In won) | SK Infosec. Co., Ltd.(*) | |||||||||||
2-4 | ||||||||||||
1st exercise | 2nd exercise | 3rd exercise | ||||||||||
Risk-free interest rate |
0.89 | % | 0.97 | % | 0.97 | % | ||||||
Estimated options life |
2 years | 2.5 years | 3 years | |||||||||
Share price |
26,787 | 26,787 | 26,787 | |||||||||
Expected volatility |
27.87 | % | 27.87 | % | 27.87 | % | ||||||
Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
Exercise price |
24,270 | 24,270 | 24,270 | |||||||||
Per-share fair value of the option |
4,862 | 5,547 | 5,800 |
(*) | The share option has transferred from Life & Security Holdings Co., Ltd. due to the business combination. |
As One Store Co., Ltd., FSK L&S Co., Ltd., and SK Infosec Co., Ltd., the subsidiaries of the Parent Company, are unlisted, the share price is calculated using the discounted cash flow model.
27. | Retained Earnings |
(1) | Retained earnings as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Appropriated: |
||||||||
Legal reserve |
22,320 | |||||||
Reserve for business expansion |
11,631,138 | 11,531,138 | ||||||
Reserve for technology development |
4,365,300 | 4,265,300 | ||||||
|
|
|
|
|||||
15,996,438 | 15,796,438 | |||||||
Unappropriated |
6,963,155 | 6,409,925 | ||||||
|
|
|
|
|||||
22,228,683 | ||||||||
|
|
|
|
102
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
27. | Retained Earnings, Continued |
(2) | Legal reserve |
The Korean Commercial Act requires the Parent Company to appropriate as a legal reserve at least 10% of cash dividends paid for each accounting period until the reserve equals 50% of outstanding share capital. The legal reserve may not be utilized for cash dividends, but may only be used to offset a future deficit, if any, or may be transferred to share capital.
28. | Reserves |
(1) | Details of reserves, net of taxes, as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Valuation gain (loss) on FVOCI |
(47,086 | ) | ||||||
Other comprehensive loss of investments in associates and joint ventures |
(392,333 | ) | (278,142 | ) | ||||
Valuation gain (loss) on derivatives |
17,615 | (920 | ) | |||||
Foreign currency translation differences for foreign operations |
(24,122 | ) | (3,428 | ) | ||||
|
|
|
|
|||||
(329,576 | ) | |||||||
|
|
|
|
(2) | Changes in reserves for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||
Valuation gain (loss) on financial assets at FVOCI |
Other comprehensive income (loss) of investments in associates and joint ventures |
Valuation gain (loss) on derivatives |
Foreign currency translation differences for foreign operations |
Total | ||||||||||||||||
Balance at January 1, 2019 |
(334,637) | (41,601) | 2,920 | (373,442) | ||||||||||||||||
Changes, net of taxes |
(46,962) | 56,495 | 40,681 | (6,348) | 43,866 | |||||||||||||||
Balance at December 31, 2019 |
(278,142) | (920) | (3,428) | (329,576) | ||||||||||||||||
Changes, net of taxes |
486,065 | (114,191) | 18,535 | (20,694) | 369,715 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2020 |
(392,333) | 17,615 | (24,122) | 40,139 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(3) | Changes in valuation gain (loss) on financial assets at FVOCI for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Balance at January 1 |
(124 | ) | ||||||
Amount recognized as other comprehensive income (loss) during the year, net of taxes |
486,440 | (18,472 | ) | |||||
Amount reclassified to retained earnings, net of taxes |
(375 | ) | (28,490 | ) | ||||
|
|
|
|
|||||
Balance at December 31 |
(47,086 | ) | ||||||
|
|
|
|
103
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
28. | Reserves, Continued |
(4) | Changes in valuation gain (loss) on derivatives for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Balance at January 1 |
(41,601 | ) | ||||||
Amount recognized as other comprehensive income during the year, net of taxes |
15,414 | 34,209 | ||||||
Amount reclassified to profit or loss, net of taxes |
3,121 | 6,472 | ||||||
|
|
|
|
|||||
Balance at December 31 |
(920 | ) | ||||||
|
|
|
|
29. | Redeemable convertible preferred stocks |
Eleven street Co., Ltd., a subsidiary of the Parent Company, issued redeemable convertible preferred stocks on September 7, 2018 according to the board of directors resolution. The details of the issuance are as follows:
Information of redeemable convertible preferred stocks | ||
Issuer | Eleven Street Co., Ltd. | |
Number of shares issued | 1,863,093 | |
Issue price | ||
Voting rights | 1 voting right per 1 share | |
Dividend rate(*) | 6% of the issue price per annum (cumulative, non-participating) The obligatory dividend rate of the Parent Company is 1% of the issue price per annum | |
Conversion period | From 6 months after the date of issue to 1 business day before the expiration date of the redemption period | |
Conversion ratio | [Issue price ÷ Conversion price at the date of conversion] per share | |
Conversion price | ||
Refixing clauses | In the case when spin-off, merger, split merger of the company, comprehensive stock exchange or transfer and decrease in capital, (merger and others), conversion price is subject to refixing to guarantee the value that the holder could earn the day right before the circumstances arise. In the case when this preferred share is split or merged, the conversion prices is subject to refixing to correspond with the split or merge ratio. | |
Redemption period | Two months from September 30, 2023 to December 31, 2047 at the choice of the issuer. | |
Redemption party | Eleven Street Co., Ltd. | |
Redemption price | Amounts realizing the internal rate of return to be 3.5% at the date of actual redemption | |
Liquidation preference | Preferential to the common shares |
(*) | The present value of obligatory dividends amounting to |
104
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
30. | Other Operating Expenses |
Details of other operating expenses for the years ended December 31, 2020 and 2019 are as follows:
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Communication |
43,606 | |||||||
Utilities |
341,045 | 320,474 | ||||||
Taxes and dues |
40,831 | 44,761 | ||||||
Repair |
384,328 | 358,758 | ||||||
Research and development |
416,445 | 391,327 | ||||||
Training |
35,802 | 35,004 | ||||||
Bad debt for accounts receivable trade |
48,625 | 28,841 | ||||||
Travel |
15,652 | 30,746 | ||||||
Supplies and other |
328,243 | 259,154 | ||||||
|
|
|
|
|||||
1,512,671 | ||||||||
|
|
|
|
31. | Other Non-operating Income and Expenses |
Details of other non-operating income and expenses for the years ended December 31, 2020 and 2019 are as follows:
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Other Non-operating Income: |
||||||||
Gain on disposal of property and equipment and intangible assets |
8,533 | |||||||
Gain on business transfer |
12,455 | 69,522 | ||||||
Others |
50,952 | 24,676 | ||||||
|
|
|
|
|||||
102,731 | ||||||||
|
|
|
|
|||||
Other Non-operating Expenses: |
||||||||
Impairment loss on property and equipment and intangible assets |
65,935 | |||||||
Loss on disposal of property and equipment and intangible assets |
41,598 | 47,760 | ||||||
Donations |
16,774 | 17,557 | ||||||
Bad debt for accounts receivable other |
10,559 | 5,802 | ||||||
Loss on impairment of investment assets |
| 1,670 | ||||||
Others |
65,977 | 64,926 | ||||||
|
|
|
|
|||||
203,650 | ||||||||
|
|
|
|
105
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
32. | Finance Income and Costs |
(1) | Details of finance income and costs for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Finance Income: |
||||||||
Interest income |
63,579 | |||||||
Gain on sale of accounts receivable other |
22,605 | 15,855 | ||||||
Dividends |
1,170 | 10,011 | ||||||
Gain on foreign currency transactions |
13,120 | 11,798 | ||||||
Gain on foreign currency translations |
8,928 | 4,576 | ||||||
Gain on valuation of derivatives |
101,343 | 2,499 | ||||||
Gain on settlement of derivatives |
7,829 | 29,277 | ||||||
Gain relating to financial assets at FVTPL |
35,844 | 4,504 | ||||||
Gain relating to financial liabilities at FVTPL |
| 56 | ||||||
|
|
|
|
|||||
142,155 | ||||||||
|
|
|
|
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Finance Costs: |
||||||||
Interest expense |
406,087 | |||||||
Loss on sale of accounts receivable other |
| 5,823 | ||||||
Loss on foreign currency transactions |
13,373 | 12,660 | ||||||
Loss on foreign currency translations |
12,730 | 4,948 | ||||||
Loss on disposal of long-term investment securities |
98 | | ||||||
Loss on valuation of derivatives |
13,551 | | ||||||
Loss on settlement of derivatives |
2,637 | 641 | ||||||
Loss relating to financial assets at FVTPL |
10,894 | 7,753 | ||||||
Loss relating to financial liabilities at FVTPL |
| 43 | ||||||
Other financial fees |
44,734 | | ||||||
|
|
|
|
|||||
437,955 | ||||||||
|
|
|
|
(2) | Details of interest income included in finance income for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Interest income on cash equivalents and short-term financial instruments |
29,854 | |||||||
Interest income on loans and others |
25,979 | 33,725 | ||||||
|
|
|
|
|||||
63,579 | ||||||||
|
|
|
|
106
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
32. | Finance Income and Costs, Continued |
(3) | Details of interest expenses included in finance costs for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Interest expense on borrowings |
104,991 | |||||||
Interest expense on debentures |
225,309 | 224,765 | ||||||
Others |
57,470 | 76,331 | ||||||
|
|
|
|
|||||
406,087 | ||||||||
|
|
|
|
(4) | Finance income and costs by category of financial instruments for the years ended December 31, 2020 and 2019 are as follows. Bad debt expense (reversal of loss allowance) for accounts receivable trade, loans and receivables are presented and explained separately in notes 7 and 37. |
1) | Finance income and costs |
(In millions of won) | ||||||||
2020 | ||||||||
Finance income |
Finance costs |
|||||||
Financial Assets: |
||||||||
Financial assets at FVTPL |
10,894 | |||||||
Financial assets at FVOCI |
993 | 44,832 | ||||||
Financial assets at amortized cost |
64,554 | 24,601 | ||||||
Derivatives designated as hedging instrument |
| 1,867 | ||||||
|
|
|
|
|||||
227,382 | 82,194 | |||||||
|
|
|
|
|||||
Financial Liabilities: |
||||||||
Financial liabilities at FVTPL |
| 12,115 | ||||||
Financial liabilities at amortized cost |
6,434 | 400,678 | ||||||
Derivatives designated as hedging instrument |
7,380 | 2,206 | ||||||
|
|
|
|
|||||
13,814 | 414,999 | |||||||
|
|
|
|
|||||
497,193 | ||||||||
|
|
|
|
(In millions of won) | ||||||||
2019 | ||||||||
Finance income |
Finance costs |
|||||||
Financial Assets: |
||||||||
Financial assets at FVTPL |
13,577 | |||||||
Financial assets at FVOCI |
9,924 | | ||||||
Financial assets at amortized cost |
75,119 | 17,488 | ||||||
|
|
|
|
|||||
141,996 | 31,065 | |||||||
|
|
|
|
|||||
Financial Liabilities: |
||||||||
Financial liabilities at FVTPL |
56 | 43 | ||||||
Financial liabilities at amortized cost |
103 | 406,206 | ||||||
Derivatives designated as hedging instrument |
| 641 | ||||||
|
|
|
|
|||||
159 | 406,890 | |||||||
|
|
|
|
|||||
437,955 | ||||||||
|
|
|
|
107
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
32. | Finance Income and Costs, Continued |
(4) | Finance income and costs by category of financial instruments for the years ended December 31, 2020 and 2019 are as follows. Bad debt expense (reversal of loss allowance) for accounts receivable trade, loans and receivables are presented and explained separately in notes 7 and 37, Continued. |
2) | Other comprehensive income (loss) |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Financial Assets: |
||||||||
Financial assets at FVOCI |
(17,943 | ) | ||||||
Derivatives designated as hedging instrument |
24,320 | 41,305 | ||||||
|
|
|
|
|||||
603,998 | 23,362 | |||||||
|
|
|
|
|||||
Financial Liabilities: |
||||||||
Derivatives designated as hedging instrument |
(5,182 | ) | (624 | ) | ||||
|
|
|
|
|||||
22,738 | ||||||||
|
|
|
|
(5) | Details of impairment losses for financial assets for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Accounts receivable trade |
28,841 | |||||||
Other receivables |
10,559 | 5,802 | ||||||
|
|
|
|
|||||
34,643 | ||||||||
|
|
|
|
33. | Income Tax Expense |
(1) | Income tax expenses for the years ended December 31, 2020 and 2019 consist of the following: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Current tax expense: |
||||||||
Current year |
105,859 | |||||||
Current tax of prior years |
14,536 | (6,855 | ) | |||||
|
|
|
|
|||||
301,253 | 99,004 | |||||||
|
|
|
|
|||||
Deferred tax expense: |
||||||||
Changes in net deferred tax assets |
75,249 | 201,264 | ||||||
|
|
|
|
|||||
Income tax expense |
300,268 | |||||||
|
|
|
|
108
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
33. | Income Tax Expense, Continued |
(2) | The difference between income taxes computed using the statutory corporate income tax rates and the recorded income taxes for the years ended December 31, 2020 and 2019 is attributable to the following: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Income taxes at statutory income tax rate |
308,913 | |||||||
Non-taxable income |
(41,084 | ) | (92,666 | ) | ||||
Non-deductible expenses |
31,882 | 14,630 | ||||||
Tax credit and tax reduction |
(48,774 | ) | (32,877 | ) | ||||
Changes in unrecognized deferred taxes |
(69,776 | ) | 83,940 | |||||
Changes in tax rate |
24,537 | 4,050 | ||||||
Income tax refund and others |
(26,107 | ) | 14,278 | |||||
|
|
|
|
|||||
Income tax expense |
300,268 | |||||||
|
|
|
|
(3) | Deferred taxes directly charged to (credited from) equity for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Valuation gain (loss) on financial assets measured at fair value |
2,983 | |||||||
Share of other comprehensive income (loss) of associates and joint ventures |
(14 | ) | 2,279 | |||||
Valuation gain (loss) on derivatives |
(6,886 | ) | (16,083 | ) | ||||
Remeasurement of defined benefit liabilities |
(164 | ) | 22,733 | |||||
|
|
|
|
|||||
11,912 | ||||||||
|
|
|
|
109
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
33. | Income Tax Expense, Continued |
(4) | Details of the changes in deferred tax assets (liabilities) for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||
2020 | ||||||||||||||||||||
Beginning | Deferred tax expense (income) |
Directly charged to (credited from) equity |
Business combinations |
Ending | ||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences: |
||||||||||||||||||||
Loss allowance |
1,326 | | 1,046 | 91,285 | ||||||||||||||||
Accrued interest income |
(2,039 | ) | 435 | | (27 | ) | (1,631 | ) | ||||||||||||
Financial assets measured at fair value |
98,101 | (17,586 | ) | (166,612 | ) | 5,042 | (81,055 | ) | ||||||||||||
Investments in subsidiaries, associates and joint ventures |
(1,613,048 | ) | (60,844 | ) | (14 | ) | | (1,673,906 | ) | |||||||||||
Property and equipment and intangible assets |
(371,489 | ) | (47,468 | ) | | (92,905 | ) | (511,862 | ) | |||||||||||
Provisions |
2,543 | 3,751 | | | 6,294 | |||||||||||||||
Retirement benefit obligation |
100,194 | 1,873 | (164 | ) | 382 | 102,285 | ||||||||||||||
Valuation gain on derivatives |
17,507 | 4,146 | (6,886 | ) | | 14,767 | ||||||||||||||
Gain or loss on foreign currency translation |
22,005 | (231 | ) | | | 21,774 | ||||||||||||||
Incremental costs to acquire a contract |
(829,055 | ) | 21,224 | | | (807,831 | ) | |||||||||||||
Contract assets and liabilities |
(28,030 | ) | 25,424 | | | (2,606 | ) | |||||||||||||
Right-of-use assets |
(390,936 | ) | 18,639 | | | (372,297 | ) | |||||||||||||
Lease liabilities |
385,394 | (22,918 | ) | | | 362,476 | ||||||||||||||
Others |
64,620 | (30,310 | ) | | 86,204 | 120,514 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(2,455,320 | ) | (102,539 | ) | (173,676 | ) | (258 | ) | (2,731,793 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Deferred tax assets related to unused tax loss carryforwards and tax credit carryforwards: |
||||||||||||||||||||
Tax loss carryforwards |
91,136 | (2,913 | ) | | | 88,223 | ||||||||||||||
Tax credit |
9,380 | 30,203 | | | 39,583 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
100,516 | 27,290 | | | 127,806 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(75,249 | ) | (173,676 | ) | (258 | ) | (2,603,987 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
110
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
33. Income Tax Expense, Continued
(4) | Details of the changes in deferred tax assets (liabilities) for the years ended December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||
2019 | ||||||||||||||||||||
Beginning | Deferred tax expense (income) |
Directly charged to (credited from) equity |
Business combinations |
Ending | ||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences: |
||||||||||||||||||||
Loss allowance |
(13,698 | ) | | 335 | 88,913 | |||||||||||||||
Accrued interest income |
(2,713 | ) | 691 | | (17 | ) | (2,039 | ) | ||||||||||||
Financial assets measured at fair value |
79,757 | 15,099 | 2,983 | 262 | 98,101 | |||||||||||||||
Investments in subsidiaries, associates and joint ventures |
(1,580,087 | ) | (35,222 | ) | 2,279 | (18 | ) | (1,613,048 | ) | |||||||||||
Property and equipment and intangible assets |
(415,327 | ) | 43,841 | | (3 | ) | (371,489 | ) | ||||||||||||
Provisions |
2,494 | 49 | | | 2,543 | |||||||||||||||
Retirement benefit obligation |
84,034 | (6,643 | ) | 22,733 | 70 | 100,194 | ||||||||||||||
Valuation gain on derivatives |
31,415 | 2,175 | (16,083 | ) | | 17,507 | ||||||||||||||
Gain or loss on foreign currency translation |
21,948 | 57 | | | 22,005 | |||||||||||||||
Incremental costs to acquire a contract |
(640,840 | ) | (188,215 | ) | | | (829,055 | ) | ||||||||||||
Contract assets and liabilities |
(26,458 | ) | (1,572 | ) | | | (28,030 | ) | ||||||||||||
Right-of-use assets |
(263,528 | ) | (127,408 | ) | | | (390,936 | ) | ||||||||||||
Lease liabilities |
248,244 | 137,150 | | | 385,394 | |||||||||||||||
Others |
54,341 | 10,273 | | 6 | 64,620 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(2,304,444 | ) | (163,423 | ) | 11,912 | 635 | (2,455,320 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Deferred tax assets related to unused tax loss carryforwards and tax credit carryforwards: |
||||||||||||||||||||
Tax loss carryforwards |
122,899 | (31,763 | ) | | | 91,136 | ||||||||||||||
Tax credit |
15,458 | (6,078 | ) | | | 9,380 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
138,357 | (37,841 | ) | | | 100,516 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(201,264 | ) | 11,912 | 635 | (2,354,804 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
111
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
33. | Income Tax Expense, Continued |
(5) | Details of temporary differences, unused tax loss carryforwards and unused tax credits carryforwards which are not recognized as deferred tax assets (liabilities), in the consolidated statements of financial position as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
December 31, 2020 | December 31, 2019 | |||||||
Loss allowance |
96,006 | |||||||
Investments in subsidiaries, associates and joint ventures |
8,365 | (128,339 | ) | |||||
Other temporary differences |
68,415 | 145,692 | ||||||
Unused tax loss carryforwards |
1,042,063 | 1,023,907 | ||||||
Unused tax credit carryforwards |
1,037 | 1,192 |
(6) | The amount of unused tax loss carryforwards and unused tax credit carryforwards which are not recognized as deferred tax assets as of December 31, 2020 are expiring within the following periods: |
(In millions of won) | ||||||||
Unused tax loss carryforwards | Unused tax credit carryforwards | |||||||
Less than 1 year |
20 | |||||||
1 ~ 2 years |
88,794 | 172 | ||||||
2 ~ 3 years |
70,834 | 116 | ||||||
More than 3 years |
802,710 | 729 | ||||||
|
|
|
|
|||||
1,037 | ||||||||
|
|
|
|
34. | Earnings per Share |
(1) | Basic earnings per share |
1) Basic earnings per share for the years ended December 31, 2020 and 2019 are calculated as follows:
(In millions of won, except for share data) | ||||||||
2020 | 2019 | |||||||
Basic earnings per share attributable to owners of the Parent Company: |
||||||||
Profit attributable to owners of the Parent Company |
888,698 | |||||||
Interest on hybrid bonds |
(14,766 | ) | (14,766 | ) | ||||
|
|
|
|
|||||
Profit attributable to owners of the Parent Company on common shares |
1,489,586 | 873,932 | ||||||
Weighted average number of common shares outstanding |
72,795,431 | 72,064,159 | ||||||
|
|
|
|
|||||
Basic earnings per share (in won) |
12,127 | |||||||
|
|
|
|
112
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
34. | Earnings per Share, Continued |
2) | The weighted average number of common shares outstanding for the years ended December 31, 2020 and 2019 are calculated as follows: |
(In shares) | 2020 | |||||||
Number of common shares | Weighted average number of common shares |
|||||||
Issued shares at January 1, 2020 |
80,745,711 | 80,745,711 | ||||||
Treasury shares at January 1, 2020 |
(7,609,263 | ) | (7,609,263 | ) | ||||
Acquisition of treasury shares |
(1,809,295 | ) | (341,017 | ) | ||||
|
|
|
|
|||||
71,327,153 | 72,795,431 | |||||||
|
|
|
|
(In shares) | 2019 | |||||||
Number of common shares | Weighted average number of common shares |
|||||||
Issued shares at January 1, 2019 |
80,745,711 | 80,745,711 | ||||||
Treasury shares at January 1, 2019 |
(8,875,883 | ) | (8,875,883 | ) | ||||
Disposal of treasury shares |
1,266,620 | 194,331 | ||||||
|
|
|
|
|||||
73,136,448 | 72,064,159 | |||||||
|
|
|
|
(2) | Diluted earnings per share |
1) | Diluted earnings per share for the years ended December 31, 2020 are calculated as follows: |
(In millions of won, except for share data) | 2020 | |||
Profit for the year on common shares |
||||
Adjusted weighted average number of common shares outstanding |
72,808,379 | |||
|
|
|||
Diluted earnings per share (in won) |
2) | The adjusted weighted average number of common shares outstanding for the years ended December 31, 2020 are calculated as follows: |
(In shares) | 2020 | |||
Outstanding shares at January 1, 2020 |
73,136,448 | |||
Effect of treasury shares |
(341,017 | ) | ||
Effect of share option |
12,948 | |||
|
|
|||
Adjusted weighted average number of common shares outstanding |
72,808,379 |
For the year ended December 31, 2019, diluted earnings per share are the same as basic earnings per share as there are no dilutive potential common shares.
113
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
35. | Dividends |
(1) | Details of dividends declared |
Details of dividend declared for the years ended December 31, 2020 and 2019 are as follows:
(In millions of won, except for face value and share data) | ||||||||||||||||||
Year |
Dividend type |
Number of shares outstanding |
Face value (in won) |
Dividend ratio |
Dividends | |||||||||||||
2020 | Cash dividends (Interim) | 73,136,448 | 500 | 200 | % | |||||||||||||
Cash dividends (Year-end) | 71,327,153 | 500 | 1,800 | % | 641,944 | |||||||||||||
|
|
|||||||||||||||||
|
|
|||||||||||||||||
2019 | Cash dividends (Interim) | 71,869,828 | 500 | 200 | % | |||||||||||||
Cash dividends (Year-end) | 73,136,448 | 500 | 1,800 | % | 658,228 | |||||||||||||
|
|
|||||||||||||||||
|
|
(2) | Dividends yield ratio |
Dividends yield ratios for the years ended December 31, 2020 and 2019 are as follows:
(In won)
Year |
Dividend type |
Dividend per share |
Closing price at year-end |
Dividend yield ratio |
||||||||||
2020 | Cash dividends | 10,000 | 238,000 | 4.20 | % | |||||||||
2019 | Cash dividends | 10,000 | 238,000 | 4.20 | % |
36. | Categories of Financial Instruments |
(1) | Financial assets by category as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Financial assets at FVTPL |
Equity instruments at FVOCI |
Debt instruments at FVOCI |
Financial assets at amortized cost |
Derivatives hedging instrument |
Total | |||||||||||||||||||
Cash and cash equivalents |
| | 1,369,653 | | 1,369,653 | |||||||||||||||||||
Financial instruments |
| | | 1,427,845 | | 1,427,845 | ||||||||||||||||||
Short-term investment securities |
150,392 | | | | | 150,392 | ||||||||||||||||||
Long-term investment securities(*) |
193,396 | 1,454,361 | 1,080 | | | 1,648,837 | ||||||||||||||||||
Accounts receivable trade |
| | | 2,214,353 | | 2,214,353 | ||||||||||||||||||
Loans and other receivables |
517,175 | | | 1,220,828 | | 1,738,003 | ||||||||||||||||||
Derivative financial assets |
99,559 | | | | 65,136 | 164,695 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
1,454,361 | 1,080 | 6,232,679 | 65,136 | 8,713,778 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | The Group designated |
114
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
36. | Categories of Financial Instruments, Continued |
(1) | Financial assets by category as of December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Financial assets at FVTPL |
Equity instruments at FVOCI |
Debt instruments at FVOCI |
Financial assets at amortized cost |
Derivatives hedging instrument |
Total | |||||||||||||||||||
Cash and cash equivalents |
| | 1,270,824 | | 1,270,824 | |||||||||||||||||||
Financial instruments |
| | | 831,637 | | 831,637 | ||||||||||||||||||
Short-term investment securities |
166,666 | | | | | 166,666 | ||||||||||||||||||
Long-term investment securities(*) |
142,316 | 710,272 | 4,627 | | | 857,215 | ||||||||||||||||||
Accounts receivable trade |
| | | 2,247,895 | | 2,247,895 | ||||||||||||||||||
Loans and other receivables |
532,225 | | | 1,136,332 | | 1,668,557 | ||||||||||||||||||
Derivative financial assets |
6,074 | | | | 144,886 | 150,960 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
710,272 | 4,627 | 5,486,688 | 144,886 | 7,193,754 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | The Group designated |
(2) | Financial liabilities by category as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | December 31, 2020 | |||||||||||||||
Financial liabilities at FVTPL |
Financial liabilities at amortized cost |
Derivatives hedging instrument |
Total | |||||||||||||
Accounts payable trade |
372,909 | | 372,909 | |||||||||||||
Derivative financial liabilities |
333,099 | | 42,061 | 375,160 | ||||||||||||
Borrowings |
| 2,138,922 | | 2,138,922 | ||||||||||||
Debentures |
| 8,579,743 | | 8,579,743 | ||||||||||||
Lease liabilities(*) |
| 1,436,777 | | 1,436,777 | ||||||||||||
Accounts payable other and others |
| 6,051,550 | | 6,051,550 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
18,579,901 | 42,061 | 18,955,061 | ||||||||||||||
|
|
|
|
|
|
|
|
(In millions of won) | December 31, 2019 | |||||||||||
Financial liabilities at amortized cost |
Derivatives hedging instrument |
Total | ||||||||||
Accounts payable trade |
| 438,297 | ||||||||||
Derivative financial liabilities |
| 1,043 | 1,043 | |||||||||
Borrowings |
2,043,140 | | 2,043,140 | |||||||||
Debentures |
8,220,833 | | 8,220,833 | |||||||||
Lease liabilities(*) |
1,291,007 | | 1,291,007 | |||||||||
Accounts payable other and others |
6,562,612 | | 6,562,612 | |||||||||
|
|
|
|
|
|
|||||||
1,043 | 18,556,932 | |||||||||||
|
|
|
|
|
|
(*) | Lease liabilities are not applicable on category of financial liabilities, but are classified as financial liabilities measured at amortized cost on consideration of nature for measurement of liabilities. |
115
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
37. | Financial Risk Management |
(1) | Financial risk management |
The Group is exposed to credit risk, liquidity risk and market risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates and interest rates. The Group implements a risk management system to monitor and manage these specific risks.
The Groups financial assets consist of cash and cash equivalents, financial instruments, investment securities, accounts receivable trade and other, etc. Financial liabilities consist of accounts payable trade and other, borrowings, debentures, lease liabilities and others.
1) Market risk
(i) Currency risk
The Group incurs exchange position due to revenue and expenses from its global operations. Major foreign currencies where the currency risk occur are USD, EUR and JPY. The Group determines the currency risk management policy after considering the nature of business and the presence of methods that mitigate the currency risk for each Group entities. Currency risk occurs on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of each Group entity. The Group manages currency risk arising from business transactions by using currency forwards, etc.
Monetary assets and liabilities denominated in foreign currencies as of December 31, 2020 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Foreign currencies |
Won equivalent |
Foreign currencies |
Won equivalent |
|||||||||||||
USD |
84,581 | 1,541,544 | ||||||||||||||
EUR |
10,903 | 14,591 | 2,519 | 3,370 | ||||||||||||
JPY |
672,311 | 7,088 | 22,778 | 240 | ||||||||||||
Others |
| 2,702 | | 606 | ||||||||||||
|
|
|
|
|||||||||||||
|
|
|
|
In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (See note 22)
As of December 31, 2020 a hypothetical change in exchange rates by 10% would have increased (decreased) the Groups income before income tax as follows:
(In millions of won) | ||||||||
If increased by 10% | If decreased by 10% | |||||||
USD |
(5,507 | ) | ||||||
EUR |
1,122 | (1,122 | ) | |||||
JPY |
685 | (685 | ) | |||||
Others |
210 | (210 | ) | |||||
|
|
|
|
|||||
(7,524 | ) | |||||||
|
|
|
|
116
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
37. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk |
The interest rate risk of the Group arises from borrowings, debenture and long-term payables other. Since the Groups interest bearing assets are mostly fixed-interest bearing assets, the Groups revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.
The Group performs various analysis to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Group takes various measures such as refinancing, renewal, alternative financing and hedging.
As of December 31,
2020, the floating-rate borrowings and bonds of the Group are 121,750 million and W326,400 million, respectively, and the Group has entered into interest rate swap
agreements, as described in note 22, for the most of all floating-rate borrowings and debentures to hedge interest rate risk. If the interest rate increases (decreases) 1% with all other variables held constant, income before income taxes would
change by W470 million in relation to interest expenses on floating-rate borrowings that are exposed to interest rate risk, which would also change the year-end balance
of shareholders equity by the same amount. W
As of December 31, 2020, the floating-rate long-term payables other are
1,626,040 million. If the interest rate increases (decreases) 1% with all other variables held constant, income before income taxes for the year ended December 31, 2020 would change by
W 16,260 million in relation to floating-rate long-term payables - other that are exposed to interest rate risk. W
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as IBOR reform). The Group has exposures to IBORs on its financial instruments that will be replaced or reformed as part of these market-wide initiatives. There is uncertainty over the timing and the methods of transition in some jurisdictions that the Group operates in. The Group anticipates that IBOR reform will impact its risk management and hedge accounting.
Derivatives
The Group holds interest rate swaps for risk management purposes which are designated in cash flow hedging relationships. The interest rate swaps have floating legs that are indexed to LIBOR. The Groups derivative instruments are governed by contracts based on the International Swaps and Derivatives Association (ISDA)s master agreements.
ISDA is currently reviewing its standardized contracts in the light of IBOR reform and plans to amend certain floating-rate options in the 2006 ISDA definitions to include fallback clauses that would apply on the permanent discontinuation of certain key IBORs. ISDA is expected to publish an IBOR fallback supplement to amend the 2006 ISDA definitions and an IBOR fallback protocol to facilitate multilateral amendments to include the amended floating-rate options in derivative transactions that were entered into before the date of the supplement. The Group currently plans to adhere to the protocol if and when it is finalized and to monitor whether its counterparties will also adhere. If this plan changes or there are counterparties who will not adhere to the protocol, the Group will negotiate with them bilaterally about including new fallback clauses.
117
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
37. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk, Continued |
Hedge accounting
The Group has evaluated the extent to which its cash flow hedging relationships are subject to uncertainty driven by IBOR reform as of December 31, 2020. The Groups hedged items and hedging instruments continue to be indexed to LIBOR. These benchmark rates are quoted each day and the IBOR cash flows are exchanged with counterparties as usual.
However, the Groups LIBOR cash flow hedging relationships extend beyond the anticipated cessation date for LIBOR. The Group expects that LIBOR will be discontinued after the end of 2021. As of December 31, 2020, the Group has not determined the alternative interest rate benchmark to LIBOR and there is uncertainty about when and how replacement may occur with respect to the relevant hedged items and hedging instruments. Such uncertainty may impact the hedging relationship. The Group applies the amendments to K-IFRS No. 1109, Financial Instruments issued in 2020 to those hedging relationships directly affected by IBOR reform.
Hedging relationships impacted by IBOR reform may experience ineffectiveness attributable to market participants expectations of when the shift from the existing IBOR benchmark rate to an alternative benchmark interest rate will occur. This transition may occur at different times for the hedged item and hedging instrument, which may lead to hedge ineffectiveness. The Group has measured its hedging instruments indexed to LIBOR using available quoted market rates for LIBOR-based instruments of the same tenor and similar maturity and has measured the cumulative change in the present value of hedged cash flows attributable to changes in LIBOR on a similar basis.
2) | Credit risk |
The maximum credit exposure as of December 31, 2020 and 2019 are as follows:
(In millions of won) | ||||||||
December 31, 2020 |
December 31, 2019 |
|||||||
Cash and cash equivalents |
1,270,572 | |||||||
Financial instruments |
1,427,845 | 831,637 | ||||||
Investment securities |
4,154 | 13,548 | ||||||
Accounts receivable trade |
2,214,353 | 2,247,895 | ||||||
Contract assets |
148,281 | 191,858 | ||||||
Loans and other receivables |
1,738,003 | 1,668,557 | ||||||
Derivative financial assets |
164,695 | 150,960 | ||||||
|
|
|
|
|||||
6,375,027 | ||||||||
|
|
|
|
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To manage credit risk, the Group evaluates the credit worthiness of each customer or counterparty considering the partys financial information, its own trading records and other factors. Based on such information, the Group establishes credit limits for each customer or counterparty.
118
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
37. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk, Continued |
(i) | Accounts receivable trade and contract assets |
The Group establishes a loss allowance in respect of accounts receivable trade and contract assets. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Details of changes in loss allowance during the year ended December 31, 2020 are included in note 7.
(ii) | Debt investments |
The credit risk arises from debt investments included in 1,427,845 million of financial instruments,
W4,154 million of investment securities and W1,738,003 million of loans and other receivables. To limit the exposure to this risk, the Group transacts only with financial
institutions with credit ratings that are considered to be low credit risk. W
Most of the Groups debt investments are considered to have a low risk of default and the borrower has a strong capacity to meet its contractual cash flow obligations in the near term. Thus the Group measured the loss allowance for the debt investments at an amount equal to 12-month expected credit losses.
Meanwhile, the Group monitors changes in credit risk at each reporting date. The Group recognized the loss allowance at an amount equal to lifetime expected credit losses when the credit risk on the debt investments is assumed to have increased significantly if it is more than 30 days past due.
The Groups maximum exposure to credit risk is equal to each financial assets carrying amount. The gross carrying amounts of each financial asset except for the accounts receivable trade and derivative financial assets as of December 31, 2020 are as follows.
(In millions of won) | ||||||||||||||||||||
Financial assets at FVTPL |
Financial assets at FVOCI |
At amortized cost | ||||||||||||||||||
|
12-month ECL | Lifetime ECL not credit impaired |
Lifetime ECL credit impaired |
|||||||||||||||||
Gross amount |
1,080 | 2,517,685 | 105,878 | 125,674 | ||||||||||||||||
Loss allowance |
| | (3,751 | ) | (7,995 | ) | (88,819 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Carrying amount |
1,080 | 2,513,934 | 97,883 | 36,855 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
119
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
37. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) Credit risk, Continued
(ii) Debt investments, Continued
Changes in the loss allowance for the debt investments during the year ended December 31, 2020 are as follows:
(In millions of won) | ||||||||||||||||
12-month ECL | Lifetime ECL not credit impaired |
Lifetime ECL credit impaired |
Total | |||||||||||||
December 31, 2019 |
8,704 | 83,953 | 96,898 | |||||||||||||
Remeasurement of loss allowance, net |
834 | 2,321 | 7,404 | 10,559 | ||||||||||||
Transfer to lifetime ECL not credit impaired |
(334 | ) | 334 | | | |||||||||||
Transfer to lifetime ECL credit impaired |
(990 | ) | (2,357 | ) | 3,347 | | ||||||||||
Amounts written off |
| | (12,208 | ) | (12,208 | ) | ||||||||||
Recovery of amounts written off |
| | 6,323 | 6,323 | ||||||||||||
Other |
| (1,007 | ) | | (1,007 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2020 |
7,995 | 88,819 | 100,565 | |||||||||||||
|
|
|
|
|
|
|
|
(iii) Cash and cash equivalents
The Group has W1,369,423 million as of December 31, 2020 (W1,270,572 million as of
December 31, 2019) cash and cash equivalents with banks and financial institutions above specific credit ratings.
Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Group considered that its cash and cash equivalents have low credit risk based on the credit ratings of the counterparties assigned by external credit rating agencies.
120
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
37. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
3) Liquidity risk
The Groups approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalents balances and have enough liquidity through various committed credit lines. The Group maintains enough liquidity within credit lines through active operating activities.
Contractual maturities of financial liabilities as of December 31, 2020 are as follows:
(In millions of won) | ||||||||||||||||||||||||
Carrying amount |
Contractual cash flows |
Less than 1 year |
1 - 5 years | More than 5 years |
||||||||||||||||||||
Accounts payable trade |
372,909 | 372,909 | 372,909 | | | |||||||||||||||||||
Borrowings(*) |
2,138,923 | 2,467,988 | 225,657 | 2,242,331 | | |||||||||||||||||||
Debentures (*) |
8,579,743 | 9,749,762 | 1,106,505 | 5,680,403 | 2,962,854 | |||||||||||||||||||
Lease liabilities |
1,436,777 | 1,537,279 | 365,925 | 826,331 | 345,023 | |||||||||||||||||||
Accounts payable other and others (*) |
6,051,550 | 6,145,185 | 4,920,324 | 849,013 | 375,848 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
18,579,902 | 20,273,123 | 6,991,320 | 9,598,078 | 3,683,725 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | Includes interest payables. |
The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.
As of December 31, 2020, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:
(In millions of won) | ||||||||||||||||||||||||
Carrying amount |
Contractual cash flows |
Less than 1 year |
1 - 5 years | More than 5 years |
||||||||||||||||||||
Assets |
65,136 | 65,637 | 20,211 | 52,651 | (7,225 | ) | ||||||||||||||||||
Liabilities |
(42,061 | ) | (43,076 | ) | (1,740 | ) | (41,336 | ) | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
23,075 | 22,561 | 18,471 | 11,315 | (7,225 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
121
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
37. | Financial Risk Management, Continued |
(2) | Capital management |
The Group manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity structure. The overall strategy of the Group is the same as that of the Group as of and for the year ended December 31, 2019.
The Group monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity; both are from the financial statements.
Debt-equity ratio as of December 31, 2020, 2019 and January 1, 2019 are as follows:
(In millions of won) | ||||||||
December 31, 2020 |
December 31, 2019 |
|||||||
Total liabilities |
22,385,434 | |||||||
Total equity |
24,396,243 | 22,816,934 | ||||||
|
|
|
|
|||||
Debt-equity ratios |
96.37 | % | 98.11 | % | ||||
|
|
|
|
(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2020 are as follows: |
(In millions of won) | December 31, 2020 | |||||||||||||||||||
Carrying amount |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: |
||||||||||||||||||||
FVTPL |
60,473 | 629,732 | 270,317 | 960,522 | ||||||||||||||||
Derivatives hedging instruments |
65,136 | | 65,136 | | 65,136 | |||||||||||||||
FVOCI |
1,455,441 | 885,452 | | 569,989 | 1,455,441 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
945,925 | 694,868 | 840,306 | 2,481,099 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Financial liabilities that are measured at fair value: |
||||||||||||||||||||
FVTPL |
| | 333,099 | 333,099 | ||||||||||||||||
Derivative hedging instruments |
42,061 | | 42,061 | | 42,061 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 42,061 | 333,099 | 375,160 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Financial liabilities that are not measured at fair value: |
||||||||||||||||||||
Borrowings |
| 2,282,316 | | 2,282,316 | ||||||||||||||||
Debentures |
8,579,743 | | 9,085,324 | | 9,085,324 | |||||||||||||||
Long-term payables other |
1,566,954 | | 1,582,805 | | 1,582,805 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 12,950,445 | | 12,950,445 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
122
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
37. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
2) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2019 are as follows: |
(In millions of won) | December 31, 2019 | |||||||||||||||||||
Carrying amount |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: |
||||||||||||||||||||
FVTPL |
| 668,891 | 178,390 | 847,281 | ||||||||||||||||
Derivatives hedging instruments |
144,886 | | 144,886 | | 144,886 | |||||||||||||||
FVOCI |
714,899 | 407,651 | | 307,248 | 714,899 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
407,651 | 813,777 | 485,638 | 1,707,066 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Financial liabilities that are measured at fair value: |
||||||||||||||||||||
Derivative hedging instruments |
| 1,043 | | 1,043 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Financial liabilities that are not measured at fair value: |
||||||||||||||||||||
Borrowings |
| 2,191,037 | | 2,191,037 | ||||||||||||||||
Debentures |
8,220,833 | | 8,714,408 | | 8,714,408 | |||||||||||||||
Long-term payables other |
1,974,006 | | 2,008,493 | | 2,008,493 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 12,913,938 | | 12,913,938 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.
Fair value of the financial instruments that are traded in an active market (financial assets at FVOCI) is measured based on the bid price at the end of the reporting date.
The Group uses various valuation methods for determination of fair value of financial instruments that are not traded in an active market. Derivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods such as discounted cash flow and market approach. Inputs used to such valuation methods include swap rate, interest rate, and risk premium, and the Group performs valuation using the inputs which are consistent with natures of assets and liabilities measured.
Interest rates used by the Group for the fair value measurement as of December 31, 2020 are as follows:
Interest rate | ||||
Derivative instruments |
0.14% ~ 3.90% | |||
Borrowings and debentures |
0.99% ~ 2.21% | |||
Long-term payables other |
0.90% ~ 1.72% |
123
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
37. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
3) | There have been no transfers between Level 2 and Level 1 for year ended December 31, 2020. The changes of financial assets classified as Level 3 for the year ended December 31, 2020 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||
Balance at January 1, 2020 |
Gain (loss) for the year |
OCI | Acquisition | Disposal | Transfer | Business combinations |
Balance at December 31, 2020 |
|||||||||||||||||||||||||
Financial assets |
| |||||||||||||||||||||||||||||||
FVTPL |
103,327 | (8,266 | ) | 60,576 | (39,570 | ) | (24,156 | ) | 16 | 270,317 | ||||||||||||||||||||||
FVOCI |
307,248 | (98 | ) | 230,526 | 37,381 | (5,154 | ) | (6,137 | ) | 6,223 | 569,989 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
103,229 | 222,260 | 97,957 | (44,724 | ) | (30,293 | ) | 6,239 | 840,306 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Financial liabilities |
| |||||||||||||||||||||||||||||||
(12,115 | ) | | | | | (320,984 | ) | (333,099 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) | Enforceable master netting agreement or similar agreement |
Carrying amount of financial instruments recognized of which offset agreements are applicable as of December 31, 2020 and 2019 are as follows:
(In millions of won) | December 31, 2020 | |||||||||||||||||||
Gross financial instruments recognized |
Amount offset | Net financial instruments presented on the statements of financial position |
Relevant financial instruments not offset |
Net amount | ||||||||||||||||
Financial assets: |
||||||||||||||||||||
Derivative instruments(*) |
| 8,015 | (453 | ) | 7,562 | |||||||||||||||
Accounts receivable trade and others |
317,332 | (203,403 | ) | 113,929 | | 113,929 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(203,403 | ) | 121,944 | (453 | ) | 121,491 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Financial liabilities: |
||||||||||||||||||||
Derivative instruments(*) |
| 453 | (453 | ) | | |||||||||||||||
Accounts payable other and others |
301,996 | (203,403 | ) | 98,593 | | 98,593 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
(203,403 | ) | 99,046 | (453 | ) | 98,593 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
(*) | The balance represents the net amount under the standard terms and conditions of International Swaps and Derivatives Association. |
124
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
37. | Financial Risk Management, Continued |
(4) | Enforceable master netting agreement or similar agreement, Continued |
Carrying amount of financial instruments recognized of which offset agreements are applicable as of December 31, 2020 and 2019 are as follows, Continued:
(In millions of won) | December 31, 2019 | |||||||||||
Gross financial instruments recognized |
Amount offset | Net financial instruments presented on the statements of financial position |
||||||||||
Financial assets: |
||||||||||||
Accounts receivable trade and others |
(100,895 | ) | 1,346 | |||||||||
|
|
|
|
|
|
|||||||
Financial liabilities: |
||||||||||||
Accounts payable other and others |
(100,895 | ) | | |||||||||
|
|
|
|
|
|
38. | Transactions with Related Parties |
(1) | List of related parties |
Relationship |
Company | |
Ultimate Controlling Entity |
SK Holdings Co., Ltd. | |
Joint ventures |
Dogus Planet, Inc. and 4 others | |
Associates |
SK hynix Inc. and 55 others | |
Others |
The Ultimate Controlling Entitys subsidiaries and associates, etc. |
For the periods presented, the Group belongs to SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act of the Republic of Korea. All of the other entities included in SK Group are considered related parties of the Group.
(2) | Compensation for the key management |
The Parent Company considers registered directors (3 executive and 5 non-executive directors) who have substantial role and responsibility in planning, operations, and relevant controls of the business as key management. The compensation given to such key management for the years ended December 31, 2020 and 2019 are as follows:
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Salaries |
5,969 | |||||||
Defined benefits plan expenses |
3,459 | 1,237 | ||||||
Share option |
158 | 325 | ||||||
|
|
|
|
|||||
7,531 | ||||||||
|
|
|
|
Compensation for the key management includes salaries, non-monetary salaries, and retirement benefits made in relation to the pension plan and compensation expenses related to share options granted.
125
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
38. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | 2020 | |||||||||||||||
Scope |
Company | Operating revenue and others |
Operating expense and others(*1) |
Acquisition of property and equipment |
||||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd.(*2) | 596,509 | 76,534 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Associates |
F&U Credit information Co., Ltd. | 3,484 | 51,228 | | ||||||||||||
SK hynix Inc(*3) | 316,001 | 267 | | |||||||||||||
KEB HanaCard Co., Ltd. | 683 | 3,065 | | |||||||||||||
SK Wyverns Co., Ltd. | 1,279 | 19,354 | | |||||||||||||
Content Wavve Co., Ltd. | 446 | 56,631 | | |||||||||||||
Others(*4) | 65,431 | 12,511 | 78 | |||||||||||||
|
|
|
|
|
|
|||||||||||
387,324 | 143,056 | 78 | ||||||||||||||
|
|
|
|
|
|
|||||||||||
Others |
SK Engineering & Construction Co., Ltd. | 12,349 | 238 | | ||||||||||||
SK Innovation Co., Ltd. | 38,999 | 18,464 | | |||||||||||||
SK Networks Co., Ltd.(*5) | 13,893 | 1,022,976 | 32 | |||||||||||||
SK Networks Services Co., Ltd. | 6,936 | 76,653 | 2,023 | |||||||||||||
SK Telesys Co., Ltd. | 388 | 10,751 | 30,453 | |||||||||||||
SK TNS Co., Ltd. | 1,118 | 43,767 | 496,460 | |||||||||||||
SK Energy Co., Ltd. | 16,009 | 296 | | |||||||||||||
SK hynix Semiconductor (China) Ltd. | 73,683 | | | |||||||||||||
SK Battery Hungary Krt | 19,394 | | | |||||||||||||
SK Global Chemical Co., Ltd. | 20,667 | 9 | | |||||||||||||
|
SK Global Chemical International Trading (Shanghai) Co., Ltd. |
15,898 | 8 | | ||||||||||||
HappyNarae Co., Ltd. | 9,871 | 17,361 | 129,621 | |||||||||||||
Others | 102,141 | 128,268 | 83,693 | |||||||||||||
|
|
|
|
|
|
|||||||||||
331,346 | 1,318,791 | 742,282 | ||||||||||||||
|
|
|
|
|
|
|||||||||||
2,058,356 | 818,894 | |||||||||||||||
|
|
|
|
|
|
(*1) | Operating expense and others include lease payments by the Group. |
(*2) | Operating expense and others include |
(*3) | Operating revenue and others include |
(*4) | Operating revenue and others include |
(*5) | Operating expenses and others include costs for handset purchases amounting to
|
126
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
38. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | 2019 | |||||||||||||
Scope |
Company |
Operating revenue and others |
Operating expense and others(*1) |
Acquisition of property and equipment |
||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd.(*2) |
612,248 | 95,426 | |||||||||||
|
|
|
|
|
|
|
||||||||
Associates |
F&U Credit information Co., Ltd. |
2,293 | 55,179 | | ||||||||||
SK hynix Inc(*3) |
273,047 | 481 | | |||||||||||
KEB HanaCard Co., Ltd. |
832 | 1,901 | | |||||||||||
SK Wyverns Co., Ltd. |
1,399 | 21,528 | | |||||||||||
Others(*4) |
17,286 | 13,864 | 457 | |||||||||||
|
|
|
|
|
|
|||||||||
294,857 | 92,953 | 457 | ||||||||||||
|
|
|
|
|
|
|||||||||
Others |
SK Engineering & Construction Co., Ltd. |
13,339 | 1,601 | 7,400 | ||||||||||
SK Innovation Co., Ltd. |
26,697 | 2,777 | | |||||||||||
SK Networks Co., Ltd.(*5) |
29,321 | 1,088,443 | 449 | |||||||||||
SK Networks Services Co., Ltd. |
1,056 | 76,671 | 4,979 | |||||||||||
SK Telesys Co., Ltd. |
474 | 9,686 | 59,392 | |||||||||||
SK TNS Co., Ltd. |
240 | 35,824 | 607,546 | |||||||||||
SK Energy Co., Ltd. |
16,294 | 516 | | |||||||||||
SK hynix Semiconductor (China) Ltd. |
73,542 | | | |||||||||||
SK Global Chemical International |
14,535 | 131 | | |||||||||||
HappyNarae Co., Ltd. |
6,943 | 18,121 | 168,286 | |||||||||||
Others |
90,307 | 105,569 | 109,189 | |||||||||||
|
|
|
|
|
|
|||||||||
272,748 | 1,339,339 | 957,241 | ||||||||||||
|
|
|
|
|
|
|||||||||
2,044,540 | 1,053,124 | |||||||||||||
|
|
|
|
|
|
(*1) | Operating expense and others include lease payments by the Group. |
(*2) | Operating expense and others include |
(*3) | Operating revenue and others include |
(*4) | Operating revenue and others include |
(*5) | Operating expenses and others include costs for handset purchases amounting to
|
127
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
38. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of December 31, 2020 and 2019 are as follows: |
(In millions of won) | December 31, 2020 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope |
Company |
Loans | Accounts receivable trade, etc |
Accounts payable other, etc |
||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd. |
6,449 | 64,373 | |||||||||||
Associates |
F&U Credit information Co., Ltd. |
| 10 | 4,699 | ||||||||||
SK hynix Inc. |
| 33,773 | 128 | |||||||||||
Wave City Development Co., Ltd.(*1) |
| 25,782 | | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) |
22,147 | 2,779 | | |||||||||||
KEB HanaCard Co., Ltd. |
| 352 | 145,328 | |||||||||||
Content Wavve Co., Ltd. |
| 283 | 2,491 | |||||||||||
Others | | 9,098 | 1,686 | |||||||||||
|
|
|
|
|
|
|||||||||
22,147 | 72,077 | 154,332 | ||||||||||||
|
|
|
|
|
|
|||||||||
Others |
SK Engineering & Construction Co., Ltd. |
| 1,521 | 152 | ||||||||||
SK Innovation Co., Ltd. |
| 11,737 | 44,105 | |||||||||||
SK Networks. Co., Ltd. |
| 2,245 | 108,233 | |||||||||||
SK Networks Services Co., Ltd. |
| 579 | 7,103 | |||||||||||
SK Telesys Co., Ltd. |
| 37 | 9,253 | |||||||||||
SK TNS Co., Ltd. |
| 263 | 89,915 | |||||||||||
SK Energy Co., Ltd. |
| 3,502 | 1,837 | |||||||||||
SK hystec Co., Ltd. |
| 494 | 6,085 | |||||||||||
SK hynix Semiconductor (China) Ltd. |
| 5,896 | | |||||||||||
SK Battery Hungary Krt | | 2,075 | | |||||||||||
SK Global Chemical Co., Ltd. | | 1,142 | 5 | |||||||||||
SK Global Chemical International Trading (Shanghai) Co., Ltd. |
| 795 | 21 | |||||||||||
HappyNarae Co., Ltd. |
| 720 | 16,534 | |||||||||||
Others | | 15,564 | 120,575 | |||||||||||
|
|
|
|
|
|
|||||||||
| 46,570 | 403,818 | ||||||||||||
|
|
|
|
|
|
|||||||||
125,096 | 622,523 | |||||||||||||
|
|
|
|
|
|
(*1) | As of December 31, 2020, the Parent Company recognized loss allowance amounting to
|
(*2) | As of December 31, 2020, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
128
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
38. | Transactions wiith Related Parties, Continued |
(4) | Account balances with related parties as of December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | December 31, 2019 | |||||||||||||||
Receivables | Payables | |||||||||||||||
Scope |
Company | Loans | Accounts receivable trade, etc |
Accounts payable other, etc |
||||||||||||
Ultimate Controlling Entity |
SK Holdings Co., Ltd. | 7,941 | 87,458 | |||||||||||||
Associates |
F&U Credit information Co., Ltd. | | 2 | 4,869 | ||||||||||||
SK hynix Inc. | | 21,510 | 100 | |||||||||||||
|
Wave City Development Co., Ltd.(*1) |
|
| 31,523 | | |||||||||||
|
Daehan Kanggun BcN Co., Ltd.(*2) |
|
22,147 | 5,359 | | |||||||||||
KEB HanaCard Co., Ltd. | | 1,025 | 9,474 | |||||||||||||
Others | 204 | 2,490 | 2,262 | |||||||||||||
|
|
|
|
|
|
|||||||||||
22,351 | 61,909 | 16,705 | ||||||||||||||
|
|
|
|
|
|
|||||||||||
Others |
|
SK Engineering & Construction Co., Ltd. |
|
| 4,422 | 97 | ||||||||||
SK Innovation Co., Ltd. | | 7,496 | 43,791 | |||||||||||||
SK Networks. Co., Ltd. | | 3,469 | 76,993 | |||||||||||||
SK Networks Services Co., Ltd. | | | 10,900 | |||||||||||||
SK Telesys Co., Ltd. | | 30 | 16,337 | |||||||||||||
SK TNS Co., Ltd. | | 14 | 200,703 | |||||||||||||
SK Energy Co., Ltd. | | 2,757 | 1,954 | |||||||||||||
SK hystec Co., Ltd. | | 848 | 687 | |||||||||||||
|
SK hynix Semiconductor (China) Ltd. |
|
| 8,556 | | |||||||||||
Others | | 23,264 | 88,813 | |||||||||||||
|
|
|
|
|
|
|||||||||||
| 50,856 | 440,275 | ||||||||||||||
|
|
|
|
|
|
|||||||||||
120,706 | 544,438 | |||||||||||||||
|
|
|
|
|
|
(*1) | As of December 31, 2019, the Parent Company recognized loss allowance amounting to
|
(*2) | As of December 31, 2019, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
(5) | SK Telink Co., Ltd., a subsidiary of the Parent Company, is holding a blank note provided by SK Holdings Co., Ltd. with regards to a performance guarantee. |
(6) | The details of additional investments and disposal of associates and joint ventures for the year ended December 31, 2020 as presented in note 13. |
129
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
39. | Commitments and Contingencies |
(1) Collateral assets and commitments
SK Broadband Co., Ltd., a subsidiary of the Parent Company, has pledged its properties as collateral for leases on buildings in the amount of
W1,568 million as of December 31, 2020.
In addition, SK Infosec Co, Ltd., a subsidiary of the Parent Company,
has pledged its shares of ADT CAPS Co., Ltd., CAPSTEC Co., Ltd., and ADT SECURITY Co., Ltd. for the long-term borrowings with a face value of W1,950,000 million and Incross Co., Ltd., a subsidiary of the Parent Company, has
pledged W20,057 million of short-term financial instrument for performance guarantee as of December 31, 2020.
(2) Legal claims and litigations
As of December 31, 2020 the Group is involved in various legal claims and litigation. Provision recognized in relation to these claims and litigation is immaterial. In connection with those legal claims and litigation for which no provision was recognized, management does not believe the Group has a present obligation, nor is it expected any of these claims or litigation will have a significant impact on the Groups financial position or operating results in the event an outflow of resources is ultimately necessary.
Meanwhile, the pending litigation over the validity of partnership contract that SK Planet Co., Ltd., a subsidiary of the Parent Company, was
involved as the defendant (Plaintiff: Nonghyup Bank) was settled by the agreement between the parties during the year ended December 31, 2018. As a result of the settlement, the credit card business partnership between SK Planet Co., Ltd. and
Nonghyup Bank will be maintained until April 2021, and the Group is obligated to pay the commission fees based on the customers credit card usage until September 2021, the expiration date of the credit cards. The Group determined that the
contract and the subsidiary agreements meet the definition of an onerous contract according to K-IFRS No.1037, for which the Group recognized provisions with the best estimate of the expenditure required to
settle the present obligation at the end of the reporting period. In this regard, W18,717 million are recognized as current provisions as of December 31, 2020.
(3) Accounts receivables from sale of handsets
The sales agents of the Parent Company sell handsets to the Parent Companys subscribers on an installment basis. The Parent Company entered into comprehensive agreements to purchase accounts receivables from handset sales with retail stores and authorized dealers and to transfer the accounts receivables from handset sales to special purpose companies which were established with the purpose of liquidating receivables, respectively.
The accounts receivables from sale of handsets amounting to
W571,004 million and W646,837 million as of December 31, 2020 and 2019, respectively, which the Parent Company purchased according to the relevant comprehensive agreement are recognized as accounts
receivable other and long-term accounts receivable other.
130
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
40. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Interest income |
(63,579 | ) | ||||||
Dividends |
(1,170 | ) | (10,011 | ) | ||||
Gain on foreign currency translations |
(8,928 | ) | (4,576 | ) | ||||
Gain on valuation of derivatives |
(101,343 | ) | (2,499 | ) | ||||
Gain on settlement of derivatives |
(7,829 | ) | (29,277 | ) | ||||
Gain on sale of accounts receivable other |
(22,605 | ) | (15,855 | ) | ||||
Gain relating to investments in subsidiaries, associates and joint ventures, net |
(1,028,403 | ) | (449,543 | ) | ||||
Gain on disposal of property and equipment and intangible assets |
(35,644 | ) | (8,533 | ) | ||||
Gain on business transfer |
(12,455 | ) | (69,522 | ) | ||||
Gain relating to financial assets at FVTPL |
(35,844 | ) | (4,504 | ) | ||||
Gain relating to financial liabilities at FVTPL |
| (56 | ) | |||||
Other income |
(4,220 | ) | (1,875 | ) | ||||
Interest expenses |
399,176 | 406,087 | ||||||
Loss on foreign currency translations |
12,730 | 4,948 | ||||||
Loss on disposal of long-term investment securities |
98 | | ||||||
Loss on sale of accounts receivable other |
| 5,823 | ||||||
Income tax expense |
376,502 | 300,268 | ||||||
Expense related to defined benefit plan |
198,794 | 175,165 | ||||||
Share option |
4,313 | 2,073 | ||||||
Depreciation and amortization |
4,169,996 | 4,021,016 | ||||||
Bad debt expense |
48,625 | 28,841 | ||||||
Loss on disposal of property and equipment and intangible assets |
41,598 | 47,760 | ||||||
Loss on impairment of property and equipment and intangible assets |
208,833 | 65,935 | ||||||
Bad debt for accounts receivable other |
10,559 | 5,802 | ||||||
Loss on valuation of derivatives |
13,551 | | ||||||
Loss on settlement of derivatives |
2,637 | 641 | ||||||
Loss relating to financial assets at FVTPL |
10,894 | 7,753 | ||||||
Loss relating to financial liabilities at FVTPL |
| 43 | ||||||
Loss on impairment of investment assets |
| 1,670 | ||||||
Other expenses |
67,146 | 21,044 | ||||||
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4,435,039 | ||||||||
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131
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
40. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Accounts receivable trade |
(211,712 | ) | ||||||
Accounts receivable other |
(50,003 | ) | 48,399 | |||||
Accrued income |
| 151 | ||||||
Advanced payments |
(945 | ) | (12,204 | ) | ||||
Prepaid expenses |
112,270 | (680,925 | ) | |||||
Inventories |
(7,219 | ) | 115,893 | |||||
Long-term accounts receivable other |
26,027 | (56,216 | ) | |||||
Contract assets |
1,528 | (68,805 | ) | |||||
Guarantee deposits |
26,122 | 6,392 | ||||||
Accounts payable trade |
3,023 | (23,607 | ) | |||||
Accounts payable other |
311,737 | 167,595 | ||||||
Withholdings |
33,348 | (31,545 | ) | |||||
Contract liabilities |
35,426 | 33,574 | ||||||
Deposits received |
(1,028 | ) | (3,112 | ) | ||||
Accrued expenses |
61,848 | 116,949 | ||||||
Provisions |
(30,773 | ) | (36,478 | ) | ||||
Long-term provisions |
(548 | ) | (1,699 | ) | ||||
Plan assets |
(145,214 | ) | (130,790 | ) | ||||
Retirement benefit payment |
(76,987 | ) | (84,098 | ) | ||||
Others |
37,256 | (3,892 | ) | |||||
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(856,130 | ) | |||||||
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(3) | Significant non-cash transactions for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||
2020 | 2019 | |||||||
Increase in accounts payable other relating to the acquisition of property and equipment and intangible assets |
438,622 | |||||||
Increase of right-of-use assets |
736,157 | 1,141,349 | ||||||
Contribution in kind for investments |
4,702 | 78,900 | ||||||
Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd. |
1,072,487 | |
132
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
40. | Statements of Cash Flows, Continued |
(4) | Reconciliation of liabilities arising from financing activities for the years ended December 31, 2020 and 2019 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||
January 1, 2020 |
Cash flows | Non-cash transactions | ||||||||||||||||||||||||||
Exchange rate changes(*) |
Fair value changes |
Business combinations |
Other changes |
December 31, 2020 |
||||||||||||||||||||||||
Total liabilities from financing activities: |
| |||||||||||||||||||||||||||
Short-term borrowings |
76,375 | 13,020 | | | | 109,998 | ||||||||||||||||||||||
Long-term borrowings |
2,022,537 | (3,026 | ) | (14,208 | ) | | | 23,621 | 2,028,924 | |||||||||||||||||||
Debentures |
8,220,833 | 445,462 | (94,391 | ) | | | 7,839 | 8,579,743 | ||||||||||||||||||||
Lease liabilities |
1,291,007 | (412,666 | ) | | | 7,696 | 550,740 | 1,436,777 | ||||||||||||||||||||
Long-term payables other |
1,971,609 | (428,100 | ) | | | | 23,445 | 1,566,954 | ||||||||||||||||||||
Derivative financial liabilities |
1,043 | 8,191 | | 44,942 | | | 54,176 | |||||||||||||||||||||
Derivative financial assets |
(144,886 | ) | 28,500 | | 51,250 | | | (65,136 | ) | |||||||||||||||||||
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(285,264 | ) | (95,579 | ) | 96,192 | 7,696 | 605,645 | 13,711,436 | |||||||||||||||||||||
Other cash flows from financing activities: |
| |||||||||||||||||||||||||||
Payments of cash dividends |
||||||||||||||||||||||||||||
Payments of interest on hybrid bonds |
(14,766 | ) | ||||||||||||||||||||||||||
Acquisition of treasury shares |
(426,664 | ) | ||||||||||||||||||||||||||
Cash inflow from transactions with the non-controlling shareholders |
17,766 | |||||||||||||||||||||||||||
Cash outflow from transactions with the non-controlling shareholders |
(6,515 | ) | ||||||||||||||||||||||||||
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(1,172,315 | ) | |||||||||||||||||||||||||||
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(*) | The effect of changes in foreign exchange rates for financial liabilities at amortized cost. |
133
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
40. | Statements of Cash Flows, Continued |
(4) | Reconciliation of liabilities arising from financing activities for the years ended December 31, 2020 and 2019 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||||||
2019 | ||||||||||||||||||||||||||||
January 1, 2019 |
Cash flows | Non-cash transactions | ||||||||||||||||||||||||||
Exchange rate changes(*) |
Fair value changes |
Business combinations |
Other changes |
December 31, 2019 |
||||||||||||||||||||||||
Total liabilities from financing activities: |
| |||||||||||||||||||||||||||
Short-term borrowings |
(59,860 | ) | (2 | ) | | 465 | | 20,603 | ||||||||||||||||||||
Long-term borrowings |
2,104,996 | (89,882 | ) | 1,129 | | | 6,294 | 2,022,537 | ||||||||||||||||||||
Debentures |
7,466,852 | 693,444 | 59,157 | 223 | | 1,157 | 8,220,833 | |||||||||||||||||||||
Lease liabilities |
844,283 | (443,238 | ) | | | 955 | 889,007 | 1,291,007 | ||||||||||||||||||||
Long-term payables other |
2,393,027 | (428,153 | ) | (84 | ) | | | 6,819 | 1,971,609 | |||||||||||||||||||
Derivative financial liabilities |
4,184 | 626 | | (3,767 | ) | | | 1,043 | ||||||||||||||||||||
Derivative financial assets |
(55,457 | ) | 11,800 | | (98,958 | ) | | (2,271 | ) | (144,886 | ) | |||||||||||||||||
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(315,263 | ) | 60,200 | (102,502 | ) | 1,420 | 901,006 | 13,382,746 | |||||||||||||||||||||
Other cash flows from financing activities: |
| |||||||||||||||||||||||||||
Payments of cash dividends |
||||||||||||||||||||||||||||
Payments of interest on hybrid bonds |
(14,766 | ) | ||||||||||||||||||||||||||
Disposal of treasury shares |
300,000 | |||||||||||||||||||||||||||
Cash inflow from transactions with the non-controlling shareholders |
101,398 | |||||||||||||||||||||||||||
Cash outflow from transactions with the non-controlling shareholders |
(39,345 | ) | ||||||||||||||||||||||||||
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(371,411 | ) | |||||||||||||||||||||||||||
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(*) | The effect of changes in foreign exchange rates for financial liabilities at amortized cost. |
134
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
41. | Subsequent Events |
(1) Merge of ADT Caps Co., Ltd. by SK Infosec Co., Ltd
On January 13, 2021, the board of directors of SK Infosec Co., Ltd., a subsidiary of the Parent Company, resolved to approve SK Infosec Co., Ltd.s merger with ADT CAPS Co., Ltd. SK Infosec Co., Ltd. will merge ADT CAPS Co., Ltd. which is planned to be merged and dissolved on the date of merger expected to be March 4, 2021.
(2) Sale of ownership interest for SK Wynerns
On January 26, 2021, the Parent Company has entered into a memorandum of understanding (MOU) with E-MART Inc. to sell its entire 1,000,000 common stock of SK Wyverns Co., Ltd., in addition to land and buildings for W100,000 million and W35,280 million, respectively. In
accordance with the MOU, the sale and purchase agreement of stock has been executed on February 23, 2021 and the agreement to sell land and building with SK Wyverns Co., Ltd. was executed on February 26, 2021.
135