Income taxes

12 Months Ended

Dec. 31, 2025

Income Taxes

Income taxes

13. Income taxes

A. Amounts recognized in profit or loss

		2025			2024			2023
		(In thousands of Korean won)
Current tax expense
Current year	₩		876,391			233,403			1,319,643
Adjustments recognized related to prior period incomes (*)			(79,248	)		(263,935	)		(518,699	)
Total Current tax expense	₩		797,143			(30,532	)		800,944
Deferred tax expense
Origination and reversal of temporary differences	₩		(362,851	)		(723,118	)		(40,165	)
Deferred taxes charged directly to equity			794			-			-
Tax expense(benefit) on continuing operations			435,086			(753,650	)		760,779

(*) In the normal course of business, the Company and its respective subsidiaries are examined by taxation authority. Our management regularly assesses the potential outcomes of these examinations and any future examinations for the current or prior years in determining the adequacy of its liabilities for income taxes.

We establish additional current tax liabilities for income taxes when, despite the belief that tax positions are fully supportable, there remain positions that do not meet the minimum probability threshold, which is a tax position that is more likely than not to be sustained upon examination by the applicable taxation authority. The impact of current tax liabilities for uncertain tax positions, as well as the related net interest and penalties, are included in income taxes in the consolidated statements of operations.

B. Amounts recognized in OCI

		2025							2024						2023
		Before tax		Tax (expense) benefit			Net of tax		Before tax		Tax (expense) benefit		Net of tax		Before tax		Tax (expense) benefit		Net of tax
		(In thousands of Korean won)
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit liability	₩		309,013		(794	)		308,219		44,085		-		44,085		109,558		-		109,558

C. Reconciliation of effective tax rate

		2025			2024			2023
		(In thousands of Korean won)
Profit before income tax	₩		(207,674,801	)		(4,311,845	)		3,553,129
Tax at the statutory income tax rate			(10,535,806	)		(844,871	)		720,604
Adjustments:
Tax-exempt income			(1,857	)		(408	)		(92	)
Expenses not deductible for tax purposes			6,826,010			31,689			37,369
Tax credits			(94,216	)		(84,755	)		(124,290	)
Changes in unrecognized deferred tax			3,481,880			380,738			(149,470	)
Adjustments recognized related to prior period incomes			(79,248	)		(263,935	)		121,794
Others (differences in tax rate, etc.)			838,323			27,892			154,864
Income tax expenses	₩		435,086			(753,650	)		760,779
Effective income tax rate (*)			-			-			21.4	%

(*) The effective tax rate is not calculated as the Company incurred a loss before income taxes for the years ended December 31, 2025 and 2024.

D. Movement in deferred tax balances

i. Movement in deferred tax balances as of December 31, 2025

		Beginning			Changes resulting from business combinations			Increase (decrease)			Exchange Rate Diff			Ending
Accrued income	₩		(15,876	)		(603	)		(30,570	)		-			(47,049	)
Short-term financial instruments			91,074			19,278			14,934			-			125,286
Inventories			569,966			(23,760	)		37,008			-			583,214
Property & equipment including right-of-use assets			(2,052,129	)		(44,226	)		927,989			-			(1,168,366	)
Intangible assets other than goodwill			6,998			(129,352	)		607,864			5,427			490,937
Allowance for bad debts			395,217			-			(5,102	)		-			390,115
Investments in associate and subsidiary (*)			1,205,749			23,950			(1,305,999	)		-			(76,300	)
Accrued expenses			(5,291	)		175,901			(65,189	)		-			105,422
Lease liabilities			2,246,860			26,629			(583,844	)		-			1,689,645
Provisions			175,126			-			(43,162	)		-			131,964
Investment property			(83,809	)		-			(361,321	)		-			(445,130	)
Defined benefit liabilities			117,936			53,066			18,445			-			189,447
Brand			(399,157	)		-			399,157			-			-
Contract assets			-			(60,788	)		54,869			-			(5,919	)
Prepaid expenses			-			(120,089	)		(79,337	)		-			(199,427	)
Prepayments			-			(55,537	)		27,876			-			(27,661	)
Trade and other payables			-			-			186,815			3,514			190,330
Convertible Notes			-			-			569,322			10,710			580,031
Other			57,399			812,858			768,957			27,499			1,666,713
Total	₩		2,310,064			683,358			1,147,367			47,150			4,187,939
Loss carried forward	₩		1,039,258			4,155,051			2,546,380			134,615			7,875,304
Carryover tax credit			3,118,117			346,716			150,984			-			3,615,817
Unrecognized deferred tax liabilities (assets) (*)			(5,855,583	)		(5,268,632	)		(3,481,880	)		(181,764	)		(14,787,859	)
Deferred tax assets (liabilities)	₩		611,857			(83,507	)		362,851			-			891,201

(*) As of December 31, 2025, the Company did not recognize deferred income tax assets for the temporary difference relating to investments in subsidiary as it is not probable such temporary differences can be utilized in the foreseeable future.

ii. Movement in deferred tax balances as of December 31, 2024

		Tax effect
		Beginning			Increase (decrease)			Ending
		(In thousands of Korean won)
Accrued income	₩		(54,469	)		38,593			(15,876	)
Short-term financial instruments			74,007			17,067			91,074
Inventories			220,559			349,407			569,966
Property & equipment including right-of-use assets			(2,261,920	)		209,791			(2,052,129	)
Intangible assets other than goodwill			(10,712	)		17,710			6,998
Allowance for bad debts			267,801			127,416			395,217
Investments in associate and subsidiary (*)			924,522			281,227			1,205,749
Accrued expenses			-			(5,291	)		(5,291	)
Lease liabilities			2,988,900			(742,040	)		2,246,860
Provisions			192,644			(17,518	)		175,126
Investment property			(681,506	)		597,697			(83,809	)
Defined benefit liabilities			143,140			(25,204	)		117,936
Brand			(676,406	)		277,249			(399,157	)
Other			50,733			6,667			57,400
Total	₩		1,177,293			1,132,771			2,310,064
Loss carried forward	₩		509,696			529,562			1,039,258
Carryover tax credit			4,246,455			(1,128,338	)		3,118,117
Unrecognized deferred tax liabilities (assets) (*)			(6,044,706	)		189,123			(5,855,583	)
Deferred tax assets (liabilities)	₩		(111,262	)		723,118			611,856

(*) As of December 31, 2024, the Company did not recognize deferred income tax asset for the temporary difference relating to investments in subsidiary as it is not probable such temporary differences can be utilized in the foreseeable future.

E. Deferred assets (liabilities)

i. Details of unrecognized as deferred income tax assets as of December 31, 2025 and 2024 are as follows:

		2025		2024
		(In thousands of Korean won)
Tax loss carryforwards	₩		7,875,304		1,039,258
Tax credit carryforwards			3,615,817		3,118,117
Unrecognized temporary difference			3,296,738		1,698,208

ii. Details of unused tax loss carryforwards and unused tax credit carryforwards that are not recognized as deferred income tax assets as of December 31, 2025 are as follows:

Year of expiration		Unused loss carryforwards		Unused tax credit carryforwards
		(In thousands of Korean won)
2026	₩		-		-
2027			-		-
2028			-		-
2029			-		188,128
2030			-		2,929,990
2031			-		-
After 2031			7,543,356		497,699
No expiry date			28,815,986		-
Total	₩		36,359,342		3,615,817

iii. The timing of recovery of deferred tax assets and liabilities as of December 31, 2025 and 2024 is as follows:

		December 31, 2025			December 31, 2024
		(In thousands of Korean won)
Deferred tax assets
- Deferred tax assets to be recovered after more than 12 months	₩		1,334,368			593,760
- Deferred tax assets to be recovered within 12 months			1,337,718			978,311
Sub-total			2,672,086			1,572,071
Deferred tax liabilities
- Deferred tax liabilities to be recovered after more than 12 months			(1,469,704	)		(939,073	)
- Deferred tax liabilities to be recovered within 12 months			(311,181	)		(21,142	)
Sub-total			(1,780,885	)		(960,215	)
Deferred tax assets (liabilities), net	₩		891,201			611,856