Sk Telecom Co Ltd 6-K, filed Mar 23, 2020
Sk Telecom Co Ltd (SKM)
About this 6-K
Sk Telecom Co Ltd filed this 6-K on March 23, 2020.
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 2020
Commission File Number: 333-04906
SK Telecom Co., Ltd.
(Translation of registrant’s name into English)
65, Eulji-ro, 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): ☐
Submission of Audit Report
| 1. Name of External Auditor | KPMG Samjong Accounting Corporation | |||||||
| 2. Date of Receiving External Audit Report | March 10, 2020 | |||||||
| 3. Auditor’s Opinion on Consolidated Financial Statements |
|
FY 2019
Unqualified |
|
|
FY2018
Unqualified |
| ||
| 4. Financial Highlights of Consolidated Financial Statements (KRW) |
||||||||
| - Total Assets |
44,611,620,042,560 | 42,369,110,923,939 | ||||||
| - Total Liabilities |
21,788,083,318,919 | 20,019,860,568,927 | ||||||
| - Total Shareholders’ Equity |
22,823,536,723,641 | 22,349,250,355,012 | ||||||
| - Capital Stock |
44,639,473,000 | 44,639,473,000 | ||||||
| - Total Shareholder’s Equity / Capital Stock Ratio(%) (excluding |
51,427.2 | 50,338.5 | ||||||
| - Operating Revenue |
17,743,702,299,559 | 16,873,960,468,986 | ||||||
| - Operating Profit |
1,109,980,249,920 | 1,201,759,916,903 | ||||||
| - Profit before Income Tax |
1,162,655,779,428 | 3,975,966,373,798 | ||||||
| - Profit for the Year |
861,942,820,229 | 3,131,988,278,691 | ||||||
| - Profit for the Year Attributable to Owners of the Parent Company |
889,906,585,360 | 3,127,886,516,202 | ||||||
SK TELECOM CO., LTD. AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 2019 and 2018
(With Independent Auditors’ Report Thereon)
Contents
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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, 2019 and 2018, 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, 2019 and 2018, 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.
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, 2019. 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 of the consolidated financial statements, the Group identifies performance obligations in contracts with customers and recognizes revenue as the performance obligations are satisfied. The Group’s revenue is primarily generated from the provision of a variety of telecommunications services at various rate plans and products. Revenue 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 Group’s cellular telecommunications service as a key audit matter due to the complexity of information technology systems involved and the revenue recognition standard applied.
The primary procedures we performed to address this key audit matter included:
| • | Testing certain internal controls relating to the Group’s revenue recognition process, including evaluation of the environment of the information technology systems that aggregate data used for revenue recognition for voice usage, text and mobile data services, including data records, rating and billing systems. |
| • | Testing the reconciliation of the Group’s revenue among rating system, billing system and the general ledger for selected samples. |
| • | Inspecting a sample of contracts with subscribers to assess the Group’s 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 note 4 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 Group’s security services-related
operating segments included Life & Security Holdings Co., Ltd. CGU (security services) and SK Infosec Co., Ltd. CGU (information security services). The amount of goodwill that is allocated to the security services CGU is
W1,173,382 million as of December 31, 2019. 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. Considering the potential impact of changes in the significant assumptions on the evaluation of goodwill impairment, 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 management’s 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 Group’s ability to accurately forecast. |
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 Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
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.
2
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 Group’s 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 management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our 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.
3
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 10, 2020
This report is effective as of March 10, 2020, 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.
4
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Financial Position
As of December 31, 2019 and 2018
| (In millions of won) | Note | December 31, 2019 |
December 31, 2018 |
|||||||||
| Assets |
||||||||||||
| Current Assets: |
||||||||||||
| Cash and cash equivalents |
35,36 | 1,506,699 | ||||||||||
| Short-term financial instruments |
6,35,36 | 830,647 | 1,045,676 | |||||||||
| Short-term investment securities |
11,35,36 | 166,666 | 195,080 | |||||||||
| Accounts receivable - trade, net |
7,35,36,37 | 2,230,979 | 2,008,640 | |||||||||
| Short-term loans, net |
7,35,36,37 | 66,123 | 59,094 | |||||||||
| Accounts receivable - other, net |
3,7,35,36,37 | 905,436 | 937,837 | |||||||||
| Prepaid expenses |
3,8 | 2,030,550 | 1,768,343 | |||||||||
| Contract assets |
9 | 127,499 | 90,072 | |||||||||
| Inventories, net |
10 | 162,882 | 288,053 | |||||||||
| Derivative financial assets |
21,35,36,39 | 26,253 | 13 | |||||||||
| Prepaid income taxes |
33 | 63,748 | 1,216 | |||||||||
| Advanced payments and others |
7,35,36,37 | 220,687 | 58,116 | |||||||||
|
|
|
|
|
|||||||||
| 8,102,294 | 7,958,839 | |||||||||||
|
|
|
|
|
|||||||||
| Non-Current Assets: |
||||||||||||
| Long-term financial instruments |
6,35,36 | 990 | 1,221 | |||||||||
| Long-term investment securities |
11,35,36 | 857,215 | 664,726 | |||||||||
| Investments in associates and joint ventures |
13 | 13,385,264 | 12,811,771 | |||||||||
| Property and equipment, net |
3,14,37,38 | 12,334,280 | 10,718,354 | |||||||||
| Goodwill |
12,15 | 2,949,530 | 2,938,563 | |||||||||
| Intangible assets, net |
3,16 | 4,866,092 | 5,513,510 | |||||||||
| Long-term contract assets |
9 | 64,359 | 43,821 | |||||||||
| Long-term loans, net |
7,35,36,37 | 33,760 | 29,034 | |||||||||
| Long-term accounts receivable - other |
3,7,35,36,37,38 | 344,662 | 274,053 | |||||||||
| Long-term prepaid expenses |
3,8 | 1,241,429 | 895,272 | |||||||||
| Guarantee deposits |
7,35,36,37 | 164,734 | 313,140 | |||||||||
| Long-term derivative financial assets |
21,35,36,39 | 124,707 | 55,444 | |||||||||
| Deferred tax assets |
32 | 109,057 | 92,465 | |||||||||
| Defined benefit assets |
20 | 1,125 | 31,926 | |||||||||
| Other non-current assets |
7,35,36 | 32,122 | 26,972 | |||||||||
|
|
|
|
|
|||||||||
| 36,509,326 | 34,410,272 | |||||||||||
|
|
|
|
|
|||||||||
| 42,369,111 | ||||||||||||
|
|
|
|
|
|||||||||
See accompanying notes to the consolidated financial statements.
5
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Financial Position, Continued
As of December 31, 2019 and 2018
| (In millions of won) | Note | December 31, 2019 |
December 31, 2018 |
|||||||||
| Liabilities and Shareholders’ Equity |
||||||||||||
| Current Liabilities: |
||||||||||||
| Short-term borrowings |
17,35,36,39 | 80,000 | ||||||||||
| Current installments of long-term debt, net |
17,35,36,39 | 1,017,327 | 984,272 | |||||||||
| Current installments of long-term payables - other |
18,35,36,39 | 423,839 | 424,243 | |||||||||
| Lease liabilities |
3,35,36,37,39 | 304,247 | — | |||||||||
| Accounts payable - trade |
35,36,37 | 438,297 | 381,302 | |||||||||
| Accounts payable - other |
35,36,37 | 2,521,474 | 1,913,813 | |||||||||
| Contract liabilities |
9 | 191,225 | 140,711 | |||||||||
| Withholdings |
35,36,37 | 1,350,244 | 1,353,663 | |||||||||
| Accrued expenses |
35,36 | 1,425,251 | 1,299,217 | |||||||||
| Income tax payable |
32 | 5,450 | 182,343 | |||||||||
| Provisions |
19,38 | 89,446 | 87,993 | |||||||||
| Other current liabilities |
319 | — | ||||||||||
|
|
|
|
|
|||||||||
| 7,787,722 | 6,847,557 | |||||||||||
|
|
|
|
|
|||||||||
| Non-Current Liabilities: |
||||||||||||
| Debentures, excluding current installments, net |
17,35,36,39 | 7,253,894 | 6,572,211 | |||||||||
| Long-term borrowings, excluding current installments, net |
17,35,36,38,39 | 1,972,149 | 2,015,365 | |||||||||
| Long-term payables - other |
18,35,36,39 | 1,550,167 | 1,968,784 | |||||||||
| Long-term contract liabilities |
9 | 32,231 | 43,102 | |||||||||
| Defined benefit liabilities |
20 | 172,258 | 141,529 | |||||||||
| Long-term derivative financial liabilities |
21,35,36,39 | 1,043 | 4,184 | |||||||||
| Long-term lease liabilities |
3,35,36,37,39 | 408,493 | — | |||||||||
| Long-term provisions |
19,38 | 53,783 | 99,215 | |||||||||
| Deferred tax liabilities |
3,32 | 2,466,295 | 2,269,792 | |||||||||
| Other non-current liabilities |
35,36 | 90,049 | 58,122 | |||||||||
|
|
|
|
|
|||||||||
| 14,000,362 | 13,172,304 | |||||||||||
|
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|
|||||||||
| Total Liabilities |
21,788,084 | 20,019,861 | ||||||||||
|
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|
|||||||||
| Shareholders’ Equity |
||||||||||||
| Share capital |
1,22 | 44,639 | 44,639 | |||||||||
| Capital surplus and others |
12,22,23,24,25 | 1,006,481 | 655,084 | |||||||||
| Retained earnings |
3,26 | 22,235,285 | 22,144,541 | |||||||||
| Reserves |
27 | (329,576 | ) | (373,442 | ) | |||||||
|
|
|
|
|
|||||||||
| Equity attributable to owners of the Parent Company |
22,956,829 | 22,470,822 | ||||||||||
| Non-controlling interests |
(133,293 | ) | (121,572 | ) | ||||||||
|
|
|
|
|
|||||||||
| Total Shareholders’ Equity |
22,823,536 | 22,349,250 | ||||||||||
|
|
|
|
|
|||||||||
| 42,369,111 | ||||||||||||
|
|
|
|
|
|||||||||
See accompanying notes to the consolidated financial statements.
6
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Income
For the years ended December 31, 2019 and 2018
| (In millions of won) | Note | 2019 | 2018 | |||||||||
| Operating revenue: |
5,37 | |||||||||||
| Revenue |
16,873,960 | |||||||||||
|
|
|
|
|
|||||||||
| Operating expenses: |
37 | |||||||||||
| Labor |
2,822,673 | 2,288,655 | ||||||||||
| Commissions |
3,8 | 5,002,174 | 5,002,598 | |||||||||
| Depreciation and amortization |
3,5 | 3,771,486 | 3,126,118 | |||||||||
| Network interconnection |
752,334 | 808,403 | ||||||||||
| Leased lines |
272,616 | 309,773 | ||||||||||
| Advertising |
434,561 | 468,509 | ||||||||||
| Rent |
3 | 231,934 | 529,453 | |||||||||
| Cost of goods sold |
1,833,362 | 1,796,146 | ||||||||||
| Others |
29 | 1,512,582 | 1,342,545 | |||||||||
|
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|
|
|
|||||||||
| 16,633,722 | 15,672,200 | |||||||||||
|
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|
|
|||||||||
| Operating profit |
5 | 1,109,980 | 1,201,760 | |||||||||
| Finance income |
5,31 | 141,977 | 256,435 | |||||||||
| Finance costs |
3,5,31 | (429,758 | ) | (385,232 | ) | |||||||
| Gain relating to investments in subsidiaries, associates and joint ventures, net |
5,13 | 449,543 | 3,270,912 | |||||||||
| Other non-operating income |
5,30 | 103,140 | 71,253 | |||||||||
| Other non-operating expenses |
5,30 | (212,227 | ) | (439,162 | ) | |||||||
|
|
|
|
|
|||||||||
| Profit before income tax |
5 | 1,162,655 | 3,975,966 | |||||||||
| Income tax expense |
32 | 300,713 | 843,978 | |||||||||
|
|
|
|
|
|||||||||
| Profit for the year |
861,942 | 3,131,988 | ||||||||||
|
|
|
|
|
|||||||||
| Attributable to: |
||||||||||||
| Owners of the Parent Company |
3,127,887 | |||||||||||
| Non-controlling interests |
(27,965 | ) | 4,101 | |||||||||
| Earnings per share |
33 | |||||||||||
| Basic and diluted earnings per share (in won) |
44,066 | |||||||||||
|
|
|
|
|
|||||||||
See accompanying notes to the consolidated financial statements.
7
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2019 and 2018
| (In millions of won) | Note | 2019 | 2018 | |||||||||
| Profit for the year |
3,131,988 | |||||||||||
| Other comprehensive income (loss): |
||||||||||||
| Items that will never be reclassified to profit or loss, net of taxes: |
||||||||||||
| Remeasurement of defined benefit liabilities |
20 | (72,605 | ) | (41,490 | ) | |||||||
| Net change in other comprehensive loss of investments in associates and joint ventures |
13,27 | (19,269 | ) | (16,330 | ) | |||||||
| Valuation loss on financial assets at fair value through other comprehensive income |
27,31 | (17,943 | ) | (130,035 | ) | |||||||
| Items that are or may be reclassified subsequently to profit or loss, net of taxes: |
||||||||||||
| Net change in other comprehensive income of investments in associates and joint ventures |
13,27 | 75,763 | 1,753 | |||||||||
| Net change in unrealized fair value of derivatives |
21,27,31 | 40,681 | 32,227 | |||||||||
| Foreign currency translation differences for foreign operations |
27 | (5,618 | ) | 12,291 | ||||||||
|
|
|
|
|
|||||||||
| Other comprehensive income (loss) for the year, net of taxes |
1,009 | (141,584 | ) | |||||||||
|
|
|
|
|
|||||||||
| Total comprehensive income |
2,990,404 | |||||||||||
|
|
|
|
|
|||||||||
| Total comprehensive income (loss) attributable to: |
||||||||||||
| Owners of the Parent Company |
3,000,503 | |||||||||||
| Non-controlling interests |
(29,309 | ) | (10,099 | ) | ||||||||
See accompanying notes to the consolidated financial statements.
8
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Changes in Equity
For the years ended December 31, 2019 and 2018
| (In millions of won) | ||||||||||||||||||||||||||||||||
| Controlling Interest | Non- controlling interests |
Total equity |
||||||||||||||||||||||||||||||
| Note | Share capital | Capital surplus and others |
Retained earnings |
Reserves | Sub-total | |||||||||||||||||||||||||||
| Balance, December 31, 2017 |
196,281 | 17,835,946 | (234,727 | ) | 17,842,139 | 187,056 | 18,029,195 | |||||||||||||||||||||||||
| Impact of adopting K-IFRS No. 1115 |
— | — | 1,900,049 | — | 1,900,049 | — | 1,900,049 | |||||||||||||||||||||||||
| Impact of adopting K-IFRS No. 1109 |
— | — | 60,026 | (68,804 | ) | (8,778 | ) | — | (8,778 | ) | ||||||||||||||||||||||
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| Balance, January 1, 2018 |
44,639 | 196,281 | 19,796,021 | (303,531 | ) | 19,733,410 | 187,056 | 19,920,466 | ||||||||||||||||||||||||
| Total comprehensive income: |
||||||||||||||||||||||||||||||||
| Profit for the year |
— | — | 3,127,887 | — | 3,127,887 | 4,101 | 3,131,988 | |||||||||||||||||||||||||
| Other comprehensive income (loss) |
13,20,21,27,31 | — | — | (57,473 | ) | (69,911 | ) | (127,384 | ) | (14,200 | ) | (141,584 | ) | |||||||||||||||||||
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|||||||||||||||||||
| — | — | 3,070,414 | (69,911 | ) | 3,000,503 | (10,099 | ) | 2,990,404 | ||||||||||||||||||||||||
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| Transactions with owners: |
||||||||||||||||||||||||||||||||
| Annual dividends |
34 | — | — | (635,482 | ) | — | (635,482 | ) | — | (635,482 | ) | |||||||||||||||||||||
| Interim dividends |
34 | — | — | (70,609 | ) | — | (70,609 | ) | — | (70,609 | ) | |||||||||||||||||||||
| Share option |
25 | — | 593 | — | — | 593 | 196 | 789 | ||||||||||||||||||||||||
| Interest on hybrid bonds |
24 | — | — | (15,803 | ) | — | (15,803 | ) | — | (15,803 | ) | |||||||||||||||||||||
| Repayments of hybrid bonds |
24 | — | (400,000 | ) | — | — | (400,000 | ) | — | (400,000 | ) | |||||||||||||||||||||
| Proceeds from issuance of hybrid bonds |
24 | — | 398,759 | — | — | 398,759 | — | 398,759 | ||||||||||||||||||||||||
| Comprehensive stock exchange |
12 | — | 129,595 | — | — | 129,595 | — | 129,595 | ||||||||||||||||||||||||
| Changes in ownership in subsidiaries |
— | 329,856 | — | — | 329,856 | (298,725 | ) | 31,131 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| — | 458,803 | (721,894 | ) | — | (263,091 | ) | (298,529 | ) | (561,620 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance, December 31, 2018 |
655,084 | 22,144,541 | (373,442 | ) | 22,470,822 | (121,572 | ) | 22,349,250 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Impact of adopting K-IFRS No. 1116 |
3 | — | — | (24,186 | ) | — | (24,186 | ) | (503 | ) | (24,689 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance, January 1, 2019 |
44,639 | 655,084 | 22,120,355 | (373,442 | ) | 22,446,636 | (122,075 | ) | 22,324,561 | |||||||||||||||||||||||
| Total comprehensive income: |
||||||||||||||||||||||||||||||||
| Profit (loss) for the year |
— | — | 889,907 | — | 889,907 | (27,965 | ) | 861,942 | ||||||||||||||||||||||||
| Other comprehensive income (loss) |
13,20,21,27,31 | — | — | (41,513 | ) | 43,866 | 2,353 | (1,344 | ) | 1,009 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| — | — | 848,394 | 43,866 | 892,260 | (29,309 | ) | 862,951 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Transactions with owners: |
||||||||||||||||||||||||||||||||
| Annual dividends |
34 | — | — | (646,828 | ) | — | (646,828 | ) | (21,150 | ) | (667,978 | ) | ||||||||||||||||||||
| Interim dividends |
34 | — | — | (71,870 | ) | — | (71,870 | ) | (8,650 | ) | (80,520 | ) | ||||||||||||||||||||
| Share option |
25 | — | 295 | — | — | 295 | 764 | 1,059 | ||||||||||||||||||||||||
| Interest on hybrid bonds |
24 | — | — | (14,766 | ) | — | (14,766 | ) | — | (14,766 | ) | |||||||||||||||||||||
| Disposal of treasury shares |
23 | — | 300,000 | — | — | 300,000 | — | 300,000 | ||||||||||||||||||||||||
| Changes in ownership in subsidiaries |
— | 51,102 | — | — | 51,102 | 47,127 | 98,229 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| — | 351,397 | (733,464 | ) | — | (382,067 | ) | 18,091 | (363,976 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance, December 31, 2019 |
1,006,481 | 22,235,285 | (329,576 | ) | 22,956,829 | (133,293 | ) | 22,823,536 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
See accompanying notes to the consolidated financial statements.
9
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2019 and 2018
| (In millions of won) | Note | 2019 | 2018 | |||||||||
| Cash flows from operating activities: |
||||||||||||
| Cash generated from operating activities: |
||||||||||||
| Profit for the year |
3,131,988 | |||||||||||
| Adjustments for income and expenses |
39 | 4,351,037 | 1,568,919 | |||||||||
| Changes in assets and liabilities related to operating activities |
39 | (836,335 | ) | 25,949 | ||||||||
|
|
|
|
|
|||||||||
| 4,376,644 | 4,726,856 | |||||||||||
| Interest received |
56,392 | 59,065 | ||||||||||
| Dividends received |
241,117 | 195,671 | ||||||||||
| Interest paid |
(346,343 | ) | (255,189 | ) | ||||||||
| Income tax paid |
(341,728 | ) | (393,823 | ) | ||||||||
|
|
|
|
|
|||||||||
| Net cash provided by operating activities |
3,986,082 | 4,332,580 | ||||||||||
|
|
|
|
|
|||||||||
| 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 |
29,503 | — | ||||||||||
| Collection of short-term loans |
113,345 | 117,610 | ||||||||||
| Decrease in long-term financial instruments |
231 | 5 | ||||||||||
| Proceeds from disposals of long-term investment securities |
234,683 | 371,816 | ||||||||||
| Proceeds from disposals of investments in associates and joint ventures |
220 | 74,880 | ||||||||||
| Proceeds from disposals of property and equipment |
18,478 | 58,256 | ||||||||||
| Proceeds from disposals of intangible assets |
7,327 | 5,851 | ||||||||||
| Collection of long-term loans |
4,435 | 10,075 | ||||||||||
| Decrease in deposits |
9,180 | 7,490 | ||||||||||
| Proceeds from settlement of derivatives |
601 | — | ||||||||||
| Collection of lease receivables |
26,773 | — | ||||||||||
| Proceeds from disposals of other non-current assets |
— | 1,186 | ||||||||||
| Proceeds from disposals of subsidiaries |
4,802 | — | ||||||||||
| Cash inflow from business combinations |
5,016 | 38,925 | ||||||||||
| Cash inflow from transfers of business |
45,658 | — | ||||||||||
|
|
|
|
|
|||||||||
| 754,223 | 686,094 | |||||||||||
| Cash outflows for investing activities: |
||||||||||||
| Increase in short-term financial instruments, net |
— | (373,450 | ) | |||||||||
| Increase in short-term investment securities, net |
— | (49,791 | ) | |||||||||
| Increase in short-term loans |
(116,320 | ) | (112,319 | ) | ||||||||
| Increase in long-term loans |
(11,541 | ) | (6,057 | ) | ||||||||
| Increase in long-term financial instruments |
— | (2 | ) | |||||||||
| Acquisitions of long-term investment securities |
(383,976 | ) | (19,114 | ) | ||||||||
| Acquisitions of investments in associates and joint ventures |
(264,015 | ) | (206,340 | ) | ||||||||
| Acquisitions of property and equipment |
(3,375,883 | ) | (2,792,390 | ) | ||||||||
| Acquisitions of intangible assets |
(141,010 | ) | (503,229 | ) | ||||||||
| Increase in deposits |
(6,164 | ) | (8,591 | ) | ||||||||
| Increase in other non-current assets |
— | (5,927 | ) | |||||||||
| Cash outflow for business combinations |
(36,910 | ) | (654,685 | ) | ||||||||
| Cash outflow for disposal and liquidation of subsidiaries |
(927 | ) | (1,924 | ) | ||||||||
|
|
|
|
|
|||||||||
| (4,336,746 | ) | (4,733,819 | ) | |||||||||
|
|
|
|
|
|||||||||
| Net cash used in investing activities |
(4,047,725 | ) | ||||||||||
|
|
|
|
|
|||||||||
See accompanying notes to the consolidated financial statements.
10
SK TELECOM CO., LTD. and Subsidiaries
Consolidated Statements of Cash Flows, Continued
For the years ended December 31, 2018 and 2017
| (In millions of won) | Note | 2019 | 2018 | |||||||||
| Cash flows from financing activities: |
||||||||||||
| Cash inflows from financing activities: |
||||||||||||
| Proceeds from issuance of debentures |
1,809,641 | |||||||||||
| Proceeds from long-term borrowings |
— | 1,920,114 | ||||||||||
| Proceeds from issuance of hybrid bonds |
— | 398,759 | ||||||||||
| Cash inflows from settlement of derivatives |
12,426 | 23,247 | ||||||||||
| Proceeds from disposals of treasury shares |
300,000 | — | ||||||||||
| Transactions with non-controlling shareholders |
101,398 | 499,926 | ||||||||||
|
|
|
|
|
|||||||||
| 2,047,268 | 4,651,687 | |||||||||||
| Cash outflows for financing activities: |
||||||||||||
| Decrease in short-term borrowings, net |
(59,860 | ) | (87,701 | ) | ||||||||
| Repayments of long-term payables - other |
(428,153 | ) | (305,644 | ) | ||||||||
| Repayments of debentures |
(940,000 | ) | (1,487,970 | ) | ||||||||
| Repayments of long-term borrowings |
(89,882 | ) | (1,780,708 | ) | ||||||||
| Repayments of hybrid bonds |
— | (400,000 | ) | |||||||||
| Cash outflows for settlement of derivatives |
— | (29,278 | ) | |||||||||
| Payments of dividends |
(718,698 | ) | (706,091 | ) | ||||||||
| Payments of interest on hybrid bonds |
(14,766 | ) | (15,803 | ) | ||||||||
| Repayments of lease liabilities |
|
(393,398 | ) | — | ||||||||
| Transactions with non-controlling shareholders |
|
(39,345 | ) | (76,805 | ) | |||||||
|
|
|
|
|
|||||||||
| (2,684,102 | ) | (4,890,000 | ) | |||||||||
|
|
|
|
|
|||||||||
| Net cash used in financing activities |
(636,834 | ) | (238,313 | ) | ||||||||
|
|
|
|
|
|||||||||
| Net increase (decrease) in cash and cash equivalents |
(233,275 | ) | 46,542 | |||||||||
| Cash and cash equivalents at beginning of the year |
1,506,699 | 1,457,735 | ||||||||||
| Effects of exchange rate changes on cash and cash equivalents |
(2,600 | ) | 2,422 | |||||||||
|
|
|
|
|
|||||||||
| Cash and cash equivalents at end of the year |
1,506,699 | |||||||||||
|
|
|
|
|
|||||||||
See accompanying notes to the consolidated financial statements.
11
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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 Company’s 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, 2019, the Parent Company’s 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 |
8,982,136 | 11.12 | ||||||
| Institutional investors and other shareholders |
41,263,572 | 51.11 | ||||||
| Kakao Co., Ltd. |
1,266,620 | 1.57 | ||||||
| Treasury shares |
7,609,263 | 9.42 | ||||||
|
|
|
|
|
|||||
| 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.
| (2) | List of subsidiaries |
The list of subsidiaries as of December 31, 2019 and 2018 is as follows:
| Ownership (%)(*1) | ||||||||||||||
| Subsidiary |
Location | Primary business |
Dec. 31, 2019 |
Dec. 31, 2018 |
||||||||||
| 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. |
Korea | Telecommunication services |
100.0 | 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. (Formerly, Network 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.(*2) |
Korea | Telecommunication services | 52.7 | 65.5 | ||||||||||
| SK Planet Co., Ltd. |
Korea | Telecommunication services, system software development and supply services |
98.7 | 98.7 | ||||||||||
| Eleven Street Co., Ltd.(*3) |
Korea | Commerce | 80.3 | 81.8 | ||||||||||
| DREAMUS COMPANY (Formerly, IRIVER LIMITED)(*4) |
Korea | Manufacturing digital audio players and other portable media devices |
51.4 | 52.6 | ||||||||||
| SK Infosec Co., Ltd. |
Korea | Information security service | 100.0 | 100.0 | ||||||||||
| Life & Security Holdings Co., Ltd. |
Korea | Investment (holdings company) | 55.0 | 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 | ||||||||||
12
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 1. | Reporting Entity, Continued |
| (2) | List of subsidiaries, Continued |
The list of subsidiaries as of December 31, 2019 and 2018 is as follows, Continued:
| Ownership (%)(*1) | ||||||||||||||
| Subsidiary |
Location | Primary business |
Dec. 31, 2019 |
Dec. 31, 2018 |
||||||||||
| Subsidiaries owned by the Parent Company |
id Quantique SA(*5) |
Switzerland | Quantum information and communications service |
66.8 | 65.6 | |||||||||
| SK Telecom TMT Investment |
USA | Investment |
100.0 | — | ||||||||||
| FSK L&S Co., Ltd.(*6) | Korea | Freight and logistics consulting business |
60.0 | — | ||||||||||
| Incross Co., Ltd.(*6) |
Korea | Media representative business |
34.6 | — | ||||||||||
| Happy Hanool Co., Ltd.(*6) |
Korea | Service |
100.0 | — | ||||||||||
| Subsidiaries owned by SK Planet Co., Ltd. |
SK m&service Co., Ltd. |
Korea | Data base 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 | ||||||||||
| shopkick Management Company, |
USA | Investment |
— | 100.0 | ||||||||||
| shopkick, Inc.(*6) | USA | Reward points-based in-store shopping application development |
— | 100.0 | ||||||||||
| K-net Culture and Contents Venture Fund |
Korea | Capital investing in startups |
59.0 | 59.0 | ||||||||||
| Subsidiaries owned by DREAMUS COMPANY (Formerly, IRIVER LIMITED) |
iriver Enterprise Ltd. | Hong Kong | Management of Chinese subsidiaries |
100.0 | 100.0 | |||||||||
| iriver Inc.(*6) | USA | Marketing and sales in |
— | 100.0 | ||||||||||
| iriver China Co., Ltd. |
China | Sales of and manufacturing MP3 and 4 |
100.0 | 100.0 | ||||||||||
| Dongguan iriver Electronics Co., Ltd. |
China | Sales of and manufacturing e-book |
100.0 | 100.0 | ||||||||||
| groovers Japan Co., Ltd.(*6) |
Japan | Digital music contents sourcing and distribution service |
— | 100.0 | ||||||||||
| LIFE DESIGN COMPANY Inc. |
Japan | Sales of goods in Japan |
100.0 | 100.0 | ||||||||||
| groovers Inc.(*6) |
Korea | Sales of contents and Mastering Quality Sound album |
— | 100.0 | ||||||||||
| Subsidiary owned by SK Infosec Co., Ltd. |
SKinfosec Information Technology (Wuxi) Co., Ltd.(*6) |
China | System software development and supply services |
100.0 | — | |||||||||
| Subsidiaries owned by Life & Security Holdings Co., Ltd. |
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. | Korea | Sales and trade of anti-theft devices and surveillance devices |
100.0 | 100.0 | ||||||||||
| Subsidiary owned by SK Telink Co., Ltd. |
SK TELINK VIETNAM Co., Ltd. | Vietnam | Communications device retail business |
100.0 | 100.0 | |||||||||
| Subsidiaries owned by SK Broadband Co., Ltd. |
Home & Service Co., Ltd. | Korea | Operation of information and communications facility |
100.0 | 100.0 | |||||||||
| SK stoa Co., Ltd. | Korea | Other telecommunication retail business |
100.0 | 100.0 | ||||||||||
| Subsidiary owned by SK Telecom Japan Inc. |
SK Planet Japan, K. K. | Japan | Digital Contents sourcing service |
79.8 | 79.8 | |||||||||
| Subsidiary owned by id Quantique SA |
Id Quantique LLC | Korea | Quantum information and communications service |
100.0 | 100.0 | |||||||||
13
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 1. | Reporting Entity, Continued |
| (2) | List of subsidiaries, Continued |
The list of subsidiaries as of December 31, 2019 and 2018 is as follows, Continued:
| Ownership (%)(*1) | ||||||||||||||
| Subsidiary |
Location | Primary business |
Dec. 31, 2019 |
Dec. 31, 2018 |
||||||||||
| Subsidiaries owned by FSK |
FSK L&S (Shanghai) Co., Ltd.(*6) | China | Logistics business |
66.0 | — | |||||||||
| FSK L&S (Hungary) Co., Ltd.(*6) |
Hungary | Logistics business |
100.0 | — | ||||||||||
| Subsidiaries owned by Incross |
Infra Communications Co., Ltd.(*6) |
Korea | Service operation |
100.0 | — | |||||||||
| Mindknock Co., Ltd.(*6) | Korea | Software development |
100.0 | — | ||||||||||
| Others(*7) |
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 | ||||||||||
| (*1) | The ownership interest represents direct ownership interest in subsidiaries either by the Parent Company or subsidiaries of the Parent Company. |
| (*2) | The ownership interest has changed due to a non-proportional paid-in capital increase of One store Co., Ltd. during the year ended December 31, 2019. |
| (*3) | 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. During 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, 2019. The Parent Company is obliged to guarantee dividend of at least 1% per annum of the preferred share’s 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 |
| (*4) | The ownership has changed due to the conversion of the convertible bonds issued by DREAMUS COMPANY (Formerly, IRIVER LIMITED) during the year ended December 31, 2019. |
| (*5) | The ownership has changed due to a non-proportional paid-in capital increase of id Quantique SA during the year ended December 31, 2019. |
| (*6) | Details of changes in the consolidation scope during the year ended December 31, 2019 are presented and explained separately in Note 1-(4). |
| (*7) | Others are owned by Atlas Investment and another subsidiary of the Parent Company. |
14
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 1. | Reporting Entity, Continued |
| (3) | Condensed financial information of subsidiaries |
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 Communications Co., Ltd. |
67,327 | 30,361 | 36,966 | 39,944 | (13,301 | ) | ||||||||||||||
| SK Broadband Co., Ltd. |
4,447,549 | 2,811,417 | 1,636,132 | 3,178,805 | 48,583 | |||||||||||||||
| 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. (Formerly, Network 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 (Formerly, IRIVER LIMITED)(*2) |
171,586 | 53,669 | 117,917 | 196,961 | (48,006 | ) | ||||||||||||||
| SKP America LLC. |
48,344 | 126 | 48,218 | — | (351,470 | ) | ||||||||||||||
| 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. |
113,176 | 76,192 | 36,984 | 351,154 | (267 | ) | ||||||||||||||
| 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 (Formerly, IRIVER LIMITED) is consolidated financial information including iriver Enterprise Ltd. and three other subsidiaries of DREAMUS COMPANY (Formerly, IRIVER LIMITED). |
| (*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. |
| (*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. |
15
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 1. | Reporting Entity, Continued |
| (3) | Condensed financial information of subsidiaries, Continued |
Condensed financial information of significant subsidiaries as of and for the year ended December 31, 2018 is as follows:
|
(In millions of won) |
||||||||||||||||||||
| As of December 31, 2018 | 2018 | |||||||||||||||||||
| Subsidiary |
Total assets | Total liabilities |
Total equity |
Revenue | Profit (loss) |
|||||||||||||||
| SK Telink Co., Ltd.(*1) |
107,565 | 386,407 | 373,019 | 39,962 | ||||||||||||||||
| Eleven Street Co., Ltd.(*2) |
1,045,946 | 495,907 | 550,039 | 228,000 | (9,507 | ) | ||||||||||||||
| SK m&service Co., Ltd. |
97,924 | 48,182 | 49,742 | 208,936 | (119 | ) | ||||||||||||||
| SK Communications Co., Ltd. |
79,646 | 28,458 | 51,188 | 41,604 | (10,323 | ) | ||||||||||||||
| SK Broadband Co., Ltd. |
4,266,458 | 2,682,236 | 1,584,222 | 3,158,877 | 154,999 | |||||||||||||||
| K-net Culture and Contents Venture Fund |
147,691 | 20,873 | 126,818 | — | 58,584 | |||||||||||||||
| PS&Marketing Corporation |
432,699 | 216,624 | 216,075 | 1,587,203 | 76 | |||||||||||||||
| SERVICE ACE Co., Ltd. |
76,770 | 45,229 | 31,541 | 198,164 | 4,217 | |||||||||||||||
| SERVICE TOP Co., Ltd. |
74,452 | 49,400 | 25,052 | 205,574 | 5,276 | |||||||||||||||
| SK O&S Co., Ltd. (Formerly, Network O&S Co., Ltd.) |
81,773 | 42,257 | 39,516 | 265,183 | 1,089 | |||||||||||||||
| SK Planet Co., Ltd. |
753,630 | 436,501 | 317,129 | 672,648 | (436,106 | ) | ||||||||||||||
| DREAMUS COMPANY (Formerly, IRIVER LIMITED)(*3) |
204,479 | 44,620 | 159,859 | 137,849 | (21,314 | ) | ||||||||||||||
| SKP America LLC. |
383,697 | — | 383,697 | — | (370 | ) | ||||||||||||||
| Life & Security Holdings Co., Ltd.(*4) |
2,611,838 | 2,261,456 | 350,382 | 197,487 | 6,038 | |||||||||||||||
| SK Infosec Co., Ltd.(*5) |
183,896 | 54,301 | 129,595 | — | — | |||||||||||||||
| One Store Co., Ltd. |
116,716 | 65,890 | 50,826 | 110,284 | (13,903 | ) | ||||||||||||||
| Home & Service Co., Ltd. |
87,159 | 45,341 | 41,818 | 325,177 | (1,264 | ) | ||||||||||||||
| SK stoa Co., Ltd. |
41,305 | 37,560 | 3,745 | 116,459 | (16,987 | ) | ||||||||||||||
| (*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 Eleven Street Co., Ltd. includes four months of revenue and profit and loss since the spin-off on August 31, 2018. |
| (*3) | The condensed financial information of DREAMUS COMPANY (Formerly, IRIVER LIMITED) is consolidated financial information including iriver Enterprise Ltd. and six other subsidiaries of DREAMUS COMPANY (Formerly, IRIVER LIMITED). |
| (*4) | The condensed financial information of Life & Security Holdings Co., Ltd. is consolidated financial information including ADT CAPS Co., Ltd. and two other subsidiaries, including 3 months of revenue and profit and loss since Life & Security Holdings Co., Ltd. was acquired by the Parent Company on October 1, 2018. |
| (*5) | SK Infosec Co., Ltd. was acquired by the Parent Company and newly included in consolidation as of December 27, 2018. |
16
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 1. | Reporting Entity, Continued |
| (4) | Changes in subsidiaries |
The list of subsidiaries that were newly included in consolidation during the year ended December 31, 2019 is as follows:
| Subsidiary |
Reason | |
| SK Telecom TMT Investment Corp. |
Established by the Parent Company | |
| FSK L&S Co., Ltd. |
Acquired by the Parent Company | |
| FSK L&S (Shanghai) Co., Ltd. |
Subsidiary of FSK L&S Co., Ltd. | |
| Incross Co., Ltd. |
Acquired by the Parent Company | |
| Infra Communications Co., Ltd. |
Subsidiary of Incross Co., Ltd. | |
| Mindknock Co., Ltd. |
Acquired by Incross Co., Ltd. | |
| Happy Hanool Co., Ltd. |
Established by the Parent Company | |
| SKinfosec Information Technology (Wuxi) Co., Ltd. |
Established by SK Infosec Co., Ltd. | |
| FSK L&S (Hungary) Co., Ltd. |
Established by FSK L&S Co., Ltd. | |
The list of subsidiaries that were excluded from consolidation during the year ended December 31, 2019 is as follows:
| Subsidiary |
Reason | |
| groovers Inc. |
Merged into DREAMUS COMPANY(Formerly, IRIVER LIMITED) | |
| shopkick Management Company, Inc. |
Disposed | |
| shopkick, Inc. |
Disposed | |
| iriver Inc. |
Disposed | |
| groovers Japan Co., Ltd. |
Merged into LIFE DESIGN COMPANY Inc. | |
17
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||||||||||||||
| DREAMUS COMPANY (Formerly, IRIVER LIMITED) |
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 on 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 | ) | 8,478 | |||||||||||||
| Dividend paid to non- controlling interests during the year ended December 31, 2019 |
— | 17,500 | 28,786 | — | ||||||||||||||||
18
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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, 2019 and 2018 are as follows, Continued: |
| (In millions of won) | ||||||||||||||||||||
| K-net Culture and Contents Venture Fund |
DREAMUS COMPANY (Formerly, IRIVER LIMITED) |
One Store Co., Ltd. | Eleven Street Co., Ltd. | Life & Security Holdings Co., Ltd. | ||||||||||||||||
| Ownership of non-controlling interests (%) |
41.0 | 47.4 | 34.5 | 18.2 | 45.0 | |||||||||||||||
| As of December 31, 2018 | ||||||||||||||||||||
| Current assets |
150,199 | 92,844 | 923,153 | 124,091 | ||||||||||||||||
| Non-current assets |
147,573 | 54,465 | 23,872 | 122,793 | 2,487,747 | |||||||||||||||
| Current liabilities |
(20,873 | ) | (42,142 | ) | (63,440 | ) | (486,391 | ) | (243,064 | ) | ||||||||||
| Non-current liabilities |
— | (2,663 | ) | (2,450 | ) | (9,516 | ) | (2,018,392 | ) | |||||||||||
| Net assets |
126,818 | 159,859 | 50,826 | 550,039 | 350,382 | |||||||||||||||
| Fair value adjustment and others |
— | — | — | (23,191 | ) | (1,216,347 | ) | |||||||||||||
| Net assets on the consolidated financial statements |
126,818 | 159,859 | 50,826 | 526,848 | (865,965 | ) | ||||||||||||||
| Carrying amount of non-controlling interests |
51,995 | 76,204 | 17,711 | 95,811 | (389,684 | ) | ||||||||||||||
| 2018 | ||||||||||||||||||||
| Revenue |
137,849 | 110,284 | 228,000 | 197,487 | ||||||||||||||||
| Profit (Loss) for the year |
58,584 | (21,314 | ) | (13,903 | ) | (9,507 | ) | 6,038 | ||||||||||||
| Depreciation of the fair value adjustment and others |
— | — | — | (161 | ) | (2,954 | ) | |||||||||||||
| Profit (Loss) for the year on the consolidated financial statements |
58,584 | (21,314 | ) | (13,903 | ) | (9,668 | ) | 3,084 | ||||||||||||
| Total comprehensive income (loss) |
27,773 | (21,125 | ) | (14,386 | ) | (8,897 | ) | (991 | ) | |||||||||||
| Profit (Loss) attributable to non-controlling interests |
24,019 | (10,094 | ) | (4,791 | ) | (1,758 | ) | 1,387 | ||||||||||||
| Net cash provided by (used in) operating activities |
13,635 | 7,181 | (69,347 | ) | (23,451 | ) | ||||||||||||||
| Net cash provided by (used in) investing activities |
600 | (10,169 | ) | (11,482 | ) | (470,211 | ) | (139,430 | ) | |||||||||||
| Net cash provided by (used in) financing activities |
(116,150 | ) | 69,267 | 5 | 494,923 | 124,076 | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents |
16 | 72,733 | (4,296 | ) | (44,635 | ) | (38,805 | ) | ||||||||||||
| Dividend paid to non-controlling interests during the year ended December 31, 2018 |
— | — | — | — | ||||||||||||||||
19
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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 Group’s investments in associates and joint ventures.
The consolidated financial statements were authorized for issuance by the Board of Directors on February 6, 2020, which will be submitted for approval at the shareholders’ meeting to be held on March 26, 2020.
| (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 Company’s 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), determination of stand-alone selling prices and determination of whether a contract is or contains a lease .
20
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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 36), estimated useful lives of costs to obtain a contract (notes 8), property and equipment and intangible assets (notes 4 (7), (9), 14 and 16), impairment of goodwill (notes 4 (11) and 15), recognition of provision (notes 4 (17) and 19), measurement of defined benefit liabilities (notes 4 (16) and 20), and recognition of deferred tax assets (liabilities) (notes 4 (24) and 32).
A number of the Group’s 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 36.
21
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 3. | Changes in Accounting Policies |
The Group has initially applied K-IFRS No. 1116 from January 1, 2019. A number of other new or amended standards are also effective from January 1, 2019, but they do not have a material effect on the Group’s consolidated financial statements.
K-IFRS No. 1116, Leases
K-IFRS No. 1116 introduced a single, on-balance sheet accounting model for lessees. As a result, the Group, as a lessee, has recognized right-of-use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease payments. Lessor accounting remains similar to previous accounting policies.
The Group has applied K-IFRS No. 1116 from January 1, 2019 using the modified retrospective method with the cumulative effect of initially applying this standard recognized as an adjustment to the retained earnings as at January 1, 2019. Accordingly, the comparative information presented for 2018 has been presented, as previously reported, under K-IFRS No. 1017 and has not been restated. Details of the changes in accounting policies are disclosed below.
(1) Definition of a lease
Previously, the Group determined at contract inception whether an arrangement was or contained a lease under K-IFRS No. 2104, Determining Whether an Arrangement Contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a lease. Under K-IFRS No. 1116, a contract is or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.
(2) As a lessee
The Group leases a number of assets including buildings and vehicles. The terms of leases are negotiated individually and include various conditions. Each lease contract is entered into with a term of 1~50 years.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under K-IFRS No. 1116, the Group recognizes right-of-use assets and lease liabilities for most leases – i.e. theses leases are presented on the consolidated statements of financial position.
However, the Group has elected not to recognize right-of-use assets and lease liabilities for leases with the lease term of 12 months or less at the commencement date and for leases of low-value assets. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The Group has also elected to apply the practical expedient which allows a lease and associated non-lease components to be accounted for as a single lease component.
22
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 3. | Changes in Accounting Policies, Continued |
| (2) | As a lessee, Continued |
1) Significant accounting policies
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 comprise the initial amount of lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying assets 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 measured at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements of the lease liability. The Group presents its right-of-use assets in property and equipment on the consolidated statements of financial position. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term.
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 Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payment made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
The Group has applied judgment to determine the lease term for some lease contracts in which it is a lessee that include extension options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized. The Group has not included the extension option periods in the lease term because it is not reasonably certain that the Group will exercise such options. After the commencement date, the Group reassesses the lease term upon the occurrence of a significant event or a significant change in circumstances that is within the control of the Group that affects whether the Group is reasonably certain to exercise the extension option.
23
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 3. | Changes in Accounting Policies, Continued |
| (2) | As a lessee, Continued |
2) Transition requirements
At transition, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as of January 1, 2019. Right-of-use assets are measured at either:
| • | their carrying amount as if K-IFRS No. 1116 had been applied since the commencement date, discounted using the lessee’s incremental borrowing rate at the date of initial application; or |
| • | the amount equal to the lease liabilities, adjusted by the amount of any prepaid or accrued lease payments. |
The Group used the following practical expedients when applying K-IFRS No. 1116 to leases previously classified as operating leases under K-IFRS No. 1017.
| • | Excluded initial direct costs from measuring the right-of-use assets at the date of initial application. |
| • | Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease. |
| (3) | As a lessor |
The accounting policies applicable to the Group as a lessor are not different from those under K-IFRS No. 1017. However, when the Group is an intermediate lessor the sub-leases are classified with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.
24
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 3. | Changes in Accounting Policies, Continued |
| (4) | Impact on financial statements |
| 1) | Impact on transition |
On transition to K-IFRS No. 1116, the Group recognized right-of-use assets and lease liabilities, with the difference recognized in retained earnings. The impact on transition is summarized below.
| (In millions of won) | January 1, 2019 | |||
| Impact on the assets: |
||||
| Right-of-use assets presented in property and equipment |
||||
| Increase in accounts receivable – other (lease receivables) |
31,355 | |||
| Adjustments in property and equipment and intangible assets |
(3,387 | ) | ||
| Decrease in advanced payments and others |
(52,638 | ) | ||
|
|
|
|||
| 629,779 | ||||
|
|
|
|||
| Impact on the liabilities: |
||||
| Increase in the lease liabilities |
663,827 | |||
| Decrease in deferred tax liabilities |
(9,359 | ) | ||
|
|
|
|||
| 654,468 | ||||
| Decrease in retained earnings |
(24,186 | ) | ||
| Decrease in non-controlling interests |
||||
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted average incremental borrowing rate applied is 2.11%.
| (In millions of won) | January 1, 2019 | |||
| Operating lease commitments at December 31, 2018 |
||||
| Discounted using the incremental borrowing rate at January 1, 2019 |
735,051 | |||
| • Recognition exemption for leases with less than 12 months of lease term at the lease commencement date |
(66,548 | ) | ||
| • Recognition exemption for leases of low-value assets |
(4,676 | ) | ||
|
|
|
|||
| Lease liabilities recognized at January 1, 2019 |
||||
|
|
|
|||
25
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 3. | Changes in Accounting Policies, Continued |
| (4) | Impact on financial statements, Continued |
2) Impacts subsequent to transition
| (i) | As a lessee |
As a result of initially applying K-IFRS No. 1116, in relation to the leases that were previously
classified as operating leases, the Group recognized WW
Also, in relation to those
leases under K-IFRS No. 1116, the Group has recognized depreciation and interest costs, instead of operating lease expense. For the year ended December 31, 2019, the Group recognized
WWWW
The payments of lease liabilities presented in the cash flows from financing activities would have been included in the cash flows from operating activities if the previous accounting standards were applied.
| (ii) | As a lessor |
| ① | Finance lease |
The following table sets out a maturity analysis of lease receivables, presenting the undiscounted lease payments to be received subsequent to December 31, 2019. Under K-IFRS No. 1017, the Group did not hold any finance lease as a lessor.
| (In millions of won) | ||||
| Amount | ||||
| Less than 1 year |
||||
| 1 ~ 2 years |
12,690 | |||
| 2 ~ 3 years |
6,348 | |||
| 3 ~ 4 years |
3,683 | |||
| 4 ~ 5 years |
1,589 | |||
| More than 5 years |
1 | |||
|
|
|
|||
| Undiscounted lease payments |
||||
|
|
|
|||
| Unrealized finance income |
1,822 | |||
|
|
|
|||
| Net investment in the lease |
46,775 | |||
|
|
|
|||
26
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 3. | Changes in Accounting Policies, Continued |
| (4) | Impact on financial statements, Continued |
2) Impacts subsequent to transition, Continued
(ii) As a lessor, Continued
② Operating lease
The Group recognized lease income of WW
The following table sets out a maturity analysis of lease payments, presenting the undiscounted lease payments to be received subsequent to December 31, 2019.
| (In millions of won) | ||||
| Amount | ||||
| Less than 1 year |
||||
| 1 ~ 2 years |
76,669 | |||
| 2 ~ 3 years |
25,047 | |||
| 3 ~ 4 years |
1,243 | |||
| 4 ~ 5 years |
1,218 | |||
| More than 5 year |
3 | |||
|
|
|
|||
|
|
|
|||
| (5) | Determining the lease term and assessing the length of the enforceable period of a lease |
In December 2019, International Financial Reporting Interpretations Committee(‘IFRIC’) issued its final agenda decision that the concept of penalty that should be considered in determining the enforceable period under IFRS 16 ‘Leases’, shall be determined considering broader economics of the contract, and not only contractual termination payments. Further, a lease is no longer enforceable when each of the parties has the right to terminate the lease without permission from the other party with no more than an insignificant penalty.
As of December 31, 2019, the Group assesses 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 counterparty’s consent to be extended. Applying the above mentioned IFRIC interpretation may change the judgment on enforceable period for certain of the Group’s lease contracts.
The Group plans to analyze and apply the impact of IFRIC’s interpretation in 2020, if any, as changes in accounting policies.
27
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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, 2018, 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 Group’s other components. The Group’s 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.
| (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, identical to the measurement of identifiable net assets acquired at fair value. The difference between the acquired company’s fair value and the consideration transferred is accounted for 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 excluding 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 and the amount settled in relation to the pre-existing relationship is 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 acquiree’s identifiable net assets at the date of acquisition.
Changes in a Controlling Company’s ownership interest in a subsidiary that do not result in the Controlling Company losing control of the subsidiary are accounted for as equity transactions.
28
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (2) | Basis of consolidation, Continued |
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.
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 entity’s 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 Group’s 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 Group’s 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 shareholder’s consolidated financial statements. The difference between consideration and carrying amount of net assets acquired is added to or subtracted from capital surplus and others.
29
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (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.
| (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. |
30
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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 investment’s 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. | |||
31
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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 Group’s 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 assets.
4) Derecognition
Financial assets are derecognized if the Group’s 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 the risks and rewards of the 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 is 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.
32
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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 foreign currency risk of 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.
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.
33
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (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 asset’s 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).
The estimated useful lives of the Group’s property and equipment are as follows:
| Useful lives (years) | ||
| Buildings and structures | 15 ~ 40 | |
| Machinery | 3 ~ 15 | |
| 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.
34
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (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.
The estimated useful lives of the Group’s 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.
35
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (9) | Intangible assets, Continued |
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 grant’s 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.
| (11) | Impairment of non-financial assets |
The carrying amounts of the Group’s 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 asset’s 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.
36
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (11) | Impairment of non-financial assets, Continued |
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 asset’s 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.
| (12) | Leases - Policies applicable from January 1, 2019 |
The Group has applied K-IFRS No. 1116, Leases, from January 1, 2019. See note 3 (1) for additional information.
The Group determined at contract inception whether an arrangement was or contained a lease. A contract is, or contains, a lease if the contract transfers the right to control the identified asset for a period of time in exchange for consideration. To assess whether a contract transfers the right to control the identified asset, the Group uses the definition of a lease in K-IFRS No. 1116, Leases.
1) As a lessee
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 comprise the initial amount of lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying assets 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 measured at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements of the lease liability. The Group presents its right-of-use assets in property and equipment on the statements of financial position. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term.
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 Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The lease liability is subsequently increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
37
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (12) | Leases - Policies applicable from January 1, 2019, Continued |
1) As a lessee, Continued
The Group has applied judgment to determine the lease term for some lease contracts in which it is a lessee that include extension options. The assessment of whether The Group is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognized. The Group has not included the extension option periods in the lease term because it is not reasonably certain to exercise such options. After the commencement date, The Group reassesses the lease term upon the occurrence of a significant event or a significant change in circumstances that is within the control of The Group that affects whether The Group is reasonably certain to exercise the extension option.
The Group has elected not to recognize right-of-use assets and lease liabilities for leases with the lease term of 12 months or less at the commencement date and for leases of low-value assets. The Group recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The Group has also elected to apply the practical expedient which allows a lease and associated non-lease components to be accounted for as a single lease component.
2) As a lessor
The Group determines whether each lease is a finance lease or an operating lease at inception of a contract. A lease is classified as a finance lease when the lease transfers substantially all of the risks and rewards of ownership of the underlying asset. If not, then it is classified as an operating lease.
When the Group is an intermediate lessor, the Group accounts for the head lease and the sublease separately. The sub-leases are classified with reference to the right-of-use assets arising from the head lease, not with reference to the underlying asset.
| (13) | Leases - Policies applied before January 1, 2019 |
The Group classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases under which the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases.
1) Finance leases – lessee
At the commencement of the lease term, the Group recognizes as finance assets and finance liabilities in its consolidated statement of financial position, the lower amount of the fair value of the leased property and the present value of the minimum lease payments, each determined at the inception of the lease. Any initial direct costs are added to the amount recognized as an asset.
Minimum lease payments are apportioned between the finance cost and the reduction of the outstanding liability. The finance cost is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the periods in which they are incurred.
38
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (13) | Leases - Policies applied before January 1, 2019, Continued |
1) Finance leases – lessee, Continued
The depreciable amount of a leased asset is allocated to each accounting period during the period of expected use on a systematic basis consistent with the depreciation policy the Group adopts for depreciable assets that are owned. If there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life. The Group reviews to determine whether the leased assets are impaired at the reporting date.
2) Operating leases
Leases where the lessor retains a significant portion of the risks and rewards of ownership are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are recognized in profit or loss on a straight-line basis over the lease term.
3) Determining whether an arrangement contains a lease
Determining whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether fulfillment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset.
At inception or reassessment of the arrangement, the Group separates payments and other consideration required by such an arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a financial lease that it is impracticable to separate the payments reliably, the Group recognizes an asset and a liability at an amount equal to the fair value of the underlying asset that was identified as the subject of the lease. Subsequently, the liability is reduced as payments are made and an imputed finance charge on the liability is recognized using the Group’s incremental borrowing rate of interest.
| (14) | 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).
39
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (15) | 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 a 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.
40
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (16) | 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 Group’s 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.
41
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (16) | 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.
| (17) | 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.
| (18) | 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.
42
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (18) | Transactions in foreign currencies, Continued |
2) Foreign operations
If the presentation currency of the Group is different from a foreign operation’s 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.
| (19) | 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.
| (20) | 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.
43
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (21) | 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.
For cash-settled share-based payment transaction, the Group measures and recognizes the amount payable to employees at fair value 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-based payment. Any changes in the liability are recognized in profit or loss.
| (22) | 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 Group’s 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.
44
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (22) | Revenue, Continued |
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.
5) Consideration payable to a customer
Based on the subscription contract, a customer who uses the Group’s 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 the 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.
| (23) | 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.
45
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (24) | 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.
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.
46
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 4. | Significant Accounting Policies, Continued |
| (24) | Income taxes, Continued |
2) Deferred tax, Continued
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 from January 1, 2019. 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. |
| (25) | 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.
| (26) | Standards issued but not yet effective |
The following new standards are effective for annual periods beginning after January 1, 2019 and earlier application is permitted. However, the Group has not adopted the following new standards early in preparing the accompanying consolidated financial statements.
The following amended standards are not expected to have a significant impact on the Group’s consolidated financial statements.
| • | Amendments to References to Conceptual Framework in K-IFRS Standards. |
| • | Definition of a Business (Amendments to K-IFRS No. 1103, Business Combination). |
| • | Definition of Materiality (Amendments to K-IFRS No. 1001, Presentation of Financial Statements and K-IFRS No. 1008, Accounting Policies, Changes in Accounting Estimates and Errors). |
47
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 5. | Operating Segments |
The Group’s operating segments have been identified to be each business unit, by which the Group provides independent services and merchandise. The Group’s reportable segments are cellular services, which include cellular voice service, wireless data service and wireless internet services; fixed-line telecommunications 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 Group’s 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.
| (1) | Segment information for the year ended December 31, 2019 is as follows: |
| (In millions of won) | ||||||||||||||||||||||||||||||||
| 2019 | ||||||||||||||||||||||||||||||||
| Cellular Services |
Fixed-line telecommu- nication Services(*) |
Security Services(*) |
Commerce Services(*) |
Others(*) | Sub-total | Adjustments | Total | |||||||||||||||||||||||||
| Total revenue |
3,952,373 | 1,183,724 | 726,552 | 1,069,685 | 20,714,216 | (2,970,514 | ) | 17,743,702 | ||||||||||||||||||||||||
| Inter-segment revenue |
1,609,467 | 1,004,193 | 74,247 | 15,899 | 266,708 | 2,970,514 | (2,970,514 | ) | — | |||||||||||||||||||||||
| External revenue |
12,172,415 | 2,948,180 | 1,109,477 | 710,653 | 802,977 | 17,743,702 | — | 17,743,702 | ||||||||||||||||||||||||
| Depreciation and amortization |
2,694,786 | 752,234 | 224,537 | 35,788 | 64,141 | 3,771,486 | — | 3,771,486 | ||||||||||||||||||||||||
| Operating profit (loss) |
914,118 | 139,172 | 133,573 | 1,938 | (78,821 | ) | 1,109,980 | — | 1,109,980 | |||||||||||||||||||||||
| Finance income and costs, net |
|
(287,781 | ) | |||||||||||||||||||||||||||||
| Gain relating to investments in subsidiaries, associates and joint ventures, net |
|
449,543 | ||||||||||||||||||||||||||||||
| Other non-operating income and expense, net |
|
(109,087 | ) | |||||||||||||||||||||||||||||
| Profit before income tax |
|
1,162,655 | ||||||||||||||||||||||||||||||
| (2) | Segment information for the year ended December 31, 2018 is as follows: |
| (In millions of won) | ||||||||||||||||||||||||||||||||
| 2018 | ||||||||||||||||||||||||||||||||
| Cellular Services |
Fixed-line telecommu- nication Services(*) |
Security Services(*) |
Commerce Services(*) |
Others(*) | Sub-total | Adjustments | Total | |||||||||||||||||||||||||
| Total revenue |
3,857,074 | 286,089 | 790,818 | 912,776 | 19,808,519 | (2,934,559 | ) | 16,873,960 | ||||||||||||||||||||||||
| Inter-segment revenue |
1,582,865 | 1,034,769 | 1,801 | 62,446 | 252,678 | 2,934,559 | (2,934,559 | ) | — | |||||||||||||||||||||||
| External revenue |
12,378,897 | 2,822,305 | 284,288 | 728,372 | 660,098 | 16,873,960 | — | 16,873,960 | ||||||||||||||||||||||||
| Depreciation and amortization |
2,341,862 | 641,336 | 60,723 | 19,051 | 63,146 | 3,126,118 | — | 3,126,118 | ||||||||||||||||||||||||
| Operating profit (loss) |
1,299,869 | 245,509 | (11,284 | ) | (85,041 | ) | (247,293 | ) | 1,201,760 | — | 1,201,760 | |||||||||||||||||||||
| Finance income and costs, net |
|
(128,797 | ) | |||||||||||||||||||||||||||||
| Gain relating to investments in subsidiaries, associates and joint ventures, net |
|
3,270,912 | ||||||||||||||||||||||||||||||
| Other non-operating income and expense, net |
|
(367,909 | ) | |||||||||||||||||||||||||||||
| Profit before income tax |
|
3,975,966 | ||||||||||||||||||||||||||||||
48
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 5. | Operating Segments, Continued |
| (*) | During the year ended December 31, 2019, the Group reclassified SK stoa Co., Ltd. from Fixed-line telecommunications Services 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. Segment information for the year ended December 31, 2018 was restated considering these reclassifications. |
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 Group’s total revenue for the years ended December 31, 2019 and 2018.
| (3) | Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows: |
| (In millions of won) | ||||||||||
| 2019 | 2018 | |||||||||
| Goods and services transferred at a point in time: |
||||||||||
| Cellular revenue |
Goods (*1) |
1,124,143 | ||||||||
| Fixed-line telecommunication revenue |
Goods |
145,314 | 125,959 | |||||||
| Commerce services revenue |
Goods |
56,699 | 45,837 | |||||||
| Commerce |
151,690 | 77,539 | ||||||||
| Security services revenue |
Goods |
44,764 | 12,332 | |||||||
| Other revenue |
Goods |
86,793 | 81,311 | |||||||
| Products |
44,336 | 51,214 | ||||||||
| Others (*7) |
442,869 | 275,431 | ||||||||
|
|
|
|
|
|||||||
| 2,115,333 | 1,793,766 | |||||||||
|
|
|
|
|
|||||||
| Goods and services transferred over time: |
||||||||||
| Cellular revenue |
Wireless service(*2) |
9,532,377 | 9,770,423 | |||||||
| Cellular interconnection |
494,267 | 532,156 | ||||||||
| Other(*3) |
1,002,903 | 952,175 | ||||||||
| Fixed-line telecommunication revenue |
Fixed-line service |
224,453 | 371,224 | |||||||
| Cellular interconnection |
92,396 | 95,865 | ||||||||
| Internet Protocol Television(*4) |
1,285,831 | 1,171,104 | ||||||||
| International calls |
137,902 | 152,918 | ||||||||
| Internet service and miscellaneous(*5) |
1,062,284 | 905,235 | ||||||||
| Commerce services revenue |
Commerce service |
502,264 | 604,996 | |||||||
| Security services revenue |
Service(*6) |
1,064,713 | 271,956 | |||||||
| Other revenue |
Miscellaneous(*7) |
228,979 | 252,142 | |||||||
|
|
|
|
|
|||||||
| 15,628,369 | 15,080,194 | |||||||||
|
|
|
|
|
|||||||
| 16,873,960 | ||||||||||
|
|
|
|
|
|||||||
49
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 5. | Operating Segments, Continued |
| (3) | Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows, Continued: |
| (*1) | Cellular revenue includes revenue from sale of handsets and other electronic accessories. |
| (*2) | Wireless service includes revenue from wireless voice and data transmission services principally derived from usage charges to wireless subscribers. |
| (*3) | Other revenue includes revenue from billing and collection services as well as other miscellaneous services. |
| (*4) | IPTV service revenue includes revenue from IPTV services principally derived from usage charges to IPTV subscribers. |
| (*5) | Internet service includes revenue from the high speed broadband internet service principally derived from usage charges to subscribers as well as other miscellaneous services. |
| (*6) | Service includes revenue from rendering security services. |
| (*7) | Miscellaneous other revenue includes revenue from considerations received for the development and maintenance of system software, and digital contents platform services. |
| 6. | Restricted Deposits |
Deposits which are restricted in use as of December 31, 2019 and 2018 are summarized as follows:
| (In millions of won) | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| Short-term financial instruments(*) |
79,511 | |||||||
| Long-term financial instruments(*) |
988 | 1,218 | ||||||
|
|
|
|
|
|||||
| 80,729 | ||||||||
|
|
|
|
|
|||||
| (*) | Financial instruments include charitable trust fund established by the Group where profits from the fund are donated to charitable institutions. As of December 31, 2019, the funds cannot be withdrawn before maturity. |
50
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 7. | Trade and Other Receivables |
| (1) | Details of trade and other receivables as of December 31, 2019 and 2018 are as follows: |
| (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(*) |
953,815 | (48,379 | ) | 905,436 | ||||||||
| Accrued income |
3,977 | (166 | ) | 3,811 | ||||||||
| Guarantee deposits (Other current assets) |
145,041 | — | 145,041 | |||||||||
|
|
|
|
|
|
|
|||||||
| 3,649,958 | (298,568 | ) | 3,351,390 | |||||||||
| Non-current assets: |
||||||||||||
| Long-term loans |
81,231 | (47,471 | ) | 33,760 | ||||||||
| Long-term accounts receivable – other(*) |
344,662 | — | 344,662 | |||||||||
| Guarantee deposits |
165,033 | (299 | ) | 164,734 | ||||||||
| Long-term accounts receivable – trade (Other non-current assets) |
16,977 | (61 | ) | 16,916 | ||||||||
|
|
|
|
|
|
|
|||||||
| 607,903 | (47,831 | ) | 560,072 | |||||||||
|
|
|
|
|
|
|
|||||||
| (346,399 | ) | 3,911,462 | ||||||||||
|
|
|
|
|
|
|
|||||||
| (*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2019 include
|
| (In millions of won) | December 31, 2018 | |||||||||||
| Gross amount |
Loss allowance |
Carrying amount |
||||||||||
| Current assets: |
||||||||||||
| Accounts receivable – trade |
(260,040 | ) | 2,008,640 | |||||||||
| Short-term loans |
59,643 | (549 | ) | 59,094 | ||||||||
| Accounts receivable – other(*) |
1,006,183 | (68,346 | ) | 937,837 | ||||||||
| Accrued income |
6,232 | (166 | ) | 6,066 | ||||||||
| Guarantee deposits (Other current assets) |
2,714 | — | 2,714 | |||||||||
|
|
|
|
|
|
|
|||||||
| 3,343,452 | (329,101 | ) | 3,014,351 | |||||||||
| Non-current assets: |
||||||||||||
| Long-term loans |
75,860 | (46,826 | ) | 29,034 | ||||||||
| Long-term accounts receivable – other(*) |
274,053 | — | 274,053 | |||||||||
| Guarantee deposits |
313,140 | — | 313,140 | |||||||||
| Long-term accounts receivable – trade (Other non-current assets) |
11,410 | (117 | ) | 11,293 | ||||||||
|
|
|
|
|
|
|
|||||||
| 674,463 | (46,943 | ) | 627,520 | |||||||||
|
|
|
|
|
|
|
|||||||
| (376,044 | ) | 3,641,871 | ||||||||||
|
|
|
|
|
|
|
|||||||
| (*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2018 include
|
51
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 7. | Trade and Other Receivables, Continued |
| (2) | Changes in the loss allowance on accounts receivable – trade measured at amortized costs during the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||||||||||||||||||||||
| Beginning balance |
Impact of adopting K-IFRS No. 1109 |
Impairment | Write-offs (*) | Collection of receivables previously written-off |
Business combination and others |
Ending Balance |
||||||||||||||||||||||
| 2019 |
— | 28,841 | (55,756 | ) | 14,772 | 1,487 | 249,501 | |||||||||||||||||||||
| 2018 |
239,448 | 12,950 | 38,211 | (46,616 | ) | 13,455 | 2,709 | 260,157 | ||||||||||||||||||||
| (*) | The Group writes off the trade and other receivables when contractual payments are more than 5 years past due, or for reasons such as termination of operations or liquidation. |
| (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, 2019 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 | 1.34 | % | 63.33 | % | 85.89 | % | 97.49 | % | |||||||||
| Gross amount | 44,972 | 110,038 | 28,300 | |||||||||||||||
| Loss allowance | 15,822 | 28,481 | 94,509 | 27,589 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Other revenue |
Expected credit loss rate | 3.49 | % | 56.01 | % | 45.99 | % | 61.72 | % | |||||||||
| Gross amount | 5,162 | 20,252 | 55,409 | |||||||||||||||
| Loss allowance | 36,696 | 2,891 | 9,313 | 34,200 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
As the Group is a wireless and fixed-line telecommunications service provider, the Group’s 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.
52
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 8. | Prepaid expenses |
The Group pays commissions to its retail stores and authorized dealers for wireless and fixed-line telecommunications 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, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| Current assets: |
||||||||
| Incremental costs of obtaining contracts |
1,577,992 | |||||||
| Others |
133,317 | 190,351 | ||||||
|
|
|
|
|
|||||
| 2,030,550 | 1,768,343 | |||||||
|
|
|
|
|
|||||
| Non-current assets: |
||||||||
| Incremental costs of obtaining contracts |
1,152,748 | 799,607 | ||||||
| Others |
88,681 | 95,665 | ||||||
|
|
|
|
|
|||||
| 895,272 | ||||||||
|
|
|
|
|
|||||
| (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, 2019 and 2018 are as follows:
| (In millions of won) | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| Amortization and impairment losses recognized |
2,002,460 | |||||||
53
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| Contract assets: |
||||||||
| Allocation of consideration between performance obligations |
133,893 | |||||||
| Contract liabilities: |
||||||||
| Wireless service contracts |
20,393 | 18,425 | ||||||
| Customer loyalty programs |
21,945 | 17,113 | ||||||
| Fixed-line service contracts |
65,315 | 57,327 | ||||||
| Security services |
32,026 | 38,109 | ||||||
| Others |
83,777 | 52,839 | ||||||
|
|
|
|
|
|||||
| 183,813 | ||||||||
|
|
|
|
|
|||||
| (2) | The amount of revenue recognized during the year ended December 31, 2019 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 |
— | — | 20,393 | |||||||||||||
| Customer loyalty programs |
17,285 | 3,253 | 1,407 | 21,945 | ||||||||||||
| Fixed-line service contracts |
52,237 | 13,078 | — | 65,315 | ||||||||||||
| Security services |
24,215 | 5,676 | 2,135 | 32,026 | ||||||||||||
| Others |
77,095 | 1,578 | 5,104 | 83,777 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 23,585 | 8,646 | 223,456 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
54
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 10. | Inventories |
| (1) | Details of inventories as of December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||||||||||||||||||
| December 31, 2019 | December 31, 2018 | |||||||||||||||||||||||
| Acquisition cost |
Write-down | Carrying amount |
Acquisition cost |
Write-down | Carrying amount |
|||||||||||||||||||
| Merchandise |
(14,557 | ) | 147,928 | 268,366 | (8,842 | ) | 259,524 | |||||||||||||||||
| Finished goods |
4,264 | (2,265 | ) | 1,999 | 1,260 | (251 | ) | 1,009 | ||||||||||||||||
| Work in process |
2,674 | (539 | ) | 2,135 | 3,985 | (338 | ) | 3,647 | ||||||||||||||||
| Raw materials |
12,369 | (7,967 | ) | 4,402 | 11,729 | (2,706 | ) | 9,023 | ||||||||||||||||
| Supplies |
7,112 | (694 | ) | 6,418 | 14,850 | — | 14,850 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (26,022 | ) | 162,882 | 300,190 | (12,137 | ) | 288,053 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (2) | Inventories recognized as operating expenses for the years ended December 31, 2019 and 2018 are
|
| 11. | Investment Securities |
| (1) | Details of short-term investment securities as of December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||||
| Category | December 31, 2019 | December 31, 2018 | ||||||||
| Beneficiary certificates |
FVTPL |
195,080 | ||||||||
| (2) | Details of long-term investment securities as of December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||||||
| Category | December 31, 2019 | December 31, 2018 | ||||||||||
| Equity instruments |
FVOCI | (*) | 542,496 | |||||||||
| FVTPL | 1,011 | — | ||||||||||
|
|
|
|
|
|||||||||
| 711,283 | 542,496 | |||||||||||
| Debt instruments |
FVOCI | 4,627 | 2,147 | |||||||||
| FVTPL | 141,305 | 120,083 | ||||||||||
|
|
|
|
|
|||||||||
| 145,932 | 122,230 | |||||||||||
|
|
|
|
|
|||||||||
| 664,726 | ||||||||||||
|
|
|
|
|
|||||||||
55
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 11. | Investment Securities, Continued |
| (2) | Details of long-term investment securities as of December 31, 2019 and 2018 are as follows, Continued: |
| (*) | The Group designated |
| 12. | Business Combinations |
| (1) | 2019 |
| 1) | Acquisition of Incross Co., Ltd. by the Parent Company |
The Parent Company acquired 2,786,455 shares (or 34.6%) of Incross Co., Ltd. at WWW
| (i) | Summary of the acquiree |
| Information of Acquiree | ||
| Corporate name |
Incross Co., Ltd. | |
| Location |
5th floor, 1925, Nambusunhwan-ro, Gwanak-gu, Seoul, Korea | |
| CEO |
Lee, Jae-won | |
| Industry |
Media representative business |
56
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 12. | Business Combinations, Continued |
| 1) | 2019, Continued |
| 1) | Acquisition of Incross Co., Ltd. by the Parent Company, Continued |
| (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 | |||
| Trade and other receivables |
67,259 | |||
| Property and equipment |
2,411 | |||
| Intangible assets |
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) |
||||
|
|
|
|||
57
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 12. | Business Combinations, Continued |
| (2) | 2018 |
| 1) | Acquisition of id Quantique SA by the Parent Company |
As of April 30, 2018, the Parent Company acquired additional 41,157,506 shares in exchange of W55,249 million in
cash, which resulted in the Parent Company obtaining control over id Quantique SA with 44,157,506 shares and 58.1% ownership of the outstanding shares, in aggregate. Taking control of id Quantique SA will enable the Parent Company to increase its
corporate value as the leading mobile telecommunication operator in Korea and to generate profit in overseas markets by utilizing quantum cryptographic technologies.
In addition, the Parent Company acquired additional 16,666,666 shares in exchange for assets amounting to W5,672 million
resulting in the increase of the ownership to 65.6%.
id Quantique SA has recognized W9,935 million in revenue and
W5,220 million in net losses since the Group obtained control. Meanwhile, the existing shares were reclassified into the investment in a subsidiary from the FVOCI equity instrument with the valuation gain on FVOCI equity
instrument of W1,636 million reclassified into the retained earnings.
| (i) | Summary of the acquiree |
| Information of Acquiree | ||
| Corporate name |
id Quantique SA | |
| Location |
3, CHEMIN DE LA MARBRERIE, 1227 CAROUGE, SWITZERLAND | |
| CEO |
Gregoire Ribordy | |
| Industry |
Quantum information and communications industry |
58
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 12. | Business Combinations, Continued |
| (2) | 2018, Continued |
| 1) | Acquisition of id Quantique SA by the Parent Company, Continued |
| (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 |
||||
| Existing shares(financial assets at FVOCI) at fair value |
3,965 | |||
|
|
|
|||
| 59,214 | ||||
| II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
| Cash and cash equivalents |
1,538 | |||
| Trade and other receivables |
13,609 | |||
| Inventories |
2,003 | |||
| Property and equipment |
415 | |||
| Intangible assets |
7,566 | |||
| Other assets |
447 | |||
| Trade and other payables |
(1,569 | ) | ||
| Other liabilities |
(2,880 | ) | ||
|
|
|
|||
| 21,129 | ||||
| III. Non-controlling interests: |
9,290 | |||
|
|
|
|||
| IV. Goodwill(I-II+III) |
||||
|
|
|
|||
59
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 12. | Business Combinations, Continued |
| (2) | 2018, Continued |
| 2) | Acquisition of Life & Security Holdings Co., Ltd. by the Parent Company |
As of October 1, 2018, the Parent Company obtained control by acquiring 55% ownership of Life & Security Holdings Co., Ltd which
owns 100% ownership of ADT CAPS Co., Ltd. in order to strengthen the security business and expand residential customer base. The consideration for the business combination was W696,665 million in cash, and the difference
between the fair value of net assets acquired and the consideration paid amounting to W1,155,037 million was recognized as goodwill. Subsequent to the acquisition, Life & Security Holdings Co., Ltd. recognized revenue
of W197,487 million, and net profit of W6,038 million. In addition, assuming that the business combination occurred at the beginning of the reporting period, the Group would have additionally recognized
revenue of W763,375 million, and net loss of W19,548 million.
| (i) | Summary of the acquiree |
| Information of Acquiree | ||
| Corporate name |
Life & Security Holdings Co., Ltd. | |
| Location |
323, Incheon tower-daero, Yeonsu-gu, Incheon, Korea | |
| CEO |
Choi, Jin-hwan | |
| Industry |
Holding company of subsidiaries in security 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 |
101,896 | |||
| Trade and other receivables |
40,241 | |||
| Inventories |
2,440 | |||
| Property and equipment |
427,752 | |||
| Intangible assets |
1,019,503 | |||
| Other assets |
3,956 | |||
| Trade and other payables |
(296,660 | ) | ||
| Borrowings |
(1,744,839 | ) | ||
| Deferred tax liabilities |
(229,207 | ) | ||
| Other liabilities |
(158,042 | ) | ||
|
|
|
|||
| (832,960 | ) | |||
| III. Non-controlling interests: |
(374,588 | ) | ||
|
|
|
|||
| IV. Goodwill(I - II+III) |
||||
|
|
|
|||
60
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 12. | Business Combinations, Continued |
| (2) | 2018, Continued |
| 3) | Business combination under common control: Acquisition of SK Infosec Co., Ltd. |
The Group acquired 100% ownership of SK Infosec Co., Ltd. from SK Holdings Co., Ltd., the ultimate controlling entity of the Parent Company, in order to create synergy in the security business and increase corporate value. 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 entity’s consolidated financial statements. Considerations paid and assets and liabilities recognized at the acquisition date are as follows:
| (In millions of won) |
| |||
| Amount | ||||
| I. Considerations paid: |
||||
| Treasury shares of the Parent Company(*) |
||||
| II. Assets and liabilities acquired: |
||||
| Cash and cash equivalents |
30,762 | |||
| Trade and other receivables |
62,448 | |||
| Inventories |
1,293 | |||
| Property and equipment |
8,047 | |||
| Intangible assets |
5,528 | |||
| Other assets |
79,951 | |||
| Trade and other payables |
(38,431 | ) | ||
| Other liabilities |
(20,003 | ) | ||
|
|
|
|||
| 129,595 | ||||
|
|
|
|||
| III. Deduction of capital surplus and others (I-II) |
||||
|
|
|
|||
| (*) | The Parent Company provided 1,260,668 shares of its treasury shares as considerations, and the fair value of
the considerations was |
In addition, assuming that the
business combination occurred at the beginning of the reporting period, the Group would have additionally recognized revenue of W172,905 million, and net profit of W19,512 million.
| 4) | Business combination under common control: Acquisition of Device business unit by SK Telink Co., Ltd. |
During the year ended December 31, 2018, SK Telink Co., Ltd., the subsidiary owned by the Parent Company, acquired
a device business in exchange of W4,450 million in cash from SK Holdings Co., Ltd., the ultimate controlling entity of the Parent Company. As this transaction is a business combination under common control, the difference
between the consideration and carrying amount of net assets amounting to W1,018 million was deducted from capital surplus and others.
61
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 13. | Investments in Associates and Joint Ventures |
| (1) | Investments in associates and joint ventures accounted for using the equity method as of December 31, 2019 and 2018 are as follows: |
| (In millions of won) | December 31, 2019 | December 31, 2018 | ||||||||||||||||||
| 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 | 311,552 | 63.3 | 281,684 | |||||||||||||||
| KEB HanaCard Co., Ltd.(*2) |
Korea | 15.0 | 294,756 | 15.0 | 288,457 | |||||||||||||||
| SK Telecom CS T1 Co., Ltd. (*1,3) |
Korea | 54.9 | 60,305 | — | — | |||||||||||||||
| NanoEnTek, Inc. |
Korea | 28.6 | 42,127 | 28.9 | 40,974 | |||||||||||||||
| UniSK |
China | 49.0 | 14,342 | 49.0 | 13,486 | |||||||||||||||
| SK Technology Innovation Company |
Cayman Islands | 49.0 | 43,997 | 49.0 | 42,469 | |||||||||||||||
| SK MENA Investment B.V. |
Netherlands | 32.1 | 14,904 | 32.1 | 14,420 | |||||||||||||||
| SK hynix Inc. |
Korea | 20.1 | 11,425,325 | 20.1 | 11,208,315 | |||||||||||||||
| SK Latin America Investment S.A. |
Spain | 32.1 | 13,698 | 32.1 | 13,313 | |||||||||||||||
| Grab Geo Holdings PTE. LTD.(*4) |
Singapore | 30.0 | 31,269 | — | — | |||||||||||||||
| SK South East Asia Investment Pte. Ltd.(Formerly, SE ASIA INVESTMENT PTE. LTD.) (*5) |
Singapore | 20.0 | 250,034 | 20.0 | 111,000 | |||||||||||||||
| Pacific Telecom Inc.(*2) |
USA | 15.0 | 40,016 | 15.0 | 37,075 | |||||||||||||||
| S.M. Culture & Contents Co., Ltd. |
Korea | 23.4 | 63,469 | 23.4 | 63,801 | |||||||||||||||
| Content Wavve Co., Ltd. (*6) |
Korea | 30.0 | 83,640 | — | — | |||||||||||||||
| Hello Nature., Ltd. |
Korea | 49.9 | 13,620 | 49.9 | 28,549 | |||||||||||||||
| Health Connect Co., Ltd. and others |
— | — | 65,343 | — | 96,522 | |||||||||||||||
|
|
|
|
|
|||||||||||||||||
| 13,336,856 | 12,791,613 | |||||||||||||||||||
|
|
|
|
|
|||||||||||||||||
| Investments in joint ventures: |
||||||||||||||||||||
| Dogus Planet, Inc.(*7) |
Turkey | 50.0 | 15,921 | 50.0 | 12,487 | |||||||||||||||
| Finnq Co., Ltd.(*7,8) |
Korea | 49.0 | 22,880 | 49.0 | 7,671 | |||||||||||||||
| NEXTGEN BROADCAST SERVICES CO, LLC(*7,9) |
USA | 50.0 | 7,961 | — | — | |||||||||||||||
| NEXTGEN ORCHESTRATION, LLC(*7,10) |
USA | 50.0 | 1,646 | — | — | |||||||||||||||
| Celcom Planet(*11) |
Malaysia | — | — | 44.7 | — | |||||||||||||||
|
|
|
|
|
|||||||||||||||||
| 48,408 | 20,158 | |||||||||||||||||||
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|||||||||||||||||
62
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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, 2019 and 2018 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 board of directors even though the Group has less than 20% of equity interests. |
| (*3) | SK Telecom CS T1 Co., Ltd. was newly established during the year ended December 31, 2019. The Group contributed its e-sports business after the establishment. |
| (*4) | The Group jointly established Grab Geo Holdings PTE. LTD. by investing |
| (*5) | The Group contributed |
| (*6) | The Group newly invested |
| (*7) | These investments were classified as investment in joint ventures as the Group has a joint control pursuant to the agreement with the other shareholders. |
| (*8) | The Group contributed |
| (*9) | The Group newly invested |
| (*10) | The Group newly invested |
| (*11) | Investment in Celcom Planet was disposed during the year ended December 31, 2019. |
| (2) | The market value of investments in listed associates as of December 31, 2019 and 2018 are as follows: |
| (In millions of won, except for share data) | ||||||||||||||||||||||||
| December 31, 2019 | December 31, 2018 | |||||||||||||||||||||||
| 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 | 42,716 | 4,235 | 7,600,649 | 32,189 | |||||||||||||||||||
| SK hynix Inc. |
94,100 | 146,100,000 | 13,748,010 | 60,500 | 146,100,000 | 8,839,050 | ||||||||||||||||||
| S.M.Culture & Contents Co., Ltd. |
1,530 | 22,033,898 | 33,712 | 2,020 | 22,033,898 | 44,508 | ||||||||||||||||||
63
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||||||||||
| SK hynix Inc. | KEB HanaCard Co., Ltd. |
Korea IT Fund |
SK China Company Ltd. |
|||||||||||||
| As of December 31, 2019 | ||||||||||||||||
| Current assets |
7,974,407 | 113,233 | 615,028 | |||||||||||||
| Non-current assets |
50,331,892 | 207,284 | 378,691 | 1,442,748 | ||||||||||||
| Current liabilities |
7,874,033 | 1,015,657 | — | 59,395 | ||||||||||||
| Non-current liabilities |
8,972,266 | 5,537,850 | — | 215,354 | ||||||||||||
| 2019 | ||||||||||||||||
| Revenue |
26,990,733 | 1,236,678 | 70,565 | 116,269 | ||||||||||||
| Profit for the year |
2,016,391 | 56,281 | 53,867 | 23,474 | ||||||||||||
| Other comprehensive income (loss)94,023 |
|
(4,458 | ) | 6,132 | (15,093 | ) | ||||||||||
| Total comprehensive income |
2,110,414 | 51,823 | 59,999 | 8,381 | ||||||||||||
| (In millions of won) | ||||||||||||||||
| SK hynix Inc. | KEB HanaCard Co., Ltd. |
Korea IT Fund |
SK China Company Ltd. |
|||||||||||||
| As of December 31, 2018 | ||||||||||||||||
| Current assets |
7,781,888 | 118,024 | 677,686 | |||||||||||||
| Non-current assets |
43,764,189 | 202,251 | 326,740 | 1,221,736 | ||||||||||||
| Current liabilities |
13,031,852 | 1,122,538 | — | 71,396 | ||||||||||||
| Non-current liabilities |
3,774,152 | 5,286,179 | — | 117,094 | ||||||||||||
| 2018 | ||||||||||||||||
| Revenue |
40,445,066 | 1,642,133 | 57,430 | 117,132 | ||||||||||||
| Profit for the year |
15,539,984 | 106,675 | 45,110 | 30,274 | ||||||||||||
| Other comprehensive loss |
(67,219 | ) | (4,344 | ) | (13,422 | ) | (16,149 | ) | ||||||||
| Total comprehensive income |
15,472,765 | 102,331 | 31,688 | 14,125 | ||||||||||||
64
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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, 2019 and 2018 are as follows: |
| (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 |
136,777 | 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 | ) | |||||
| (In millions of won) | ||||||||
| Dogus Planet, Inc. | Finnq Co., Ltd. | |||||||
| As of December 31, 2018 | ||||||||
| Current assets |
11,985 | |||||||
| Cash and cash equivalents |
42,416 | 10,434 | ||||||
| Non-current assets |
20,239 | 15,435 | ||||||
| Current liabilities |
37,105 | 5,070 | ||||||
| Accounts payable, other payables and provision |
28,432 | 87 | ||||||
| Non-current liabilities |
1,287 | 7,579 | ||||||
| 2018 | ||||||||
| Revenue |
99,770 | 232 | ||||||
| Depreciation and amortization |
(5,427 | ) | (3,490 | ) | ||||
| Interest income |
1,635 | 5 | ||||||
| Interest expense |
— | (301 | ) | |||||
| Profit (Loss) for the year |
642 | (17,995 | ) | |||||
| Total comprehensive income (loss) |
642 | (18,166 | ) | |||||
65
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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, 2019 and 2018 are as follows: |
| (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 | |||||||||||||||
| (In millions of won) | ||||||||||||||||||||
| December 31, 2018 | ||||||||||||||||||||
| Net assets | Ownership interests (%) |
Net assets attributable to the ownership interests |
Cost-book value differentials |
Carrying amount |
||||||||||||||||
| SK hynix Inc.(*1,2) |
20.1 | 10,005,624 | 1,202,691 | 11,208,315 | ||||||||||||||||
| KEB HanaCard Co., Ltd. |
1,575,422 | 15.0 | 236,313 | 52,144 | 288,457 | |||||||||||||||
| Korea IT Fund |
444,764 | 63.3 | 281,684 | — | 281,684 | |||||||||||||||
| SK China Company Ltd.(*1) |
1,708,612 | 27.3 | 465,959 | 85,589 | 551,548 | |||||||||||||||
| (*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 investee’s total shares outstanding. The effective ownership interest applied for the equity method is 21.36% for 2019 and 2018. |
66
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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, 2019 and 2018 are as follows: |
| (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. (Formerly, SE 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 | |||||||||||||||||
| Content 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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|
|
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|
|||||||||||||
| 12,791,613 | 302,552 | 442,400 | 60,723 | (260,432 | ) | 13,336,856 | ||||||||||||||||||
| 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 | ) | — | — | — | |||||||||||||||||
|
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|||||||||||||
| 20,158 | 40,468 | (10,189 | ) | (1,963 | ) | (66 | ) | 48,408 | ||||||||||||||||
|
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|||||||||||||
| 343,020 | 432,211 | 58,760 | (260,498 | ) | 13,385,264 | |||||||||||||||||||
|
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67
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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, 2019 and 2018 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) | Investments in Celcom Planet was disposed during year ended December 31, 2019. |
68
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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, 2019 and 2018 are as follows, Continued: |
| (In millions of won) | 2018 | |||||||||||||||||||||||
| 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. |
— | 7,618 | 17,831 | — | 551,548 | |||||||||||||||||||
| Korea IT Fund(*) |
257,003 | — | 38,099 | (9,919 | ) | (3,499 | ) | 281,684 | ||||||||||||||||
| KEB HanaCard Co., Ltd. |
280,988 | — | 14,581 | (7,112 | ) | — | 288,457 | |||||||||||||||||
| NanoEnTek, Inc. |
38,718 | 3,180 | (116 | ) | (808 | ) | — | 40,974 | ||||||||||||||||
| SK Technology Innovation Company |
42,511 | — | (1,880 | ) | 1,838 | — | 42,469 | |||||||||||||||||
| HappyNarae Co., Ltd. |
21,873 | (29,325 | ) | 7,479 | (27 | ) | — | — | ||||||||||||||||
| SK hynix Inc.(*) |
8,130,000 | — | 3,238,054 | (13,639 | ) | (146,100 | ) | 11,208,315 | ||||||||||||||||
| SK MENA Investment B.V. |
13,853 | — | (24 | ) | 591 | — | 14,420 | |||||||||||||||||
| S.M. Culture & Contents Co., Ltd. |
64,966 | — | (909 | ) | (256 | ) | — | 63,801 | ||||||||||||||||
| Xian Tianlong Science and Technology Co., Ltd. |
25,891 | (25,553 | ) | (338 | ) | — | — | — | ||||||||||||||||
| Hello Nature Ltd. |
— | — | (959 | ) | — | 29,508 | 28,549 | |||||||||||||||||
| 12CM Japan, Inc. |
— | 7,697 | (43 | ) | 80 | — | 7,734 | |||||||||||||||||
| MAKEUS Corp. |
— | 9,773 | (574 | ) | — | (6 | ) | 9,193 | ||||||||||||||||
| SK South East Asia Investment Pte. Ltd. (Formerly, SE ASIA INVESTMENT PTE. LTD.) |
— | 111,000 | — | — | — | 111,000 | ||||||||||||||||||
| Pacific Telecom Inc. |
— | 36,487 | 473 | 115 | — | 37,075 | ||||||||||||||||||
| Health Connect Co., Ltd. and others(*) |
96,479 | 22,902 | (6,474 | ) | 197 | (6,710 | ) | 106,394 | ||||||||||||||||
|
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|
|||||||||||||
| 9,498,381 | 136,161 | 3,294,987 | (11,109 | ) | (126,807 | ) | 12,791,613 | |||||||||||||||||
| Investments in joint ventures: |
||||||||||||||||||||||||
| Dogus Planet, Inc. |
13,991 | 1,537 | 563 | (3,604 | ) | — | 12,487 | |||||||||||||||||
| Finnq Co., Ltd. |
16,474 | — | (8,728 | ) | (75 | ) | — | 7,671 | ||||||||||||||||
| 12CM GLOBAL PTE. LTD. |
9,592 | (9,631 | ) | 42 | (3 | ) | — | — | ||||||||||||||||
| Celcom Planet |
— | 12,932 | (12,932 | ) | — | — | — | |||||||||||||||||
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|||||||||||||
| 40,057 | 4,838 | (21,055 | ) | (3,682 | ) | — | 20,158 | |||||||||||||||||
|
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|||||||||||||
| 140,999 | 3,273,932 | (14,791 | ) | (126,807 | ) | 12,811,771 | ||||||||||||||||||
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|||||||||||||
| (*) | Dividends received from the associates are deducted from the carrying amount during the year ended December 31, 2018. |
69
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 13. | Investments in Associates and Joint Ventures, Continued |
| (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, 2019 are as follows: |
| (In millions of won) | Unrecognized loss | Unrecognized change in equity | ||||||||||||||
| 2019 | Cumulative loss |
2019 | Cumulative loss |
|||||||||||||
| Wave City Development Co., Ltd. |
4,370 | — | — | |||||||||||||
| Daehan Kanggun BcN Co., Ltd. and others |
(4,758 | ) | 10,652 | (503 | ) | (138 | ) | |||||||||
|
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|||||||||
| 15,022 | (503 | ) | (138 | ) | ||||||||||||
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|||||||||
| 14. | Property and Equipment |
| (1) | Property and equipment as of December 31, 2019 and 2018 are as follows: |
| (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 |
34,173,584 | (26,198,631 | ) | (33,742 | ) | 7,941,211 | ||||||||||
| Other |
2,084,463 | (1,349,039 | ) | (3,125 | ) | 732,299 | ||||||||||
| Right-of-use assets |
1,000,491 | (291,095 | ) | — | 709,396 | |||||||||||
| Construction in progress |
755,508 | — | — | 755,508 | ||||||||||||
|
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|||||||||
| (29,247,905 | ) | (38,918 | ) | 12,334,280 | ||||||||||||
|
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|
|||||||||
| (In millions of won) | December 31, 2018 | |||||||||||||||
| Acquisition cost | Accumulated depreciation |
Accumulated impairment loss |
Carrying amount |
|||||||||||||
| Land |
— | — | 938,344 | |||||||||||||
| Buildings |
1,670,486 | (807,192 | ) | — | 863,294 | |||||||||||
| Structures |
883,032 | (525,537 | ) | (1,456 | ) | 356,039 | ||||||||||
| Machinery |
32,096,543 | (24,922,091 | ) | (27,728 | ) | 7,146,724 | ||||||||||
| Other |
2,182,960 | (1,331,971 | ) | (2,393 | ) | 848,596 | ||||||||||
| Construction in progress |
565,357 | — | — | 565,357 | ||||||||||||
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|||||||||
| (27,586,791 | ) | (31,577 | ) | 10,718,354 | ||||||||||||
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70
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 14. | Property and Equipment, Continued |
| (2) | Changes in property and equipment for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||||||||||||||||||||||||||||||||||
| 2019 | ||||||||||||||||||||||||||||||||||||||||
| Beginning balance |
Impact of adopting K-IFRS No. 1116 |
Acquisition | Disposal | Transfer | Depreciation | Impair- ment)(*1) |
Business Combinations(*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 |
7,146,724 | — | 821,576 | (25,791 | ) | 2,351,614 | (2,319,634 | ) | (33,278 | ) | — | — | 7,941,211 | |||||||||||||||||||||||||||
| Other |
848,596 | (1,113 | ) | 1,443,327 | (5,816 | ) | (1,353,999 | ) | (199,106 | ) | (147 | ) | 557 | — | 732,299 | |||||||||||||||||||||||||
| Right-of-use assets |
— | 654,449 | 618,811 | (204,241 | ) | — | (360,606 | ) | — | 1,080 | (97 | ) | 709,396 | |||||||||||||||||||||||||||
| Construction in progress |
565,357 | — | 1,515,617 | (22,338 | ) | (1,303,128 | ) | — | — | — | — | 755,508 | ||||||||||||||||||||||||||||
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| 653,336 | 4,428,991 | (261,395 | ) | (202,702 | ) | (2,969,595 | ) | (35,476 | ) | 2,864 | (97 | ) | 12,334,280 | |||||||||||||||||||||||||||
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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 Parent Company’s acquisitions of FSK L&S Co., Ltd. and Incross Co., Ltd. |
| (In millions of won) | ||||||||||||||||||||||||||||||||||||
| 2018 | ||||||||||||||||||||||||||||||||||||
| Beginning balance |
Acquisition | Disposal | Transfer | Depreciation | Impair- ment(*1) |
Business Combinations(*2) |
Disposal of subsidiaries |
Ending balance |
||||||||||||||||||||||||||||
| Land |
4,734 | (7,151 | ) | 15,062 | — | — | 62,838 | — | 938,344 | |||||||||||||||||||||||||||
| Buildings |
882,650 | 5,858 | (4,313 | ) | 25,249 | (52,153 | ) | — | 6,003 | — | 863,294 | |||||||||||||||||||||||||
| Structures |
378,575 | 9,188 | (36 | ) | 5,859 | (36,091 | ) | (1,456 | ) | — | — | 356,039 | ||||||||||||||||||||||||
| Machinery |
7,079,798 | 806,520 | (74,465 | ) | 1,347,320 | (2,214,957 | ) | (27,264 | ) | 229,772 | — | 7,146,724 | ||||||||||||||||||||||||
| Other |
531,057 | 892,103 | (7,408 | ) | (539,068 | ) | (148,223 | ) | — | 123,214 | (3,079 | ) | 848,596 | |||||||||||||||||||||||
| Construction in progress |
409,941 | 1,223,410 | (3,906 | ) | (1,078,539 | ) | — | — | 14,451 | — | 565,357 | |||||||||||||||||||||||||
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|||||||||||||||||||
| 2,941,813 | (97,279 | ) | (224,117 | ) | (2,451,424 | ) | (28,720 | ) | 436,278 | (3,079 | ) | 10,718,354 | ||||||||||||||||||||||||
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|
|||||||||||||||||||
| (*1) | The Group recognized impairment losses for obsolete assets during the year ended December 31, 2018. |
| (*2) | Includes assets from the Parent Company’s acquisitions of id Quantique SA, Life & Security Holdings Co., Ltd. and SK Infosec Co., Ltd. |
| (2) | Details of the right-of-use assets as of December 31, 2019 and January 1, 2019 are as follows: |
| (In millions of won) | ||||||||
| December 31, 2019 |
January 1, 2019 |
|||||||
| Buildings, Land and Structures |
512,698 | |||||||
| Other |
124,873 | 141,751 | ||||||
|
|
|
|
|
|||||
| 654,449 | ||||||||
|
|
|
|
|
|||||
71
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 15. | Goodwill |
| (1) | Goodwill as of December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| December 31, 2019 |
December 31, 2018 |
|||||||
| Goodwill related to merger of Shinsegi Telecom, Inc. |
1,306,236 | |||||||
| Goodwill related to acquisition of SK Broadband Co., Ltd. |
358,443 | 358,443 | ||||||
| Goodwill related to acquisition of Life & Security Holdings Co., Ltd. |
1,155,037 | 1,155,037 | ||||||
| Other goodwill |
129,814 | 118,847 | ||||||
|
|
|
|
|
|||||
| 2,938,563 | ||||||||
|
|
|
|
|
|||||
| (2) | Details of the impairment testing of Goodwill as of December 31, 2019 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 telecommunications services; |
| • | goodwill related to Life & Security Holdings Co., Ltd.(*3): Security services; and |
| • | other goodwill: Commerce, Information security services and other. |
| (*1) | Goodwill related to acquisition 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 4.9% to the estimated future cash flows based on financial budgets for the next five years. An annual growth rate of (-)0.6% 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 5.0% to the estimated future cash flows based on financial budgets for the next five years. An annual growth rate of 1.0% 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.
72
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 15. | Goodwill, Continued |
| (2) | Details of the impairment testing of Goodwill as of December 31, 2019 is as follows, Continued: |
| (*3) | Goodwill related to acquisition of Life & Security Holdings Co., Ltd. |
The recoverable amount of the CGU is based on its value in use calculated by applying the annual discount rate of 7.29% to the estimated future cash flows based on financial budgets for the next five years. An annual growth rate of 1.0% was applied for the cash flows expected to be incurred after five years and is not expected to exceed the long-term security services industry growth rate.
The recoverable amount of the CGU exceeds the carrying amount by W11,276 million. Management has identified that
reasonably possible changes in two significant assumptions could cause the carrying amount to exceed the recoverable amount. The following table shows the amount by which these two assumptions would need to be changed to individually for the
estimated recoverable amount of the CGU to be equal to the carrying amount.
| 2019 | ||||
| Annual discount rate |
7.31 | % | ||
| Annual growth rate applied for the cash flows expected to be incurred after five years |
0.97 | % | ||
| (3) | Details of the changes in goodwill for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Beginning balance |
1,915,017 | |||||||
| Acquisition |
30,962 | 1,206,702 | ||||||
| Disposal |
— | (807 | ) | |||||
| Impairment loss(*1,2) |
(21,065 | ) | (166,838 | ) | ||||
| Other |
1,070 | (15,511 | ) | |||||
|
|
|
|
|
|||||
| Ending balance |
2,938,563 | |||||||
|
|
|
|
|
|||||
| (*1) | Goodwill related to LIFE DESIGN COMPANY Inc. of DREAMUS COMPANY (formerly, IRIVER LIMITED). |
The recoverable amount of the CGU is based on its value in use calculated by applying the annual discount rate of 10.1%
to the estimated future cash flows based on financial budgets for the next five years. The cash flows expected to occur in the period exceeding five years were assumed to increase by 0.0% which is expected to be less than the long-term growth rate
of Celebrity MD industry. As a result of the impairment test, the carrying amount of the CGU exceeded the recoverable amount, thus the Group recognized W20,594 million of impairment loss.
| (*2) | Goodwill related to Syrup Ad of Incross Co., Ltd. |
The recoverable amount of the CGU is based on its value in use calculated by applying the annual discount rate of 13.6% to the estimated future
cash flows based on financial budgets for the next five years. An annual growth rate of 0.0% was applied for the cash flows expected to be incurred after five years and is not expected to exceed the long-term advertising industry growth rate. As a
result of the impairment test, the carrying amount of the CGU exceeded the recoverable amount, thus the Group recognized W471 million of impairment loss.
As of December 31, 2019 and 2018, accumulated impairment losses are W85,245 million and
W217,548 million, respectively.
| 16. | Intangible Assets |
| (1) | Intangible assets as of December 31, 2019 and 2018 are as follows: |
73
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 16. | Intangible Assets, Continued |
| (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(*1) |
112,571 | — | (32,161 | ) | 80,410 | |||||||||||
| Brands(*1) |
374,096 | — | — | 374,096 | ||||||||||||
| Other(*2) |
4,397,319 | (3,313,263 | ) | (22,493 | ) | 1,061,563 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (7,164,105 | ) | (57,255 | ) | 4,866,092 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (In millions of won) | December 31, 2018 | |||||||||||||||
| Acquisition cost | Accumulated amortization |
Accumulated impairment |
Carrying amount |
|||||||||||||
| Frequency usage rights |
(3,070,904 | ) | — | 3,139,978 | ||||||||||||
| Land usage rights |
65,974 | (55,463 | ) | — | 10,511 | |||||||||||
| Industrial rights |
163,983 | (50,640 | ) | (29,716 | ) | 83,627 | ||||||||||
| Development costs |
54,941 | (44,304 | ) | (1,647 | ) | 8,990 | ||||||||||
| Facility usage rights |
155,470 | (124,443 | ) | — | 31,027 | |||||||||||
| Customer relations |
643,421 | (18,330 | ) | — | 625,091 | |||||||||||
| Club memberships(*1) |
114,650 | — | (34,175 | ) | 80,475 | |||||||||||
| Brands(*1) |
374,096 | — | — | 374,096 | ||||||||||||
| Other(*2) |
4,256,377 | (3,058,022 | ) | (38,640 | ) | 1,159,715 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (6,422,106 | ) | (104,178 | ) | 5,513,510 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (*1) | Club memberships and Brands are classified as intangible assets with indefinite useful lives and are not amortized. |
| (*2) | Other intangible assets primarily consist of computer software and others. |
74
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 16. | Intangible Assets, Continued |
| (2) | Details of the changes in intangible assets for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||||||||||||||||||||||||||||||||||
| 2019 | ||||||||||||||||||||||||||||||||||||||||
| Beginning balance |
Impact of adopting K-IFRS No. 1116 |
Acquisition | Disposal | Transfer | Amortization | Impairment (*1) |
Business combina- tions(*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 |
1,159,715 | (2,274 | ) | 134,911 | (5,154 | ) | 209,322 | (417,571 | ) | (7,517 | ) | 1,100 | (10,969 | ) | 1,061,563 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (2,274 | ) | 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 Company’s acquisitions of FSK L&S Co., Ltd. and Incross Co., Ltd. |
| (In millions of won) | ||||||||||||||||||||
| 2018 | ||||||||||||||||||||||||||||||||
| Beginning balance |
Acquisition | Disposal | Transfer | Amortiza-tion | Impairment (*1) |
Business combinations (*2) |
Ending balance |
|||||||||||||||||||||||||
| Frequency usage rights |
1,366,926 | — | — | (403,888 | ) | — | — | 3,139,978 | ||||||||||||||||||||||||
| Land usage rights |
15,750 | 2,918 | (1,142 | ) | 406 | (7,421 | ) | — | — | 10,511 | ||||||||||||||||||||||
| Industrial rights |
111,347 | 6,694 | (1,598 | ) | 5,254 | (7,418 | ) | (30,748 | ) | 96 | 83,627 | |||||||||||||||||||||
| Development costs |
4,103 | 4,250 | — | (6 | ) | (1,866 | ) | (118 | ) | 2,627 | 8,990 | |||||||||||||||||||||
| Facility usage rights |
36,451 | 2,223 | (39 | ) | 101 | (7,709 | ) | — | — | 31,027 | ||||||||||||||||||||||
| Customer relations |
4,035 | 213 | — | 149 | (9,541 | ) | — | 630,235 | 625,091 | |||||||||||||||||||||||
| Club memberships |
73,614 | 6,719 | (2,950 | ) | (7 | ) | — | (173 | ) | 3,272 | 80,475 | |||||||||||||||||||||
| Brands |
— | — | — | — | — | — | 374,096 | 374,096 | ||||||||||||||||||||||||
| Other |
1,164,725 | 126,164 | (9,181 | ) | 277,504 | (395,072 | ) | (29,242 | ) | 24,817 | 1,159,715 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| 1,516,107 | (14,910 | ) | 283,401 | (832,915 | ) | (60,281 | ) | 1,035,143 | 5,513,510 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (*1) | The Group recognized the difference between recoverable amount and the carrying amount of intangible assets
amounting to |
| (*2) | Includes assets from the Parent Company’s acquisitions of id Quantique SA, Life & Security Holdings Co., Ltd. and SK Infosec Co., Ltd. |
75
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 16. | Intangible Assets, Continued |
| (3) | Research and development expenditures recognized as expense for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Research and development costs expensed as incurred |
387,675 | |||||||
| (4) | Details of frequency usage rights as of December 31, 2019 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 |
251,240 | LTE service | Sept. 2013 | Dec. 2021 | ||||||
| 2.6GHz license |
849,930 | LTE service | Sept. 2016 | Dec. 2026 | ||||||
| 2.1GHz license |
208,918 | W-CDMA and LTE service | Dec. 2016 | Dec. 2021 | ||||||
| 3.5GHz license(*) |
1,073,914 | 5G service | Apr. 2019 | Nov. 2028 | ||||||
| 28GHz license(*) |
202,683 | 5G service | — | Nov. 2023 | ||||||
|
|
|
|||||||||
|
|
|
|||||||||
| (*) | The Group participated in the frequency license allocation auction hosted by Ministry of Science and
Information and Communication Technology(ICT) 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
|
| 17. | Borrowings and Debentures |
| (1) | Short-term borrowings as of December 31, 2019 and 2018 are as follows: |
| (In millions of won, thousands of foreign currency) | ||||||||||||||
| Lender | Annual interest rate (%) |
December 31, 2019 | December 31, 2018 |
|||||||||||
| Short-term borrowings |
Shinhan Bank | 3.19 | 30,000 | |||||||||||
| Shinhan Bank | 2.27 | — | 30,000 | |||||||||||
| Shinhan Bank(*1) | 6M Financial I (bank) + 1.60 | 15,000 | 15,000 | |||||||||||
| KEB Hana Bank(*2) | 3M CD + 1.75 | 5,000 | 5,000 | |||||||||||
| Woori Bank | 7.50 | |
603 (VND12,068,234 |
) |
— | |||||||||
|
|
|
|
|
|||||||||||
| 80,000 | ||||||||||||||
|
|
|
|
|
|||||||||||
76
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 17. | Borrowings and Debentures, Continued |
| (1) | Short-term borrowings as of December 31, 2019 and 2018 are as follows, Continued: |
| (*1) | As of December 31, 2019, 6M Financial I(bank) rate is 1.52%. |
| (*2) | As of December 31, 2019, 3M CD rate is 1.53%. |
| (2) | Long-term borrowings as of December 31, 2019 and 2018 are as follows: |
| (In millions of won and thousands of U.S. dollars) | ||||||||||||||
| Lender |
Annual interest rate (%) |
Maturity |
December 31, 2019 |
December 31, 2018 |
||||||||||
| KEB Hana Bank(*1) |
3.51 | Feb. 28, 2020 | — | 40,000 | ||||||||||
| Korea Development Bank(*2) |
3M CD + 0.60 | Jul. 30, 2019 | — | 9,750 | ||||||||||
| Korea Development Bank(*2) |
3M CD + 0.60 | Jul. 30, 2019 | — | 2,500 | ||||||||||
| Korea Development Bank(*2,3) |
3M CD + 0.61 | Dec. 20, 2021 | 24,500 | 36,750 | ||||||||||
| Korea Development Bank(*2,4) |
3M CD + 0.71 | Dec. 21, 2022 | 37,500 | 50,000 | ||||||||||
| Credit Agricole CIB(*2,5) |
3M CD + 0.82 | Dec. 14, 2023 | 50,000 | 50,000 | ||||||||||
| Shinhan Bank and others |
4.21 | Sept. 30, 2023 | 1,750,000 | 1,750,000 | ||||||||||
| KDB Capital and others |
7.20 | Sept. 30, 2023 | 150,000 | 150,000 | ||||||||||
| Export Kreditnamnden(*6) |
1.70 | Apr. 29, 2022 | |
33,266 (USD 28,732 |
) |
|
45,007 (USD 40,253 |
) | ||||||
|
|
|
|
|
|||||||||||
| 2,045,266 | 2,134,007 | |||||||||||||
| Less present value discount |
(22,729 | ) | (29,011 | ) | ||||||||||
|
|
|
|
|
|||||||||||
| 2,022,537 | 2,104,996 | |||||||||||||
| Less current installments |
(50,388 | ) | (89,631 | ) | ||||||||||
|
|
|
|
|
|||||||||||
| 2,015,365 | ||||||||||||||
|
|
|
|
|
|||||||||||
| (*1) | The long-term borrowings were repaid before maturity during the year ended December 31, 2019. |
| (*2) | As of December 31, 2019, 3M CD rate is 1.53%. |
| (*3) | The long-term borrowings are to be repaid by installments on an annual basis from 2017 to 2021. |
| (*4) | The long-term borrowings are to be repaid by installments on an annual basis from 2018 to 2022. |
| (*5) | The long-term borrowings are to be repaid by installments on an annual basis from 2020 to 2023. |
| (*6) | The long-term borrowings are to be repaid by installments on an annual basis from 2014 to 2022. |
77
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 17. | Borrowings and Debentures, Continued |
| (3) | Debentures as of December 31, 2019 and 2018 are as follows: |
| (In millions of won and thousands of U.S. dollars) | ||||||||||||||||
| Purpose |
Maturity | Annual interest rate (%) |
December 31, 2019 |
December 31, 2018 |
||||||||||||
| Unsecured corporate bonds |
Operating fund | 2021 | 4.22 | 190,000 | ||||||||||||
| Unsecured corporate bonds |
Operating and refinancing fund | 2019 | 3.24 | — | 170,000 | |||||||||||
| Unsecured corporate bonds |
2022 | 3.30 | 140,000 | 140,000 | ||||||||||||
| Unsecured corporate bonds |
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 |
2019 | 3.30 | — | 50,000 | ||||||||||||
| Unsecured corporate bonds |
2024 | 3.64 | 150,000 | 150,000 | ||||||||||||
| Unsecured corporate bonds(*1) |
2029 | 4.72 | — | 61,813 | ||||||||||||
| Unsecured corporate bonds |
Refinancing fund | 2019 | 2.53 | — | 160,000 | |||||||||||
| Unsecured corporate bonds |
2021 | 2.66 | 150,000 | 150,000 | ||||||||||||
| Unsecured corporate bonds |
2024 | 2.82 | 190,000 | 190,000 | ||||||||||||
| Unsecured corporate bonds |
Operating and refinancing fund | 2022 | 2.40 | 100,000 | 100,000 | |||||||||||
| Unsecured corporate bonds |
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 refinancing fund | 2025 | 2.55 | 100,000 | 100,000 | |||||||||||
| Unsecured corporate bonds |
2035 | 2.75 | 70,000 | 70,000 | ||||||||||||
| Unsecured corporate bonds |
Operating fund | 2019 | 1.65 | — | 70,000 | |||||||||||
| Unsecured corporate bonds |
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 |
2019 | 1.62 | — | 50,000 | ||||||||||||
| 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 | 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 | 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 refinancing fund | 2021 | 2.10 | 100,000 | 100,000 | |||||||||||
| Unsecured corporate bonds |
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 | — | |||||||||||
| Unsecured corporate bonds |
2024 | 2.09 | 120,000 | — | ||||||||||||
| Unsecured corporate bonds |
2029 | 2.19 | 50,000 | — | ||||||||||||
78
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 17. | Borrowings and Debentures, Continued |
| (3) | Debentures as of December 31, 2019 and 2018 are as follows, Continued: |
| (In millions of won and thousands of U.S. dollars) | ||||||||||||||||
| Purpose |
Maturity | Annual interest rate (%) |
December 31, 2019 | December 31, 2018 |
||||||||||||
| Unsecured corporate bonds |
Operating fund | 2039 | 2.23 | — | ||||||||||||
| Unsecured corporate bonds |
Operating and refinancing fund | 2022 | 1.40 | 120,000 | — | |||||||||||
| Unsecured corporate bonds |
2024 | 1.49 | 60,000 | — | ||||||||||||
| Unsecured corporate bonds |
2029 | 1.50 | 120,000 | — | ||||||||||||
| Unsecured corporate bonds |
2039 | 1.52 | 50,000 | — | ||||||||||||
| Unsecured corporate bonds |
2049 | 1.56 | 50,000 | — | ||||||||||||
| Unsecured corporate bonds |
Operating fund | 2022 | 1.69 | 230,000 | — | |||||||||||
| Unsecured corporate bonds |
2024 | 1.76 | 70,000 | — | ||||||||||||
| Unsecured corporate bonds |
2029 | 1.79 | 40,000 | — | ||||||||||||
| Unsecured corporate bonds |
2039 | 1.81 | 60,000 | — | ||||||||||||
| Unsecured corporate bonds(*2) |
Operating fund | 2019 | 3.49 | — | 210,000 | |||||||||||
| Unsecured corporate bonds(*2) |
2019 | 2.76 | — | 130,000 | ||||||||||||
| Unsecured corporate bonds(*2) |
2020 | 2.49 | 160,000 | 160,000 | ||||||||||||
| Unsecured corporate bonds(*2) |
2020 | 2.43 | 140,000 | 140,000 | ||||||||||||
| Unsecured corporate bonds(*2) |
2020 | 2.18 | 130,000 | 130,000 | ||||||||||||
| Unsecured corporate bonds(*2) |
2019 | 1.58 | — | 50,000 | ||||||||||||
| Unsecured corporate bonds(*2) |
Operating and refinancing fund | 2021 | 1.77 | 120,000 | 120,000 | |||||||||||
| Unsecured corporate bonds(*2) |
Operating fund | 2022 | 2.26 | 150,000 | 150,000 | |||||||||||
| Unsecured corporate bonds(*2) |
Refinancing fund | 2020 | 2.34 | 30,000 | 30,000 | |||||||||||
| Unsecured corporate bonds(*2) |
Operating and refinancing fund | 2022 | 2.70 | 140,000 | 140,000 | |||||||||||
| Unsecured corporate bonds(*2) |
2021 | 2.59 | 70,000 | 70,000 | ||||||||||||
| Unsecured corporate bonds(*2) |
2023 | 2.93 | 80,000 | 80,000 | ||||||||||||
| Unsecured corporate bonds(*2) |
Refinancing fund | 2022 | 2.00 | 50,000 | — | |||||||||||
| Unsecured corporate bonds(*2) |
2024 | 2.09 | 160,000 | — | ||||||||||||
| Unsecured corporate bonds(*2) |
Operating and refinancing fund | 2022 | 1.71 | 80,000 | — | |||||||||||
| Unsecured corporate bonds(*2) |
2024 | 1.71 | 100,000 | — | ||||||||||||
| Unsecured corporate bonds(*2) |
2026 | 1.86 | 50,000 | — | ||||||||||||
| Convertible bonds(*3) |
Operating fund | 2019 | 1.00 | — | 5,479 | |||||||||||
| Private placement corporate bonds |
Operating fund | 2023 | — | 6,292 | — | |||||||||||
| Private placement corporate bonds |
Operating fund | 2023 | — | 6,222 | — | |||||||||||
| Unsecured global bonds |
Operating fund | 2027 | 6.63 | |
463,120 (USD 400,000 |
) |
|
447,240 (USD 400,000 |
) | |||||||
| Unsecured global bonds |
2023 | 3.75 | |
578,900 (USD 500,000 |
) |
|
559,050 (USD 500,000 |
) | ||||||||
| Unsecured global bonds(*2) |
Refinancing fund | 2023 | 3.88 | |
347,340 (USD 300,000 |
) |
|
335,430 (USD 300,000 |
) | |||||||
| Floating rate notes(*4) |
Operating fund | 2020 | 3M LIBOR + 0.88 | |
347,340 (USD 300,000 |
) |
|
335,430 (USD 300,000 |
) | |||||||
|
|
|
|
|
|||||||||||||
| 8,249,214 | 7,494,442 | |||||||||||||||
| Less discounts on bonds |
(28,381 | ) | (27,590 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
| 8,220,833 | 7,466,852 | |||||||||||||||
| Less current installments of bonds |
(966,939 | ) | (894,641 | ) | ||||||||||||
|
|
|
|
|
|||||||||||||
| 6,572,211 | ||||||||||||||||
|
|
|
|
|
|||||||||||||
| (*1) | The debenture was repaid before maturity during the year ended December 31, 2019. |
| (*2) | Unsecured corporate bonds were issued by SK Broadband Co., Ltd. |
| (*3) | Convertible bonds were issued by DREAMUS COMPANY (formerly, IRIVER LIMITED). |
| (*4) | As of December 31, 2019, 3M LIBOR rate is 1.91%. |
79
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 18. | Long-term Payables – other |
| (1) | Long-term payables – other as of December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| December 31, 2019 |
December 31, 2018 |
|||||||
| Payables related to acquisition of frequency usage rights |
1,939,082 | |||||||
| Other |
5,468 | 29,702 | ||||||
|
|
|
|
|
|||||
| 1,968,784 | ||||||||
|
|
|
|
|
|||||
| (2) | As of December 31, 2019 and 2018, details of long-term payables – other which consist of payables related to the acquisition of frequency usage rights are as follows (See Note 16): |
| (In millions of won) | ||||||||
| December 31, 2019 |
December 31, 2018 |
|||||||
| Long-term payables – other |
2,476,738 | |||||||
| Present value discount on long-term payables – other |
(82,851 | ) | (113,772 | ) | ||||
| Current installments of long-term payables – other |
(423,839 | ) | (423,884 | ) | ||||
|
|
|
|
|
|||||
| Carrying amount at December 31 |
1,939,082 | |||||||
|
|
|
|
|
|||||
| (3) | The principal amount of the long-term payables – other repaid during the year ended December 31, 2019
is |
| (In millions of won) | ||||
| Amount | ||||
| Less than 1 year |
||||
| 1~3 years |
647,589 | |||
| 3~5 years |
413,385 | |||
| More than 5 years |
565,066 | |||
|
|
|
|||
|
|
|
|||
80
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 19. | Provisions |
| Changes | in provisions for the years ended December 31, 2019 and 2018 are as follows: |
| (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 |
7,811 | (3,409 | ) | (1,711 | ) | 115 | 40 | 80,587 | 51,517 | 29,070 | ||||||||||||||||||||||||||
| 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 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| 20,457 | (49,755) | (2,806) | (11,915) | 40 | 143,229 | 89,446 | 53,783 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| (*) |
|
| (In millions of won) | ||||||||||||||||||||||||||||||||||||||||
| 2018 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||||||||
| Beginning balance |
Impact of adopting K-IFRS No. 1115 |
Increase | Utilization | Reversal | Other | Business Combination |
Ending balance |
Current | Non-current | |||||||||||||||||||||||||||||||
| Provision for installment of handset subsidy |
— | — | (1,075 | ) | (2,799 | ) | — | — | — | — | — | |||||||||||||||||||||||||||||
| Provision for restoration |
73,267 | — | 6,684 | (1,788 | ) | (765 | ) | 2 | 341 | 77,741 | 47,293 | 30,448 | ||||||||||||||||||||||||||||
| Emission allowance |
4,650 | — | 2,228 | (1,334 | ) | (3,306 | ) | — | — | 2,238 | 2,238 | — | ||||||||||||||||||||||||||||
| Other provisions(*) |
2,935 | (215 | ) | 110,628 | (15,176 | ) | (272 | ) | — | 9,329 | 107,229 | 38,462 | 68,767 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (215 | ) | 119,540 | (19,373 | ) | (7,142 | ) | 2 | 9,670 | 187,208 | 87,993 | 99,215 | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (*) |
|
81
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 20. | Defined Benefit Liabilities (Assets) |
| (1) | Details of defined benefit liabilities (assets) as of December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| December 31, 2019 |
December 31, 2018 |
|||||||
| Present value of defined benefit obligations |
926,302 | |||||||
| Fair value of plan assets |
(965,654 | ) | (816,699 | ) | ||||
|
|
|
|
|
|||||
| Defined benefit assets(*) |
(1,125 | ) | (31,926 | ) | ||||
|
|
|
|
|
|||||
| Defined benefit liabilities |
172,258 | 141,529 | ||||||
|
|
|
|
|
|||||
| (*) | 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, 2019 and 2018 are as follows: |
| December 31, 2019 |
December 31, 2018 | |||
| Discount rate for defined benefit obligations | 1.77 ~ 3.04% | 2.24 ~ 3.07% | ||
| Expected rate of salary increase | 1.53 ~ 6.00% | 3.42 ~ 5.61% |
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 Group’s historical promotion index, inflation rate and salary increase ratio.
| (3) | Changes in defined benefit obligations for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | For the year ended December 31 |
|||||||
| 2019 | 2018 | |||||||
| Beginning balance |
679,625 | |||||||
| Current service cost |
171,197 | 143,725 | ||||||
| Interest cost |
23,685 | 23,131 | ||||||
| Remeasurement - Demographic assumption |
19,344 | (1,929 | ) | |||||
| - Financial assumption |
56,265 | 30,519 | ||||||
| - Adjustment based on experience |
14,363 | 16,085 | ||||||
| Benefit paid |
(84,098 | ) | (63,957 | ) | ||||
| Business combinations |
3,653 | 104,251 | ||||||
| Others(*) |
6,076 | (5,148 | ) | |||||
|
|
|
|
|
|||||
| Ending balance |
926,302 | |||||||
|
|
|
|
|
|||||
| (*) | Others include changes of liabilities due to employee’s transfers among affiliates for the years ended December 31, 2019 and 2018. |
82
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 20. | Defined Benefit Liabilities (Assets), Continued |
| (4) | Changes in plan assets for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | For the year ended December 31 | |||||||
| 2019 | 2018 | |||||||
| Beginning balance |
663,617 | |||||||
| Interest income |
19,717 | 19,134 | ||||||
| Remeasurement |
(5,366 | ) | (7,659 | ) | ||||
| Contributions |
204,186 | 166,624 | ||||||
| Benefit paid |
(73,396 | ) | (43,549 | ) | ||||
| Business combinations |
3,207 | 21,417 | ||||||
| Others |
607 | (2,885 | ) | |||||
|
|
|
|
|
|||||
| Ending balance |
816,699 | |||||||
|
|
|
|
|
|||||
The Group expects to contribute W180,461 million to the defined benefit plans in 2020.
| (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, 2019 and 2018 are as follows: |
| (In millions of won) | For the year ended December 31 | |||||||
| 2019 | 2018 | |||||||
| Current service cost |
143,725 | |||||||
| Net interest cost |
3,968 | 3,997 | ||||||
|
|
|
|
|
|||||
| 147,722 | ||||||||
|
|
|
|
|
|||||
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, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| Equity instruments |
60,828 | |||||||
| Debt instruments |
207,504 | 144,272 | ||||||
| Short-term financial instruments, etc. |
728,661 | 611,599 | ||||||
|
|
|
|
|
|||||
| 816,699 | ||||||||
|
|
|
|
|
|||||
| (7) | As of December 31, 2019, 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 |
54,248 | |||||||
| Expected salary increase rate |
53,864 | (47,325 | ) | |||||
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, 2019 is 9.52 years.
83
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 21. | Derivative Instruments |
| (1) | Currency and interest rate swap contracts under cash flow hedge accounting as of December 31, 2019 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 | ||||
| Mar. 7, 2013 |
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 | DBS bank | Mar. 7, 2013 ~ Mar. 7, 2020 | ||||
| Dec. 16, 2013 |
Fixed-to-fixed cross currency (U.S. dollar borrowing amounting to USD 28,732) |
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 | ||||
| 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 24,500) |
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 37,500) |
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 50,000) |
Interest rate risk | Credit Agricole CIB | Mar.19, 2019 ~ Dec.14, 2023 | ||||
84
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 21. | Derivative Instruments, Continued |
| (2) | SK Broadband Co., Ltd., a subsidiary of the Parent Company, entered into a leasing contract with GL Gasan Metro
Co., Ltd., which develops and leases real estate, for the building and operations of Internet Data Center during the year ended December 31, 2017. With respect to financing the development of the property, GL Gasan Metro Co., Ltd. has issued
subordinated bonds to IGIS Professional Investment Type Private Real Estate Investment Trust No. 156, which financed the purchase of bonds by issuing beneficiary certificates to Sbsen Co., Ltd. and Msgadi Co., Ltd. In connection with these
arrangements, SK Broadband Co., Ltd., Sbsen Co., Ltd. and Msgadi Co., Ltd. entered into a Total Return Swap (TRS) contract amounting to |
Also in 2019, SK Broadband Co., Ltd. entered into leasing contract with Hana Professional Alternative Investment Type Private Real Estate
Investment Trust No. 62 which develops and leases real estate, for developing the Internet Data Center. With respect to financing the development of the property, Hana Professional Alternative Investment Type Private Real Estate Investment
Trust No. 62 financed the purchase of bonds by issuing beneficiary certificates to Sgumi Co., Ltd. and Sori Co., Ltd. In connection with these arrangements, SK Broadband Co., Ltd., Sgasan Co., Ltd., Sgumi Co., Ltd. and Sori Co., Ltd. entered
into a Total Return Swap (TRS) contract amount to W
85
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 21. | Derivative Instruments, Continued |
| (3) | As of December 31, 2019, details of fair values of the above derivatives recorded in current assets (Derivative financial assets), non-current assets (Long-term derivative financial assets) and non-current liabilities (Long-term derivative financial liabilities) are as follows: |
| (In millions of won and thousands of U.S. dollars) | ||||||||||||
| Hedging instrument (Hedged item) |
Cash flow hedge |
Held for trading |
Fair value | |||||||||
| Current assets: |
||||||||||||
| Floating-to-fixed
cross currency interest rate swap |
— | 26,253 | ||||||||||
| Non-current assets: |
||||||||||||
| Fixed-to-fixed
cross currency swap |
— | 43,851 | ||||||||||
| Fixed-to-fixed
cross currency swap |
55,350 | — | 55,350 | |||||||||
| Fixed-to-fixed
cross currency swap |
797 | — | 797 | |||||||||
| Fixed-to-fixed
cross currency swap |
18,635 | — | 18,635 | |||||||||
| Settlement contract: |
||||||||||||
| Others |
6,074 | 6,074 | ||||||||||
|
|
|
|||||||||||
|
|
|
|||||||||||
| Non-current liabilities: |
||||||||||||
| Floating-to-fixed
interest rate swap |
— | (85 | ) | |||||||||
| Floating-to-fixed
interest rate swap |
(424 | ) | — | (424 | ) | |||||||
| Floating-to-fixed
interest rate swap |
(534 | ) | — | (534 | ) | |||||||
|
|
|
|||||||||||
|
|
|
|||||||||||
86
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 22. | Share Capital and Capital Surplus and Others |
The Parent Company’s outstanding share capital consists entirely of common shares with a par value of W500. The number of
authorized, issued and outstanding common shares and the details of capital surplus and others as of December 31, 2019 and 2018 are as follows:
| (In millions of won, except for share data) | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| 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 23) |
(1,696,997 | ) | (1,979,475 | ) | ||||
| Hybrid bonds(Note 24) |
398,759 | 398,759 | ||||||
| Share option(Note 25) |
1,302 | 1,007 | ||||||
| Others(*2) |
(612,470 | ) | (681,094 | ) | ||||
|
|
|
|
|
|||||
| 655,084 | ||||||||
|
|
|
|
|
|||||
| (*1) | In 2002 and 2003, the Parent Company retired treasury shares with reduction of retained earnings before appropriation. As a result, the Parent Company’s 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. |
There were no changes in share capital during the years ended December 31, 2019 and 2018 and details of shares outstanding as of December 31, 2019 and 2018 are as follows:
| (In shares) | 2019 | 2018 | ||||||||||||||||||||||
| Issued shares |
Treasury shares |
Outstanding shares |
Issued shares |
Treasury shares |
Outstanding shares |
|||||||||||||||||||
| Shares outstanding |
80,745,711 | 7,609,263 | 73,136,448 | 80,745,711 | 8,875,883 | 71,869,828 | ||||||||||||||||||
87
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 23. | Treasury Shares |
Treasury shares as of December 31, 2019 and 2018 are as follows:
| (In millions of won, except for share data) | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| Number of shares(*) |
7,609,263 | 8,875,883 | ||||||
| Acquisition cost |
1,979,475 | |||||||
| (*) | The Parent Company disposed 1,266,620 of its treasury shares to Kakao Co., Ltd. in exchange for
|
| 24. | Hybrid Bonds |
Hybrid bonds classified as equity as of December 31, 2019 and 2018 are as follows:
| (In millions of won) | ||||||||||||||||||||||
| Type |
Issuance date | Maturity (*1) |
Annual interest rate(%)(*2) |
December 31, 2019 |
December 31, 2018 |
|||||||||||||||||
| 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. |
88
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 25. | 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 | ||||||||||||
| Series | ||||||||||||
| 1-1 | 1-2 | 1-3 | 2 | 3(*) | 4 | |||||||
| Grant date |
March 24, 2017 | February 20, 2018 | February 22, 2019 | March 26, 2019 | ||||||||
| Types of shares to be issued |
Registered common shares | |||||||||||
| Grant method |
Reissue of treasury shares | Reissue of treasury shares, cash settlement | ||||||||||
| Number of shares (in shares) |
22,168 | 22,168 | 22,168 | 1,358 | 4,177 | 1,734 | ||||||
| Exercise price (in won) |
246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | ||||||
| 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 | ||||||
| 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 | ||||||
| (*) | Parts of the grant that have not met the vesting conditions have been forfeited during the year ended December 31, 2019. |
| DREAMUS COMPANY(Formerly, IRIVER LIMITED) | ||||||||
| 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 (Formerly, IRIVER LIMITED) | ||||||
| Grant method |
Issuance of new shares | Issuance of new shares, reissue of treasury shares, cash settlement | ||||||
| Number of shares (in shares)(*) |
970,050 | 400,014 | 400,005 | 399,981 | ||||
| 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 | ||||
89
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 25. | 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: |
| Incross Co., Ltd. | ||||||||||||||||||||
| 3 | 4 | 5 | 6 | 7 | ||||||||||||||||
| Grant date |
March 30, 2016 | March 7, 2017 | March 7, 2018 | March 7, 2019 | October 15, 2019 | |||||||||||||||
| Types of shares to be issued |
Common shares of Incross Co., Ltd. | |||||||||||||||||||
| Grant method |
Issuance of new shares, reissue of treasury shares | |||||||||||||||||||
| Number of shares (in shares) |
19,750 | 29,625 | 9,900 | 6,600 | 59,225 | |||||||||||||||
| Exercise price (in won) |
10,571 | 17,485 | 25,861 | 16,895 | 22,073 | |||||||||||||||
| Exercise period |
|
Mar. 31, 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 |
| |||||
| 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 |
| |||||
| Life & Security Holdings Co., Ltd. | FSK L&S Co., Ltd. | |||||||||
| 1-1 | 1-2 | 1-3 | 1-4 | |||||||
| Grant date |
August 22, 2019 | May 31, 2019 | ||||||||
| Types of shares to be issued |
Common shares of Life & Security Holdings Co., Ltd. | Common shares of FSK L&S Co., Ltd. | ||||||||
| Grant method |
cash settlement | Issuance of new shares | ||||||||
| Number of shares (in shares) |
3,506 | 3,163 | 6,260 | 6,245 | 43,955 | |||||
| Exercise price (in won) |
949,940 | 949,940 | 1,025,935 | 1,108,010 | 10,000 | |||||
| Exercise period |
1st excercise : Applied to 50% of the granted shares and exercisible 6 months after the listing (June. 30, 2023) of Life & Security Holdings Co., Ltd. |
June 1, 2022 ~ May 31, 2025 | ||||||||
|
2nd excercise: Applied to 25% of the granted shares and exercisible 12 months after the listing (June. 30, 2023) of Life & Security Holdings Co., Ltd. | ||||||||||
|
3rd excercise: Applied to 25% of the granted shares and exercisible 18 months after the listing (June. 30, 2023) of Life & Security Holdings Co., Ltd. | ||||||||||
| Vesting conditions |
Service provided until December 31, 2019 |
Service provided until December 31, 2020 |
Service provided until December 31, 2021 |
Service provided until December 31, 2022 |
3 years’ service from the grant date | |||||
| (*) | Parts of the grant of One Store Co., Ltd. and DREAMUS COMPANY(Formerly, IRIVER LIMITED) that have not met the vesting conditions have been forfeited during the years ended December 31, 2019 and 2018. |
| (2) | Share compensation expense recognized during the year ended December 31, 2019 and the remaining share compensation to be recognized in subsequent periods are as follows: |
| (In millions of won) |
||||
| Share compensation expense |
||||
| As of December 31, 2018 |
||||
| During the year ended December 31, 2019 |
2,073 | |||
| In subsequent periods |
4,498 | |||
|
|
|
|||
|
|
|
|||
90
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 25. | 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: |
| (In won) | Parent Company | |||||||||||||||||||||||
| Series | ||||||||||||||||||||||||
| 1-1 | 1-2 | 1-3 | 2 | 3 | 4 | |||||||||||||||||||
| Risk-free interest rate |
1.86 | % | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | ||||||||||||
| Estimated option’s life |
5 years | 6 years | 7 years | 5 years | 5 years | 5 years | ||||||||||||||||||
| Share price (Closing price on the preceding day) |
262,500 | 262,500 | 262,500 | 243,500 | 259,000 | 253,000 | ||||||||||||||||||
| Expected volatility |
13.38 | % | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | ||||||||||||
| Expected dividends |
3.80 | % | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | ||||||||||||
| Exercise price |
246,750 | 266,490 | 287,810 | 254,120 | 265,260 | 254,310 | ||||||||||||||||||
| Per share fair value of the option |
27,015 | 20,240 | 15,480 | 23,988 | 8,600 | 8,111 | ||||||||||||||||||
| (In won) | One Store Co., Ltd. |
DREAMUS COMPANY (Formerly, IRIVER LIMITED) |
||||||||||||||
| 1-1 | 1-2 | 1-3 | ||||||||||||||
| Risk-free interest rate |
2.58 | % | 1.73 | % | 1.77 | % | 1.82 | % | ||||||||
| Estimated option’s 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 | ||||||||||||||||||||
| Risk-free interest rate |
2.09 | % | 1.35 | % | 1.50 | % | 1.76 | % | 1.41 | % | 1.64 | % | ||||||||||||
| Estimated option’s life |
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 | 10,455 | ||||||||||||||||||
| Expected volatility |
20.67 | % | 18.67 | % | 21.28 | % | 25.58 | % | 42.37 | % | 16.20 | % | ||||||||||||
| Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||
| Exercise price |
10,571 | 17,485 | 25,861 | 16,895 | 22,073 | 10,000 | ||||||||||||||||||
| Per share fair value of the option |
1,965 | 9,423 | 7,277 | 4,887 | 9,209 | 1,420 | ||||||||||||||||||
| (In won) | Life & Security Holdings Co., Ltd. | |||||||||||
| 1-1 and 1-2 | ||||||||||||
| 1st exercise | 2nd exercise | 3rd exercise | ||||||||||
| Risk-free interest rate |
1.47 | % | 1.47 | % | 1.47 | % | ||||||
| Estimated option’s life |
4 years | 4.5 years | 5 years | |||||||||
| Share price |
964,084 | 964,084 | 964,084 | |||||||||
| Expected volatility |
25.84 | % | 26.76 | % | 26.79 | % | ||||||
| Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
| Exercise price |
949,940 | 949,940 | 949,940 | |||||||||
| Per share fair value of the option |
144,513 | 145,878 | 162,219 | |||||||||
91
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 25. | 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) | Life & Security Holdings Co., Ltd. | |||||||||||
| 1-3 | ||||||||||||
| 1st exercise | 2nd exercise | 3rd exercise | ||||||||||
| Risk-free interest rate |
1.47 | % | 1.47 | % | 1.47 | % | ||||||
| Estimated option’s life |
4 years | 4.5 years | 5 years | |||||||||
| Share price |
964,084 | 964,084 | 964,084 | |||||||||
| Expected volatility |
25.84 | % | 26.76 | % | 26.79 | % | ||||||
| Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
| Exercise price |
1,025,935 | 1,025,935 | 1,025,935 | |||||||||
| Per share fair value of the option |
123,004 | 125,792 | 141,861 | |||||||||
| (In won) | Life & Security Holdings Co., Ltd. | |||||||||||
| 1-4 | ||||||||||||
| 1st exercise | 2nd exercise | 3rd exercise | ||||||||||
| Risk-free interest rate |
1.47 | % | 1.47 | % | 1.47 | % | ||||||
| Estimated option’s life |
4 years | 4.5 years | 5 years | |||||||||
| Share price |
964,084 | 964,084 | 964,084 | |||||||||
| Expected volatility |
25.84 | % | 26.76 | % | 26.79 | % | ||||||
| Expected dividends |
0.00 | % | 0.00 | % | 0.00 | % | ||||||
| Exercise price |
1,108,010 | 1,108,010 | 1,108,010 | |||||||||
| Per share fair value of the option |
101,207 | 105,797 | 120,924 | |||||||||
As One Store Co., Ltd., FSK L&S Co., Ltd. and Life & Security Holdings Co., Ltd., the subsidiaries of the Parent Company, are unlisted, the share price is calculated using the discounted cash flow model.
92
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 26 | Retained Earnings |
| (1) | Retained earnings as of December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| Appropriated: |
||||||||
| Legal reserve |
22,320 | |||||||
| Reserve for business expansion |
11,531,138 | 10,531,138 | ||||||
| Reserve for technology development |
4,265,300 | 3,321,300 | ||||||
|
|
|
|
|
|||||
| 15,796,438 | 13,852,438 | |||||||
| Unappropriated |
6,416,527 | 8,269,783 | ||||||
|
|
|
|
|
|||||
| 22,144,541 | ||||||||
|
|
|
|
|
|||||
| (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.
| 27. | Reserves |
| (1) | Details of reserves, net of taxes, as of December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| Valuation loss on FVOCI |
(124 | ) | ||||||
| Other comprehensive loss of investments in associates and joint ventures |
(278,142 | ) | (334,637 | ) | ||||
| Valuation loss on derivatives |
(920 | ) | (41,601 | ) | ||||
| Foreign currency translation differences for foreign operations |
(3,428 | ) | 2,920 | |||||
|
|
|
|
|
|||||
| (373,442 | ) | |||||||
|
|
|
|
|
|||||
| (2) | Changes in reserves for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||||||||||||||||||
| Valuation gain (loss) on financial assets at FVOCI |
Valuation gain (loss) on available-for- sale financial assets |
Other compre- hensive loss of investments in associates and joint ventures |
Valuation gain (loss) on derivatives |
Foreign currency translation differences for foreign operations |
Total | |||||||||||||||||||
| Balance at December 31, 2017 |
168,211 | (320,060 | ) | (73,828 | ) | (9,050 | ) | (234,727 | ) | |||||||||||||||
| Impact of adopting K-IFRS No.1109 |
99,407 | (168,211 | ) | — | — | — | (68,804 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance at January 1, 2018 |
— | (320,060 | ) | (73,828 | ) | (9,050 | ) | (303,531 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Changes, net of taxes |
— | (14,577 | ) | 32,227 | 11,970 | (69,911 | ) | |||||||||||||||||
| Balance at December 31, 2018 |
(124 | ) | — | (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 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
93
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 27. | Reserves, Continued |
| (3) | Changes in valuation gain (loss) on financial assets at FVOCI for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Balance at January 1 |
99,407 | |||||||
| Amount recognized as other comprehensive loss during the year, net of taxes |
(18,472 | ) | (117,514 | ) | ||||
| Amount reclassified to retained earnings, net of taxes |
(28,490 | ) | 17,983 | |||||
|
|
|
|
|
|||||
| Balance at December 31 |
(124 | ) | ||||||
|
|
|
|
|
|||||
| (4) | Changes in valuation gain (loss) on derivatives for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Balance at January 1 |
(73,828 | ) | ||||||
| Amount recognized as other comprehensive income (loss) during the year, net of taxes |
34,209 | (11,301 | ) | |||||
| Amount reclassified to profit or loss, net of taxes |
6,472 | 43,528 | ||||||
|
|
|
|
|
|||||
| Balance at December 31 |
(41,601 | ) | ||||||
|
|
|
|
|
|||||
94
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 28. | 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 |
95
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 29. | Other Operating Expenses |
Details of other operating expenses for the years ended December 31, 2019 and 2018 are as follows:
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Communication |
35,507 | |||||||
| Utilities |
320,474 | 297,049 | ||||||
| Taxes and dues |
44,761 | 37,290 | ||||||
| Repair |
358,758 | 353,321 | ||||||
| Research and development |
391,327 | 387,675 | ||||||
| Training |
35,004 | 35,574 | ||||||
| Bad debt for accounts receivable – trade |
28,841 | 38,211 | ||||||
| Travel |
30,746 | 27,910 | ||||||
| Supplies and other |
259,065 | 130,008 | ||||||
|
|
|
|
|
|||||
| 1,342,545 | ||||||||
|
|
|
|
|
|||||
| 30. | Other Non-operating Income and Expenses |
Details of other non-operating income and expenses for the years ended December 31, 2019 and 2018 are as follows:
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Other Non-operating Income: |
||||||||
| Gain on disposal of property and equipment and intangible assets |
38,933 | |||||||
| Gain on business transfer |
69,522 | — | ||||||
| Others |
24,676 | 32,320 | ||||||
|
|
|
|
|
|||||
| 71,253 | ||||||||
|
|
|
|
|
|||||
| Other Non-operating Expenses: |
||||||||
| Impairment loss on property and equipment and intangible assets |
255,839 | |||||||
| Loss on disposal of property and equipment and intangible assets |
56,248 | 87,257 | ||||||
| Donations |
17,557 | 59,012 | ||||||
| Bad debt for accounts receivable – other |
5,802 | 7,718 | ||||||
| Loss on impairment of investment assets |
1,670 | 3,157 | ||||||
| Others |
65,015 | 26,179 | ||||||
|
|
|
|
|
|||||
| 439,162 | ||||||||
|
|
|
|
|
|||||
96
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 31. | Finance Income and Costs |
| (1) | Details of finance income and costs for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Finance Income: |
||||||||
| Interest income |
69,936 | |||||||
| Gain on sale of accounts receivable - other |
15,855 | 20,023 | ||||||
| Dividends |
10,011 | 35,143 | ||||||
| Gain on foreign currency transactions |
11,798 | 17,990 | ||||||
| Gain on foreign currency translations |
4,576 | 2,776 | ||||||
| Gain on valuation of derivatives |
2,499 | 6,532 | ||||||
| Gain on settlement of derivatives |
29,277 | 20,399 | ||||||
| Gain relating to financial assets at FVTPL |
4,504 | 83,636 | ||||||
| Gain relating to financial liabilities at FVTPL |
56 | — | ||||||
|
|
|
|
|
|||||
| 256,435 | ||||||||
|
|
|
|
|
|||||
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Finance Costs: |
||||||||
| Interest expense |
307,319 | |||||||
| Loss on sale of accounts receivable - other |
5,823 | — | ||||||
| Loss on foreign currency transactions |
12,660 | 38,920 | ||||||
| Loss on foreign currency translations |
4,948 | 2,397 | ||||||
| Loss on settlement of derivatives |
641 | 12,554 | ||||||
| Loss relating to financial assets at FVTPL |
7,753 | 22,507 | ||||||
| Loss relating to financial liabilities at FVTPL |
43 | 1,535 | ||||||
|
|
|
|
|
|||||
| 385,232 | ||||||||
|
|
|
|
|
|||||
| (2) | Details of interest income included in finance income for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Interest income on cash equivalents and short-term financial instruments |
33,808 | |||||||
| Interest income on loans and others |
33,547 | 36,128 | ||||||
|
|
|
|
|
|||||
| 69,936 | ||||||||
|
|
|
|
|
|||||
| (3) | Details of interest expenses included in finance costs for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Interest expense on borrowings |
10,796 | |||||||
| Interest expense on debentures |
224,765 | 222,195 | ||||||
| Others |
68,134 | 74,328 | ||||||
|
|
|
|
|
|||||
| 307,319 | ||||||||
|
|
|
|
|
|||||
97
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 31. | Finance Income and Costs, Continued |
| (4) | Finance income and costs by category of financial instruments for the years ended December 31, 2019 and 2018 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 36. |
| 1) | Finance income and costs |
| (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 |
74,941 | 17,488 | ||||||
|
|
|
|
|
|||||
| 141,818 | 31,065 | |||||||
|
|
|
|
|
|||||
| Financial Liabilities: |
||||||||
| Financial liabilities at FVTPL |
56 | 43 | ||||||
| Financial liabilities at amortized cost |
103 | 398,009 | ||||||
| Derivatives designated as hedging instrument |
— | 641 | ||||||
|
|
|
|
|
|||||
| 159 | 398,693 | |||||||
|
|
|
|
|
|||||
| 429,758 | ||||||||
|
|
|
|
|
|||||
| (In millions of won) | ||||||||
| 2018 | ||||||||
| Finance income |
Finance costs |
|||||||
| Financial Assets: |
||||||||
| Financial assets at FVTPL |
22,507 | |||||||
| Financial assets at FVOCI |
35,143 | — | ||||||
| Financial assets at amortized cost |
86,032 | 20,018 | ||||||
|
|
|
|
|
|||||
| 256,016 | 42,525 | |||||||
|
|
|
|
|
|||||
| Financial Liabilities: |
||||||||
| Financial liabilities at FVTPL |
— | 1,535 | ||||||
| Financial liabilities at amortized cost |
419 | 328,618 | ||||||
| Derivatives designated as hedging instrument |
— | 12,554 | ||||||
|
|
|
|
|
|||||
| 419 | 342,707 | |||||||
|
|
|
|
|
|||||
| 385,232 | ||||||||
|
|
|
|
|
|||||
98
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 31. | Finance Income and Costs, Continued |
| (4) | Finance income and costs by category of financial instruments for the years ended December 31, 2019 and 2018 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 36, Continued. |
| 2) | Other comprehensive income (loss) |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Financial Assets: |
||||||||
| Financial assets at FVOCI |
(130,035 | ) | ||||||
| Derivatives designated as hedging instrument |
41,305 | 17,180 | ||||||
|
|
|
|
|
|||||
| 23,362 | (112,855 | ) | ||||||
|
|
|
|
|
|||||
| Financial Liabilities: |
||||||||
| Derivatives designated as hedging instrument |
(624 | ) | 15,047 | |||||
|
|
|
|
|
|||||
| (97,808 | ) | |||||||
|
|
|
|
|
|||||
| (5) | Details of impairment losses for financial assets for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Accounts receivable - trade |
28,841 | 38,211 | ||||||
| Other receivables |
5,802 | 7,718 | ||||||
|
|
|
|
|
|||||
| 45,929 | ||||||||
|
|
|
|
|
|||||
99
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 32. | Income Tax Expense |
| (1) | Income tax expenses for the years ended December 31, 2019 and 2018 consist of the following: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Current tax expense: |
||||||||
| Current year |
362,265 | |||||||
| Current tax of prior years(*) |
(6,963 | ) | (22,575 | ) | ||||
|
|
|
|
|
|||||
| 98,896 | 339,690 | |||||||
|
|
|
|
|
|||||
| Deferred tax expense: |
||||||||
| Changes in net deferred tax assets |
201,817 | 504,288 | ||||||
|
|
|
|
|
|||||
| Income tax expense |
843,978 | |||||||
|
|
|
|
|
|||||
| (*) | Current tax of prior years are mainly composed of the income tax refund due to a change in the interpretation of the tax authority in relation to the income tax previously recognized by the Group. |
| (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, 2019 and 2018 is attributable to the following: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Income taxes at statutory income tax rate |
1,083,029 | |||||||
| Non-taxable income |
(92,666 | ) | (19,450 | ) | ||||
| Non-deductible expenses |
14,630 | 26,724 | ||||||
| Tax credit and tax reduction |
(32,877 | ) | (17,580 | ) | ||||
| Changes in unrecognized deferred taxes |
83,940 | (177,902 | ) | |||||
| Changes in tax rate |
4,040 | (3,983 | ) | |||||
| Income tax refund and other |
14,278 | (46,860 | ) | |||||
|
|
|
|
|
|||||
| Income tax expense |
843,978 | |||||||
|
|
|
|
|
|||||
| (3) | Deferred taxes directly charged to (credited from) equity for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Valuation gain on financial assets measured at fair value |
41,461 | |||||||
| Share of other comprehensive income of associates |
2,279 | 278 | ||||||
| Valuation loss on derivatives |
(16,083 | ) | (9,223 | ) | ||||
| Remeasurement of defined benefit liabilities |
22,733 | 10,843 | ||||||
|
|
|
|
|
|||||
| 43,359 | ||||||||
|
|
|
|
|
|||||
100
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 32. | Income Tax Expense, Continued |
| (4) | Details of the changes in deferred tax assets (liabilities) for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||||||||||||||||||
| 2019 | ||||||||||||||||||||||||
| Beginning | Changes in Accounting Policies |
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 |
(420,061 | ) | — | 44,051 | — | (3 | ) | (376,013 | ) | |||||||||||||||
| 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 |
— | (165,762 | ) | (8,755 | ) | — | — | (174,517 | ) | |||||||||||||||
| Lease liabilities |
— | 168,423 | 10,930 | — | — | 179,353 | ||||||||||||||||||
| Others |
32,551 | 6,698 | 17,077 | — | 6 | 56,332 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (2,315,684 | ) | 9,359 | (163,976 | ) | 11,912 | 635 | (2,457,754 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 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 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 9,359 | (201,817 | ) | 11,912 | 635 | (2,357,238 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
101
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 32. | Income Tax Expense, Continued |
| (4) | Details of the changes in deferred tax assets (liabilities) for the years ended December 31, 2019 and 2018 are as follows, Continued: |
| (In millions of won) | ||||||||||||||||||||||||
| 2018 | ||||||||||||||||||||||||
| Beginning | Changes in Accounting Policies |
Deferred tax expense (income) |
Directly charged to (credited from) equity |
Business combinations |
Ending | |||||||||||||||||||
| Deferred tax assets (liabilities) related to temporary differences: |
||||||||||||||||||||||||
| Loss allowance |
3,501 | 26,547 | — | 5,226 | 102,276 | |||||||||||||||||||
| Accrued interest income |
(2,467 | ) | — | (218 | ) | — | (28 | ) | (2,713 | ) | ||||||||||||||
| Financial assets measured at fair value |
53,781 | (282 | ) | (15,203 | ) | 41,461 | — | 79,757 | ||||||||||||||||
| Investments in subsidiaries, associates and joint ventures |
(937,629 | ) | — | (642,736 | ) | 278 | — | (1,580,087 | ) | |||||||||||||||
| Property and equipment and intangible assets |
(235,343 | ) | — | 71,912 | — | (256,630 | ) | (420,061 | ) | |||||||||||||||
| Provisions |
2,312 | — | (6 | ) | — | 188 | 2,494 | |||||||||||||||||
| Retirement benefit obligation |
38,360 | — | 12,888 | 10,843 | 21,943 | 84,034 | ||||||||||||||||||
| Valuation gain on derivatives |
25,956 | — | 14,682 | (9,223 | ) | — | 31,415 | |||||||||||||||||
| Gain or loss on foreign currency translation |
21,931 | — | 17 | — | — | 21,948 | ||||||||||||||||||
| Reserve for research and manpower development |
(2,387 | ) | — | 2,387 | — | — | — | |||||||||||||||||
| Incremental costs to acquire a contract |
— | (566,633 | ) | (74,207 | ) | — | — | (640,840 | ) | |||||||||||||||
| Contract assets and liabilities |
— | (37,540 | ) | 11,082 | — | — | (26,458 | ) | ||||||||||||||||
| Others |
5,506 | — | 22,627 | — | 4,418 | 32,551 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (962,978 | ) | (600,954 | ) | (570,228 | ) | 43,359 | (224,883 | ) | (2,315,684 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Deferred tax assets related to unused tax loss carryforwards and tax credit carryforwards: |
||||||||||||||||||||||||
| Tax loss carryforwards |
72,417 | — | 50,482 | — | — | 122,899 | ||||||||||||||||||
| Tax credit |
— | — | 15,458 | — | — | 15,458 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 72,417 | — | 65,940 | — | — | 138,357 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (600,954 | ) | (504,288 | ) | 43,359 | (224,883 | ) | (2,177,327 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
102
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 32. | 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, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| December 31, 2019 | December 31, 2018 | |||||||
| Loss allowance |
98,205 | |||||||
| Investments in subsidiaries, associates and joint ventures |
(128,339 | ) | (233,234 | ) | ||||
| Other temporary differences |
145,692 | 189,604 | ||||||
| Unused tax loss carryforwards |
1,023,907 | 849,850 | ||||||
| Unused tax credit carryforwards |
1,192 | 3,705 | ||||||
| (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, 2019 are expiring within the following periods: |
| (In millions of won) | ||||||||
| Unused tax loss carryforwards | Unused tax credit carryforwards | |||||||
| Less than 1 year |
258 | |||||||
| 1 ~ 2 years |
152,361 | 316 | ||||||
| 2 ~ 3 years |
80,363 | 388 | ||||||
| More than 3 years |
682,480 | 230 | ||||||
|
|
|
|
|
|||||
| 1,192 | ||||||||
|
|
|
|
|
|||||
| 33. | Earnings per Share |
| (1) | Basic earnings per share |
1) Basic earnings per share for the years ended December 31, 2019 and 2018 are calculated as follows:
| (In millions of won, except for share data) | ||||||||
| 2019 | 2018 | |||||||
| Basic earnings per share attributable to owners of the Parent Company: |
||||||||
| Profit attributable to owners of the Parent Company |
3,127,887 | |||||||
| Interest on hybrid bonds |
(14,766 | ) | (15,803 | ) | ||||
|
|
|
|
|
|||||
| Profit attributable to owners of the Parent Company on common shares |
875,141 | 3,112,084 | ||||||
| Weighted average number of common shares outstanding |
72,064,159 | 70,622,976 | ||||||
|
|
|
|
|
|||||
| Basic earnings per share (in won) |
44,066 | |||||||
|
|
|
|
|
|||||
103
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 33. | Earnings per Share, Continued |
| (1) | Basic earnings per share, Continued |
| 2) | The weighted average number of common shares outstanding for the years ended December 31, 2019 and 2018 are calculated as follows: |
| (In shares) | 2019 | |||||||||||||||||||
| Issued shares |
Treasury shares |
Number of common shares outstanding at December 31 |
Weights | Weighted average number of common shares |
||||||||||||||||
| Issued shares at January 1 |
80,745,711 | (8,875,883 | ) | 71,869,828 | 365/365 | 71,869,828 | ||||||||||||||
| Disposal of treasury shares |
— | 1,266,620 | 1,266,620 | 56/365 | 194,331 | |||||||||||||||
|
|
|
|||||||||||||||||||
| 72,064,159 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||
| (In shares) | 2018 | |||||||||||||||||||
| Issued shares |
Treasury shares |
Number of common shares outstanding at December 31 |
Weights | Weighted average number of common shares |
||||||||||||||||
| Issued shares at January 1 |
80,745,711 | (10,136,551 | ) | 70,609,160 | 365/365 | 70,609,160 | ||||||||||||||
| Disposal of treasury shares |
— | 1,260,668 | 1,260,668 | 4/365 | 13,816 | |||||||||||||||
|
|
|
|||||||||||||||||||
| 70,622,976 | ||||||||||||||||||||
|
|
|
|||||||||||||||||||
| (2) | Diluted earnings per share |
For the years ended December 31, 2019 and 2018, diluted earnings per share are the same as basic earnings per share as there are no dilutive potential common shares.
104
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 34. | Dividends |
| (1) | Details of dividends declared |
Details of dividend declared for the years ended December 31, 2019 and 2018 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 | |||||||||||||
| 2019 | Cash dividends (interim) | 71,869,828 | 500 | 200 | % | |||||||||||||
| Cash dividends (year-end) | 73,136,448 | 500 | 1,800 | % | 658,228 | |||||||||||||
|
|
|
|||||||||||||||||
|
|
|
|||||||||||||||||
| 2018 | Cash dividends (interim) | 70,609,160 | 500 | 200 | % | |||||||||||||
| Cash dividends (year-end) | 71,869,828 | 500 | 1,800 | % | 646,828 | |||||||||||||
|
|
|
|||||||||||||||||
|
|
|
|||||||||||||||||
| (2) | Dividends yield ratio |
Dividends yield ratios for the years ended December 31, 2019 and 2018 are as follows:
(In won)
| Year |
Dividend type |
Dividend per share |
Closing price at year-end |
Dividend yield ratio |
||||||||||
| 2019 | Cash dividends | 10,000 | 238,000 | 4.20 | % | |||||||||
| 2018 | Cash dividends | 10,000 | 269,500 | 3.71 | % | |||||||||
105
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 35. | Categories of Financial Instruments |
| (1) | Financial assets by category as of December 31, 2019 and 2018 are as follows: |
| (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 | — | — | 1,131,342 | — | 1,663,567 | ||||||||||||||||||
| Derivative financial assets |
6,074 | — | — | — | 144,886 | 150,960 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 710,272 | 4,627 | 5,481,698 | 144,886 | 7,188,764 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (*) | The Group designated |
| (In millions of won) | ||||||||||||||||||||||||
| December 31, 2018 | ||||||||||||||||||||||||
| 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 |
— | — | 1,506,699 | — | 1,506,699 | |||||||||||||||||||
| Financial instruments |
— | — | — | 1,046,897 | — | 1,046,897 | ||||||||||||||||||
| Short-term investment securities |
195,080 | — | — | — | — | 195,080 | ||||||||||||||||||
| Long-term investment securities(*) |
120,083 | 542,496 | 2,147 | — | — | 664,726 | ||||||||||||||||||
| Accounts receivable – trade |
— | — | — | 2,019,933 | — | 2,019,933 | ||||||||||||||||||
| Loans and other receivables |
489,617 | — | — | 1,132,321 | — | 1,621,938 | ||||||||||||||||||
| Derivative financial assets |
15,586 | — | — | — | 39,871 | 55,457 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 542,496 | 2,147 | 5,705,850 | 39,871 | 7,110,730 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (*) | The Group designated |
| (2) | Financial liabilities by category as of December 31, 2019 and 2018 are as follows: |
| 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 |
712,740 | — | 712,740 | |||||||||
| Accounts payable – other and others |
6,563,030 | — | 6,563,030 | |||||||||
|
|
|
|
|
|
|
|||||||
| 1,043 | 17,979,083 | |||||||||||
|
|
|
|
|
|
|
|||||||
106
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 35. | Categories of Financial Instruments, Continued |
| (2) | Financial liabilities by category as of December 31, 2019 and 2018 are as follows, Continued: |
| (In millions of won) | ||||||||||||||||
| December 31, 2018 | ||||||||||||||||
| Financial liabilities at FVTPL(*) |
Financial liabilities at amortized cost |
Derivatives hedging instrument |
Total | |||||||||||||
| Accounts payable – trade |
381,302 | — | 381,302 | |||||||||||||
| Derivative financial liabilities |
— | — | 4,184 | 4,184 | ||||||||||||
| Borrowings |
— | 2,184,996 | — | 2,184,996 | ||||||||||||
| Debentures |
61,813 | 7,405,039 | — | 7,466,852 | ||||||||||||
| Accounts payable – other and others |
— | 6,762,782 | — | 6,762,782 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 16,734,119 | 4,184 | 16,800,116 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (*) | Debentures classified as financial liabilities at FVTPL as of December 31, 2018 are structured bonds and they were designated as financial liabilities at FVTPL in order to eliminate a measurement inconsistency with the related derivatives. The debenture has been repaid during the year ended December 31, 2019 before its maturity. |
| 36. | 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 Group’s financial assets consist of cash and cash equivalents, financial instruments, investment securities, accounts receivable – trade and others, etc. Financial liabilities consist of accounts payable – 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, JPY and EUR. 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.
107
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
36. Financial Risk Management, Continued
| (1) | Financial risk management, Continued |
| 1) | Market risk, Continued |
| (i) | Currency risk, Continued |
Monetary assets and liabilities denominated in foreign currencies as of December 31, 2019 are as follows:
| (In millions of won, thousands of foreign currencies) | ||||||||||||||||
| Assets | Liabilities | |||||||||||||||
| Foreign currencies |
Won equivalent |
Foreign currencies |
Won equivalent |
|||||||||||||
| USD |
124,137 | 1,588,591 | ||||||||||||||
| EUR |
414 | 537 | 110 | 142 | ||||||||||||
| JPY |
800,440 | 8,512 | 261,255 | 2,778 | ||||||||||||
| Others |
— | 5,299 | — | 1,669 | ||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|||||||||||||
In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (See note 21)
As of December 31, 2019, a hypothetical change in exchange rates by 10% would have increased (reduced) the Group’s income before income tax as follows:
| (In millions of won) | ||||||||
| If increased by 10% | If decreased by 10% | |||||||
| USD |
(6,228 | ) | ||||||
| EUR |
40 | (40 | ) | |||||
| JPY |
573 | (573 | ) | |||||
| Others |
363 | (363 | ) | |||||
|
|
|
|
|
|||||
| (7,204 | ) | |||||||
|
|
|
|
|
|||||
(ii) Interest rate risk
The interest rate risk of the Group arises from borrowings, debenture and long-term payables – other. Since the Group’s interest bearing assets are mostly fixed-interest bearing assets, the Group’s 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,
2019, the floating-rate borrowings and bonds of the Group are W132,000 million and W347,340 million, respectively, and the Group has entered into interest rate swap agreements, as described in note 21, for
the most of 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 W200 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 shareholder’s equity by the same amount.
108
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
37. Financial Risk Management, Continued
| (1) | Financial risk management, Continued |
| 1) | Market risk, Continued |
| (ii) | Interest rate risk, Continued |
As of December 31, 2019, the floating-rate long-term payables – other are
W2,051,389 million. If the interest rate increases (decreases) 1% with all other variables held constant, income before income taxes for the year ended December 31, 2019 would change by
W20,514 million in relation to floating-rate long-term payables – other that are exposed to interest rate risk.
| 2) | Credit risk |
The maximum credit exposure as of December 31, 2019 and 2018 are as follows:
| (In millions of won) | ||||||||
| December 31, 2019 |
December 31, 2018 |
|||||||
| Cash and cash equivalents |
1,506,432 | |||||||
| Financial instruments |
831,637 | 1,046,897 | ||||||
| Investment securities |
13,548 | 11,672 | ||||||
| Accounts receivable – trade |
2,247,895 | 2,019,933 | ||||||
| Loans and other receivables |
1,663,567 | 1,621,938 | ||||||
| Derivative financial assets |
150,960 | 55,457 | ||||||
|
|
|
|
|
|||||
| 6,262,329 | ||||||||
|
|
|
|
|
|||||
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 party’s financial information, its own trading records and other factors. Based on such information, the Group establishes credit limits for each customer or counterparty.
109
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 36. | 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, 2019 are included in note 7.
| (ii) | Debt investments |
The credit risk arises from debt investments included in W831,637 million of financial instruments,
W13,548 million of investment securities and W1,663,567 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.
Most of the Group’s 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 Group’s maximum exposure to credit risk is equal to each financial asset’s carrying amount. The gross carrying amounts of each financial asset except for the accounts receivable – trade and derivative financial assets as of December 31, 2019 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 |
4,627 | 1,887,321 | 49,360 | 123,196 | ||||||||||||||||
| Loss allowance |
— | — | (4,241 | ) | (8,704 | ) | (83,953 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Carrying amount |
4,627 | 1,883,080 | 40,656 | 39,243 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
110
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 36. | 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, 2019 are as follows:
| (In millions of won) | ||||||||||||||||
| 12-month ECL | Lifetime ECL – not credit impaired |
Lifetime ECL –credit impaired |
Total | |||||||||||||
| December 31, 2018 |
10,760 | 101,823 | 115,888 | |||||||||||||
| Remeasurement of loss allowance, net |
1,316 | 1,334 | 3,942 | 6,592 | ||||||||||||
| Transfer to lifetime ECL – not credit impaired |
(380 | ) | 380 | — | — | |||||||||||
| Transfer to lifetime ECL – credit impaired |
— | (2,790 | ) | 2,790 | — | |||||||||||
| Amounts written off |
— | (1,515 | ) | (32,165 | ) | (33,680 | ) | |||||||||
| Recovery of amounts written off |
— | — | 7,563 | 7,563 | ||||||||||||
| Business combinations |
— | 535 | — | 535 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| December 31, 2019 |
8,704 | 83,953 | 96,898 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
(iii) Cash and cash equivalents
The Group has W1,270,572 million of cash and cash equivalents with banks and financial institutions above specific credit
ratings as of December 31, 2019 (W1,506,432 million as of December 31, 2018).
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.
111
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 36. | Financial Risk Management, Continued |
| (1) | Financial risk management, Continued |
3) Liquidity risk
The Group’s 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, 2019 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 |
W | 438,297 | 438,297 | — | — | |||||||||||||||||||
| Borrowings(*) |
2,043,140 | 2,412,647 | 159,416 | 2,253,231 | — | |||||||||||||||||||
| Debentures(*) |
8,220,833 | 9,493,178 | 1,184,309 | 5,237,357 | 3,071,512 | |||||||||||||||||||
| Lease liabilities |
712,740 | 757,871 | 315,793 | 335,727 | 106,351 | |||||||||||||||||||
| Accounts payable – other and others(*) |
6,563,030 | 6,704,379 | 5,005,857 | 1,124,389 | 574,133 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| W | 19,806,372 | 7,103,672 | 8,950,704 | 3,751,996 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (*) | 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, 2019, 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 |
W | 147,386 | 44,872 | 103,142 | (628 | ) | ||||||||||||||||||
| Liabilities |
(1,043 | ) | (1,043 | ) | — | (1,043 | ) | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| W | 146,343 | 44,872 | 102,099 | (628 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
112
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 36. | 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, 2018.
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, 2019 and 2018 are as follows:
| (In millions of won) |
||||||||
| December 31, 2019 |
December 31, 2018 |
|||||||
| Total liabilities |
20,019,861 | |||||||
| Total equity |
22,823,536 | 22,349,250 | ||||||
|
|
|
|
|
|||||
| Debt-equity ratios |
95.46 | % | 89.58 | % | ||||
|
|
|
|
|
|||||
| (3) | Fair value |
| 1) | 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: |
||||||||||||||||||||
| Derivatives 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 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
113
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 36. | 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, 2018 are as follows: |
| (In millions of won) | December 31, 2018 | |||||||||||||||||||
| Carrying amount |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
| Financial assets that are measured at fair value: |
||||||||||||||||||||
| FVTPL |
— | 695,992 | 124,374 | 820,366 | ||||||||||||||||
| Derivatives hedging instruments |
39,871 | — | 39,871 | — | 39,871 | |||||||||||||||
| FVOCI |
544,643 | 293,925 | — | 250,718 | 544,643 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| 293,925 | 735,863 | 375,092 | 1,404,880 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Financial liabilities that are measured at fair value: |
||||||||||||||||||||
| FVTPL |
— | 61,813 | — | 61,813 | ||||||||||||||||
| Derivatives hedging instruments |
4,184 | — | 4,184 | — | 4,184 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| — | 65,997 | — | 65,997 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Financial liabilities that are not measured at fair value: |
||||||||||||||||||||
| Borrowings |
— | 2,378,843 | — | 2,378,843 | ||||||||||||||||
| Debentures |
7,405,039 | — | 7,868,472 | — | 7,868,472 | |||||||||||||||
| Long-term payables – other |
2,393,027 | — | 2,469,653 | — | 2,469,653 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| — | 12,716,968 | — | 12,716,968 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
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, 2019 are as follows:
| Interest rate | ||
| Derivative instruments |
1.68% ~ 1.89% | |
| Borrowings and debentures |
1.65% ~ 2.41% | |
| Long-term payables – other |
1.59% ~ 1.90% |
114
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 36. | 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, 2019. The changes of financial assets classified as Level 3 for the year ended December 31, 2019 are as follows: |
| (In millions of won) | ||||||||||||||||||||||||||||
| Balance at January 1, 2019 |
Loss for the period |
OCI | Acquisition | Disposal | Transfer | Balance at December 31, 2019 |
||||||||||||||||||||||
| FVTPL |
(5,417 | ) | 2,345 | 58,361 | (9,264 | ) | 7,991 | 178,390 | ||||||||||||||||||||
| FVOCI |
250,718 | — | (7,716 | ) | 92,445 | (6,306 | ) | (21,893 | ) | 307,248 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (5,417) | (5,371) | 150,806 | (15,570) | (13,902) | 485,638 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (4) | Enforceable master netting agreement or similar agreement |
Carrying amount of financial instruments recognized of which offset agreements are applicable as of December 31, 2019 and 2018 are as follows:
| (In millions of won) | December 31, 2019 | |||||||||||||||||||
| 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: |
||||||||||||||||||||
| Accounts receivable – trade and others |
(100,895 | ) | 1,346 | — | 1,346 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Financial liabilities: |
||||||||||||||||||||
| Accounts payable – other and others |
(100,895 | ) | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (In millions of won) | December 31, 2018 | |||||||||||||||||||
| 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: |
||||||||||||||||||||
| Derivatives(*) |
— | 1,867 | (1,107 | ) | 760 | |||||||||||||||
| Accounts receivable – trade and others |
95,990 | (95,920 | ) | 70 | — | 70 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
97,857 |
(95,920 | ) | 1,937 | (1,107 | ) | 830 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Financial liabilities: |
||||||||||||||||||||
| Derivatives(*) |
— | 1,107 | (1,107 | ) | — | |||||||||||||||
| Accounts payable – other and others |
95,920 | (95,920 | ) | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (95,920 | ) | 1,107 | (1,107 | ) | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (*) | The balance represents the net amount under the standard terms and conditions of International Swap and Derivatives Association. |
115
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 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 3 others | |
| Associates |
SK hynix Inc. and 44 others | |
| Others |
The Ultimate Controlling Entity’s 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, 2019 and 2018 are as follows:
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Salaries |
4,488 | |||||||
| Defined benefits plan expenses |
1,237 | 920 | ||||||
| Share option |
325 | 548 | ||||||
|
|
|
|
|
|||||
| 5,956 | ||||||||
|
|
|
|
|
|||||
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.
116
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
37. Transactions with Related Parties, Continued
| (3) | Transactions with related parties for the years ended December 31, 2019 and 2018 are as follows: |
| (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 InternationalTrading (Shanghai) Co., Ltd. |
14,535 | 131 | — | |||||||||||
| Others |
90,307 | 105,569 | 109,189 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| 265,805 | 1,321,218 | 788,955 | ||||||||||||
|
|
|
|
|
|
|
|||||||||
| 2,026,419 | 884,838 | |||||||||||||
|
|
|
|
|
|
|
|||||||||
| (*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
|
117
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 37. | Transactions with Related Parties, Continued |
| (3) | Transactions with related parties for the years ended December 31, 2019 and 2018 are as follows, Continued: |
| (In millions of won) | 2018 | |||||||||||||||||
| Scope |
Company |
Operating revenue and others |
Operating expense and others |
Acquisition of property and equipment |
Collection of loans |
|||||||||||||
| Ultimate Controlling Entity |
SK Holdings Co., Ltd.(*1) |
601,176 | 151,502 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Associates |
F&U Credit information Co., Ltd. |
2,777 | 54,857 | — | — | |||||||||||||
| HappyNarae Co., Ltd.(*2) |
1,002 | 20,286 | 88,327 | — | ||||||||||||||
| SK hynix Inc.(*3) |
179,708 | 313 | — | — | ||||||||||||||
| KEB HanaCard Co., Ltd. |
15,046 | 15,387 | — | — | ||||||||||||||
| Others(*4) |
5,924 | 35,296 | 1,202 | 204 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 204,457 | 126,139 | 89,529 | 204 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| Others |
SK Engineering & Construction Co., Ltd. |
4,662 | 1,122 | 8,700 | — | |||||||||||||
| SK Innovation Co., Ltd.(*5) |
44,010 | 996 | — | — | ||||||||||||||
| SK Networks Co., Ltd.(*6) |
23,078 | 1,189,404 | 460 | — | ||||||||||||||
| SK Networks Services Co., Ltd. |
774 | 90,723 | 5,478 | — | ||||||||||||||
| SK Telesys Co., Ltd. |
362 | 10,945 | 127,840 | — | ||||||||||||||
| SK TNS Co., Ltd. |
140 | 31,220 | 493,793 | — | ||||||||||||||
| SK Energy Co., Ltd.(*5) |
15,134 | 897 | — | — | ||||||||||||||
| SK Gas Co., Ltd. |
7,653 | 2 | — | — | ||||||||||||||
| SKC Infra Service Co., Ltd. |
57 | 50,829 | 24,761 | — | ||||||||||||||
| Others(*5) |
55,224 | 19,323 | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 151,094 | 1,395,461 | 661,032 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| 2,122,776 | 902,063 | 204 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||
| (*1) | Operating expense and others include |
| (*2) | Transactions with HappyNarae Co., Ltd. occurred before disposal. |
| (*3) | Operating revenue and others include |
| (*4) | Operating revenue and others include |
| (*5) | Operating revenue and others include |
| (*6) | Operating expenses and others include costs for handset purchases amounting to
|
118
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 37. | Transactions with Related Parties, Continued |
| (4) | Account balances with related parties as of December 31, 2019 and 2018 are as follows: |
| (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 | 87,519 | |||||||||||
| Associates |
F&U Credit information Co., Ltd. |
— | 2 | 4,869 | ||||||||||
| SK hynix Inc. |
— | 21,510 | 48 | |||||||||||
| Wave City Development Co., Ltd. |
— | 31,523 | — | |||||||||||
| Daehan Kanggun BcN Co., Ltd.(*) |
22,147 | 5,359 | — | |||||||||||
| KEB HanaCard Co., Ltd. |
— | 1,025 | 9,474 | |||||||||||
| Others |
204 | 2,490 | 2,262 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| 22,351 | 61,909 | 16,653 | ||||||||||||
|
|
|
|
|
|
|
|||||||||
| Others |
SK Engineering & Construction Co., Ltd. |
— | 4,422 | 97 | ||||||||||
| SK Innovation Co., Ltd. |
— | 7,496 | 22,673 | |||||||||||
| SK Networks Co., Ltd. |
— | 3,469 | 85,421 | |||||||||||
| SK Networks Services Co., Ltd. |
— | — | 10,820 | |||||||||||
| SK Telesys Co., Ltd. |
— | 30 | 16,319 | |||||||||||
| SK TNS Co., Ltd. |
— | 14 | 200,703 | |||||||||||
| SK Energy Co., Ltd. |
— | 2,757 | 1,886 | |||||||||||
| SK hystec Co., Ltd. |
— | 848 | 687 | |||||||||||
| SK hynix Semiconductor (China) Ltd. |
— | 8,556 | — | |||||||||||
| Others |
— | 22,529 | 40,073 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| — | 50,121 | 378,679 | ||||||||||||
|
|
|
|
|
|
|
|||||||||
| 119,971 | 482,851 | |||||||||||||
|
|
|
|
|
|
|
|||||||||
| (*) | As of December 31, 2019, the Parent Company recognized full allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
119
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 37. | Transactions with Related Parties, Continued |
| (4) | Account balances with related parties as of December 31, 2019 and 2018 are as follows, Continued: |
| (In millions of won) | December 31, 2018 | |||||||||||||
| Receivables | Payables | |||||||||||||
| Scope |
Company |
Loans | Accounts receivable - trade, etc |
Accounts payable - other, etc |
||||||||||
| Ultimate Controlling Entity |
SK Holdings Co., Ltd. |
5,987 | 139,260 | |||||||||||
| Associates |
F&U Credit information Co., Ltd. |
— | 98 | 5,801 | ||||||||||
| SK hynix Inc. |
— | 14,766 | 89 | |||||||||||
| Wave City Development Co., Ltd. |
— | 37,263 | — | |||||||||||
| Daehan Kanggun BcN Co., Ltd.(*) |
22,147 | — | — | |||||||||||
| KEB HanaCard Co., Ltd. |
— | 541 | 11,311 | |||||||||||
| Others |
407 | 130 | 1,764 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| 22,554 | 52,798 | 18,965 | ||||||||||||
|
|
|
|
|
|
|
|||||||||
| Others |
SK Engineering & Construction Co., Ltd. |
— | 1,561 | 760 | ||||||||||
| SK Networks Co., Ltd. |
— | 2,647 | 167,433 | |||||||||||
| SK Networks Services Co., Ltd. |
— | 54 | 8,946 | |||||||||||
| SK Telesys Co., Ltd. |
— | 154 | 39,188 | |||||||||||
| SK TNS Co., Ltd. |
— | — | 89,017 | |||||||||||
| SK Innovation Co., Ltd. |
— | 4,696 | 1,019 | |||||||||||
| SK Energy Co., Ltd. |
— | 5,511 | 887 | |||||||||||
| SK Gas Co., Ltd. |
— | 2,225 | 60 | |||||||||||
| SK hystec Co., Ltd. |
— | 2,661 | 75 | |||||||||||
| Others |
— | 8,958 | 8,066 | |||||||||||
|
|
|
|
|
|
|
|||||||||
| — | 28,467 | 315,451 | ||||||||||||
|
|
|
|
|
|
|
|||||||||
| 87,252 | 473,676 | |||||||||||||
|
|
|
|
|
|
|
|||||||||
| (*) | As of December 31, 2018, the Parent Company recognized the entire balance of loans to Daehan Kanggun BcN Co., Ltd. as loss allowances. |
| (5) | SK Infosec Co., Ltd., a subsidiary of the Parent Company, provided a blank note to SK Holdings Co., Ltd. with regards to performance guarantee. |
| (6) | 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. |
| (7) | The details of additional investments and disposal of associates and joint ventures for the year ended December 31, 2019 as presented in note 13. |
120
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 38. | 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
W4,013 million as of December 31, 2019.
In addition, Life & Security Holdings 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 W1,900,000 million as of December 31, 2019.
(2) Legal claims and litigations
As of December 31, 2019 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 Group’s 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 the SK Planet Co., Ltd.
and Nonghyup Bank will be maintained until April 2021, and the SK Planet Co., Ltd. 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, W32,104 million and W18,018 million are recognized as current provisions and non-current provisions, respectively as of December 31, 2019.
(3) Accounts receivable from sale of handsets
The sales agents of the Parent Company sell handsets to the Parent Company’s subscribers on an installment basis. The Parent Company entered into comprehensive agreements to purchase accounts receivable from handset sales with retail stores and authorized dealers and to transfer the accounts receivable from handset sales to special purpose companies which were established with the purpose of liquidating receivables, respectively.
The accounts receivable from sale of handsets amounting to
W646,837 million as of December 31, 2019 which the Parent Company purchased according to the relevant comprehensive agreement are recognized as accounts receivable – other and long-term accounts receivable –
other.
(4) On April 26, 2019, the board of directors of SK Broadband Co., Ltd., a subsidiary of the Parent Company, resolved to approve SK Broadband Co., Ltd.’s merger 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. SK Broadband Co., Ltd. will merge Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. which are planned to be merged and dissolved on the date of merger expected to be April 30, 2020. The Group obtained a conditional approval from regulatory authorities on January 21, 2020.
121
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 39. | Statements of Cash Flows |
| (1) | Adjustments for income and expenses from operating activities for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Interest income |
(69,936 | ) | ||||||
| Dividend |
(10,011 | ) | (35,143 | ) | ||||
| Gain on foreign currency translation |
(4,576 | ) | (2,776 | ) | ||||
| Gain on valuation of derivatives |
(2,499 | ) | (6,532 | ) | ||||
| Gain on settlement of derivatives |
(29,277 | ) | (20,399 | ) | ||||
| Gain on sale of accounts receivable – other |
(15,855 | ) | (20,023 | ) | ||||
| Gain relating to investments in subsidiaries, associates and joint ventures, net |
(449,543 | ) | (3,270,912 | ) | ||||
| Gain on disposal of property and equipment and intangible assets |
(8,942 | ) | (38,933 | ) | ||||
| Gain on business transfer |
(69,522 | ) | — | |||||
| Gain relating to financial assets at FVTPL |
(4,504 | ) | (83,636 | ) | ||||
| Gain relating to financial liabilities at FVTPL |
(56 | ) | — | |||||
| Other income |
(1,890 | ) | (952 | ) | ||||
| Interest expenses |
397,890 | 307,319 | ||||||
| Loss on foreign currency translation |
4,948 | 2,397 | ||||||
| Loss on sale of accounts receivable – other |
5,823 | — | ||||||
| Income tax expense |
300,713 | 843,978 | ||||||
| Expense related to defined benefit plan |
175,165 | 147,722 | ||||||
| Share option |
2,073 | 789 | ||||||
| Depreciation and amortization |
3,935,841 | 3,284,339 | ||||||
| Bad debt expense |
28,841 | 38,211 | ||||||
| Loss on disposal of property and equipment and intangible assets |
56,248 | 87,257 | ||||||
| Loss on impairment of property and equipment and intangible assets |
65,935 | 255,839 | ||||||
| Loss relating to financial liabilities at FVTPL |
43 | 1,535 | ||||||
| Loss relating to financial assets at FVTPL |
7,753 | 22,507 | ||||||
| Bad debt for accounts receivable – other |
5,802 | 7,718 | ||||||
| Loss on disposal of investment assets |
— | 3 | ||||||
| Loss on impairment of investment assets |
1,670 | 3,157 | ||||||
| Loss on settlement of derivatives |
641 | 12,554 | ||||||
| Other expenses |
21,727 | 102,836 | ||||||
|
|
|
|
|
|||||
| 1,568,919 | ||||||||
|
|
|
|
|
|||||
122
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 39. | Statements of Cash Flows, Continued |
| (2) | Changes in assets and liabilities from operating activities for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Accounts receivable – trade |
175,841 | |||||||
| Accounts receivable – other |
48,399 | 319,913 | ||||||
| Accrued income |
151 | — | ||||||
| Advanced payments |
(12,204 | ) | 13,393 | |||||
| Prepaid expenses |
(660,891 | ) | (3,597 | ) | ||||
| Inventories |
115,893 | (13,429 | ) | |||||
| Long-term accounts receivable – other |
(56,216 | ) | 11,064 | |||||
| Contract assets |
(68,805 | ) | 9,161 | |||||
| Guarantee deposits |
6,392 | (258 | ) | |||||
| Accounts payable – trade |
(23,607 | ) | (58,487 | ) | ||||
| Accounts payable – other |
167,595 | (271,128 | ) | |||||
| Withholdings |
(31,545 | ) | 129,492 | |||||
| Contract liabilities |
33,574 | 11,328 | ||||||
| Deposits received |
(3,112 | ) | (333 | ) | ||||
| Accrued expenses |
117,367 | (102,246 | ) | |||||
| Provisions |
(37,134 | ) | (4,298 | ) | ||||
| Long-term provisions |
(1,699 | ) | 1,193 | |||||
| Plan assets |
(130,790 | ) | (123,075 | ) | ||||
| Retirement benefit payment |
(84,098 | ) | (63,957 | ) | ||||
| Others |
(3,893 | ) | (4,628 | ) | ||||
|
|
|
|
|
|||||
| 25,949 | ||||||||
|
|
|
|
|
|||||
| (3) | Significant non-cash transactions for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||
| 2019 | 2018 | |||||||
| Increase in accounts payable – other relating to the acquisition of property and equipment and intangible assets |
1,162,301 | |||||||
| Increase of right-of-use assets |
618,811 | — | ||||||
| Investment in subsidiary from comprehensive stock exchange |
— | 129,595 | ||||||
| Contribution in kind for investments |
78,900 | — | ||||||
123
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 39. | Statements of Cash Flows, Continued |
| (4) | Reconciliation of liabilities arising from financing activities for the years ended December 31, 2019 and 2018 are as follows: |
| (In millions of won) | ||||||||||||||||||||||||||||||||||||
| 2019 | ||||||||||||||||||||||||||||||||||||
| December 31, 2018 |
Impact of adopting K-IFRS No. 1116 |
January 1, 2019 |
Cash flows | Non-cash transactions | December 31, 2019 |
|||||||||||||||||||||||||||||||
| Exchange rate changes |
Fair value changes |
Business Combinations |
Other changes |
|||||||||||||||||||||||||||||||||
| Total liabilities from financing activities: |
||||||||||||||||||||||||||||||||||||
| Short-term borrowings |
— | 80,000 | (59,860) | (2) | — | 465 | — | 20,603 | ||||||||||||||||||||||||||||
| Long-term borrowings |
2,104,996 | — | 2,104,996 | (89,882) | 1,129 | — | — | 6,294 | 2,022,537 | |||||||||||||||||||||||||||
| Debentures |
7,466,852 | — | 7,466,852 | 693,444 | 59,157 | 223 | — | 1,157 | 8,220,833 | |||||||||||||||||||||||||||
| Lease liabilities |
— | 663,827 | 663,827 | (393,398) | — | — | 955 | 441,356 | 712,740 | |||||||||||||||||||||||||||
| Long-term payables – other |
2,393,027 | — | 2,393,027 | (428,153) | (84) | — | — | 6,819 | 1,971,609 | |||||||||||||||||||||||||||
| Derivative financial liabilities |
4,184 | — | 4,184 | 626 | 83 | (3,850) | — | — | 1,043 | |||||||||||||||||||||||||||
| Derivative financial assets |
(55,457) | — | (55,457) | 11,800 | — | (98,958) | — | (2,271) | (144,886) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| 663,827 | 12,657,429 | (265,423) | 60,283 | (102,585) | 1,420 | 453,355 | 12,804,479 | |||||||||||||||||||||||||||||
| 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) | |||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||
| (371,411) | ||||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||
|
|
|
|||||||||||||||||||||||||||||||||||
124
SK TELECOM CO., LTD. and Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2019 and 2018
| 39. | Statements of Cash Flows, Continued |
| (4) | Reconciliation of liabilities arising from financing activities for the years ended December 31, 2019 and 2018 are as follows, Continued: |
| (In millions of won) | ||||||||||||||||||||||||||||
| 2018 | ||||||||||||||||||||||||||||
| January 1, 2018 |
Cash flows | Non-cash transactions | ||||||||||||||||||||||||||
| Exchange rate changes |
Fair value changes |
Business Combinations |
Other changes |
December 31, 2018 |
||||||||||||||||||||||||
| Total liabilities from financing activities: |
| |||||||||||||||||||||||||||
| Short-term borrowings |
(87,701 | ) | — | — | 36,201 | 1,500 | 80,000 | |||||||||||||||||||||
| Long-term borrowings |
252,817 | 139,406 | 2,281 | — | 1,708,638 | 1,854 | 2,104,996 | |||||||||||||||||||||
| Debentures |
7,086,187 | 321,671 | 55,523 | 1,911 | — | 1,560 | 7,466,852 | |||||||||||||||||||||
| Long-term payables – other |
1,641,081 | (305,644 | ) | — | — | — | 1,057,590 | 2,393,027 | ||||||||||||||||||||
| Derivative financial liabilities |
39,470 | (4,031 | ) | 13,595 | (7,163 | ) | — | (37,687 | ) | 4,184 | ||||||||||||||||||
| Derivative financial assets |
(253,213 | ) | (2,000 | ) | 2,000 | (19,849 | ) | — | 217,605 | (55,457 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| 61,701 | 73,399 | (25,101 | ) | 1,744,839 | 1,242,422 | 11,993,602 | ||||||||||||||||||||||
| Other cash flows from financing activities: |
| |||||||||||||||||||||||||||
| Payments of cash dividends |
||||||||||||||||||||||||||||
| Issuance of hybrid bonds |
398,759 | |||||||||||||||||||||||||||
| Repayment of hybrid bonds |
(400,000 | ) | ||||||||||||||||||||||||||
| Payments of interest on hybrid bonds |
(15,803 | ) | ||||||||||||||||||||||||||
| Capital increase by subsidiaries and others |
499,926 | |||||||||||||||||||||||||||
| Transactions with the non-controlling shareholders |
(76,805 | ) | ||||||||||||||||||||||||||
|
|
|
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| (300,014 | ) | |||||||||||||||||||||||||||
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125
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/ Jung Hwan Choi | |
| (Signature) | ||
| Name: | Jung Hwan Choi | |
| Title: | Senior Vice President | |
Date: March 23, 2020
126