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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): ☐
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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 Seperate Financial Statements |
| FY2019
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| FY2018
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Unqualified | Unqualified | |||||||
4. Financial Highlights of Seperate Financial Statements (KRW) | ||||||||
- Total Assets | 30,839,366,596,041 | 28,848,023,467,304 | ||||||
- Total Liabilities | 13,449,627,680,406 | 11,960,536,543,326 | ||||||
- Total Shareholders’ Equity | 17,389,738,915,635 | 16,887,486,923,978 | ||||||
- Capital Stock | 44,639,473,000 | 44,639,473,000 | ||||||
- Total Shareholder’s Equity / Capital Stock Ratio(%) | 38,956.0 | 37,830.8 | ||||||
- Operating Revenue | 11,416,214,972,741 | 11,705,638,546,115 | ||||||
- Operating Profit | 950,109,532,860 | 1,307,494,276,778 | ||||||
- Profit before Income Tax | 1,185,489,906,823 | 1,221,244,645,982 | ||||||
- Profit for the Year | 980,338,251,688 | 933,902,416,151 |
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SK TELECOM CO., LTD.
Separate Financial Statements
December 31, 2019 and 2018
(With Independent Auditors’ Report Thereon)
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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 separate financial statements of SK Telecom Co., Ltd. (the “Company”) which comprise the separate statements of financial position as of December 31, 2019 and 2018, and the separate statements of income, comprehensive income, changes in equity and cash flows for the years then ended, and notes to the separate financial statements, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of the Company as of December 31, 2019 and 2018, and its separate financial performance and its separate cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”).
We also have audited, in accordance with the Korean Standards on Auditing, the Company’s Internal Control over Financial Reporting as of December 31, 2019, based on the criteria established in Conceptual Framework for Designing and Operating Internal Control over Financial Reporting issued by the Operating Committee of Internal Control over Financial Reporting in the Republic of Korea, and our report dated March 10, 2020 expressed an unmodified opinion on the effectiveness of the Company’s internal control over financial reporting.
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 Separate Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the separate 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 Matter
Key audit matter is this matter that, in our professional judgment, was of most significance in our audit of the separate financial statements as of and for the year ended December 31, 2019. This matter was addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
1. | Revenue Recognition |
As described in note 4 of the separate financial statements, the Company identifies performance obligations in contracts with customers and recognizes revenue as the performance obligations are satisfied. The Company’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 Company’s cellular telecommunications service as a key audit matter due to the complexity of information technology systems involved and the revenue recognition standard applied.
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The primary procedures we performed to address this key audit matter included:
• | Testing certain internal controls relating to the Company’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 Company’s revenue among rating system, billing system and the general ledger for selected samples. |
• | Inspecting a sample of contracts with subscribers to assess the Company’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. |
Other Matter
The procedures and practices utilized in the Republic of Korea to audit such separate financial statements may differ from those generally accepted and applied in other countries.
Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements
Management is responsible for the preparation and fair presentation of these separate financial statements in accordance with K-IFRS, and for such internal control as management determines is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the separate financial statements, management is responsible for assessing the Company’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 Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
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Auditors’ Responsibilities for the Audit of the Separate Financial Statements
Our objectives are to obtain reasonable assurance about whether the separate 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 separate financial statements.
As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• | Identify and assess the risks of material misstatement of the separate 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. |
• | Evaluate the appropriateness of accounting policies used in the preparation of the separate 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 Company’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 separate 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 Company to cease to continue as a going concern. |
• | Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
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.
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From the matters communicated with those charged with governance, we determine this matter that was of most significant in the audit of the separate financial statements of the current period and is therefore the key audit matter. We describe this matter 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 separate 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.
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SK TELECOM CO., LTD.
Separate Statements of Financial Position
As of December 31, 2019 and December 31, 2018
(In millions of won) | Note | December 31, 2019 | December 31, 2018 | |||||||||
Assets | ||||||||||||
Current Assets: | ||||||||||||
Cash and cash equivalents | 33,34 | 877,823 | ||||||||||
Short-term financial instruments | 5,33,34 | 234,000 | 99,000 | |||||||||
Short-term investment securities | 9,33,34 | 31,920 | 47,849 | |||||||||
Accounts receivable – trade, net | 6,33,34,35 | 1,479,971 | 1,354,260 | |||||||||
Short-term loans, net | 6,33,34,35 | 57,751 | 54,336 | |||||||||
Accounts receivable – other, net | 3,6,33,34,35,36 | 507,680 | 518,451 | |||||||||
Contract assets | 8 | 7,173 | 1,689 | |||||||||
Prepaid expenses | 3,7 | 1,970,982 | 1,688,234 | |||||||||
Guarantee deposits | 6,33,34,35 | 73,345 | — | |||||||||
Inventories, net | 11,125 | 22,079 | ||||||||||
Prepaid income taxes | 30 | 70,528 | — | |||||||||
Derivative financial assets | 18,33,34,37 | 26,253 | — | |||||||||
Advanced payments and others | 6,33,34 | 43,353 | 15,657 | |||||||||
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5,011,363 | 4,679,378 | |||||||||||
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Non-Current Assets: | ||||||||||||
Long-term financial instruments | 5,33,34 | 382 | 382 | |||||||||
Long-term investment securities | 9,33,34 | 510,633 | 410,672 | |||||||||
Investments in subsidiaries, associates and joint ventures | 10 | 10,578,158 | 10,188,914 | |||||||||
Property and equipment, net | 3,11,35 | 8,264,888 | 6,943,490 | |||||||||
Goodwill | 12 | 1,306,236 | 1,306,236 | |||||||||
Intangible assets, net | 3,13 | 3,461,152 | 4,010,864 | |||||||||
Long-term loans, net | 6,33,34,35 | 7,474 | 7,236 | |||||||||
Long-term accounts receivable - other | 3,6,33,34,36 | 332,220 | 274,053 | |||||||||
Long-term contract assets | 8 | 23,724 | 5,842 | |||||||||
Long-term prepaid expenses | 3,7 | 1,134,749 | 753,181 | |||||||||
Guarantee deposits | 6,33,34,35 | 108,141 | 184,887 | |||||||||
Long-term derivative financial assets | 18,33,34,37 | 99,998 | 50,805 | |||||||||
Defined benefit assets | 17 | — | 31,834 | |||||||||
Other non-current assets | 249 | 249 | ||||||||||
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25,828,004 | 24,168,645 | |||||||||||
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28,848,023 | ||||||||||||
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See accompanying notes to the separate financial statements.
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SK TELECOM CO., LTD.
Separate Statements of Financial Position, Continued
As of December 31, 2019 and December 31, 2018
(In millions of won) | Note | December 31, 2019 | December 31, 2018 | |||||||||
Liabilities and Shareholders’ Equity |
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Current Liabilities: | ||||||||||||
Accounts payable – other | 33,34,35 | 1,622,744 | ||||||||||
Contract liabilities | 8 | 88,257 | 46,075 | |||||||||
Withholdings | 33,34 | 685,822 | 696,790 | |||||||||
Accrued expenses | 33,34 | 793,669 | 664,286 | |||||||||
Income tax payable | 30 | — | 162,609 | |||||||||
Provisions | 16 | 50,912 | 49,303 | |||||||||
Current installments of long-term debt, net | 14,33,34,37 | 520,292 | 512,377 | |||||||||
Lease liabilities | 3,33,34,35,37 | 207,710 | — | |||||||||
Current installments of long-term payables – other | 15,33,34,37 | 423,839 | 423,884 | |||||||||
Other current liabilities | 33,34 | 20,019 | — | |||||||||
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5,057,478 | 4,178,068 | |||||||||||
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Non-Current Liabilities: | ||||||||||||
Debentures, excluding current installments, net | 14,33,34,37 | 5,900,829 | 5,222,865 | |||||||||
Long-term borrowings, excluding current installments, net | 14,33,34,37 | 19,777 | 31,764 | |||||||||
Long-term payables – other | 15,33,34,37 | 1,544,699 | 1,939,082 | |||||||||
Long-term contract liabilities | 8 | 11,342 | 8,358 | |||||||||
Long-term derivative financial liabilities | 18,33,34,37 | — | 1,107 | |||||||||
Long-term lease liabilities | 3,33,34,35,37 | 203,179 | — | |||||||||
Long-term provisions | 16 | 16,359 | 12,483 | |||||||||
Deferred tax liabilities | 3,30 | 644,754 | 523,732 | |||||||||
Defined benefit liabilities | 17 | 25,093 | — | |||||||||
Other non-current liabilities | 33,34 | 26,118 | 43,077 | |||||||||
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8,392,150 | 7,782,468 | |||||||||||
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Total Liabilities | 13,449,628 | 11,960,536 | ||||||||||
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Shareholders’ Equity: | ||||||||||||
Share capital | 1,19 | 44,639 | 44,639 | |||||||||
Capital surplus and others | 19,20,21,22 | 715,619 | 415,324 | |||||||||
Retained earnings | 3,23,24 | 16,678,787 | 16,467,789 | |||||||||
Reserves | 25 | (49,306 | ) | (40,265 | ) | |||||||
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Total Shareholders’ Equity | 17,389,739 | 16,887,487 | ||||||||||
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28,848,023 | ||||||||||||
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See accompanying notes to the separate financial statements.
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SK TELECOM CO., LTD.
For the years ended December 31, 2019 and 2018
(In millions of won) | Note | 2019 | 2018 | |||||||||
Operating revenue: | 26,35 | |||||||||||
Revenue | 11,705,639 | |||||||||||
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Operating expenses: | 35 | |||||||||||
Labor | 783,124 | 684,777 | ||||||||||
Commissions | 3,7 | 4,419,953 | 4,454,763 | |||||||||
Depreciation and amortization | 3 | 2,672,597 | 2,324,509 | |||||||||
Network interconnection | 565,084 | 606,452 | ||||||||||
Leased lines | 213,753 | 276,699 | ||||||||||
Advertising | 154,124 | 169,003 | ||||||||||
Rent | 3 | 223,439 | 445,122 | |||||||||
Cost of goods sold | 479,605 | 500,119 | ||||||||||
Others | 27 | 954,427 | 936,701 | |||||||||
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10,466,106 | 10,398,145 | |||||||||||
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Operating profit | 950,109 | 1,307,494 | ||||||||||
Finance income | 29 | 615,589 | 279,059 | |||||||||
Finance costs | 3,29 | (270,795 | ) | (255,455 | ) | |||||||
Other non-operating income | 28 | 78,212 | 41,265 | |||||||||
Other non-operating expenses | 28 | (119,075 | ) | (149,817 | ) | |||||||
Loss on investments in subsidiaries, associates and joint ventures, net | 10 | (68,550 | ) | (1,302 | ) | |||||||
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Profit before income tax | 1,185,490 | 1,221,244 | ||||||||||
Income tax expense | 30 | 205,152 | 287,342 | |||||||||
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Profit for the year | 933,902 | |||||||||||
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Earnings per share: | 31 | |||||||||||
Basic and diluted earnings per share (in won) | 13,000 | |||||||||||
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See accompanying notes to the separate financial statements.
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SK TELECOM CO., LTD.
Separate Statements of Comprehensive Income
For the years ended December 31, 2019 and 2018
(In millions of won) | Note | 2019 | 2018 | |||||||||
Profit for the year | 933,902 | |||||||||||
Other comprehensive income (loss): | ||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||
Remeasurement of defined benefit liabilities | 17 | (40,720 | ) | (16,354 | ) | |||||||
Valuation loss on financial assets at fair value through other comprehensive income | 25,29 | (13,972 | ) | (102,454 | ) | |||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: | ||||||||||||
Net change in unrealized fair value of derivatives | 18,25,29 | 35,004 | 28,260 | |||||||||
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Other comprehensive loss for the year, net of taxes | (19,688 | ) | (90,548 | ) | ||||||||
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Total comprehensive income | 843,354 | |||||||||||
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See accompanying notes to the separate financial statements.
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SK TELECOM CO., LTD.
Separate Statements of Changes in Equity
For the years ended December 31, 2019 and 2018
(In millions of won) | ||||||||||||||||||||||||||||||||||||||||||||
Capital surplus and others | Retained earnings | Reserves | ||||||||||||||||||||||||||||||||||||||||||
Note | Share capital | Paid-in surplus | Treasury shares | Hybrid bonds | Share options | Other | Sub-total | Total equity | ||||||||||||||||||||||||||||||||||||
Balance, December 31, 2017 | 2,915,887 | (2,260,626 | ) | 398,518 | 414 | (682,298 | ) | 371,895 | 14,512,556 | 78,301 | 15,007,391 | |||||||||||||||||||||||||||||||||
Impact of adopting K-IFRS No. 1115 | — | — | — | — | — | — | — | 1,723,985 | — | 1,723,985 | ||||||||||||||||||||||||||||||||||
Impact of adopting K-IFRS No. 1109 | — | — | — | — | — | — | — | 49,611 | (58,389 | ) | (8,778 | ) | ||||||||||||||||||||||||||||||||
Balance, January 1, 2018 | 2,915,887 | (2,260,626 | ) | 398,518 | 414 | (682,298 | ) | 371,895 | 16,286,152 | 19,912 | 16,722,598 | |||||||||||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | — | — | — | 933,902 | — | 933,902 | ||||||||||||||||||||||||||||||||||
Other comprehensive loss | 17,18,25,29 | — | — | — | — | — | — | — | (30,371 | ) | (60,177 | ) | (90,548 | ) | ||||||||||||||||||||||||||||||
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— | — | — | — | — | — | — | 903,531 | (60,177 | ) | 843,354 | ||||||||||||||||||||||||||||||||||
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Transactions with owners: | ||||||||||||||||||||||||||||||||||||||||||||
Annual dividends | 32 | — | — | — | — | — | — | — | (635,482 | ) | — | (635,482 | ) | |||||||||||||||||||||||||||||||
Interim dividends | 32 | — | — | — | — | — | — | — | (70,609 | ) | — | (70,609 | ) | |||||||||||||||||||||||||||||||
Share option | 22 | — | — | — | — | 593 | — | 593 | — | — | 593 | |||||||||||||||||||||||||||||||||
Repayments of hybrid bonds | 21 | — | — | — | (398,518 | ) | — | (1,482 | ) | (400,000 | ) | — | — | (400,000 | ) | |||||||||||||||||||||||||||||
Proceeds from issuance of hybrid bonds | 21 | — | — | — | 398,759 | — | — | 398,759 | — | — | 398,759 | |||||||||||||||||||||||||||||||||
Interest on hybrid bonds | 21 | — | — | — | — | — | — | — | (15,803 | ) | — | (15,803 | ) | |||||||||||||||||||||||||||||||
Business combination under common control | — | — | 281,151 | — | — | (237,074 | ) | 44,077 | — | — | 44,077 | |||||||||||||||||||||||||||||||||
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— | — | 281,151 | 241 | 593 | (238,556 | ) | 43,429 | (721,894 | ) | — | (678,465 | ) | ||||||||||||||||||||||||||||||||
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Balance, December 31, 2018 | 2,915,887 | (1,979,475 | ) | 398,759 | 1,007 | (920,854 | ) | 415,324 | 16,467,789 | (40,265 | ) | 16,887,487 | ||||||||||||||||||||||||||||||||
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Impact of adopting K-IFRS No. 1116 | 3 | — | — | — | — | — | — | — | (25,229 | ) | — | (25,229 | ) | |||||||||||||||||||||||||||||||
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Balance, January 1, 2019 | 2,915,887 | (1,979,475 | ) | 398,759 | 1,007 | (920,854 | ) | 415,324 | 16,442,560 | (40,265 | ) | 16,862,258 | ||||||||||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | — | — | — | 980,338 | — | 980,338 | ||||||||||||||||||||||||||||||||||
Other comprehensive loss | 17,18,25,29 | — | — | — | — | — | — | — | (10,647 | ) | (9,041 | ) | (19,688 | ) | ||||||||||||||||||||||||||||||
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— | — | — | — | — | — | — | 969,691 | (9,041 | ) | 960,650 | ||||||||||||||||||||||||||||||||||
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Transactions with owners: | ||||||||||||||||||||||||||||||||||||||||||||
Annual dividends | 32 | — | — | — | — | — | — | — | (646,828 | ) | — | (646,828 | ) | |||||||||||||||||||||||||||||||
Interim dividends | 32 | — | — | — | — | — | — | — | (71,870 | ) | — | (71,870 | ) | |||||||||||||||||||||||||||||||
Share option | 22 | — | — | — | — | 295 | — | 295 | — | — | 295 | |||||||||||||||||||||||||||||||||
Interest on hybrid bonds | 21 | — | — | — | — | — | — | — | (14,766 | ) | — | (14,766 | ) | |||||||||||||||||||||||||||||||
Disposal of treasury shares | 20 | — | — | 282,478 | — | — | 17,522 | 300,000 | — | — | 300,000 | |||||||||||||||||||||||||||||||||
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— | — | 282,478 | — | 295 | 17,522 | 300,295 | (733,464 | ) | — | (433,169 | ) | |||||||||||||||||||||||||||||||||
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Balance, December 31, 2019 | 2,915,887 | (1,696,997 | ) | 398,759 | 1,302 | (903,332 | ) | 715,619 | 16,678,787 | (49,306 | ) | 17,389,739 | ||||||||||||||||||||||||||||||||
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See accompanying notes to the separate financial statements.
9
Table of Contents
SK TELECOM CO., LTD.
Separate 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 | 933,902 | |||||||||||
Adjustments for income and expenses | 37 | 2,793,813 | 2,863,632 | |||||||||
Changes in assets and liabilities related to operating activities | 37 | (683,296 | ) | 510,379 | ||||||||
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| |||||||||
3,090,855 | 4,307,913 | |||||||||||
Interest received | 28,388 | 35,456 | ||||||||||
Dividends received | 525,045 | 177,490 | ||||||||||
Interest paid | (217,200 | ) | (183,023 | ) | ||||||||
Income tax paid | (311,680 | ) | (372,808 | ) | ||||||||
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| |||||||||
Net cash provided by operating activities | 3,115,408 | 3,965,028 | ||||||||||
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Cash flows from investing activities: | ||||||||||||
Cash inflows from investing activities: | ||||||||||||
Decrease in short-term investment securities, net | 16,217 | — | ||||||||||
Collection of short-term loans | 107,996 | 110,261 | ||||||||||
Proceeds from disposal of long-term investment securities | 223,619 | 189,083 | ||||||||||
Proceeds from disposal of investments in subsidiaries, associates and joint ventures | — | 78,548 | ||||||||||
Proceeds from disposal of property and equipment | 10,767 | 10,848 | ||||||||||
Proceeds from disposal of intangible assets | 3,843 | 916 | ||||||||||
Collection of lease receivables | 15,495 | — | ||||||||||
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| |||||||||
377,937 | 389,656 | |||||||||||
Cash outflows for investing activities: | ||||||||||||
Increase in short-term financial instruments, net | (135,000 | ) | — | |||||||||
Increase in short-term investment securities, net | — | (5,000 | ) | |||||||||
Increase in short-term loans | (111,686 | ) | (109,915 | ) | ||||||||
Acquisition of long-term investment securities | (321,124 | ) | (990 | ) | ||||||||
Acquisition of investments in subsidiaries, associates and joint ventures | (379,821 | ) | (1,045,713 | ) | ||||||||
Acquisition of property and equipment | (2,304,512 | ) | (1,893,284 | ) | ||||||||
Acquisition of intangible assets | (109,853 | ) | (444,038 | ) | ||||||||
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(3,361,996 | ) | (3,498,940 | ) | |||||||||
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Net cash used in investing activities | (3,109,284 | ) | ||||||||||
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See accompanying notes to the separate financial statements.
10
Table of Contents
SK TELECOM CO., LTD.
Separate Statements of Cash Flows, Continued
For the years ended December 31, 2019 and 2018
(In millions of won) | Note | 2019 | 2018 | |||||||||
Cash flows from financing activities: | ||||||||||||
Cash inflows from financing activities: | ||||||||||||
Proceeds from issuance of hybrid bonds | 398,759 | |||||||||||
Proceeds from issuance of debentures | 1,195,274 | 1,326,346 | ||||||||||
Cash inflows from settlement of derivatives | 12,426 | 116 | ||||||||||
Proceeds from disposal of treasury shares | 300,000 | — | ||||||||||
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1,507,700 | 1,725,221 | |||||||||||
Cash outflows for financing activities: | ||||||||||||
Repayments of long-term borrowings | (12,882 | ) | (12,770 | ) | ||||||||
Repayments of hybrid bonds | — | (400,000 | ) | |||||||||
Repayments of long-term payables - other |
| (425,349 | ) | (302,867 | ) | |||||||
Repayments of debentures | (550,000 | ) | (1,116,550 | ) | ||||||||
Payments of cash dividends | (718,698 | ) | (706,091 | ) | ||||||||
Payments of interest on hybrid bonds | (14,766 | ) | (15,803 | ) | ||||||||
Cash outflows for settlement of derivatives | — | (29,213 | ) | |||||||||
Repayments of lease liabilities | (297,895 | ) | — | |||||||||
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(2,019,590 | ) | (2,583,294 | ) | |||||||||
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Net cash used in financing activities | (511,890 | ) | (858,073 | ) | ||||||||
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Net decrease in cash and cash equivalents | (380,541 | ) | (2,329 | ) | ||||||||
Cash and cash equivalents at beginning of the year | 877,823 | 880,583 | ||||||||||
Effects of exchange rate changes on cash and cash equivalents | — | (431 | ) | |||||||||
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Cash and cash equivalents at end of the year |
| 877,823 | ||||||||||
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See accompanying notes to the separate financial statements.
11
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
1. | Reporting Entity |
SK Telecom Co., Ltd. (“the Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The Company mainly provides wireless telecommunications services in Korea. The head office of the Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.
The 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 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 | ||||||
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80,745,711 | 100.00 | |||||||
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2. | Basis of Preparation |
These separate financial statements were prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed inthe Act on External Audits of Stock Companies, Etc in the Republic of Korea.
These financial statements are separate financial statements prepared in accordance with K-IFRS No.1027,Separate Financial Statements, presented by a parent or an investor with joint control of or significant influence over an investee, in which the investments are accounted for at cost less impairment, if any.
The separate 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 separate financial statements have been prepared on the historical cost basis, except for the following material items in the separate 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 |
12
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
2. | Basis of Preparation, Continued |
(2) | Functional and presentation currency |
These separate financial statements are presented in Korean won, which is the currency of the primary economic environment in which the Company operates.
(3) | Use of estimates and judgments |
The preparation of the separate 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 most significant effects on the amounts recognized in the separate financial statements is included in note 4 for determination of whether a contract is or contains a lease.
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 6 and 34), estimated useful lives of costs to obtain a contract (notes 4 (22), and 7), property and equipment and intangible assets (notes 4 (7), (9), 11 and 13), impairment of goodwill (notes 4 (11) and 12), recognition of provision (notes 4 (17) and 16), measurement of defined benefit liabilities (notes 4 (16) and 17), and recognition of deferred tax assets (liabilities) (notes 4 (24) and 30).
3) Fair value measurement
A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established policies and processes with respect to the measurement of fair values including Level 3 fair values, and the measurement of fair value is reviewed is directly reported to the finance executives.
The Company regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, are used to measure fair values, then the Company 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.
13
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
2. | Basis of Preparation, Continued |
(3) | Use of estimates and judgments, Continued |
3) | Fair value measurement, Continued |
When measuring the fair value of an asset or a liability, the Company 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 Company 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 34.
3. | Changes in Accounting Policies |
The Company 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 Company’s separate 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 Company, 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 Company 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 Company 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 Company 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.
14
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
3. | Changes in Accounting Policies, Continued |
(2) | As a lessee |
The Company 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 Company 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 Company recognizes right-of-use assets and lease liabilities for most leases – i.e. theses leases are presented on the statements of financial position.
However, the Company 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 Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The Company 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.
1) Significant accounting policies
The Company 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 Company 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 Company’s incremental borrowing rate. Generally, the Company 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 Company 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 Company 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 Company has not included the extension option periods in the lease term because it is not reasonably certain that the Company will exercise such options. After the commencement date, the Company reassesses the lease term upon the occurrence of a significant event or a significant change in circumstances that is within the control of the Company that affects whether the Company is reasonably certain to exercise the extension option.
15
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate 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 Company’s incremental borrowing rate as of January 1, 2019. Right-of-use assets are measured at their carrying amounts as if K-IFRS No. 1116 had been applied since the commencement date, discounted using the Company’s incremental borrowing rate at the date of initial application.
The Company 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 Company as a lessor are not different from those under K-IFRS No. 1017. However, when the Company 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.
(4) | Impact on financial statements |
1) | Impact on transition |
On transition to K-IFRS No. 1116, the Company 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) | 17,203 | |||
Adjustments in intangible assets | (2,274 | ) | ||
Decrease in advanced payments and others | (53,608 | ) | ||
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377,873 | ||||
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Impact on the liabilities: | ||||
Increase in the lease liabilities | 412,407 | |||
Decrease in deferred tax liabilities | (9,305 | ) | ||
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403,102 | ||||
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Decrease in retained earnings | ||||
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16
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
3. | Changes in Accounting Policies, Continued |
(4) | Impact on financial statements, Continued |
1) | Impact on transition, Continued |
When measuring lease liabilities for leases that were classified as operating leases, the Company discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted average incremental borrowing rate applied is 1.92%.
(In millions of won) | ||||
January 1, 2019 | ||||
Operating lease commitments at December 31, 2018 | ||||
Discounted using the incremental borrowing rate at January 1, 2019 | 419,141 | |||
- Recognition exemption for leases with less than 12 months of lease term at the lease commencement date | (6,617 | ) | ||
- Recognition exemption for leases of low-value assets | (117 | ) | ||
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Lease liabilities recognized at January 1, 2019 | ||||
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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 Company recognizedW434,555 million of right-of-use assets andW410,889 million of lease liabilities as of December 31, 2019.
Also, in relation to those leases under K-IFRS No. 1116, the Company has recognized depreciation and interest costs, instead of operating lease expense. For the year ended December 31, 2019, the Company recognizedW270,086 million of depreciation charges andW8,067 million of interest costs from those leases. Expenses related to short-term leases and leases of low-value assets areW69,599 million andW183 million, respectively.
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.
17
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate 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 |
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 Company did not hold any finance lease as a lessor.
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 2 years | 2,997 | |||
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Undiscounted lease payments | ||||
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Unrealized finance income | 808 | |||
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Net investment in the lease | 9,805 | |||
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② | Operating lease |
The Company recognized lease income ofW83,807 million for the year ended December 31, 2019, of which income relating to variable lease payments isW20,101 million.
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 | 9,176 | |||
2 ~ 3 years | 1,586 | |||
3 ~ 4 years | 1,243 | |||
4 ~ 5 years | 1,218 | |||
More than 5 years | 3 | |||
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18
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
3. | Changes in Accounting Policies, Continued |
(5) | Determining the lease term and assessing the length of the non-cancellable 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 Company 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 Company’s lease contracts.
The Company plans to analyze and apply the impact of IFRIC’s interpretation in 2020, if any, as changes in accounting policies.
4. | Significant Accounting Policies |
The significant accounting policies applied by the Company in the preparation of its separate financial statements in accordance with K-IFRS are included below. The significant accounting policies applied by the Company in these separate financial statements are the same as those applied by the Company in its separate 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 |
The Company presents disclosures relating to operating segments on its consolidated financial statements in accordance with K-IFRS No. 1108,Operating Segments, and such disclosures are not separately disclosed on these separate financial statements.
(2) | Investments in subsidiaries, associates, and joint ventures |
These separate financial statements are prepared and presented in accordance with K-IFRS No. 1027,Separate Financial Statements. The Company applies the cost method to investments in subsidiaries, associates and joint ventures in accordance with K-IFRS No. 1027. Dividends from subsidiaries, associates, and joint ventures are recognized in profit or loss when the right to receive the dividends is established.
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.
(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.
19
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
4. | Significant Accounting Policies, Continued |
(4) | Inventories |
Inventories are initially recognized at the acquisition cost and subsequently measured using the 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 Company 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 Company 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. |
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. |
20
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate 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 |
On initial recognition of an equity investment that is not held for trading, the Company 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 Company 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. |
21
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate 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 Company estimates the expected credit losses (ECL) for the debt instruments measured at amortized cost and FVOCI based on the Company’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 Company 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 Company expects to receive).
At each reporting date, the Company 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 Company’s contractual rights to the cash flows from the financial assets expire or if the Company 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 Company 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 Company 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.
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SK TELECOM CO., LTD.
Notes to the Separate 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 Company holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Company 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 Company 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.
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SK TELECOM CO., LTD.
Notes to the Separate 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 Company 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 Company’s property and equipment are as follows:
Useful lives (years) | ||
Buildings and structures | 15, 30 | |
Machinery | 3 ~ 8 | |
Other property and equipment | 4 ~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.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
4. | Significant Accounting Policies, Continued |
(8) | Borrowing costs |
The Company 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 Company borrows funds specifically for the purpose of obtaining a qualifying asset, the Company 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 Company borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Company 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 Company 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 Company 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 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 Company’s intangible assets are as follows:
Useful lives (years) | ||
Frequency usage rights | 5 ~ 10 | |
Land usage rights | 5 | |
Industrial rights | 5, 10 | |
Facility usage rights | 10, 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.
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SK TELECOM CO., LTD.
Notes to the Separate 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 Company 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 Company 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 Company 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 Company for expenses incurred are deducted from the related expenses.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
4. | Significant Accounting Policies, Continued |
(11) | Impairment of non-financial assets |
The carrying amounts of the Company’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 Company estimates the recoverable amount of an individual asset, and if it is impossible to measure the individual recoverable amount of an asset, the Company estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU, for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.
An impairment loss is recognized in profit or loss to the extent the carrying amount of the asset exceeds its recoverable amount.
Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergy arising from the business acquired. Any impairment identified at the CGU level will first reduce the carrying value 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 Company has applied K-IFRS No. 1116,Leases, from January 1, 2019. See note 3 (1) for additional information.
The Company 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 Company uses the definition of a lease in K-IFRS No. 1116,Leases.
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SK TELECOM CO., LTD.
Notes to the Separate 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 |
The Company 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 Company 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 Company’s incremental borrowing rate. Generally, the Company 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 Company 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 Company 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 Company 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 Company reassesses the lease term upon the occurrence of a significant event or a significant change in circumstances that is within the control of the Company that affects whether the Company is reasonably certain to exercise the extension option.
The Company 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 Company recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. The Company 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.
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SK TELECOM CO., LTD.
Notes to the Separate 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 |
2) | As a lessor |
The Company 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 an operating lease.
When the Company is an intermediate lessor, the Company 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 Company classifies and accounts for leases as either a finance or operating lease, depending on the terms. Leases under which the Company 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 Company recognizes as finance assets and finance liabilities in its separate 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.
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 Company adopts for depreciable assets that are owned. If there is no reasonable certainty that the Company 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 Company reviews to determine whether the leased assets are impaired at the reporting date.
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SK TELECOM CO., LTD.
Notes to the Separate 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 |
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 Company 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 Company concludes for a financial lease that it is impracticable to separate the payments reliably, the Company 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 Company’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 Company 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).
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
4. | Significant Accounting Policies, Continued |
(15) | Non-derivative financial liabilities |
The Company 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 Company recognizes financial liabilities in the separate statement of financial position when the Company 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 Company extinguishes a financial liability only when the contractual obligation is fulfilled, canceled or expires. The Company 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.
(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 Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
4. | Significant Accounting Policies, Continued |
(16) | Employee benefits, Continued |
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 Company’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 Company during a period, the Company 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 Company 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 Company 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 Company 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 Company recognizes a gain or loss on a settlement when the settlement of defined benefit plan occurs.
5) | Termination benefits |
The Company recognizes a liability and expense for termination benefits at the earlier of the period when the Company can no longer withdraw the offer of those benefits and the period when the Company 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.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
4. | Significant Accounting Policies, Continued |
(17) | Provisions |
Provisions are recognized when the Company 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 |
Transactions in foreign currencies are translated to the functional currency of the Company 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.
(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 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 Company recognizes a financial instrument issued by the Company as an equity instrument if it does not include contractual obligation to deliver financial assets including cash to the counter party.
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SK TELECOM CO., LTD.
Notes to the Separate 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 Company 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.
(22) | Revenue |
1) | Identification of performance obligations in contracts with customers |
The Company identifies the distinct services or goods as performance obligations in contracts with customers such as (1) providing wireless telecommunications services, (2) sale of other goods and services. In the case of providing both wireless telecommunications service and selling a handset together to one customer, the Company 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 Company allocates the transaction price of a contract to each performance obligation identified on a relative stand-alone selling price basis. The Company uses “adjusted market assessment approach” for estimating the stand-alone selling price of a good or service. In the case of providing both a wireless telecommunications service and a handset together to one customer, the Company allocates the transaction price based on relative stand-alone selling prices.
3) | Incremental costs of obtaining a contract |
The Company 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 Company’s operating expenses. These commissions would not have been paid if there have been no binding contracts with subscribers and, therefore, the Company capitalizes certain costs associated with commissions paid to obtain new customer contracts and amortize them over the expected contract periods.
4) | Customer loyalty programs |
The Company provides customer loyalty points to customers based on the usage of the service to which the Company 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.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
4. | Significant Accounting Policies, Continued |
(22) | Revenue, Continued |
5) | Consideration payable to a customer |
Based on the subscription contract, a customer who uses the Company’s wireless telecommunications services may receive a discount for purchasing goods or services from a designated third party. The Company pays a portion of the price discounts that the customer receives to the third party, which is the consideration payable to a customer. The Company 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 by 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.
(24) | Income taxes |
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except for to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.
The Company pays income tax in accordance with the tax-consolidation system when the Company and its subsidiaries are economically unified.
1) | Current tax |
In accordance with the tax-consolidation system, the Company calculates current taxes on the consolidated taxable income for the Company and its subsidiaries that meet the criteria for the consolidated income tax returns and recognizes the income tax payable as current tax liabilities of the Company.
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.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
4. | Significant Accounting Policies, Continued |
(24) | Income taxes, Continued |
2) | Deferred tax |
Deferred tax is recognized by using the asset-liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Company recognizes a deferred tax liability for all taxable temporary differences, except for the difference associated with investments in subsidiaries and associates that the Company 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 Company 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 Company and the reversal of existing temporary differences are considered in determining the future taxable profit.
The Company reviews the carrying amount of a deferred tax asset at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Company 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 Company 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.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
4. | Significant Accounting Policies, Continued |
(24) | Income taxes, Continued |
3) | Uncertainty over income tax treatments |
The Company assesses the uncertainty over income tax treatments pursuant to K-IFRS No. 1012 from January 1, 2019. If the Company concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Company 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 Company 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 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 Company has not adopted the following new standards early in preparing the accompanying separate financial statements.
The following amended standards are not expected to have a significant impact on the Company’s separate 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). |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
5. | 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(*) | 79,000 | |||||||
Long-term financial instruments(*) | 382 | 382 | ||||||
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79,382 | ||||||||
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(*) | Financial instruments include charitable trust fund established by the Company where profits from the fund are donated to charitable institutions. As of December 31, 2019 the funds cannot be withdrawn before maturity. |
6. | 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 | (103,756 | ) | 1,479,971 | |||||||||
Short-term loans | 58,334 | (583 | ) | 57,751 | ||||||||
Accounts receivable – other(*) | 542,444 | (34,764 | ) | 507,680 | ||||||||
Guarantee deposits | 73,345 | — | 73,345 | |||||||||
Accrued income | 336 | — | 336 | |||||||||
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2,258,186 | (139,103 | ) | 2,119,083 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 48,585 | (41,111 | ) | 7,474 | ||||||||
Long-term accounts receivable – other(*) | 332,220 | — | 332,220 | |||||||||
Guarantee deposits | 108,141 | — | 108,141 | |||||||||
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488,946 | (41,111 | ) | 447,835 | |||||||||
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(180,214 | ) | 2,566,918 | ||||||||||
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(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2019 include |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
6. | Trade and Other Receivables, Continued |
(1) | Details of trade and other receivables as of December 31, 2019 and 2018 are as follows, Continued: |
(In millions of won) | December 31, 2018 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (119,842 | ) | 1,354,260 | |||||||||
Short-term loans | 54,885 | (549 | ) | 54,336 | ||||||||
Accounts receivable – other(*) | 568,878 | (50,427 | ) | 518,451 | ||||||||
Accrued income | 410 | — | 410 | |||||||||
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2,098,275 | (170,818 | ) | 1,927,457 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 48,344 | (41,108 | ) | 7,236 | ||||||||
Long-term accounts receivable – other(*) | 274,053 | — | 274,053 | |||||||||
Guarantee deposits | 184,887 | — | 184,887 | |||||||||
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507,284 | (41,108 | ) | 466,176 | |||||||||
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(211,926 | ) | 2,393,633 | ||||||||||
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(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2018 include |
(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 | Ending Balance | |||||||||||||||||||
2019 | — | 4,036 | (29,972 | ) | 9,850 | 103,756 | ||||||||||||||||||
2018 | 107,827 | 12,950 | 18,082 | (29,397 | ) | 10,380 | 119,842 |
(*) | The Company 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. |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
6. | Trade and Other Receivables, Continued |
(3) | The Company applies the practical expedient that allows the Company 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 Company 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 year ~ 3 years | More than 3 years | |||||||||||||||
Telecommunications service revenue | Expected credit loss rate | 51.29 | % | 69.68 | % | 97.93 | % | |||||||||||
Gross amount | 1,078,966 | 16,418 | 46,124 | 28,507 | ||||||||||||||
Loss allowance | 6,667 | 8,420 | 32,139 | 27,916 | ||||||||||||||
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Other revenue | Expected credit loss rate | 1.10 | % | 1.00 | % | 12.98 | % | 48.40 | % | |||||||||
Gross amount | 351,067 | 301 | 15,311 | 47,033 | ||||||||||||||
Loss allowance | 3,858 | 3 | 1,988 | 22,765 | ||||||||||||||
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As the Company is a wireless telecommunications service provider, the Company’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 Company trades only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Company is not exposed to significant credit concentration risk as the Company 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.
7. | Prepaid expenses |
The Company pays commissions to its retail stores and authorized dealers for wireless telecommunications services and for each service contract and installation contract secured. The Company 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 Company expects to maintain its customers.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
7. | Prepaid expenses, Continued |
(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 | 1,574,309 | |||||||
Others | 50,959 | 113,925 | ||||||
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1,688,234 | ||||||||
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Non-current assets: | ||||||||
Incremental costs of obtaining contracts | 724,233 | |||||||
Others | 22,154 | 28,948 | ||||||
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753,181 | ||||||||
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(2) | Incremental costs of obtaining contracts |
Incremental costs of obtaining contracts that are capitalized as assets as of December 31, 2019 and 2018 and the related amortization recognized as commissions during the years ended December 31, 2019 and 2018 are as follows:
(In millions of won) | 2019 | 2018 | ||||||
Amortization recognized as commissions | 2,040,089 |
8. | Contract assets and liabilities |
In case of providing both wireless telecommunications services and sales of handsets, the Company allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Company 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 | 7,531 | |||||||
Contract liabilities: | ||||||||
Wireless service contracts | 20,393 | 18,425 | ||||||
Customer loyalty programs | 21,945 | 17,113 | ||||||
Others | 57,261 | 18,895 | ||||||
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54,433 | ||||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
8. | Contract assets and liabilities, Continued |
(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 W36,890 million. Details of revenue expected to be recognized from contract liabilities as of December 31, 2019 are as follows: |
(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 | ||||||||||||
Others | 50,579 | 1,578 | 5,104 | 57,261 | ||||||||||||
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4,831 | 6,511 | 99,599 | ||||||||||||||
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9. | 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 | 47,849 |
(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(*) | 333,161 | ||||||||
Debt instruments | FVTPL | 75,423 | 77,511 | |||||||
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410,672 | ||||||||||
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(*) | The Company designated W435,210 million of investments in equity instruments that are not held for trading as financial assets at FVOCI. During the year ended December 31, 2019, the Company disposed of 6,109,000 common shares issued by Hana Financial Group Inc. in exchange for W 221,146 million in cash. The valuation gain on financial assets at FVOCI of W30,073 million was reclassified from reserves to retained earnings. Also, the Company acquired 2,177,401 shares of Kakao Co., Ltd. in exchange for W302,321 million in cash and designated the investments as financial assets at FVOCI. In relation to this transaction, the Company disposed 1,266,620 of its treasury shares to Kakao Co., Ltd. in exchange for W300,000 million in cash. (See Note 20) As this transaction is considered as a forward transaction, the Company recognized W28,787 million of gain of settlement of derivatives, the difference of fair value between the contract date and the transaction date. The acquired shares were deposited at the Korea Securities Depository for a year from the acquisition date based on the shares acquisition agreement between the Company and Kakao Co., Ltd. |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
10. | Investments in Subsidiaries, Associates and Joint Ventures |
(1) | Investments in subsidiaries, associates and joint ventures as of December 31, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||
December 31, 2019 | December 31, 2018 | |||||||
Investments in subsidiaries | 5,286,601 | |||||||
Investments in associates and joint ventures | 5,169,184 | 4,902,313 | ||||||
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10,188,914 | ||||||||
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(2) | Details of investments in subsidiaries 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 | Ownership (%) | Carrying amount | Carrying amount | |||||||||||||
SK Telink Co., Ltd. | 1,432,627 | 100.0 | 243,988 | |||||||||||||
SK Broadband Co., Ltd. | 298,460,212 | 100.0 | 1,870,582 | 1,870,582 | ||||||||||||
SK Communications Co., Ltd. (*1) | 43,427,530 | 100.0 | 41,939 | 69,668 | ||||||||||||
PS&Marketing Corporation | 66,000,000 | 100.0 | 313,934 | 313,934 | ||||||||||||
SERVICE ACE Co., Ltd. | 4,385,400 | 100.0 | 21,927 | 21,927 | ||||||||||||
SK Planet Co., Ltd. | 69,593,562 | 98.7 | 404,833 | 404,833 | ||||||||||||
Eleven Street Co., Ltd. | 8,224,709 | 80.3 | 1,049,403 | 1,049,403 | ||||||||||||
DREAMUS COMPANY | 29,246,387 | 51.4 | 156,781 | 156,642 | ||||||||||||
SK Telecom China Holdings Co., Ltd. | — | 100.0 | 48,096 | 48,096 | ||||||||||||
Life & Security Holdings Co., Ltd. | 740,895 | 55.0 | 703,394 | 703,736 | ||||||||||||
SKT Americas, Inc. | 122 | 100.0 | 45,701 | 45,701 | ||||||||||||
Atlas Investment (*3) | — | 100.0 | 130,200 | 99,874 | ||||||||||||
One Store Co., Ltd. (*4) | 10,409,600 | 52.7 | 82,186 | 82,186 | ||||||||||||
id Quantique SA (*5) | 69,157,505 | 66.8 | 94,119 | 81,902 | ||||||||||||
SK Infosec Co., Ltd. | 12,636,024 | 100.0 | 44,410 | 44,410 | ||||||||||||
SK Telecom TMT Investment Corp. (*6) | 30,000 | 100.0 | 33,834 | — | ||||||||||||
FSK L&S Co., Ltd. (*7) | 2,415,750 | 60.0 | 17,757 | — | ||||||||||||
Incross Co., Ltd. (*8) | 2,786,455 | 34.6 | 53,722 | — | ||||||||||||
SK O&S Co., Ltd. | — | — | 52,168 | 49,719 | ||||||||||||
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5,286,601 | ||||||||||||||||
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
10. | Investments in Subsidiaries, Associates and Joint ventures, Continued |
(2) | Details of investments in subsidiaries as of December 31, 2019 and 2018 are as follows, Continued: |
(*1) | The Company recognized |
(*2) | The ownership has changed due to the conversion of the convertible bonds issued by DREAMUS COMPANY (Formerly, IRIVER LIMITED) during year ended December 31, 2019. |
(*3) | The Company contributed |
(*4) | The ownership has changed due to a capital increase through third-party allocation during the year ended December 31, 2019. |
(*5) | The ownership has changed due to a non-proportional paid-in capital increase in id Quantique SA during the year ended December 31, 2019. Also, the Company contributed |
(*6) | SK Telecom TMT Investment Corp. was newly established during the year ended December 31, 2019. |
(*7) | FSK L&S Co., Ltd. was reclassified as investments in subsidiaries from investments in associates during the year ended December 31, 2019. |
(*8) | The Company acquired 2,786,455 shares of Incross Co., Ltd. at |
44
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
10. | Investments in Subsidiaries, Associates and Joint ventures, Continued |
(3) | Details of investments in associates and joint ventures 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 | Ownership (%) | Carrying amount | Carrying amount | |||||||||||||
Investments in associates: | ||||||||||||||||
SK China Company Ltd. | 10,928,921 | 27.3 | 601,192 | |||||||||||||
Korea IT Fund (*1) | 190 | 63.3 | 220,957 | 220,957 | ||||||||||||
KEB HanaCard Co., Ltd. (*2) | 39,902,323 | 15.0 | 253,739 | 253,739 | ||||||||||||
NanoEnTek, Inc. | 7,600,649 | 28.6 | 51,138 | 51,138 | ||||||||||||
SK Technology Innovation Company | 14,700 | 49.0 | 45,864 | 45,864 | ||||||||||||
SK hynix Inc. | 146,100,000 | 20.1 | 3,374,725 | 3,374,725 | ||||||||||||
S.M. Culture & Contents Co., Ltd. | 22,033,898 | 23.4 | 65,341 | 65,341 | ||||||||||||
SK South East Asia Investment Pte. Ltd. | 200,000,000 | 20.0 | 224,470 | 111,000 | ||||||||||||
Pacific Telecom Inc. (*2) | 1,734,109 | 15.0 | 36,487 | 36,487 | ||||||||||||
Grab Geo Holdings PTE. LTD. (*4) | 300 | 30.0 | 30,517 | — | ||||||||||||
Content Wavve Co., Ltd. (*5) | 1,306,286 | 30.0 | 90,858 | — | ||||||||||||
SK telecom CS T1 Co., Ltd. (*1,6) | 50,000 | 54.9 | 60,305 | — | ||||||||||||
FSK L&S Co., Ltd. (*7) | — | — | — | 17,757 | ||||||||||||
HealthConnect Co., Ltd. and others (*8) | — | — | 88,162 | 99,533 | ||||||||||||
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4,877,733 | ||||||||||||||||
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Investment in joint ventures: | ||||||||||||||||
Finnq Co., Ltd. (*9) | 6,370,000 | 49.0 | 24,580 | |||||||||||||
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4,902,313 | ||||||||||||||||
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(*1) | Investment in Korea IT Fund and SK telecom CS T1 Co., Ltd. was classified as investment in associates as the Company does not have control over the investee under the contractual agreement. |
(*2) | These investments were classified as investments in associates as the Company can exercise significant influence through its right to appoint the members of board of directors even though the Company has less than 20% of equity interest. |
(*3) | The Company contributed |
(*4) | The Company jointly established Grab Geo Holdings PTE. LTD. by investing |
(*5) | The Company newly invested |
(*6) | SK Telecom CS T1 Co., Ltd. was newly established during the year ended December 31, 2019. The Company contributed its e-sports business after the establishment. |
(*7) | FSK L&S Co., Ltd. was reclassified as investments in subsidiaries from investments in associates during the year ended December 31, 2019. |
(*8) | The Company newly invested |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
10. | Investments in Subsidiaries, Associates and Joint ventures, Continued |
(3) | Details of investments in associates and joint ventures as of December 31, 2019 and 2018 are as follows, Continued: |
(*9) | The investment was classified as investment in joint ventures as the Company has joint control pursuant to the agreement with the other shareholders. The Company contributed |
(4) | The market value of investments in listed subsidiaries as of December 31, 2019 and 2018 are as follows: |
(In millions of won, except for share data) |
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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 | |||||||||||||||||||
DREAMUS COMPANY | 29,246,387 | 174,601 | 6,760 | 29,246,387 | 197,706 | |||||||||||||||||||
Incross Co., Ltd. | 25,150 | 2,786,455 | 70,079 | — | — | — | ||||||||||||||||||
(5) The market value of investments in listed associates as of December 31, 2019 and 2018 are as follows: |
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(In millions of won, except for share data) |
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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 |
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Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
11. | 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 | Carrying amount | |||||||||||||
Land | — | — | 618,012 | |||||||||||||
Buildings | 1,243,945 | (642,870 | ) | (450 | ) | 600,625 | ||||||||||
Structures | 908,504 | (560,169 | ) | (1,601 | ) | 346,734 | ||||||||||
Machinery | 25,060,812 | (19,948,212 | ) | (21,117 | ) | 5,091,483 | ||||||||||
Right-of-use assets | 640,761 | (206,206 | ) | — | 434,555 | |||||||||||
Other | 1,480,921 | (980,034 | ) | — | 500,887 | |||||||||||
Construction in progress | 672,592 | — | — | 672,592 | ||||||||||||
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(22,337,491 | ) | (23,168 | ) | 8,264,888 | ||||||||||||
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(In millions of won) | ||||||||||||||||
December 31, 2018 | ||||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment | Carrying amount | |||||||||||||
Land | — | — | 544,419 | |||||||||||||
Buildings | 1,143,315 | (606,315 | ) | — | 537,000 | |||||||||||
Structures | 879,774 | (524,035 | ) | — | 355,739 | |||||||||||
Machinery | 23,479,250 | (19,069,611 | ) | (27,264 | ) | 4,382,375 | ||||||||||
Other | 1,598,988 | (981,151 | ) | — | 617,837 | |||||||||||
Construction in progress | 506,120 | — | — | 506,120 | ||||||||||||
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(21,181,112 | ) | (27,264 | ) | 6,943,490 | ||||||||||||
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(2) | Details of the 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 | Impairment(*) | Ending balance | |||||||||||||||||||||||||
Land | — | 34,246 | (150 | ) | 39,497 | — | — | 618,012 | ||||||||||||||||||||||||
Buildings | 537,000 | — | 53,298 | (1,126 | ) | 50,738 | (38,835 | ) | (450 | ) | 600,625 | |||||||||||||||||||||
Structures | 355,739 | — | 18,200 | (2 | ) | 10,536 | (36,138 | ) | (1,601 | ) | 346,734 | |||||||||||||||||||||
Machinery | 4,382,375 | — | 256,819 | (8,951 | ) | 2,081,599 | (1,599,242 | ) | (21,117 | ) | 5,091,483 | |||||||||||||||||||||
Right-of-use assets | — | 416,552 | 450,557 | (162,468 | ) | — | (270,086 | ) | — | 434,555 | ||||||||||||||||||||||
Other | 617,837 | — | 1,335,828 | (1,046 | ) | (1,355,841 | ) | (95,891 | ) | — | 500,887 | |||||||||||||||||||||
Construction in progress | 506,120 | — | 1,089,126 | (5,847 | ) | (916,807 | ) | — | — | 672,592 | ||||||||||||||||||||||
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|
|
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| |||||||||||||||||
416,552 | 3,238,074 | (179,590 | ) | (90,278 | ) | (2,040,192 | ) | (23,168 | ) | 8,264,888 | ||||||||||||||||||||||
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|
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|
|
|
(*) | The Company recognized impairment losses for obsolete assets during the year ended December 31, 2019. |
47
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
11. | Property and Equipment, Continued |
(2) | Details of the changes in property and equipment for the years ended December 31, 2019 and 2018 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Impairment(*) | Ending balance | ||||||||||||||||||||||
Land | 4,360 | (29 | ) | 14,516 | — | — | 544,419 | |||||||||||||||||||||
Buildings | 546,872 | 3,636 | (1,457 | ) | 25,216 | (37,267 | ) | — | 537,000 | |||||||||||||||||||
Structures | 376,755 | 9,188 | (36 | ) | 5,859 | (36,027 | ) | — | 355,739 | |||||||||||||||||||
Machinery | 4,648,331 | 222,564 | (52,881 | ) | 1,192,243 | (1,600,618 | ) | (27,264 | ) | 4,382,375 | ||||||||||||||||||
Other | 448,203 | 841,425 | (5,330 | ) | (565,720 | ) | (100,741 | ) | — | 617,837 | ||||||||||||||||||
Construction in progress | 377,400 | 948,966 | (4,622 | ) | (815,624 | ) | — | — | 506,120 | |||||||||||||||||||
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| |||||||||||||||
2,030,139 | (64,355 | ) | (143,510 | ) | (1,774,653 | ) | (27,264 | ) | 6,943,490 | |||||||||||||||||||
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|
(*) | The Company recognized impairment losses for obsolete assets during the year ended December 31, 2018. |
(3) | Details of theright-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 | |||||||
Land, buildings and structures | 335,481 | |||||||
Others | 71,359 | 81,071 | ||||||
|
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|
| |||||
416,552 | ||||||||
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|
|
|
12. | Goodwill |
Goodwill as of December 31, 2019 and 2018 are as follows:
(In millions of won) | ||||||||
December 31, 2019 | December 31, 2018 | |||||||
Goodwill related to acquisition of Shinsegi Telecom, Inc. | 1,306,236 |
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 Company’s long-term wireless telecommunication industry growth rate. Management of the Company 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.
48
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
13. | Intangible Assets |
(1) | Intangible assets as of December 31, 2019 and 2018 are as follows: |
(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 | 45,930 | (40,222 | ) | — | 5,708 | |||||||||||
Industrial rights | 41,485 | (29,431 | ) | — | 12,054 | |||||||||||
Facility usage rights | 56,479 | (40,955 | ) | — | 15,524 | |||||||||||
Club memberships (*1) | 75,496 | — | (27,885 | ) | 47,611 | |||||||||||
Other (*2) | 3,245,063 | (2,512,309 | ) | — | 732,754 | |||||||||||
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| |||||||||
(6,186,298 | ) | (27,885 | ) | 3,461,152 | ||||||||||||
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|
|
| |||||||||
(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 | 47,123 | (40,625 | ) | — | 6,498 | |||||||||||
Industrial rights | 47,584 | (32,284 | ) | — | 15,300 | |||||||||||
Facility usage rights | 54,344 | (38,336 | ) | — | 16,008 | |||||||||||
Club memberships (*1) | 77,767 | — | (30,356 | ) | 47,411 | |||||||||||
Other (*2) | 3,079,376 | (2,293,707 | ) | — | 785,669 | |||||||||||
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| |||||||||
(5,475,856 | ) | (30,356 | ) | 4,010,864 | ||||||||||||
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|
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(*1) | Club memberships are classified as intangible assets with indefinite useful lives and are not amortized. |
(*2) | Other intangible assets primarily consist of computer software and others. |
49
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
13. | 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 | Ending balance | |||||||||||||||||||||||||
Frequency usage rights | — | — | — | — | (492,477 | ) | — | 2,647,501 | ||||||||||||||||||||||||
Land usage rights | 6,498 | — | 2,017 | (14 | ) | — | (2,793 | ) | — | 5,708 | ||||||||||||||||||||||
Industrial rights | 15,300 | — | 759 | (1,206 | ) | — | (2,799 | ) | — | 12,054 | ||||||||||||||||||||||
Facility usage rights | 16,008 | — | 2,093 | (25 | ) | 177 | (2,729 | ) | — | 15,524 | ||||||||||||||||||||||
Club memberships | 47,411 | — | 1,113 | (850 | ) | — | — | (63 | ) | 47,611 | ||||||||||||||||||||||
Other | 785,669 | (2,274 | ) | 103,871 | (2,464 | ) | 134,525 | (286,573 | ) | — | 732,754 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
(2,274 | ) | 109,853 | (4,559 | ) | 134,702 | (787,371 | ) | (63 | ) | 3,461,152 | ||||||||||||||||||||||
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|
|
(In millions of won) | ||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Ending balance | |||||||||||||||||||
Frequency usage rights | 1,366,926 | — | — | (403,888 | ) | 3,139,978 | ||||||||||||||||||
Land usage rights | 7,858 | 2,134 | (72 | ) | 406 | (3,828 | ) | 6,498 | ||||||||||||||||
Industrial rights | 12,899 | 6,617 | (716 | ) | 263 | (3,763 | ) | 15,300 | ||||||||||||||||
Facility usage rights | 16,456 | 2,223 | (39 | ) | 101 | (2,733 | ) | 16,008 | ||||||||||||||||
Club memberships | 44,843 | 3,219 | (651 | ) | — | — | 47,411 | |||||||||||||||||
Other | 830,549 | 73,395 | (3,408 | ) | 169,757 | (284,624 | ) | 785,669 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1,454,514 | (4,886 | ) | 170,527 | (698,836 | ) | 4,010,864 | ||||||||||||||||||
|
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50
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
13. | 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 | 319,931 |
(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 Company 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 |
14. | Borrowings and Debentures |
(1) | 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 | ||||||||||||
Export Kreditnamnden(*) | 1.70 | Apr. 29, 2022 |
| (USD 28,732 | ) | | 45,007 (USD 40,253 | ) | ||||||||
|
|
|
| |||||||||||||
Less present value discount |
| (332 | ) | (613 | ) | |||||||||||
|
|
|
| |||||||||||||
32,934 | 44,394 | |||||||||||||||
Less current installments |
| (13,157 | ) | (12,630 | ) | |||||||||||
|
|
|
| |||||||||||||
31,764 | ||||||||||||||||
|
|
|
|
(*) | The long-term borrowings are to be repaid by installments on an annual basis from 2014 to 2022. |
51
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
14. | Borrowings and Debentures, Continued |
(2) | 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 | 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 |
52
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
14. | Borrowings and Debentures, Continued |
(2) | 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 | 2022 | 2.03 | 180,000 | — | |||||||||||||
Unsecured corporate bonds | 2024 | 2.09 | 120,000 | — | ||||||||||||||
Unsecured corporate bonds | 2029 | 2.19 | 50,000 | — | ||||||||||||||
Unsecured corporate bonds | 2039 | 2.23 | 50,000 | — | ||||||||||||||
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 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 | ) | ||||||||||
Floating rate notes (*2) | 2020 | 3M LIBOR +0.88 | | 347,340 (USD 300,000 | ) | | 335,430 (USD 300,000 | ) | ||||||||||
|
|
|
| |||||||||||||||
6,429,360 | 5,743,533 | |||||||||||||||||
Less discounts on bonds |
| (21,396 | ) | (20,921 | ) | |||||||||||||
|
|
|
| |||||||||||||||
6,407,964 | 5,722,612 | |||||||||||||||||
Less current installments of bonds |
| (507,135 | ) | (499,747 | ) | |||||||||||||
|
|
|
| |||||||||||||||
5,222,865 | ||||||||||||||||||
|
|
|
|
(*1) | The debenture was repaid before maturity during the year ended December 31, 2019. |
(*2) | As of December 31, 2019, 3M LIBOR rate is 1.91%. |
53
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
15. | Long-term Payables - other |
(1) | As of December 31, 2019 and 2018, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 13): |
(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 | |||||||
|
|
|
|
(2) | Principal amount of long-term payables repaid during the year ended December 31, 2019 are |
(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 | |||
|
| |||
|
|
16. | Provisions |
Changes in provisions for the years ended December 31, 2019 and 2018 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||
For the year ended December 31, 2019 | As of December 31, 2019 | |||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Ending balance | Current | Non-current | ||||||||||||||||||||||
Provision for restoration | 3,597 | (656 | ) | (474 | ) | 62,015 | 45,656 | 16,359 | ||||||||||||||||||||
Emission allowance | 2,238 | 5,036 | (1,086 | ) | (932 | ) | 5,256 | 5,256 | — | |||||||||||||||||||
|
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|
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|
|
|
|
|
|
|
|
|
| |||||||||||||||
8,633 | (1,742 | ) | (1,406 | ) | 67,271 | 50,912 | 16,359 | |||||||||||||||||||||
|
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|
|
|
|
|
|
| |||||||||||||||
(In millions of won) | ||||||||||||||||||||||||||||
For the year ended December 31, 2018 | As of December 31, 2018 | |||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Ending balance | Current | Non-current | ||||||||||||||||||||||
Provision for installment of handset subsidy | — | (1,075 | ) | (2,799 | ) | — | — | — | ||||||||||||||||||||
Provision for restoration | 56,162 | 4,745 | (824 | ) | (535 | ) | 59,548 | 47,065 | 12,483 | |||||||||||||||||||
Emission allowance | 4,650 | 2,228 | (1,334 | ) | (3,306 | ) | 2,238 | 2,238 | — | |||||||||||||||||||
|
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|
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|
|
|
|
|
| |||||||||||||||
6,973 | (3,233 | ) | (6,640 | ) | 61,786 | 49,303 | 12,483 | |||||||||||||||||||||
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54
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
17. | 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 | 332,044 | |||||||
Fair value of plan assets | (397,689 | ) | (363,878 | ) | ||||
|
|
|
| |||||
(31,834 | ) | |||||||
|
|
|
|
(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 | 2.36 | % | 2.61 | % | ||||
Expected rate of salary increase | 4.69 | % | 3.88 | % |
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 Company’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 | 278,778 | |||||||
Current service cost | 45,664 | 41,525 | ||||||
Interest cost | 8,638 | 8,956 | ||||||
Remeasurement | ||||||||
- Demographic assumption | 19,746 | — | ||||||
- Financial assumption | 28,774 | 10,794 | ||||||
- Adjustment based on experience | 5,105 | 7,941 | ||||||
Benefit paid | (21,875 | ) | (23,601 | ) | ||||
Others (*) | 4,686 | 7,651 | ||||||
|
|
|
| |||||
Ending balance | 332,044 | |||||||
|
|
|
|
(*) | Others include changes of liabilities due to employee’s transfers among affiliates for the years ended December 31, 2019 and 2018. |
55
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
17 | Defined Benefit Liabilities (Assets), Continued |
(4) | Changes in plan assets for the years ended December 31, 2019 and 2018 are as follows, Continued: |
(In millions of won) | For the year ended December 31 | |||||||
2019 | 2018 | |||||||
Beginning balance | 318,860 | |||||||
Interest income | 9,073 | 9,582 | ||||||
Remeasurement | (2,023 | ) | (3,747 | ) | ||||
Contributions | 51,500 | 47,000 | ||||||
Benefit paid | (22,951 | ) | (12,473 | ) | ||||
Others | (1,788 | ) | 4,656 | |||||
|
|
|
| |||||
Ending balance | 363,878 | |||||||
|
|
|
|
The Company expects to contributeW79,293 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 intoconstruction-in-progress, for the years ended December 31, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||
2019 | 2018 | |||||||
Current service cost | 41,525 | |||||||
Net interest income | (435 | ) | (626 | ) | ||||
|
|
|
| |||||
40,899 | ||||||||
|
|
|
|
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) | ||||||||
2019 | 2018 | |||||||
Equity instruments | 1,867 | |||||||
Debt instruments | 123,951 | 70,670 | ||||||
Short-term financial instruments, etc. | 273,396 | 291,341 | ||||||
|
|
|
| |||||
363,878 | ||||||||
|
|
|
|
(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 | 21,234 | |||||||
Expected salary increase rate | 21,221 | (19,894 | ) |
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 10.35 years.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
18 | 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 date | Hedging Instrument (Hedged item) | Hedged risk | Financial | 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 swap (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 |
(2) | As of December 31, 2019, details of fair values of the above derivatives recorded in current andnon-current assets are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||
Hedging instrument (Hedged item) | Cash flow hedge | 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 | 43,851 | ||||||
Fixed-to-fixed cross currency swap | 797 | 797 | ||||||
Fixed-to-fixed cross currency swap | 55,350 | 55,350 | ||||||
|
| |||||||
126,251 | ||||||||
|
|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
19 | Share Capital and Capital Surplus and Others |
The Company’s outstanding share capital consists entirely of common shares with a par value ofW500. The number of authorized, issued and outstanding common stocks 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 (*) | 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 20) | (1,696,997 | ) | (1,979,475 | ) | ||||
Hybrid bonds (Note 21) | 398,759 | 398,759 | ||||||
Share option (Note 22) | 1,302 | 1,007 | ||||||
Others | (903,332 | ) | (920,854 | ) | ||||
|
|
|
| |||||
415,324 | ||||||||
|
|
|
|
(*) | In 2002 and 2003, the Company retired treasury shares with reduction of its retained earnings before appropriation. As a result, the Company’s outstanding shares have decreased without change in share capital. |
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 |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
20. | 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 Company disposed 1,266,620 of its treasury shares to Kakao Co., Ltd. in exchange for |
21. | 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 | |||||||||||||||||
Series2-1 hybrid bonds | Unsecured subordinated bearer bond | June 7, 2018 | June 7, 2078 | 3.70 | 300,000 | |||||||||||||||||
Series2-2 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 Company 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 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 thestep-up clause, additional premium of 0.25% and 0.75%, respectively, after 10 years and 25 years from the issuance date are applied. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
22. | Share option |
(1) | The terms and conditions related to the grants of the share options under the share option program are as follows: |
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 | 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. |
(2) | Share compensation expense recognized during the year ended December 31, 2019 and the remaining share compensation expense to be recognized in subsequent periods are as follows: |
(In millions of won) | Share compensation expense | |||
During the year ended December 31, 2018 | ||||
During the year ended December 31, 2019 | 295 | |||
In subsequent periods | 171 | |||
|
| |||
|
|
(3) | The Company used binomial option pricing model 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) | 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 | 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 |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
23. | 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 | ||||||
|
|
|
| |||||
15,818,758 | 13,874,758 | |||||||
Unappropriated | 860,029 | 2,593,031 | ||||||
|
|
|
| |||||
16,467,789 | ||||||||
|
|
|
|
(2) | Legal reserve |
The Korean Commercial Act requires the 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.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
24. | Statements of Appropriation of Retained Earnings |
Details of statements of appropriation of retained earnings for the years ended December 31, 2019 and 2018 are as follows:
Date of appropriation for 2019: March 26, 2020
Date of appropriation for 2018: March 26, 2019
(In millions of won) | ||||||||
2019 | 2018 | |||||||
Unappropriated retained earnings: | ||||||||
Unappropriated retained earnings | 2,316 | |||||||
Changes in accounting policies | (25,229 | ) | 1,773,596 | |||||
Remeasurement of defined benefit liabilities | (40,720 | ) | (16,354 | ) | ||||
Reclassification of valuation gain (loss) on FVOCI | 30,073 | (14,017 | ) | |||||
Interim dividends: 2019: 200% on par value 2018: 200% on par value | (71,870 | ) | (70,609 | ) | ||||
Interest on hybrid bonds | (14,766 | ) | (15,803 | ) | ||||
Profit for the year | 980,338 | 933,902 | ||||||
|
|
|
| |||||
860,029 | 2,593,031 | |||||||
|
|
|
| |||||
Appropriation of retained earnings: | ||||||||
Reserve for business expansion | 100,000 | 1,000,000 | ||||||
Reserve for technology development | 100,000 | 944,000 | ||||||
Cash dividends: 2019: 1,800% on par value 2018: 1,800% on par value | 658,228 | 646,828 | ||||||
|
|
|
| |||||
858,228 | 2,590,828 | |||||||
|
|
|
| |||||
Unappropriated retained earnings to be carried over to subsequent year | 2,203 | |||||||
|
|
|
|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
25. | Reserves |
(1) | Details of reserves, net of taxes, as of December 31, 2019 and 2018 are as follows: |
(In millions of won) | ||||||||
December 31, 2018 | December 31, 2017 | |||||||
Valuation gain (loss) on FVOCI | | 2,047 | | |||||
Valuation loss on derivatives | (7,308 | ) | (42,312 | ) | ||||
|
|
|
| |||||
(40,265 | ) | |||||||
|
|
|
|
(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 | Valuation gain (loss) on derivatives | Total | |||||||||||||
Balance at December 31, 2017 | 148,873 | (70,572 | ) | 78,301 | ||||||||||||
Impact of adoptingK-IFRS No.1109 | 90,484 | (148,873 | ) | — | (58,389 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at January 1, 2018 | 90,484 | — | (70,572 | ) | 19,912 | |||||||||||
Changes, net of taxes | (88,437 | ) | — | 28,260 | (60,177 | ) | ||||||||||
Balance at January 1, 2019 | 2,047 | — | (42,312 | ) | (40,265 | ) | ||||||||||
Changes, net of taxes | (44,045 | ) | — | 35,004 | (9,041 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at December 31, 2019 | — | (7,308 | ) | (49,306 | ) | |||||||||||
|
|
|
|
|
|
|
|
(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 | 90,484 | |||||||
Amount recognized as other comprehensive loss during the year, net of taxes | (13,972 | ) | (102,454 | ) | ||||
Amount reclassified to retained earnings, net of taxes | (30,073 | ) | 14,017 | |||||
|
|
|
| |||||
Balance at December 31 | 2,047 | |||||||
|
|
|
|
(4) | Changes in valuation 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 | (70,572 | ) | ||||||
Amount recognized as other comprehensive income (loss) during the year, net of taxes | 28,532 | (11,658 | ) | |||||
Amount reclassified to profit or loss, net of taxes | 6,472 | 39,918 | ||||||
|
|
|
| |||||
Balance at December 31 | (42,312 | ) | ||||||
|
|
|
|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
26. | Operating revenue |
Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Company’s revenue and future cash flows is as follows:
(In millions of won) | ||||||||
2019 | 2018 | |||||||
Products transferred at a point in time: | ||||||||
Product sales | 134,290 | |||||||
Services transferred over time: | ||||||||
Wireless service revenue(*1) | 9,721,569 | 9,999,778 | ||||||
Cellular interconnection revenue | 518,810 | 565,314 | ||||||
Others(*2) | 1,064,771 | 1,006,257 | ||||||
|
|
|
| |||||
11,305,150 | 11,571,349 | |||||||
|
|
|
| |||||
11,705,639 | ||||||||
|
|
|
|
(*1) | Wireless service revenue includes revenue from wireless voice and data transmission services principally derived through usage charges collected from the wireless subscribers. |
(*2) | Other revenue includes revenue from billing and collection services as well as other miscellaneous services. |
Most of the Company’s transactions are occurring in Korea as it principally operates its businesses in Korea.
27. | 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 | 28,374 | |||||||
Utilities | 247,263 | 229,508 | ||||||
Taxes and dues | 26,307 | 21,630 | ||||||
Repair | 246,840 | 247,095 | ||||||
Research and development | 324,053 | 319,931 | ||||||
Training | 27,272 | 26,482 | ||||||
Bad debt for accounts receivable – trade | 4,036 | 18,082 | ||||||
Others | 48,043 | 45,599 | ||||||
|
|
|
| |||||
936,701 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
28. | OtherNon-operating Income and Expenses |
Details of othernon-operating income and expenses for the years ended December 31, 2019 and 2018 are as follows:
(In millions of won) | ||||||||
2019 | 2018 | |||||||
OtherNon-operating Income: | ||||||||
Gain on disposal of property and equipment and intangible assets | 19,906 | |||||||
Gain on business transfer | 59,375 | — | ||||||
Others | 12,272 | 21,359 | ||||||
|
|
|
| |||||
41,265 | ||||||||
|
|
|
| |||||
OtherNon-operating Expenses: | ||||||||
Loss on disposal of property and equipment and intangible assets | 54,695 | |||||||
Impairment loss on property and equipment and intangible assets | 23,231 | 27,264 | ||||||
Donations | 16,441 | 58,354 | ||||||
Bad debt for accounts receivable – other | 3,295 | 3,008 | ||||||
Others | 55,428 | 6,496 | ||||||
|
|
|
| |||||
149,817 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
29. | 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 | 42,301 | |||||||
Gain on sale of accounts receivable – other | 15,855 | 25,476 | ||||||
Dividends | 525,045 | 177,490 | ||||||
Gain on foreign currency transactions | 6,782 | 14,666 | ||||||
Gain on foreign currency translations | 1,870 | 568 | ||||||
Gain relating to financial assets at FVTPL | 859 | 16,665 | ||||||
Gain relating to financial liabilities at FVTPL | 56 | — | ||||||
Gain on valuation of derivatives | 465 | 1,893 | ||||||
Gain on settlement of derivatives | 29,176 | — | ||||||
|
|
|
| |||||
279,059 | ||||||||
|
|
|
| |||||
(In millions of won) | ||||||||
2019 | 2018 | |||||||
Finance Costs: | ||||||||
Interest expenses | 225,224 | |||||||
Loss on foreign currency transactions | 7,853 | 14,932 | ||||||
Loss on foreign currency translations | 2,253 | 650 | ||||||
Loss on settlement of derivatives | 641 | 12,489 | ||||||
Loss on sale of accounts receivable – other | 5,823 | — | ||||||
Loss relating to financial assets at FVTPL | 7,448 | 625 | ||||||
Loss relating to financial liabilities at FVTPL | 43 | 1,535 | ||||||
|
|
|
| |||||
255,455 | ||||||||
|
|
|
|
(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 | 16,220 | |||||||
Interest income on loans and others | 24,944 | 26,081 | ||||||
|
|
|
| |||||
42,301 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
29. | Finance Income and Costs, Continued |
(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 | 3,970 | |||||||
Interest expense on debentures | 180,474 | 171,580 | ||||||
Others | 59,000 | 49,674 | ||||||
|
|
|
| |||||
225,224 | ||||||||
|
|
|
|
(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 6 and 34. |
1) | Finance income and costs |
(In millions of won) | ||||||||
2019 | ||||||||
Finance income(*) | Finance costs | |||||||
Financial Assets: | ||||||||
Financial assets at FVTPL | 13,271 | |||||||
Financial assets at FVOCI | 9,909 | — | ||||||
Financial assets at amortized cost | 43,140 | 10,106 | ||||||
|
|
|
| |||||
100,484 | 23,377 | |||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Financial liabilities at FVTPL | 56 | 43 | ||||||
Financial liabilities at amortized cost | — | 246,734 | ||||||
Derivatives designated as hedging instrument | — | 641 | ||||||
|
|
|
| |||||
56 | 247,418 | |||||||
|
|
|
| |||||
270,795 | ||||||||
|
|
|
|
(*) | Finance income does not include |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
29. | 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 6 and 34, Continued. |
1) | Finance income and costs, Continued |
(In millions of won) | ||||||||
2018 | ||||||||
Finance income(*) | Finance costs | |||||||
Financial Assets: | ||||||||
Financial assets at FVTPL | 625 | |||||||
Financial assets at FVOCI | 17,585 | — | ||||||
Financial assets at amortized cost | 57,240 | 15,574 | ||||||
|
|
|
| |||||
119,071 | 16,199 | |||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Financial liabilities at FVTPL | — | 1,535 | ||||||
Financial liabilities at amortized cost | 83 | 225,232 | ||||||
Derivatives designated as hedging instrument | — | 12,489 | ||||||
|
|
|
| |||||
83 | 239,256 | |||||||
|
|
|
| |||||
255,455 | ||||||||
|
|
|
|
(*) | Finance income does not include |
2) | Other comprehensive income (loss) |
(In millions of won) | ||||||||
2019 | 2018 | |||||||
Financial Assets: | ||||||||
Financial assets at FVOCI | (102,454 | ) | ||||||
Derivatives designated as hedging instrument | 35,004 | 17,694 | ||||||
|
|
|
| |||||
21,032 | (84,760 | ) | ||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Derivatives designated as hedging instrument | — | 10,566 | ||||||
|
|
|
| |||||
(74,194 | ) | |||||||
|
|
|
|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
29. | Finance Income and Costs, Continued |
(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 | 18,082 | |||||||
Other receivables | 3,295 | 3,008 | ||||||
|
|
|
| |||||
21,090 | ||||||||
|
|
|
|
30. | 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 | 340,177 | |||||||
Current tax of prior years | (10,385 | ) | (10,638 | ) | ||||
|
|
|
| |||||
67,133 | 329,539 | |||||||
|
|
|
| |||||
Deferred tax expense: | ||||||||
Changes in net deferred tax assets | 138,019 | (42,197 | ) | |||||
|
|
|
| |||||
Income tax expense | 287,342 | |||||||
|
|
|
|
(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 | 325,480 | |||||||
Non-taxable income | (90,160 | ) | (16,912 | ) | ||||
Non-deductible expenses | 7,433 | 9,807 | ||||||
Tax credit and tax reduction | (22,163 | ) | (14,037 | ) | ||||
Changes in unrecognized deferred taxes | (1,434 | ) | 4,777 | |||||
Income tax refund | 3,633 | 1,392 | ||||||
Changes in tax rate and other | (7,805 | ) | (23,165 | ) | ||||
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| |||||
Income tax expense | 287,342 | |||||||
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|
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(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 at fair value | 36,187 | |||||||
Valuation loss on derivatives | (12,917 | ) | (10,266 | ) | ||||
Remeasurement of defined benefit liabilities | 14,928 | 6,128 | ||||||
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| |||||
32,049 | ||||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
30. | 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 | Ending | ||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences: | ||||||||||||||||||||
Loss allowance | — | (10,994 | ) | — | 51,941 | |||||||||||||||
Accrued interest income | (111 | ) | — | 21 | — | (90 | ) | |||||||||||||
Financial assets measured at fair value | 65,570 | — | 6,893 | 5,681 | 78,144 | |||||||||||||||
Investments in subsidiaries, associates and joint ventures | 15,905 | — | 5,850 | — | 21,755 | |||||||||||||||
Property and equipment | (146,390 | ) | — | 34,158 | — | (112,232 | ) | |||||||||||||
Retirement benefit obligation | 14,711 | — | (4,600 | ) | 14,928 | 25,039 | ||||||||||||||
Valuation gain on derivatives | 30,287 | — | 2,175 | (12,917 | ) | 19,545 | ||||||||||||||
Gain or loss on foreign currency translation | 21,938 | — | 57 | — | 21,995 | |||||||||||||||
Incremental costs to acquire a contract | (621,372 | ) | — | (202,601 | ) | — | (823,973 | ) | ||||||||||||
Right-of-use assets | — | (112,240 | ) | (4,639 | ) | — | (116,879 | ) | ||||||||||||
Lease liabilities | — | 111,123 | (609 | ) | — | 110,514 | ||||||||||||||
Others | 32,795 | 10,422 | 34,971 | — | 78,188 | |||||||||||||||
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9,305 | (139,318 | ) | 7,692 | (646,053 | ) | |||||||||||||||
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Tax credit | — | — | 1,299 | — | 1,299 | |||||||||||||||
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9,305 | (138,019 | ) | 7,692 | (644,754 | ) | |||||||||||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
30. | 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 | Ending | ||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences: | ||||||||||||||||||||
Loss allowance | 3,501 | 1,430 | — | 62,935 | ||||||||||||||||
Accrued interest income | (177 | ) | — | 66 | — | (111 | ) | |||||||||||||
Financial assets measured at fair value | 37,000 | (282 | ) | (7,335 | ) | 36,187 | 65,570 | |||||||||||||
Investments in subsidiaries, associates and joint ventures | 65,948 | — | (50,043 | ) | — | 15,905 | ||||||||||||||
Property and equipment | (212,146 | ) | — | 65,756 | — | (146,390 | ) | |||||||||||||
Provisions | 1,039 | — | (1,039 | ) | — | — | ||||||||||||||
Retirement benefit obligation | 6,917 | — | 1,666 | 6,128 | 14,711 | |||||||||||||||
Valuation gain on derivatives | 25,872 | — | 14,681 | (10,266 | ) | 30,287 | ||||||||||||||
Gain or loss on foreign currency translation | 21,922 | — | 16 | — | 21,938 | |||||||||||||||
Incremental costs to acquire a contract | — | (632,150 | ) | 10,778 | — | (621,372 | ) | |||||||||||||
Others | 26,574 | — | 6,221 | — | 32,795 | |||||||||||||||
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(628,931 | ) | 42,197 | 32,049 | (523,732 | ) | |||||||||||||||
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(5) | Details of temporary differences not recognized as deferred tax assets(liabilities) in the 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 | 77,405 | |||||||
Investments in subsidiaries, associates and joint ventures | 1,531,810 | 1,537,141 | ||||||
Other temporary differences | 51,150 | 51,150 |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
31. | 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 | |||||||
Profit for the year | 933,902 | |||||||
Interest on hybrid bonds | (14,766 | ) | (15,803 | ) | ||||
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| |||||
Profit for the year on common shares | 965,572 | 918,099 | ||||||
Weighted average number of common shares outstanding | 72,064,159 | 70,622,976 | ||||||
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| |||||
Basic earnings per share (in won) | 13,000 | |||||||
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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 | |||||||||||||||
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72,064,159 | ||||||||||||||||||||
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(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 | |||||||||||||||
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70,622,976 | ||||||||||||||||||||
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(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.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
32. | 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 | |||||||||||||
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2018 | Cash dividends (interim) | 70,609,160 | 500 | 200 | % | |||||||||||||
Cash dividends (year-end) | 71,869,828 | 500 | 1,800 | % | 646,828 | |||||||||||||
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(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 | % |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
33. | 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 | Financial assets at amortized cost | Derivatives- hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | — | 497,282 | — | 497,282 | ||||||||||||||||
Financial instruments | — | — | 234,382 | — | 234,382 | |||||||||||||||
Short-term investment securities | 31,920 | — | — | — | 31,920 | |||||||||||||||
Long-term investment securities(*) | 75,423 | 435,210 | — | — | 510,633 | |||||||||||||||
Accounts receivable – trade | — | — | 1,479,971 | — | 1,479,971 | |||||||||||||||
Loans and other receivables | 532,225 | — | 554,722 | — | 1,086,947 | |||||||||||||||
Derivative financial assets | — | — | — | 126,251 | 126,251 | |||||||||||||||
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435,210 | 2,766,357 | 126,251 | 3,967,386 | |||||||||||||||||
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(*) | The Company designated |
(In millions of won) | ||||||||||||||||||||
December 31, 2018 | ||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Financial assets at amortized cost | Derivatives- hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | — | 877,823 | — | 877,823 | ||||||||||||||||
Financial instruments | — | — | 99,382 | — | 99,382 | |||||||||||||||
Short-term investment securities | 47,849 | — | — | — | 47,849 | |||||||||||||||
Long-term investment securities(*) | 77,511 | 333,161 | — | — | 410,672 | |||||||||||||||
Accounts receivable – trade | — | — | 1,354,260 | — | 1,354,260 | |||||||||||||||
Loans and other receivables | 485,325 | — | 554,048 | — | 1,039,373 | |||||||||||||||
Derivative financial assets | 10,947 | — | — | 39,858 | 50,805 | |||||||||||||||
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333,161 | 2,885,513 | 39,858 | 3,880,164 | |||||||||||||||||
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(*) | The Company designated |
74
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
33. | Categories of Financial Instruments, Continued |
(2) | Financial liabilities by category as of December 31, 2019 and 2018 are as follows: |
(In millions of won) | ||||
December 31, 2019 | ||||
Financial liabilities at amortized cost | ||||
Borrowings | ||||
Debentures | 6,407,964 | |||
Lease liabilities | 410,889 | |||
Accounts payable – other and others | 5,337,980 | |||
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(In millions of won) | ||||||||||||||||
December 31, 2018 | ||||||||||||||||
Financial liabilities at FVTPL (*) | Financial liabilities at amortized cost | Derivatives- hedging instrument | Total | |||||||||||||
Derivative financial liabilities | — | 1,107 | 1,107 | |||||||||||||
Borrowings | — | 44,394 | — | 44,394 | ||||||||||||
Debentures | 61,813 | 5,660,799 | — | 5,722,612 | ||||||||||||
Accounts payable – other and others | — | 5,181,029 | — | 5,181,029 | ||||||||||||
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10,886,222 | 1,107 | 10,949,142 | ||||||||||||||
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(*) | 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. |
75
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
34. | Financial Risk Management |
(1) | Financial risk management |
The Company 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 Company implements a risk management system to monitor and manage these specific risks.
The Company’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 Company is exposed to currency risk mainly on exchange fluctuations on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of the Company.
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 | 22,031 | 1,221,621 | ||||||||||||||
EUR | 247 | 321 | 102 | 132 | ||||||||||||
JPY | 14,698 | 156 | 76,531 | 814 | ||||||||||||
Others | — | 169 | — | — | ||||||||||||
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In addition, the Company has entered into cross currency swaps to hedge against currency risk related to foreign currency borrowings and debentures. (See note 18)
As of December 31, 2019, a hypothetical change in exchange rates by 10% would have increased (reduced) the Company’s income before income taxes as follows:
(In millions of won) | ||||||||
If increased by 10% | If decreased by 10% | |||||||
USD | (2,474 | ) | ||||||
EUR | 19 | (19 | ) | |||||
JPY | (66 | ) | 66 | |||||
Others | 17 | (17 | ) | |||||
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(2,444 | ) | |||||||
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76
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
34. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk |
The interest rate risk of the Company arises from borrowings, debentures, and long-term payables – other. Since the Company’s interest-bearing assets are mostly fixed-interest bearing assets, the Company’s revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.
The Company performs various analysis of interest rate risk to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Company takes various measures such as refinancing, renewal, alternative financing and hedging.
As of December 31, 2019, floating-rate debentures amount to347,340 million, and the Company has entered into interest rate swaps to hedge interest rate risk related to floating-rate debentures as described in note 18. Therefore, income before income taxes for the year ended December 31, 2019 would not have been affected by the changes in interest rates of floating-rate borrowings and debentures.W
As of December 31, 2019, the floating-rate long-term payables – other areW2,051,389 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 byW20,514 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 | 877,781 | |||||||
Financial instruments | 234,382 | 99,382 | ||||||
Investment securities | 900 | 900 | ||||||
Accounts receivable - trade | 1,479,971 | 1,354,260 | ||||||
Loans and other receivables | 1,086,947 | 1,039,373 | ||||||
Derivative financial assets | 126,251 | 50,805 | ||||||
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3,422,501 | ||||||||
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Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To manage credit risk, the Company 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 Company establishes credit limits for each customer or counterparty.
77
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
34. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk, Continued |
(i) | Accounts receivable – trade and contract assets |
The Company establishes a loss allowance in respect of account 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 6.
(ii) | Debt investments |
The credit risk arises from debt investments included inW234,382 million of financial instruments,W900 million of investment securities, andW1,086,947 million of loans and other receivables. To limit the exposure to this risk, the Company transacts only with financial institutions with credit ratings that are considered to be low credit risk.
Most of the Company’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 Company measured the loss allowance for the debt investments at an amount equal to12-month expected credit losses.
Meanwhile, the Company monitors changes in credit risk at each reporting date. The Company 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 Company’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) | At amortized cost | |||||||||||||||
Financial assets at FVTPL | 12-month ECL | Lifetime ECL –not credit impaired | Lifetime ECL – credit impaired | |||||||||||||
Gross carrying amount | 767,544 | 31,926 | 66,092 | |||||||||||||
Loss allowance | — | (3,252 | ) | (7,114 | ) | (66,092 | ) | |||||||||
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Carrying amount | 764,292 | 24,812 | — | |||||||||||||
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78
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
34. | 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 | 9,116 | 79,663 | 92,084 | |||||||||||||
Remeasurement of loss allowance, net | 327 | 408 | 2,560 | 3,295 | ||||||||||||
Transfer to lifetime ECL – not credit impaired | (380 | ) | 380 | — | — | |||||||||||
Transfer to lifetime ECL – credit impaired | — | (2,790 | ) | 2,790 | — | |||||||||||
Amounts written off | — | — | (26,141 | ) | (26,141 | ) | ||||||||||
Recovery of amounts written off | — | — | 7,220 | 7,220 | ||||||||||||
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December 31, 2019 | 7,114 | 66,092 | 76,458 | |||||||||||||
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(iii) | Cash and cash equivalents |
The Company hasW497,240 million of cash and cash equivalents with banks and financial institutions above specific credit ratings as of December 31, 2019 (W877,781 million as of December 31, 2018).
Impairment on cash and cash equivalents has been measured on a12-month expected loss basis and reflects the short maturities of the exposures. The Company 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.
79
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
34. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
3) | Liquidity risk |
The Company’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 Company 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 | ||||||||||||||||
Borrowings(*) | 34,414 | 13,971 | 20,443 | — | ||||||||||||||||
Debentures(*) | 6,407,964 | 7,567,918 | 687,774 | 3,860,257 | 3,019,887 | |||||||||||||||
Lease liabilities | 410,889 | 431,977 | 213,747 | 193,892 | 24,338 | |||||||||||||||
Accounts payable – other and others(*) | 5,337,980 | 5,479,330 | 3,797,938 | 1,107,259 | 574,133 | |||||||||||||||
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13,513,639 | 4,713,430 | 5,181,851 | 3,618,358 | |||||||||||||||||
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(*) | Includes interest payables. |
The Company 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 | 128,750 | 44,872 | 84,506 | (628 | ) |
80
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
34. | Financial Risk Management, Continued |
(2) | Capital management |
The Company 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 Company is the same as that of the Company as of and for the year ended December 31, 2018.
The Company 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 | 11,960,536 | |||||||
Total equity | 17,389,739 | 16,887,487 | ||||||
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| |||||
Debt-equity ratios | 77.34 | % | 70.82 | % | ||||
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|
(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2019 and 2018 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 | — | 564,145 | 75,423 | 639,568 | ||||||||||||||||
Derivatives hedging instrument | 126,251 | — | 126,251 | — | 126,251 | |||||||||||||||
FVOCI | 435,210 | 384,721 | — | 50,489 | 435,210 | |||||||||||||||
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384,721 | 690,396 | 125,912 | 1,201,029 | |||||||||||||||||
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Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 33,755 | — | 33,755 | ||||||||||||||||
Debentures | 6,407,964 | — | 6,848,312 | — | 6,848,312 | |||||||||||||||
Long-term payables – other | 1,968,538 | — | 2,003,025 | — | 2,003,025 | |||||||||||||||
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— | 8,885,092 | — | 8,885,092 | |||||||||||||||||
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81
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
34. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2019 and 2018 are as follows, Continued: |
(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 | — | 544,121 | 77,511 | 621,632 | ||||||||||||||||
Derivatives hedging instrument | 39,858 | — | 39,858 | — | 39,858 | |||||||||||||||
FVOCI | 333,161 | 292,399 | — | 40,762 | 333,161 | |||||||||||||||
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292,399 | 583,979 | 118,273 | 994,651 | |||||||||||||||||
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| |||||||||||
Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | 61,813 | — | 61,813 | ||||||||||||||||
Derivative financial liabilities | 1,107 | — | 1,107 | — | 1,107 | |||||||||||||||
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— | 62,920 | — | 62,920 | |||||||||||||||||
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Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 45,229 | — | 45,229 | ||||||||||||||||
Debentures | 5,660,799 | — | 6,033,601 | — | 6,033,601 | |||||||||||||||
Long-term payables – other | 2,362,966 | — | 2,439,593 | — | 2,439,593 | |||||||||||||||
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— | 8,518,423 | — | 8,518,423 | |||||||||||||||||
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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 Company 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 Company performs valuation using the inputs which are consistent with natures of assets and liabilities measured.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
34. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2019 and 2018 are as follows, Continued: |
Interest rates used by the Company for the fair value measurement as of December 31, 2019 are as follows:
Interest rate | ||
| ||
Derivative instruments | 1.68% ~ 1.81% | |
Borrowings and debentures | 1.65% ~ 1.82% | |
Long-term payables – other | 1.59% ~ 1.90% |
2) | 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: |
Balance at January 1, 2019 | Valuation | Acquisition | Disposal | Balance at December 31, 2019 | ||||||||||||||||
FVTPL | (5,380 | ) | 5,604 | (2,312 | ) | 75,423 | ||||||||||||||
FVOCI | 40,762 | (3,473 | ) | 13,200 | — | 50,489 | ||||||||||||||
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(8,853 | ) | 18,804 | (2,312 | ) | 125,912 | |||||||||||||||
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(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 statement of financial position | Relevant financial instruments not offset | Net amount | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Accounts receivable – trade and others | (77,958 | ) | — | — | — | |||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Accounts payable – other and others | (77,958 | ) | 175 | — | 175 |
83
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
34. | Financial Risk Management, Continued |
(4) | Enforceable master netting agreement or similar agreement, Continued |
Carrying amount of financial instruments recognized of which offset agreements are applicable as of December 31, 2019 and 2018 are as follows, Continued:
(In millions of won) | December 31, 2018 | |||||||||||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the statement of financial position | Relevant financial instruments not offset | Net amount | ||||||||||||||||
Financial assets: | ||||||||||||||||||||
Derivatives(*) | — | 1,867 | (1,107 | ) | 760 | |||||||||||||||
Accounts receivable – trade and others | 92,000 | (92,000 | ) | — | — | — | ||||||||||||||
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(92,000 | ) | 1,867 | (1,107 | ) | 760 | |||||||||||||||
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Financial liabilities: | ||||||||||||||||||||
Derivatives(*) | — | 1,107 | (1,107 | ) | — | |||||||||||||||
Accounts payable – other and others | 92,324 | (92,000 | ) | 324 | — | 324 | ||||||||||||||
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(92,000 | ) | 1,431 | (1,107 | ) | 324 | |||||||||||||||
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(*) | The balance represents the net amount under the standard terms and conditions of International Swap and Derivatives Association. |
84
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
35. | Transactions with Related Parties |
(1) | List of related parties |
Relationship | Company | |
Ultimate Controlling Entity | SK Holdings Co., Ltd. | |
Subsidiaries | SK Planet Co., Ltd. and 47 others(*) | |
Joint ventures | Dogus Planet, Inc. and 3 others | |
Associates | SK Hynix Inc. and 44 others | |
Others | The Ultimate Controlling Entity’s other subsidiaries and associates, etc. |
(*) | As of December 31, 2019, subsidiaries of the Company are as follows: |
Subsidiary | Ownership percentage (%)(*1) | Primary business | ||||||
Subsidiaries owned by the Company | SK Telink Co., Ltd. | 100.0 | Telecommunications and Mobile Virtual Network Operator service | |||||
SK Communications Co., Ltd. | 100.0 | Internet website services | ||||||
SK Broadband Co., Ltd. | 100.0 | Telecommunications services | ||||||
PS&Marketing Corporation | 100.0 | Communications device retail business | ||||||
SERVICE ACE Co., Ltd. | 100.0 | Call center management service | ||||||
SERVICE TOP Co., Ltd. | 100.0 | Call center management service | ||||||
SK O&S Co., Ltd. | 100.0 | Base station maintenance service | ||||||
SK Telecom China Holdings Co., Ltd. | 100.0 | Investment(Holdings company) | ||||||
SK Global Healthcare Business Group., Ltd. | 100.0 | Investment | ||||||
YTK Investment Ltd. | 100.0 | Investment association | ||||||
Atlas Investment | 100.0 | Investment association | ||||||
SKT Americas, Inc. | 100.0 | Information gathering and consulting | ||||||
One Store Co., Ltd. | 52.7 | Telecommunications services | ||||||
SK Planet Co., Ltd. | 98.7 | Telecommunications services, system software development and supply services | ||||||
Eleven Street Co., Ltd. | 80.3 | Commerce | ||||||
DREAMUS COMPANY | 51.4 | Manufacturing digital audio players and other portable media devices | ||||||
SK Infosec Co., Ltd. | 100.0 | Information security service | ||||||
Life & Security Holdings Co., Ltd. | 55.0 | Investment(Holdings company) | ||||||
Quantum Innovation Fund I | 59.9 | Investment | ||||||
SK Telecom Japan Inc. | 100.0 | Information gathering and consulting | ||||||
id Quantique SA | 66.8 | Quantum information and communications service | ||||||
SK Telecom TMT Investment Corp.(*3) | 100.0 | Investment | ||||||
FSK L&S Co., Ltd.(*4) | 60.0 | Freight and logistics consulting business | ||||||
Incross Co., Ltd.(*5) | 34.6 | Media representative business | ||||||
HappyHanool Co., Ltd.(*3) | 100.0 | Service | ||||||
Subsidiaries owned by SK Planet Co., Ltd. | SK m&service Co.,Ltd. | 100.0 | Database and internet website service | |||||
SK Planet Global Holdings Pte. Ltd. | 100.0 | Investment(Holdings company) | ||||||
SKP America LLC. | 100.0 | Digital contents sourcing service | ||||||
K-net Culture and Contents Venture Fund | 59.0 | Capital investing in startups | ||||||
Subsidiaries owned by Dreamus Company (Formerly, IRIVER LIMITED) | iriver Enterprise Ltd. | 100.0 | Management of Chinese subsidiaries | |||||
iriver China Co., Ltd. | 100.0 | Sales of and manufacturing MP3 and 4 | ||||||
Dongguan iriver Electronics Co., Ltd. | 100.0 | Sales of and manufacturinge-book | ||||||
LIFE DESIGN COMPANY Inc.(*6) | 100.0 | Sales of goods in Japan |
85
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
35. | Transactions with Related Parties, Continued |
(1) | List of related parties, Continued |
Company | Ownership percentage(%)(*1) | Types of business | ||||||
Subsidiaries owned by SK Infosec Co., Ltd. | SKinfosec Information Technology(Wuxi) Co., Ltd.(*7) | 100.0 | System software development and supply services | |||||
Subsidiaries owned by Life & Security Holdings Co., Ltd. | ADT CAPS Co., Ltd. | 100.0 | Unmanned security | |||||
CAPSTEC Co., Ltd. | 100.0 | Manned security | ||||||
ADT SECURITY Co., Ltd. | 100.0 | Sales and trade of anti-theft devices and surveillance devices | ||||||
Subsidiaries owned by SK Telink Co., Ltd. | SK TELINK VIETNAM Co., Ltd. | 100.0 | Communications device retail business | |||||
Subsidiaries owned by SK Broadband Co., Ltd. | Home & Service Co., Ltd. | 100.0 | Operation of information and communication facility | |||||
SK stoa Co., Ltd. | 100.0 | Other telecommunications retail business | ||||||
Subsidiaries owned by id Quantique SA | Id Quantique LLC | 100.0 | Quantum information and communications service | |||||
Subsidiaries owned by FSK L&S Co., Ltd. | FSK L&S(Shanghai) Co., Ltd.(*4) | 66.0 | Logistics business | |||||
FSK L&S(Hungary) Co., Ltd.(*8) | 100.0 | Logistics business | ||||||
Subsidiaries owned by Incross Co., Ltd. | Infracommunications Co., Ltd.(*5) | 100.0 | Service operation | |||||
Mindknock Co., Ltd.(*9) | 100.0 | Software development | ||||||
Subsidiaries owned by SK Telecom Japan Inc. | SK Planet Japan, K. K. | 79.8 | Digital Contents sourcing service | |||||
Others(*10) | SK Telecom Innovation Fund, L.P | 100.0 | Investment | |||||
SK Telecom China Fund I L.P. | 100.0 | Investment |
(*1) | The ownership interest represents direct ownership interest in subsidiaries either by the Company or subsidiaries of the Company. |
(*2) | DREAMUS COMPANY(Formerly, IRIVER LIMITED) merged groovers Inc. during the year ended December 31, 2019. |
(*3) | SK Telecom TMT Investment Corp. and HappyHanool Co., Ltd were newly established by the Company during the year ended December 31, 2019. |
(*4) | FSK L&S Co., Ltd. was reclassified as a subsidiary from an associate during the year ended December 31, 2019, and thus FSK L&S(Shanghai) Co., Ltd., a subsidiary of FSK L&S Co., Ltd. was included in the subsidiary. |
(*5) | The Company acquired 2,786,455 shares of Incross Co., Ltd. at |
(*6) | LIFE DESIGN COMPANY Inc. merged groovers Japan Co., Ltd. during the year ended December 31, 2019. |
86
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
35. | Transactions with Related Parties, Continued |
(1) | List of related parties, Continued |
(*7) | SK Infosec Co., Ltd. newly established SKinfosec Information Technology(Wuxi) Co., Ltd. during the year ended December 31, 2019. |
(*8) | FSK L&S Co., Ltd. newly established FSK L&S(Hungary) Co., Ltd. during the year ended December 31, 2019. |
(*9) | Mindknock Co., Ltd. was reclassified as a subsidiary from an associate as Incross Co., Ltd. acquired additional shares of Mindknock Co., Ltd. during the year ended December 31, 2019. |
(*10) | Others are owned by Atlas Investment and another subsidiary of the Company. |
As of December 31, 2019, the Company is included in SK Group, a conglomerate as defined in theMonopoly Regulation and Fair Trade Act. All of the other entities included in SK Group are considered related parties of the Company.
(2) | Compensation for the key management |
The Company considers registered directors (3 executive and 5non-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.
87
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
35. | 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) | 508,255 | 47,789 | |||||||||||
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|
| |||||||||
Subsidiaries | SK Broadband Co., Ltd. | 109,663 | 542,715 | 22,255 | ||||||||||
PS&Marketing Corporation (*3) | 12,408 | 1,595,661 | 985 | |||||||||||
SK O&S Co., Ltd. (Formerly, Network O&S Co., Ltd.) | 4,493 | 220,585 | 60,801 | |||||||||||
SK Planet Co., Ltd. | 2,963 | 89,026 | 92,477 | |||||||||||
SK Telink Co., Ltd. (*4) | 249,464 | 22,612 | — | |||||||||||
SERVICE ACE Co., Ltd. (*5) | 15,399 | 133,717 | — | |||||||||||
SERVICE TOP Co., Ltd. (*6) | 17,695 | 138,971 | — | |||||||||||
Eleven Street Co., Ltd. | 7,202 | 7,990 | — | |||||||||||
Life & Security Holdings Co., Ltd. (*7) | 33,111 | 1,257 | 222 | |||||||||||
One Store Co., Ltd. | 14,963 | 1,461 | — | |||||||||||
SK Infosec Co., Ltd. (*8) | 50,149 | 31,267 | 4,812 | |||||||||||
Dreamus Company Inc. (formerly, IRIVER LIMITED) | 1,185 | 49,214 | — | |||||||||||
Others | 8,095 | 39,575 | 5,799 | |||||||||||
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| |||||||||
526,790 | 2,874,051 | 187,351 | ||||||||||||
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Associates | F&U Credit information Co., Ltd. | 1,108 | 46,824 | — | ||||||||||
SK hynix Inc. (*9) | 246,522 | 255 | — | |||||||||||
KEB HanaCard Co., Ltd. | 832 | 1,901 | — | |||||||||||
SK Wyverns Co., Ltd. | 1,313 | 21,145 | — | |||||||||||
Others (*10) | 11,049 | 14,208 | 457 | |||||||||||
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| |||||||||
260,824 | 84,333 | 457 | ||||||||||||
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| |||||||||
Other | SK Engineering & Construction Co., Ltd. | 5,722 | 253 | 7,400 | ||||||||||
SK Innovation Co., Ltd. | 14,470 | 2,748 | — | |||||||||||
SK Networks Co., Ltd. | 3,061 | 15,981 | 443 | |||||||||||
SK Networks service Co., Ltd. | 733 | 45,942 | 2,569 | |||||||||||
SK Telesys Co., Ltd. | 215 | 965 | 25,886 | |||||||||||
SK TNS Co., Ltd. | 197 | 34,115 | 426,273 | |||||||||||
SK energy Co., Ltd. | 2,914 | 248 | — | |||||||||||
SKC Infra Service Co., Ltd. | 64 | 8,573 | 2,008 | |||||||||||
SK ENS Co., Ltd. | 1,991 | 145 | — | |||||||||||
UbiNS Co., Ltd. | — | 1,907 | 45,814 | |||||||||||
Others | 12,105 | 6,088 | 10,130 | |||||||||||
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| |||||||||
41,472 | 116,965 | 520,523 | ||||||||||||
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| |||||||||
3,583,604 | 756,120 | |||||||||||||
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88
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
35. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2019 and 2018 are as follows, Continued: |
(*1) | Operating expenses and others include lease payments by the Company. |
(*2) | Operating expenses and others include |
(*3) | Operating expenses and others include |
(*4) | Operating revenue and others include |
(*5) | Operating revenue and others include |
(*6) | Operating revenue and others include |
(*7) | Operating revenue and others include |
(*8) | Operating revenue and others include |
(*9) | Operating revenue and others include |
(*10) | Operating revenue and others include |
89
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
35. | 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) | 509,349 | 72,756 | — | ||||||||||||||
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Subsidiaries | SK Broadband Co., Ltd. | 120,312 | 561,672 | 58,157 | — | |||||||||||||
PS&Marketing Corporation (*2) | 11,701 | 1,503,532 | 883 | — | ||||||||||||||
SK O&S Co., Ltd. | 4,331 | 216,305 | 48,643 | — | ||||||||||||||
SK Planet Co., Ltd. | 20,750 | 48,622 | 18,646 | — | ||||||||||||||
SK Telink Co., Ltd. | 55,490 | 22,875 | — | — | ||||||||||||||
SERVICE ACE Co., Ltd. | 7,739 | 130,313 | — | — | ||||||||||||||
SERVICE TOP Co., Ltd. | 8,359 | 155,577 | — | — | ||||||||||||||
Eleven Street Co., Ltd. | 8,246 | 6,870 | — | — | ||||||||||||||
SK techx Co., Ltd. (*3) | 3,373 | 96,258 | 11,064 | — | ||||||||||||||
Others (*4) | 76,878 | 80,992 | 24,761 | — | ||||||||||||||
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| |||||||||||
317,179 | 2,823,016 | 162,154 | — | |||||||||||||||
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Associates | F&U Credit information Co., Ltd. | 1,589 | 46,300 | — | — | |||||||||||||
HappyNarae Co., Ltd. (*5) | 106 | 14,465 | 78,267 | — | ||||||||||||||
SK hynix Inc. (*6) | 175,029 | 313 | — | — | ||||||||||||||
KEB HanaCard Co., Ltd. | 15,046 | 15,387 | — | — | ||||||||||||||
Others (*7) | 4,910 | 30,844 | 1,202 | 204 | ||||||||||||||
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| |||||||||||
196,680 | 107,309 | 79,469 | 204 | |||||||||||||||
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Other | SK Engineering & Construction Co., Ltd. | 3,167 | 224 | 8,700 | — | |||||||||||||
SK Innovation Co., Ltd. | 8,995 | 996 | — | — | ||||||||||||||
SK Networks Co., Ltd. | 14,069 | 15,020 | 435 | — | ||||||||||||||
SK Networks service Co., Ltd. | 650 | 48,618 | 3,948 | — | ||||||||||||||
SK Telesys Co., Ltd. | 181 | 885 | 72,942 | — | ||||||||||||||
SK TNS Co., Ltd. | 100 | 13,280 | 359,837 | — | ||||||||||||||
SK energy Co., Ltd. | 2,814 | 227 | — | — | ||||||||||||||
SKC Infra Service Co., Ltd. | 44 | 9,869 | 3,648 | — | ||||||||||||||
SK ENS Co., Ltd. | 1,604 | 121 | — | — | ||||||||||||||
Others | 10,289 | 5,356 | — | — | ||||||||||||||
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41,913 | 94,596 | 449,510 | — | |||||||||||||||
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3,534,270 | 763,889 | 204 | ||||||||||||||||
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90
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
35. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2019 and 2018 are as follows, Continued: |
(*1) | Operating expenses and others include |
(*2) | Operating expenses and others include |
(*3) | Transactions with SK techx Co., Ltd. occurred before merger with SK Planet Co., Ltd. |
(*4) | Operating revenue and others include |
(*5) | Transactions with HappyNarae Co., Ltd. occured before disposal. |
(*6) | Operating revenue and others include |
(*7) | Operating revenue and others include |
91
Table of Contents
SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
35. | Transactions with Related Parties, Continue |
(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. | 1,869 | 53,280 | |||||||||||
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| |||||||||
Subsidiaries | SK Broadband Co., Ltd. | — | 9,812 | 54,368 | ||||||||||
PS&Marketing Corporation | — | 122 | 67,029 | |||||||||||
SK O&S Co., Ltd. | — | 15 | 54,902 | |||||||||||
SK Planet Co., Ltd. | — | 949 | 100,412 | |||||||||||
SK Telink Co., Ltd. | — | 10,591 | 2,709 | |||||||||||
SERVICE ACE Co., Ltd. | — | 348 | 25,035 | |||||||||||
SERVICE TOP Co., Ltd. | — | 15 | 26,837 | |||||||||||
Eleven Street Co., Ltd. | — | 131 | 4,730 | |||||||||||
One Store Co., Ltd. | — | 263 | 27,409 | |||||||||||
SK m&service Co., Ltd. | — | 3,220 | 8,006 | |||||||||||
SK Infosec Co., Ltd. | — | 24 | 8,136 | |||||||||||
SK Communications Co., Ltd. | — | 31 | 11,574 | |||||||||||
Others | — | 1,062 | 10,252 | |||||||||||
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| |||||||||
— | 26,583 | 401,399 | ||||||||||||
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| |||||||||
Associates | F&U Credit information Co., Ltd. | — | — | 4,742 | ||||||||||
SK hynix Inc. | — | 5,602 | 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 | 25 | 2,261 | |||||||||||
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22,351 | 43,534 | 16,525 | ||||||||||||
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| |||||||||
Other | SK Engineering and Construction Co., Ltd. | — | 3,527 | 97 | ||||||||||
SK Innovation Co., Ltd. | — | 5,542 | 22,492 | |||||||||||
SK Networks Co., Ltd. | — | 333 | 20,430 | |||||||||||
SK Networks Services Co., Ltd. | — | — | 7,739 | |||||||||||
SK Telesys Co., Ltd. | — | 26 | 3,573 | |||||||||||
SK TNS Co., Ltd. | — | 9 | 193,946 | |||||||||||
SK Energy Co., Ltd | — | 215 | 149 | |||||||||||
UbiNS Co., Ltd. | — | — | 16,741 | |||||||||||
Others | — | 1,690 | 8,813 | |||||||||||
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— | 11,342 | 273,980 | ||||||||||||
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83,328 | 745,184 | |||||||||||||
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(*) | As of December 31, 2019, the Company recognized full allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
35. | Transactions with Related Parties, Continue |
(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. | 2,119 | 88,103 | |||||||||||
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Subsidiaries | SK Broadband Co., Ltd. | — | 7,637 | 69,069 | ||||||||||
PS&Marketing Corporation | — | 250 | 82,034 | |||||||||||
SK O&S Co., Ltd. | — | 35 | 42,683 | |||||||||||
SK Planet Co., Ltd. | — | 1,003 | 45,268 | |||||||||||
SK Telink Co., Ltd. | — | 8,353 | 4,629 | |||||||||||
SERVICE ACE Co., Ltd. | — | 123 | 24,629 | |||||||||||
SERVICE TOP Co., Ltd. | — | 138 | 30,771 | |||||||||||
Eleven Street Co., Ltd. | — | 2,086 | 3,141 | |||||||||||
One Store Co., Ltd. | — | 1,178 | 27,164 | |||||||||||
SK m&service Co., Ltd. | — | 3,366 | 5,894 | |||||||||||
Others | — | 401 | 28,776 | |||||||||||
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| |||||||||
— | 24,570 | 364,058 | ||||||||||||
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Associates | F&U Credit information Co., Ltd. | — | 92 | 5,725 | ||||||||||
SK hynix Inc. | — | 12,840 | 89 | |||||||||||
Wave City Development Co., Ltd. | — | 37,263 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*) | 22,147 | — | — | |||||||||||
KEB HanaCard Co., Ltd. | — | 541 | 11,311 | |||||||||||
Others | 407 | 111 | 1,762 | |||||||||||
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22,554 | 50,847 | 18,887 | ||||||||||||
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Other | SK Engineering and Construction Co., Ltd. | — | 441 | 760 | ||||||||||
SK Innovation Co., Ltd. | — | 2,297 | 798 | |||||||||||
SK Networks Co., Ltd. | — | 1,226 | 327 | |||||||||||
SK Networks Services Co., Ltd. | — | 11 | 7,849 | |||||||||||
SK Telesys Co., Ltd. | — | 19 | 4,163 | |||||||||||
SK TNS Co., Ltd. | — | — | 78,421 | |||||||||||
SK Energy Co., Ltd. | — | 790 | 102 | |||||||||||
Others | — | 1,732 | 4,591 | |||||||||||
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— | 6,516 | 97,011 | ||||||||||||
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84,052 | 568,059 | |||||||||||||
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(*) | As of December 31, 2018, the Company recognized the entire balance of loans to Daehan Kanggun BcN Co., Ltd. as loss allowances. |
(5) | There were additional investments and disposal transactions in subsidiaries, associates and joint ventures during the years ended December 31, 2019 and 2018 as presented in note 10. |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
36. | Commitments and Contingencies |
(1) | Accounts receivable from sale of handsets |
The sales agents of the Company sell handsets to the Company’s subscribers on an installment basis. The 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 toW646,837 million as of December 31, 2019 which the Company purchased according to the relevant comprehensive agreement are recognized as accounts receivable – other and long-term accounts receivable – other.
(2) | Legal claims and litigations |
As of December 31, 2019, the Company 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 Company has a present obligation, nor is it expected any of these claims or litigation will have a significant impact on the Company’s financial position or operating results in the event an outflow of resources is ultimately necessary.
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
37. | 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 | |||||||
Gain on foreign currency translations | (568 | ) | ||||||
Interest income | (35,481 | ) | (42,301 | ) | ||||
Dividends | (525,045 | ) | (177,490 | ) | ||||
Gain relating to financial assets at FVTPL | (859 | ) | (16,665 | ) | ||||
Gain relating to financial liabilities at FVTPL | (56 | ) | — | |||||
Gain on disposal of property and equipment and intangible assets | (6,565 | ) | (19,906 | ) | ||||
Gain on business transfer | (59,375 | ) | — | |||||
Gain on valuation of derivatives | (465 | ) | (1,893 | ) | ||||
Gain on settlement of derivatives | (29,176 | ) | — | |||||
Gain on sale of accounts receivable – other | (15,855 | ) | (25,476 | ) | ||||
Other income | (573 | ) | — | |||||
Loss on foreign currency translations | 2,253 | 650 | ||||||
Bad debt for accounts receivable – trade | 4,036 | 18,082 | ||||||
Bad debt for accounts receivable – other | 3,295 | 3,008 | ||||||
Loss relating to financial assets at FVTPL | 7,448 | 625 | ||||||
Depreciation and amortization | 2,827,563 | 2,473,489 | ||||||
Loss on disposal of property and equipment and intangible assets | 20,680 | 54,695 | ||||||
Impairment loss on property and equipment and intangible assets | 23,231 | 27,264 | ||||||
Interest expenses | 246,734 | 225,224 | ||||||
Loss relating to financial liabilities at FVTPL | 43 | 1,535 | ||||||
Loss on settlement of derivatives | 641 | 12,489 | ||||||
Loss relating to investments in subsidiaries and associates | 68,550 | 1,302 | ||||||
Loss on sale of accounts receivable – other | 5,823 | — | ||||||
Retirement benefit expenses | 45,229 | 40,899 | ||||||
Share option | 295 | 593 | ||||||
Income tax expense | 205,152 | 287,342 | ||||||
Other expenses | 8,160 | 734 | ||||||
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| |||||
2,863,632 | ||||||||
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|
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
37. | 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 | 135,190 | |||||||
Accounts receivable – other | 39,630 | 508,904 | ||||||
Advanced payments | (11,040 | ) | 7,167 | |||||
Prepaid expenses | (336,394 | ) | 144,274 | |||||
Inventories | 10,954 | 6,961 | ||||||
Long-term accounts receivable – other | (55,916 | ) | 11,065 | |||||
Long-term prepaid expenses | (388,285 | ) | (83,263 | ) | ||||
Guarantee deposits | 8,429 | (5,692 | ) | |||||
Contract assets | (23,366 | ) | (7,531 | ) | ||||
Accounts payable – other | 160,397 | (178,384 | ) | |||||
Withholdings | (10,967 | ) | 132,487 | |||||
Deposits received | 175 | 116 | ||||||
Accrued expenses | 96,403 | (109,331 | ) | |||||
Provisions | (656 | ) | (3,874 | ) | ||||
Plan assets | (28,549 | ) | (34,527 | ) | ||||
Retirement benefit payment | (21,875 | ) | (23,601 | ) | ||||
Contract liabilities | 34,441 | 10,388 | ||||||
Others | (20,837 | ) | 30 | |||||
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| |||||
510,379 | ||||||||
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|
|
(3) | Significantnon-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 | 1,147,331 | |||||||
Increase ofright-of-use assets | 450,557 | — | ||||||
Contribution in kind for investments | 168 | — | ||||||
Investment in subsidiary from comprehensive stock exchange | — | 44,077 |
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
37. | 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 | Other changes | ||||||||||||||||||||||||||||||
Total liabilities from financing activities: |
| |||||||||||||||||||||||||||||||
Long-term borrowings | — | 44,394 | (12,882 | ) | 1,129 | — | 293 | 32,934 | ||||||||||||||||||||||||
Debentures | 5,722,612 | — | 5,722,612 | 645,274 | 47,343 | (56 | ) | (7,209 | ) | 6,407,964 | ||||||||||||||||||||||
Lease liabilities | — | 412,407 | 412,407 | (297,895 | ) | — | — | 296,377 | 410,889 | |||||||||||||||||||||||
Long-term payables – other | 2,362,966 | — | 2,362,966 | (425,349 | ) | — | — | 30,921 | 1,968,538 | |||||||||||||||||||||||
Derivative financial liabilities | 1,107 | — | 1,107 | 626 | 83 | (1,816 | ) | — | — | |||||||||||||||||||||||
Derivative financial assets | (50,805 | ) | — | (50,805 | ) | 11,800 | — | (84,975 | ) | (2,271 | ) | (126,251 | ) | |||||||||||||||||||
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| |||||||||||||||||
412,407 | 8,492,681 | (78,426 | ) | 48,555 | (86,847 | ) | 318,111 | 8,694,074 | ||||||||||||||||||||||||
Other cash flows from financing activities: |
| |||||||||||||||||||||||||||||||
Payments of cash dividends | ||||||||||||||||||||||||||||||||
Payments of interest on hybrid bonds | (14,766 | ) | ||||||||||||||||||||||||||||||
Disposal of treasury shares | 300,000 | |||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
(433,464 | ) | |||||||||||||||||||||||||||||||
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SK TELECOM CO., LTD.
Notes to the Separate Financial Statements
For the years ended December 31, 2019 and 2018
37. | 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 | December 31, 2018 | |||||||||||||||||||||
Exchange rate changes | Fair value changes | Other changes | ||||||||||||||||||||||
Total liabilities from financing activities: |
| |||||||||||||||||||||||
Long-term borrowings | (12,770 | ) | 2,281 | — | 366 | 44,394 | ||||||||||||||||||
Debentures | 5,453,864 | 209,796 | 52,880 | 1,535 | 4,537 | 5,722,612 | ||||||||||||||||||
Long-term payables – other | 1,630,381 | (302,867 | ) | — | — | 1,035,452 | 2,362,966 | |||||||||||||||||
Derivative financial liabilities | 38,510 | (27,097 | ) | 13,595 | (9,612 | ) | (14,289 | ) | 1,107 | |||||||||||||||
Derivative financial assets | (30,608 | ) | (2,000 | ) | 2,000 | (20,197 | ) | — | (50,805 | ) | ||||||||||||||
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| |||||||||||||
(134,938 | ) | 70,756 | (28,274 | ) | 1,026,066 | 8,080,274 | ||||||||||||||||||
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 | ) | ||||||||||||||||||||||
|
| |||||||||||||||||||||||
(723,135 | ) | |||||||||||||||||||||||
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Independent Auditors’ Report on Internal Control over Financial Reporting
Based on a report originally issued in Korean
To the Board of Directors and Shareholders of
SK Telecom Co., Ltd.:
Opinion on Internal Control over Financial Reporting
We have audited SK Telecom Co., Ltd.’s (the “Company”) Internal Control over Financial Reporting (“ICFR”) as of December 31, 2019, based on the criteria established in Conceptual Framework for Designing and Operating ICFR (“ICFR Design and Operation Framework”) issued by the Operating Committee of Internal Control over Financial Reporting in the Republic of Korea (the “ICFR Committee”).
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on ICFR Design and Operation Framework.
We also have audited, in accordance with Korean Standards on Auditing (“KSAs”), the separate financial statements of the Company, which comprise the separate statement of financial position as of December 31, 2019, the separate statements of comprehensive income, changes in equity, and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information, and our report dated March 10, 2020 expressed an unmodified opinion on those separate financial statements.
Basis for Opinion
We conducted our audit in accordance with KSAs. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Internal Control over Financial Reporting section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the internal control over financial reporting 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.
Responsibilities of Management and Those Charged with Governance for the Internal Control over Financial Reporting
The Company’s management is responsible for designing, operating, and maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report on the Operation of Internal Control over Financial Reporting.
Those charged with governance are responsible for overseeing the Company’s internal control over financial reporting.
Auditors’ Responsibilities for the Audit of the Internal Control over Financial Reporting
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with KSAs. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit of internal control over financial reporting involves performing procedures to obtain audit evidence about whether a material weakness exists. The procedures selected depend on the auditor’s judgment, including the assessment of the risks that a material weakness exists. An audit includes obtaining an understanding of internal control over financial reporting and testing and evaluating the design and operating effectiveness of internal control over financial reporting based on the assessed risk.
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Definition and Inherent Limitations of Internal Control over Financial Reporting
The Company’s internal control over financial reporting is a process effected by those charged with governance, management, and other personnel, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Korean International Financial Reporting Standards(“K-IFRS”). The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withK-IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent, or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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 Company’s internal control over financial reporting. 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. |
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Report on the Operation of Internal Control over Financial Reporting
English translation of a Report Originally Issued in Korean
To Shareholders, the Board of Directors and Audit Committee of
SK Telecom Co., Ltd.
We, as the Chief Executive Officer (“CEO”) and Internal Control over Financial Reporting (“ICFR”) Officer of SK Telecom Co., Ltd. (“the Company”), assessed the status of the design and operation of the Company’s ICFR for the year ending December 31, 2019.
The Company’s management including the CEO and ICFR Officer is responsible for designing and operating ICFR. We, as the CEO and ICFR Officer (collectively, “We”, “Our” or “Us”), evaluated whether the ICFR has been appropriately designed and is effectively operating to prevent and detect error or fraud which may cause material misstatement of the financial statements to ensure preparation and disclosure of reliable financial information.
We used the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’ established by the Operating Committee of Internal Control over Financial Reporting in Korea (the “ICFR Committee”)’ as the criteria for design and operation of the Company’s ICFR. We also conducted an evaluation of ICFR based on the ‘Management Guideline for Evaluating and Reporting Effectiveness of Internal Control over Financial Reporting’ established by the ICFR Committee.
Based on our assessment of ICFR operation, we concluded that the Company’s ICFR has been appropriately designed and is operating effectively in all material respects as of December 31, 2019, in accordance with the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’.
We certify that this report does not contain any untrue statement of a fact, or omit to state a fact necessary to be presented herein. We also certify that this report does not contain or present any statements which might cause material misunderstandings of the readers, and we have reviewed and verified this report with sufficient care.
February 5, 2020
/s/ Yoon, Poong Young |
Internal Control over Financial Reporting Officer |
/s/ Park, Jung Ho |
Chief Executive Officer |
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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
102