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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 November 2020
Commission File Number 1-14926
KT Corporation
(Translation of registrant’s name into English)
90, Buljeong-ro,
Bundang-gu, Seongnam-si,
Gyeonggi-do,
Korea
(Address of principal executive offices)
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): ☐
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ☐ No ☒
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- _______________
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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.
Dated: November 30, 2020 | ||
KT Corporation | ||
By: | /s/ Seunghoon Chi | |
Name: | Seunghoon Chi | |
Title: | Vice President | |
By: | /s/ Youngkyoon Yun | |
Name: | Youngkyoon Yun | |
Title: | Director |
Table of Contents
KT Corporation and Subsidiaries
Consolidated Interim Financial Statements
September 30, 2020 and 2019
Table of Contents
KT Corporation and Subsidiaries
September 30, 2020 and 2019
Page(s) | ||
1 – 2 | ||
Consolidated Interim Financial Statements | ||
3 – 4 | ||
5 | ||
6 | ||
7 – 8 | ||
9 – 10 | ||
11 – 61 |
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Report on Review of Interim Financial Statements
(English Translation of a Report Originally Issued in Korean)
To the Shareholders and Board of Directors of
KT Corporation
Reviewed Financial Statements
We have reviewed the accompanying consolidated interim financial statements of KT Corporation and its subsidiaries (collectively referred to as the “Group”). These financial statements consist of the consolidated interim statement of financial position as at September 30, 2020, and the related consolidated interim statements of profit or loss and comprehensive income for the three-month and nine-month periods ended September 30, 2020 and 2019, and consolidated interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2020 and 2019, and a summary of significant accounting policies and other explanatory notes, expressed in Korean won.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated interim financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”) 1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to issue a report on these consolidated interim financial statements based on our review.
We conducted our review in accordance with quarterly or semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standard on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe the accompanying consolidated interim financial statements do not present fairly, in all material respects, in accordance with Korean IFRS 1034 Interim Financial Reporting.
Samil PricewaterhouseCoopers, 100 Hangang-daero, Yongsan-gu, Seoul 04386, Korea, www.samil.com
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Other Matters
We have audited the consolidated statement of financial position of the Group as at December 31, 2019, and the related consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the year then ended, in accordance with Korean Standards on Auditing. We expressed an unqualified opinion on those financial statements, not presented herein, in our audit report dated March 10, 2020. The consolidated statement of financial position as at December 31, 2019, presented herein for comparative purposes, is consistent, in all material respects, with the above audited statement of financial position as at December 31, 2019.
Review standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries.
Seoul, Korea
November 16, 2020
This report is effective as of November 16, 2020, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.
2
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KT Corporation and Subsidiaries
Consolidated Interim Statements of Financial Position
September 30, 2020 and December 31, 2019
(in millions of Korean won) | Notes | September 30, 2020 (Unaudited) | December 31, 2019 | |||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 4 | |||||||||||
Trade and other receivables, net | 4,5 | 7,247,827 | 5,906,445 | |||||||||
Other financial assets | 4,6 | 1,130,927 | 868,388 | |||||||||
Current tax assets | 2,638 | 68,120 | ||||||||||
Inventories, net | 7 | 851,886 | 665,498 | |||||||||
Current assets held for sale | 9 | 126 | 83,602 | |||||||||
Other current assets | 8 | 1,990,889 | 2,000,308 | |||||||||
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Total current assets | 14,215,239 | 11,898,255 | ||||||||||
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Non-current assets | ||||||||||||
Trade and other receivables, net | 4,5 | 1,166,491 | 1,181,797 | |||||||||
Other financial assets | 4,6 | 549,118 | 821,658 | |||||||||
Property and equipment, net | 10 | 13,773,541 | 13,785,299 | |||||||||
Right-of-use assets | 17 | 673,246 | 788,497 | |||||||||
Investment properties, net | 10 | 1,351,478 | 1,387,430 | |||||||||
Intangible assets, net | 10 | 2,517,420 | 2,834,037 | |||||||||
Investments in associates and joint ventures | 11 | 497,976 | 267,660 | |||||||||
Deferred tax assets | 409,468 | 411,171 | ||||||||||
Other non-current assets | 8 | 706,573 | 685,488 | |||||||||
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Total non-current assets | 21,645,311 | 22,163,037 | ||||||||||
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Total assets | ||||||||||||
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KT Corporation and Subsidiaries
Consolidated Interim Statements of Financial Position
September 30, 2020 and December 31, 2019
(in millions of Korean won) | Notes | September 30, 2020 (Unaudited) | December 31, 2019 | |||||||
Liabilities | ||||||||||
Current liabilities | ||||||||||
Trade and other payables | 4,12 | |||||||||
Borrowings | 4,13 | 1,546,014 | 1,185,725 | |||||||
Other financial liabilities | 4, 6 | 1,422 | 943 | |||||||
Current tax liabilities | 401,455 | 66,266 | ||||||||
Provisions | 14 | 180,777 | 175,612 | |||||||
Deferred income | 67,058 | 53,474 | ||||||||
Other current liabilities | 8 | 1,026,721 | 1,031,958 | |||||||
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Total current liabilities | 11,479,055 | 10,111,456 | ||||||||
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Non-current liabilities | ||||||||||
Trade and other payables | 4,12 | 809,986 | 1,082,219 | |||||||
Borrowings | 4,13 | 6,304,904 | 6,113,142 | |||||||
Other financial liabilities | 4,6 | 168,945 | 149,136 | |||||||
Net defined benefit liabilities | 15 | 525,640 | 365,663 | |||||||
Provisions | 14 | 123,964 | 78,549 | |||||||
Deferred income | 20 | 102,900 | 99,180 | |||||||
Deferred tax liabilities | 320,519 | 425,468 | ||||||||
Other non-current liabilities | 8 | 368,077 | 449,526 | |||||||
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Total non-current liabilities | 8,724,935 | 8,762,883 | ||||||||
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Total liabilities | 20,203,990 | 18,874,339 | ||||||||
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Equity attribute to owners of the Controlling Company | ||||||||||
Share capital | 1,564,499 | 1,564,499 | ||||||||
Share premium | 1,440,258 | 1,440,258 | ||||||||
Retained earnings | 18 | 12,139,800 | 11,637,185 | |||||||
Accumulated other comprehensive income | 59,678 | 194,934 | ||||||||
Other components of equity | 19 | (1,134,181 | ) | (1,170,083 | ) | |||||
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14,070,054 | 13,666,793 | |||||||||
Non-controlling interests | 1,586,506 | 1,520,160 | ||||||||
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Total equity | 15,656,560 | 15,186,953 | ||||||||
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Total liabilities and equity | ||||||||||
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The above consolidated interim statements of financial position should be read in conjunction with the accompanying notes.
4
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KT Corporation and Subsidiaries
Consolidated Interim Statements of Profit or Loss
Three-Month and Nine-Month Periods Ended September 30, 2020 and 2019
Periods Ended September 30 | ||||||||||||||||||
(in millions of Korean won, except per share amounts) | Notes | 2020 (Unaudited) | 2019 (Unaudited) | |||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||||
Operating revenue | 20 | |||||||||||||||||
Operating expenses | 21 | 5,708,862 | 16,692,140 | 5,901,231 | 17,143,795 | |||||||||||||
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Operating profit | 292,336 | 1,017,277 | 312,444 | 1,002,790 | ||||||||||||||
Other income | 22 | 122,176 | 232,306 | 41,114 | 173,826 | |||||||||||||
Other expenses | 22 | 99,780 | 236,797 | 81,065 | 204,880 | |||||||||||||
Finance income | 23 | 35,326 | 301,040 | 167,298 | 415,304 | |||||||||||||
Finance costs | 23 | 40,648 | 321,026 | 171,230 | 432,996 | |||||||||||||
Share of net profits (losses) of associates and joint ventures | 11 | 4,907 | (3,432 | ) | 1,714 | (2,452 | ) | |||||||||||
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Profit before income tax expense | 314,317 | 989,368 | 270,275 | 951,592 | ||||||||||||||
Income tax expense | 24 | 84,248 | 325,138 | 56,993 | 275,473 | |||||||||||||
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Profit for the period | ||||||||||||||||||
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Profit for the period attributable to: | ||||||||||||||||||
Owners of the Controlling Company | ||||||||||||||||||
Non-controlling interest | 26,645 | 75,886 | 23,543 | 81,356 | ||||||||||||||
Earnings per share attributable to the equity holders of the Controlling Company during the period (in Korean won): | 25 | |||||||||||||||||
Basic earnings per share | ||||||||||||||||||
Diluted earnings per share | 829 | 2,397 | 773 | 2,425 |
The above consolidated interim statements of profit or loss should be read in conjunction with the accompanying notes.
5
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KT Corporation and Subsidiaries
Consolidated Interim Statements of Comprehensive Income
Three-Month and Nine-Month Periods Ended September 30, 2020 and 2019
Periods Ended September 30 | ||||||||||||||||||
(in millions of Korean won) | Notes | 2020 (Unaudited) | 2019 (Unaudited) | |||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||||
Profit for the period | ||||||||||||||||||
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Other comprehensive income | ||||||||||||||||||
Items that will not be reclassified to profit or loss: | ||||||||||||||||||
Remeasurements of the net defined benefit liabilities | 15 | 2,573 | (625 | ) | (1,895 | ) | (10,070 | ) | ||||||||||
Share of remeasurement gain of associates and joint ventures | (86 | ) | (14 | ) | 171 | 833 | ||||||||||||
Gain (loss) on valuation of equity instruments at fair value | 6 | 15,704 | 56,673 | 20,127 | 135,649 | |||||||||||||
Items that may be subsequently reclassified to profit or loss: | ||||||||||||||||||
Valuation gain (loss) on cash flow hedges | 6 | (34,003 | ) | 40,176 | 61,155 | 127,495 | ||||||||||||
Other comprehensive income from cash flow hedges | 42,431 | (34,778 | ) | (62,470 | ) | (115,893 | ) | |||||||||||
Share of other comprehensive income from | (4,237 | ) | (3,659 | ) | (7,336 | ) | (8,883 | ) | ||||||||||
Exchange differences on translation of foreign operations | 10,601 | 694 | 3,426 | 6,473 | ||||||||||||||
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Other comprehensive income for the period, net of tax | 32,983 | 58,467 | 13,178 | 135,604 | ||||||||||||||
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Total comprehensive income for the period | ||||||||||||||||||
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Total comprehensive income for the period attributable to: | ||||||||||||||||||
Owners of the Controlling Company | ||||||||||||||||||
Non-controlling interests | 37,288 | 83,882 | 31,078 | 124,201 |
The above consolidated interim statements of comprehensive income should be read in conjunction with the accompanying notes.
6
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KT Corporation and Subsidiaries
Consolidated Interim Statements of Changes in Equity
Nine-Month Periods Ended September 30, 2020 and 2019
Attributable to owners of the Controlling Company | ||||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Notes | Share capital | Share premium | Retained earnings | Accumulated other comprehensive income | Other of equity | Total | Non-controlling interest | Total equity | |||||||||||||||||||||||||||
Balance as at January 1, 2019 | ||||||||||||||||||||||||||||||||||||
Changes in accounting policies | — | — | (6,149 | ) | — | — | (6,149 | ) | — | (6,149 | ) | |||||||||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||||
Profit for the period | — | — | 594,763 | — | — | 594,763 | 81,356 | 676,119 | ||||||||||||||||||||||||||||
Remeasurements of net defined benefit liabilities | 15 | — | — | (4,663 | ) | — | — | (4,663 | ) | (5,407 | ) | (10,070 | ) | |||||||||||||||||||||||
Valuation gain on cash flow hedge | 6 | — | — | — | 11,602 | — | 11,602 | — | 11,602 | |||||||||||||||||||||||||||
Share of other comprehensive income of associates and joint ventures | — | — | — | (8,437 | ) | — | (8,437 | ) | (446 | ) | (8,883 | ) | ||||||||||||||||||||||||
Share of gain on remeasurements of associates and joint ventures | — | — | 820 | — | — | 820 | 13 | 833 | ||||||||||||||||||||||||||||
Gain(Loss) on disposal of equity instruments at fair value | — | — | (1,433 | ) | — | — | (1,433 | ) | 1,433 | — | ||||||||||||||||||||||||||
Gain on valuation of financial instruments at fair value | — | — | — | 89,831 | — | 89,831 | 45,818 | 135,649 | ||||||||||||||||||||||||||||
Exchange differences on translation of foreign operations | — | — | — | 5,039 | — | 5,039 | 1,434 | 6,473 | ||||||||||||||||||||||||||||
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Total comprehensive income for the period | — | — | 589,487 | 98,035 | — | 687,522 | 124,201 | 811,723 | ||||||||||||||||||||||||||||
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Transactions with owners | ||||||||||||||||||||||||||||||||||||
Dividends paid by the Controlling Company | — | — | (269,659 | ) | — | — | (269,659 | ) | — | (269,659 | ) | |||||||||||||||||||||||||
Dividends paid to non-controlling interest of subsidiaries | — | — | — | — | — | — | (35,500 | ) | (35,500 | ) | ||||||||||||||||||||||||||
Appropriations of loss on disposal of treasury stock | — | — | (15,169 | ) | — | 15,169 | — | — | — | |||||||||||||||||||||||||||
Change in ownership interest in subsidiaries | — | — | — | — | 484 | 484 | (3,975 | ) | (3,491 | ) | ||||||||||||||||||||||||||
Disposal of treasury stock | — | — | — | — | 2,744 | 2,744 | — | 2,744 | ||||||||||||||||||||||||||||
Others | — | — | — | — | 156 | 156 | 42 | 198 | ||||||||||||||||||||||||||||
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Subtotal | — | — | (284,828 | ) | — | 18,553 | (266,275 | ) | (39,433 | ) | (305,708 | ) | ||||||||||||||||||||||||
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Balance as at September 30, 2019 (Unaudited) | ||||||||||||||||||||||||||||||||||||
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KT Corporation and Subsidiaries
Consolidated Interim Statements of Changes in Equity
Nine-Month Periods Ended September 30, 2020 and 2019
Attributable to owners of the Controlling Company | ||||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Notes | Share capital | Share premium | Retained earnings | Accumulated other comprehensive income | Other of equity | Total | Non-controlling interest | Total equity | |||||||||||||||||||||||||||
Balance as at January 1, 2020 | ||||||||||||||||||||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||||
Profit for the period | — | — | 588,344 | — | — | 588,344 | 75,886 | 664,230 | ||||||||||||||||||||||||||||
Remeasurements of net defined benefit liabilities | 15 | — | — | 1,410 | — | — | 1,410 | (2,035 | ) | (625 | ) | |||||||||||||||||||||||||
Valuation loss on cash flow hedges | 6 | — | — | — | 5,471 | — | 5,471 | (73 | ) | 5,398 | ||||||||||||||||||||||||||
Share of other comprehensive income of associates and joint ventures | — | — | — | (3,212 | ) | — | (3,212 | ) | (447 | ) | (3,659 | ) | ||||||||||||||||||||||||
Share of gain on remeasurements of associates and joint ventures | — | — | (13 | ) | — | — | (13 | ) | (1 | ) | (14 | ) | ||||||||||||||||||||||||
Gain on valuation of financial instruments at fair value | — | — | 184,330 | (138,461 | ) | — | 45,869 | 10,804 | 56,673 | |||||||||||||||||||||||||||
Exchange differences on translation of foreign operations | — | — | — | 946 | — | 946 | (252 | ) | 694 | |||||||||||||||||||||||||||
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Total comprehensive income for the period | — | — | 774,071 | (135,256 | ) | — | 638,815 | 83,882 | 722,697 | |||||||||||||||||||||||||||
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Transactions with owners | ||||||||||||||||||||||||||||||||||||
Dividends paid by the Controlling Company | — | — | (269,766 | ) | — | — | (269,766 | ) | — | (269,766 | ) | |||||||||||||||||||||||||
Dividends paid to non-controlling interests of subsidiaries | — | — | — | — | — | — | (40,802 | ) | (40,802 | ) | ||||||||||||||||||||||||||
Appropriations of loss on disposal of treasury stock | — | — | (1,690 | ) | — | 1,690 | — | — | — | |||||||||||||||||||||||||||
Change in ownership interest in subsidiaries | — | — | — | — | 10,081 | 10,081 | 23,266 | 33,347 | ||||||||||||||||||||||||||||
Disposal of treasury stock | — | — | — | — | 3,640 | 3,640 | — | 3,640 | ||||||||||||||||||||||||||||
Others | — | — | — | — | 20,491 | 20,491 | — | 20,491 | ||||||||||||||||||||||||||||
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Subtotal | — | — | (271,456 | ) | — | 35,902 | (235,554 | ) | (17,536 | ) | (253,090 | ) | ||||||||||||||||||||||||
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Balance as at September 30, 2020 (Unaudited) | �� | |||||||||||||||||||||||||||||||||||
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The above consolidated interim statements of changes in equity should be read in conjunction with the accompanying notes.
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KT Corporation and Subsidiaries
Consolidated Interim Statements of Cash Flows
Nine-Month Periods Ended September 30, 2020 and 2019
Periods Ended September 30 | ||||||||||||
(in millions of Korean won) | Notes | 2020 (Unaudited) | 2019 (Unaudited) | |||||||||
Cash flows from operating activities | ||||||||||||
Cash generated from operations | 26 | |||||||||||
Interest paid | (188,587 | ) | (171,300 | ) | ||||||||
Interest received | 189,882 | 203,657 | ||||||||||
Dividends received | 19,098 | 19,452 | ||||||||||
Income tax paid | (19,168 | ) | (297,894 | ) | ||||||||
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Net cash inflow from operating activities | 3,682,089 | 3,209,726 | ||||||||||
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Cash flows from investing activities | ||||||||||||
Collection of loans | 49,505 | 47,886 | ||||||||||
Disposal of financial assets at fair value through profit or loss | 282,114 | 728,312 | ||||||||||
Disposal of financial assets at amortized cost | 333,387 | 391,495 | ||||||||||
Disposal of financial assets at fair value through other comprehensive income | 351,066 | 75 | ||||||||||
Disposal of assets held-for-sale | 119,524 | 28,834 | ||||||||||
Disposal of investments in associates and joint ventures | 122 | 11,026 | ||||||||||
Disposal of property and equipment, and investment properties | 18,241 | 28,206 | ||||||||||
Disposal of intangible assets | 10,969 | 4,877 | ||||||||||
Disposal of right-of-use assets | 211 | 7,478 | ||||||||||
Acquisition of new subsidiary | 11,045 | — | ||||||||||
Discontinued operations | 205 | 1,977 | ||||||||||
Loans granted | (38,245 | ) | (45,594 | ) | ||||||||
Acquisition of financial assets at fair value through profit or loss | (439,135 | ) | (580,008 | ) | ||||||||
Acquisition of financial assets at amortized cost | (428,209 | ) | (361,646 | ) | ||||||||
Acquisition of financial assets at fair value through other comprehensive income | (38 | ) | (11,240 | ) | ||||||||
Acquisition of investments in associates and joint ventures | (290,911 | ) | (26,082 | ) | ||||||||
Acquisition of property and equipment, and investment properties | (2,370,338 | ) | (2,455,263 | ) | ||||||||
Acquisition of intangible assets | (465,207 | ) | (491,528 | ) | ||||||||
Acquisition of right-of-use assets | (7,118 | ) | (4,934 | ) | ||||||||
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Net cash outflow from investing activities | (2,862,812 | ) | (2,726,129 | ) | ||||||||
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Table of Contents
KT Corporation and Subsidiaries
Consolidated Interim Statements of Cash Flows
Nine-Month Periods Ended September 30, 2020 and 2019
Periods Ended September 30 | ||||||||||||
(in millions of Korean won) | Notes | 2020 (Unaudited) | 2019 (Unaudited) | |||||||||
Cash flows from financing activities | ||||||||||||
Proceeds from borrowings | 1,678,326 | 918,188 | ||||||||||
Settlement of derivative assets and liabilities, net | 16,452 | 33,635 | ||||||||||
Transaction with non-controlling interest | 25,052 | (998 | ) | |||||||||
Cash inflow from other financing activities | 149 | 20,924 | ||||||||||
Repayments of borrowings | (1,184,121 | ) | (1,328,666 | ) | ||||||||
Dividends paid | (310,465 | ) | (305,159 | ) | ||||||||
Decrease in finance lease liabilities | (345,161 | ) | (398,515 | ) | ||||||||
Acquisition of treasury stock | (935 | ) | — | |||||||||
Others | (13,674 | ) | — | |||||||||
|
|
|
| |||||||||
Net cash outflow from financing activities | (134,377 | ) | (1,060,591 | ) | ||||||||
|
|
|
| |||||||||
Effect of exchange rate change on cash and cash equivalents | 152 | 1,965 | ||||||||||
|
|
|
| |||||||||
Net increase (decrease) in cash and cash equivalents | 685,052 | (575,029 | ) | |||||||||
Cash and cash equivalents | ||||||||||||
Beginning of the period | 2,305,894 | 2,703,422 | ||||||||||
|
|
|
| |||||||||
End of the period | ||||||||||||
|
|
|
|
The above consolidated interim statements of cash flows should be read in conjunction with the accompanying notes.
10
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
1. | General Information |
The consolidated financial statements include the accounts of KT Corporation, which is the controlling company as defined under Korean IFRS 1110 Consolidated Financial Statements, and its 65 controlled subsidiaries as described in Note 1.2 (collectively referred to as the “Group”).
1.1 | The Controlling Company |
KT Corporation (the “Controlling Company”) commenced operations on January 1, 1982, when it spun off from the Korea Communications Commission (formerly the Korean Ministry of Information and Communications) to provide telephone services and to engage in the development of advanced communications services under the Act of Telecommunications of Korea. The headquarters are located in Seongnam City, Gyeonggi Province, Republic of Korea, and the address of its registered head office is 90, Buljeong-ro, Bundang-gu, Seongnam City, Gyeonggi Province.
On October 1, 1997, upon the announcement of the Government-Investment Enterprises Management Basic Act and the Privatization Law, the Controlling Company became a government-funded institution under the Commercial Code of Korea.
On December 23, 1998, the Controlling Company’s shares were listed on the Korea Stock Exchange.
On May 29, 1999, the Controlling Company issued 24,282,195 additional shares and issued American Depository Shares (ADS), which represents new shares and 20,813,311 government-owned shares, on the New York Stock Exchange. On July 2, 2001, the additional ADS representing 55,502,161 government-owned shares were issued at the New York Stock Exchange.
In 2002, the Controlling Company acquired the entire government-owned shares in accordance with the Korean government’s privatization plan. As at September 30, 2020, the Korean government does not own any shares in the Controlling Company.
1.2 | Consolidated Subsidiaries |
The consolidated subsidiaries as at September 30, 2020 and December 31, 2019, are as follows:
Controlling percentage ownership1 (%) | ||||||||||||||
Subsidiary | Type of business | Location | September 30, 2020 | December 31, 2019 | Closing month | |||||||||
KT Powertel Co., Ltd. 2 | Trunk radio system business | Korea | 44.8 | % | 44.8 | % | December | |||||||
KT Linkus Co., Ltd. | Public telephone maintenance | Korea | 92.4 | % | 92.4 | % | December | |||||||
KT Submarine Co., Ltd. 2,4 | Submarine cable construction and maintenance | Korea | 39.3 | % | 39.3 | % | December | |||||||
KT Telecop Co., Ltd. | Security service | Korea | 86.8 | % | 86.8 | % | December | |||||||
KT Hitel Co., Ltd. | Data communication | Korea | 67.1 | % | 67.1 | % | December | |||||||
KT Service Bukbu Co., Ltd. | Opening services of fixed line | Korea | 67.3 | % | 67.3 | % | December | |||||||
KT Service Nambu Co., Ltd. | Opening services of fixed line | Korea | 77.3 | % | 77.3 | % | December | |||||||
KT Commerce Inc. | B2C, B2B service | Korea | 100.0 | % | 100.0 | % | December |
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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Controlling percentage ownership1 (%) | ||||||||||||||
Subsidiary | Type of business | Location | September 30, 2020 | December 31, 2019 | Closing month | |||||||||
KT Strategic Investment Fund No. 2 | Investment fund | Korea | 100.0 | % | 100.0 | % | December | |||||||
KT Strategic Investment Fund No. 3 | Investment fund | Korea | 100.0 | % | 100.0 | % | December | |||||||
KT Strategic Investment Fund No. 4 | Investment fund | Korea | 100.0 | % | 100.0 | % | December | |||||||
KT Strategic Investment Fund No. 5 | Investment fund | Korea | 100.0 | % | 100.0 | % | December | |||||||
BC-VP Strategic Investment Fund No.1 | Investment fund | Korea | 100.0 | % | 100.0 | % | December | |||||||
BC Card Co., Ltd. | Credit card business | Korea | 69.5 | % | 69.5 | % | December | |||||||
VP Inc. | Payment security service for credit card, others | Korea | 50.9 | % | 50.9 | % | December | |||||||
H&C Network | Call center for financial sectors | Korea | 100.0 | % | 100.0 | % | December | |||||||
BC Card China Co., Ltd. | Software development and data processing | China | 100.0 | % | 100.0 | % | December | |||||||
INITECH Co., Ltd. 4 | Internet banking ASP and security solutions | Korea | 58.2 | % | 58.2 | % | December | |||||||
Smartro Co., Ltd. | VAN (Value Added Network) business | Korea | 64.5 | % | 64.5 | % | December | |||||||
KTDS Co., Ltd. 4 | System integration and maintenance | Korea | 95.5 | % | 95.5 | % | December | |||||||
KT M Hows Co., Ltd. | Mobile marketing | Korea | 90.0 | % | 90.0 | % | December | |||||||
KT M&S Co., Ltd. | PCS distribution | Korea | 100.0 | % | 100.0 | % | December | |||||||
GENIE Music Corporation (KT Music Corporation) 2,4 | Online music production and distribution | Korea | 36.2 | % | 36.0 | % | December | |||||||
KT MOS Bukbu Co., Ltd. 4 | Telecommunication facility maintenance | Korea | 100.0 | % | 100.0 | % | December | |||||||
KT MOS Nambu Co., Ltd. 4 | Telecommunication facility maintenance | Korea | 98.4 | % | 98.4 | % | December | |||||||
KT Skylife Co., Ltd. 4 | Satellite broadcasting business | Korea | 50.3 | % | 50.3 | % | December | |||||||
Skylife TV Co., Ltd. | TV contents provider | Korea | 92.6 | % | 92.6 | % | December | |||||||
KT Estate Inc. | Residential building development and supply | Korea | 100.0 | % | 100.0 | % | December | |||||||
KT AMC Co., Ltd. | Asset management and consulting services | Korea | 100.0 | % | 100.0 | % | December | |||||||
NEXR Co., Ltd. | Cloud system implementation | Korea | 100.0 | % | 100.0 | % | December | |||||||
KTGDH Co., Ltd. (KTSB Data Service Co., Ltd.) | Data center development and related service | Korea | 100.0 | % | 100.0 | % | December | |||||||
KT Sat Co., Ltd. | Satellite communication business | Korea | 100.0 | % | 100.0 | % | December | |||||||
Nasmedia, Inc.3,4 | Solution provider and IPTV advertisement sales business | Korea | 44.0 | % | 44.0 | % | December | |||||||
KT Sports Co., Ltd. | Management of sports group | Korea | 100.0 | % | 100.0 | % | December | |||||||
KT Music Contents Fund No. 1 | Music contents investment business | Korea | 80.0 | % | 80.0 | % | December | |||||||
KT Music Contents Fund No. 2 | Music contents investment business | Korea | 100.0 | % | 100.0 | % | December | |||||||
KT-Michigan Global Content Fund | Content investment business | Korea | 88.6 | % | 88.6 | % | December | |||||||
Autopion Co., Ltd. | Information and communication service | Korea | 100.0 | % | 100.0 | % | December | |||||||
KTCS Corporation 2,4 | Database and online information provider | Korea | 31.3 | % | 30.9 | % | December | |||||||
KTIS Corporation 2,4 | Database and online information provider | Korea | 30.1 | % | 30.1 | % | December | |||||||
KT M Mobile | Special category telecommunications operator and sales of communication device | Korea | 100.0 | % | 100.0 | % | December | |||||||
KT Investment Co., Ltd. | Technology business finance | Korea | 100.0 | % | 100.0 | % | December | |||||||
Whowho&Company Co., Ltd. | Software development and supply | Korea | 100.0 | % | 100.0 | % | December |
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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Controlling percentage ownership1 (%) | ||||||||||||||
Subsidiary | Type of business | Location | September 30, 2020 | December 31, 2019 | Closing month | |||||||||
PlayD Co., Ltd. | Advertising agency | Korea | 70.4 | % | 100.0 | % | December | |||||||
Next Connect PFV | Residential building development and supply | Korea | 100.0 | % | 100.0 | % | December | |||||||
KT Rwanda Networks Ltd. | Network installation and management | Rwanda | 51.0 | % | 51.0 | % | December | |||||||
AOS Ltd. | System integration and maintenance | Rwanda | 51.0 | % | 51.0 | % | December | |||||||
KT Belgium | Foreign investment business | Belgium | 100.0 | % | 100.0 | % | December | |||||||
KT ORS Belgium | Foreign investment business | Belgium | 100.0 | % | 100.0 | % | December | |||||||
KT Japan Co., Ltd. | Foreign telecommunication business | Japan | 100.0 | % | 100.0 | % | December | |||||||
KBTO sp.zo.o. | Electronic communication business | Poland | 97.4 | % | 97.2 | % | December | |||||||
Korea Telecom China Co., Ltd. | Foreign telecommunication business | China | 100.0 | % | 100.0 | % | December | |||||||
KT Dutch B.V. | East Telecom management | Netherlands | 100.0 | % | 100.0 | % | December | |||||||
East Telecom LLC | Fixed line internet business | Uzbekistan | 91.6 | % | 91.0 | % | December | |||||||
KT America, Inc. | Foreign investment business | USA | 100.0 | % | 100.0 | % | December | |||||||
PT. BC Card Asia Pacific | Software development and supply | Indonesia | 99.9 | % | 99.9 | % | December | |||||||
KT Hong Kong Telecommunications Co., Ltd. | Fixed line telecommunication business | Hong Kong | 100.0 | % | 100.0 | % | December | |||||||
Korea Telecom Singapore Pte. Ltd. | Foreign investment business | Singapore | 100.0 | % | 100.0 | % | December | |||||||
Texnoprosistem LLP | Fixed line internet business | Uzbekistan | 100.0 | % | 100.0 | % | December | |||||||
Nasmedia Thailand Company Limited | Internet advertising solution | Thailand | 99.9 | % | 99.9 | % | December | |||||||
KT Huimangjieum | Manufacturing | Korea | 100.0 | % | 100.0 | % | December | |||||||
GE Premier 1st Corporate Restructuring Real Estate Investment Trust Co. | Residential building investment and rent | Korea | 68.1 | % | 63.5 | % | December | |||||||
K-REALTY RENTAL HOUSING REIT 3 | Residential building | Korea | 88.6 | % | 100.0 | % | December | |||||||
Storywiz | Contents and software development and supply | Korea | 100.0 | % | — | December | ||||||||
KT ENGCORE Co., Ltd. | Telecommunication facility construction and maintenance | Korea | 100.0 | % | — | December |
1 | Sum of the ownership interests owned by the Controlling Company and subsidiaries. |
2 | Although the Controlling Company owns less than 50% ownership in this entity, this entity is consolidated as the Controlling Company can exercise the majority voting rights in its decision-making process at all times considering the historical voting pattern at the shareholders’ meetings. |
3 | Although the Controlling Company owns less than 50% ownership in this entity, this entity is consolidated as the Controlling Company holds the majority of voting right based on an agreement with other investors. |
4 | The number of subsidiaries’ treasury stock is deducted from the total number of shares when calculating the controlling percentage ownership. |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
1.3 | Changes in Scope of Consolidation |
Subsidiaries newly included/merged in the consolidation during the nine-month period ended September 30, 2020:
Changes | Location | Name of subsidiary | Reason | |||
Included | Korea | Storywiz | Newly established | |||
Included | Korea | KT ENGCORE Co., Ltd. | Transferred | |||
Excluded | Uzbekistan | Super iMax LLC | Merged | |||
Excluded | Indonesia | PT. KT Indonesia | Liquidated |
Summarized information for consolidated subsidiaries as at September 30, 2020 and December 31, 2019 and for the nine-month periods ended September 30, 2020 and 2019, is as follows:
September 30, 2020 | ||||||||||||||||
(in millions of Korean won) | Total assets | Total liabilities | Operating revenues | Profit (loss) for the period | ||||||||||||
KT Powertel Co., Ltd. | ||||||||||||||||
KT Linkus Co., Ltd. | 57,492 | 52,826 | 61,458 | (3,911 | ) | |||||||||||
KT Submarine Co., Ltd. | 132,770 | 22,114 | 47,522 | 8,782 | ||||||||||||
KT Telecop Co., Ltd. | 307,797 | 183,358 | 259,638 | (1,128 | ) | |||||||||||
KT Hitel Co., Ltd. | 279,882 | 78,548 | 247,207 | (2,444 | ) | |||||||||||
KT Service Bukbu Co., Ltd. | 60,636 | 57,313 | 159,167 | (2,495 | ) | |||||||||||
KT Service Nambu Co., Ltd. | 62,005 | 56,536 | 194,802 | (2,906 | ) | |||||||||||
BC Card Co., Ltd. 1 | 5,113,977 | 3,762,371 | 2,529,961 | 73,746 | ||||||||||||
H&C Network 1 | 269,677 | 61,381 | 240,521 | 2,352 | ||||||||||||
Nasmedia Co., Ltd. 1 | 388,487 | 195,584 | 79,668 | 14,566 | ||||||||||||
KTDS Co., Ltd. 1 | 174,291 | 117,128 | 333,369 | 9,984 | ||||||||||||
KT M Hows Co., Ltd. | 93,259 | 65,515 | 31,544 | 6,058 | ||||||||||||
KT M&S Co., Ltd. | 234,394 | 201,595 | 482,068 | 434 | ||||||||||||
GENIE Music Corporation | 237,873 | 77,599 | 184,330 | 7,458 | ||||||||||||
KT MOS Bukbu Co., Ltd. | 40,857 | 34,988 | 47,436 | 1,334 | ||||||||||||
KT MOS Nambu Co., Ltd. | 41,370 | 30,866 | 52,953 | 2,968 | ||||||||||||
KT Skylife Co., Ltd. 1 | 914,623 | 175,474 | 522,194 | 51,061 | ||||||||||||
KT Estate Inc. 1 | 1,621,288 | 260,483 | 287,264 | 10,752 | ||||||||||||
KTGDH Co., Ltd. | 10,884 | 1,642 | 3,151 | 433 | ||||||||||||
KT Sat Co., Ltd. | 633,606 | 100,188 | 127,525 | 10,140 | ||||||||||||
KT Sports Co., Ltd. | 20,893 | 11,982 | 35,335 | 1,642 | ||||||||||||
KT Music Contents Fund No. 1 | 4,986 | 1,521 | 280 | 230 | ||||||||||||
KT Music Contents Fund No. 2 | 14,987 | 211 | 135 | (77 | ) | |||||||||||
KT-Michigan Global Content Fund | 11,726 | 136 | 106 | (38 | ) | |||||||||||
Autopion Co., Ltd. | 6,779 | 4,836 | 4,743 | (386 | ) |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
September 30, 2020 | ||||||||||||||||
(in millions of Korean won) | Total assets | Total liabilities | Operating revenues | Profit (loss) for the period | ||||||||||||
KT M Mobile Co., Ltd. | 130,602 | 28,720 | 123,153 | (3,436 | ) | |||||||||||
KT Investment Co., Ltd. 1 | 73,869 | 55,856 | 2,237 | 767 | ||||||||||||
KTCS Corporation 1 | 358,221 | 189,022 | 645,859 | 10,628 | ||||||||||||
KTIS Corporation | 312,373 | 135,845 | 337,536 | 11,466 | ||||||||||||
Next Connect PFV | 394,654 | 31,980 | 8 | (1,424 | ) | |||||||||||
KT Japan Co., Ltd. (Korea Telecom Japan Co., Ltd.)1 | 1,639 | 2,885 | 1,175 | (179 | ) | |||||||||||
Korea Telecom China Co., Ltd. | 771 | 18 | 427 | (111 | ) | |||||||||||
KT Dutch B.V. | 30,390 | 10,318 | 19,190 | 4,893 | ||||||||||||
KT America, Inc. (Korea Telecom America, Inc.) | 4,804 | 535 | 4,795 | 265 | ||||||||||||
KT Rwanda Networks Ltd. 2 | 127,821 | 203,386 | 13,139 | (26,726 | ) | |||||||||||
KT Belgium | 94,576 | 12 | — | 26 | ||||||||||||
KT ORS Belgium | 6,961 | — | — | — | ||||||||||||
KBTO sp.zo.o. | 617 | 144 | 468 | (2,698 | ) | |||||||||||
AOS Ltd. 2 | 13,248 | 4,461 | 4,402 | 395 | ||||||||||||
KT Hong Kong Telecommunications Co., Ltd. | 6,778 | 3,406 | 12,655 | 1,073 | ||||||||||||
KT Huimangjieum | 2,408 | 1,255 | 2,674 | 201 | ||||||||||||
GE Premier 1st Corporate Restructuring Real Estate Investment Trust Co. | 6,185 | 1,672 | 91 | 28 | ||||||||||||
Storywiz | 22,149 | 10,091 | 11,217 | (1,612 | ) | |||||||||||
KT ENGCORE Co., Ltd. | 160,795 | 156,095 | 145,552 | (1,084 | ) | |||||||||||
December 31, 2019 | September 30, 2019 | |||||||||||||||
(in millions of Korean won) | Total assets | Total liabilities | Operating revenues | Profit (loss) for the period | ||||||||||||
KT Powertel Co., Ltd. | ||||||||||||||||
KT Linkus Co., Ltd. | 70,494 | 62,088 | 69,190 | (3,159 | ) | |||||||||||
KT Submarine Co., Ltd. | 120,947 | 18,452 | 36,543 | 441 | ||||||||||||
KT Telecop Co., Ltd. | 279,878 | 153,841 | 248,084 | (3,973 | ) | |||||||||||
KT Hitel Co., Ltd. | 279,818 | 74,769 | 235,638 | 5,199 | ||||||||||||
KT Service Bukbu Co., Ltd. | 64,802 | 58,984 | 161,773 | (331 | ) | |||||||||||
KT Service Nambu Co., Ltd. | 63,917 | 55,548 | 197,989 | 2,001 | ||||||||||||
BC Card Co., Ltd. 1 | 3,912,982 | 2,594,232 | 2,615,072 | 112,446 | ||||||||||||
H&C Network 1 | 282,016 | 68,401 | 236,990 | 4,433 | ||||||||||||
Nasmedia Co., Ltd. 1 | 356,236 | 203,105 | 86,136 | 15,072 | ||||||||||||
KTDS Co., Ltd. 1 | 158,153 | 105,462 | 306,603 | 9,065 | ||||||||||||
KT M Hows Co., Ltd. | 74,326 | 50,638 | 23,849 | 4,527 | ||||||||||||
KT M&S Co., Ltd. | 248,142 | 215,777 | 587,736 | 11,771 |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
September 30, 2020 | ||||||||||||||||
(in millions of Korean won) | Total assets | Total liabilities | Operating revenues | Profit (loss) for the period | ||||||||||||
GENIE Music Corporation | 234,131 | 80,952 | 169,492 | 5,027 | ||||||||||||
KT MOS Bukbu Co., Ltd. | 33,376 | 28,841 | 45,883 | 806 | ||||||||||||
KT MOS Nambu Co., Ltd. | 34,258 | 26,722 | 46,025 | 1,389 | ||||||||||||
KT Skylife Co., Ltd. 1 | 848,276 | 142,839 | 527,193 | 42,495 | ||||||||||||
KT Estate Inc. 1 | 1,686,000 | 295,706 | 355,428 | 37,431 | ||||||||||||
KTGDH Co., Ltd. | 10,437 | 1,628 | 2,891 | 220 | ||||||||||||
KT Sat Co., Ltd. | 651,195 | 127,523 | 115,506 | 8,482 | ||||||||||||
KT Sports Co., Ltd. | 15,603 | 8,333 | 43,921 | 6,987 | ||||||||||||
KT Music Contents Fund No. 1 | 10,579 | 1,677 | 429 | 276 | ||||||||||||
KT Music Contents Fund No. 2 | 7,675 | 279 | 266 | 60 | ||||||||||||
KT-Michigan Global Content Fund | 11,688 | 61 | 215 | (202 | ) | |||||||||||
Autopion Co., Ltd. | 7,460 | 4,894 | 3,935 | (382 | ) | |||||||||||
KT M Mobile Co., Ltd. | 135,917 | 30,603 | 119,294 | (4,094 | ) | |||||||||||
KT Investment Co., Ltd. 1 | 73,463 | 56,212 | 2,009 | 536 | ||||||||||||
KTCS Corporation 1 | 378,171 | 213,983 | 694,077 | 8,382 | ||||||||||||
KTIS Corporation | 305,798 | 137,524 | 344,429 | 10,610 | ||||||||||||
Next Connect PFV | 385,412 | 24,275 | 1,398 | (933 | ) | |||||||||||
Korea Telecom Japan Co., Ltd.1 | 1,851 | 2,858 | 1,542 | 890 | ||||||||||||
Korea Telecom China Co., Ltd. | 879 | 39 | 558 | 66 | ||||||||||||
KT Dutch B.V. | 31,003 | 50 | — | (150 | ) | |||||||||||
Super iMax LLC | 3,568 | 5,304 | 3,210 | (488 | ) | |||||||||||
East Telecom LLC 1 | 20,857 | 16,302 | 11,968 | 578 | ||||||||||||
Korea Telecom America, Inc. | 4,611 | 537 | 5,128 | 465 | ||||||||||||
PT. KT Indonesia | 8 | — | — | — | ||||||||||||
KT Rwanda Networks Ltd. 2 | 132,461 | 183,164 | 13,706 | (23,007 | ) | |||||||||||
KT Belgium | 93,321 | 11 | — | (71 | ) | |||||||||||
KT ORS Belgium | 6,913 | 14 | — | (37 | ) | |||||||||||
KBTO sp.zo.o. | 1,767 | 245 | 376 | (2,872 | ) | |||||||||||
AOS Ltd. 2 | 12,337 | 3,993 | 5,241 | (509 | ) | |||||||||||
KT Hong Kong Telecommunications Co., Ltd. | 5,126 | 2,923 | 9,912 | 593 | ||||||||||||
KT Huimangjieum | 2,129 | 1,019 | 216 | (639 | ) | |||||||||||
GE Premier 1st Corporate Restructuring Real Estate Investment Trust Co. | 6,285 | 1,139 | — | — | ||||||||||||
K-REALTY RENTAL HOUSING REIT 3 | 300 | — | — | — |
1 | These companies are the intermediate controlling companies of other subsidiaries and the above financial information is from their consolidated financial statements. |
2 | At the end of the reporting period, convertible preferred stock issued by subsidiaries is included in liabilities. |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
2. | Significant Accounting Policies |
2.1 | Basis of Preparation |
The Group maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with the International Financial Reporting Standards as issued by the Republic of Korea (Korean IFRS). The accompanying consolidated interim financial statements have been condensed, restructured and translated into English from the Korean language financial statements.
The consolidated interim financial statements of the Group as at and for the nine-month periods ended September 30, 2020, have been prepared in accordance with Korean IFRS 1034 Interim Financial Reporting. These consolidated interim financial statements have been prepared in accordance with Korean IFRS which is effective or has been early adopted as at September 30, 2020.
(1) New and amended standards and interpretations adopted by the Group
The Group has applied the following standards and interpretations for the first time for their annual reporting period commencing January 1, 2020.
• | Amendments to Korean IFRS 1001 Presentation of Financial Statements and Korean IFRS 1008 Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Material |
The amendments clarify the explanation of the definition of material and amended Korean IFRS 1001 and Korean IFRS 1008 in accordance with the clarified definitions. Materiality is assessed by reference to omission or misstatement of material information as well as effects of immaterial information, and to the nature of the users when determining the information to be disclosed by the Group. The amendment does not have a significant impact on the financial statements.
• | Amendments to Korean IFRS 1103 Business Combination – Definition of a Business |
To consider the integration of the required activities and assets as a business, the amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs and excludes economic benefits from the lower costs. An entity can apply a concentration test, an optional test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets acquired would not represent a business. The amendment does not have a significant impact on the financial statements.
• | Amendments to Korean IFRS 1109 Financial Instruments, Korean IFRS 1039 Financial Instruments: Recognition and Measurement and Korean IFRS 1107 Financial Instruments: Disclosure – Interest Rate Benchmark Reform |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
The amendments allow to apply the exceptions when forward-looking analysis is performed in relation the application of hedge accounting, while uncertainties arising from interest rate benchmark reform exist. The exceptions require the Group assumes that the interest rate benchmark, on which the hedged items and the hedging instruments are based on, is not altered as a result of interest rate benchmark reform, when determining whether the expected cash flows are highly probable, whether an economic relationship between the hedged item and the hedging instrument exists, and when assessing the hedging relationship is highly effective.
The Group’s risk exposure, directly affected by the interest rate benchmark reform, is the variable rate borrowings of USD 510,689 thousand and SGD 284,000 thousand with maximum remaining maturity of four years. To hedge fluctuations in cash flows of borrowings resulting from the changes in USD LIBOR of 3 months and SGD SOR of 6 months—an interest rate benchmark, the Group entered into an interest rate swap contract for a nominal amount of USD 510,689 thousand and SGD 284,000 thousand, and designated it as a hedging instrument of cash flow hedge.
(2) New standards and interpretations not yet adopted by the Group
Certain new accounting standard and interpretation that have been published but have not been early adopted by the Group, are set out below.
• | Agenda Decision of the International Accounting Standards Committee – Lease Period |
The International Accounting Standards Interpretations Committee (IFRS IC) announced on December 16, 2019 that all economic disadvantages resulting from the termination of a lease are taken into account when determining the enforceable period for ‘the useful life of lease term and lease asset improvement rights’. The Group is analyzing the effect of changes in accounting policies on the consolidated financial statements for enforceable periods in accordance with the decision and will reflect the effect in the consolidated financial statements after the analysis is completed.
2.2 | Accounting Policies |
Significant accounting policies and method of computation used in the preparation of the condensed consolidated interim financial statements are consistent with those of the consolidated financial statements for the year ended December 31, 2019, except for the changes due to the application of amendment and enactments of standards described in Note 2.1 (1) and the one described below.
(1) Income Tax Expense
Income tax expense for the interim period is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate is applied to the pre-tax income.
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
3. | Critical Accounting Estimates and Assumptions |
The Group makes estimates and assumptions concerning the future. The estimates and assumptions are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. Actual results may differ from these estimates.
During 2020, the spread of COVID-19 has a material impact on domestic and foreign economy. It may have a negative impact; such as, decrease in productivity, decrease or delay in sales, collection of existing receivables and others. Accordingly, it may have a negative impact on the financial position and financial performance of the Group, and the impact is expected to be continued to the consolidated annual financial statements in 2020.
Significant accounting estimates and assumptions applied in the preparation of the consolidated interim financial statements can be adjusted depending on changes in the uncertainty from COVID-19. Also, the ultimate effect of COVID-19 to the Group’s business, financial position and financial performance cannot presently determined.
4. | Financial Instruments by Category |
Financial instruments by category as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||||||||||
(in millions of Korean won) Financial assets | Financial assets at amortized cost | Financial assets at fair value through profit or loss | Financial assets at fair value through other comprehensive income | Derivatives used for | Total | |||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||
Trade and other receivables1 | 7,046,586 | — | 1,313,736 | — | 8,360,322 | |||||||||||||||
Other financial assets | 535,528 | 770,778 | 265,511 | 108,228 | 1,680,045 |
1 | Lease receivables and others which are not applied to financial instruments by category are excluded. |
September 30, 2020 | ||||||||||||||||
(in millions of Korean won) Financial liabilities | Financial liabilities at amortized cost | Financial liabilities profit and loss | Derivatives used for hedging | Total | ||||||||||||
Trade and other payables | ||||||||||||||||
Borrowings | 7,850,918 | — | — | 7,850,918 | ||||||||||||
Other financial liabilities | 138,276 | 2,629 | 29,462 | 170,367 |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
December 31, 2019 | ||||||||||||||||||||
(in millions of Korean won) Financial assets | Financial assets at amortized cost | Financial assets at fair value through profit or loss | Financial assets at fair value through other comprehensive income | Derivatives used for | Total | |||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||
Trade and other receivables1 | 5,796,207 | — | 1,256,266 | — | 7,052,473 | |||||||||||||||
Other financial assets | 441,804 | 632,324 | 557,342 | 58,576 | 1,690,046 |
1 | Lease receivables and others which are not applied to financial instruments by category are excluded. |
December 31, 2019 | ||||||||||||||||
(in millions of Korean won) Financial liabilities | Financial liabilities at amortized cost | Financial liabilities at profit and loss | Derivatives used for | Total | ||||||||||||
Trade and other payables | ||||||||||||||||
Borrowings | 7,298,867 | — | — | 7,298,867 | ||||||||||||
Other financial liabilities | 129,945 | 38 | 20,096 | 150,079 |
5. | Trade and Other Receivables |
Trade and other receivables as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||||||
(in millions of Korean won) | Total amounts | Provision for impairment | Present value discount | Carrying amount | ||||||||||||
Current assets | ||||||||||||||||
Trade receivables | ||||||||||||||||
Other receivables | 3,945,865 | (98,142 | ) | (209 | ) | 3,847,514 | ||||||||||
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Non-current assets | ||||||||||||||||
Trade receivables | 784,283 | (4,320 | ) | (33,433 | ) | 746,530 | ||||||||||
Other receivables | 532,036 | (96,669 | ) | (15,406 | ) | 419,961 | ||||||||||
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
December 31, 2019 | ||||||||||||||||
(in millions of Korean won) | Total amounts | Provision for impairment | Present value discount | Carrying amount | ||||||||||||
Current assets | ||||||||||||||||
Trade receivables | ||||||||||||||||
Other receivables | 2,834,893 | (78,572 | ) | (271 | ) | 2,756,050 | ||||||||||
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Non-current assets | ||||||||||||||||
Trade receivables | 874,859 | (4,117 | ) | (43,597 | ) | 827,145 | ||||||||||
Other receivables | 382,468 | (5,108 | ) | (22,708 | ) | 354,652 | ||||||||||
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Details of other receivables as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Loans | ||||||||
Receivables 1 | 3,699,712 | 2,588,064 | ||||||
Accrued income | 15,249 | 8,630 | ||||||
Refundable deposits 2 | 373,803 | 352,293 | ||||||
Loans receivable | 133,509 | 105,961 | ||||||
Finance lease receivables | 59,583 | 39,726 | ||||||
Others | 60,661 | 15,560 | ||||||
Less: Provision for impairment | (194,811 | ) | (83,680 | ) | ||||
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1 | The settlement receivables of BC Card Co., Ltd. of |
2 | Escrow deposit of |
The maximum exposure of trade and other receivables to credit risk is the carrying amount of each class of receivables mentioned above as at September 30, 2020.
A portion of the trade receivables is classified as financial assets at fair value through other comprehensive income considering the trade receivables business model for managing the asset and the cash flow characteristics of the contract.
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
6. | Other Financial Assets and Liabilities |
Details of other financial assets and liabilities as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Other financial assets | ||||||||
Financial assets at amortized cost 1 | ||||||||
Financial assets at fair value through profit or loss 1,2,3 | 770,778 | 632,324 | ||||||
Financial assets at fair value through other comprehensive income 1,3 | 265,511 | 557,342 | ||||||
Derivatives used for hedging | 108,228 | 58,576 | ||||||
Less: Non-current | (549,118 | ) | (821,658 | ) | ||||
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Current | ||||||||
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Other financial liabilities | ||||||||
Financial liabilities at amortized cost | ||||||||
Financial liabilities at fair value through profit or loss | 2,629 | 38 | ||||||
Derivatives used for hedging | 29,462 | 20,096 | ||||||
Less: Non-current | (168,945 | ) | (149,136 | ) | ||||
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Current | ||||||||
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1 | As at September 30, 2020, the Group’s other financial assets amounting to |
2 | As at September 30, 2020, MMW(Money Market Wrap) and MMT(Money Market Trust) amounting to |
3 | Investment in Korea Software Financial Cooperative amounting to |
Details of financial assets at fair value through profit or loss as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Equity instruments (Listed) | ||||||||
Equity instruments (Unlisted) | 80,749 | 90,357 | ||||||
Debt securities | 689,823 | 541,657 | ||||||
Derivative held for trading | 85 | 78 | ||||||
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770,778 | 632,324 | |||||||
Less: Non-current | (214,905 | ) | (219,026 | ) | ||||
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The maximum exposure of debt instruments of financial assets recognized at fair value through profit or loss to credit risk is the carrying amount as at September 30, 2020.
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Details of financial assets at fair value through other comprehensive income as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Equity instruments (Listed) | ||||||||
Equity instruments (Unlisted) | 252,044 | 543,518 | ||||||
Debt securities | 6,743 | 7,086 | ||||||
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265,511 | 557,342 | |||||||
Less: Non-current | (265,511 | ) | (556,147 | ) | ||||
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Current | ||||||||
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Upon disposal of these equity instruments, any balance within the accumulated other comprehensive income for these equity instruments is not reclassified to profit or loss, but to retained earnings. Upon disposal of debt securities, remaining balance of the accumulated other comprehensive income of debt investments is reclassified to profit or loss.
The Group disposed shares of Mastercard Inc. amounting toW 350,777 million at fair value. Upon disposal,W 265,087 million is reclassified as accumulated other comprehensive income after tax andW 184,330 million is reclassified as retained earnings of attributable to owners of the controlling company.
Details of valuation of derivatives used for hedging as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | December 31, 2019 | |||||||||||||||
(in millions of Korean won) | Assets | Liabilities | Assets | Liabilities | ||||||||||||
Interest rate swap 1 | ||||||||||||||||
Currency swap 2 | 104,935 | 27,847 | 55,569 | 18,632 | ||||||||||||
Currency forwards 3 | 3,293 | — | 3,007 | — | ||||||||||||
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108,228 | 29,462 | 58,576 | 20,096 | |||||||||||||
Less: Non-current | (55,892 | ) | (28,075 | ) | (28,304 | ) | (19,177 | ) | ||||||||
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Current | ||||||||||||||||
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1 | The interest rate swap contract is to hedge the risk of variability in future fair value of the borrowings. |
2 | The currency swap contract is to hedge the risk of variability in cash flow from the borrowings. In applying the cash flow hedge accounting, the Group hedges its exposures to cash flow fluctuation until September 7, 2034. |
3 | The currency forward contract is to hedge the risk of variability in cash flow from transactions in foreign currencies due to changes in foreign exchange rate. |
The full value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
The valuation gains and losses on the derivative contracts for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) Type of transaction | 2020 | 2019 | ||||||||||||||||||||||
Valuation gain | Valuation loss | Other comprehensive | Valuation gain | Valuation loss | Other comprehensive | |||||||||||||||||||
Interest rate swap | ||||||||||||||||||||||||
Currency swap | 59,398 | 17,153 | 55,796 | 153,579 | — | 165,322 | ||||||||||||||||||
Currency forwards | 1,522 | — | — | 8,613 | — | 8,613 | ||||||||||||||||||
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1 | The amounts are before adjustments of deferred income tax directly reflected in equity and allocation to the non-controlling interest. |
The ineffective portion recognized in profit or loss on the cash flow hedge is valuation gain ofW 3,192 million for the period ended September 30, 2020 (nine-month period ended September 30, 2019: valuation gain ofW 4,775 million).
Details of financial liabilities at fair value through profit or loss at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Financial liabilities at fair value through profit or loss | ||||||||
Derivative liabilities held for trading | ||||||||
Consideration for conversion rights | 2,588 | — |
The valuation gain and loss on financial liabilities at fair value through profit or loss for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Valuation gain | Valuation loss | Valuation gain | Valuation loss | ||||||||||||
Derivative liabilities held for trading |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
7. | Inventories |
Inventories as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | December 31, 2019 | |||||||||||||||||||||||
(in millions of Korean won) | Acquisition cost | Valuation allowance | Carrying amount | Acquisition cost | Valuation allowance | Carrying amount | ||||||||||||||||||
Merchandise | ||||||||||||||||||||||||
Others | 3,021 | — | 3,021 | 4,245 | — | 4,245 | ||||||||||||||||||
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Cost of inventories recognized as expenses for the nine-month period ended September 30, 2020, amounts toW 2,829,926 million (nine-month period ended September 30, 2019:W 3,390,719 million) and recovery of valuation loss on inventory amounts toW 34,873 million for the nine-month period ended September 30, 2020 (nine-month period ended September 30, 2019: valuation loss ofW 5,488 million).
8. | Other Assets and Liabilities |
Other assets and liabilities as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Other assets | ||||||||
Advance payments | ||||||||
Prepaid expenses 1 | 1,982,969 | 1,935,037 | ||||||
Contract assets 1 | 559,476 | 557,041 | ||||||
Others | 11,424 | 14,243 | ||||||
Less: Non-current | (706,573 | ) | (685,488 | ) | ||||
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Current | ||||||||
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Other liabilities | ||||||||
Advances received 1 | ||||||||
Withholdings | 91,023 | 99,844 | ||||||
Unearned revenue 1 | 44,902 | 65,228 | ||||||
Lease liabilities | 613,090 | 729,139 | ||||||
Contract liabilities 1 | 368,591 | 365,610 | ||||||
Others | 20,366 | 23,297 | ||||||
Less: Non-current | (368,077 | ) | (449,526 | ) | ||||
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Current | ||||||||
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1 | The amounts include adjustments arising from adoption of Korean IFRS 1115 (Note 20). |
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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
9. | Assets Held for Sale |
In the prior period, the Group has decided to sell all of the equity holdings of ISU-kth Content Investment Cooperative, with the approval of the Board of Directors and shareholders and classified them as assets held for sale. As at September 30, 2020, the Group is in the process of selling these assets with the approval of general meeting of members.
During the prior period, the Group decided to sell some real estate, in which the amount ofW 82,865 million was classified as assets held for sale and will be sold in the current year.
10. | Property and Equipment, Investment Properties, and Intangible Assets |
Changes in property and equipment for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Beginning, net | ||||||||
Effect from changes in accounting policy 1 | — | (209,760 | ) | |||||
Acquisition and capital expenditure | 1,967,668 | 2,508,580 | ||||||
Disposal and termination | (53,317 | ) | (61,101 | ) | ||||
Depreciation | (1,924,755 | ) | (1,828,728 | ) | ||||
Transfer to investment property | (1,881 | ) | (38,823 | ) | ||||
Scope change | 913 | — | ||||||
Others | (386 | ) | (88,760 | ) | ||||
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Ending, net | ||||||||
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1 | With the application of Korean IFRS 1116, the assets were reclassified from property and equipment to right-of-use assets. |
Details of property and equipment provided as collateral as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||||||
(in millions of Korean won) | Carrying amount | Secured amount | Related line item | Related amount | Secured party | |||||||||||
Land and Buildings | Borrowings and others | Industrial Bank of Korea/Korea Development Bank/K Bank |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
December 31, 2019 | ||||||||||||||||
(in millions of Korean won) | Carrying amount | Secured amount | Related line item | Related amount | Secured party | |||||||||||
Land and Buildings | Borrowings and others | Industrial Bank of Korea/Korea Development Bank/K Bank | ||||||||||||||
Others | 45,851 | 41,681 | Borrowings | 3,473 | Shinhan Bank |
Changes in investment properties for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Beginning, net | ||||||||
Effect from changes in accounting policy 1 | — | 46,666 | ||||||
Acquisition | 22,860 | 219,513 | ||||||
Disposal | (654 | ) | (40 | ) | ||||
Depreciation | (48,795 | ) | (49,470 | ) | ||||
Transfer from property and equipment | 1,881 | 63,484 | ||||||
Others | (11,244 | ) | 39 | |||||
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1 | With the application of Korean IFRS 1116, the assets were reclassified from property and equipment to right-of-use assets. |
As at September 30, 2020, the Group (Lessor) has entered into a non-cancellable operating lease contract relating to real estate lease. The future minimum lease fee under this contract isW 61,096 million for one year or less,W 99,464 million more than one year and less than five years,W 82,098 million over five years, andW 242,658 million in total.
Details of investment properties provided as collateral as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||||
(in millions of Korean won) | Carrying amount | Secured amount | Related account | Related amount | ||||||||||
Land and Buildings | Deposits | |||||||||||||
Land and Buildings | 1,915 | 2,277 | Borrowings | 1,897 |
December 31, 2019 | ||||||||||||||
(in millions of Korean won) | Carrying amount | Secured amount | Related account | Related amount | ||||||||||
Land and Buildings | Deposits | |||||||||||||
Land and Buildings | 1,915 | 3,044 | Borrowings | 1,903 |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Changes in intangible assets for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Beginning, net | ||||||||
Effect from changes in accounting policy 1 | — | (26,207 | ) | |||||
Acquisition and capital expenditure | 161,859 | 130,480 | ||||||
Disposal and termination | (13,259 | ) | (8,168 | ) | ||||
Amortization | (473,693 | ) | (491,879 | ) | ||||
Scope change | 3,621 | — | ||||||
Others | 4,885 | 5,013 | ||||||
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1 | With the application of Korean IFRS 1116, the assets were reclassified from intangible assets to right-of-use assets. |
The carrying amount of membership rights and others, excluding goodwill, with indefinite useful life not subject to amortization isW 205,071 million as at September 30, 2020 (December 31, 2019:W 203,240 million).
Goodwill is allocated to the Group’s cash-generating unit which is identified by operating segments. As at September 30, 2020, goodwill allocated to each cash-generating unit is as follows:
(In millions of Korean won) | ||||||
Operating Segment | Cash-Generating Unit | Amount | ||||
ICT | Mobile services1 | |||||
Finance | BC Card Co., Ltd.1 | 41,234 | ||||
Others | GENIE Music Corporation (KT Music Corporation) 1 | 53,871 | ||||
PlayD Co., Ltd. (N SEARCH MARKETING Co., Ltd.) 1 | 42,745 | |||||
KT Telecop Co., Ltd. 1 | 15,418 | |||||
KT MOS Bukbu Co., Ltd. and others | 57,793 | |||||
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1 | The recoverable amounts of telecom wireless business, BC Card Co., Ltd., PlayD Co., Ltd. (N SEARCH MARKETING Corporation) and KT Telecop Co., Ltd. are calculated based on value-in use calculations. The recoverable amounts of GENIE Music Corporation (KT Music Corporation) is calculated based on fair value less costs to sell. These calculations use pre-tax cash flow projections for the next five years based on financial budgets. Cash flow that exceeds the period of financial budgets is projected by expected growth rate. This growth rate does not exceed the long-term average growth rate of the industry which the cash-generate unit belongs in. The Group estimated its revenue growth rate based on past performance and its expectation of future market changes. The Group determined cash flow projections based on past performance and its estimation of market growth. Specific risk of related operating segment is reflected in discount rate. |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
11. | Investments in Associates and Joint Ventures |
Details of associates as at September 30, 2020 and December 31, 2019, are as follows:
Percentage of ownership (%) | Location | Closing month | ||||||||||||||
September 30, 2020 | December 31, 2019 | |||||||||||||||
Korea Information & Technology Fund | 33.3 | % | 33.3 | % | Korea | December 31 | ||||||||||
KT-IBKC Future Investment Fund 1 1 | 50.0 | % | 50.0 | % | Korea | December 31 | ||||||||||
KT-CKP New Media Investment Fund | — | 49.7 | % | Korea | December 31 | |||||||||||
K Bank Inc. | 34.0 | % | 10.0 | % | Korea | December 31 | ||||||||||
Hyundai Robotics Co., Ltd. 2 | 10.0 | % | — | Korea | December 31 |
1 | At the end of the reporting period, although the Group has 50% ownership, the equity method of accounting has been applied as the Group, which is a limited partner of the investment fund, cannot participate in determining the operating and financial policies. |
2 | At the end of the reporting period, although the Group has less than 20% ownership in ordinary share, this entity is included in investments in associates as the Group has a significant influence in determining the operating and financial policies. |
Changes in investments in associates and joint ventures for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | ||||||||||||||||||||
(in millions of Korean won) | Beginning | Acquisition (Disposal) | Share of net profit (loss) from associates and joint ventures 1 | Others | Ending | |||||||||||||||
Korea Information & Technology Fund 1 | ||||||||||||||||||||
KT-IBKC Future Investment Fund 1 1 | 14,100 | — | 1,400 | — | 15,500 | |||||||||||||||
KT-CKP New Media Investment Fund | 134 | (134 | ) | — | — | — | ||||||||||||||
K Bank Inc. | 45,158 | 195,011 | (17,828 | ) | (1,629 | ) | 220,712 | |||||||||||||
Hyundai Robotics Co., Ltd. | — | 50,000 | 101 | 176 | 50,277 | |||||||||||||||
Others 1 | 44,293 | 10,400 | 6,799 | (8,518 | ) | 52,974 | ||||||||||||||
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
2019 | ||||||||||||||||||||
(in millions of Korean won) | Beginning | Acquisition (Disposal) | Share of net profit (loss) from associates and joint ventures 1 | Others | Ending | |||||||||||||||
Korea Information & Technology Fund | ||||||||||||||||||||
KT-SB Venture Investment | 4,470 | (4,470 | ) | — | — | — | ||||||||||||||
KT-IBKC Future Investment Fund 1 1 | 9,961 | 3,750 | (149 | ) | 112 | 13,674 | ||||||||||||||
KT-CKP New Media Investment Fund | 281 | (174 | ) | 27 | — | 134 | ||||||||||||||
K Bank Inc. | 52,655 | 21,782 | (14,736 | ) | (8,292 | ) | 51,409 | |||||||||||||
Others 1 | 56,785 | (6,933 | ) | 7,007 | (12,788 | ) | 44,071 | |||||||||||||
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1 | KT Investment Co., Ltd., a subsidiary of the Group, recognized its share in net profit (loss) from associates and joint ventures as operating revenue and expense. These include its share in net loss from associates and joint ventures of |
Summarized financial information of associates and joint ventures as at September 30, 2020 and December 31, 2019 and for the nine-month periods ended September 30, 2020 and 2019, are as follows:
September 30, 2020 | ||||||||||||||||
(in millions of Korean won) | Assets | Liabilities | Operating revenue | Profit (loss) for the period | ||||||||||||
Korea Information & Technology Fund | ||||||||||||||||
KT-IBKC Future Investment Fund 1 | 31,115 | 113 | 4,499 | 2,801 | ||||||||||||
K Bank Inc. | 3,279,795 | 2,755,748 | 52,686 | (70,324 | ) | |||||||||||
Hyundai Robotics Co., Ltd. | 433,838 | 138,858 | 56,683 | 1,008 |
December 31, 2019 | September 30, 2019 | |||||||||||||||
(in millions of Korean won) | Assets | Liabilities | Operating revenue | Profit (loss) for the period | ||||||||||||
Korea Information & Technology Fund | ||||||||||||||||
KT-IBKC Future Investment Fund 1 | 28,200 | — | 441 | (298 | ) | |||||||||||
KT-CKP New Media Investment Fund | 270 | — | 56 | 54 | ||||||||||||
K Bank Inc. | 2,558,631 | 2,354,159 | 70,264 | (74,153 | ) |
Due to the discontinuance of equity method of accounting, the Group has not recognized loss from associates and joint ventures ofW 595 million for the nine-month period ended September 30, 2020 (nine-month period ended September 30, 2019: loss ofW 7,915 million). The accumulated comprehensive loss of associates and joint ventures as at September 30, 2020, which was not recognized by the Group, isW 8,027 million (December 31, 2019:W 12,599 million).
30
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
12. | Trade and Other Payables |
Details of trade and other payables as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Current liabilities | ||||||||
Trade payables | ||||||||
Other payables | 6,627,586 | 6,292,683 | ||||||
|
|
|
| |||||
|
|
|
| |||||
Non-current liabilities | ||||||||
Trade payables | ||||||||
Other payables | 807,630 | 1,080,486 | ||||||
|
|
|
| |||||
|
|
|
|
Details of other payables as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Non-trade payables 1 | ||||||||
Accrued expenses | 1,153,635 | 987,624 | ||||||
Operating deposits | 899,206 | 910,045 | ||||||
Others | 197,363 | 200,276 | ||||||
Less: Non-current | (807,630 | ) | (1,080,486 | ) | ||||
|
|
|
| |||||
Current | ||||||||
|
|
|
|
1 | Settlement payables of BC Card Co., Ltd., a subsidiary of the Group, of |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
13. | Borrowings |
Details of borrowings as at September 30, 2020 and December 31, 2019, are as follows:
Debentures
(in millions of Korean won and foreign currencies in thousands) | September 30, 2020 | December 31, 2019 | ||||||||||||||||||||
Type | Maturity | Annual interest rates | Foreign currency | Korean won | Foreign currency | Korean won | ||||||||||||||||
MTNP notes 1 | Sep. 7, 2034 | 6.500% | USD | 100,000 | 117,350 | USD | 100,000 | |||||||||||||||
MTNP notes | Jul. 18, 2026 | 2.500% | USD | 400,000 | 469,400 | USD | 400,000 | 463,120 | ||||||||||||||
MTNP notes | Aug. 7, 2022 | 2.625% | USD | 400,000 | 469,400 | USD | 400,000 | 463,120 | ||||||||||||||
FR notes 2 | Aug. 23, 2020 | — | — | — | USD | 200,000 | 231,560 | |||||||||||||||
FR notes 2 | Aug. 23, 2023 | LIBOR(3M)+0.90% | USD | 100,000 | 117,350 | USD | 100,000 | 115,780 | ||||||||||||||
MTNP notes | Jul. 6, 2020 | — | — | — | JPY | 4,000,000 | 42,539 | |||||||||||||||
MTNP notes | Jul. 6, 2021 | 0.380% | JPY | 16,000,000 | 177,930 | JPY | 16,000,000 | 170,155 | ||||||||||||||
MTNP notes | Nov. 13, 2020 | 0.300% | JPY | 30,000,000 | 333,618 | JPY | 30,000,000 | 319,041 | ||||||||||||||
MTNP notes | Jul. 19, 2022 | 0.220% | JPY | 29,600,000 | 329,170 | JPY | 29,600,000 | 314,787 | ||||||||||||||
MTNP notes | Jul. 19, 2024 | 0.330% | JPY | 400,000 | 4,448 | JPY | 400,000 | 4,254 | ||||||||||||||
FR notes 2 | Nov. 1, 2024 | LIBOR(3M)+0.98% | USD | 350,000 | 410,725 | USD | 350,000 | 405,230 | ||||||||||||||
FR notes 2 | Jun. 19, 2023 | SOR(6M)+0.5% | SGD | 284,000 | 242,919 | — | — | |||||||||||||||
FR notes | Sep. 19, 2025 | 1.000% | USD | 400,000 | 469,400 | — | — | |||||||||||||||
The 180-2nd Public bond | Apr. 26, 2021 | 4.710% | — | 380,000 | — | 380,000 | ||||||||||||||||
The 181-3rd Public bond | Aug. 26, 2021 | 4.090% | — | 250,000 | — | 250,000 | ||||||||||||||||
The 182-2nd Public bond | Oct. 28, 2021 | 4.310% | — | 100,000 | — | 100,000 | ||||||||||||||||
The 183-2nd Public bond | Dec. 22, 2021 | 4.090% | — | 90,000 | — | 90,000 | ||||||||||||||||
The 183-3rd Public bond | Dec. 22, 2031 | 4.270% | — | 160,000 | — | 160,000 | ||||||||||||||||
The 184—2nd Public bond | Apr. 10, 2023 | 2.950% | — | 190,000 | — | 190,000 | ||||||||||||||||
The 184—3rd Public bond | Apr. 10, 2033 | 3.170% | — | 100,000 | — | 100,000 | ||||||||||||||||
The 185-2nd Public bond | Sep. 16, 2020 | — | — | — | — | 300,000 | ||||||||||||||||
The 186—3rd Public bond | Jun. 26, 2024 | 3.418% | — | 110,000 | — | 110,000 | ||||||||||||||||
The 186—4th Public bond | Jun. 26, 2034 | 3.695% | — | 100,000 | — | 100,000 | ||||||||||||||||
The 187—3rd Public bond | Sep. 2, 2024 | 3.314% | — | 170,000 | — | 170,000 | ||||||||||||||||
The 187—4th Public bond | Sep. 2, 2034 | 3.546% | — | 100,000 | — | 100,000 | ||||||||||||||||
The 188-1st Public bond | Jan. 29, 2020 | — | — | — | — | 160,000 | ||||||||||||||||
The 188-2nd Public bond | Jan. 29, 2025 | 2.454% | — | 240,000 | — | 240,000 | ||||||||||||||||
The 188-3rd Public bond | Jan. 29, 2035 | 2.706% | — | 50,000 | — | 50,000 | ||||||||||||||||
The 189-2nd Public bond | Jan. 28, 2021 | 1.946% | — | 130,000 | — | 130,000 | ||||||||||||||||
The 189-3rd Public bond | Jan. 28, 2026 | 2.203% | — | 100,000 | — | 100,000 | ||||||||||||||||
The 189-4rd Public bond | Jan. 28, 2036 | 2.351% | — | 70,000 | — | 70,000 | ||||||||||||||||
The 190-1st Public bond | Jan. 29, 2021 | 2.548% | — | 110,000 | — | 110,000 | ||||||||||||||||
The 190-2nd Public bond | Jan. 30, 2023 | 2.749% | — | 150,000 | — | 150,000 | ||||||||||||||||
The 190-3rd Public bond | Jan. 30, 2028 | 2.947% | — | 170,000 | — | 170,000 | ||||||||||||||||
The 190-4th Public bond | Jan. 30, 2038 | 2.931% | — | 70,000 | — | 70,000 | ||||||||||||||||
The 191-1st Public bond | Jan. 14, 2022 | 2.048% | — | 220,000 | — | 220,000 | ||||||||||||||||
The 191-2nd Public bond | Jan. 15, 2024 | 2.088% | — | 80,000 | — | 80,000 |
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(in millions of Korean won and foreign currencies in thousands) | September 30, 2020 | December 31, 2019 | ||||||||||||||||||
Type | Maturity | Annual interest rates | Foreign currency | Korean won | Foreign currency | Korean won | ||||||||||||||
The 191-3rd Public bond | Jan. 15, 2029 | 2.160% | — | 110,000 | — | 110,000 | ||||||||||||||
The 191-4th Public bond | Jan. 14, 2039 | 2.213% | — | 90,000 | — | 90,000 | ||||||||||||||
The 192-1st Public bond | Oct. 11, 2022 | 1.550% | — | 340,000 | — | 340,000 | ||||||||||||||
The 192-2nd Public bond | Oct. 11, 2024 | 1.578% | — | 100,000 | — | 100,000 | ||||||||||||||
The 192-3rd Public bond | Oct. 11, 2029 | 1.622% | — | 50,000 | — | 50,000 | ||||||||||||||
The 192-4th Public bond | Oct. 11, 2039 | 1.674% | — | 110,000 | — | 110,000 | ||||||||||||||
The 193-1st Public bond | Jun. 16, 2023 | 1.174% | — | 150,000 | — | — | ||||||||||||||
The 193-2nd Public bond | Jun. 17, 2025 | 1.434% | — | 70,000 | — | — | ||||||||||||||
The 193-3rd Public bond | Jun. 17, 2030 | 1.608% | — | 20,000 | — | — | ||||||||||||||
The 193-4th Public bond | Jun. 15, 2040 | 1.713% | — | 60,000 | — | — | ||||||||||||||
The 148th MTN | Jun. 23, 2023 | 1.513% | — | 100,000 | — | — | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Subtotal | — | 7,481,710 | — | 7,045,366 | ||||||||||||||||
Less: Current portion | — | (1,380,908 | ) | — | (1,052,032 | ) | ||||||||||||||
Discount on bonds | — | (22,726 | ) | — | (20,780 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
1 | As at September 30, 2020, the Group has outstanding notes in the amount of USD 100 million with fixed interest rates under Medium Term Note Program (“MTNP”) registered in the Singapore Stock Exchange, which allowed issuance of notes of up to USD 2,000 million. However, the MTNP has been terminated since 2007. |
2 | The Libor (3M) and SOR (6M) is approximately 0.234% and 0.260% as at September 30, 2020. |
Convertible bonds
(in millions of Korean won) Type | ||||||||||||||||||||
Issuance Date | Maturity | Annual Interest Rate | September 30, 2020 | December 31, 2019 | ||||||||||||||||
The 1st CB(Private) 1,2 | Jun. 5, 2020 | Jun. 5, 2025 | 0.000 | % | ||||||||||||||||
Redemption premium | — | 2,267 | — | |||||||||||||||||
Bond discount issuance | — | (4,628 | ) | — | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||
Subtotal | — | 5,639 | — | |||||||||||||||||
Current portion | — | — | — | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||
— | ||||||||||||||||||||
|
|
|
|
|
|
1 | Common shares of Storywiz are subject to conversion (appraisal period: June 5, 2021~ May 4, 2025). |
2 | Nominal interest rate and maturity yield is approximately 0% and 5% and will be settled on maturity. |
33
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Short-term borrowings
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||||||
Type | Financial institution | Annual interest rates | ||||||||||
Operational | NongHyup Bank | 1.740%~2.330% | ||||||||||
Shinhan Bank | 2.430%~2.930% | 39,525 | 57,500 | |||||||||
Korea Development Bank | 2.040%~3.340% | 12,700 | 10,000 | |||||||||
Soohyup Bank | — | — | 1,000 | |||||||||
Facility Loans | Hana Bank | 4.200% | 11,000 | — | ||||||||
|
|
|
| |||||||||
|
|
|
|
Long-term borrowings
(in millions of Korean won and thousands of foreign currencies) | September 30, 2020 | December 31, 2019 | ||||||||||||||||||||
Financial institution | Type | Annual interest rates | Foreign currency | Korean won | Foreign currency | Korean won | ||||||||||||||||
Export-Import Bank of Korea | Inter-Korean Cooperation Fund 1 | 1.500% | — | — | ||||||||||||||||||
Industrial Bank of Korea | General loans | 2.980% | — | 6,000 | — | 6,000 | ||||||||||||||||
Shinhan Bank | General loans | 1.910% | — | 5,000 | — | 5,000 | ||||||||||||||||
General loans 2 | LIBOR(3M)+2.130% | USD 25,000 | 29,337 | — | — | |||||||||||||||||
Facility loans 2 | LIBOR(3M)+1.340% | USD 25,918 | 30,415 | USD 25,918 | 30,008 | |||||||||||||||||
Vessel facility loans | — | — | — | USD 3,000 | 3,473 | |||||||||||||||||
CA-CIB | Long-term CP | 1.260% | — | 100,000 | — | — | ||||||||||||||||
NongHyup Bank | Facility loans | 2.000% | — | 61 | — | 79 | ||||||||||||||||
Korea Development Bank | General loans | 3.020% | — | 10,000 | — | 10,000 | ||||||||||||||||
General loans | 3.310% | — | 30,000 | — | 30,000 | |||||||||||||||||
Others | Redeemable convertible preferred stock | — | — | — | — | 950 | ||||||||||||||||
Kookmin Bank and other 2 | LIBOR(3M)+1.850% | USD 58,626 | 68,798 | USD 87,940 | 101,816 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | — | 282,572 | — | 190,780 | ||||||||||||||||||
Less: Current portion |
| — | (61,383 | ) | — | (50,192 | ) | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
— | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
1 | The above Inter-Korean Cooperation Fund is repayable in installments over 13 years after a seven-year grace period. |
2 | LIBOR(3M) is approximately 0.234% as at September 30, 2020. |
34
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Repayment schedule of the Group’s debentures and borrowings including the portion of current liabilities as at September 30, 2020, is as follows:
Debentures | Borrowings | Total | ||||||||||||||||||||||||||
(in millions of Korean won) | In local currency | In foreign currency | Sub- total | In local currency | In foreign currency | Sub- total | ||||||||||||||||||||||
Oct. 1, 2020 ~ Sep. 30, 2021 | ||||||||||||||||||||||||||||
Oct. 1, 2021 ~ Sep. 30, 2022 | 410,000 | 798,570 | 1,208,570 | 36,518 | 22,933 | 59,451 | 1,268,021 | |||||||||||||||||||||
Oct. 1, 2022 ~ Sep. 30, 2023 | 930,000 | 360,269 | 1,290,269 | 100,506 | 59,752 | 160,258 | 1,450,527 | |||||||||||||||||||||
Oct. 1, 2023 ~ Sep. 30, 2024 | 360,000 | 4,448 | 364,448 | 493 | — | 493 | 364,941 | |||||||||||||||||||||
After Oct. 1, 2024 | 1,778,000 | 1,466,875 | 3,244,875 | 987 | — | 987 | 3,245,862 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. | Provisions |
Changes in provisions for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | ||||||||||||||||
(in millions of Korean won) | Litigation | Restoration cost | Others | Total | ||||||||||||
Beginning balance | ||||||||||||||||
Increase (transfer) | 1,683 | (1,294 | ) | 26,710 | 27,099 | |||||||||||
Usage | (1,769 | ) | (1,849 | ) | (5,939 | ) | (9,557 | ) | ||||||||
Reversal | (60 | ) | (652 | ) | (20,645 | ) | (21,357 | ) | ||||||||
Scope change | 7 | 227 | 54,161 | 54,395 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Current | ||||||||||||||||
Non-current | — | 90,093 | 33,871 | 123,964 |
2019 | ||||||||||||||||
(in millions of Korean won) | Litigation | Restoration cost | Others | Total | ||||||||||||
Beginning balance | ||||||||||||||||
Increase (transfer) | (8,623 | ) | 6,689 | 17,138 | 15,204 | |||||||||||
Usage | (35,624 | ) | (2,273 | ) | (10,877 | ) | (48,774 | ) | ||||||||
Reversal | — | (4,568 | ) | (13,917 | ) | (18,485 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Current | ||||||||||||||||
Non-current | — | 116,748 | 3,179 | 119,927 |
35
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KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
15. | Net Defined Benefit Liabilities |
The amounts recognized in the statements of financial position as at September 30, 2020 and December 31, 2019, are determined as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Present value of defined benefit obligations | ||||||||
Fair value of plan assets | (1,982,468 | ) | (2,069,710 | ) | ||||
|
|
|
| |||||
Liabilities | ||||||||
|
|
|
| |||||
Assets | ||||||||
|
|
|
|
Changes in the defined benefit obligations for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Beginning | ||||||||
Current service cost | 185,391 | 184,695 | ||||||
Interest expense | 32,720 | 34,694 | ||||||
Historical service cost | 1,353 | — | ||||||
Benefits paid | (155,070 | ) | (80,765 | ) | ||||
Remeasurements | 2,652 | 12,037 | ||||||
Scope change | 9,415 | — | ||||||
Others | 1,692 | 2,848 | ||||||
|
|
|
| |||||
Ending | ||||||||
|
|
|
|
Changes in the fair value of plan assets for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Beginning | ||||||||
Interest income | 28,112 | 26,579 | ||||||
Remeasurements on plan assets | 3,233 | (1,307 | ) | |||||
Employer contributions | 13,774 | 38,627 | ||||||
Benefits paid | (139,108 | ) | (73,132 | ) | ||||
Scope change | 8,264 | — | ||||||
Others | (1,517 | ) | 1,371 | |||||
|
|
|
| |||||
Ending | ||||||||
|
|
|
|
36
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Amounts recognized in the consolidated statement of profit or loss for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Current service cost | ||||||||
Net interest cost | 4,608 | 8,115 | ||||||
Historical service cost | 1,353 | — | ||||||
Account transfers | (12,308 | ) | (11,656 | ) | ||||
|
|
|
| |||||
Total expenses | ||||||||
|
|
|
|
16. | Commitments and Contingencies |
As at September 30, 2020, major commitments with local financial institutions are as follows:
(in millions of Korean won and foreign currencies in thousands) | Financial institution | Currency | Limit | Used amount | ||||||||
Bank overdraft | Kookmin Bank and others | KRW | 1,502,000 | 6,500 | ||||||||
Inter-Korean Cooperation Fund | Export-Import Bank of Korea | KRW | 37,700 | 2,960 | ||||||||
Insurance for Economic Cooperation project | Export-Import Bank of Korea | KRW | 3,240 | 1,732 | ||||||||
Collateralized loan on electronic accounts receivable-trade | Shinhan Bank and others | KRW | 859,660 | 11,479 | ||||||||
Plus electronic notes payable | Industrial Bank of Korea | KRW | 50,000 | 158 | ||||||||
Loans for working capital | Korea Development Bank and others | KRW | 250,574 | 161,174 | ||||||||
Facility loans | Shinhan Bank and others | KRW | 100,123 | 61 | ||||||||
Kookmin Bank and others | USD | 212,000 | 58,626 | |||||||||
Derivatives transaction limit | Korea Development Bank | KRW | 100,000 | 6,888 | ||||||||
Woori Bank and others | USD | 69,054 | 31,851 | |||||||||
|
|
|
| |||||||||
Total | KRW | 2,903,297 | 190,952 | |||||||||
USD | 281,054 | 90,477 | ||||||||||
|
|
|
|
37
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
As at September 30, 2020, guarantees received from financial institutions are as follows:
(in millions of Korean won and foreign currencies in thousands) | Financial institution | Currency | Limit | |||||||
Performance guarantee | Seoul Guarantee Insurance and others | KRW | 161,478 | |||||||
USD | 8,569 | |||||||||
Guarantee for import letters of credit | Industrial Bank of Korea and others | USD | 5,000 | |||||||
Refund guarantee for advances received | Korea Development Bank | USD | 1,859 | |||||||
Guarantee for payment in foreign currency | KEB Hana Bank and others | USD | 40,840 | |||||||
Comprehensive credit line | KEB Hana Bank and others | KRW | 41,100 | |||||||
USD | 8,700 | |||||||||
Bid guarantee | KEB Hana Bank | USD | 400 | |||||||
Bid guarantee | Korea Software Financial Cooperative and others | KRW | 108,410 | |||||||
Performance guarantee / warranty guarantee | KRW | 455,834 | ||||||||
Guarantee for advance payments/others | KRW | 315,927 | ||||||||
Warranty guarantee | Seoul Guarantee Insurance | KRW | 1,147 | |||||||
Performance guarantee | KRW | 9,236 | ||||||||
Bid guarantee | KRW | 845 | ||||||||
Guarantees for licensing | KRW | 6,259 | ||||||||
Guarantees for depositions | KRW | 3,719 | ||||||||
Merchant business guarantee insurance | KRW | 170 | ||||||||
|
| |||||||||
Total | KRW | 1,104,125 | ||||||||
USD | 65,368 | |||||||||
|
|
As at September 30, 2020, guarantees provided by the Group to a third party, are as follows:
(in millions of Korean won) | Subject to payment guarantees | Creditor | Limit | Used amount | Period | |||||||||||
KT Estate Inc. | Busan Gaya Centreville Buyers | Shinhan Bank | 115 | 105 | | Nov. 10, 2017 ~ Oct. 31, 2020 |
| |||||||||
KT Estate Inc. | Daegu Beomeo-Crossroads SeohanIDaum Buyers | Shinhan Bank | 1,455 | 1,251 | | Oct. 29, 2017 ~ Nov. 30, 2020 |
| |||||||||
KT ENGCORE Co., Ltd 1 | Gasan solar power plant Inc. | Shinhan Bank | 4,700 | 1,455 | Jan. 08, 2025 | |||||||||||
KT ENGCORE Co., Ltd 1 | SPP Inc. | Suhyup Bank | 3,250 | 591 | Feb. 16, 2024 | |||||||||||
KT ENGCORE Co., Ltd 1 | Korea cell Inc. | Suhyup Bank | 3,250 | 483 | Feb. 16, 2024 | |||||||||||
KT ENGCORE Co., Ltd 1 | San-ya agricultural association corporation | Suhyup Bank | 3,250 | 688 | Feb. 16, 2024 | |||||||||||
KT ENGCORE Co., Ltd 1 | Korean delta solar first Co., Ltd. | NH INVESTMENT & SECURITIES CO.,LTD. | 39,000 | 39,000 | Jun. 8, 2017 | |||||||||||
KT ENGCORE Co., Ltd 1 | Ciocanesti Korea Co., Ltd. | NH INVESTMENT & SECURITIES CO.,LTD. | 7,600 | 7,600 | Jun. 8, 2017 | |||||||||||
KT ENGCORE Co., Ltd 1 | Korean delta solar second Co., Ltd. | NH INVESTMENT & SECURITIES CO.,LTD. | 9,000 | 9,000 | Jul. 12, 2017 | |||||||||||
KT Hitel Co., Ltd. | Shinhan Bank | Cash payers | 700 | — | | Apr. 17, 2020 ~ Apr. 16, 2021 |
| |||||||||
Nasmedia | Stockholders Association Members | Korea Securities Finance Corp | 5,654 | 2,912 | — |
38
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
1 | KT ENGCORE Co., Ltd, the subsidiary of the Group is subject to payment, depending on reimbursement of principal debtor. |
The Controlling Company is jointly and severally obligated with KT Sat Co., Ltd., to pay KT Sat Co., Ltd.’s liabilities incurred prior to spin-off. As at September 30, 2020, the Controlling Company and KT Sat Co., Ltd. are jointly and severally liable for reimbursement ofW 1,697 million.
For the nine-month period ended September 30, 2020, the Group made agreements with the Securitization Specialty Companies (2020: Giga LTE Forty nineth to Fifty third Securitization Specialty Co., Ltd., 2019: Giga LTE Forty third to Forty eighth Securitization Specialty Co., Ltd.), and disposed of its trade receivables related to handset sales. The Group also made asset management agreements with each securitization specialty company and in accordance with the agreement the Group will receive asset management fees upon liquidation of securitization specialty company.
As at September 30, 2020, the Group is a defendant in 205 lawsuits with the total claimed amount ofW 87,681 million (2019:W 214,877 million). As at September 30, 2020, litigation provisions ofW 64,102 million for pending lawsuits and unasserted claims are recorded as liabilities for potential loss in the ordinary course of business. The final outcome of the cases cannot be estimated as at the end of the reporting period.
According to the financial and other covenants included in certain debentures and borrowings, the Group is required to maintain certain financial ratios such as debt-to-equity ratio, use the funds for the designated purpose and report to the creditors periodically. The covenant also contains restrictions on the provision of additional collateral and disposal of certain assets.
As at September 30, 2020, the Group participates in Algerie Sidi Abdela new town development consortium (percentage of ownership: 2.5%) and has joint liability with other consortium participants.
As at September 30, 2020, the contract amount of property and equipment acquisition agreements made but not yet recognized amounts toW 785,243 million (December 31, 2019:W 851,798 million).
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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
17. | Leases |
Set out below is information for leases when the Group is a lessee. Information when the Group is a lessor is described in Note 10.
The consolidated statement of financial position shows the following amounts relating to leases:
(In millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Right-of-use assets | ||||||||
Property and buildings | ||||||||
Machinery and track facilities | 67,624 | 140,296 | ||||||
Others | 94,787 | 107,414 | ||||||
|
|
|
| |||||
Total | ||||||||
|
|
|
| |||||
Investment property (buildings) |
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Lease liabilities1 | ||||||||
Current | ||||||||
Non-current | 297,158 | 373,306 | ||||||
|
|
|
| |||||
|
|
|
|
1 | Included in the line items other current liabilities and other non-current liabilities’ in the consolidated statement of financial position (Note 8). |
For the nine-month periods ended September 30, 2020, increase of right-of-use assets wasW 240,788 million.
The consolidated statement of profit or loss relating to leases for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | September 30, 2019 | ||||||
Depreciation of right-of-use assets | ||||||||
Property and buildings | ||||||||
Machinery and track facilities | 46,320 | 68,919 | ||||||
Others | 41,681 | 37,824 | ||||||
|
|
|
| |||||
|
|
|
| |||||
Depreciation of investment properties | ||||||||
Interest expense relating to lease liabilities | 26,153 | 32,818 | ||||||
Expenses relating to short-term leases | 7,516 | 6,918 | ||||||
Expenses relating to leases of low-value assets that are not short-term leases | 19,393 | 20,221 | ||||||
Expenses relating to variable lease payments not included in lease liabilities | 6,280 | 8,073 |
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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Total cash outflow from leases wasW 378,350 million andW 433,727 million during the current quarter and previous quarter, respectively.
18. | Retained Earnings |
Details of retained earnings as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Legal reserve 1 | ||||||||
Voluntary reserves 2 | 4,651,362 | 4,651,362 | ||||||
Unappropriated retained earnings | 6,706,189 | 6,203,574 | ||||||
|
|
|
| |||||
Total | ||||||||
|
|
|
|
1 | The Commercial Code of the Republic of Korea requires the Controlling Company to appropriate, as a legal reserve, an amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued share capital. The reserve is not available for the payment of cash dividends, but may be transferred to share capital with the approval of the Controlling Company’s Board of Directors or used to reduce accumulated deficits, if any, with the ratification of the Controlling Company’s majority shareholders. |
2 | In accordance with the Restrictions on Special Taxation Act, R&D and HR related reserves under the voluntary reserves are separately accumulated when retained earnings from tax reserve funds are disposed, when income tax is recalculated from tax return adjustments. |
19. | Other Components of Equity |
The Group’s other components of equity as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Treasury stock | ||||||||
Gain on disposal of treasury stock | (230 | ) | 1,229 | |||||
Share-based payments | 28,260 | 7,769 | ||||||
Equity transactions within consolidated entities 1 | (343,162 | ) | (353,243 | ) | ||||
|
|
|
| |||||
Total | ||||||||
|
|
|
|
1 | Includes profit or loss from transactions with non-controlling interests and investment differences from changes in equity ratios of subsidiaries. |
As at September 30, 2020 and December 31, 2019, the details of treasury stock are as follows:
September 30, 2020 | December 31, 2019 | |||||||
Number of shares | 15,739,783 | 15,870,258 | ||||||
Amount (in millions of Korean won) |
Treasury stock is expected to be used for the stock compensation for the Group’s directors, employees and other purposes.
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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
20. | Revenue from Contracts with Customers and Relevant Contract Assets and Liabilities |
The Group has recognized the following amounts relating to revenue in the statement of profit or loss for the three and nine-month periods ended September 30, 2020 and 2019:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Revenue from contracts with customers | ||||||||||||||||
Revenue from other sources | 52,033 | 150,847 | 47,875 | 150,473 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
Operating revenues for the three and nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Services provided | ||||||||||||||||
Sales of goods | 835,780 | 2,412,052 | 1,097,694 | 2,905,746 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
Revenues from services provided are recognized over time, and sales of goods are recognized at a point of time. Revenues from construction commitments included in sales of goods are recognized using the percentage of completion method.
The contract assets and liabilities recognized in relation to revenue from contracts with customers are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Contract assets 1 | ||||||||
Contract liabilities 1 | 379,721 | 413,442 | ||||||
Deferred revenue 2 | 90,691 | 92,557 |
1 | The Group recognized contract assets of |
2 | Deferred revenue recognized relating to government grants is excluded. |
The contract costs recognized as assets are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Incremental costs of contract establishment | ||||||||
Costs of Contract performance | 88,037 | 85,234 |
The Group recognized W 1,352,217 million of operating expenses in the current reporting period (2019:W 1,222,820 million) which relate to contract cost assets.
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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
For the three and nine-month periods ended September 30, 2020 and 2019, the recognized revenue arising from carried-forward contract liabilities from prior year is as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Revenue recognized that was included in the contract liability balance at the beginning of the year | ||||||||||||||||
Allocation of the transaction price | ||||||||||||||||
Deferred revenue of joining/installment fees | 10,681 | 33,409 | 10,387 | 34,595 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
21. | Operating Expenses |
Operating expenses for the three and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Salaries and wages | ||||||||||||||||
Depreciation | 651,660 | 1,950,561 | 618,119 | 1,862,349 | ||||||||||||
Depreciation of right-of-use assets | 100,018 | 306,613 | 116,544 | 353,651 | ||||||||||||
Amortization of intangible assets | 153,116 | 471,113 | 162,739 | 491,879 | ||||||||||||
Commissions | 250,546 | 730,582 | 282,690 | 770,904 | ||||||||||||
Interconnection charges | 133,364 | 399,012 | 132,062 | 403,908 | ||||||||||||
International interconnection fees | 45,617 | 135,707 | 70,306 | 181,451 | ||||||||||||
Purchase of inventories | 1,110,829 | 2,981,441 | 1,322,868 | 3,348,445 | ||||||||||||
Changes of inventories | (211,312 | ) | (186,388 | ) | (28,593 | ) | 47,762 | |||||||||
Sales commissions | 589,887 | 1,686,168 | 574,418 | 1,711,395 | ||||||||||||
Service costs | 543,452 | 1,517,318 | 403,852 | 1,168,185 | ||||||||||||
Utilities | 97,559 | 266,005 | 95,544 | 244,579 | ||||||||||||
Taxes and dues | 84,428 | 222,090 | 82,406 | 213,096 | ||||||||||||
Rent | 35,151 | 100,737 | 27,806 | 103,722 | ||||||||||||
Insurance premiums | 18,465 | 53,082 | 22,087 | 60,195 | ||||||||||||
Installation fees | 34,482 | 92,653 | 36,717 | 113,914 | ||||||||||||
Advertising expenses | 35,471 | 91,045 | 35,778 | 110,551 | ||||||||||||
Research and development expenses | 42,533 | 118,650 | 40,349 | 120,757 | ||||||||||||
Card service costs | 750,073 | 2,181,874 | 750,015 | 2,252,667 | ||||||||||||
Others | 161,234 | 503,990 | 196,155 | 635,086 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
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Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Details of employee benefits for the three and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Short-term employee benefits | ||||||||||||||||
Post-employment benefits (defined benefits) | 59,940 | 179,044 | 62,632 | 181,154 | ||||||||||||
Post-employment benefits (defined contributions) | 16,853 | 44,977 | 9,691 | 38,444 | ||||||||||||
Share-based payments | 22,685 | 25,278 | 1,820 | 4,798 | ||||||||||||
Others | 5,225 | 13,336 | 1,065 | 5,119 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
22. | Other Income and Other Expenses |
Other income for the three and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Gain on disposal of property and equipment and investment properties | ||||||||||||||||
Gain on disposal of intangible assets | 34 | 1,966 | 28 | 1,254 | ||||||||||||
Gain on disposal of right-of-use assets | 1,070 | 1,671 | 950 | 3,615 | ||||||||||||
Gain on disposal of investments in associates | — | — | — | 3,689 | ||||||||||||
Compensation on property and equipment | 38,968 | 112,749 | 23,102 | 85,770 | ||||||||||||
Gain on government subsidies | 3,155 | 9,883 | 3,455 | 10,431 | ||||||||||||
Others | 74,978 | 91,193 | 9,984 | 55,242 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
Other expenses for the three and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Loss on disposal of property and equipment | ||||||||||||||||
Loss on disposal of intangible assets | 1,640 | 2,540 | 1,740 | 4,545 | ||||||||||||
Loss on disposal of right-of-use assets | 483 | 6,421 | 245 | 1,799 | ||||||||||||
Loss on disposal of investments in associates | 91 | 124 | — | 4,790 | ||||||||||||
Donations | 2,978 | 16,289 | 24,243 | 68,969 | ||||||||||||
Other allowance for bad debts | 7,821 | 26,361 | 6,099 | 15,774 | ||||||||||||
Others | 71,575 | 133,435 | 24,367 | 60,129 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
44
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
23. | Financial Income and Costs |
Details of financial income for three and the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Interest income | ||||||||||||||||
Gain on foreign currency transactions | 2,675 | 11,402 | 10,620 | 20,070 | ||||||||||||
Gain on foreign currency translation | 6,771 | 14,500 | 3,004 | 8,796 | ||||||||||||
Gain on settlement of derivatives | 7,226 | 9,398 | 1,842 | 8,174 | ||||||||||||
Gain on valuation of derivatives | (50,360 | ) | 60,959 | 80,818 | 162,416 | |||||||||||
Others | 831 | 2,792 | 499 | 6,712 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
Details of financial costs for the three and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Interest expenses | ||||||||||||||||
Loss on foreign currency transactions | 10,792 | 18,696 | 15,210 | 33,350 | ||||||||||||
Loss on foreign currency translation | (48,949 | ) | 72,618 | 83,796 | 170,247 | |||||||||||
Loss on settlement of derivatives | 20 | 57 | 9 | 9 | ||||||||||||
Loss on valuation of derivatives | 10,076 | 17,157 | (4 | ) | 89 | |||||||||||
Loss on disposal of trade receivables | 1,312 | 6,040 | 3,050 | 6,560 | ||||||||||||
Others | 78 | 2,389 | 616 | 1,085 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
24. | Income Tax Expense |
Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. As at September 30, 2020, the estimated average annual income tax rate used for the year ending December 31, 2020 is 32.86%.
45
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
25. | Earnings per Share |
Basic earnings per share is calculated by dividing the profit from operations attributable to equity holders of the Group by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares purchased by the Group and held as treasury stock.
Basic earnings per share from operations for the three and nine-month periods ended September 30, 2020 and 2019, are calculated as follows:
2020 | 2019 | |||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Profit attributable to ordinary shares | ||||||||||||||||
Weighted average number of ordinary shares outstanding (in number of shares) | 245,372,025 | 245,286,249 | 245,152,955 | 245,147,603 | ||||||||||||
Basic earnings per share (in Korean won) |
Diluted earnings per share from operations is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group has dilutive potential ordinary shares from convertible bonds and other share-based payments.
Diluted earnings per share from operations for the three and nine-month periods ended September 30, 2020 and 2019, are calculated as follows:
2020 | 2019 | |||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Profit attributable to ordinary shares | ||||||||||||||||
Adjusted net income attributable to ordinary shares (in millions of Korean won) | — | — | (159 | ) | (159 | ) | ||||||||||
Diluted profit attributable to ordinary shares (in millions of Korean won) | 203,424 | 588,344 | 189,580 | 594,604 | ||||||||||||
Number of dilutive potential ordinary shares outstanding (in number of shares) | 99,815 | 119,290 | 88,595 | 93,947 | ||||||||||||
Weighted average number of ordinary shares outstanding (in number of shares) | 245,471,840 | 245,405,539 | 245,241,550 | 245,241,550 | ||||||||||||
Diluted earnings per share (in Korean won) | 829 | 2,397 | 773 | 2,425 |
46
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Diluted earnings per share is earnings per outstanding of ordinary shares and dilutive potential ordinary shares. Diluted earnings per share is calculated by dividing adjusted profit for the year by the sum of the number of ordinary shares and dilutive potential ordinary shares.
26. | Cash Generated from Operations |
Cash flows from operating activities for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
1. Profit for the period | ||||||||
2. Adjustments for: | ||||||||
Income tax expense | 325,138 | 275,473 | ||||||
Interest income 1 | (217,072 | ) | (225,274 | ) | ||||
Interest expense 1 | 204,968 | 222,050 | ||||||
Dividend income | (2,697 | ) | (2,656 | ) | ||||
Depreciation | 1,973,550 | 1,862,349 | ||||||
Amortization of intangible assets | 473,693 | 491,879 | ||||||
Depreciation of right-of-use assets | 306,613 | 353,651 | ||||||
Provisions for severance benefits (defined benefits) | 191,352 | 192,810 | ||||||
Allowance for bad debts | 92,598 | 82,848 | ||||||
Share of net profit or loss of associates and joint ventures | 3,432 | 2,452 | ||||||
Loss on disposal of associates and joint ventures | 124 | 1,101 | ||||||
Loss on disposal of property and equipment and investment properties | 36,783 | 35,049 | ||||||
Loss on impairment of property and equipment | 47,291 | — | ||||||
Loss (gain) on disposal of right-of-use assets | 4,750 | (1,816 | ) | |||||
Loss on disposal of intangible assets | 574 | 3,291 | ||||||
Loss on impairment of intangible assets | 1,023 | — | ||||||
Loss on foreign currency translation | 58,118 | 161,451 | ||||||
Gain on valuation of derivatives | (53,143 | ) | (170,492 | ) | ||||
Loss on disposal of financial assets at amortized cost | 1 | 1 | ||||||
Loss (gain) on disposal of financial assets at fair value through profit or loss | 428 | (4,736 | ) | |||||
Loss on valuation of financial assets at fair value through profit or loss | 419 | 74 | ||||||
Others | 35,275 | (13,626 | ) | |||||
3. Changes in operating assets and liabilities | ||||||||
Increase in trade receivables | (123,877 | ) | (421,963 | ) | ||||
Increase in other receivables | (1,200,120 | ) | (69,224 | ) |
47
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Decrease (increase) in other current assets | 58,039 | (392,020 | ) | |||||
Increase in other non-current assets | (76,538 | ) | (160,505 | ) | ||||
Decrease (increase) in inventories | (140,708 | ) | 39,177 | |||||
Increase in trade payables | 241,342 | 355,564 | ||||||
Increase in other payables | 773,746 | 35,675 | ||||||
Increase in other current liabilities | 33,633 | 229,845 | ||||||
Increase (decrease) in other non-current liabilities | 699 | (180 | ) | |||||
Increase (decrease) in provisions | 2,233 | (52,527 | ) | |||||
Increase in deferred revenue | 66 | 498 | ||||||
Decrease in plan assets | 117,281 | 50,789 | ||||||
Payment of severance benefits | (152,380 | ) | (101,316 | ) | ||||
|
|
|
| |||||
4. Cash generated from operations (1+2+3) | ||||||||
|
|
|
|
1 | BC Card Co., Ltd. and other subsidiaries of the Group recognized interest income and expenses as operating revenue and expenses, respectively. Related interest income |
Significant transactions not affecting cash flows for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Reclassification of the current portion of borrowings | ||||||||
Reclassification of construction-in-progress to property and equipment | 1,202,305 | 1,231,763 | ||||||
Reclassification of other payables from property and equipment | (378,807 | ) | 274,107 | |||||
Reclassification of other payables from intangible assets | (305,064 | ) | (361,048 | ) | ||||
Reclassification of other payables from defined benefit liabilities | 2,690 | (20,551 | ) | |||||
Reclassification of other payables from plan assets | (211 | ) | (16,284 | ) |
48
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
27. | Changes in Liabilities Arising from Financing Activities |
2020 | ||||||||||||||||||||||||||||
Beginning | Cash flows | Non-cash | Ending | |||||||||||||||||||||||||
(in millions of Korean won) | Newly acquired | Exchange differences | Fair value changes | Others | ||||||||||||||||||||||||
Borrowings | ||||||||||||||||||||||||||||
Lease liabilities | 729,139 | (345,161 | ) | 233,670 | 4 | 31 | (4,593 | ) | 613,090 | |||||||||||||||||||
Other financial liabilities | — | (13,674 | ) | 13,674 | — | — | — | — | ||||||||||||||||||||
Derivative liabilities | 20,096 | (714 | ) | 2,588 | 3,210 | 13,670 | (6,801 | ) | 32,049 | |||||||||||||||||||
Derivative assets | (58,576 | ) | 15,184 | — | (50,391 | ) | (21,243 | ) | 6,798 | (108,228 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 | ||||||||||||||||||||||||||||
Beginning | Cash flows | Non-cash | Ending | |||||||||||||||||||||||||
(in millions of Korean won) | Newly acquired | Exchange differences | Fair value changes | Others | ||||||||||||||||||||||||
Borrowings | ||||||||||||||||||||||||||||
Lease liabilities | 163,858 | (398,515 | ) | 926,700 | — | — | 111,794 | 803,837 | ||||||||||||||||||||
Derivative liabilities | 65,067 | (735 | ) | — | 43 | (633 | ) | (54,076 | ) | 9,666 | ||||||||||||||||||
Derivative assets | (29,843 | ) | 33,635 | — | (150,563 | ) | (12,705 | ) | 33,607 | (125,869 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28. | Segment Information |
The Group’s operating segments are as follows:
Details | Business service | |
ICT | Mobile/fixed line telecommunication service and convergence business, B2B business and others | |
Finance | Credit card business and others | |
Satellite TV | Satellite TV business | |
Others | IT, facility security and global business, and others |
49
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Details of operating revenues and profit by each segment for the three nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | ||||||||||||||||||||||||
Operating revenues | Operating profit | Depreciation and amortization 1 | ||||||||||||||||||||||
(In millions of Korean won) | Three months | Nine months | Three months | Nine months | Three months | Nine months | ||||||||||||||||||
ICT | ||||||||||||||||||||||||
Finance | 864,332 | 2,532,719 | 28,604 | 96,431 | 12,760 | 31,434 | ||||||||||||||||||
Satellite TV | 176,610 | 522,194 | 13,579 | 63,912 | 20,624 | 63,629 | ||||||||||||||||||
Others | 1,487,678 | 4,248,259 | 44,395 | 111,750 | 89,076 | 269,005 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
7,049,086 | 20,592,381 | 293,381 | 1,031,203 | 925,700 | 2,791,803 | |||||||||||||||||||
Elimination | (1,047,889 | ) | (2,882,964 | ) | (1,045 | ) | (13,926 | ) | (20,906 | ) | (63,516 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Consolidated amount | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
2019 | ||||||||||||||||||||||||
Operating revenues | Operating profit | Depreciation and amortization 1 | ||||||||||||||||||||||
(In millions of Korean won) | Three months | Nine months | Three months | Nine months | Three months | Nine months | ||||||||||||||||||
ICT2 | ||||||||||||||||||||||||
Finance | 869,561 | 2,617,991 | 42,817 | 129,129 | 6,449 | 19,636 | ||||||||||||||||||
Satellite TV | 182,318 | 527,193 | 12,620 | 50,786 | 23,503 | 71,437 | ||||||||||||||||||
Others | 2,672,656 | 7,418,483 | (13,404 | ) | (82,707 | ) | 112,659 | 337,226 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
7,212,607 | 20,974,158 | 318,367 | 1,027,905 | 917,250 | 2,766,432 | |||||||||||||||||||
Elimination | (998,932 | ) | (2,827,573 | ) | (5,923 | ) | (25,115 | ) | (19,848 | ) | (58,554 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Consolidated amount | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | Sum of depreciation of property and equipment, investment properties, right-of-use assets and amortization of intangible assets. |
2 | The prior year segment reporting has been reclassified to reflect the current year changes for comparability purposes. |
Operating revenues for the three-month and nine-month periods ended September 30, 2020 and 2019, and non-current assets as at September 30, 2020 and December 31, 2019, by geographical region, are as follows:
50
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
2020 | ||||||||||||
Operating revenues | Non-current assets1 | |||||||||||
(in millions of Korean won) | Three months | Nine months | September 30, 2020 | |||||||||
Domestic | ||||||||||||
Overseas | 14,969 | 52,683 | 75,540 | |||||||||
|
|
|
|
|
| |||||||
Total | ||||||||||||
|
|
|
|
|
|
2019 | ||||||||||||
Operating revenues | Non-current assets1 | |||||||||||
(in millions of Korean won) | Three months | Nine months | December 31, 2019 | |||||||||
Domestic | ||||||||||||
Overseas | 17,022 | 49,425 | 76,679 | |||||||||
|
|
|
|
|
| |||||||
Total | ||||||||||||
|
|
|
|
|
|
1 | Non-current assets include property and equipment, intangible assets, investment properties, and right-of-use-assets |
29. | Related Party Transactions |
The list of related party of the Group as at September 30, 2020, is as follows:
Relationship | Name of Entity | |
Associates and joint ventures | Korea Information & Technology Investment Fund (KIF Investment Fund), K- Realty CR-REITs No.1, Boston Global Film & Contents Fund L.P., QTT Global (Group) Company Limited, CU Industrial Development Co., Ltd., KD Living, Inc., Oscar Ent. Co., Ltd., LoginD Co., Ltd., K-REALTY CR-REIT 6, K Bank, Inc., ISU-kth Contents Investment Fund, Daiwon Broadcasting Co., Ltd., KT-DSC creative economy youth start-up investment fund, Korea electronic Vehicle charging service, K-REALTY RENTAL HOUSING REIT 2, AI RESEARCH INSTITUTE, KT-IBKC Future Investment Fund 1, Gyeonggi-KT Yoojin Superman Fund, FUNDA Co., Ltd., CHAMP IT Co.,Ltd., Alliance Internet Corp., Little big pictures, Virtual Realm Sendirian Berhad, KT Philippines Co., Ltd., KT-Smart Factory Investment Fund, Studio Discovery Co., Ltd , KT Young Entrepreneurs DNA Investment Fund, Hyundai Robotics Co., Ltd. | |
Others 1 | KHS Corp. |
1 | Although the entity is not the related party of the Group in accordance with Korean IFRS 1024, the entity belongs to the Large Enterprise Group to which the Group also belongs in accordance with the Monopoly Regulation and Fair Trade Act. |
51
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Outstanding balances of receivables and payables in relation to transactions with related parties as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||||||||
Receivables | Payables | |||||||||||||||||
(in millions of Korean won) | Trade receivables | Other receivables | Other payables | Lease liabilities | ||||||||||||||
Associates and joint ventures | K-Realty CR-REITs No. 1 | |||||||||||||||||
K Bank, Inc. | 561 | 29,732 | 2,127 | — | ||||||||||||||
Others | 78 | 1,143 | 724 | — | ||||||||||||||
Others | KHS Corp. | 1 | — | 218 | — | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Total | ||||||||||||||||||
|
|
|
|
|
|
|
|
December 31, 2019 | ||||||||||||||||||||||
Receivables | Payables | |||||||||||||||||||||
(in millions of Korean won) | Trade receivables | Other receivables | Trade payables | Other payables | Lease liabilities | |||||||||||||||||
Associates and joint ventures | K-Realty CR-REITs No.1 | |||||||||||||||||||||
K Bank, Inc. | 583 | 13,664 | — | 557 | — | |||||||||||||||||
Others | 434 | 1,177 | — | 711 | — | |||||||||||||||||
Others | KT ENGCORE Co., Ltd. | 4,497 | 9,517 | 1,169 | 148,503 | 74 | ||||||||||||||||
KHS Corp. | — | — | — | 2 | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Significant transactions with related parties for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | ||||||||||||||||||
Sales | Purchases | |||||||||||||||||
(in millions of Korean won) | Operating revenue | Other income | Operating expenses | Others 1 | ||||||||||||||
Associates and joint ventures | K-Realty CR-REITs No. 1 | |||||||||||||||||
KIF Investment fund | — | — | — | — | ||||||||||||||
K Bank, Inc. | 12,889 | — | 6,300 | — | ||||||||||||||
Others | 489 | 70 | 7,369 | — | ||||||||||||||
Others | KT ENGCORE Co., Ltd.2 | 2,385 | — | 25,862 | 61,491 | |||||||||||||
KHS Corp. | 62 | — | 8,084 | — | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Total | ||||||||||||||||||
|
|
|
|
|
|
|
|
1 | Amounts include acquisition of property and equipment, and others. |
2 | Transactions before reclassification as subsidiary of the Group |
52
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
2019 | ||||||||||||||||||
Sales | Purchases | |||||||||||||||||
(in millions of Korean won) | Operating revenue | Other income | Operating expenses | Others 1 | ||||||||||||||
Associates and joint ventures | K-Realty CR-REITs No. 1 | |||||||||||||||||
KIF Investment fund | — | — | — | — | ||||||||||||||
K Bank, Inc. | 13,335 | — | 6,262 | — | ||||||||||||||
KD Living, Inc. | 28 | — | 3,721 | — | ||||||||||||||
Daiwon Broadcasting Co., Ltd. | 28 | — | 4,270 | — | ||||||||||||||
Others | 826 | 88 | 24 | — | ||||||||||||||
Others | KT ENGCORE Co., Ltd. | 6,265 | 6 | 65,356 | 121,212 | |||||||||||||
KHS Corp. | 24 | — | 11,704 | — | ||||||||||||||
K-Realty CR-REITs No. 10 | 2,801 | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Total | ||||||||||||||||||
|
|
|
|
|
|
|
|
1 | Amounts include acquisition of property and equipment, and others. |
2020 | 2019 | |||||||||||||||||||||||||
(in millions of Korean won) | Finance costs | Finance income | Dividend income | Finance costs | Finance income | Dividend income | ||||||||||||||||||||
Associates and joint ventures | K-Realty CR-REITs No. 1 | 8,061 | ||||||||||||||||||||||||
KIF Investment fund | — | — | 9,241 | — | — | 4,280 | ||||||||||||||||||||
K Bank, Inc | — | 3 | — | — | — | — | ||||||||||||||||||||
KD Living, Inc. | — | — | — | — | — | — | ||||||||||||||||||||
Daiwon Broadcasting Co., Ltd. | — | — | — | — | — | 77 | ||||||||||||||||||||
Others | — | — | 43 | — | — | 69 | ||||||||||||||||||||
Others | KT ENGCORE Co., Ltd 1 | 1 | — | — | 1 | 4 | — | |||||||||||||||||||
KHS Corp. | — | — | — | — | — | — | ||||||||||||||||||||
K-Realty CR-REITs No. 10 | — | — | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | Transactions before reclassification as a subsidiary of the Group |
Key management compensation for the nine-month periods ended September 30, 2020 and 2019, consists of:
(in millions of Korean won) | 2020 | 2019 | ||||||
Salaries and other short-term benefits | ||||||||
Post-employment benefits | 285 | 247 | ||||||
Stock-based compensation | 4,209 | 668 | ||||||
|
|
|
| |||||
Total | ||||||||
|
|
|
|
53
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Fund transactions with related parties for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | ||||||||
(in millions of Korean won) | Repayments1 | Equity contributions in cash and others | ||||||
Associates and Joint ventures | ||||||||
K-Realty CR-REITs No. 1 | ||||||||
Studio Discovery Co., Ltd. | — | 3,000 | ||||||
KT Young Entrepreneurs DNA Investment Fund | — | 3,600 | ||||||
KT-Smart Factory Investment Fund | — | 2,800 | ||||||
KT-CKP new media investment fund | — | (148 | ) | |||||
K Bank, Inc | — | 195,011 | ||||||
Gyeonggi-KT Yoojin Superman Fund | — | 1,000 | ||||||
Hyundai Robotics Co., Ltd. | — | 50,000 | ||||||
Others | — | — | ||||||
KT ENGCORE Co., Ltd2 | 34 | — | ||||||
|
|
|
| |||||
Total | ||||||||
|
|
|
|
1 | Amounts include lease transactions. |
2 | Transactions before reclassified as subsidiary of the Group |
2019 | ||||||||
(in millions of Korean won) | Repayments1 | Equity contributions in cash and others | ||||||
Associates and Joint ventures | ||||||||
KT-IBKC future investment fund 1 | ||||||||
Virtual Realm Sendirian Berhad | — | 550 | ||||||
KT-DSC creative economy youth start-up investment fund | — | (360 | ) | |||||
K-Realty CR-REITs No. 1 | 20,941 | — | ||||||
KIF Investment fund | — | — | ||||||
K Bank, Inc | — | 21,782 | ||||||
Others | — | (75 | ) | |||||
Others | ||||||||
KT ENGCORE Co., Ltd | 97 | — | ||||||
|
|
|
| |||||
Total | ||||||||
|
|
|
|
1 | Amounts include lease transactions. |
At the end of the reporting period, there are no collateral and payment guarantees provided by the related parties.
54
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
30. | Fair Value |
(1) | Fair Value of Financial Instruments by Category |
Carrying amount and fair value of financial instruments by category as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | December 31, 2019 | |||||||||||||||
(in millions of Korean won) | Carrying amount | Fair value | Carrying amount | Fair value | ||||||||||||
Financial assets | ||||||||||||||||
Cash and cash equivalents | 1 | 1 | ||||||||||||||
Trade and other receivables | ||||||||||||||||
Financial assets measured at amortized cost 2 | 7,046,586 | 1 | 5,796,207 | 1 | ||||||||||||
Financial assets at fair value through other comprehensive income | 1,313,736 | 1,313,736 | 1,256,266 | 1,256,266 | ||||||||||||
Other financial assets | ||||||||||||||||
Financial assets measured at amortized cost | 535,528 | 1 | 441,804 | 1 | ||||||||||||
Financial assets at fair value through profit or loss | 770,778 | 770,778 | 632,324 | 632,324 | ||||||||||||
Financial assets at fair value through other comprehensive income | 265,511 | 265,511 | 557,342 | 557,342 | ||||||||||||
Derivative financial assets for hedging | 108,228 | 108,228 | 58,576 | 58,576 | ||||||||||||
|
|
|
| |||||||||||||
Total | ||||||||||||||||
|
|
|
| |||||||||||||
Financial liabilities | ||||||||||||||||
Trade and other payables | 9,065,594 | 1 | 8,679,697 | 1 | ||||||||||||
Borrowings | 7,850,918 | 1 | 7,298,867 | 1 | ||||||||||||
Other financial liabilities | ||||||||||||||||
Financial liabilities at amortized cost | 138,276 | 1 | 129,945 | 1 | ||||||||||||
Financial liabilities at fair value through profit or loss | 2,629 | 2,629 | 38 | 38 | ||||||||||||
Derivative financial liabilities for hedging | 29,462 | 29,462 | 20,096 | 20,096 | ||||||||||||
|
|
|
| |||||||||||||
Total | ||||||||||||||||
|
|
|
|
1 | The Group did not conduct fair value estimation since the book amount is a reasonable approximation of the fair value. |
2 | With the application of Korean IFRS 1107, lease receivables are excluded from fair value disclosure. |
55
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(2) | Fair Value Hierarchy |
To provide an indication about the reliability of the inputs used in determining fair value, the Group classifies its financial instruments into the three levels prescribed under the accounting standards. Financial instruments that are measured at fair value are categorized by the fair value hierarchy, and the defined levels are as follows:
• | Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. |
• | Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. |
• | Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. |
Fair value hierarchy classifications of the financial assets and financial liabilities that are measured at fair value or its fair value is disclosed as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||||||
(in millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Trade and other receivables | ||||||||||||||||
Financial assets at fair value through other comprehensive income | ||||||||||||||||
Other financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | 121 | 276,672 | 493,985 | 770,778 | ||||||||||||
Financial assets at fair value through other comprehensive income | 6,164 | 206,530 | 52,817 | 265,511 | ||||||||||||
Derivative financial assets for hedging | — | 78,164 | 30,064 | 108,228 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Other financial liabilities | ||||||||||||||||
Financial liabilities at fair value through profit or loss | ||||||||||||||||
Derivative financial liabilities for hedging | — | 29,462 | — | 29,462 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
56
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
December 31, 2019 | ||||||||||||||||
(in millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Trade and other receivables | ||||||||||||||||
Financial assets at fair value through other comprehensive income | ||||||||||||||||
Other financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | 232 | 136,951 | 495,141 | 632,324 | ||||||||||||
Financial assets at fair value through other comprehensive income | 6,738 | 508,550 | 42,054 | 557,342 | ||||||||||||
Derivative financial assets for hedging | — | 40,788 | 17,788 | 58,576 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Other financial liabilities | ||||||||||||||||
Financial liabilities at fair value through profit or loss | ||||||||||||||||
Derivative financial liabilities for hedging | — | 20,096 | — | 20,096 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
57
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(3) | Transfers Between Fair Value Hierarchy Levels of Recurring Fair Value Measurements |
There are no transfers between Level 1 and Level 2 of the fair value hierarchy for the recurring fair value measurements.
Details of changes in Level 3 of the fair value hierarchy for the recurring fair value measurements are as follows:
September 30, 2020 | ||||||||||||||||
Financial assets | Financial liabilities | |||||||||||||||
(In millions of Korean won) | Financial assets at fair value through profit or loss | Financial assets at fair value through other comprehensive income | Derivative financial assets for hedging | Financial liabilities at fair value through profit or loss | ||||||||||||
Beginning balance | ||||||||||||||||
Purchases | 247,854 | 13,143 | — | — | ||||||||||||
Reclassifications | (2,539 | ) | — | — | 2,588 | |||||||||||
Disposals | (247,897 | ) | (547 | ) | — | — | ||||||||||
Amount recognized in profit or loss | 1,426 | (447 | ) | 5,211 | — | |||||||||||
Amount recognized in other comprehensive income | — | (1,386 | ) | 7,065 | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | ||||||||||||||||
|
|
|
|
|
|
|
|
September 30, 2019 | ||||||||||||||||
Financial assets | Financial liabilities | |||||||||||||||
(In millions of Korean won) | Financial assets at fair value through profit or loss | Financial assets at fair value through other comprehensive income | Derivative financial assets (liabilities) for hedging | Financial liabilities at fair value through profit or loss | ||||||||||||
Beginning balance | ||||||||||||||||
Purchases | 69,756 | 6,040 | — | — | ||||||||||||
Reclassifications | 17,962 | (444,875 | ) | — | — | |||||||||||
Disposals | (15,360 | ) | (941 | ) | — | — | ||||||||||
Amount recognized in profit or loss | (1,987 | ) | 69 | (32,211 | ) | — | ||||||||||
Amount recognized in other comprehensive income | — | 168,925 | 11,542 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | ||||||||||||||||
|
|
|
|
|
|
|
|
58
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(4) | Valuation Techniques and Inputs |
Valuation techniques and inputs used in the recurring, non-recurring fair value measurements and disclosed fair values categorized within Level 2 and Level 3 of the fair value hierarchy as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||
(in millions of Korean won) | Fair value | Level | Valuation techniques | |||||||
Assets | ||||||||||
Trade and other receivables | ||||||||||
Financial assets at fair value through other comprehensive income | 2 | DCF Model | ||||||||
Other financial assets | ||||||||||
Financial assets at fair value through profit or loss | 770,657 | 2,3 | DCF Model, Adjusted Net Asset model | |||||||
Financial assets at fair value through other comprehensive income | 259,347 | 2,3 | DCF Model Comparable Company Analysis | |||||||
Derivative financial assets for hedging | 108,228 | 2,3 | DCF Model, Hull-White model | |||||||
Liabilities | ||||||||||
Other financial liabilities | ||||||||||
Financial liabilities at fair value through profit or loss | 2,3 | DCF Model | ||||||||
Derivative financial liabilities for hedging | 29,462 | 2 | DCF Model | |||||||
December 31, 2019 | ||||||||||
(in millions of Korean won) | Fair value | Level | Valuation techniques | |||||||
Assets | ||||||||||
Trade and other receivables | ||||||||||
Financial assets at fair value through other comprehensive income | 2 | DCF Model | ||||||||
Other financial assets | ||||||||||
Financial assets at fair value through profit or loss | 632,092 | 2,3 | DCF Model, Adjusted Net Asset model | |||||||
Financial assets at fair value through other comprehensive income | 550,604 | 2,3 | DCF Model, Comparable Company Analysis | |||||||
Derivative financial assets for hedging | 58,576 | 2,3 | DCF Model, Hull-White model | |||||||
Liabilities | ||||||||||
Other financial liabilities | ||||||||||
Financial liabilities at fair value through profit or loss | 2 | DCF Model | ||||||||
Derivative financial liabilities for hedging | 20,096 | 2 | DCF Model |
59
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(5) | Valuation Processes for Fair Value Measurements Categorized Within Level 3 |
The Group uses external experts that perform the fair value measurements required for financial reporting purposes. External experts report directly to the chief financial officer (CFO), and discuss valuation processes and results with the CFO in line with the Group’s closing dates.
(6) | Gains and Losses on Valuation at the Transaction Date |
In the case that the Group values derivative financial instruments using inputs not based on observable market data, and the fair value calculated by the said valuation technique differs from the transaction price, then the fair value of the financial instruments is recognized as the transaction price. The difference between the fair value at initial recognition and the transaction price is deferred and amortized using a straight-line method by maturity of the financial instrument. However, in the case that inputs of the valuation techniques become observable in markets, the remaining deferred difference is immediately recognized in full in profit or loss.
In relation to this, details and changes of the total deferred differences for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||
(in millions of Korean won) | Derivatives used for hedging | Derivatives used for hedging | ||||||
Beginning balance | ||||||||
New transactions | — | — | ||||||
Recognized at fair value through profit or loss | (1,069 | ) | (1,069 | ) | ||||
|
|
|
| |||||
Ending balance | ||||||||
|
|
|
|
31. | Business Combinations |
To foster a company specialized in engineering within the Group, KT Corporation (the controlling company) has acquired 1,400,000 shares (59.8%) of KT ENGCORE Co., Ltd. and KT Estate Inc., a subsidiary of the Group, acquired 940,000 shares (40.2%) on March 16, 2020. Through these transactions, the Group consolidated KT ENGCORE Co., Ltd. as a subsidiary and accounted in accordance with Korean IFRS 1103 Business combinations.
With the acquisition method, the group identified intangible assets amounting toW 314 million and goodwill amountingW 40,785 million.
60
Table of Contents
KT Corporation and Subsidiaries
Notes to the Consolidated Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Details and amounts of total transfer consideration, acquired assets and liabilities on control acquisition date are as follows:
(in millions of Korean won) | Amounts | |||
Total transfer consideration (a) | ||||
Acquired assets and liabilities (b) 1 | 6,015 | |||
Cash and cash equivalents | 57,845 | |||
Trade and other receivables | 95,814 | |||
Other financial assets | 3,110 | |||
Other assets | 14,021 | |||
Inventories | 1,521 | |||
Property and equipment | 3,128 | |||
Intangible assets | 721 | |||
Trade and other payables | (105,964 | ) | ||
Other liabilities | (4,883 | ) | ||
Current tax liabilities | (3,664 | ) | ||
Provisions | (54,366 | ) | ||
Net defined benefit liabilities | (1,268 | ) | ||
|
| |||
Goodwill (a-b) | ||||
|
|
1 | Assets and liabilities are measured at fair value based on Korean IFRS 1103 Business Combinations. |
Goodwill is subject to change as the fair value of identifiable assets and liabilities has been confirmed as at September 30, 2020.
After the acquisition of control, operating income included in the consolidated statement before the removal of intercompany transactions isW 145,552 million and net loss isW 1,084 million. Had KT ENGCORE Co., Ltd. consolidated on January 1, 2020, the operating income that would be included isW 241,212 million and the net loss for the year isW 7,597 million.
32. | Events after the Reporting Period |
The Group has signed contracts acquiring 7,000,000 shares of Hyundai HCN Co., Ltd. (spun-off as a separate corporation on November 1, 2020) amounting toW 491,000 million and 3,017,428 shares of Hyundai Media, Inc. amounting toW 29,000 million on October 13, 2020.
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KT Corporation
Separate Interim Financial Statements
September 30, 2020 and 2019
Table of Contents
KT Corporation
September 30, 2020 and 2019
Page(s) | ||
1 – 2 | ||
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3 – 4 | ||
5 | ||
6 | ||
7 | ||
8 | ||
9 – 52 |
Table of Contents
Report on Review of Interim Financial Statements
(English Translation of a Report Originally Issued in Korean)
To the Shareholders and Board of Directors of
KT Corporation
Reviewed Financial Statements
We have reviewed the accompanying separate interim financial statements of KT Corporation (the “Company”). These financial statements consist of the separate interim statement of financial position as at September 30, 2020, and the related separate interim statements of profit or loss and comprehensive income for the three-month and nine-month periods ended September 30, 2020 and 2019, and separate interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2020 and 2019, and a summary of significant accounting policies and other explanatory notes, expressed in Korean won.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these separate interim financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”) 1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of separate interim financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to issue a report on these separate interim financial statements based on our review.
We conducted our review in accordance with quarterly or semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standard on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe the accompanying separate interim financial statements do not present fairly, in all material respects, in accordance with Korean IFRS 1034 Interim Financial Reporting.
Samil PricewaterhouseCoopers, 100 Hangang-daero, Yongsan-gu, Seoul 04386, Korea, www.sarnil.com
Table of Contents
Other Matters
We have audited the separate statement of financial position of the Company as at December 31, 2019, and the related separate statements of profit or loss, comprehensive income, changes in equity and cash flows for the year then ended, in accordance with Korean Standards on Auditing. We expressed an unqualified opinion on those financial statements, not presented herein, in our audit report dated March 10, 2020. The separate statement of financial position as at December 31, 2019, presented herein for comparative purposes, is consistent, in all material respects, with the above audited statement of financial position as at December 31, 2019.
Review standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries.
Seoul, Korea
November 16, 2020
This report is effective as of November 16, 2020, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.
2
Table of Contents
KT Corporation
Separate Interim Statements of Financial Position
September 30, 2020 and December 31, 2019
(in millions of Korean won) | Notes | September 30, 2020 (Unaudited) | December 31, 2019 | |||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | 4 | |||||||||||
Trade and other receivables, net | 4,5 | 3,473,678 | 3,231,008 | |||||||||
Other financial assets | 4,6 | 122,219 | 100,830 | |||||||||
Inventories, net | 7 | 649,419 | 477,138 | |||||||||
Current tax assets | — | 64,967 | ||||||||||
Current assets held for sale | 9 | — | 82,865 | |||||||||
Other current assets | 8 | 1,945,539 | 1,951,064 | |||||||||
|
|
|
| |||||||||
Total current assets | 8,102,420 | 7,236,269 | ||||||||||
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|
|
| |||||||||
Non-current assets | ||||||||||||
Trade and other receivables, net | 4,5 | 1,001,309 | 1,063,440 | |||||||||
Other financial assets | 4,6 | 212,356 | 179,240 | |||||||||
Property and equipment, net | 10 | 11,502,194 | 11,447,952 | |||||||||
Right-of-use assets | 17 | 576,938 | 714,968 | |||||||||
Investment properties, net | 10 | 742,242 | 769,019 | |||||||||
Intangible assets, net | 10 | 1,873,569 | 2,239,882 | |||||||||
Investments in subsidiaries, associates and joint ventures | 11 | 3,556,615 | 3,501,391 | |||||||||
Other non-current assets | 8 | 617,825 | 581,693 | |||||||||
|
|
|
| |||||||||
Total non-current assets | 20,083,048 | 20,497,585 | ||||||||||
|
|
|
| |||||||||
Total assets | ||||||||||||
|
|
|
|
3
Table of Contents
KT Corporation
Separate Interim Statements of Financial Position
September 30, 2020 and December 31, 2019
(in millions of Korean won) | Notes | September 30, 2020 (Unaudited) | December 31, 2019 | |||||||||
Liabilities | ||||||||||||
Current liabilities | ||||||||||||
Trade and other payables | 4,12 | |||||||||||
Borrowings | 4,13 | 1,381,402 | 1,052,526 | |||||||||
Current tax liabilities | 260,800 | — | ||||||||||
Provisions | 14 | 150,832 | 167,729 | |||||||||
Deferred income | 57,964 | 45,754 | ||||||||||
Other current liabilities | 8 | 771,336 | 768,961 | |||||||||
|
|
|
| |||||||||
Total current liabilities | 6,980,915 | 6,764,653 | ||||||||||
|
|
|
| |||||||||
Non-current liabilities | ||||||||||||
Trade and other payables | 4,12 | 744,945 | 1,028,886 | |||||||||
Borrowings | 4,13 | 6,080,746 | 5,975,514 | |||||||||
Other financial liabilities | 4,6 | 26,187 | 18,632 | |||||||||
Net defined benefit liabilities | 15 | 374,076 | 274,598 | |||||||||
Provisions | 14 | 84,640 | 69,990 | |||||||||
Deferred income | 20 | 95,345 | 91,703 | |||||||||
Deferred tax liabilities | 176,376 | 206,440 | ||||||||||
Other non-current liabilities | 8 | 314,523 | 406,737 | |||||||||
|
|
|
| |||||||||
Total non-current liabilities | 7,896,838 | 8,072,500 | ||||||||||
|
|
|
| |||||||||
Total liabilities | 14,877,753 | 14,837,153 | ||||||||||
|
|
|
| |||||||||
Equity | ||||||||||||
Share capital | 1,564,499 | 1,564,499 | ||||||||||
Share premium | 1,440,258 | 1,440,258 | ||||||||||
Retained earnings | 18 | 11,248,970 | 10,869,987 | |||||||||
Accumulated other comprehensive income | 29,659 | 23,449 | ||||||||||
Other components of equity | 19 | (975,671 | ) | (1,001,492 | ) | |||||||
|
|
|
| |||||||||
Total equity | 13,307,715 | 12,896,701 | ||||||||||
|
|
|
| |||||||||
Total liabilities and equity | ||||||||||||
|
|
|
|
The above separate interim statements of financial position should be read in conjunction with the accompanying notes.
4
Table of Contents
KT Corporation
Separate Interim Statements of Profit or Loss
Three-Month and Nine-Month Periods Ended September 30, 2020 and 2019
Periods Ended September 30 | ||||||||||||||||||||
(in millions of Korean won, except per share amounts) | Notes | 2020 (Unaudited) | 2019 (Unaudited) | |||||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||||||
Operating revenue | 20 | |||||||||||||||||||
Operating expenses | 21 | 4,313,663 | 12,530,098 | 4,507,993 | 12,913,224 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Operating profit | 206,803 | 759,110 | 197,729 | 685,311 | ||||||||||||||||
Other income | 22 | 65,459 | 292,509 | 40,267 | 265,743 | |||||||||||||||
Other expenses | 22 | 50,876 | 162,309 | 139,985 | 251,366 | |||||||||||||||
Finance income | 23 | 29,818 | 273,943 | 154,910 | 380,546 | |||||||||||||||
Finance costs | 23 | 29,924 | 283,449 | 154,720 | 395,475 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Profit before income tax expense | 221,280 | 879,804 | 98,201 | 684,759 | ||||||||||||||||
Income tax expense | 58,043 | 230,773 | 25,817 | 180,023 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Profit for the period | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Earnings per share | ||||||||||||||||||||
Basic earnings per share | 25 | |||||||||||||||||||
Diluted earnings per share | 25 | 665 | 2,645 | 295 | 2,058 |
The above separate interim statements of profit or loss should be read in conjunction with the accompanying notes.
5
Table of Contents
KT Corporation
Separate Interim Statements of Comprehensive Income
Three-Month and Nine-Month Periods Ended September 30, 2020 and 2019
Periods Ended September 30 | ||||||||||||||||||||
(in millions of Korean won) | Notes | 2020 (Unaudited) | 2019 (Unaudited) | |||||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||||||
Profit for the period | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other comprehensive income | ||||||||||||||||||||
Items that will not be subsequently reclassified to profit or loss: | ||||||||||||||||||||
Remeasurements of the net defined benefit liability | 15 | 865 | 1,408 | 288 | (887 | ) | ||||||||||||||
Gain (loss) on valuation of financial instruments at fair value through other comprehensive income | 635 | 154 | (343 | ) | (874 | ) | ||||||||||||||
Items that may be subsequently reclassified to profit or loss: | ||||||||||||||||||||
Valuation gain (loss) on cash flow hedge | 6 | (34,570 | ) | 40,834 | 55,519 | 121,859 | ||||||||||||||
Other comprehensive income from cash flow hedges reclassified to profit or loss | 42,431 | (34,778 | ) | (56,855 | ) | (109,364 | ) | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Other comprehensive income for the period, net of tax | 9,361 | 7,618 | (1,391 | ) | 10,734 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total comprehensive income for the period | ||||||||||||||||||||
|
|
|
|
|
|
|
|
The above separate interim statements of comprehensive income should be read in conjunction with the accompanying notes.
6
Table of Contents
KT Corporation
Separate Interim Statements of Changes in Equity
Nine-Month Periods Ended September 30, 2020 and 2019
(in millions of Korean won) | Notes | Share capital | Share premium | Retained earnings | Accumulated comprehensive income | Other of equity | Total equity | |||||||||||||||||||
Balance as at January 1, 2019 | ||||||||||||||||||||||||||
Changes in accounting policies | — | — | (6,149 | ) | — | — | (6,149 | ) | ||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||
Profit for the period | — | — | 504,736 | — | — | 504,736 | ||||||||||||||||||||
Loss on valuation of financial assets at fair value through other comprehensive income | 6 | — | — | — | (874 | ) | — | (874 | ) | |||||||||||||||||
Remeasurements of net defined benefit liabilities | 15 | — | — | (887 | ) | — | — | (887 | ) | |||||||||||||||||
Valuation gain on cash flow hedge | 6 | — | — | — | 12,495 | — | 12,495 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total comprehensive income for the period | — | — | 503,849 | 11,621 | — | 515,470 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Transactions with owners | ||||||||||||||||||||||||||
Dividends paid | — | — | (269,659 | ) | — | — | (269,659 | ) | ||||||||||||||||||
Appropriation of retained earnings related to loss on disposal of treasury stock | — | — | (15,169 | ) | — | 15,169 | — | |||||||||||||||||||
Disposal of treasury stock | — | — | — | — | 2,744 | 2,744 | ||||||||||||||||||||
Others | — | — | — | — | 213 | 213 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | — | — | (284,828 | ) | — | 18,126 | (266,702 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance as at September 30, 2019 (Unaudited) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance as at January 1, 2020 | ||||||||||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||
Profit for the period | — | — | 649,031 | — | — | 649,031 | ||||||||||||||||||||
Loss on valuation of financial assets at fair value through other comprehensive income | 6 | — | — | — | 154 | — | 154 | |||||||||||||||||||
Remeasurements of net defined benefit liabilities | 15 | — | — | 1,408 | — | — | 1,408 | |||||||||||||||||||
Valuation loss on cash flow hedge | 6 | — | — | — | 6,056 | — | 6,056 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total comprehensive income for the period | — | — | 650,439 | 6,210 | — | 656,649 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Transactions with owners | ||||||||||||||||||||||||||
Dividends paid | — | — | (269,766 | ) | — | — | (269,766 | ) | ||||||||||||||||||
Appropriation of retained earnings related to loss on disposal of treasury stock | — | — | (1,690 | ) | — | 1,690 | — | |||||||||||||||||||
Disposal of treasury stock | — | — | — | — | 3,640 | 3,640 | ||||||||||||||||||||
Others | — | — | — | — | 20,491 | 20,491 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Subtotal | — | — | (271,456 | ) | — | 25,821 | (245,635 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance as at September 30, 2020 (Unaudited) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The above separate interim statements of changes in equity should be read in conjunction with the accompanying notes.
7
Table of Contents
KT Corporation
Separate Interim Statements of Cash Flows
Nine-Month Periods Ended September 30, 2020 and 2019
Nine-Month Periods Ended September 30 | ||||||||||||
(in millions of Korean won) | Notes | 2020 (Unaudited) | 2019 (Unaudited) | |||||||||
Cash flows from operating activities | ||||||||||||
Cash generated from operations | 26 | |||||||||||
Interest paid | (174,995 | ) | (158,806 | ) | ||||||||
Interest received | 164,568 | 173,103 | ||||||||||
Dividends received | 132,033 | 128,895 | ||||||||||
Income tax refund (paid) | 66,979 | (204,404 | ) | |||||||||
|
|
|
| |||||||||
Net cash inflow from operating activities | 3,305,023 | 2,710,035 | ||||||||||
|
|
|
| |||||||||
Cash flows from investing activities | ||||||||||||
Collection of loans | 46,064 | 45,570 | ||||||||||
Disposal of non-current financial assets at amortized cost | 1 | 3,780 | ||||||||||
Disposal of financial assets at fair value through profit or loss | 361 | 2,662 | ||||||||||
Disposal of financial assets at fair value through other comprehensive income | 288 | — | ||||||||||
Disposal of investments in subsidiaries, associates and joint ventures | 1,378 | 7,262 | ||||||||||
Disposal of assets held for sale | 119,182 | — | ||||||||||
Disposal of property and equipment | 13,989 | 24,697 | ||||||||||
Disposal of intangible assets | 3,996 | 1,735 | ||||||||||
Disposal of right-of-use assets | 50 | 7,294 | ||||||||||
Loans granted | (33,391 | ) | (43,176 | ) | ||||||||
Acquisition of current financial assets at amortized cost | (173 | ) | (22,034 | ) | ||||||||
Acquisition of financial assets at fair value through profit or loss | (5,828 | ) | (27,927 | ) | ||||||||
Acquisition of investments in subsidiaries, associates and joint ventures | (108,521 | ) | (40,486 | ) | ||||||||
Acquisition of property and equipment | (2,164,413 | ) | (1,936,702 | ) | ||||||||
Acquisition of intangible assets | (373,540 | ) | (395,701 | ) | ||||||||
Acquisition of right-of-use assets | (3,781 | ) | (4,891 | ) | ||||||||
|
|
|
| |||||||||
Net cash outflow from investing activities | (2,504,338 | ) | (2,377,917 | ) | ||||||||
|
|
|
| |||||||||
Cash flows from financing activities | ||||||||||||
Proceeds from borrowings | 1,113,964 | 826,088 | ||||||||||
Settlement of derivative assets and liabilities, net | 16,452 | 33,635 | ||||||||||
Dividends paid | (269,766 | ) | (269,659 | ) | ||||||||
Repayments of borrowings | (742,427 | ) | (1,189,773 | ) | ||||||||
Decrease in lease liabilities | (335,743 | ) | (322,740 | ) | ||||||||
|
|
|
| |||||||||
Net cash outflow from financing activities | 27 | (217,520 | ) | (922,449 | ) | |||||||
|
|
|
| |||||||||
Effect of exchange rate change on cash and cash equivalents | 3 | (184 | ) | |||||||||
|
|
|
| |||||||||
Net increase (decrease) in cash and cash equivalents | 583,168 | (590,515 | ) | |||||||||
Cash and cash equivalents | ||||||||||||
Beginning of the period | 1,328,397 | 1,779,745 | ||||||||||
|
|
|
| |||||||||
End of the period | ||||||||||||
|
|
|
|
The above separate interim statements of cash flows should be read in conjunction with the accompanying notes.
8
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
1. | General Information |
KT Corporation (the “Company”) commenced operations on January 1, 1982, when it spun off from the Korea Communications Commission (formerly the Korean Ministry of Information and Communications) to provide telephone services and to engage in the development of advanced communications services under the Act of Telecommunications of Korea. The address of the Company’s registered office is 90, Buljeong-ro, Bundang-gu, Seongnam City, Gyeonggi Province, Korea.
On October 1, 1997, upon the announcement of the Act on the Management of Government-Invested Institutions and the Privatization Law, the Company became a government-funded institution under the Commercial Code of Korea.
On December 23, 1998, the Company’s shares were listed on the Korea Stock Exchange.
On May 29, 1999, the Company issued 24,282,195 additional shares and issued American Depository Shares (ADS), which represents new shares and 20,813,311 government-owned shares, on the New York Stock Exchange. On July 2, 2001, the additional ADS representing 55,502,161 government-shares were issued at the New York Stock Exchange.
In 2002, the Company acquired the entire government-owned shares in accordance with the Korean government’s privatization plan. As at September 30, 2020, the Korean government does not own any shares in the Company.
2. | Significant Accounting Policies |
2.1 | Basis of Preparation |
The Company maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying separate interim financial statements have been translated into English from the Korean language financial statements.
The Company’s separate interim financial statements for the nine-month periods ended September 30, 2020, have been prepared in accordance with Korean IFRS 1034 Interim Financial Reporting. These separate interim financial statements have been prepared in accordance with Korean IFRS which is effective or has been early adopted as at September 30, 2020.
(1) New and amended standards adopted by the Company
The Company has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, 2020.
9
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
• | Amendments to Korean IFRS 1001 Presentation of Financial Statements, Korean IFRS 1008 Accounting Policies, Changes in Accounting Estimates and Errors – Definition of Material |
The amendments clarify the explanation of the definition of material and amended Korean IFRS 1001 and Korean IFRS 1008 in accordance with the clarified definitions. Materiality is assessed by reference to omission or misstatement of material information as well as effects of immaterial information, and to the nature of the users when determining the information to be disclosed by the Company. The amendment does not have a significant impact on the financial statements.
• | Amendments to Korean IFRS 1103 Business Combination – Definition of a Business |
To consider the integration of the required activities and assets as a business, the amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs and excludes economic benefits from the lower costs. An entity can apply a concentration test, an optional test, where substantially all of the fair value of gross assets acquired is concentrated in a single asset or a group of similar assets, the assets acquired would not represent a business. The amendment does not have a significant impact on the financial statements.
• | Amendments to Korean IFRS 1109 Financial Instruments, Korean IFRS 1039 Financial Instruments: Recognition and Measurement and Korean IFRS 1107 Financial Instruments: Disclosures – Interest Rate Benchmark Reform |
The amendments allow to apply the exceptions when forward-looking analysis is performed in relation the application of hedge accounting while uncertainties arising from interest rate benchmark reform exist. The exceptions require the Company assumes that the interest rate benchmark on which the hedged items and the hedging instruments are based on is not altered as a result of interest rate benchmark reform, when determining whether the expected cash flows are highly probable, whether an economic relationship between the hedged item and the hedging instrument exists, and when assessing the hedging relationship is highly effective. The Company’s risk exposure, directly affected by interest rate benchmark reform, is the variable rate borrowings of USD 450,000 thousand and SGD 284,000 thousand with maximum remaining maturity of four years. To hedge fluctuations in cash flows of borrowings resulting from the changes in USD LIBOR of 3 months and SGD SOR of 6 months—an interest rate benchmark, the Company entered into an interest rate swap contract for a nominal amount of USD 450,000 thousand and SGD 284,000 thousand and designated it as a hedging instrument of cash flow hedge.
(2) New standards and interpretations not yet adopted by the Company
Certain new accounting standard and interpretation that have been published but have not been early adopted by the Company are set out below.
• | Agenda Decision of the International Accounting Standards Committee – Lease Period |
10
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
The International Accounting Standards Interpretations Committee (IFRS IC) announced on December 16, 2019 that all economic disadvantages resulting from the termination of a lease are taken into account when determining the enforceable period for ‘the useful life of lease term and lease asset improvement rights’. The Company is analyzing the effect of changes in accounting policies on the separate financial statements for enforceable periods in accordance with the decision and will reflect the effect in the separate financial statements after the analysis is completed.
2.2 | Significant Accounting Policies |
Significant accounting policies and method of computation used in the presentation of the condensed separate interim financial statements are consistent with those of the separate financial statements for the year ended December 31, 2019, except for the changes due to the application of amendment and enactments of standards described in Note 2.1 (1) and the one described below.
(1) Income Tax Expense
Income tax expense for the interim period is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate is applied to the pre-tax income.
(2) Subsidiaries, Associates and Joint Ventures
The financial statements of the Company are the separate financial statements prepared in accordance with Korean IFRS 1027 Separate Financial Statements. Investments in subsidiaries, joint ventures and associates are recognized at cost under the direct equity method. Management applied the carrying amounts under the previous K-GAAP at the time of transition to Korean IFRS as deemed cost of investments. The Company recognizes dividend income from subsidiaries, joint ventures and associates in profit or loss when its right to receive the dividend is established.
3. | Critical Accounting Estimates and Assumptions |
The Company makes estimates and assumptions concerning the future. The estimates and assumptions are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. Actual results may differ from these estimates.
During 2020, the spread of COVID-19 has a material impact on domestic and foreign economy. It may have a negative impact; such as, decrease in productivity, decrease or delay in sales, collection of existing receivables and others. Accordingly, it may have a negative impact on the financial position and financial performance of the Company, and the impact is expected to be continued to the separate annual financial statements in 2020.
Significant accounting estimates and assumptions applied in the preparation of the separate annual financial statements can be adjusted depending on changes in the uncertainty from COVID-19. Also, the ultimate effect of COVID-19 to the Company’s business, financial position and financial performance cannot presently determined.
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
4. | Financial Instruments by Category |
Financial instruments by category as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||||||||||
(in millions of Korean won) Financial assets | Financial assets at amortized cost | Financial assets at fair value through profit or loss | Financial assets at fair value through other comprehensive income | Derivatives used for | Total | |||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||
Trade and other receivables 1 | 3,157,106 | — | 1,313,736 | — | 4,470,842 | |||||||||||||||
Other financial assets | 72,501 | 136,123 | 20,861 | 105,090 | 334,575 |
1 | Lease receivables and others which are not applied to financial instruments by category are excluded. |
September 30, 2020 | ||||||||||||
(in millions of Korean won) Financial liabilities | Financial liabilities at amortized cost | Derivatives used for hedging | Total | |||||||||
Trade and other payables | ||||||||||||
Borrowings | 7,462,148 | — | 7,462,148 | |||||||||
Other financial liabilities | — | 26,187 | 26,187 |
December 31, 2019 | ||||||||||||||||||||
(in millions of Korean won) Financial assets | Financial assets at amortized cost | Financial assets at fair value through profit or loss | Financial assets at fair value through other comprehensive income | Derivatives used for | Total | |||||||||||||||
Cash and cash equivalents | ||||||||||||||||||||
Trade and other receivables1 | 3,035,777 | — | 1,256,266 | — | 4,292,043 | |||||||||||||||
Other financial assets | 72,329 | 131,344 | 20,974 | 55,423 | 280,070 |
1 | Lease receivables and others which are not applied to financial Instruments by category are excluded. |
December 31, 2019 | ||||||||||||
(in millions of Korean won) Financial liabilities | Financial liabilities at amortized cost | Derivatives used for hedging | Total | |||||||||
Trade and other payables | ||||||||||||
Borrowings | 7,028,040 | — | 7,028,040 | |||||||||
Other financial liabilities | — | 18,632 | 18,632 |
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
5. | Trade and Other Receivables |
Trade and other receivables as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||||||
(in millions of Korean won) | Total amounts | Provision for impairment | Present value discount | Carrying amount | ||||||||||||
Current assets | ||||||||||||||||
Trade receivables | ||||||||||||||||
Other receivables | 470,219 | (55,327 | ) | (5,511 | ) | 409,381 | ||||||||||
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Trade receivables | ||||||||||||||||
Other receivables | 282,429 | (5 | ) | (15,158 | ) | 267,266 | ||||||||||
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December 31, 2019 | ||||||||||||||||
(in millions of Korean won) | Total amounts | Provision for impairment | Present value discount | Carrying amount | ||||||||||||
Current assets | ||||||||||||||||
Trade receivables | ||||||||||||||||
Other receivables | 454,987 | (48,991 | ) | (159 | ) | 405,837 | ||||||||||
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Trade receivables | ||||||||||||||||
Other receivables | 275,042 | (5 | ) | (23,846 | ) | 251,191 | ||||||||||
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Details of other receivables as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Loans | ||||||||
Receivables | 333,302 | 300,656 | ||||||
Accrued income | 2,716 | 1,485 | ||||||
Refundable deposits | 329,875 | 327,748 | ||||||
Others | 4,235 | 2,529 | ||||||
Less: Provision for impairment | (55,332 | ) | (48,996 | ) | ||||
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The maximum exposure of trade and other receivables to credit risk is the carrying amount of each class of receivables mentioned above as at September 30, 2020.
A portion of the trade receivables is classified as financial assets at fair value through other comprehensive income considering the trade receivables business model for managing the asset and the cash flow characteristics of the contract.
6. | Other Financial Assets and Liabilities |
Details of other financial assets and liabilities as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Other financial assets | ||||||||
Financial assets at amortized cost 1 | ||||||||
Financial assets at fair value through profit or loss1,2 | 136,123 | 131,344 | ||||||
Financial assets at fair value through other comprehensive income | 20,861 | 20,974 | ||||||
Derivatives used for hedging | 105,090 | 55,423 | ||||||
Less: Non-current | (212,356 | ) | (179,240 | ) | ||||
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Other financial liabilities | ||||||||
Derivatives used for hedging | ||||||||
Less: Non-current | (26,187 | ) | (18,632 | ) | ||||
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Current | ||||||||
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1 | As at September 30, 2020, the Company’s financial instruments amounting to |
2 | Investment in Korea Software Financial Cooperative amounting to |
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Details of financial assets at fair value through profit or loss as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Equity instruments (Listed) | ||||||||
Equity instruments (Unlisted) | — | — | ||||||
Debt securities | 136,003 | 131,112 | ||||||
Less: Non-current | (136,123 | ) | (131,344 | ) | ||||
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Current | ||||||||
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The maximum exposure of debt instruments of financial assets recognized at fair value through profit or loss to credit risk is the carrying amount as at September 30, 2020.
Details of financial assets at fair value through other comprehensive income as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Equity instruments (Listed) | ||||||||
Equity instruments (Unlisted) | 18,546 | 18,964 | ||||||
Less: Non-current | (20,861 | ) | (20,974 | ) | ||||
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Upon disposal of these equity instruments, any balance within the accumulated other comprehensive income for these equity instruments is not reclassified to profit or loss, but to retained earnings. Upon disposal of debt securities, remaining balance of the accumulated other comprehensive income of debt investments is reclassified to profit or loss.
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Details of valuation of derivatives used for hedging as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | December 31, 2019 | |||||||||||||||
(in millions of Korean won) | Assets | Liabilities | Assets | Liabilities | ||||||||||||
Currency swap 1 | ||||||||||||||||
Less: Non-current | (55,368 | ) | (26,187 | ) | (26,917 | ) | (18,632 | ) | ||||||||
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Current | ||||||||||||||||
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1 | The currency swap contract is to hedge the risk of variability in cash flow from the bond. In applying the cash flow hedge accounting, the Company hedges its exposures to cash flow fluctuation until September 7, 2034. |
The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.
The valuation gains and losses on the derivative contracts for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||||||||||
(in millions of Korean won) Type of transaction | Valuation gain | Valuation loss | Other comprehensive income 1 | Valuation gain | Valuation loss | Other comprehensive income 1 | ||||||||||||||||||
Currency swap |
1 | The amounts are before adjustments of deferred income tax directly reflected in equity and allocation to the non-controlling interest. |
The ineffective portion recognized in profit or loss on the cash flow hedge is valuation gain ofW 3,192 million for the current period (nine-month period ended September 30, 2019: valuation gain ofW 4,819 million).
7. | Inventories |
Inventories as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | December 31, 2019 | |||||||||||||||||||||||
(in millions of Korean won) | Acquisition cost | Valuation allowance | Carrying amount | Acquisition cost | Valuation allowance | Carrying amount | ||||||||||||||||||
Merchandise |
Cost of inventories recognized as expenses for the nine-month period ended September 30, 2020, amounts toW 2,180,194 million (nine-month period ended September 30, 2019:W 2,939,027 million) and valuation loss on inventory amounts toW 34,549 million for the nine-month period ended September 30, 2020 (nine-month period ended September 30, 2019: valuation loss ofW 6,826 million).
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
8. | Other Assets and Liabilities |
Other assets and liabilities as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Other assets | ||||||||
Advance payments | ||||||||
Prepaid expenses 1 | 2,002,627 | 1,942,179 | ||||||
Contract assets 1 | 510,244 | 512,908 | ||||||
Less: Non-current | (617,825 | ) | (581,693 | ) | ||||
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Other liabilities | ||||||||
Advances received | ||||||||
Withholdings | 28,445 | 21,712 | ||||||
Unearned revenue | 17,201 | 40,789 | ||||||
Lease liabilities | 506,886 | 638,614 | ||||||
Contract liabilities 1 | 370,622 | 363,624 | ||||||
Less: Non-current | (314,523 | ) | (406,737 | ) | ||||
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1 | The amounts include adjustments arising from adoption of Korean IFRS 1115 (Note 20). |
9. | Assets Held for Sale |
(1) | During the prior period, the Company decided to sell some real estate, in which the amount of |
(2) | As the Company decided to sell some of the investments in associates in the current period, |
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
10. | Property and Equipment, Investment Properties, and Intangible Assets |
Changes in property and equipment for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Beginning, net | ||||||||
Effect from changes in accounting policy 1 | — | (209,703 | ) | |||||
Acquisition and capital expenditure | 1,821,333 | 2,187,764 | ||||||
Disposal and termination | (47,367 | ) | (55,136 | ) | ||||
Depreciation | (1,728,928 | ) | (1,668,444 | ) | ||||
Transfer to investment property | (23,627 | ) | 3,814 | |||||
Transfer from intangible assets | — | 254 | ||||||
Others | (32,831 | ) | (30,539 | ) | ||||
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1 | With the application of Korean IFRS 1116, the assets were reclassified from property and equipment to right-of-use assets. |
Changes in investment properties for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Beginning, net | ||||||||
Effect from changes in accounting policy 1 | — | 46,666 | ||||||
Depreciation | (39,405 | ) | (36,513 | ) | ||||
Transfer | 12,628 | 20,847 | ||||||
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1 | With the application of Korean IFRS 1116, the assets were reclassified from right-of-use assets to investment properties. |
As at September 30 2020, the Company (Lessor) has entered into a non-cancellable operating lease contract relating to real estate lease. The future minimum lease fee under this contract isW 83,120 million for one year or less,W 71,287 million more than one year and less than five years,W 56,866 million over five years, andW 211,273 million in total.
Details of investment properties provided as collateral as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||||||
(in millions of Korean won) | Carrying amount | Secured amount | Related account | Related amount | ||||||||||||
Land and Buildings | Deposits received |
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
December 31, 2019 | ||||||||||||||||
(in millions of Korean won) | Carrying amount | Secured amount | Related account | Related amount | ||||||||||||
Land and Buildings | Deposits received |
Changes in intangible assets for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Beginning, net | ||||||||
Effect from changes in accounting policy 1 | — | (26,208 | ) | |||||
Acquisition and capital expenditure | 34,346 | 56,661 | ||||||
Disposal and termination | (5,530 | ) | (3,959 | ) | ||||
Amortization | (395,129 | ) | (425,102 | ) | ||||
Transfer to property and equipment | — | (254 | ) | |||||
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Ending, net | ||||||||
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1 | With the application of Korean IFRS 1116, the assets were reclassified from intangible assets to right-of-use assets. |
The carrying amount of goodwill with indefinite useful life not subject to amortization isW 65,057 million as at September 30, 2020 (December 31, 2019:W 65,057 million). The carrying amount of membership rights with indefinite useful life not subject to amortization isW 66,202 million as at September 30, 2020 (December 31, 2019:W 64,825 million).
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
11. | Investments in Subsidiaries, Associates and Joint Ventures |
Carrying amount in investments in subsidiaries, associates and joint ventures as at September 30, 2020 and December 31, 2019, is as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Subsidiaries | ||||||||
Associates and joint ventures | 235,844 | 230,621 | ||||||
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Investments in subsidiaries as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | Location | Percentage of ownership (%) | Carrying amount | |||||||||||
September 30, 2020 | December 31, 2019 | |||||||||||||
KT Estate Inc. | Korea | 100.0 | % | |||||||||||
KT Sat Co., Ltd. | Korea | 100.0 | % | 390,530 | 390,530 | |||||||||
KTCS Corporation 1 | Korea | 7.7 | % | 6,427 | 6,427 | |||||||||
KTIS Corporation 1 | Korea | 30.1 | % | 30,633 | 30,633 | |||||||||
KT Skylife Co., Ltd. | Korea | 50.3 | % | 311,696 | 311,696 | |||||||||
BC Card Co., Ltd. | Korea | 69.5 | % | 633,004 | 633,004 | |||||||||
KT M&S Co., Ltd. | Korea | 100.0 | % | 26,764 | 26,764 | |||||||||
KT Hitel Co., Ltd. | Korea | 63.7 | % | 120,078 | 120,078 | |||||||||
KT Belgium | Belgium | 100.0 | % | 22,743 | 22,743 | |||||||||
KT Powertel Co., Ltd. 1 | Korea | 44.8 | % | 37,419 | 37,419 | |||||||||
Genie Music Corporation 1 (KT Music Corporation) | Korea | 36.2 | % | 37,417 | 37,417 | |||||||||
KT Dutch B.V. | Netherlands | 100.0 | % | 32,359 | 32,359 | |||||||||
KT Telecop Co., Ltd. | Korea | 86.8 | % | 134,308 | 134,308 | |||||||||
KT Submarine Co., Ltd. 1 | Korea | 39.3 | % | 24,370 | 24,370 | |||||||||
Nasmedia, Inc. 2 | Korea | 44.0 | % | 23,051 | 23,051 | |||||||||
KTDS Co., Ltd. | Korea | 95.5 | % | 19,616 | 19,616 | |||||||||
KTGDH Co., Ltd. (KTSB Data Service Co., Ltd.) | Korea | 100.0 | % | 7,544 | 7,544 | |||||||||
KT Strategic Investment Fund No. 2 | Korea | 90.9 | % | 10,245 | 10,245 | |||||||||
KT Sports | Korea | 66.0 | % | 9,900 | 9,900 | |||||||||
KT M Mobile Co., Ltd. | Korea | 100.0 | % | 136,174 | 136,174 | |||||||||
KT Service Bukbu Co., Ltd. | Korea | 67.3 | % | 7,092 | 7,092 | |||||||||
KT Service Nambu Co., Ltd. | Korea | 76.4 | % | 10,160 | 10,160 | |||||||||
KT Strategic Investment Fund No. 3 | Korea | 86.7 | % | 4,507 | 4,507 | |||||||||
KT Strategic Investment Fund No. 4 | Korea | 95.0 | % | 19,000 | 19,000 | |||||||||
PlayD Co., Ltd. (N Search Marketing Co., Ltd.) 3 | Korea | 23.5 | % | 20,000 | 20,000 | |||||||||
KT MOS Bukbu Co., Ltd. | Korea | 100.0 | % | 6,334 | 6,334 | |||||||||
KT MOS Nambu Co., Ltd. | Korea | 98.4 | % | 4,267 | 4,267 | |||||||||
Next Connect PFV | Korea | 100.0 | % | 24,250 | 23,421 |
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(in millions of Korean won) | Location | Percentage of ownership (%) | Carrying amount | |||||||||||||
September 30, 2020 | December 31, 2019 | |||||||||||||||
KT Strategic Investment Fund No.5 | Korea | 95.0 | % | 12,540 | 6,000 | |||||||||||
Storywiz., Ltd. | Korea | 100.0 | % | 14,000 | — | |||||||||||
KT ENGCORE Co., Ltd. | Korea | 59.8 | % | 28,000 | — | |||||||||||
Others | 71,821 | 71,189 | ||||||||||||||
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1 | At the end of the reporting period, although sum of percentage of ownership of the Company and its subsidiaries is less than 50% ownership in this entity, this entity is included in investments in subsidiaries due to the dispersion of the non-controlling interests and voting patterns at the shareholders’ meetings in the past. |
2 | At the end of the reporting period, although the Company owns less than 50% ownership in this entity, this entity is included in investments in subsidiaries as the Company holds the majority of voting right based on an agreement with other investors. |
3 | At the end of the reporting period, this entity is included in investments in subsidiaries as the Nasmedia Inc., holds ownership of 46.9% the Company and subsidiary holds ownership of 70.4%. |
Investments in associates and joint ventures as at September 30, 2020 and December 31, 2019, are as follows:
Carrying amount | ||||||||||||||||
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(in millions of Korean won) | Location | Percentage of ownership (%) | September 30, 2020 | December 31, 2019 | ||||||||||||
KIF Investment Fund | Korea | 33.3 | % | |||||||||||||
KT-IBKC Future Investment Fund 1 | Korea | 43.3 | % | 12,090 | 12,090 | |||||||||||
KT-CKP New Media Investment Fund | Korea | — | — | 127 | ||||||||||||
K Bank Inc. 1 | Korea | — | — | 50,950 | ||||||||||||
Hyundai Robotics Co., Ltd. 2 | Korea | 10.0 | % | 50,000 | — | |||||||||||
Others | 58,116 | 51,818 | ||||||||||||||
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1 | As at September 30, 2020, this entity is disposed as assets held for sale (Note 9). |
2 | At the end of the reporting period, although the Company has less than 20% ownership in ordinary share, this entity is included in investments in associates as the Company has a significant influence in determining the operating and financial policies. |
Changes in investments in associates and joint ventures for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Beginning | ||||||||
Acquisition | 109,350 | 38,518 | ||||||
Disposal | (1,495 | ) | (12,881 | ) | ||||
Impairment 1 | (1,681 | ) | (68,800 | ) | ||||
Others 2 | (50,950 | ) | — | |||||
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1 | As at September 30. 2020, the Company recognized impairment loss of |
2 | The portion of others is disposed as assets held for sale in the current period (Note 9). |
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
12. | Trade and Other Payables |
Details of trade and other payables as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Current liabilities | ||||||||
Trade payables | ||||||||
Other payables | 3,239,893 | 3,840,712 | ||||||
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Non-current liabilities | ||||||||
Other payables | ||||||||
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Details of other payables as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Non-trade payables | ||||||||
Accrued expenses | 883,470 | 698,083 | ||||||
Operating deposits | 462,535 | 480,638 | ||||||
Others | 148,718 | 163,544 | ||||||
Less: Non-current | (744,945 | ) | (1,028,886 | ) | ||||
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KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
13. | Borrowings |
Details of borrowings as at September 30, 2020 and December 31, 2019, are as follows:
Debentures |
(in millions of Korean won and foreign currencies in thousands) | September 30, 2020 | December 31, 2019 | ||||||||||||||||||
Type | Maturity | Annual interest rates | Foreign currency | Korean won | Foreign currency | Korean won | ||||||||||||||
MTNP notes 1 | Sep. 7, 2034 | 6.500% | USD | 100,000 | USD | 100,000 | ||||||||||||||
MTNP notes | Jul. 18, 2026 | 2.500% | USD | 400,000 | 469,400 | USD | 400,000 | 463,120 | ||||||||||||
MTNP notes | Aug. 7, 2022 | 2.625% | USD | 400,000 | 469,400 | USD | 400,000 | 463,120 | ||||||||||||
FR notes 2 | Aug. 23, 2020 | — | — | — | USD | 200,000 | 231,560 | |||||||||||||
FR notes 2 | Aug. 23, 2023 | LIBOR (3M) +0.90% | USD | 100,000 | 117,350 | USD | 100,000 | 115,780 | ||||||||||||
MTNP notes | Jul. 6, 2020 | — | — | — | JPY | 4,000,000 | 42,539 | |||||||||||||
MTNP notes | Jul. 6, 2021 | 0.380% | JPY | 16,000,000 | 177,930 | JPY | 16,000,000 | 170,155 | ||||||||||||
MTNP notes | Nov. 13, 2020 | 0.300% | JPY | 30,000,000 | 333,618 | JPY | 30,000,000 | 319,041 | ||||||||||||
MTNP notes | Jul. 19, 2022 | 0.220% | JPY | 29,600,000 | 329,170 | JPY | 29,600,000 | 314,787 | ||||||||||||
MTNP notes | Jul. 19, 2024 | 0.330% | JPY | 400,000 | 4,448 | JPY | 400,000 | 4,254 | ||||||||||||
FR notes 2 | Nov. 1, 2024 | LIBOR(3M)+0.980% | USD | 350,000 | 410,725 | USD | 350,000 | 405,230 | ||||||||||||
FR notes 2 | Jun. 19, 2023 | SOR(6M)+0.5% | SGD | 284,000 | 242,919 | — | — | |||||||||||||
MTNP notes | Sep. 1, 2025 | 1.000% | USD | 400,000 | 469,400 | — | — | |||||||||||||
The 180-2nd Public bond | Apr. 26, 2021 | 4.710% | — | 380,000 | — | 380,000 | ||||||||||||||
The 181-3rd Public bond | Aug. 26, 2021 | 4.090% | — | 250,000 | — | 250,000 | ||||||||||||||
The 182-2nd Public bond | Oct. 28, 2021 | 4.310% | — | 100,000 | — | 100,000 | ||||||||||||||
The 183-2nd Public bond | Dec. 22, 2021 | 4.090% | — | 90,000 | — | 90,000 | ||||||||||||||
The 183-3rd Public bond | Dec. 22, 2031 | 4.270% | — | 160,000 | — | 160,000 | ||||||||||||||
The 184-2nd Public bond | Apr. 10, 2023 | 2.950% | — | 190,000 | — | 190,000 | ||||||||||||||
The 184-3rd Public bond | Apr. 10, 2033 | 3.170% | — | 100,000 | — | 100,000 | ||||||||||||||
The 185-2nd Public bond | Sep. 16, 2020 | — | — | — | — | 300,000 | ||||||||||||||
The 186-3rd Public bond | Jun. 26, 2024 | 3.418% | — | 110,000 | — | 110,000 | ||||||||||||||
The 186-4th Public bond | Jun. 26, 2034 | 3.695% | — | 100,000 | — | 100,000 | ||||||||||||||
The 187-3rd Public bond | Sep. 2, 2024 | 3.314% | — | 170,000 | — | 170,000 | ||||||||||||||
The 187-4th Public bond | Sep. 2, 2034 | 3.546% | — | 100,000 | — | 100,000 | ||||||||||||||
The 188-1st Public bond | Jan. 29, 2020 | — | — | — | — | 160,000 | ||||||||||||||
The 188-2nd Public bond | Jan. 29, 2025 | 2.454% | — | 240,000 | — | 240,000 | ||||||||||||||
The 188-3rd Public bond | Jan. 29, 2035 | 2.706% | — | 50,000 | — | 50,000 | ||||||||||||||
The 189-2nd Public bond | Jan. 28, 2021 | 1.946% | — | 130,000 | — | 130,000 | ||||||||||||||
The 189-3rd Public bond | Jan. 28, 2026 | 2.203% | — | 100,000 | — | 100,000 | ||||||||||||||
The 189-4th Public bond | Jan. 28, 2036 | 2.351% | — | 70,000 | — | 70,000 | ||||||||||||||
The 190-1st Public bond | Jan. 29, 2021 | 2.548% | — | 110,000 | — | 110,000 | ||||||||||||||
The 190-2nd Public bond | Jan. 30, 2023 | 2.749% | — | 150,000 | — | 150,000 | ||||||||||||||
The 190-3rd Public bond | Jan. 30, 2028 | 2.947% | — | 170,000 | — | 170,000 | ||||||||||||||
The 190-4th Public bond | Jan. 30, 2038 | 2.931% | — | 70,000 | — | 70,000 | ||||||||||||||
The 191-1st Public bond | Jan. 14, 2022 | 2.048% | — | 220,000 | — | 220,000 | ||||||||||||||
The 191-2nd Public bond | Jan. 15, 2024 | 2.088% | — | 80,000 | — | 80,000 |
23
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(in millions of Korean won and foreign currencies in thousands) | September 30, 2020 | December 31, 2019 | ||||||||||||||||||||||
Type | Maturity | Annual interest rates | Foreign currency | Korean won | Foreign currency | Korean won | ||||||||||||||||||
The 191-3rd Public bond | Jan. 15, 2029 | 2.160% | — | 110,000 | — | 110,000 | ||||||||||||||||||
The 191-4th Public bond | Jan. 14, 2039 | 2.213% | — | 90,000 | — | 90,000 | ||||||||||||||||||
The 192-1st Public bond | Oct. 11, 2022 | 1.550% | — | 340,000 | — | 340,000 | ||||||||||||||||||
The 192-2nd Public bond | Oct. 11, 2024 | 1.578% | — | 100,000 | — | 100,000 | ||||||||||||||||||
The 192-3rd Public bond | Oct. 11, 2029 | 1.622% | — | 50,000 | — | 50,000 | ||||||||||||||||||
The 192-4th Public bond | Oct. 11, 2039 | 1.674% | — | 110,000 | — | 110,000 | ||||||||||||||||||
The 193-1st Public bond | Jun. 16, 2023 | 1.174% | — | 150,000 | — | — | ||||||||||||||||||
The 193-2nd Public bond | Jun. 17, 2025 | 1.434% | — | 70,000 | — | — | ||||||||||||||||||
The 193-3rd Public bond | Jun. 17, 2030 | 1.608% | — | 20,000 | — | — | ||||||||||||||||||
The 193-4th Public bond | Jun. 15, 2040 | 1.713% | — | 60,000 | — | — | ||||||||||||||||||
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| |||||||||||||||||
Subtotal | — | 7,381,710 | — | 7,045,366 | ||||||||||||||||||||
Less: Current portion | — | (1,380,909 | ) | — | (1,052,033 | ) | ||||||||||||||||||
Discount on bonds | — | (22,522 | ) | — | (20,780 | ) | ||||||||||||||||||
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| |||||||||||||||||
Total | — | — | ||||||||||||||||||||||
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|
1 | As at September 30, 2020, the Company has outstanding notes in the amount of USD 100 million with fixed interest rates under Medium Term Note Program (“MTNP”) registered in the Singapore Stock Exchange, which allowed issuance of notes of up to USD 2,000 million. However, the MTN program has been terminated since 2007. |
2 | The Libor (3M) and the SOR (6M) is approximately 0.234% and 0.26% as at September 30, 2020, respectively. |
Long-term borrowings
(in millions of Korean won) | ||||||||||||||||||||
Financial institution | Type | Maturity | Annual interest rates | September 30, 2020 | December 31, 2019 | |||||||||||||||
Export-Import Bank of Korea | Inter-Korean Cooperation Fund | 1 | July 10, 2026 | 1.500 | % | |||||||||||||||
CA-CIB | Long-term commercial papers | May 15, 2023 | 1.260 | % | 100,000 | — | ||||||||||||||
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| |||||||||||||||||
Subtotal |
| 102,960 | 3,454 | |||||||||||||||||
Less: Current portion |
| (493 | ) | (493 | ) | |||||||||||||||
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| |||||||||||||||||
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1 | Inter-Korean Cooperation Fund is repayable in installments over 13 years after a seven-year grace period. |
24
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Repayment schedule of the Company’s debentures and borrowings including the portion of current liabilities as at September 30, 2020, is as follows:
Bonds | ||||||||||||||||||||
(in millions of Korean won) | In local currency | In foreign currency | Sub- total | Borrowings | Total | |||||||||||||||
Oct. 1, 2020 ~ Sep. 30, 2021 | ||||||||||||||||||||
Oct. 1, 2021 ~ Sep. 30, 2022 | 410,000 | 798,570 | 1,208,570 | 493 | 1,209,063 | |||||||||||||||
Oct. 1, 2022 ~ Sep. 30, 2023 | 830,000 | 360,269 | 1,190,269 | 100,493 | 1,290,762 | |||||||||||||||
Oct. 1, 2023 ~ Sep. 30, 2024 | 360,000 | 4,448 | 364,448 | 493 | 364,941 | |||||||||||||||
After Oct. 1, 2024 | 1,770,000 | 1,466,875 | 3,236,875 | 988 | 3,237,863 | |||||||||||||||
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14. | Provisions |
Changes in provisions for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | ||||||||||||||||
(in millions of Korean won) | Litigation | Restoration cost | Others | Total | ||||||||||||
Beginning balance | ||||||||||||||||
Increase (transfer) | 1,578 | (639 | ) | 26,129 | 27,068 | |||||||||||
Usage | (1,506 | ) | (1,015 | ) | (5,477 | ) | (7,998 | ) | ||||||||
Reversal | (11 | ) | (1,786 | ) | (19,520 | ) | (21,317 | ) | ||||||||
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| |||||||||
Ending balance | ||||||||||||||||
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| |||||||||
Current | ||||||||||||||||
Non-current | — | 82,052 | 2,588 | 84,640 |
2019 | ||||||||||||||||
(in millions of Korean won) | Litigation | Restoration cost | Others | Total | ||||||||||||
Beginning balance | ||||||||||||||||
Increase (transfer) | — | 6,000 | 6,937 | 12,937 | ||||||||||||
Usage | — | (2,163 | ) | (8,903 | ) | (11,066 | ) | |||||||||
Reversal | — | (4,529 | ) | (14,000 | ) | (18,529 | ) | |||||||||
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| |||||||||
Ending balance | ||||||||||||||||
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| |||||||||
Current | ||||||||||||||||
Non-current | — | 109,503 | 2,671 | 112,174 |
25
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
15. | Net Defined Benefit Liabilities |
The amounts recognized in the statements of financial position as at September 30, 2020 and December 31, 2019, are determined as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Present value of defined benefit obligations | ||||||||
Fair value of plan assets | (1,429,555 | ) | (1,499,984 | ) | ||||
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|
|
| |||||
Liabilities, net | ||||||||
|
|
|
|
Changes in the defined benefit obligations for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Beginning | ||||||||
Current service cost | 107,199 | 105,492 | ||||||
Interest expense | 25,236 | 27,548 | ||||||
Benefit paid | (103,386 | ) | (32,067 | ) | ||||
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|
|
| |||||
Ending | ||||||||
|
|
|
|
Changes in the fair value of plan assets for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Beginning | ||||||||
Interest income | 21,331 | 20,252 | ||||||
Remeasurements on plan assets | 1,908 | (1,202 | ) | |||||
Benefits paid | (93,668 | ) | (29,695 | ) | ||||
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|
| |||||
Ending | ||||||||
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|
|
Amounts recognized in the separate statement of profit or loss for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Current service cost | ||||||||
Net interest cost | 3,905 | 7,296 | ||||||
Account transfers | (12,434 | ) | (12,037 | ) | ||||
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| |||||
Total expenses | ||||||||
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|
|
26
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
16. | Commitments and Contingencies |
As at September 30, 2020, major commitments with local financial institutions are as follows:
(in millions of Korean won and foreign currencies in thousands) | Financial institution | Currency | Limit | Used amount | ||||||||
Bank overdraft | Kookmin Bank and others | KRW | 1,480,000 | — | ||||||||
Inter-Korean Cooperation Fund | Export-Import Bank of Korea | KRW | 37,700 | 2,960 | ||||||||
Economic Cooperation Business Insurance | Export-Import Bank of Korea | KRW | 3,240 | 1,732 | ||||||||
Collateralized loan on electronic accounts receivable-trade | Shinhan Bank and others | KRW | 317,000 | 8,659 | ||||||||
Plus electronic notes payable | Industrial Bank of Korea | KRW | 50,000 | 158 | ||||||||
Derivatives transaction limit | Korea Development Bank | KRW | 100,000 | 6,888 | ||||||||
Woori Bank and others | USD | 69,054 | 31,851 | |||||||||
Total | KRW | 1,987,940 | 20,397 | |||||||||
|
|
|
| |||||||||
USD | 69,054 | 31,851 | ||||||||||
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|
|
As at September 30, 2020, guarantees received from financial institutions are as follows:
(in millions of Korean won and foreign currencies in thousands) | Financial institution | Currency | Limit | |||||||
Comprehensive credit line | KEB Hana Bank | KRW | 4,100 | |||||||
USD | 8,700 | |||||||||
Refund guarantee for advances received | Korea Development Bank | USD | 1,859 | |||||||
Bid guarantee | Korea Software Financial Cooperative | KRW | 64,705 | |||||||
Performance guarantee / warranty guarantee | KRW | 358,424 | ||||||||
Guarantee for advances received / others | KRW | 285,880 | ||||||||
Guarantee for payment in foreign currency | Kookmin Bank | USD | 16,948 | |||||||
Shinhan Bank | USD | 8,072 | ||||||||
Woori Bank | USD | 15,000 | ||||||||
Performance guarantee | Korea Development Bank | USD | 7,369 | |||||||
Performance guarantee | Seoul Guarantee Insurance | KRW | 9,236 | |||||||
Guarantees for licensing | KRW | 4,071 | ||||||||
Guarantee for deposits | KRW | 1,712 | ||||||||
|
| |||||||||
Total | KRW | 728,128 | ||||||||
USD | 57,948 | |||||||||
|
|
The Company is jointly and severally obligated with KT Sat Co., Ltd. to pay KT Sat Co., Ltd.’s liabilities incurred prior to spin-off. As at September 30, 2020, the Company and KT Sat Co., Ltd. are jointly and severally liable for reimbursement ofW 1,697 million.
27
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
For the nine-month period ended September 30, 2020, the Company made agreements with the Securitization Specialty Companies (2020: First 5G Forty ninth to Fifty third Securitization Specialty Co., Ltd., 2019: Giga LTE Forty third to Forty eighth Securitization Specialty Co., Ltd.), and disposed of its trade receivables related to handset sales. The Company also made asset management agreements with each securitization specialty company and in accordance with the agreement the Company will receive asset management fees upon liquidation of securitization specialty company.
As at September 30, 2020, the Company is a defendant in 164 lawsuits with the total claimed amount ofW 73,047 million. As at September 30, 2020, litigation provisions ofW 64,102 million for pending lawsuits and unasserted claims are recorded as liabilities for potential loss in the ordinary course of business. The final outcomes of the cases cannot be estimated at the end of the reporting period.
According to the financial and other covenants included in certain debentures and borrowings, the Company is required to maintain certain financial ratios such as debt-to-equity ratio, use the funds for the designated purpose and report to the creditors periodically. The covenant also contains restriction on provision of additional collateral and disposal of certain assets.
As at September 30, 2020, the Company participates in Algerie Sidi Abdela new town development consortium (percentage of ownership: 2.5%) and has joint liability with other consortium participants.
As at September 30, 2020, contract amount of property and equipment and intangible assets acquisition agreement made but not yet recognized amounts toW 784,406 million (December 31, 2019:W 850,054 million).
28
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
17. | Leases |
Set out below is information for leases when the Company is a lessee. Information for when the Company is a lessor is provided in Note 10.
The separate statement of financial position shows the following amounts relating to leases:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Right-of-use assets | ||||||||
Property and buildings | ||||||||
Machinery and track facilities | 63,597 | 138,678 | ||||||
Others | 33,397 | 45,095 | ||||||
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| |||||
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| |||||
Investment properties(buildings) |
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Lease liabilities 1 | ||||||||
Current | ||||||||
Non-current | 251,842 | 342,633 | ||||||
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| |||||
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|
|
1 | Included in the line item ‘other current liabilities and non-current liabilities’ in the separate statement of financial position (Note 8) |
For the nine-month period ended September 30, 2020, right-of-use assets has increased toW 221,647 million.
The separate statement of profit or loss for the nine-month periods ended 30 September 2020 and 2019 shows the following amounts relating to leases:
(in millions of Korean won) | 2020 | 2019 | ||||||
Depreciation of right-of-use assets | ||||||||
Property and buildings | ||||||||
Machinery and track facilities | 45,887 | 68,920 | ||||||
Others | 16,268 | 14,538 | ||||||
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| |||||
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|
|
| |||||
Depreciation of investment properties | ||||||||
Interest expense relating to lease liabilities | 23,934 | 32,097 | ||||||
Expense relating to short-term leases | 3,061 | 3,229 | ||||||
Expense relating to leases of low-value assets that are not short-term leases | 11,560 | 12,175 |
The total cash outflow for leases for the nine-month periods ended September 30, 2020 and 2019 wasW 350,364 million andW 338,144 million, respectively.
29
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
18. | Retained Earnings |
Details of retained earnings as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Legal reserve 1 | ||||||||
Voluntary reserves 2 | 4,651,362 | 4,651,362 | ||||||
Unappropriated retained earnings | 5,815,359 | 5,436,376 | ||||||
|
|
|
| |||||
Total | ||||||||
|
|
|
|
1 | The Commercial Code of the Republic of Korea requires the Company to appropriate, as a legal reserve, an amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued share capital. The reserve is not available for the payment of cash dividends, but may be transferred to share capital with the approval of the Company’s Board of Directors or used to reduce accumulated deficits, if any, with the ratification of the Company’s majority shareholders. |
2 | In accordance with the Restrictions on Special Taxation Act, R&D and HR related reserves under the voluntary reserves are separately accumulated when retained earnings from tax reserve funds are disposed, when income tax is recalculated from tax return adjustments. |
19. | Other Components of Equity |
The Company’s other components of equity as at September 30, 2020 and December 31, 2019, are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Treasury stock | ||||||||
Loss on disposal of treasury stock | (3,149 | ) | (1,690 | ) | ||||
Share-based payments | 28,260 | 7,769 | ||||||
Others | (181,733 | ) | (181,733 | ) | ||||
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|
|
| |||||
Total | ||||||||
|
|
|
|
As at September 30, 2020 and December 31, 2019, the details of treasury stock are as follows:
September 30, 2020 | December 31, 2019 | |||||||
Number of shares (in shares) | 15,739,783 | 15,870,258 | ||||||
Amount (in millions of Korean won) |
Treasury stock is expected to be used as stock compensation for the Company’s directors, employees and other purposes.
30
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
20. | Revenue from Contracts with Customers and Relevant Contract Assets and Liabilities |
The Company has recognized the following amounts relating to revenue in the statement of profit or loss for the three-month and nine-month periods ended September 30, 2020 and 2019:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Revenue from contracts with customers | ||||||||||||||||
Revenue from other sources | 46,401 | 136,165 | 48,106 | 142,032 | ||||||||||||
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| |||||||||
Total revenue | ||||||||||||||||
|
|
|
|
|
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|
|
Operating revenues for the three-month and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Services provided | ||||||||||||||||
Sales of goods | 714,752 | 1,990,002 | 938,912 | 2,430,274 | ||||||||||||
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|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
Revenues from services provided are recognized over time, and sales of goods are recognized at a point of time.
The contract assets, liabilities and deferred revenue recognized in relation to revenue from contracts with customers are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Contract assets 1 | ||||||||
Contract liabilities 1 | 381,752 | 411,456 | ||||||
Deferred revenue 2 | 77,195 | 78,872 |
1 | The Company recognized contract assets of |
2 | Deferred revenue recognized relating to government grants is excluded. |
The contract costs recognized as assets are as follows:
(in millions of Korean won) | September 30, 2020 | December 31, 2019 | ||||||
Incremental costs of contract establishment | ||||||||
Costs of contract performance | 136,558 | 124,934 |
The Company recognizedW 1,383,625 million of operating expenses in the current reporting period (2019:W 1,243,197 million) which relate to contract cost assets.
31
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
The Company did not recognize an impairment loss in anticipation of full recovery of costs recognized as assets.
For the three-month and nine-month periods ended September 30, 2020 and 2019, the recognized revenue arising from carried-forward contract liabilities and deferred revenue from prior year are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Revenue recognized that was included in the contract liability balance at the beginning of the year | ||||||||||||||||
Allocation of the transaction price | ||||||||||||||||
Deferred revenue of joining/installment fees | 9,734 | 30,460 | 9,770 | 32,593 | ||||||||||||
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|
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| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
21. | Operating Expenses |
Operating expenses for the three-month and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Salaries and wages | ||||||||||||||||
Depreciation | 584,403 | 1,745,381 | 551,014 | 1,659,933 | ||||||||||||
Depreciation of right-of-use assets | 93,865 | 288,770 | 111,338 | 337,752 | ||||||||||||
Amortization of intangible assets | 124,973 | 393,585 | 139,236 | 422,175 | ||||||||||||
Commissions | 394,000 | 1,141,574 | 395,187 | 1,156,231 | ||||||||||||
Interconnection charges | 133,484 | 399,231 | 132,118 | 404,087 | ||||||||||||
International interconnection fees | 45,633 | 135,775 | 70,328 | 181,562 | ||||||||||||
Purchase of inventories | 698,486 | 2,317,926 | 1,173,281 | 2,918,198 | ||||||||||||
Changes of inventories | (189,927 | ) | (172,281 | ) | (32,820 | ) | 27,655 | |||||||||
Sales commissions | 641,899 | 1,836,635 | 620,252 | 1,813,600 | ||||||||||||
Service costs | 509,775 | 846,883 | 166,803 | 491,271 | ||||||||||||
Purchase of contents | 137,622 | 437,288 | 142,335 | 422,086 | ||||||||||||
Utilities | 90,982 | 245,644 | 89,472 | 233,133 | ||||||||||||
Taxes and dues | 76,708 | 184,605 | 74,972 | 178,900 | ||||||||||||
Rent | 27,277 | 81,424 | 27,923 | 84,930 | ||||||||||||
Insurance premiums | 15,430 | 45,873 | 19,685 | 51,008 | ||||||||||||
Installation fees | 109,731 | 316,082 | 116,607 | 344,263 | ||||||||||||
Advertising expenses | 30,509 | 82,771 | 32,838 | 106,316 | ||||||||||||
Research and development expenses | 42,098 | 120,239 | 40,544 | 121,069 | ||||||||||||
Others | 117,529 | 363,031 | 108,351 | 313,283 | ||||||||||||
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| |||||||||
Total | ||||||||||||||||
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32
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Details of employee benefits for the three-month and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Short-term employee benefits | ||||||||||||||||
Post-employment benefits (defined benefits) | 32,916 | 98,670 | 33,339 | 100,751 | ||||||||||||
Post-employment benefits (defined contributions) | 12,699 | 33,790 | 9,776 | 28,800 | ||||||||||||
Share-based payments | 22,685 | 25,279 | 1,820 | 4,798 | ||||||||||||
Others | 1,950 | 9,486 | 1,067 | 5,098 | ||||||||||||
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| |||||||||
Total | ||||||||||||||||
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|
|
|
|
|
|
22. | Other Income and Other Expenses |
Other income for the three-month and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Gain on disposal of property and equipment | ||||||||||||||||
Gain on disposal of right-of-use assets | 944 | 1,491 | 918 | 3,569 | ||||||||||||
Gain on disposal of intangible assets | 340 | 424 | — | 840 | ||||||||||||
Compensation on property and equipment | 38,968 | 112,749 | 23,102 | 85,770 | ||||||||||||
Dividends received | 5,800 | 132,025 | 2,184 | 128,390 | ||||||||||||
Gain on government subsidies | 3,155 | 9,883 | 3,455 | 10,431 | ||||||||||||
Others | 12,735 | 22,807 | 7,127 | 23,085 | ||||||||||||
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| |||||||||
Total | ||||||||||||||||
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33
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Other expenses for the three-month and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Loss on disposal of property and equipment | ||||||||||||||||
Loss on disposal of right-of-use assets | 462 | 6,270 | 236 | 1,756 | ||||||||||||
Loss on disposal of intangible assets | 1,568 | 1,958 | 709 | 3,064 | ||||||||||||
Loss on disposal of investments in associates | — | 117 | — | 5,619 | ||||||||||||
Impairment loss on investments in associates | 1,681 | 1,681 | 68,800 | 68,800 | ||||||||||||
Impairment loss on assets held for sale 1 | — | 14,629 | — | — | ||||||||||||
Donations | 2,276 | 13,721 | 22,956 | 66,756 | ||||||||||||
Others | 31,189 | 78,255 | 25,522 | 61,306 | ||||||||||||
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| |||||||||
Total | ||||||||||||||||
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|
1 | Impairment loss was recognized after being classified as an asset held for sale in the current quarter and subsequently disposed. |
34
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
23. | Finance Income and Costs |
Details of finance income for the three-month and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Interest income | ||||||||||||||||
Gain on foreign currency transactions | 2,296 | 8,968 | 10,251 | 17,685 | ||||||||||||
Gain on foreign currency translation | 5,515 | 12,474 | 2,742 | 8,152 | ||||||||||||
Gain on settlement of derivatives | 6,850 | 6,850 | — | 6,332 | ||||||||||||
Gain on valuation of derivatives | (47,942 | ) | 58,991 | 77,749 | 153,579 | |||||||||||
Others | 1 | 7 | 28 | 3,188 | ||||||||||||
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| |||||||||
Total | ||||||||||||||||
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|
|
|
|
|
|
|
Details of finance costs for the three-month and nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||||||||||
(in millions of Korean won) | Three months | Nine months | Three months | Nine months | ||||||||||||
Interest expenses | ||||||||||||||||
Loss on foreign currency transactions | 9,833 | 15,295 | 10,079 | 22,191 | ||||||||||||
Loss on foreign currency translation | (50,956 | ) | 61,538 | 79,659 | 161,371 | |||||||||||
Loss on valuation of derivatives | 9,581 | 15,493 | — | — | ||||||||||||
Loss on disposal of trade receivables | 1,312 | 6,040 | 3,049 | 6,560 | ||||||||||||
Others | (67 | ) | 689 | — | — | |||||||||||
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| |||||||||
Total | ||||||||||||||||
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|
24. | Income Tax Expense |
Income tax expense is recognized based on the best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual income tax rate used for the year ending December 31, 2020 is 26.23%.
25. | Earnings per Share |
Basic earnings per share is calculated by dividing the profit from operations attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares purchased by the Company and held as treasury stock.
Basic earnings per share from operations for the three-month and nine-month periods ended September 30, 2020 and 2019, are calculated as follows:
35
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
2020 | 2019 | |||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Profit attributable to ordinary shares | ||||||||||||||||
(in millions of Korean won) | ||||||||||||||||
Weighted average number of ordinary shares outstanding | 245,372,025 | 245,286,249 | 245,152,955 | 245,147,603 | ||||||||||||
(in number of shares) | ||||||||||||||||
Basic earnings per share | ||||||||||||||||
(in Korean won) |
Diluted earnings per share from operations is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has dilutive potential ordinary shares from other share-based payments.
Diluted earnings per share from operations for the three-month and nine-month periods ended September 30, 2020 and 2019, are calculated as follows:
2020 | 2019 | |||||||||||||||
Three months | Nine months | Three months | Nine months | |||||||||||||
Profit attributable to ordinary shares | ||||||||||||||||
(in millions of Korean won) | ||||||||||||||||
Diluted profit attributable to ordinary shares | ||||||||||||||||
(in millions of Korean won) | ||||||||||||||||
Number of dilutive potential ordinary shares outstanding | 99,815 | 119,290 | 88,595 | 93,947 | ||||||||||||
(in number of shares) | ||||||||||||||||
Weighted average number of ordinary shares outstanding | 245,471,840 | 245,405,539 | 245,241,550 | 245,241,550 | ||||||||||||
(in number of shares) | ||||||||||||||||
Diluted earnings per share | ||||||||||||||||
(in Korean won) |
Diluted earnings per share is earnings per outstanding of ordinary shares and dilutive potential ordinary shares. Diluted earnings per share is calculated by dividing adjusted profit for the period by the sum of the number of ordinary shares and dilutive potential ordinary shares excluding other share-based payments without dilutive effect.
36
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
26. | Cash Generated from Operations |
Cash flows from operating activities for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
1. Profit for the period | ||||||||
2. Adjustments for: | ||||||||
Income tax expense | 230,773 | 180,023 | ||||||
Interest income | (186,653 | ) | (191,610 | ) | ||||
Interest expense | 184,394 | 205,353 | ||||||
Dividends income | (132,033 | ) | (128,895 | ) | ||||
Depreciation | 1,768,333 | 1,704,957 | ||||||
Amortization of intangible assets | 395,129 | 425,102 | ||||||
Depreciation of right-of-use assets | 288,770 | 321,903 | ||||||
Provisions for severance benefits (defined benefits) | 111,104 | 112,788 | ||||||
Allowance for bad debts | 63,530 | 62,828 | ||||||
Loss on disposal of investments in subsidiaries, associates and joint ventures | 117 | 5,619 | ||||||
Impairment loss on interests in subsidiaries, associates and joint ventures | 1,681 | 68,800 | ||||||
Loss on disposal of property and equipment | 32,548 | 30,407 | ||||||
Loss on disposal of intangible assets | 1,534 | 2,224 | ||||||
Loss (gain) on disposal of right-of-use assets | 4,779 | (1,813 | ) | |||||
Loss on foreign currency translation | 49,064 | 153,219 | ||||||
Gain on valuation of derivatives, net | (50,348 | ) | (159,911 | ) | ||||
Loss (gain) on valuation of financial assets at fair value through profit or loss | 112 | (170 | ) | |||||
Loss (gain) on disposal of financial assets at fair value through profit or loss | 576 | (2,515 | ) | |||||
Others | (11,902 | ) | (67,490 | ) | ||||
3. Changes in operating assets and liabilities | ||||||||
Increase in trade receivables | (186,832 | ) | (475,603 | ) | ||||
Decrease (increase) in finance lease receivables | (1,740 | ) | 694 | |||||
Increase in other receivables | (56,271 | ) | (27,742 | ) | ||||
Decrease (increase) in other current assets | 5,479 | (433,847 | ) | |||||
Increase in other non-current assets | (36,132 | ) | (125,449 | ) | ||||
Increase (decrease) in inventories | (140,466 | ) | 16,446 | |||||
Increase in trade payables | 229,780 | 463,031 | ||||||
Increase (decrease) in other payables | (149,292 | ) | 79,041 | |||||
Increase in other current liabilities | 43,311 | 81,441 | ||||||
Decrease in other non-current liabilities | (1,423 | ) | (3,498 | ) | ||||
Increase (decrease) in provisions | 3,476 | (15,090 | ) | |||||
Increase (decrease) deferred revenue | 15,853 | (9,321 | ) |
37
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(in millions of Korean won) | 2020 | 2019 | ||||||
Post-employment benefits paid (defined benefits) | (103,723 | ) | (51,275 | ) | ||||
Decrease in plan assets | 93,879 | 46,864 | ||||||
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|
|
| |||||
4. Cash generated from operations (1+2+3) | ||||||||
|
|
|
|
Significant transactions not affecting cash flows for the nine-month periods ended September 30, 2020 and 2019, are as follows:
(in millions of Korean won) | 2020 | 2019 | ||||||
Reclassification of the current portion of borrowings | ||||||||
Reclassification of construction-in-progress to property and equipment | 1,364,518 | 1,451,381 | ||||||
Reclassification of other payables from property and equipment | (374,316 | ) | 194,906 | |||||
Reclassification of right-of-use assets from property and equipment | — | (209,703 | ) | |||||
Reclassification of other payables from intangible assets | (339,208 | ) | (339,208 | ) | ||||
Reclassification of other payables from defined benefit liabilities | (337 | ) | (19,208 | ) | ||||
Reclassification of other payables from plan assets | (211 | ) | (17,169 | ) |
27. | Cash Generated from Financing Activities |
Changes in liabilities arising from financial activities for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | ||||||||||||||||||||||||||||
Non-cash | ||||||||||||||||||||||||||||
(in millions of Korean won) | Beginning | Cash flows | Newly acquired | Exchange differences | Fair value changes | Others | Ending | |||||||||||||||||||||
Borrowings | ||||||||||||||||||||||||||||
Financial lease liabilities | 638,614 | (335,743 | ) | 205,380 | — | — | (1,365 | ) | 506,886 | |||||||||||||||||||
Derivative liabilities | 18,632 | — | — | 3,200 | 11,152 | (6,797 | ) | 26,187 | ||||||||||||||||||||
Derivative assets | (55,423 | ) | 16,452 | — | (51,178 | ) | (21,718 | ) | 6,777 | (105,090 | ) | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 | ||||||||||||||||||||||||||||
Non-cash | ||||||||||||||||||||||||||||
(in millions of Korean won) | Beginning | Cash flows | Newly acquired | Exchange differences | Fair value changes | Others | Ending | |||||||||||||||||||||
Borrowings | ||||||||||||||||||||||||||||
Financial lease liabilities | 163,710 | (322,740 | ) | 877,113 | — | — | (498 | ) | 717,585 | |||||||||||||||||||
Derivative liabilities | 61,833 | — | — | — | — | (54,075 | ) | 7,758 | ||||||||||||||||||||
Derivative assets | (29,843 | ) | 33,635 | — | (150,563 | ) | (19,578 | ) | 47,354 | (118,995 | ) | |||||||||||||||||
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| |||||||||||||||
Total | ||||||||||||||||||||||||||||
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38
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
28. | Related Party Transactions |
The list of related party of the Company as at September 30, 2020, is as follows:
Relationship | Name of Entity | |
Subsidiaries | KT Hitel Co., Ltd., KTCS Corporation, KTIS Corporation, KT Service Bukbu Co., Ltd., KT Service Nambu Co., Ltd., KT Powertel Co., Ltd., KT Linkus Co., Ltd., KT Telecop Co., Ltd., KTDS Co., Ltd., Nasmedia, Inc., KT M Hows Co., Ltd., KT M&S Co., Ltd., GENIE Music Corporation (KT Music Corporation), KT Estate Inc., KT Skylife Co., Ltd., H&C Network, KTGDH Co., Ltd. (KTSB Data Service Co., Ltd.), KT Sat Co., Ltd., KT Submarine Co., Ltd., KT Sports Co., Ltd., KT Strategic Investment Fund No.2, KT Music Contents Fund 1, KT America, Inc. (Korea Telecom America, Inc.), KT Japan Co., Ltd. (Korea Telecom Japan Co., Ltd.), Korea Telecom China Co., Ltd., KT Dutch B.V., KT AMC, KT Commerce Inc., BC Card Co., Ltd., VP Inc., BC Card Science and Technology (Shanghai) Co., Ltd., Skylife TV Co., Ltd., Initech Co., Ltd., Smartro Co., Ltd., East Telecom LLC, KT NEXR Co., Ltd., KT Rwanda Networks Ltd., KT Belgium, KT ORS Belgium, KT-Michigan Global Contents Fund, Autopion Co., Ltd., KBTO sp.zo.o, AOS Ltd., KT M Mobile Co., Ltd., KT investment Co., Ltd, PT. BC Card Asia Pacific, Whowho&Company Co., Ltd., KT Hongkong Telecommunications Co., Ltd., KT Strategic Investment Fund No.3, PlayD Co., Ltd. (N search Marketing Co., Ltd.), Korea Telecom Singapore Pte, Ltd., Texnoprosistem LLC, KT Music Contents Fund No.2, KT Strategic Investment Fund No.4, BC-VP Strategic Investment Fund No.1, KT MOS Bukbu Co., Ltd., KT MOS Nambu Co., Ltd., Nasmedia Thailand Co., Ltd., Next Connect PFV, KT Huimangjieum, KT Strategic Investment Fund No.5 GE Premier 1st Corporate Restructuring Real Estate Investment Trust Company, K-REALTY RENTAL HOUSING REIT 3, Storywiz., Ltd., KT ENGCORE Co., Ltd. | |
Associates | KIF Investment Fund, K-REALTY CR REITs No.1,Boston Global Film & Contents Fund L.P., QTT Global (Group) Company Limited, CU Industrial Development Co., Ltd, KD Living, Inc., Oscar Ent. Co., Ltd., LoginD Co., Ltd., K-REALTY CR-REIT 6, K Bank Inc., ISU-kth Contents Investment Fund, Daiwon Broadcasting Co., Ltd., KT-DSC creative economy youth start-up investment fund, Korea Electronic Vehicle Charging Service, K-REALTY RENTAL HOUSING REIT 2, AI RESEARCH INSTITUTE, KT-IBKC Future Investment Fund 1, Gyeonggi-KT Yoojin Superman Fund, FUNDA Co., Ltd, CHAMP IT Co., Ltd., Alliance Internet Corp., Little big pictures, Virtua Realm Sendirian Berhad, KT Philippines KT-Smart Factory Investment Fund, Studio Discovery Co., Ltd., KT Young Entrepreneurs DNA Investment Fund, Hyundai Robotics Co., Ltd. | |
Others 1 | KHS Corporation |
1 | Although the entity is not a related party of the Company in accordance with Korean IFRS 1024, the entity belongs to the Large Enterprise Group in which the Company also belongs in accordance with the Monopoly Regulation and Fair Trade Act. |
39
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
The amount of installment handset sales receivable inherited from KTIS Corporation, KTCS Corporation and KT M&S Co., Ltd. for the nine-month period ended September 30, 2020 isW 405,436 million.
The Company has entered into an additional agreement with KT M Mobile Co., Ltd. regarding wholesale provision of telecommunication services. In connection with the agreement, the Company offsets receivables, partially or in-full, against payables for joining mobile telecommunications services and network usage arising from telecommunication operations.
Outstanding balances of receivables and payables in relation to transactions with related parties as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||||||||||||||||||
Receivables | Payables | |||||||||||||||||||||||||||
(in millions of Korean won) | Trade receivables | Loans and others | Other receivables | Lease receivables | Trade payables | Other payables | Lease liabilities | |||||||||||||||||||||
Subsidiaries | ||||||||||||||||||||||||||||
KT Linkus Co., Ltd. | ||||||||||||||||||||||||||||
KT Telecop Co., Ltd. | 1,178 | — | 148 | — | 572 | 26,834 | 10 | |||||||||||||||||||||
KTCS Corporation | 793 | — | 4,266 | — | — | 49,384 | — | |||||||||||||||||||||
KTIS Corporation | 537 | — | 2,641 | — | — | 38,870 | — | |||||||||||||||||||||
KT Service Bukbu Co., Ltd. | 11 | — | 5 | 4 | — | 17,754 | — | |||||||||||||||||||||
KT Service Nambu Co., Ltd. | 1 | — | — | — | — | 24,036 | — | |||||||||||||||||||||
KT Skylife Co., Ltd. | 1,770 | — | 6,471 | — | — | 8,050 | — | |||||||||||||||||||||
KTDS Co., Ltd. | 125 | — | 15,367 | — | 129 | 84,988 | — | |||||||||||||||||||||
KT Estate Inc. | — | — | 52,126 | — | — | 10,182 | 69,414 | |||||||||||||||||||||
Skylife TV Co., Ltd 2 | — | 3,687 | 67 | — | — | 1,791 | — | |||||||||||||||||||||
BC Card Co., Ltd.1 | 707 | — | 6,755 | — | — | 686 | — | |||||||||||||||||||||
KT Sat Co., Ltd. | 3,221 | — | 354 | — | — | 1,226 | — | |||||||||||||||||||||
KT Hitel Co., Ltd. | 2,123 | — | 365 | — | 12,784 | 6,326 | — | |||||||||||||||||||||
KT Commerce Inc. | 169 | — | — | — | 1,673 | 22,247 | — | |||||||||||||||||||||
KT M Hows Co., Ltd. | 137 | — | — | — | — | 2,877 | — | |||||||||||||||||||||
KT M&S Co., Ltd. | 128 | 4,200 | 283 | — | — | 96,205 | — | |||||||||||||||||||||
GENIE Music Corporation (KT Music Corporation) | 227 | — | 330 | — | — | 17,907 | — | |||||||||||||||||||||
KT M Mobile Co., Ltd. | 16,021 | — | 389 | — | — | 6,201 | — | |||||||||||||||||||||
Nasmedia, Inc. | 4,925 | — | — | — | — | 517 | — | |||||||||||||||||||||
KT MOS Bukbu Co., Ltd. | 15 | — | 3,751 | — | — | 13,520 | — |
40
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
September 30, 2020 | ||||||||||||||||||||||||||||
Receivables | Payables | |||||||||||||||||||||||||||
(in millions of Korean won) | Trade receivables | Loans and others | Other receivables | Lease receivables | Trade payables | Other payables | Lease liabilities | |||||||||||||||||||||
KT MOS Nambu Co., Ltd. | 2 | — | — | — | — | 9,385 | — | |||||||||||||||||||||
KT ENGCORE Co., Ltd. | 40 | — | 4,432 | — | 23 | 103,482 | — | |||||||||||||||||||||
Others | 3,955 | 500 | 4,355 | — | 408 | 8,482 | — | |||||||||||||||||||||
Associates and joint ventures | ||||||||||||||||||||||||||||
K-REALTY CR REITs No.1 | — | — | 20,200 | — | — | — | 31,997 | |||||||||||||||||||||
K Bank Inc. | 296 | — | — | — | — | — | — | |||||||||||||||||||||
Others | 74 | — | 1 | — | — | — | — | |||||||||||||||||||||
Others | ||||||||||||||||||||||||||||
KHS Corporation | — | — | — | — | — | 218 | — | |||||||||||||||||||||
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|
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| |||||||||||||||
Total | ||||||||||||||||||||||||||||
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|
|
|
|
|
|
December 31, 2019 | ||||||||||||||||||||||||||||
Receivables | Payables | |||||||||||||||||||||||||||
(in millions of Korean won) | Trade receivables | Loans and others | Other receivables | Lease receivables | Trade payables | Other payables | Lease liabilities | |||||||||||||||||||||
Subsidiaries | ||||||||||||||||||||||||||||
KT Linkus Co., Ltd. | ||||||||||||||||||||||||||||
KT Telecop Co., Ltd. | 849 | — | 96 | — | 1,791 | 2,985 | 10 | |||||||||||||||||||||
KTCS Corporation | 63 | — | — | — | — | 52,550 | 2 | |||||||||||||||||||||
KTIS Corporation | 986 | — | 3,099 | — | — | 37,257 | — | |||||||||||||||||||||
KT Service Bukbu Co., Ltd. | 16 | — | 9 | 30 | — | 20,992 | — | |||||||||||||||||||||
KT Service Nambu Co., Ltd. | — | — | 17 | — | — | 22,612 | — | |||||||||||||||||||||
KT Skylife Co., Ltd. | 5,243 | — | 2,795 | — | — | 14,647 | — | |||||||||||||||||||||
KTDS Co., Ltd. | 307 | — | 925 | — | — | 85,327 | — | |||||||||||||||||||||
KT Estate Inc. | 834 | — | 46,064 | — | — | 43,780 | 86,018 | |||||||||||||||||||||
Skylife TV Co., Ltd 2 | 7 | 3,687 | — | — | — | 2,524 | — | |||||||||||||||||||||
BC Card Co., Ltd.1 | 4,255 | — | 77 | — | — | 1,153 | — | |||||||||||||||||||||
KT Sat Co., Ltd. | 576 | — | 1 | — | — | 1,954 | — | |||||||||||||||||||||
KT Hitel Co., Ltd. | 1,794 | — | 386 | — | 17,380 | 7,192 | — |
41
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
December 31, 2019 | ||||||||||||||||||||||||||||
Receivables | Payables | |||||||||||||||||||||||||||
(in millions of Korean won) | Trade receivables | Loans and others | Other receivables | Lease receivables | Trade payables | Other payables | Lease liabilities | |||||||||||||||||||||
KT Commerce Inc. | 89 | — | — | — | 8,837 | 36,750 | — | |||||||||||||||||||||
KT M Hows Co., Ltd. | 119 | — | 61 | — | — | 2,665 | — | |||||||||||||||||||||
KT M&S Co., Ltd. | 200 | 4,235 | 10 | — | — | 91,693 | — | |||||||||||||||||||||
GENIE Music Corporation (KT Music Corporation) | 185 | — | 4 | — | 8,705 | 4,023 | — | |||||||||||||||||||||
KT M Mobile Co., Ltd. | 10,394 | — | — | — | — | 752 | — | |||||||||||||||||||||
Nasmedia, Inc. | 6,727 | — | 13 | — | — | 933 | — | |||||||||||||||||||||
KT MOS Bukbu Co., Ltd. | 7 | — | — | — | — | 9,169 | — | |||||||||||||||||||||
KT MOS Nambu Co., Ltd. | 2 | — | 2,390 | — | — | 8,698 | — | |||||||||||||||||||||
Others | 3,534 | 500 | 4,080 | — | 382 | 10,146 | 6 | |||||||||||||||||||||
Associates and joint ventures | ||||||||||||||||||||||||||||
K-REALTY CR REITs No.1 | — | — | 23,100 | — | — | — | 57,907 | |||||||||||||||||||||
K Bank Inc. | 188 | — | — | — | — | — | — | |||||||||||||||||||||
Others | 402 | — | 2 | — | — | — | — | |||||||||||||||||||||
Others | ||||||||||||||||||||||||||||
KT ENGCORE Co., Ltd. | — | — | 9,401 | — | 85 | 147,369 | 74 | |||||||||||||||||||||
KHS Corporation | — | — | — | — | — | 2 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | As at September 30, 2020, |
2 | As at September 30, 2020, the convertible bonds issued by Skylife TV Co., Ltd. amounting to |
42
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Significant transactions with related parties for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | ||||||||||||||||||||||||||||||||
Sales | Purchases | Acquisition of right-of-use assets | Finance income | Finance costs | Dividends received | |||||||||||||||||||||||||||
(in millions of Korean won) | Operating revenue | Other income | Operating expenses | Others 1 | ||||||||||||||||||||||||||||
Subsidiaries | ||||||||||||||||||||||||||||||||
KT Linkus Co., Ltd. | ||||||||||||||||||||||||||||||||
KT Telecop Co., Ltd. | 8,056 | — | 35,347 | — | — | — | 1 | — | ||||||||||||||||||||||||
KTCS Corporation | 54,933 | 75 | 237,821 | 1,404 | — | — | — | 254 | ||||||||||||||||||||||||
KTIS Corporation | 36,909 | — | 216,682 | — | — | 1 | — | 918 | ||||||||||||||||||||||||
KT Service Bukbu Co., Ltd. | 10,580 | 3 | 151,077 | — | — | 1 | — | — | ||||||||||||||||||||||||
KT Service Nambu Co., Ltd. | 8,803 | 3 | 182,485 | 20 | — | — | — | — | ||||||||||||||||||||||||
KT Skylife Co., Ltd. | 24,044 | 13 | 29,633 | — | — | — | 2 | 8,368 | ||||||||||||||||||||||||
KTDS Co., Ltd. | 10,133 | 1 | 250,943 | 4 | — | 1 | — | 5,208 | ||||||||||||||||||||||||
KT Estate Inc. | 8,101 | — | 93,347 | — | 1 | — | 1,314 | 42,680 | ||||||||||||||||||||||||
Skylife TV Co., Ltd. | 2,677 | — | 5,370 | — | — | 67 | — | — | ||||||||||||||||||||||||
BC Card Co., Ltd. | 6,927 | 24 | 22,243 | — | — | 4 | — | 52,013 | ||||||||||||||||||||||||
KT Sat Co., Ltd. | 11,433 | — | 9,752 | — | — | — | — | — | ||||||||||||||||||||||||
KT Hitel Co., Ltd. | 19,389 | — | 44,664 | 793 | — | — | — | — | ||||||||||||||||||||||||
KT Commerce Inc. | 710 | — | 106,918 | 40,308 | — | — | — | — | ||||||||||||||||||||||||
KT M Hows Co., Ltd. | 1,068 | — | 486 | — | — | — | — | 1,520 | ||||||||||||||||||||||||
KT M&S Co., Ltd. | 301,159 | 65 | 146,694 | — | — | — | — | — | ||||||||||||||||||||||||
GENIE Music Corporation | 3,312 | — | 42,740 | — | — | — | — | — | ||||||||||||||||||||||||
KT M Mobile Co., Ltd. | 63,930 | — | 6,525 | — | — | — | — | — | ||||||||||||||||||||||||
Nasmedia, Inc. | 443 | — | 4,893 | — | — | — | — | 2,470 | ||||||||||||||||||||||||
KT MOS Nambu Co., Ltd. | 1,342 | 5 | 44,979 | 6,994 | — | — | — | — | ||||||||||||||||||||||||
KT MOS Bukbu Co., Ltd. | 1,822 | — | 47,228 | — | — | — | — | — | ||||||||||||||||||||||||
KT ENGCORE Co., Ltd. | 208 | — | 22,603 | 103,868 | — | — | 1 | — | ||||||||||||||||||||||||
Others | 17,081 | 5 | 34,927 | — | — | 5 | 1 | 1,294 | ||||||||||||||||||||||||
Associates and joint ventures |
| |||||||||||||||||||||||||||||||
K-REALTY CR REITs No.1 | — | — | — | — | — | — | 1,008 | 8,061 | ||||||||||||||||||||||||
K Bank Inc. | 1,790 | — | 3 | — | — | — | — | — | ||||||||||||||||||||||||
KIF Investment Fund | — | — | — | — | — | — | — | 9,241 | ||||||||||||||||||||||||
Others | 372 | 70 | 2,453 | — | — | — | — | — | ||||||||||||||||||||||||
Others | ||||||||||||||||||||||||||||||||
KT ENGCORE Co., Ltd.2 | 149 | — | 25,082 | 61,409 | — | — | — | — | ||||||||||||||||||||||||
KHS Corporation | 25 | — | 8,056 | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Amounts include acquisition of property, equipment, and others. |
2 | Transactions before reclassification as a subsidiary of the Company |
43
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
2019 | ||||||||||||||||||||||||||||||||
Sales | Purchases | Acquisition of right-of-use assets | Finance income | Finance costs | Dividends received | |||||||||||||||||||||||||||
(in millions of Korean won) | Operating revenue | Other income | Operating expenses | Others 1 | ||||||||||||||||||||||||||||
Subsidiaries | ||||||||||||||||||||||||||||||||
KT Linkus Co., Ltd. | ||||||||||||||||||||||||||||||||
KT Telecop Co., Ltd. | 12,396 | — | 13,180 | 4,335 | — | 6 | 3 | — | ||||||||||||||||||||||||
KTCS Corporation | 50,011 | 1 | 249,116 | 2,407 | — | 2 | 1,397 | 286 | ||||||||||||||||||||||||
KTIS Corporation | 40,080 | 1 | 220,019 | 77 | — | 1 | 93 | 816 | ||||||||||||||||||||||||
KT Service Bukbu Co., Ltd. | 12,139 | 1 | 156,014 | — | — | 2 | — | — | ||||||||||||||||||||||||
KT Service Nambu Co., Ltd. | 11,246 | — | 187,680 | 61 | — | 1 | — | — | ||||||||||||||||||||||||
KT Skylife Co., Ltd. | 28,250 | 1 | 41,130 | 57 | — | — | 6 | 8,368 | ||||||||||||||||||||||||
KTDS Co., Ltd. | 11,434 | 8 | 207,478 | 27,715 | — | 1 | — | 4,440 | ||||||||||||||||||||||||
KT Estate Inc. | 7,779 | 59 | 129,915 | 21,100 | 179 | — | 1,978 | 48,671 | ||||||||||||||||||||||||
Skylife TV Co., Ltd. | 3,066 | — | 6,643 | — | — | 69 | — | — | ||||||||||||||||||||||||
BC Card Co., Ltd. | 8,970 | 28 | 22,373 | — | 2 | 4 | — | 43,140 | ||||||||||||||||||||||||
KT Sat Co., Ltd. | 3,351 | 1 | 12,836 | — | — | — | — | 4,400 | ||||||||||||||||||||||||
KT Hitel Co., Ltd. | 14,941 | 1 | 42,299 | 3,363 | — | — | — | — | ||||||||||||||||||||||||
KT Commerce Inc. | 690 | — | 72,103 | 74,530 | — | — | — | — | ||||||||||||||||||||||||
KT M Hows Co., Ltd. | 1,171 | — | 1,096 | — | — | — | — | 836 | ||||||||||||||||||||||||
KT M&S Co., Ltd. | 347,093 | — | 169,183 | 49 | — | — | 1,616 | — | ||||||||||||||||||||||||
GENIE Music Corporation | 1,585 | — | 38,594 | — | — | — | — | — | ||||||||||||||||||||||||
KT M Mobile Co., Ltd. | 52,848 | — | 5,170 | — | — | — | — | — | ||||||||||||||||||||||||
Nasmedia, Inc. | 355 | — | 468 | — | — | — | — | 1,983 | ||||||||||||||||||||||||
KT MOS Nambu Co., Ltd. | 1,402 | — | 45,026 | 434 | — | — | — | — | ||||||||||||||||||||||||
KT MOS Bukbu Co., Ltd. | 1,729 | — | 48,010 | 1,542 | — | — | — | — | ||||||||||||||||||||||||
Others | 18,439 | 111 | 37,484 | 1,148 | 770 | 18 | 6 | 243 | ||||||||||||||||||||||||
Associates and joint ventures |
| |||||||||||||||||||||||||||||||
K-REALTY CR REITs No.1 | — | — | — | — | — | — | 1,718 | 10,928 | ||||||||||||||||||||||||
K Bank Inc. | 1,837 | — | 1 | — | — | — | — | — | ||||||||||||||||||||||||
KIF Investment Fund | — | — | — | — | — | — | — | 4,279 | ||||||||||||||||||||||||
Others | 402 | 70 | 3,113 | — | — | — | — | — | ||||||||||||||||||||||||
Others | ||||||||||||||||||||||||||||||||
KT ENGCORE Co., Ltd. | 330 | 10 | 62,200 | 120,757 | — | — | 1 | — | ||||||||||||||||||||||||
KHS Corporation | 24 | — | 11,704 | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Amounts include acquisition of property, equipment, and others. |
44
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
Key management compensation for the nine-month periods ended September 30, 2020 and 2019, consists of:
(in millions of Korean won) | 2020 | 2019 | ||||||
Salaries and other short-term benefits | ||||||||
Post-employment benefits | 285 | 247 | ||||||
Stock-based compensation | 4,209 | 668 | ||||||
|
|
|
| |||||
Total | ||||||||
|
|
|
|
Fund transactions with related parties for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | ||||||||||||||||||||
Loan transactions | Borrowing transactions1 | Equity contributions in cash | ||||||||||||||||||
(in millions of Korean won) | Loans | Collections | Borrowings | Refunds | ||||||||||||||||
Subsidiaries | ||||||||||||||||||||
KTIS Corporation | ||||||||||||||||||||
KT Estate Inc. | — | — | 1 | 20,240 | — | |||||||||||||||
KBTO Sp.z o.o. | — | — | — | — | 1,681 | |||||||||||||||
KT M&S Co., Ltd. | 13,200 | 13,235 | — | — | — | |||||||||||||||
Storywiz., Ltd. | 202 | 202 | — | — | 14,000 | |||||||||||||||
KT ENGCORE Co., Ltd. | — | — | — | 21 | 28,000 | |||||||||||||||
Others | — | — | — | 84 | 8,001 | |||||||||||||||
Associates and joint ventures | ||||||||||||||||||||
KT-Smart Factory Investment Fund | — | — | — | — | 2,000 | |||||||||||||||
K-REALTY CR REIT 1 | — | — | — | 18,934 | — | |||||||||||||||
KT-CKP New Media Investment Fund | — | — | — | — | (148 | ) | ||||||||||||||
KT Young Entrepreneurs DNA Investment Fund | — | — | — | — | 3,300 | |||||||||||||||
Hyundai Robotics Co., Ltd. | — | — | — | — | 50,000 | |||||||||||||||
Gyeonggi-KT Yoojin Fund | — | — | — | — | 1,000 | |||||||||||||||
Others | ||||||||||||||||||||
KT ENGCORE Co., Ltd.2 | — | — | — | 34 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
1 | Borrowing transactions include lease transactions. |
2 | Transactions before reclassification as a subsidiary of the Company |
45
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
2019 | ||||||||||||||||||||
Loan transactions | Borrowing transactions1 | Equity contributions in cash | ||||||||||||||||||
(in millions of Korean won) | Loans | Collections | Borrowings | Refunds | ||||||||||||||||
Subsidiaries | ||||||||||||||||||||
KT Linkus Co., Ltd. | ||||||||||||||||||||
KTCS Corporation | — | — | — | 5 | — | |||||||||||||||
KTIS Corporation | — | — | — | 21 | — | |||||||||||||||
KT Estate Inc. | — | — | 177 | 19,689 | — | |||||||||||||||
BC Card Co., Ltd. | — | — | 2 | — | — | |||||||||||||||
KTGDH Co., Ltd. (KTSB Data Service Co., Ltd.) | — | — | — | — | 3,440 | |||||||||||||||
KT Strategic Investment Fund No.5 | — | — | — | — | 6,000 | |||||||||||||||
KT Huimangjieum | — | — | — | — | 1,500 | |||||||||||||||
KBTO Sp.z o.o. | — | — | — | — | 1,897 | |||||||||||||||
KT Music Contents Fund 1 | — | — | — | — | (1,050 | ) | ||||||||||||||
Others | — | — | 372 | 394 | — | |||||||||||||||
Associates and joint ventures | ||||||||||||||||||||
KT-DSC creative economy youth start-up investment fund, | — | — | — | — | (360 | ) | ||||||||||||||
KT-IBKC Future Investment Fund 1, | — | — | — | — | 3,250 | |||||||||||||||
Virtua Realm Sendirian Berhad, | — | — | — | — | 550 | |||||||||||||||
K-REALTY CR REITs No.1 | — | — | — | 20,941 | — | |||||||||||||||
KT Philippines | — | — | — | — | 99 | |||||||||||||||
KT-CKP New Media Investment Fund | — | — | — | — | (174 | ) | ||||||||||||||
K Bank Inc. | — | — | — | — | 21,782 | |||||||||||||||
Others | ||||||||||||||||||||
KT ENGCORE Co., Ltd. | — | — | — | 97 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
1 | Borrowing transactions include lease transactions. |
At the end of the reporting period, the Company entered into a credit card agreement with a limit ofW 4,719 million (December 31, 2019:W 4,851 million) with BC Card Co., Ltd.
At the end of reporting period, there are no collateral and payment guarantees provided by the related parties.
46
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
29. | Fair Value |
During the period ended September 30, 2020, there have been no significant changes in the business or economic environment that affect the fair value of the Company’s financial assets and liabilities.
(1) | Fair Value of Financial Instruments by Category |
Carrying amount and fair value of financial instruments by category as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | December 31, 2019 | |||||||||||||||
(in millions of Korean won) | Carrying amount | Fair value | Carrying amount | Fair value | ||||||||||||
Financial assets | ||||||||||||||||
Cash and cash equivalents | 1 | 1 | ||||||||||||||
Trade and other receivables | ||||||||||||||||
Financial assets measured at amortized cost2 | 3,157,106 | 1 | 3,035,777 | 1 | ||||||||||||
Financial assets at fair value through profit or loss | 1,313,736 | 1,256,266 | ||||||||||||||
Other financial assets | ||||||||||||||||
Financial assets measured at amortized cost | 72,501 | 1 | 72,329 | 1 | ||||||||||||
Financial assets at fair value through profit or loss | 136,123 | 136,123 | 131,344 | 131,344 | ||||||||||||
Financial assets at fair value through other comprehensive income | 20,861 | 20,861 | 20,974 | 20,974 | ||||||||||||
Derivative financial assets for hedging | 105,090 | 105,090 | 55,423 | 55,423 | ||||||||||||
|
|
|
| |||||||||||||
Total | ||||||||||||||||
|
|
|
| |||||||||||||
Financial liabilities | ||||||||||||||||
Trade and other payables2 | 1 | 1 | ||||||||||||||
Borrowings | 7,462,148 | 1 | 7,028,040 | 1 | ||||||||||||
Other financial liabilities | ||||||||||||||||
Derivative financial liabilities for hedging | 26,187 | 26,187 | 18,632 | 18,632 | ||||||||||||
|
|
|
| |||||||||||||
Total | ||||||||||||||||
|
|
|
|
1 | The Company did not conduct fair value estimation since the book amount is a reasonable approximation of the fair value. |
2 | With the application of Korean IFRS 1107, lease receivables and lease liabilities are excluded from fair value disclosure. |
47
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(2) | Fair Value Hierarchy |
To provide an indication about the reliability of the inputs used in determining fair value, the Company classifies its financial instruments into the three levels prescribed under the accounting standards. Financial instruments that are measured at fair value are categorized by the fair value hierarchy, and the defined levels are as follows:
• | Quoted prices (unadjusted) in active markets for identical assets or liabilities that an entity can access at the measurement date (Level 1). |
• | All inputs other than quoted prices included in level 1 that are observable (either directly that is, prices, or indirectly that is, derived from prices) for the asset or liability (Level 2). |
• | Unobservable inputs for the asset or liability (Level 3). |
Fair value hierarchy classifications of financial assets and financial liabilities that are measured at fair value or its fair value is disclosed as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||||||
(in millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Trade and other receivables | ||||||||||||||||
Financial assets at fair value through other comprehensive income | ||||||||||||||||
Other financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | 120 | — | 136,003 | 136,123 | ||||||||||||
Financial assets at fair value through other comprehensive income | 2,315 | — | 18,546 | 20,861 | ||||||||||||
Derivative financial assets for hedging | — | 75,026 | 30,064 | 105,090 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Other financial liabilities | ||||||||||||||||
Derivative financial liabilities for hedging | — | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
48
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
December 31, 2019 | ||||||||||||||||
(in millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Trade and other receivables | ||||||||||||||||
Financial assets at fair value through other comprehensive income | ||||||||||||||||
Other financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | 232 | — | 131,112 | 131,344 | ||||||||||||
Financial assets at fair value through other comprehensive income | 2,010 | — | 18,964 | 20,974 | ||||||||||||
Derivative financial assets for hedging | — | 37,781 | 17,642 | 55,423 | ||||||||||||
Investment properties | — | — | 1,825,297 | 1,825,297 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Other financial liabilities | ||||||||||||||||
Derivative financial liabilities for hedging | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
49
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(3) | Transfers Between Fair Value Hierarchy Levels of Recurring Fair Value Measurements |
There are no transfers between Level 1 and Level 2 of the fair value hierarchy for the recurring fair value measurements.
Details of changes in Level 3 of the fair value hierarchy for the recurring fair value measurements are as follows:
2020 | ||||||||||||
Financial assets | ||||||||||||
(in millions of Korean won) | Financial assets at fair value through profit or loss | Financial assets at fair value through other comprehensive income | Derivative financial assets for hedging | |||||||||
Beginning balance | ||||||||||||
Amount recognized in profit or loss | — | — | 5,211 | |||||||||
Amount recognized in other comprehensive income | — | — | 7,211 | |||||||||
Acquisition amount | 5,828 | — | — | |||||||||
Transfers | — | — | — | |||||||||
Disposal amount | (937 | ) | (418 | ) | — | |||||||
|
|
|
|
|
| |||||||
Ending balance | ||||||||||||
|
|
|
|
|
|
2019 | ||||||||||||||||
Financial assets | Financial liabilities | |||||||||||||||
(in millions of Korean won) | Financial assets at fair value through profit or loss | Financial assets at fair value through other comprehensive income | Derivative financial assets(liabilities) for hedging | Financial liabilities at fair value through profit or loss | ||||||||||||
Beginning balance | ||||||||||||||||
Amount recognized in profit or loss | — | — | 32,211 | — | ||||||||||||
Amount recognized in other comprehensive income | — | — | 11,542 | — | ||||||||||||
Acquisition amount | 27,927 | — | — | — | ||||||||||||
Disposal amount | (147 | ) | — | — | — | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Ending balance | ||||||||||||||||
|
|
|
|
|
|
|
|
50
Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(4) | Valuation Techniques and Inputs |
Valuation techniques and inputs used in the recurring and non-recurring fair value measurements and disclosed fair value categorized within Level 2 and Level 3 of the fair value hierarchy as at September 30, 2020 and December 31, 2019, are as follows:
September 30, 2020 | ||||||||||||
(in millions of Korean won) | Fair value | Level | Valuation techniques | |||||||||
Assets | ||||||||||||
Trade and other receivables | ||||||||||||
Financial assets at fair value through other comprehensive income | 2 | DCF Model | ||||||||||
Other financial assets | ||||||||||||
Financial assets at fair value through profit or loss | 136,003 | 3 | | DCF Model, Adjusted net asset model |
| |||||||
Financial assets at fair value through other comprehensive income | 18,546 | 3 | DCF Model | |||||||||
Derivative financial assets for hedging | 75,026 | 2 | DCF Model | |||||||||
30,064 | 3 | | Hull-White Model, DCF Model |
| ||||||||
Liabilities | ||||||||||||
Other financial liabilities | ||||||||||||
Derivative financial liabilities for hedging | 2 | DCF Model |
December 31, 2019 | ||||||||||||
(in millions of Korean won) | Fair value | Level | Valuation techniques | |||||||||
Assets | ||||||||||||
Trade and other receivables | ||||||||||||
Financial assets at fair value through other comprehensive income | 2 | DCF Model | ||||||||||
Other financial assets | ||||||||||||
Financial assets at fair value through profit or loss | 131,112 | 3 | | DCF Model, Adjusted net asset model |
| |||||||
Financial assets at fair value through other comprehensive income | 18,964 | 3 | DCF Model | |||||||||
Derivative financial assets for hedging | 37,781 | 2 | DCF Model | |||||||||
17,642 | 3 | | Hull-White Model, DCF Model |
| ||||||||
Investment properties | 1,825,297 | 3 | DCF Model | |||||||||
Liabilities | ||||||||||||
Other financial liabilities | ||||||||||||
Derivative financial liabilities for hedging | 18,632 | 2 | DCF Model |
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Table of Contents
KT Corporation
Notes to the Separate Interim Financial Statements
September 30, 2020 and 2019 (Unaudited), and December 31, 2019
(5) | Valuation Processes for Fair Value Measurements Categorized Within Level 3 |
The Company uses external experts that perform the fair value measurements required for financial reporting purposes. External experts report directly to the chief financial officer (CFO), and discuss valuation processes and results with the CFO in line with the Company’s closing dates.
(6) | Gains and Losses on Valuation at the Transaction Date |
In the case that the Company values derivative financial instruments using inputs not based on observable market data, and the fair value calculated by the said valuation technique differs from the transaction price, then the fair value of the financial instruments is recognized as the transaction price. The difference between the fair value at initial recognition and the transaction price is deferred and amortized using a straight-line method by maturity of the financial instrument. However, in the case that the inputs of the valuation techniques become observable in markets, the remaining deferred difference is immediately recognized in full in profit or loss.
In relation to this, details and changes of the total deferred difference for the nine-month periods ended September 30, 2020 and 2019, are as follows:
2020 | 2019 | |||||||
(in millions of Korean won) | Derivatives used for hedging | Derivatives used for hedging | ||||||
I. Beginning balance | ||||||||
II. New transactions | — | — | ||||||
III. Recognized at fair value through profit or loss | (1,069 | ) | (1,069 | ) | ||||
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IV. Ending balance (I+II+III) | ||||||||
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