6-K 1 d16951d6k.htm FORM 6-K Form 6-K
Table of Contents

 

 

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 September 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-

 

 

 


Table of Contents

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: September 1, 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

June 30, 2020 and 2019


Table of Contents

KT Corporation and Subsidiaries

Index

June 30, 2020 and 2019

 

 

     Page(s)  

Report on Review of Interim Financial Statements

     1 – 2  

Consolidated Interim Financial Statements

  

Consolidated Interim Statements of Financial Position

     3 – 4  

Consolidated Interim Statements of Profit or Loss

     5  

Consolidated Interim Statements of Comprehensive Income

     6  

Consolidated Interim Statements of Changes in Equity

     7 – 8  

Consolidated Interim Statements of Cash Flows

     9 – 10  

Notes to the Consolidated Interim Financial Statements

     11 – 61  


Table of Contents
LOGO    LOGO

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 June 30, 2020, and the related consolidated interim statements of profit or loss and comprehensive income for the three-month and six-month periods ended June 30, 2020 and 2019, and consolidated interim statements of changes in equity and cash flows for the six-month periods ended June 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.sarnil.com


Table of Contents

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.

 

LOGO

Seoul, Korea

August 14, 2020

 

This report is effective as of August 14, 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


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Financial Position

June 30, 2020 and December 31, 2019

 

 

(in millions of Korean won)    Notes   

June 30, 2020

(Unaudited)

     December 31, 2019  

Assets

        

Current assets

        

Cash and cash equivalents

   4    W 2,942,236      W 2,305,894  

Trade and other receivables, net

   4,5      5,683,349        5,906,445  

Other financial assets

   4,6      1,140,390        868,388  

Current tax assets

        1,230        68,120  

Inventories, net

   7      640,575        665,498  

Current assets held for sale

   9      82,992        83,602  

Other current assets

   8      1,989,727        2,000,308  
     

 

 

    

 

 

 

Total current assets

        12,480,499        11,898,255  
     

 

 

    

 

 

 

Non-current assets

        

Trade and other receivables, net

   4,5      1,217,078        1,181,797  

Other financial assets

   4,6      541,597        821,658  

Property and equipment, net

   10      13,454,522        13,785,299  

Right-of-use assets

   17      752,314        788,497  

Investment properties, net

   10      1,491,534        1,387,430  

Intangible assets, net

   10      2,647,536        2,834,037  

Investments in associates and joint ventures

   11      315,429        267,660  

Deferred tax assets

        410,891        411,171  

Other non-current assets

   8      692,035        685,488  
     

 

 

    

 

 

 

Total non-current assets

        21,522,936        22,163,037  
     

 

 

    

 

 

 

Total assets

      W 34,003,435      W     34,061,292  
     

 

 

    

 

 

 

 

3


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Financial Position

June 30, 2020 and December 31, 2019

 

 

(in millions of Korean won)    Notes   

June 30, 2020

(Unaudited)

    December 31, 2019  

Liabilities

       

Current liabilities

       

Trade and other payables

   4,12    W 6,601,683     W 7,597,478  

Borrowings

   4,13      1,667,309       1,185,725  

Other financial liabilities

   4, 6      1,728       943  

Current tax liabilities

        340,429       66,266  

Provisions

   14      185,163       175,612  

Deferred income

        51,763       53,474  

Other current liabilities

   8      1,061,804       1,031,958  
     

 

 

   

 

 

 

Total current liabilities

        9,909,879       10,111,456  
     

 

 

   

 

 

 

Non-current liabilities

       

Trade and other payables

   4,12      811,058       1,082,219  

Borrowings

   4,13      6,320,309       6,113,142  

Other financial liabilities

   4,6      162,525       149,136  

Net defined benefit liabilities

   15      472,844       365,663  

Provisions

   14      124,485       78,549  

Deferred income

   20      98,351       99,180  

Deferred tax liabilities

        316,151       425,468  

Other non-current liabilities

   8      414,053       449,526  
     

 

 

   

 

 

 

Total non-current liabilities

        8,719,776       8,762,883  
     

 

 

   

 

 

 

Total liabilities

        18,629,655       18,874,339  
     

 

 

   

 

 

 

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      11,934,464       11,637,185  

Accumulated other comprehensive income

        39,251       194,934  

Other components of equity

   19      (1,155,911     (1,170,083
     

 

 

   

 

 

 
        13,822,561       13,666,793  

Non-controlling interests

        1,551,219       1,520,160  
     

 

 

   

 

 

 

Total equity

        15,373,780       15,186,953  
     

 

 

   

 

 

 

Total liabilities and equity

      W 34,003,435     W 34,061,292  
     

 

 

   

 

 

 

The above consolidated interim statements of financial position should be read in conjunction with the accompanying notes.

 

4


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Profit or Loss

Three-Month and Six-Month Periods Ended June 30, 2020 and 2019

 

 

          Six-Month Periods Ended June 30  
(in millions of Korean won, except per share amounts)    Notes    2020
(Unaudited)
    2019
(Unaudited)
 
          Three months     Six months     Three months     Six months  

Operating revenue

   20    W 5,876,503     W 11,708,219     W 6,098,533     W 11,932,910  

Operating expenses

   21      5,534,640       10,983,278       5,810,277       11,242,564  
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

        341,863       724,941       288,256       690,346  

Other income

   22      61,273       110,130       68,643       132,712  

Other expenses

   22      78,024       137,017       60,225       123,815  

Finance income

   23      24,066       265,714       130,605       248,006  

Finance costs

   23      36,423       280,378       138,858       261,766  

Share of net profits (losses) of associates and joint ventures

   11      (4,886     (8,339     (4,825     (4,166
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit before income tax expense

        307,869       675,051       283,596       681,317  

Income tax expense

   24      100,294       240,890       80,529       218,480  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period

      W 207,575     W 434,161     W 203,067     W 462,837  
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit for the period attributable to:

           

Owners of the Controlling Company

      W 176,605     W 384,920     W 173,934     W 405,024  

Non-controlling interest

        30,970       49,241       29,133       57,813  

Earnings per share attributable to the equity holders of the Controlling Company during the period (in Korean won):

   25         

Basic earnings per share

      W 720     W 1,570     W 710     W 1,652  

Diluted earnings per share

        720       1,569       709       1,652  

The above consolidated interim statements of profit or loss should be read in conjunction with the accompanying notes.

 

5


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Comprehensive Income    

Three-Month and Six-Month Periods Ended June 30, 2020 and 2019                     

 

 

            Six-Month Periods Ended June 30  
(in millions of Korean won)    Notes      2020
(Unaudited)
    2019
(Unaudited)
 
            Three months     Six months     Three months     Six months  

Profit for the period

      W 207,575     W 434,161     W 203,067     W 462,837  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

           

Items that will not be reclassified to profit or loss:

           

Remeasurements of the net defined benefit liabilities

     15        (2,625     (3,198     (7,949     (8,175

Share of remeasurement gain of associates and joint ventures

        (768     72       1       662  

Gain (loss) on valuation of equity instruments at fair value
through other comprehensive income

     6        92,972       40,969       63,673       115,522  

Items that may be subsequently reclassified to profit or loss:

           

Valuation gain (loss) on cash flow hedges

     6        (21,379     74,179       31,404       66,340  

Other comprehensive income from cash flow hedges
reclassified to profit or loss

        32,820       (77,209     (26,163     (53,423

Share of other comprehensive income from
associates and joint ventures

        709       578       (615     (1,547

Exchange differences on translation of foreign operations

        (11,954     (9,907     1,272       3,047  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income for the period, net of tax

        89,775       25,484       61,623       122,426  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

      W 297,350     W 459,645     W 264,690     W 585,263  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period attributable to:

           

Owners of the Controlling Company

      W 250,692     W 413,052     W 217,025     W 492,140  

Non-controlling interests

        46,658       46,593       47,665       93,123  

The above consolidated interim statements of comprehensive income should be read in conjunction with the accompanying notes.

 

6


Table of Contents
KT Corporation and Subsidiaries
Consolidated Interim Statements of Changes in Equity

Six-Month Periods Ended June 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
components
of equity
    Total     Non-controlling
interest
    Total equity  

Balance as at January 1, 2019

    W 1,564,499     W 1,440,258     W 11,328,859     W 50,158     W (1,181,083   W 13,202,691     W 1,528,589     W 14,731,280  

Changes in accounting policies

      —         —         (6,149     —         —         (6,149     —         (6,149

Comprehensive income

                 

Profit for the period

      —         —         405,024       —         —         405,024       57,813       462,837  

Remeasurements of net defined benefit liabilities

  15     —         —         (3,223     —         —         (3,223     (4,952     (8,175

Valuation gain on cash flow hedge

  6     —         —         —         12,917       —         12,917       —         12,917  

Share of other comprehensive income of associates and joint ventures

      —         —         —         (1,100     —         (1,100     (447     (1,547

Share of gain on remeasurements of associates and joint ventures

      —         —         650       —         —         650       12       662  

Gain(Loss) on disposal of equity instruments at fair value through other comprehensive income

      —         —         (1,433     —         —         (1,433     1,433       —    

Gain on valuation of financial instruments at fair value through other comprehensive income

      —         —         —         76,587       —         76,587       38,935       115,522  

Exchange differences on translation of foreign operations

      —         —         —         2,718       —         2,718       329       3,047  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

                  401,018       91,122             492,140       93,123       585,263  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

      —               —         —         118       118       —         118  

Others

      —               —         —         2,760       2,760       (3     2,757  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

                  (284,828           18,531       (266,297     (39,478     (305,775
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at June, 2019 (Unaudited)

    W 1,564,499     W 1,440,258     W 11,438,900     W 141,280     W (1,162,552   W 13,422,385     W 1,582,234     W 15,004,619  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

7


Table of Contents

KT Corporation and Subsidiaries    

Consolidated Interim Statements of Changes in Equity    

Six-Month Periods Ended June 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
components
of equity
    Total     Non-controlling
interest
    Total equity  

Balance as at January 1, 2020

    W 1,564,499     W 1,440,258     W 11,637,185     W 194,934     W (1,170,083   W 13,666,793     W 1,520,160     W 15,186,953  

Comprehensive income

                 

Profit for the period

      —         —         384,920       —         —         384,920       49,241       434,161  

Remeasurements of net defined benefit liabilities

    15       —         —         (502     —         —         (502     (2,696     (3,198

Valuation loss on cash flow hedges

    6       —         —         —         (2,935     —         (2,935     (95     (3,030

Share of other comprehensive income of associates and joint ventures

      —         —         —         578       —         578       —         578  

Share of gain on remeasurements of associates and joint ventures

      —         —         (13     —         —         (13     85       72  

Gain on valuation of financial instruments at fair value
through other comprehensive income

      —         —         184,330       (149,086     —         35,244       5,725       40,969  

Exchange differences on translation of foreign operations

      —         —         —         (4,240     —         (4,240     (5,667     (9,907
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

                  568,735       (155,683           413,052       46,593       459,645  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners

                 

Dividends paid by the Controlling Company

      —         —         (269,766     —         —         (269,766     —         (269,766

Dividends paid to non-controlling interests of subsidiaries

      —         —         —         —         —         —         (40,753     (40,753

Appropriations of loss on disposal of treasury stock

      —         —         (1,690     —         1,690       —         —         —    

Change in ownership interest in subsidiaries

      —         —         —         —         11,934       11,934       25,219       37,153  

Disposal of treasury stock

      —               —         —         3,640       3,640       —         3,640  

Others

      —         —         —         —         (3,092     (3,092     —         (3,092
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

                  (271,456           14,172       (257,284     (15,534     (272,818
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at June 30, 2020 (Unaudited)

    W 1,564,499     W 1,440,258     W 11,934,464     W 39,251     W (1,155,911   W 13,822,561     W 1,551,219     W 15,373,780  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The above consolidated interim statements of changes in equity should be read in conjunction with the accompanying notes.

 

8


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Cash Flows

Six-Month Periods Ended June 30, 2020 and 2019

 

 

          Six-Month Period Ended June 30  
(in millions of Korean won)    Notes   

2020

(Unaudited)

   

2019

(Unaudited)

 

Cash flows from operating activities

       

Cash generated from operations

   26    W 2,407,736     W 2,469,048  

Interest paid

        (121,001     (120,585

Interest received

        125,013       138,859  

Dividends received

        13,019       16,400  

Income tax paid

        7,092       (232,092
     

 

 

   

 

 

 

Net cash inflow from operating activities

        2,431,859       2,271,630  
     

 

 

   

 

 

 

Cash flows from investing activities

       

Collection of loans

        35,030       32,344  

Disposal of financial assets at fair value through profit or loss

        196,776       632,625  

Disposal of financial assets at amortized cost

        194,600       288,211  

Disposal of financial assets at fair value through other comprehensive income

        350,964       —    

Disposal of assets held-for-sale

        342       28,172  

Disposal of investments in associates and joint ventures

        110       10,253  

Disposal of property and equipment, and investment properties

        13,558       21,334  

Disposal of intangible assets

        5,795       2,759  

Disposal of right-of-use assets

        213       4,051  

Acquisition of new subsidiary

        11,045       —    

Discontinued operations

        —         2,000  

Loans granted

        (22,293     (24,264

Acquisition of financial assets at fair value through profit or loss

        (369,455     (463,099

Acquisition of financial assets at amortized cost

        (261,137     (220,484

Acquisition of financial assets at fair value through other comprehensive income

        (38     (446

Acquisition of investments in associates and joint ventures

        (59,408     (4,399

Acquisition of property and equipment, and investment properties

        (1,650,921     (1,623,268

Acquisition of intangible assets

        (431,371     (416,016

Acquisition of right-of-use assets

        (5,228     (4,158
     

 

 

   

 

 

 

Net cash outflow from investing activities

        (1,991,418     (1,734,385
     

 

 

   

 

 

 

 

9


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Cash Flows

Six-Month Periods Ended June 30, 2020 and 2019

 

 

            Six-Month Periods Ended June 30  
(in millions of Korean won)    Notes     

2020

(Unaudited)

   

2019

(Unaudited)

 

Cash flows from financing activities

       

Proceeds from borrowings

        1,036,111       584,050  

Settlement of derivative assets and liabilities, net

        —         33,635  

Transaction with Non-controlling interest

        32,329       (4,439

Cash inflow from other financing activities

        —         19,283  

Repayments of borrowings

        (455,516     (1,066,858

Dividends paid

        (310,519     (305,159

Decrease in finance lease liabilities

        (93,314     (251,555

Others

        (13,674     —    
     

 

 

   

 

 

 

Net cash inflow (outflow) from financing activities

        195,417       (991,043
     

 

 

   

 

 

 

Effect of exchange rate change on cash and cash equivalents

        484       501  
     

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

        636,342       (453,297

Cash and cash equivalents

       

Beginning of the period

        2,305,894       2,703,422  
     

 

 

   

 

 

 

End of the period

      W 2,942,236     W 2,250,125  
     

 

 

   

 

 

 

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

June 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 June 30, 2020, the Korean government does not own any shares in the Controlling Company.

 

  1.2

Consolidated Subsidiaries

The consolidated subsidiaries as at June 30, 2020 and December 31, 2019, are as follows:

 

               Controlling percentage
ownership1 (%)
      
Subsidiary    Type of business    Location   

June 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

 

11


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

               Controlling percentage
ownership1 (%)
      
Subsidiary    Type of business    Location   

June 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      30.9      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

 

12


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

               Controlling percentage
ownership1 (%)
      
Subsidiary    Type of business    Location   

June 30,

2020

    

December 31,

2019

     Closing month

PlayD Co., Ltd. (N Search Marketing 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. (Korea Telecom 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.

(Korea Telecom 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      63.5      63.5    December

K-REALTY RENTAL HOUSING REIT 3

  

Residential building

   Korea      100.0      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.

 

13


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

  1.3

Changes in Scope of Consolidation

Subsidiaries newly included/merged in the consolidation during six-month period ended June 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 June 30, 2020 and December 31, 2019 and for the six-month periods ended June 30, 2020 and 2019, is as follows:

 

     June 30, 2020  
(in millions of Korean won)    Total assets      Total liabilities      Operating
revenues
    

Profit (loss)

for the period

 

KT Powertel Co., Ltd.

   W 115,939      W 16,367      W 27,690      W 2,153  

KT Linkus Co., Ltd.

     60,011        54,114        41,725        (2,566

KT Submarine Co., Ltd.

     123,512        19,939        36,023        1,698  

KT Telecop Co., Ltd.

     283,690        159,464        158,320        (1,125

KT Hitel Co., Ltd.

     268,849        71,153        161,998        (4,099

KT Service Bukbu Co., Ltd.

     63,706        59,181        105,215        (1,293

KT Service Nambu Co., Ltd.

     60,548        55,455        124,683        (3,282

BC Card Co., Ltd. 1

     3,957,422        2,640,029        1,666,561        53,789  

H&C Network 1

     269,789        63,453        160,284        462  

Nasmedia Co., Ltd. 1

     344,267        156,710        51,764        9,188  

KTDS Co., Ltd. 1

     143,713        93,253        207,060        3,340  

KT M Hows Co., Ltd.

     82,497        57,350        19,541        3,461  

KT M&S Co., Ltd.

     222,242        191,121        319,535        (1,244

GENIE Music Corporation (KT Music Corporation)

     254,237        97,383        122,348        4,143  

KT MOS Bukbu Co., Ltd.

     32,998        27,981        30,989        482  

KT MOS Nambu Co., Ltd.

     39,508        30,153        33,923        1,820  

KT Skylife Co., Ltd. 1

     868,876        141,591        345,584        39,637  

KT Estate Inc. 1

     1,655,852        297,392        211,102        8,436  

KTGDH Co., Ltd. (KTSB Data Service Co., Ltd.)

     10,800        1,715        2,097        276  

KT Sat Co., Ltd.

     642,452        114,453        86,674        5,126  

KT Sports Co., Ltd.

     22,903        17,752        20,260        (2,115

KT Music Contents Fund No.1

     4,932        1,522        222        175  

KT Music Contents Fund No.2

     14,883        136        39        (106

KT-Michigan Global Content Fund

     11,719        91        99        —    

Autopion Co., Ltd.

     7,525        5,398        3,663        (202

KT M Mobile Co., Ltd.

     135,090        30,635        82,150        (861

 

14


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

     June 30, 2020  
(in millions of Korean won)    Total assets      Total liabilities     

Operating

revenues

    

Profit (loss)

for the period

 

KT Investment Co., Ltd. 1

     73,848        56,046        1,466        556  

KTCS Corporation 1

     361,639        196,350        424,708        6,951  

KTIS Corporation

     307,916        134,823        223,054        8,519  

Next Connect PFV

     378,741        17,892        8        (288

KT Japan Co., Ltd. (Korea Telecom Japan Co., Ltd.)1

     1,791        2,900        905        (38

Korea Telecom China Co., Ltd.

     982        32        426        97  

KT Dutch B.V.

     32,665        11,943        14,679        3,231  

KT America, Inc. (Korea Telecom America, Inc.)

     4,824        554        3,197        169  

KT Rwanda Networks Ltd. 2

     135,649        203,687        8,559        (16,470

KT Belgium

     96,752        9        —          1  

KT ORS Belgium

     7,142        9        —          —    

KBTO sp.zo.o.

     1,239        323        373        (2,230

AOS Ltd. 2

     13,318        6,848        2,787        265  

KT Hong Kong Telecommunications Co., Ltd.

     12,934        9,801        8,390        761  

KT Huimangjieum

     2,486        1,325        1,598        208  

GE Premier 1st Corporate Restructuring Real Estate Investment Trust Co.

     6,225        1,150        153        30  

Storywiz

     22,308        7,144        4,334        (567

KT ENGCORE Co., Ltd.

     159,119        152,011        60,366        1,331  
     December 31, 2019      June 30, 2019  
(in millions of Korean won)    Total assets      Total liabilities     

Operating

revenues

    

Profit (loss)

for the period

 

KT Powertel Co., Ltd.

   W 118,052      W 19,766      W 31,304      W 2,233  

KT Linkus Co., Ltd.

     70,494        62,088        46,837        (1,708

KT Submarine Co., Ltd.

     120,947        18,452        22,666        (552

KT Telecop Co., Ltd.

     279,878        153,841        163,916        (3,541

KT Hitel Co., Ltd.

     279,818        74,769        154,040        2,536  

KT Service Bukbu Co., Ltd.

     64,802        58,984        106,277        (581

KT Service Nambu Co., Ltd.

     63,917        55,548        129,980        776  

BC Card Co., Ltd. 1

     3,912,982        2,594,232        1,746,306        78,645  

H&C Network 1

     282,016        68,401        157,798        1,440  

Nasmedia Co., Ltd. 1

     356,236        203,105        59,304        11,186  

KTDS Co., Ltd. 1

     158,153        105,462        198,222        2,506  

KT M Hows Co., Ltd.

     74,326        50,638        15,423        2,912  

KT M&S Co., Ltd.

     248,142        215,777        372,360        7,456  

 

15


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

     June 30, 2020  
(in millions of Korean won)    Total assets      Total liabilities     

Operating

revenues

    

Profit (loss)

for the period

 

GENIE Music Corporation (KT Music Corporation)

     234,131        80,952        107,687        4,079  

KT MOS Bukbu Co., Ltd.

     33,376        28,841        29,433        433  

KT MOS Nambu Co., Ltd.

     34,258        26,722        29,982        1,063  

KT Skylife Co., Ltd. 1

     848,276        142,839        344,875        32,303  

KT Estate Inc. 1

     1,686,000        295,706        229,822        25,000  

KTGDH Co., Ltd. (KTSB Data Service Co., Ltd.)

     10,437        1,628        1,948        175  

KT Sat Co., Ltd.

     651,195        127,523        80,481        6,851  

KT Sports Co., Ltd.

     15,603        8,333        27,854        2,596  

KT Music Contents Fund No.1

     10,579        1,677        264        124  

KT Music Contents Fund No.2

     7,675        279        255        118  

KT-Michigan Global Content Fund

     11,688        61        199        (95

Autopion Co., Ltd.

     7,460        4,894        2,660        (300

KT M Mobile Co., Ltd.

     135,917        30,603        81,988        (4,707

KT Investment Co., Ltd. 1

     73,463        56,212        1,405        446  

KTCS Corporation 1

     378,171        213,983        460,628        5,823  

KTIS Corporation

     305,798        137,524        230,192        8,419  

Next Connect PFV

     385,412        24,275        974        (454

Korea Telecom Japan Co., Ltd.1

     1,851        2,858        1,041        853  

Korea Telecom China Co., Ltd.

     879        39        334        2  

KT Dutch B.V.

     31,003        50        —          10  

Super iMax LLC

     3,568        5,304        2,260        (141

East Telecom LLC 1

     20,857        16,302        8,159        1,501  

Korea Telecom America, Inc.

     4,611        537        3,287        282  

PT. KT Indonesia

     8        —          —          —    

KT Rwanda Networks Ltd. 2

     132,461        183,164        9,356        (14,468

KT Belgium

     93,321        11        —          (36

KT ORS Belgium

     6,913        14        —          (34

KBTO sp.zo.o.

     1,767        245        240        (2,250

AOS Ltd. 2

     12,337        3,993        3,012        (605

KT Hong Kong Telecommunications Co., Ltd.

     5,126        2,923        6,143        214  

KT Huimangjieum

     2,129        1,019        36        (346

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.

 

16


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 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 six-month periods ended June 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 June 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

 

17


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 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 amendments do not have a significant impact on the financial statements.

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.

 

18


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 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 June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)    June 30, 2020  
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

hedging

     Total  

Cash and cash equivalents

   W 2,942,236      W —        W —        W —        W 2,942,236  

Trade and other receivables1

     5,468,735        —          1,382,958        —          6,851,693  

Other financial assets

     514,128        781,002        234,016        152,841        1,681,987  

 

  1 

Lease receivables and others which are not applied to financial instruments by category are excluded.

 

(in millions of Korean won)    June 30, 2020  
Financial liabilities   

Financial liabilities

at amortized cost

    

Financial liabilities

at fair

value through

profit and loss

    

Derivatives

used for hedging

     Total  

Trade and other payables

   W 7,412,741      W —        W —        W 7,412,741  

Borrowings

     7,987,618        —          —          7,987,618  

Other financial liabilities

     149,104        56        15,093        164,253  

 

19


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

(in millions of Korean won)    December 31, 2019  
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
hedging

     Total  

Cash and cash equivalents

   W 2,305,894      W —        W —        W —        W 2,305,894  

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.

 

(in millions of Korean won)    December 31, 2019  
Financial liabilities   

Financial liabilities

at amortized cost

    

Financial liabilities

at fair

value through

profit and loss

    

Derivatives

used for hedging

     Total  

Trade and other payables

   W 8,679,697      W —        W —        W 8,679,697  

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 June 30, 2020 and December 31, 2019, are as follows:

 

     June 30, 2020  
(in millions of Korean won)    Total amounts     

Provision for

impairment

    

Present value

discount

    

Carrying

amount

 

Current assets

           

Trade receivables

   W 3,652,962      W (297,521    W (8,151    W 3,347,290  

Other receivables

     2,426,605        (90,278      (268      2,336,059  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,079,567      W (387,799    W (8,419    W 5,683,349  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-current assets

           

Trade receivables

     853,447        (4,325      (37,453      811,669  

Other receivables

     427,174        (6,064      (15,701      405,409  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,280,621      W (10,389    W (53,154    W 1,217,078  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 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

   W 3,451,107      W (291,202    W (9,510    W 3,150,395  

Other receivables

     2,834,893        (78,572      (271      2,756,050  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 6,286,000      W (369,774    W (9,781    W 5,906,445  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-current assets

           

Trade receivables

     874,859        (4,117      (43,597      827,145  

Other receivables

     382,468        (5,108      (22,708      354,652  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,257,327      W (9,225    W (66,305    W 1,181,797  
  

 

 

    

 

 

    

 

 

    

 

 

 

Details of other receivables as at June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)   

June 30,

2020

    

December 31,

2019

 

Loans

   W 79,415      W 84,148  

Receivables 1

     2,182,124        2,588,064  

Accrued income

     11,811        8,630  

Refundable deposits 2

     373,232        352,293  

Loans receivable

     123,353        105,961  

Finance lease receivables

     53,707        39,726  

Others

     14,168        15,560  

Less: Provision for impairment

     (96,342      (83,680
  

 

 

    

 

 

 
   W 2,741,468      W 3,110,702  
  

 

 

    

 

 

 

 

  1

The settlement receivables of BC Card Co., Ltd. of W1,454,630 million (December 31, 2019: W1,786,610 million) are included.

  2 

Escrow deposit of W16,218 million, for the reimbursement of KT ENGCORE Co., Ltd.’s rehabilitation receivables, are included.

The maximum exposure of trade and other receivables to credit risk is the carrying amount of each class of receivables mentioned above as at June 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.

 

21


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

6.

Other Financial Assets and Liabilities

Details of other financial assets and liabilities as at June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)   

June 30,

2020

    

December 31,

2019

 

Other financial assets

     

Financial assets at amortized cost 1

   W 514,128      W 441,804  

Financial assets at fair value through profit or loss 1,2,3

     781,002        632,324  

Financial assets at fair value through other comprehensive income 1

     234,016        557,342  

Derivatives used for hedging

     152,841        58,576  

Less: Non-current

     (541,597      (821,658
  

 

 

    

 

 

 

Current

   W 1,140,390      W 868,388  
  

 

 

    

 

 

 

Other financial liabilities

     

Financial liabilities at amortized cost

   W 149,104      W 129,945  

Financial liabilities at fair value through profit or loss

     56        38  

Derivatives used for hedging

     15,093        20,096  

Less: Non-current

     (162,525      (149,136
  

 

 

    

 

 

 

Current

   W 1,728      W 943  
  

 

 

    

 

 

 

 

  1

As at June 30, 2020, the Group’s other financial assets amounting to W101,486 million (December 31, 2019: W91,445 million), which consist of checking account deposits, time deposits and others, are subject to withdrawal restrictions.

  2 

As at June 30, 2020, MMW(Money Market Wrap) and MMT(Money Market Trust) amounting to W512,500 million (December 31, 2019: W406,062 million are included in other financial assets.

  3 

Investment in Korea Software Financial Cooperative amounting to W4,773 million is provided as collateral.

Details of financial assets at fair value through profit or loss as at June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)   

June 30,

2020

    

December 31,

2019

 

Equity instruments (Listed)

   W 166      W 232  

Equity instruments (Unlisted)

     78,610        90,357  

Debt securities

     702,087        541,657  

Derivative held for trading

     139        78  
  

 

 

    

 

 

 
     781,002        632,324  

Less: Non-current

     (200,658      (219,026
  

 

 

    

 

 

 

Current

   W 580,344      W 413,298  
  

 

 

    

 

 

 

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 June 30, 2020.

 

22


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

Details of financial assets at fair value through other comprehensive income as at June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)   

June 30,

2020

    

December 31,

2019

 

Equity instruments (Listed)

   W 4,754      W 6,738  

Equity instruments (Unlisted)

     222,516        543,518  

Debt securities

     6,746        7,086  
  

 

 

    

 

 

 
     234,016        557,342  

Less: Non-current

     (234,016      (556,147
  

 

 

    

 

 

 

Current

   W —        W 1,195  
  

 

 

    

 

 

 

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 to W350,777 million at fair value. Upon disposal W265,087 million is reclassified as accumulated other comprehensive income after tax and W184,330 million is reclassified as retained earnings of attributable to owners of the controlling company.

Details of valuation of derivatives used for hedging as at June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)    June 30, 2020      December 31, 2019  
     Assets      Liabilities      Assets      Liabilities  

Interest rate swap 1

   W —        W 2,170      W —        W 1,464  

Currency swap 2

     147,501        12,923        55,569        18,632  

Currency forwards 3

     5,340               3,007        —    
  

 

 

    

 

 

    

 

 

    

 

 

 
     152,841        15,093        58,576        20,096  

Less: Non-current

     (94,111      (13,409      (28,304      (19,177
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 58,730      W 1,684      W 30,272      W 919  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  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.

 

23


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

The valuation gains and losses on the derivative contracts for the six-month periods ended June 30, 2020 and 2019, are as follows:

 

(in millions of Korean won)  
     2020      2019  
Type of transaction   

Valuation

gain

    

Valuation

loss

    

Other

comprehensive

income1

    

Valuation

gain

    

Valuation

loss

    

Other

comprehensive

income1

 

Interest rate swap

   W —        W —        W (1,605    W —        W —        W (1,402

Currency swap

     108,063        7,062        102,824        75,830        —          90,002  

Currency forwards

     3,174        —          —          5,622        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 111,237      W 7,062      W 101,219      W 81,452      W —        W 88,600  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  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 of W2,537 million for the period ended June 30, 2020 (six-month period ended June 30, 2019: valuation gain of W3,114 million).

Details of financial liabilities at fair value through profit or loss at June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)   

June 30,

2020

    

December 31,

2019

 

Financial liabilities at fair value through profit or loss Derivative liabilities held for trading

   W 56      W 38  

The valuation gain and loss on financial liabilities at fair value through profit or loss for the six-month periods ended June 30, 2020 and 2019, are as follows:

 

(in millions of Korean won)    2020      2019  
    

Valuation

gain

    

Valuation

loss

    

Valuation

gain

    

Valuation

loss

 

Derivative liabilities held for trading

   W 82      W 19      W 146      W 93  

 

24


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

7.

Inventories

Inventories as at June 30, 2020 and December 31, 2019, are as follows:

 

     June 30, 2020      December 31, 2019  
(in millions of Korean won)   

Acquisition

cost

    

Valuation

allowance

   

Carrying

amount

    

Acquisition

cost

    

Valuation

allowance

    

Carrying

amount

 

Merchandise

   W  770,454      W (133,943   W  636,511      W  805,691      W (144,438)      W  661,253  

Others

     4,064        —         4,064        4,245        —          4,245  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
   W 774,518      W  (133,943   W 640,575      W 809,936      W (144,438)      W 665,498  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Cost of inventories recognized as expenses for the six-month period ended June 30, 2020, amounts to W1,906,031 million (six-month period ended March 31, 2019: W2,094,465 million) and valuation loss on inventory amounts to W10,495 million for the six-month period ended June 30, 2020 (six-month period ended March 31, 2019: valuation loss of W7,468 million).

 

8.

Other Assets and Liabilities

Other assets and liabilities as at June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)    June 30, 2020      December 31, 2019  

Other assets

     

Advance payments

   W 151,005      W 179,475  

Prepaid expenses 1

     1,970,456        1,935,037  

Contract assets 1

     552,833        557,041  

Others

     7,468        14,243  

Less: Non-current

     (692,035      (685,488
  

 

 

    

 

 

 

Current

   W  1,989,727      W  2,000,308  
  

 

 

    

 

 

 

Other liabilities

     

Advances received 1

   W 240,727      W 198,366  

Withholdings

     79,750        99,844  

Unearned revenue 1

     77,954        65,228  

Lease liabilities

     690,114        729,139  

Contract liabilities 1

     367,047        365,610  

Others

     20,265        23,297  

Less: Non-current

     (414,053      (449,526
  

 

 

    

 

 

 

Current

   W 1,061,804      W 1,031,958  
  

 

 

    

 

 

 

 

  1 

The amounts include adjustments arising from adoption of Korean IFRS 1115 (Note 20).

 

25


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 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 June 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 of W82,865 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 six-month periods ended June 30, 2020 and 2019, are as follows:

 

(in millions of Korean won)    2020      2019  

Beginning, net

   W 13,785,299      W 13,068,257  

Effect from changes in accounting policy 1

     —          (209,760

Acquisition and capital expenditure

     1,106,069        1,695,279  

Disposal and termination

     (37,208      (35,567

Depreciation

     (1,279,453      (1,221,326

Transfer to investment property

     (139,437      (47,302

Others

     19,252        (56,749
  

 

 

    

 

 

 

Ending, net

   W 13,454,522      W 13,192,832  
  

 

 

    

 

 

 

 

  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 June 30, 2020 and December 31, 2019, are as follows:

 

     June 30, 2020
(in millions of Korean won)   

Carrying

amount

    

Secured

amount

    

Related line

item

   Related
amount
     Secured party

Land and Buildings

   W  16,961      W  17,072      Borrowings
and others
   W  4,352      Industrial Bank of
Korea/Korea
Development
Bank/K Bank

 

26


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 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

   W  17,097      W  18,705      Borrowings
and others
   W  4,347      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 six-month periods ended June 30, 2020 and 2019, are as follows:

 

(in millions of Korean won)    2020      2019  

Beginning, net

   W  1,387,430      W  1,091,084  

Effect from changes in accounting policy 1

     —          46,666  

Acquisition

     7,760        213,479  

Disposal

     (654      (40

Depreciation

     (35,367      (32,917

Transfer from property and equipment

     139,437        71,602  

Others

     (7,072      —    
  

 

 

    

 

 

 

Ending, net

   W 1,491,534      W 1,389,874  
  

 

 

    

 

 

 

As at June 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 is W66,876 million for one year or less, W104,945 million more than one year and less than five years, W88,403 million over five years, and W260,224 million in total.

Details of investment properties provided as collateral as at June 30, 2020 and December 31, 2019, are as follows:

 

     June 30, 2020  
(in millions of Korean won)    Carrying
amount
     Secured
amount
     Related
account
     Related
amount
 

Land and Buildings

   W  821,521      W  65,264        Deposits      W  58,447  

Land and Buildings

     1,869        2,277        Borrowings        1,897  

 

     December 31, 2019  
(in millions of Korean won)    Carrying
amount
     Secured
amount
     Related
account
   Related
amount
 

Land and Buildings

   W  854,874      W  62,896      Deposits    W  56,831  

Land and Buildings

     1,915        3,044      Borrowings      1,903  

 

27


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

Changes in intangible assets for the six-month periods ended June 30, 2019 and 2018, are as follows:

 

(in millions of Korean won)    2020      2019  

Beginning, net

   W  2,834,037      W  3,407,123  

Effect from changes in accounting policy 1

     —          (26,207

Acquisition and capital expenditure

     91,604        71,455  

Disposal and termination

     (6,810      (4,338

Amortization

     (320,672      (329,140

Others

     49,377        13,864  
  

 

 

    

 

 

 

Ending, net

   W 2,647,536      W 3,132,757  
  

 

 

    

 

 

 

 

  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 is W206,029 million as at June 30, 2020 (December 31, 2019: W203,240 million).

Goodwill is allocated to the Group’s cash-generating unit which is identified by operating segments. As at June 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

   W 65,057  

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

     57,804  
     

 

 

 
      W   276,129  
  

 

 

 

 

  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.

 

28


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

11.

Investments in Associates and Joint Ventures

Details of associates as at June 30, 2020 and December 31, 2019, are as follows:

 

     Percentage of ownership (%)     Location    Closing month
  

June 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. 2

     10.0     10.0   Korea    December 31

Hyundai Robotics Co., Ltd 3

     10.0     —       Korea    December 31

 

  1 

At the end of the reporting period, even though 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 owns 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. Furthermore, 12.1% of non-voting convertible stock are excluded from the ownership percentage.

  3 

At the end of the reporting period, even though 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 six-month periods ended June 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

   W 163,975      W —       W (346   W (9,240   W 154,389  

KT-IBKC Future Investment Fund 1

     14,100        —         768       —         14,868  

KT-CKP New Media Investment Fund

     134        (134     —         —         —    

K Bank Inc.

     45,158        —         (9,920     8       35,246  

Hyundai Robotics Co., Ltd

     —          50,000       —         —         50,000  

Others 1

     44,293        17,730       1,262       (2,359     60,926  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 267,660      W 67,596     W (8,236)     W (11,591   W 315,429  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

29


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

     2019  
                  Share of net profit              
            Acquisition     (loss) from associates              
(in millions of Korean won)    Beginning      (Disposal)     and joint ventures 1     Others     Ending  

Korea Information & Technology Fund

   W 148,255      W —       W (220   W (4,280   W 143,755  

KT-SB Venture Investment

     4,470        (4,470     —         —         —    

KT-IBKC Future Investment Fund 1 1

     9,961        3,250       (76     (1,318     11,817  

KT-CKP New Media Investment Fund

     281        —         17       —         298  

K Bank Inc.

     52,655        —         (9,392     (199     43,064  

Others 1

     56,785        (5,735     5,505       (9,773     46,782  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 272,407      W (6,955   W (4,166   W (15,570   W 245,716  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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 W103 million (six-month period ended June 30, 2019: net income of W10 million) recognized as operating revenue and expense during the period.

Summarized financial information of associates and joint ventures as at June 30, 2020 and December 31, 2019 and for the six-month periods ended June 30, 2020 and 2019, are as follows:

 

     June 30, 2020  
(in millions of Korean won)    Assets      Liabilities     

Operating

revenue

    

Profit (loss)

for the period

 

Korea Information & Technology Fund

   W 463,167      W —        W —        W (1,036

KT-IBKC Future Investment Fund 1

     29,738        —          1,901        1,538  

K Bank Inc.

     2,060,492        1,900,900        34,567        (44,920

Hyundai Robotics Co., Ltd

     433,642        141,432        1,805        1,047  

 

     December 31, 2019      June 30, 2019  
(in millions of Korean won)    Assets      Liabilities     

Operating

revenue

    

Profit (loss)

for the period

 

Korea Information & Technology Fund

   W 491,924      W —        W —        W (659

KT-IBKC Future Investment Fund 1

     28,200        —          437        (152

KT-CKP New Media Investment Fund

     270        —          35        33  

K Bank Inc.

     2,558,631        2,354,159        46,426        (49,956

Due to the discontinuance of equity method of accounting, the Group has not recognized loss from associates and joint ventures of W2,599 million for the six-month period ended June 30, 2020 (six-month period ended March 31, 2019: loss of W6,092 million). The accumulated comprehensive loss of associates and joint ventures as at June 30, 2020, which was not recognized by the Group, is W10,000 million (December 31, 2019: W12,599 million).

 

30


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

12.

Trade and Other Payables

Details of trade and other payables as at June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)    June 30, 2020      December 31, 2019  

Current liabilities

     

Trade payables

   W 1,234,563      W 1,304,795  

Other payables

     5,367,120        6,292,683  
  

 

 

    

 

 

 
   W 6,601,683      W 7,597,478  
  

 

 

    

 

 

 

Non-current liabilities

     

Trade payables

   W 2,273      W 1,733  

Other payables

     808,785        1,080,486  
  

 

 

    

 

 

 
   W 811,058      W 1,082,219  
  

 

 

    

 

 

 

Details of other payables as at June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)    June 30, 2020      December 31, 2019  

Non-trade payables 1

   W 3,800,844      W 5,275,224  

Accrued expenses

     987,528        987,624  

Operating deposits

     1,188,641        910,045  

Others

     198,892        200,276  

Less: Non-current

     (808,785      (1,080,486
  

 

 

    

 

 

 

Current

   W 5,367,120      W 6,292,683  
  

 

 

    

 

 

 

 

  1

Settlement payables of BC Card Co., Ltd., a subsidiary of the Group, of W1,496,801 million related to credit card transactions are included as at June 30, 2020 (December 31, 2019: W1,824,068 million).

 

31


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

13.

Borrowings

Details of borrowings as at June 30, 2020 and December 31, 2019, are as follows:

Debentures

 

(in millions of Korean won and foreign currencies in thousands)   June 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      W 120,070        USD 100,000      W 115,780  

MTNP notes

   Jul. 18, 2026    2.500%     USD 400,000        480,280        USD 400,000        463,120  

MTNP notes

   Aug. 7, 2022    2.625%     USD 400,000        480,280        USD 400,000        463,120  

FR notes 2

   Aug. 23, 2020    LIBOR(3M)+0.40%     USD 200,000        240,140        USD 200,000        231,560  

FR notes 2

   Aug. 23, 2023    LIBOR(3M)+0.90%     USD 100,000        120,070        USD 100,000        115,780  

MTNP notes

   Jul. 6, 2020    0.310%     JPY 4,000,000        44,642        JPY 4,000,000        42,539  

MTNP notes

   Jul. 6, 2021    0.380%     JPY 16,000,000        178,568        JPY 16,000,000        170,155  

MTNP notes

   Nov. 13, 2020    0.300%     JPY 30,000,000        334,815        JPY 30,000,000        319,041  

MTNP notes

   Jul. 19, 2022    0.220%     JPY 29,600,000        330,351        JPY 29,600,000        314,787  

MTNP notes

   Jul. 19, 2024    0.330%     JPY 400,000        4,464        JPY 400,000        4,254  

FR notes 2

   Nov. 01, 2024    LIBOR(3M)+0.98%     USD 350,000        420,245        USD 350,000        405,230  

FR notes 2

   Jun. 19, 2023    SOR(6M)+0.5%     SGD 284,000        244,734        —          —    

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    3.650%     —          300,000        —          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  

The 191-3rd Public bond

   Jan. 15, 2029    2.160%     —          110,000        —          110,000  

 

32


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

(in millions of Korean won and foreign currencies in thousands)      June 30, 2020      December 31, 2019  
Type    Maturity   

Annual

interest

rates

    

Foreign

currency

    

Korean

won

    

Foreign

currency

    

Korean

won

 

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

 

     —          7,638,659        —          7,045,366  

Less: Current portion

 

     —          (1,538,837      —          (1,052,032

Discount on bonds

 

     —          (20,064      —          (20,780
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

 

     —        W 6,079,758        —        W 5,972,554  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1 

As at June 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 0.302% and 0.261% as at June 30, 2020.

Convertible bonds

 

(in millions of Korean won)  
Type    Issuance Date    Maturity   

Annual

Interest

Rate

    June 30, 2020     December 31, 2019  

The 1st CB(Private) 1,2

   Jun. 5, 2020    Jun. 5, 2025      0.000   W 8,000     W —    

Redemption Premium

           —         2,267       —    

Bond discount issuance

           —         (4,807     —    
        

 

 

   

 

 

   

 

 

 
Subtotal            —         5,460       —    

Current portion

           —         —         —    
        

 

 

   

 

 

   

 

 

 
           —       W 5,460     W —    
        

 

 

   

 

 

   

 

 

 

 

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


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

Short-term borrowings

 

(in millions of Korean won)                       
Type    Financial institution    Annual interest rates   June 30, 2020      December 31, 2019  

Operational

   NongHyup Bank    2.490%   W 15,000      W 15,000  
   Shinhan Bank    2.590%~3.090%     30,025        57,500  
   Korea Development Bank    3.850%     10,000        10,000  
   Soohyup Bank    —       —          1,000  

Facility Loans

   Hana Bank    4.200%     11,000        —    
       

 

 

    

 

 

 
        W 66,025      W 83,500  
       

 

 

    

 

 

 

Long-term borrowings

 

(in millions of Korean won and thousands of foreign currencies)     June 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%       —        W 3,208       —        W 3,454  

Industrial Bank of Korea

     General loans       2.980%       —          6,000       —          6,000  

Shinhan Bank

     General loans       2.810%       —          5,000       —          5,000  
     General loans 2       LIBOR(3M)+2.130%       USD 25,000        30,018       —          —    
     Facility loans 2       LIBOR(3M)+1.340%       USD 25,918        31,120       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%       —          67       —          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 68,397        82,125       USD 87,940        101,816  
      

 

 

    

 

 

   

 

 

    

 

 

 

Subtotal

         —          297,538       —          190,780  

Less: Current portion

         —          (62,447     —          (50,192
      

 

 

    

 

 

   

 

 

    

 

 

 
         —        W 235,091       —        W 140,588  
      

 

 

    

 

 

   

 

 

    

 

 

 

 

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 0.302% as at June 30, 2020.

 

34


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 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 June 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

        

Jul. 1, 2020 ~ Jun. 30, 2021

   W 920,000      W 619,597      W 1,539,597      W 81,543      W 46,929      W 128,472      W 1,668,069  

Jul. 1, 2021 ~ Jun. 30, 2022

     660,000        178,568        838,568        36,518        35,196        71,714        910,282  

Jul. 1, 2022 ~ Jun. 30, 2023

     930,000        1,055,365        1,985,365        100,512        61,138        161,650        2,147,015  

Jul. 1, 2023 ~ Jun. 30, 2024

     190,000        120,070        310,070        493        —          493        310,563  

After Jul. 1, 2024

     1,948,000        1,025,059        2,973,059        1,234        —          1,234        2,974,293  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,648,000      W 2,998,659      W 7,646,659      W 220,300      W 143,263      W 363,563      W 8,010,222  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

 

14.

Provisions

Changes in provisions for the six-month periods ended June 30, 2020 and 2019, are as follows:

 

     2020  
(in millions of Korean won)    Litigation      Restoration cost      Others      Total  

Beginning balance

   W 64,241      W 113,289      W 76,631      W 254,161  

Increase (transfer)

     112        (257      8,294        8,149  

Usage

     (261      (888      (3,856      (5,005

Reversal

     (50      (348      (2,346      (2,744

Scope change

     —          195        54,892        55,087  
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   W 64,042      W 111,991      W 133,615      W 309,648  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 64,042      W 21,177      W 99,944      W 185,163  

Non-current

     —          90,814        33,671        124,485  

 

     2019  
(in millions of Korean won)    Litigation      Restoration cost      Others      Total  

Beginning balance

   W 58,760      W 118,828      W 97,868      W 275,456  

Increase (transfer)

     (8,623      6,195        12,543        10,115  

Usage

     (35,624      (1,662      (9,836      (47,122

Reversal

     —          (2,761      (13,950      (16,711
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   W 14,513      W 120,600      W 86,625      W 221,738  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 14,513      W 1,804      W 84,354      W 100,671  

Non-current

     —          118,796        2,271        121,067  

 

35


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 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 June 30, 2020 and December 31, 2019, are determined as follows:

 

(in millions of Korean won)    June 30, 2020      December 31, 2019  

Present value of defined benefit obligations

   W 2,478,220      W 2,427,351  

Fair value of plan assets

     (2,009,148      (2,069,710
  

 

 

    

 

 

 

Liabilities

   W 472,844      W 365,663  
  

 

 

    

 

 

 

Assets

   W 3,772      W 8,022  
  

 

 

    

 

 

 

Changes in the defined benefit obligations for the six-month periods ended June 30, 2020 and 2019, are as follows:

 

(in millions of Korean won)    2020      2019  

Beginning

   W 2,427,351      W 2,201,876  

Current service cost

     123,693        121,591  

Interest expense

     21,365        23,138  

Historical service cost

     971        —    

Benefits paid

     (104,303      (40,360

Remeasurements

     5,011        10,893  

Scope change

     1,268        —    

Others

     2,864        2,611  
  

 

 

    

 

 

 

Ending

   W 2,478,220      W 2,319,749  
  

 

 

    

 

 

 

Changes in the fair value of plan assets for the six-month periods ended June 30, 2020 and 2019, are as follows:

 

(in millions of Korean won)    2020      2019  

Beginning

   W 2,069,710      W 1,643,046  

Interest income

     18,695        17,634  

Remeasurements on plan assets

     1,289        (1,175

Employer contributions

     13,105        32,249  

Benefits paid

     (92,874      (40,950

Others

     (777      1,577  
  

 

 

    

 

 

 

Ending

   W 2,009,148      W 1,652,381  
  

 

 

    

 

 

 

 

36


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

Amounts recognized in the consolidated statement of profit or loss for the six-month periods ended June 30, 2020 and 2019, are as follows:

 

(in millions of Korean won)    2020      2019  

Current service cost

   W 123,693      W 121,591  

Net interest cost

     2,670        5,504  

Historical service cost

     971        —    

Account transfers

     (8,230      (8,573
  

 

 

    

 

 

 

Total expenses

   W 119,104      W 118,522  
  

 

 

    

 

 

 

 

16.

Commitments and Contingencies

As at June 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        1,487,000        5,000  

Inter-Korean Cooperation Fund

    
Export-Import Bank of
Korea
 
 
     KRW        37,700        3,207  

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        442,660        19,593  

Plus electronic notes payable

     Industrial Bank of Korea        KRW        50,000        1,564  

Loans for working capital

    
Korea Development Bank
and others
 
 
     KRW        244,110        148,740  

Facility loans

     Shinhan Bank and others        KRW        100,123        67  
     Kookmin Bank and others        USD        212,000        68,397  

Derivatives transaction limit

     Korea Development Bank        KRW        100,000        6,888  
     

 

 

    

 

 

    

 

 

 

Total

        KRW        2,464,833        186,791  
        USD        212,000        68,397  
     

 

 

    

 

 

    

 

 

 

 

37


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

As at June 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      169,174  
      USD      8,569  

Guarantee for import letters of credit

     Industrial Bank of Korea and others      USD      5,500  

Refund guarantee for advances received

     Korea Development Bank      USD      1,859  

Guarantee for payment in foreign currency

     KEB Hana Bank and others      USD      26,911  
      PLN1      13,751  

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      69,919  

Performance guarantee / warranty guarantee

      KRW      460,445  

Guarantee for advance payments/others

      KRW      226,415  

Warranty guarantee

     Seoul Guarantee Insurance      KRW      357  

Performance guarantee

      KRW      11,617  

Bid guarantee

      KRW      10,000  

Guarantees for licensing

      KRW      4,908  

Guarantees for depositions

      KRW      3,764  

Merchant business guarantee insurance

      KRW      170  
     

 

  

 

 

 

Total

      KRW      997,869  
      USD      51,939  
      PLN1      13,751  
     

 

  

 

 

 

 

  1 

Polish Zloty.

As at June 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      4,861        4,858       

Nov. 10, 2017

~ Oct. 31, 2020

 

 

KT Estate Inc.

   Daegu Beomeo-Crossroads
SeohanIDaum Buyers
   Shinhan Bank      7,946        7,929       

Oct. 29, 2017

~ Nov. 30, 2020

 

 

KT ENGCORE Co., Ltd 1

   Gasan solar power plant
Inc.
   Shinhan Bank      4,700        1,539        Jan. 08, 2025  

KT ENGCORE Co., Ltd 1

   SPP Inc.    Suhyup Bank      3,250        630        Feb. 16, 2024  

KT ENGCORE Co., Ltd 1

   Korea cell Inc.    Suhyup Bank      3,250        515        Feb. 16, 2024  

KT ENGCORE Co., Ltd 1

   San-ya agricultural
association corporation
   Suhyup Bank      3,250        734        Feb. 16, 2024  

KT ENGCORE Co., Ltd 1

   Korean delta solar first
Co., Ltd.
   NH INVESTMENT & SECURITIES
CO.,LTD.
     39,000        39,000        Jun. 08, 2017  

KT ENGCORE Co., Ltd 1

   Ciocanesti Korea Co., Ltd.    NH INVESTMENT & SECURITIES
CO.,LTD.
     7,600        7,600        Jun. 08, 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        3,070        —    

 

  1 

KT ENGCORE Co., Ltd, the subsidiary of the Group is subject to payment, depending on reimbursement of principal debtor.

 

38


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

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 June 30, 2020, the Controlling Company and KT Sat Co., Ltd. are jointly and severally liable for reimbursement of W1,817 million.

For the six-month period ended June 30, 2020, the Group made agreements with the Securitization Specialty Companies (2020: Giga LTE Forty nineth to Fifty 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 June 30, 2020, the Group is a defendant in 192 lawsuits with the total claimed amount of W95,172 million (2019: W214,877 million). As at June 30, 2020, litigation provisions of W64,042 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 June 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 June 30, 2020, the contract amount of property and equipment acquisition agreements made but not yet recognized amounts to W640,286 million (December 31, 2019: W851,798 million).

 

39


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 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)    June 30, 2020      December 31, 2019  

Right-of-use assets

     

Property and buildings

   W 520,819      W 540,787  

Machinery and track facilities

     132,151        140,296  

Others

     99,344        107,414  
  

 

 

    

 

 

 

Total

   W 752,314      W 788,497  
  

 

 

    

 

 

 

Investment property (buildings)

   W 28,875      W 50,010  

 

(in millions of Korean won)    June 30, 2020      December 31, 2019  

Lease liabilities1

     

Current

   W 346,530      W 355,833  

Non-current

     343,584        373,306  
  

 

 

    

 

 

 
   W 690,114      W 729,139  
  

 

 

    

 

 

 

 

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 six-month periods ended June 30, 2020, increase of right-of-use assets was W84,378 million.

The consolidated statement of profit or loss relating to leases for the six-month periods ended June 30, 2020 and 2019, are as follows:

 

(in millions of Korean won)    June 30, 2020      June 30, 2019  

Depreciation of right-of-use assets

     

Property and buildings

   W 145,640      W 157,215  

Machinery and track facilities

     33,439        46,340  

Others

     27,516        23,481  
  

 

 

    

 

 

 
   W 206,595      W 227,036  
  

 

 

    

 

 

 

Depreciation of investment properties

   W 10,356      W 10,070  

Interest expense relating to lease liabilities

     17,649        21,019  

Expenses relating to short-term leases

     4,911        2,244  

Expenses relating to leases of low-value assets that are not short-term leases

     12,856        17,082  

Expenses relating to variable lease payments not included in lease liabilities

     4,063        3,127  

 

40


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 30, 2020 and 2019 (Unaudited), and December 31, 2019

 

 

 

The total cash outflow for leases for six-month periods ended in June 30, 2020 was W115,144 million.

 

18.

Retained Earnings

Details of retained earnings as at June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)    June 30, 2020      December 31, 2019  

Legal reserve 1

   W 782,249      W 782,249  

Voluntary reserves 2

     4,651,362        4,651,362  

Unappropriated retained earnings

     6,500,853        6,203,574  
  

 

 

    

 

 

 

Total

   W 11,934,464      W 11,637,185  
  

 

 

    

 

 

 

 

  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 June 30, 2020 and December 31, 2019, are as follows:

 

(in millions of Korean won)    June 30, 2020      December 31, 2019  

Treasury stock

   W (819,049    W (825,838

Gain on disposal of treasury stock

     (230      1,229  

Share-based payments

     4,677        7,769  

Equity transactions within consolidated entities 1

     (341,309      (353,243
  

 

 

    

 

 

 

Total

   W (1,155,911    W (1,170,083
  

 

 

    

 

 

 

 

  1

Includes profit or loss from transactions with non-controlling interests and investment differences from changes in equity ratios of subsidiaries.

As at June 30, 2020 and December 31, 2019, the details of treasury stock are as follows:

 

     June 30, 2020      December 31, 2019  

Number of shares

     15,739,783        15,870,258  

Amount (in millions of Korean won)

   W 819,049      W 825,838  

Treasury stock is expected to be used for the stock compensation for the Group’s directors, employees and other purposes.

 

41


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

June 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 six-month periods ended June 30, 2020 and 2019:

 

(in millions of Korean won)    2020      2019  
     Three months      Six months      Three months      Six months  

Revenue from contracts with customers

   W 5,828,576      W 11,609,405      W 6,049,702      W 11,830,312  

Revenue from other sources

     47,927        98,814        48,831        102,598