6-K 1 d31192d6k.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 March 2021

Commission File Number 1-14926

 

 

KT Corporation

(Translation of registrant’s name into English)

 

 

90, Buljeong-ro,

Bundang-gu, Seongnam-si,

Gyeonggi-do,

Korea

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  ☒            Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ☐

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ☐            No  ☒

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-            

 

 

 


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Dated: March 10, 2021
KT Corporation
By:     /s/ Seunghoon Chi
Name:   Seunghoon Chi
Title:   Vice President
By:     /s/ Ginah Yun
Name:   Ginah Yun
Title:   Director


Table of Contents

KT Corporation and Subsidiaries

Consolidated Financial Statements

December 31, 2020 and 2019


Table of Contents

KT Corporation and Subsidiaries

Index

December 31, 2020 and 2019

 

 

     Page(s)  

Independent Auditor’s Report

     1 – 4  

Consolidated Financial Statements

  

Consolidated Statements of Financial Position

     5 – 6  

Consolidated Statements of Profit or Loss

     7  

Consolidated Statements of Comprehensive Income

     8  

Consolidated Statements of Changes in Equity

     9 – 10  

Consolidated Statements of Cash Flows

     11 – 12  

Notes to the Consolidated Financial Statements

     13 – 123  


Table of Contents
LOGO    LOGO

Independent Auditor’s Report

(English Translation of a Report Originally Issued in Korean)

To the Board of Directors and Shareholders of

KT Corporation

Opinion

We have audited the accompanying consolidated financial statements of KT Corporation (the Group), which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated statements of profit or loss, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2020 and 2019, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS).

Basis for Opinion

We conducted our audits in accordance with Korean Standards on Auditing. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the consolidated financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Emphasis of Matter

Without modifying our opinion, we draw attention to Note 2.2 and Note 43 to the consolidated financial statements. As discussed in Note 2.2 and Note 43, changes in accounting policy in relation to lease term have been adopted retrospectively and the Group’s consolidated financial statements for the year ended December 31, 2019, presented herein for comparative purposes, were adjusted.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

 

 

Samil PricewaterhouseCoopers, 100 Hangang-daero, Yongsan-gu, Seoul 04386, Korea, www.samil.com

 

 

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(1)

Cash-Generating Unit Impairment Assessment

 

   

Why the matter was determined to be a key audit matter

As described in Note 2.16 in the consolidated financial statements, the Group assesses whether indicators of impairment on assets exist. This assessment is completed in accordance with Korean IFRS 1036. When an impairment indicator exists, then management performs an impairment test. Given that there is a significant difference between the market value and the total net assets of KT Corporation (“the Controlling Company”) as of December 31, 2020, the Group determined that indicators of impairment on the cash-generating units (“the CGUs”) in wire, wireless and corporate business CGUs in the Controlling Company existed as at December 31, 2020. Management completed an impairment assessment, and no impairment loss was recognized as the recoverable amount of each of the CGUs exceeds their respective carrying amounts.

To determine the recoverable amounts of the CGUs, the Group estimated future cash flows which reflected forecast information such as the number of users for communication services, average profit per user (“ARPU”), and other assumptions. Another critical assumption was the determination of a discount rate to apply to these forecasted future cash flows. Significant judgment is used by management in determining these key assumptions.

The carrying amounts of assets allocated to each of the CGUs are material in the consolidated financial statements. Management’s assumptions have a significant impact on determining the recoverable amounts. This results in a high degree of judgement, effort and specialized knowledge being used by management. Therefore, we determined that the Group’s impairment assessment of assets allocated to each of the aforementioned CGUs as a key audit matter.

 

   

How the matter was addressed in the audit:

We have performed the following audit procedures to address the above key audit matter:

 

   

We obtained an understanding of the Group’s procedures for asset impairment assessment and evaluated relevant internal controls.

 

   

We obtained an understanding of the Group’s procedures to identify the CGUs and evaluated relevant internal controls.

 

   

We evaluated the appropriateness of valuation models used by management to estimate the recoverable amounts.

 

   

We evaluated the appropriateness of internal and external information used by management to estimate the recoverable amounts.

 

   

We assessed the consistency of key assumptions used by management to estimate the recoverable amounts, by comparing the historical results, current market conditions and future business plans.

 

   

We used independent auditor’s experts to assess management’s valuation models and assumptions.

 

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Responsibilities of Management and Those Charged with Governance for the Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with Korean IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Korean Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

   

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

   

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.

 

   

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

   

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

 

   

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

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Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Jin-Kyu Lee, Certified Public Accountant.

 

LOGO

Seoul, Korea

March 9, 2021

 

This report is effective as of March 9, 2021, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

 

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KT Corporation and Subsidiaries

Consolidated Statements of Financial Position

Years Ended December 31, 2020 and 2019

 

 

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

Assets

        

Current assets

        

Cash and cash equivalents

     4, 5      W 2,634,624      W 2,305,894  

Trade and other receivables, net

     4, 6        4,902,471        5,906,445  

Other financial assets

     4, 7        1,202,840        868,388  

Current income tax assets

        2,059        68,120  

Inventories, net

     8        534,636        665,498  

Current assets held-for-sale

     10        1,198        83,602  

Other current assets

     9        1,876,352        1,999,282  
     

 

 

    

 

 

 

Total current assets

        11,154,180        11,897,229  
     

 

 

    

 

 

 

Non-current assets

        

Trade and other receivables, net

     4, 6        1,250,769        1,181,797  

Other financial assets

     4, 7        544,347        821,658  

Property and equipment, net

     11        14,206,119        13,785,299  

Right-of-use assets

     21        1,217,179        1,268,329  

Investment properties, net

     12        1,368,453        1,387,430  

Intangible assets, net

     13        2,161,258        2,834,037  

Investments in associates and joint ventures

     14        557,881        267,660  

Deferred income tax assets

     31        433,698        411,171  

Other non-current assets

     9        768,661        685,488  
     

 

 

    

 

 

 

Total non-current assets

        22,508,365        22,642,869  
     

 

 

    

 

 

 

Total assets

      W 33,662,545      W     34,540,098  
     

 

 

    

 

 

 

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

 

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KT Corporation and Subsidiaries

Consolidated Statements of Financial Position

Years Ended December 31, 2020 and 2019

 

 

 

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

Liabilities

        

Current liabilities

        

Trade and other payables

     4, 15      W 6,210,099      W 7,597,478  

Borrowings

     4, 16        1,418,114        1,185,725  

Other financial liabilities

     4, 7        2,493        943  

Current income tax liabilities

        232,225        66,266  

Other provisions

     17        165,990        175,612  

Deferred income

        60,252        53,474  

Other current liabilities

     9        1,103,299        1,068,558  
  

 

 

    

 

 

 

Total current liabilities

        9,192,472        10,148,056  
  

 

 

    

 

 

 

Non-current liabilities

        

Trade and other payables

     4, 15        807,540        1,082,219  

Borrowings

     4, 16        5,898,184        6,113,142  

Other financial liabilities

     4, 7        260,676        149,136  

Net defined benefit liabilities

     18        378,087        365,663  

Other provisions

     17        86,202        78,549  

Deferred income

        149,050        99,180  

Deferred income tax liabilities

     31        429,331        425,468  

Other non-current liabilities

     9        909,570        895,137  
  

 

 

    

 

 

 

Total non-current liabilities

        8,918,640        9,208,494  
  

 

 

    

 

 

 

Total liabilities

        18,111,112        19,356,550  
     

 

 

    

 

 

 

Equity attribute to owners of the Controlling Company

        

Share capital

     22        1,564,499        1,564,499  

Share premium

        1,440,258        1,440,258  

Retained earnings

     23        12,155,420        11,633,780  

Accumulated other comprehensive income

     24        86,051        194,934  

Other components of equity

     24        (1,234,784      (1,170,083
  

 

 

    

 

 

 
        14,011,444        13,663,388  

Non-controlling interest

        1,539,989        1,520,160  
  

 

 

    

 

 

 

Total equity

        15,551,433        15,183,548  
     

 

 

    

 

 

 

Total liabilities and equity

      W 33,662,545      W 34,540,098  
     

 

 

    

 

 

 

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

 

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KT Corporation and Subsidiaries

Consolidated Statements of Profit or Loss

Years Ended December 31, 2020 and 2019

 

 

(in millions of Korean won, except per share amounts)    Notes      2020      2019  

Operating revenue

     26      W     23,916,667      W     24,342,064  

Operating expenses

     28        22,732,560        23,182,498  
     

 

 

    

 

 

 

Operating profit

        1,184,107        1,159,566  

Other income

     29        341,253        259,431  

Other expenses

     29        559,576        431,684  

Finance income

     30        498,614        424,395  

Finance costs

     30        507,383        432,133  

Share of net losses of associates and joint ventures

     14        18,041        (3,304
     

 

 

    

 

 

 

Profit before income tax expense

        975,056        976,271  

Income tax expense

     31        271,664        310,329  
     

 

 

    

 

 

 

Profit for the year

      W 703,392      W 665,942  
     

 

 

    

 

 

 

Profit for the year attributable to:

        

Owners of the Controlling Company:

      W 658,025      W 615,777  

Non-controlling interest:

        45,367        50,165  

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

     32        

Basic earnings per share

      W 2,684      W 2,512  

Diluted earnings per share

        2,683        2,510  

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

 

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KT Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

Years Ended December 31, 2020 and 2019

 

 

(in millions of Korean won)    Notes      2020     2019  

Profit for the year

      W   703,392     W   665,942  
     

 

 

   

 

 

 

Other comprehensive income

       

Items that will not be reclassified to profit or loss:

       

Remeasurements of the net defined benefit liability

     18        (60,181     (25,777

Share of remeasurement loss of associates and joint ventures

        786       649  

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

        51,696       155,319  

Items that may be subsequently reclassified to profit or loss:

       

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

        (9,699     11,833  

Valuation gain on cash flow hedge

        (84,044     67,548  

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

        111,431       (44,684

Share of other comprehensive income from associates and joint ventures

        15,932       2,517  

Exchange differences on translation of foreign operations

        (2,666     4,933  
     

 

 

   

 

 

 

Total comprehensive income for the year

      W 726,647     W 838,280  
     

 

 

   

 

 

 

Total comprehensive income for the year attributable to:

       

Owners of the Controlling Company

      W 684,213     W 738,415  

Non-controlling interest

        42,434       99,865  

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

 

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KT Corporation and Subsidiaries

Consolidated Statements of Changes in Equity

Years Ended December 31, 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 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 policy

    42       —         —         (3,890     —         —         (3,890     —         (3,890

Adjusted balance at January 1, 2019

      1,564,499       1,440,258       11,324,969       50,158       (1,181,083     13,198,801       1,528,589       14,727,390  

Comprehensive income

                 

Profit for the year

      —         —         615,777       —         —         615,777       50,165       665,942  

Remeasurements of net defined benefit liabilities

    18       —         —         (22,774     —         —         (22,774     (3,003     (25,777

Share of loss on remeasurements of associates and joint ventures

      —         —         636       —         —         636       13       649  

Share of other comprehensive income of associates and joint ventures

      —         —         —         2,427       —         2,427       90       2,517  

Valuation gain on cash flow hedge

    4,7       —         —         —         22,850       —         22,850       14       22,864  

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

    4,7       —         —         —         114,869       —         114,869       52,283       167,152  

Exchange differences on translation of foreign operations

      —         —         —         4,630       —         4,630       303       4,933  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

      —         —         593,639       144,776       —         738,415       99,865       838,280  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

Change in consolidation scope

      —         —         —         —         (245     (245     1,784       1,539  

Change in ownership interest in subsidiaries

      —         —         —         —         (9,082     (9,082     (74,578     (83,660

Appropriations of loss on disposal of treasury stock

      —         —         (15,169     —         15,169       —         —         —    

Disposal of treasury stock

      —         —         —         —         3,346       3,346       —         3,346  

Others

      —         —         —         —         1,812       1,812       —         1,812  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

      —         —         (284,828     —         11,000       (273,828     (108,294     (382,122
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2019

    W 1,564,499     W 1,440,258     W 11,633,780     W 194,934     W (1,170,083   W 13,663,388     W 1,520,160     W 15,183,548  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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KT Corporation and Subsidiaries

Consolidated Statements of Changes in Equity

Years Ended December 31, 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 December 31, 2019

    W 1,564,499     W 1,440,258     W 11,633,780     W 194,934     W (1,170,083   W 13,663,388     W 1,520,160     W 15,183,548  

Balance as at January 1, 2020

      1,564,499       1,440,258       11,633,780       194,934       (1,170,083     13,663,388       1,520,160       15,183,548  

Comprehensive income

                 

Profit for the year

      —         —         658,025       —         —         658,025       45,367       703,392  

Remeasurements of net defined benefit liabilities

    18       —         —         (49,554     —         —         (49,554     (10,627     (60,181

Share of gain on remeasurements of associates and joint ventures

      —         —         410       —         —         410       376       786  

Share of other comprehensive income of associates and joint ventures

      —         —         —         14,701       —         14,701       1,231       15,932  

Valuation gain on cash flow hedge

    4,7       —         —         —         27,433       —         27,433       (46     27,387  

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

    4,7       —         —         184,215       (150,135     —         34,080       7,917       41,997  

Exchange differences on translation of foreign operations

      —         —         —         (882     —         (882     (1,784     (2,666
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

      —         —         793,096       (108,883     —         684,213       42,434       726,647  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners

                 

Dividends paid by the Controlling Company

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

Dividends paid to non-controlling interest of subsidiaries

      —         —         —         —         —         —         (40,802     (40,802

Change in ownership interest in subsidiaries

      —         —         —         —         11,628       11,628       18,197       29,825  

Appropriations of loss on disposal of treasury stock

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

Acquisition of treasury stock

      —         —         —         —         (110,097     (110,097     —         (110,097

Disposal of treasury stock

      —         —         —         —         33,213       33,213       —         33,213  

Others

      —         —         —         —         (1,135     (1,135     —         (1,135
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

      —         —         (271,456     —         (64,701     (336,157     (22,605     (358,762
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at December 31, 2020

    W 1,564,499     W 1,440,258     W 12,155,420     W 86,051     W (1,234,784   W 14,011,444     W 1,539,989     W 15,551,433  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

10


Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2020 and 2019

 

 

(in millions of Korean won)    Notes          2020     2019  

Cash flows from operating activities

       

Cash generated from operations

     34          W 4,745,293     W 4,058,065  

Interest paid

        (254,852     (255,908

Interest received

        259,836       276,349  

Dividends received

        19,623       18,922  

Income tax paid

        (30,073     (352,255
     

 

 

   

 

 

 

Net cash inflow from operating activities

        4,739,827       3,745,173  
     

 

 

   

 

 

 

Cash flows from investing activities

       

Collection of loans

        63,435       63,517  

Disposal of financial assets at fair value through profit or loss

        528,655       720,148  

Disposal of financial assets at amortized cost

        528,746       422,637  

Disposal of financial assets at fair value through other comprehensive income

        351,065       —    

Disposal of investments in associates and joint ventures

        24       16,930  

Disposal of assets held-for-sale

        83,241       28,834  

Disposal of property and equipment and investment properties

        49,832       42,554  

Disposal of intangible assets

        13,362       12,097  

Disposal of right-of-use assets

        2,023       9,393  

Discontinued operations

        205       1,977  

Loans granted

        (48,731     (65,138

Acquisition of financial assets at fair value through profit or loss

        (521,142     (793,977

Acquisition of financial assets at amortized cost

        (759,180     (501,838

Acquisition of financial assets at fair value through other comprehensive income

        (14,092     (14,277

Acquisition of investments in associates and joint ventures

        (273,411     (29,980

Acquisition of property and equipment and investment properties

        (3,207,566     (3,263,338

Acquisition of intangible assets

        (511,094     (530,775

Acquisition of right-of-use assets

        (5,824     (6,236

Decrease in cash due to business combination, etc.

        (41,018     —    
     

 

 

   

 

 

 

Net cash outflow from investing activities

        (3,761,470     (3,887,472
     

 

 

   

 

 

 

The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.

 

11


Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Cash Flows

Years Ended December 31, 2020 and 2019

 

 

(in millions of Korean won)    Notes          2020     2019  

Cash flows from financing activities

     35       

Proceeds from borrowings

        1,795,221       1,951,568  

Settlement of derivative assets and liabilities, net

        36,594       33,635  

Cash inflow from other financing activities

        35,854       65,698  

Repayments of borrowings

        (1,627,354     (1,377,394

Dividends paid

        (310,567     (305,159

Decrease in lease liabilities

        (447,784     (485,444

Decrease in other liabilities

        (13,674     —    

Liquidation of derivative instruments

        —         (9,734

Acquisition of treasury stock

        (114,683     —    

Cash outflow from consolidated equity transaction

        (1,192     (122,918
     

 

 

   

 

 

 

Net cash outflow from financing activities

        (647,585     (249,748
     

 

 

   

 

 

 

Effect of exchange rate change on cash and cash equivalents

        (2,042     (5,481
     

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

        328,730       (397,528

Cash and cash equivalents

       

Beginning of the year

     5        2,305,894       2,703,422  
     

 

 

   

 

 

 

End of the year

     5      W 2,634,624     W 2,305,894  
     

 

 

   

 

 

 

The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.

 

12


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 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 64 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 telecommunication 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 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, 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 December 31, 2020, the Korean government does not own any shares in the Controlling Company.

 

13


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  1.2

Consolidated Subsidiaries

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

 

               Controlling percentage
ownership1 (%)
      
Subsidiary    Type of business    Location    December 31,
2020
     December 31,
2019
     Closing month

KT Powertel Co., Ltd. 2

  

Trunk Radio System (TRS) 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

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 centre 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)

  

Data centre development and related service

   Korea      100.0      100.0    December

KT Sat Co., Ltd.

  

Satellite communication business

   Korea      100.0      100.0    December

 

14


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

               Controlling percentage
ownership1 (%)
      
Subsidiary    Type of business    Location    December 31,
2020
     December 31,
2019
     Closing month

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 Contents Fund

  

Content investment business

   Korea      88.6      88.6    December

Autopion Co., Ltd.

  

Information and communication service

   Korea      100.0      100.0    December

KTCS Corporation 2,4

  

Database and online information provider

   Korea      31.9      30.9    December

KTIS Corporation 2,4

  

Database and online information provider

   Korea      30.8      30.1    December

KT M Mobile Co., Ltd.

  

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

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

Korea Japan Co., Ltd.

  

Foreign telecommunication business

   Japan      100.0      100.0    December

KBTO sp.z o.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.

  

Super iMax and East Telecom management

   Netherlands      100.0      100.0    December

East Telecom LLC

  

Fixed line telecommunication business

   Uzbekistan      91.6      91.0    December

KT America, Inc.

  

Foreign telecommunication 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 communication 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 Co., Ltd.

  

Internet advertising solution provider

   Thailand      99.9      99.9    December

KT Huimangjieum

  

Manufacturing

   Korea      100.0      100.0    December

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

  

Residential building investment and rent

   Korea      68.1      63.5    December

K-REALTY RENTAL HOUSING REIT 3

  

Residential building

   Korea      88.6      100.0    December

Storywiz Co., Ltd

  

Content and software development and supply

   Korea      100.0      —        December

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.)

  

Telecommunication facility construction and maintenance

   Korea      100.0      —        December

 

1 

Sum of the ownership interests owned by the Controlling Company and subsidiaries.

2 

Although the Controlling Company owns less than 50% ownership in this entity, this entity is consolidated as the Controlling Company can exercise the majority voting rights in its decision-making process at all times considering the historical voting pattern at the shareholders’ meetings.

3 

Although the Controlling Company owns less than 50% ownership in this entity, this entity is consolidated as the Controlling Company holds the majority of voting right based on an agreement with other investors.

4 

The number of subsidiaries’ treasury stock is deducted from the total number of shares when calculating the controlling percentage ownership.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

1.3

Changes in Scope of Consolidation

Subsidiaries newly included and excluded in the consolidation during the year ended December 31, 2020:

 

Changes

  

Location

 

Name of Subsidiary

  

Reason

Included    Korea   Storywiz Co., Ltd    Newly established
Included    Korea   KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.)    Transferred
Excluded    Uzbekistan   Super iMax LLC    Merged
Excluded    Indonesia   PT. KT Indonesia    Liquidated
Excluded    Belgium   KT ORS Belgium    Liquidated

Summarized information for consolidated subsidiaries as at and for the years ended December 31, 2020 and 2019, is as follows:

 

     December 31, 2020  
(in millions of Korean won)    Total assets      Total liabilities      Operating
revenues
     Profit (loss)
for the year
 

KT Powertel Co., Ltd.

   W 119,694      W 18,833      W 65,564      W 3,809  

KT Linkus Co., Ltd.

     58,372        54,022        84,071        (3,212

KT Submarine Co., Ltd.

     116,813        14,032        52,226        1,197  

KT Telecop Co., Ltd.

     318,456        193,737        390,333        212  

KT Hitel Co., Ltd.

     288,949        92,599        349,404        2,080  

KT Service Bukbu Co., Ltd.

     60,825        56,554        217,194        (871

KT Service Nambu Co., Ltd.

     58,182        51,460        264,482        (456

BC Card Co., Ltd. 1

     3,084,398        1,778,751        3,386,364        39,455  

H&C Network 1

     269,651        61,365        321,476        2,413  

Nasmedia Co., Ltd. 1

     422,039        221,371        111,641        23,134  

KTDS Co., Ltd. 1

     183,297        133,129        499,135        10,635  

KT M Hows Co., Ltd.

     104,704        76,315        44,825        6,935  

KT M&S Co., Ltd.

     231,260        197,306        661,197        (485

GENIE Music Corporation (KT Music Corporation)

     250,538        88,488        246,968        9,472  

KT MOS Bukbu Co., Ltd.

     32,167        26,070        67,929        1,473  

KT MOS Nambu Co., Ltd.

     33,765        24,947        71,066        1,639  

KT Skylife Co., Ltd. 1

     919,476        175,039        698,715        58,190  

KT Estate Inc. 1

     1,689,601        325,429        364,429        14,370  

KTGDH Co., Ltd. (KTSB Data Service)

     11,003        1,669        4,274        538  

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

     December 31, 2020  
(in millions of Korean won)    Total assets      Total liabilities      Operating
revenues
     Profit (loss)
for the year
 

KT Sat Co., Ltd.

     630,740        92,791        173,548        14,753  

KT Sports Co., Ltd.

     26,572        14,940        46,539        (2,516

KT Music Contents Fund No.1

     4,844        1,525        243        84  

KT Music Contents Fund No.2

     15,021        285        169        (116

KT-Michigan Global Contents Fund

     10,382        175        111        (1,420

Autopion Co., Ltd.

     4,903        4,961        6,165        (2,459

KT M Mobile Co., Ltd.

     129,011        27,281        163,115        (3,617

KT Investment Co., Ltd. 1

     115,627        93,695        47,801        4,680  

KTCS Corporation 1

     384,919        215,175        931,704        11,323  

KTIS Corporation

     294,289        126,894        453,639        7,387  

Next Connect PFV

     394,268        37,271        8        (7,101

Korea Japan Co., Ltd. 1

     2,694        2,622        1,790        1  

Korea Telecom China Co., Ltd.

     381        21        618        (492

KT Dutch B.V. 1

     29,585        10,109        26,393        6,061  

Korea Telecom America, Inc.

     4,498        125        6,808        712  

KT Rwanda Networks Ltd. 2

     114,768        191,781        17,831        (34,610

KT Belgium

     87,608        —          —          (81

KBTO sp.z o.o.

     438        117        490        (2,823

AOS Ltd. 2

     11,812        3,875        5,739        296  

KT Hong Kong Telecommunications Co., Ltd.

     6,159        2,800        16,386        1,308  

KT Huimangjieum

     3,720        2,787        4,312        (13

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

     5,703        1,165        333        83  

Storywiz Co., Ltd

     21,594        10,065        19,209        (1,954

KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.)

     138,220        102,963        335,507        (8,461

 

     December 31, 2019  
(in millions of Korean won)    Total assets      Total liabilities      Operating
revenues
     Profit (loss)
for the year
 

KT Powertel Co., Ltd.

   W 118,052      W 19,766      W 62,710      W 3,085  

KT Linkus Co., Ltd.

     70,494        62,088        94,027        (2,258

KT Submarine Co., Ltd.

     120,947        18,452        55,168        486  

KT Telecop Co., Ltd.

     279,878        153,841        331,217        (4,875

KT Hitel Co., Ltd.

     279,818        74,769        322,321        1,426  

KT Service Bukbu Co., Ltd.

     64,802        58,984        219,284        (445

KT Service Nambu Co., Ltd.

     63,917        55,548        265,691        280  

BC Card Co., Ltd. 1

     3,912,982        2,594,232        3,536,523        115,885  

H&C Network 1

     282,016        68,401        319,934        (1,593

Nasmedia Co., Ltd. 1

     356,236        203,105        117,007        22,484  

KTDS Co., Ltd. 1

     158,153        105,462        428,513        9,027  

KT M Hows Co., Ltd.

     74,326        50,638        33,442        6,771  

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

     December 31, 2019  
(in millions of Korean won)    Total assets      Total liabilities      Operating
revenues
     Profit (loss)
for the year
 

KT M&S Co., Ltd.

     248,142        215,777        812,478        12,732  

GENIE Music Corporation (KT Music Corporation)

     234,131        80,952        230,426        7,658  

KT MOS Bukbu Co., Ltd.

     33,376        28,841        63,686        353  

KT MOS Nambu Co., Ltd.

     34,258        26,722        67,244        3,099  

KT Skylife Co., Ltd. 1

     848,276        142,839        694,637        56,008  

KT Estate Inc. 1

     1,686,000        295,706        485,271        48,552  

KTGDH Co., Ltd. (KTSB Data Service)

     10,437        1,628        3,971        344  

KT Sat Co., Ltd.

     651,195        127,523        168,009        16,497  

KT Sports Co., Ltd.

     15,603        8,333        55,086        (464

KT Music Contents Fund No.1

     10,579        1,677        521        345  

KT Music Contents Fund No.2

     7,675        279        331        48  

KT-Michigan Global Contents Fund

     11,688        61        248        (1,113

Autopion Co., Ltd.

     7,460        4,894        5,577        (302

KT M Mobile Co., Ltd.

     135,917        30,603        161,304        (5,580

KT Investment Co., Ltd. 1

     73,463        56,212        13,375        847  

KTCS Corporation 1

     378,171        213,983        943,950        7,597  

KTIS Corporation

     305,798        137,524        451,027        9,205  

Next Connect PFV

     385,412        24,275        1,590        (5,898

Korea Telecom Japan Co., Ltd. 1

     1,851        2,858        1,987        651  

Korea Telecom China Co., Ltd.

     879        39        844        192  

KT Dutch B.V.

     31,003        50        —          (242

Super iMax LLC

     3,568        5,304        4,604        (631

East Telecom LLC 1

     20,857        16,302        17,186        2,140  

Korea Telecom America, Inc.

     4,611        537        6,808        572  

PT. KT Indonesia

     8        —          —          —    

KT Rwanda Networks Ltd. 2

     132,461        183,164        17,949        (31,662

KT Belgium

     93,321        11        —          (64

KBTO sp.z o.o.

     1,767        245        519        (3,457

AOS Ltd. 2

     12,337        3,993        6,931        (591

KT Hong Kong Telecommunications Co., Ltd.

     5,126        2,923        13,321        586  

KT Huimangjieum

     2,129        1,019        899        (390

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

     6,285        1,139        176        70  

 

  1 

These entities are the intermediate controlling companies of other subsidiaries and the above financial information is from their consolidated financial statements.

  2 

At the end of the reporting period, convertible preferred stock issued by subsidiaries is included in liabilities.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

2.

Significant Accounting Policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

 

  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 International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying consolidated financial statements have been condensed, restructured and translated into English from the Korean language financial statements.

The consolidated financial statements of the Group have been prepared in accordance with Korean IFRS. These are the standards, subsequent amendments and related interpretations issued by the International Accounting Standards Board (IASB) that have been adopted by the Republic of Korea.

The financial statements have been prepared on a historical cost basis, except for the following:

 

   

Certain financial assets and liabilities (including derivative instruments), certain classes of property and equipment and investment property – measured at fair value

 

   

Assets held-for-sale – measured at fair value less costs to sell

 

   

Defined benefit pension plans – plan assets measured at fair value

The preparation of the consolidated financial statements requires the use of critical accounting estimates. Management also needs to exercise judgement in applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  2.2

Changes in Accounting Policy and Disclosures

 

  (1)

New and amended standards adopted by the Group

The Group has applied the following standards and amendments 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 definition of material. Information is material if omitting, misstating or obscuring it could reasonably be expected to influence the decisions that the primary users of general-purpose financial statements make on the basis of those financial statements. The amendments do not have a significant impact on the financial statements.

 

   

Amendments to Korean IFRS 1103 Business Combination – Definition of 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 the definition of output excludes the returns in the form of lower costs and other economic benefits. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, an entity may elect to apply an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The amendments do 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

The amendments allow to apply the exceptions when forward-looking analysis is performed in relation the application of hedge accounting, while uncertainties arising from interest rate benchmark reform exist. The exceptions require the Group assumes that the interest rate benchmark, on which the hedged items and the hedging instruments are based on, is not altered as a result of interest rate benchmark reform, when determining whether the expected cash flows are highly probable, whether an economic relationship between the hedged item and the hedging instrument exists, and when assessing the hedging relationship is highly effective.

The Group’s risk exposure, directly affected by the interest rate benchmark reform, is the variable rate borrowings of USD 519,598,989 and SGD 284,000,000 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 519,598,989 and SGD 284,000,000 and designated it as a hedging instrument of cash flow hedge.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

   

Agenda Decision of the International Accounting Standards Interpretations Committee – Lease Period

The IFRS Interpretations Committee (IFRS IC) announced on December 16, 2019 that all economic penalties resulting from the termination of a lease are taken into account when determining the enforceable period for ‘Lease Term and Useful Life of Leasehold Improvements’. The Group’s changes in accounting policy have been adopted retrospectively in accordance with Korean IFRS 1108 Accounting Policies, Changes in Accounting Estimates and Errors, and the comparative financial statements as at December 31, 2019 and for the year then ended have been adjusted (Note 43).

 

  (2)

New standards and interpretations not yet adopted by the Group

The following new accounting standards and interpretations have been published that are not mandatory for December 31, 2020 reporting periods and have not been early adopted by the Group.

 

   

Amendments to Korean IFRS 1116 Lease – Practical expedient for COVID-19 - Related Rent Exemption, Concessions, Suspension

As a practical expedient, a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification, and the amounts recognized in profit or loss as a result of applying this exemption should be disclosed. The amendments should be applied for annual periods beginning on or after June 1, 2020, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements.

 

   

Amendments to Korean IFRS 1109 Financial Instruments, Korean IFRS 1039 Financial Instruments: Recognition and Measurement, Korean IFRS 1107 Financial Instruments: Disclosure, Korean IFRS 1104 Insurance Contracts and Korean IFRS 1116 Lease – Interest Rate Benchmark Reform

In relation to interest rate benchmark reform, the amendments provide exceptions including adjust effective interest rate instead of book amounts when interest rate benchmark of financial instruments at amortized costs is replaced, and apply hedge accounting without discontinuance although the interest rate benchmark is replaced in hedging relationship. The amendments should be applied for annual periods beginning on or after January 1, 2021, and earlier application is permitted. The Group is in review for the impact of these amendments on the financial statements.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

   

Amendments to Korean IFRS 1103 Business Combination – Reference to the Conceptual Framework

The amendments update a reference of definition of assets and liabilities qualify for recognition in revised Conceptual Framework for Financial Reporting. However, the amendments add an exception for the recognition of liabilities and contingent liabilities within the scope of Korea IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets, and Korean IFRS 2121 Levies. The amendments also confirm that contingent assets should not be recognized at the acquisition date. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements.

 

   

Amendments to Korean IFRS 1016 Property, Plant and Equipment - Proceeds Before Intended Use

The amendments prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while the entity is preparing the asset for its intended use. Instead, the entity will recognize the proceeds from selling such items, and the costs of producing those items, in profit or loss. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group is in review for the impact of these amendments on the financial statements.

 

   

Amendments to Korean IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets - Onerous Contracts: Cost of Fulfilling a Contract

The amendments clarify that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts when assessing whether the contract is onerous. The amendments should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements.

 

   

Annual improvements to Korean IFRS 2018-2020

Annual improvements of Korean IFRS 2018-2020 Cycle should be applied for annual periods beginning on or after January 1, 2022, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements.

 

   

Korean IFRS 1101 First time Adoption of Korean International Financial Reporting Standards – Subsidiaries that are first-time adopters

 

   

Korean IFRS 1109 Financial Instruments – Fees related to the 10% test for derecognition of financial liabilities

 

   

Korean IFRS 1116 Leases – Lease incentives

 

   

Korean IFRS 1041 Agriculture – Measuring fair value

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

   

Amendments to Korean IFRS 1001 Presentation of Financial Statements - Classification of Liabilities as Current or Non-Current

The amendments clarify that liabilities are classified as either current or non-current, depending on the substantive rights that exist at the end of the reporting period. Classification is unaffected by the likelihood that an entity will exercise right to defer settlement of the liability or the expectations of management. Also, the settlement of liability include the transfer of the entity’s own equity instruments, however, it would be excluded if an option to settle them by the entity’s own equity instruments if compound financial instruments is met the definition of equity instruments and recognized separately from the liability. The amendments should be applied for annual periods beginning on or after January 1, 2023, and earlier application is permitted. The Group is in review for the impact of these amendments on the financial statements.

 

  2.3

Consolidation

The Group has prepared the consolidated financial statements in accordance with Korean IFRS 1110 Consolidated Financial Statements.

 

  (a)

Subsidiaries

Subsidiaries are all entities (including special purpose entities (“SPEs”)) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred is measured at the fair values of the assets transferred, and identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. All other non-controlling interests are measured at fair values, unless otherwise required by other standards. Acquisition-related costs are expensed as incurred.

The excess of consideration transferred, amount of any non-controlling interest in the acquired entity and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recoded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognized directly in the profit or loss as a bargain purchase.

Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  (b)

Changes in ownership interests in subsidiaries without change of control

Any difference between the amount of the adjustment to non-controlling interest that do not result in a loss of control and any consideration paid or received is recognized in a separate reserve within equity attributable to owners of the Controlling Group.

 

  (c)

Disposal of subsidiaries

When the Group ceases to consolidate for a subsidiary because of a loss of control, any retained interest in the subsidiary is remeasured to its fair value with the change in carrying amount recognized in profit or loss.

 

  (d)

Associates

Associates are entities over which the Group has significant influence but does not possess control or joint control. Investments in associates are accounted for using the equity method of accounting, after initially being recognized at cost. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. If the Group’s share of losses of an associate equals or exceeds its interest in the associate (including long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognizing its share of further losses. After the Group’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. If there is an objective evidence of impairment for the investment in the associate, the Group recognizes the difference between the recoverable amount of the associate and its book amount as impairment loss. If an associate uses accounting policies other than those of the Group for transactions and events in similar circumstances, if necessary, adjustments shall be made to make the associate’s accounting policies conform to those of the Group when the associate’s financial statements are used by the Group in applying the equity method.

 

  (e)

Joint arrangement

A joint arrangement, wherein two or more parties have joint control, is classified as either a joint operation or a joint venture. A joint operator recognizes its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. A joint venture has rights to the net assets relating to the joint venture and accounts for that investment using the equity method.

 

  2.4

Segment Reporting

Information of each operating segment is reported in a manner consistent with the business segment reporting provided to the chief operating decision-maker (Note 36). The chief operating decision-maker is responsible for allocating resources and assessing performance of the operating segments.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  2.5

Foreign Currency Translation

 

  (a)

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which each entity operates (the “functional currency”). The consolidated financial statements are presented in Korean won, which is the Controlling Company’s functional and presentation currency.

 

  (b)

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognized in profit or loss. They are deferred in other comprehensive income if they relate to qualifying cash flow hedges and qualifying effective portion of net investment hedges, or are attributable to monetary part of the net investment in a foreign operation.

Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss within ‘other income or other expenses’.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as available-for-sale financial assets are recognized in other comprehensive income.

 

  2.6

Financial Assets

 

  (a)

Classification

The Group classifies its financial assets in the following measurement categories:

 

   

those to be measured at fair value through profit or loss

 

   

those to be measured at fair value through other comprehensive income

 

   

those to be measured at amortized cost

The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the cash flows.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

For financial assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. The Group reclassifies debt investments when, and only when its business model for managing those assets changes.

For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. Changes in fair value of the investments in equity instruments that are not accounted for as other comprehensive income are recognized in profit or loss.

 

  (b)

Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

 

  A.

Debt instruments

Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash flow characteristics of the asset. The Group classifies its debt instruments into one of the following three measurement categories:

 

   

Amortized cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in ‘finance income’ using the effective interest rate method.

 

   

Fair value through other comprehensive income: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment loss (and reversal of impairment loss), interest income and foreign exchange gains and losses which are recognized in profit or loss. When the financial asset is derecognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. Interest income from these financial assets is included in ‘finance income’ using the effective interest rate method. Foreign exchange gains and losses are presented in ‘finance income or finance costs’ and impairment loss in ‘finance costs or operating expenses’.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

   

Fair value through profit or loss: Assets that do not meet the criteria for amortized cost or fair value through other comprehensive income are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss and presented net in the statement of profit or loss within ‘finance income or finance costs’ in the period in which it arises.

 

  B.

Equity instruments

The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognized in profit or loss as ‘finance income’ when the Group’s right to receive payments is established.

Changes in the fair value of financial assets at fair value through profit or loss are recognized in ‘finance income or finance costs’ in the statement of profit or loss as applicable. Impairment loss (reversal of impairment loss) on equity investments, measured at fair value through other comprehensive income, are not reported separately from other changes in fair value.

 

  (c)

Impairment

The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortized cost and fair value through other comprehensive income. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables and lease receivables, the Group applies the simplified approach, which requires expected lifetime credit losses to be recognized from initial recognition of the receivables.

 

  (d)

Recognition and derecognition

Regular way purchases and sales of financial assets are recognized or derecognized on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

If a transfer does not result in derecognition because the Group has retained substantially all the risks and rewards of ownership of the transferred asset, the Group continues to recognize the transferred asset in its entirety and recognizes a financial liability for the consideration received.

 

  (e)

Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount reported in the statements of financial position where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Group or the counterparty.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  2.7

Derivative Instruments

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group has hedge relationships and designates certain derivatives as:

 

   

hedges of a particular risk associated with the cash flows of recognized assets and liabilities and highly probable forecast transactions (cash flow hedges)

At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments and hedged items including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedged items.

The fair values of derivative financial instruments designated in hedge relationships are disclosed in Note 39.

The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. A non-derivative financial asset and a non-derivative financial liability is classified as a current or non-current based on its expected maturity and its settlement, respectively.

The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the cash flow hedge reserve within equity. The ineffective portion is recognized in ‘finance income (costs)’.

Amounts of changes in fair value of effective hedging instruments accumulated in equity are recognized as ‘finance income (costs)’ for the periods when the corresponding transactions affect profit or loss.

When a hedging instrument expires, or is sold, terminated, exercised, or when a hedge no longer meets the criteria for hedge accounting, any accumulated cash flow hedge reserve at that time remains in equity until the forecast transaction occurs, resulting in the recognition of a non-financial asset such as inventory. When the forecast transaction is no longer expected to occur, the cash flow hedge reserve and deferred costs of hedging that were reported in equity are immediately reclassified to profit or loss.

 

  2.8

Trade Receivables

Trade receivables are recognized initially at the amount of consideration that is unconditional, unless they contain significant financing components when they are recognized at fair value. Trade receivables are subsequently measured at amortized cost using the effective interest method, less loss allowance. See Note 6 for further information about the Group’s accounting for trade receivables and Note 2.6 (c) for a description of the Group’s impairment policies.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  2.9

Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the moving average method, except for inventories in-transit.

 

  2.10

Non-Current Assets (or Disposal Group) Held-for-Sale

Non-current assets (or disposal group) are classified as assets held for sale when their carrying amount will be recovered principally through a sale transaction rather than through continued use and when a sale is considered highly probable. The assets are measured at the lower amount between their carrying amount and the fair value less selling costs.

 

  2.11

Property and Equipment

Property and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditures that is directly attributable to the acquisition of the items.

Depreciation of all property and equipment, except for land, is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives as follows:

 

     Useful Life

Buildings

   5 – 40 years

Structures

   5 – 40 years

Machinery and equipment

(Telecommunications equipment and others)

   2 – 40 years

Vehicles

   4 – 6 years

Tools

   4 – 6 years

Office equipment

   2 – 6 years

The depreciation method, residual values and useful lives of property and equipment are reviewed at the end of each reporting period and, if appropriate, accounted for as changes in accounting estimates.

 

  2.12

Investment Property

Investment property is a property held to earn rentals or for capital appreciation. An investment property is measured initially at its cost. After recognition as an asset, investment property is carried at cost less accumulated depreciation and impairment losses. Investment property, except for land, is depreciated using the straight-line method over their useful lives from 10 to 40 years.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  2.13

Intangible Assets

 

  (a)

Goodwill

Goodwill is measured as explained in Note 2.3 (a) and goodwill arising from acquisition of subsidiaries and business are included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of subsidiaries and business include the carrying amount of goodwill relating to the subsidiaries and business sold.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or group of CGUs, that is expected to benefit from the synergies of the combination. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying amount of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense and is not subsequently reversed.

 

  (b)

Intangible assets excluding goodwill

Intangible assets, except for goodwill, are initially recognized at its historical cost, and carried at cost less accumulated amortization and accumulated impairment losses. Membership rights (condominium membership and golf membership) that have an indefinite useful life are not subject to amortization because there is no foreseeable limit to the period over which the assets are expected to be utilized. The Group amortizes intangible assets with a limited useful life using the straight-line method over the following periods:

 

     Useful Life

Development costs

   5 – 6 years

Software

   4 – 6 years

Frequency usage rights

   5 – 10 years

Others1

   1 – 50 years

 

  1 

Membership rights (condominium membership and golf membership) and broadcast license included in others are classified as intangible assets with indefinite useful life.

 

  2.14

Borrowing Costs

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Investment income earned on the temporary investment of specific borrowings on qualifying assets is deducted from the borrowing costs eligible for capitalization. Other borrowing costs are expensed in the period in which they are incurred.

 

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Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  2.15

Government Grants

Grants from the government are recognized at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants related to assets are presented in the statement of financial position by setting up the grant as deferred income that is recognized in profit or loss on a systematic basis over the useful life of the asset. Grants related to income are presented as a credit in the statement of profit or loss within ‘other income’.

 

  2.16

Impairment of Non-Financial Assets

Goodwill and intangible assets with indefinite useful life are tested annually for impairment at the end of each reporting period. If certain assets are deemed to be impaired, their recoverable amount is estimated in order to determine the impairment loss. The Group estimates the recoverable amount for each asset, and in cases when the recoverable amount cannot be estimated for an asset, the recoverable amount of the cash generating unit to which the asset belongs is estimated. Corporate assets are allocated to individual cash generating units on a reasonable and consistent basis and if they cannot be allocated to individual cash generating units, they are allocated to the smallest group of cash generating units on a reasonable and consistent basis. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount (higher of its fair value less costs of disposal and value in use). Impairment loss on non-financial assets other than goodwill are evaluated for reversal at the end of each reporting period.

 

  2.17

Trade and Other Payables

These amounts represent liabilities for goods and services provided to the Group prior to the end of reporting period which are unpaid. Trade and other payables are presented as current liabilities, unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method.

 

  2.18

Financial Liabilities

 

  (a)

Classification and measurement

The Group’s financial liabilities at fair value through profit or loss are financial instruments held for trading. A financial liability is held for trading if it is incurred principally for the purpose of repurchasing in the near term. Derivatives that are not designated as hedging instruments or derivatives separated from financial instruments containing embedded derivatives are also categorized as held for trading.

The Group classifies non-derivative financial liabilities, except for financial liabilities at fair value through profit or loss, financial guarantee contracts and financial liabilities that arise when a transfer of financial assets does not qualify for derecognition, as financial liabilities carried at amortized cost and present as ‘trade payables’, ‘borrowings’ and ‘other financial liabilities’ in the statement of financial position.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

Preferred shares that require mandatory redemption at a particular date are classified as liabilities. Interest expenses on these preferred shares using the effective interest method are recognized in the statement of profit or loss as ‘finance costs’, together with interest expenses recognized from other financial liabilities.

 

  (b)

Derecognition

Financial liabilities are removed from the statement of financial position when it is extinguished; for example, when the obligation specified in the contract is discharged or cancelled or expired or when the terms of an existing financial liability are substantially modified. The difference between the carrying amount of a financial liability extinguished or transferred to another party and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss.

 

  2.19

Financial Guarantee Contracts

Financial guarantee contracts are recognized as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value, subsequently at the higher of following and recognized in the statement of financial position within ‘other financial liabilities’:

 

   

the amount determined in accordance with the expected credit loss model under Korean IFRS 1109 Financial Instruments

 

   

the amount initially recognized less, where appropriate, the cumulative amount of income recognized in accordance with Korean IFRS 1115 Revenue from Contracts with Customers

 

  2.20

Employee Benefits

 

  (a)

Post-employment benefits

The Group operates both defined contribution and defined benefit pension plans.

A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The contributions are recognized as employee benefit expenses when an employee has rendered service.

A defined benefit plan is a pension plan that is not a defined contribution plan. Generally, post-employment benefits are payable after the completion of employment, and the benefit amount depended on the employee’s age, periods of service or salary levels. The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service costs.

 

  (b)

Termination benefits

Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits at the earlier of the following dates: when the entity can no longer withdraw the offer of those benefits or when the entity recognizes costs for a restructuring.

 

  (c)

Long-term employee benefits

Certain entities within the Group provide long-term employee benefits that are entitled to employees with service period for ten years and above. The expected costs of these benefits are accrued over the period of employment using the same accounting methodology as used for defined benefit pension plans. The Group recognizes service cost, net interest on other long-term employee benefits and remeasurements as profit or loss for the year. These liabilities are valued annually by an independent qualified actuary.

 

  2.21

Share-Based Payments

Equity-settled share-based payment is recognized at fair value of equity instruments granted, and employee benefit expense is recognized over the vesting period. At the end of each period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognizes the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.

 

  2.22

Provisions

Provisions for service warranties, recoveries, litigations and claims, and others are recognized when the Group presently hold legal or constructive obligation as a result of past events, and when it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period, and the increase in the provision due to the passage of time is recognized as interest expense.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  2.23

Leases

As explained in “Note 2.2 (1)” above, the Group has changed its accounting policy for leases. The impact of the new accounting policies is disclosed in Note 43.

 

  (a)

Lessee

The Group leases various repeater server rack, offices, communication line facilities, machinery and cars.

Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Group is lessee, the Group applies the practical expedient which has elected not to separate lease and non-lease components and instead accounts them as a single lease component.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

 

   

Fixed payments (including in-substance fixed payments), less any lease incentives receivable

 

   

Variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date

 

   

Amounts expected to be payable by the Group (the lessee) under residual value guarantees

 

   

The exercise price of a purchase option if the Group (the lessee) is reasonably certain to exercise that option, and

 

   

Payments of penalties for terminating the lease, if the lease term reflects the Group (the lessee) exercising that option

Lease liability measurement also include payments to be made in option periods if the lessee is reasonably certain in exercising an option to extend the lease.

The Group determines the lease term as the non-cancellable period of a lease, together with both (a) periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and (b) periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. When the lessee and the lessor each has the right to terminate the lease without permission from the other party, the Group should consider a termination penalty in determining the period for which the contract is enforceable.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, which is the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period in order to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

 

   

amount of the initial measurement of lease liability

 

   

any lease payments made at or before the commencement date less any lease incentives received

 

   

any initial direct costs (leasehold deposits)

 

   

restoration costs, and

 

   

present value discount on leasehold deposits

The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.

Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less, such as mechanical devices and cars. Low-value assets are comprised of tools, equipment, and others.

 

  (b)

Lessor

Lease income from operating leases where the Group is a lessor is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognized as expense over the lease term on the same basis as lease income. The respective leased assets are included in the statement of financial position based on their nature. As a result of adopting the new lease standard, the Group applied the accounting for assets held as a lessor.

 

  2.24

Share Capital

The Controlling Company classifies ordinary shares as equity.

Where the Controlling Company purchases its own shares, the consideration paid, including any directly attributable incremental costs, is deducted from equity until the share are cancelled or reissued. When these treasury shares are reissued, any consideration received is included in equity attributable to the equity holders of the Controlling Company.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  2.25

Revenue Recognition

 

  (a)

Identifying performance obligations

The Group identifies performance obligations with a customer such as providing telecommunication services, selling handsets and other. The revenue from handsets is recognized when a performance obligation is satisfied by transferring promised goods to customers, and the revenue from telecommunication services is recognized over the estimated contract periods of each services by transferring promised services to customers.

 

  (b)

Allocation the transaction price and revenue recognition

The Group allocates the transaction price to each performance obligation identified in the contract based on a relative stand-alone selling prices of the goods or services being provided to the customer. To allocate the transaction price to each performance obligation on a relative stand-alone price basis, the Group determines the stand-alone selling price at contract inception of the distinct good or service underlying each performance obligation in the contract and allocate the transaction price in proportion to those stand-alone selling price. The stand-alone selling price is the price at which the Group would sell a promised good or service separately to the customer. The best evidence of a stand-alone selling price is the observable price of a good or service when the Group sells that good or service separately in similar circumstances and to similar customers. The Group recognizes the allocated amount as contract assets or contract liabilities, and amortizes it through the remaining period which is adjusted in operating income.

 

  (c)

Incremental contract acquisition costs

The Group pays the commission fees when new customers subscribe for telecommunication services. The incremental contract acquisition costs are those commission fees that the Group incurs to acquire a contract with a customer that would not have been incurred if the contract had not been acquired. The Group recognizes the incremental contract acquisition costs as an asset and amortizes it over the expected period of benefit. However, as a practical expedient, the Group may recognize the incremental contract acquisition costs as an expense when it is incurred if the amortization period of the asset is one year or less.

 

  (d)

Commission fees

Commission fees are recognized when it is probable that future economic benefits will flow to the entity and these benefits can be reliably measured. Revenues are measured at the fair value of the consideration received.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  2.26

Current and Deferred Income Tax

The tax expense for the period consists of current and deferred tax. Current and deferred tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

The tax expense is measured at the amount expected to be paid to the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Management periodically evaluates tax policies that are applied in tax returns in which applicable tax regulation is subject to interpretation. The Group recognizes current income tax on the basis of the amount expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting profit nor taxable profit or loss.

Deferred tax assets are recognized only if it is probable that future taxable amount will be available to utilize those temporary differences and losses.

The Group recognizes a deferred tax liability all taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint arrangements, except to the extent that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. In addition, the Group recognizes a deferred tax asset for all deductible temporary differences arising from such investments to the extent that it is probable the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset when the Group has a legally enforceable right to offset and intends either to settle on a net basis, or to realize the assets and settle the liability simultaneously.

The Group adopts the consolidated corporate tax return and calculates income tax expenses and income tax liabilities of the Group based on systematic and reasonable methods.

 

  2.27

Dividend

Dividend distribution to the Group’s shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the Group’s shareholders.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  2.28

Approval of Issuance of the Financial Statements

The consolidated financial statements of 2020 were approved for issuance by the Board of Directors on February 9, 2021 and are subject to change with the approval of shareholders at their Annual General Meeting.

 

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 Coronavirus disease 2019 (“COVID-19”) has a material impact on the global 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.

Significant accounting estimates and assumptions applied in the preparation of the consolidated 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 be determined.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Additional information of significant judgement and assumptions of certain items are included in relevant notes.

 

  3.1

Impairment of Non-Financial Assets (including Goodwill)

The Group determines the recoverable amount of a cash generating unit (CGU) based on fair value or value-in-use calculations assess non-financial assets (including goodwill) for impairment (Note 13).

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  3.2

Income Taxes

The Group’s taxable income generated from these operations are subject to income taxes based on tax laws and interpretations of tax authorities in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain (Note 31).

If certain portion of the taxable income is not used for investments or increase in wages or dividends in accordance with the Tax System for Recirculation of Corporate Income, the Group is liable to pay additional income tax calculated based on the tax laws. Accordingly, the measurement of current and deferred income tax is affected by the tax effects from the new tax system. As the Group’s income tax is dependent on the investments, as well as wage and dividends increase, there is an uncertainty measuring the final tax effects.

 

  3.3

Fair Value of Derivatives and Financial Instruments

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period (Note 39).

 

  3.4

Impairment of Financial Assets

The provision for impairment for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses judgement in making these assumptions and selecting the inputs to the impairment calculation based on the Group’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period (Note 38).

 

  3.5

Net Defined Benefit Liability

The present value of net defined benefit liability depends on a number of factors that are determined on an actuarial basis using a number of assumptions including the discount rate (Note 18).

 

  3.6

Amortization of Contract Assets, Contract Liabilities and Contract Cost Assets

Contract assets, contract liabilities and contract cost assets recognized under the application of Korean IFRS 1115 are amortized over the expected periods of customer relationships. The estimate of the expected terms of customer relationship is based on the historical data. If management’s estimate changes, it may cause significant differences in the timing of revenue recognition and amounts recognized.

 

  3.7

Provisions

As described in Note 17, the Group records provisions for litigation and assets retirement obligations as at the end of the reporting period. The provisions are estimated based on the factors such as the historical experiences.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  3.8

Useful Lives of Property and Equipment and Investment Property

Property and equipment, intangible assets, and investment properties, excluding land, goodwill, condominium memberships and golf club memberships are depreciated using the straight-line method over their useful lives. The estimated useful lives are determined based on expected usage of the assets and the estimates can be materially affected by technical changes and other factors. The Group will increase depreciation expenses if the useful lives are considered shorter than the previously estimated useful lives.

 

  3.9

Critical Judgments in Determining the Lease Term

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

For leases of property, machinery and communication line facilities, the following factors are normally the most relevant:

 

   

If there are significant penalties to terminate (or not extend), the Group is typically reasonably certain to extend (or not terminate).

 

   

If any leasehold improvements are expected to have a significant remaining value, the Group is typically reasonably certain to extend (or not terminate).

 

   

Otherwise, the Group considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset.

Most extension options in offices, retail stores and vehicles leases have not been included in the lease liability, because the Group could replace the assets without significant cost or business disruption.

The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee.

Details on the current period’s financial impact from changes in accounting policies, to reflect exercising extension and termination options, are disclosed in Note 43.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

4.

Financial Instruments by Category

Financial instruments by category as at December 31, 2020 and 2019, are as follows:

 

(in millions of Korean won)    December 31, 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  2,634,624      W —        W —        W —        W  2,634,624  

Trade and other receivables1

     4,976,423        —          1,118,619        —          6,095,042  

Other financial assets

     671,068        809,919        258,516        7,684        1,747,187  

 

  1

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

 

(in millions of Korean won)    December 31, 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 7,017,639      W —        W —        W 7,017,639  

Borrowings

     7,316,298        —          —          7,316,298  

Other financial liabilities

     132,558        2,682        127,929        263,169  

 

(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

   W8,679,697    W —        W —        W 8,679,697  

Borrowings

   7,298,867      —          —          7,298,867  

Other financial liabilities

   129,945      38        20,096        150,079  

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

Gains or losses arising from financial instruments by category for the years ended December 31, 2020 and 2019, are as follows:

 

(in millions of Korean won)    2020      2019  

Financial assets at amortized cost

     

Interest income 1,5

   W 55,742      W 79,838  

Loss (gain) on foreign currency transactions 4

     (19,244      32,293  

Loss on foreign currency translation 4

     (3,895      (474

Gain (loss) on disposal

     138        (43

Loss on valuation

     (140,474      (59,947

Financial assets at fair value through profit or loss

     

Interest income 1

     6,548        5,634  

Dividend income 6

     4,379        1,096  

Gain on valuation 7

     59,044        4,334  

Loss (gain) on disposal

     (329      5,115  

Loss (gain) on foreign currency transactions 4

     (38      —    

Loss on foreign currency translation 4

     —          (27

Financial assets at fair value through other comprehensive income

     

Interest income 1

     227,736        217,355  

Dividend income6

     56        2,312  

Reversal of impairment loss (impairment loss)

     —          (304

Loss on disposal

     (8,152      (11,247

Other comprehensive income for the year 2

     41,997        167,152  

Derivative used for hedging

     

Gain on transactions

     6,050        6,332  

Loss (gain) on valuation

     (2,707      56,537  

Other comprehensive income (loss) for the year 2

     (2,373      46,806  

Reclassified to profit or loss from other

comprehensive income for the year 2,3

     3,645        (39,604

Financial liabilities at fair value through profit or loss

     

Gain (loss) on valuation

     119        (1,936

Gain on disposal

     799        2,664  

Derivatives used for hedging

     

Gain on transactions

     1,141        —    

Loss (gain) on valuation

     (161,003      4,949  

Other comprehensive income (loss) for the year 2

     (81,671      20,742  

Reclassified to profit or loss from other comprehensive income for the year 2,3

     107,786        (5,080

Financial liabilities at amortized cost

     

Interest expense 1,5

     (220,945      (223,974

Loss on foreign currency transactions 4

     (10,717      (20,958

Gain (loss) on foreign currency translation 4

     141,849        (75,502
  

 

 

    

 

 

 

Total

   W 5,481      W 214,063  
  

 

 

    

 

 

 

 

  1 

BC Card Co., Ltd., etc., subsidiaries of the Group, recognized interest income and expenses as operating revenue and expenses, respectively. Related interest income recognized as operating revenue is W 20,854 million (2019: W 21,018 million) and related interest expense recognized as operating expense is W 1,456 million (2019: W 548 million) for the year ended December 31, 2020.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

  2

The amounts directly reflected in equity after adjustments of deferred income tax.

  3

During the current and previous year, certain derivatives of the Group was settled and the related gain or loss on valuation of cash flow hedge in other comprehensive income was reclassified to profit or loss for the year.

  4

BC Card Co., Ltd., a subsidiary of the Group recognized foreign currency translation/transaction gain and loss and as operating revenue and expense. In relation to this, foreign currency translation gain and loss recognized as operating revenue and expense amount to W 56 million (2019: W 5 million) and W 19,687 million (2019: W 17,006 million), respectively, for the year ended December 31, 2020.

  5 

Interest income (interest expense) from lease receivables (lease liabilities) is excluded as it is not subject to classification of financial instruments (Note 21).

  6 

BC Card Co., Ltd., etc., subsidiaries of the Group, recognized dividend income as operating revenue. Related dividend income recognized as operating revenue is W 2,059 million (2019: W 2,250 million) for the year ended December 31, 2020.

  7

KT Investment Co., Ltd., etc., subsidiaries of the Group, recognized financial instruments measured at fair value through profit or loss as operating income and expenses. In relation to this, valuation gain and loss recognized as operating revenue and expense amount to W 40,822 million, for the year ended December 31, 2020.

 

5.

Cash and Cash Equivalents

Restricted cash and cash equivalents as at December 31, 2020 and 2019, are as follows:

 

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

Bank deposits

   W  28,414      W  21,290      Deposit restricted for
government project and others

Cash and cash equivalents in the statement of financial position equal to cash and cash equivalents in the statement of cash flows.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

6.

Trade and Other Receivables

Trade and other receivables as at December 31, 2020 and 2019, are as follows:

 

     December 31, 2020  
(in millions of Korean won)    Total amounts      Provision for
impairment
     Present value
discount
    

Carrying

amount

 

Current assets

           

Trade receivables

   W 3,388,099      W (322,992    W (8,977    W 3,056,130  

Other receivables

     1,948,108        (101,619      (148      1,846,341  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 5,336,207      W (424,611    W (9,125    W 4,902,471  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-current assets

           

Trade receivables

   W 892,992      W (4,323    W (34,716    W 853,953  

Other receivables

     513,926        (102,985      (14,125      396,816  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 1,406,918      W (107,308    W (48,841    W 1,250,769  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     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  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

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

 

 

    

 

 

    

 

 

    

 

 

 

Non-current assets

           

Trade receivables

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

Other receivables

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

 

 

    

 

 

    

 

 

    

 

 

 

Total

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

 

 

    

 

 

    

 

 

    

 

 

 

The fair values of trade and other receivables with original maturities less than one year are equal to their carrying amounts because the discounting effect is immaterial. The fair value of trade and other receivables with original maturities longer than one year, which are mainly from sales of goods, is determined by discounting the expected future cash flow at the weighted average interest rate.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

Details of changes in provisions for impairment the years ended December 31, 2020 and 2019, are as follows:

 

     2020      2019  
(in millions of Korean won)    Trade
receivables
     Other
receivables
     Trade
receivables
     Other
receivables
 

Beginning balance

   W 295,319      W 83,680      W 359,924      W  93,8222  

Provision

     89,097        50,860        24,596        35,597  

Reversal

     —          (890      —          (475

Written-off or transfer out

     (60,598      (25,067      (90,513      (44,108

Changes in Consolidation Scope

     3,211        87,614        —          —    

Others

     286        8,407        1,312        (1,156
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   W  327,315      W  204,604      W  295,319      W 83,680  
  

 

 

    

 

 

    

 

 

    

 

 

 

Provisions for impairment on trade and other receivables are recognized as operating expenses, other expenses and finance costs.

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

 

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

Loans

   W 116,082      W 84,148  

Receivables 1

     1,699,608        2,588,064  

Accrued income

     6,901        8,630  

Refundable deposits 2

     350,180        352,293  

Loans receivable

     150,527        105,961  

Finance lease receivables

     64,047        39,726  

Others

     60,416        15,560  

Less: Provision for impairment

     (204,604      (83,680
  

 

 

    

 

 

 
   W 2,243,157      W 3,110,702  
  

 

 

    

 

 

 

 

  1 

The settlement receivables of BC Card Co., Ltd. Amounting to W 986,384 million (December 31, 2019: W 1,786,610 million) 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 December 31, 2020.

A portion of the trade receivables is classified as financial assets at fair value through other comprehensive income considering the trade receivables business model for managing the asset and the cash flow characteristics of the contract.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

7.

Other Financial Assets and Liabilities

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

 

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

Other financial assets

     

Financial assets at amortized cost 1

   W 671,068      W 441,804  

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

     809,919        632,324  

Financial assets at fair value through other comprehensive income 1,3

     258,516        557,342  

Derivatives used for hedging

     7,684        58,576  

Less: Non-current

     (544,347      (821,658
  

 

 

    

 

 

 

Current

   W  1,202,840      W 868,388  
  

 

 

    

 

 

 

Other financial liabilities

     

Financial liabilities at amortized cost

   W 132,558      W 129,945  

Financial liabilities at fair value through profit or loss

     2,682        38  

Derivatives used for hedging

     127,929        20,096  

Less: Non-current

     (260,676      (149,136
  

 

 

    

 

 

 

Current

   W 2,493      W 943  
  

 

 

    

 

 

 

 

  1

As at December 31, 2020, the Group’s other financial assets amounting to W 104,442 million (December 31, 2019: W 91,445 million), which consist of checking account deposits, time deposits and others, are subject to withdrawal restrictions.

  2 

As at December 31, 2020, MMW(Money Market Wrap) and MMT(Money Market Trust) amounting to W 509,068 million (December 31, 2019: W 406,062 million) are included in other financial assets.

  3 

As at December 31, 2020, the Group provided investments in Korea Software Financial Cooperative amounting to W 5,491 million as a collateral for the payment guarantee provided by the Cooperative.

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

 

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

Equity instruments (Listed)

   W 46,449      W 232  

Equity instruments (Unlisted)

     83,017        90,357  

Debt securities

     680,453        541,657  

Derivatives held for trading

     —          78  
  

 

 

    

 

 

 

Total

     809,919        632,324  

Less: Non-current

     (276,109      (219,026
  

 

 

    

 

 

 

Current

   W 533,810      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 December 31, 2020.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

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

 

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

Equity instruments (Listed)

   W 6,216      W 6,738  

Equity instruments (Unlisted)

     245,730        543,518  

Debt securities

     6,570        7,086  
  

 

 

    

 

 

 

Total

     258,516        557,342  

Less: Non-current

     (258,516      (556,147
  

 

 

    

 

 

 

Current

   W —        W 1,195  
  

 

 

    

 

 

 

Upon disposal of these equity investments, any balance within the accumulated other comprehensive income for these equity investments is not reclassified to profit or loss, but to retained earnings. Upon disposal of these debt investments, the 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 W 350,777 million at fair value. Upon disposal, W 265,087 million is reclassified as accumulated other comprehensive income after tax and W 184,330 million is reclassified as retained earnings of attributable to owners of the controlling company.

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

 

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

Interest rate swap 1

   W —        W 1,078      W —        W 1,464  

Currency swap 2

     7,684        126,189        55,569        18,632  

Currency forwards 3

     —          662        3,007        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     7,684        127,929        58,576        20,096  

Less: Non-current

     (2,111      (126,408      (28,304      (19,177
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 5,573      W 1,521      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.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

The valuation gains and losses on the derivative contracts for the years ended December 31, 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 (567   W —        W 45      W (963)  

Currency swap

     —          161,661        (113,175     72,417        15,784        87,626  

Currency forwards

     —          2,049        —         4,858        —          4,858  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

   W —        W  163,710      W  (113,742)     W  77,275      W  15,829      W  91,521  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

 

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 hedges are valuation losses of W 2,711 million for the year ended December 31, 2020 (2019: valuation gains of W 4,181 million).

The unsettled amount of derivative instruments for the years ended December 31, 2020 and 2019, are as follows:

(i) Hedging instruments

 

(in millions of Korean won and thousands of foreign currencies)    2020  
  

 

 

 
                   Book value of hedging
instruments
     Changes in fair
value to calculate
the ineffective
portion of
hedges
 

Currency

   Foreign
currency
     Contract
amount
     Assets      Liabilities  

USD

   W 1,768,912      W  2,037,568      W  2,111      W  100,623      W (136,852

JPY

     46,000,000        488,924        5,573        13,839        (4,065

SGD

     284,000        245,208        —          13,467        (13,611
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

        2,771,700        7,684        127,929        (154,528
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(in millions of Korean won and thousands of foreign currencies)    2019  
  

 

 

 
                   Book value of hedging
instruments
     Changes in fair
value to calculate
the ineffective
portion of
hedges
 

Currency

   Foreign
currency
     Contract
amount
     Assets      Liabilities  

USD

   W 1,574,068      W  1,788,831      W  30,175      W  10,692      W  49,480  

JPY

     80,000,000        827,292        28,401        9,404        15,396  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

        2,616,123        58,576        20,096        64,876  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

48


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

(ii) Hedged item

 

(in millions of Korean won)             
   2020     2019  

Currency

   Book value
of hedged
items
     Changes in fair
value to
calculate the
ineffective
portion of
hedges
     Cash flow
hedge
reserves
    Book value
of hedged
items
     Changes in fair
value to
calculate the
ineffective
portion of
hedges
    Cash flow
hedge
reserves
 

USD

   W 1,924,576      W 133,978      W 19,641     W 1,822,477      W (45,855   W (5,214

JPY

     484,960        4,228        (2,569     850,776        (14,841     (2,395

SGD

     233,510        13,611        2,707       —          —         —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

     2,643,046        151,817        19,779       2,673,253        (60,696     (7,609
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

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

 

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

Financial liabilities at fair value through profit or loss

     

Derivative liabilities held for trading

   W 45      W 38  

Consideration for conversion rights

     2,637        —    
  

 

 

    

 

 

 

Total

   W  2,682      W 38  
  

 

 

    

 

 

 

The valuation gain and loss on financial liabilities at fair value through profit or loss for the years ended December 31, 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 10      W 53      W 78      W 2,014  

Consideration for conversion rights

     162        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W  172      W 53      W 78      W  2,014  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

49


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

8.

Inventories

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

 

     December 31, 2020      December 31, 2019  
(in millions of Korean won)    Acquisition
cost
     Valuation
allowance
   

Carrying

amount

     Acquisition
cost
     Valuation
allowance
   

Carrying

amount

 

Merchandise

   W 650,856      W (133,224   W 517,632      W 805,691      W (144,438   W 661,253  

Others

     17,004        —         17,004        4,245        —         4,245  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   W 667,860      W (133,224   W 534,636      W 809,936      W (144,438   W 665,498  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Cost of inventories recognized as expenses for the year ended December 31, 2020 amounts to W 3,950,056 million (December 31, 2019: W 4,705,920 million) and valuation loss on inventory amounts to W 11,214 million for the year ended December 31, 2020 (December 31, 2019: W 30,857 million).

 

9.

Other Assets and Liabilities

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

 

(in millions of Korean won)   

December 31,

2020

    

December 31,

2019

 

Other assets

     

Advance payments

   W 168,302      W 179,475  

Prepaid expenses 1

     66,578        84,768  

Contract assets 1

     1,804,948        1,849,243  

Contract cost 1

     586,438        557,041  

Others

     18,747        14,243  

Less: Non-current

     (768,661      (685,488
  

 

 

    

 

 

 

Current

   W 1,876,352      W 1,999,282  
  

 

 

    

 

 

 

Other liabilities

     

Advances received 1

   W 328,491      W 198,366  

Withholdings

     105,415        99,844  

Unearned revenue 1

     29,593        65,228  

Lease liabilities

     1,143,640        1,211,352  

Contract liabilities 1

     384,133        365,610  

Others

     21,597        23,297  

Less: Non-current

     (909,570      (895,139
  

 

 

    

 

 

 

Current

   W 1,103,299      W 1,068,558  
  

 

 

    

 

 

 

 

  1

The amounts include adjustments arising from adoption of Korean IFRS 1115 (Note 26).

 

50


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

10.

Assets Held-for-Sale

For the year ended December 31, 2020, the Group decided to sell certain real estate and classified it as assets held for sale. Details of assets held for sale are as follows:

 

(in millions of Korean won)       

Land

   W 172  

Buildings

     938  
  

 

 

 

Total

   W 1,110  
  

 

 

 

Consideration for sale is expected to exceed the carrying amount of net assets, and as a result, no impairment was recognized for the segment classified as held for sale.

During the prior period, the Group decided to sell some real estate, in which the amount of W 82,865 million was classified as assets held for sale and was sold in the current year.

 

11.

Property and Equipment

Changes in property and equipment for the years ended December 31, 2020 and 2019, are as follows:

 

     2020  
(in millions of Korean won)    Land     Buildings and
structures
    Machinery and
equipment
    Others     Construction-
in-progress
    Total  

Acquisition cost

   W 1,262,313     W 4,125,229     W 37,654,635     W 1,612,108     W 1,001,171     W 45,655,456  

Less: Accumulated depreciation (including accumulated impairment loss and others)

     (132     (1,963,165     (28,561,384     (1,344,573     (903     (31,870,157
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Beginning, net

     1,262,181       2,162,064       9,093,251       267,535       1,000,268       13,785,299  

Acquisition and capital expenditure

     25,156       7,249       112,085       47,669       2,959,690       3,151,849  

Disposal and termination

     (1,756     (3,367     (69,401     (3,385     (1,027     (78,936

Depreciation

     —         (135,646     (2,343,965     (91,164     —         (2,570,775

Impairment (recovery of impairment)

     —         (36     (35,271     (44,468     —         (79,775

Transfer in (out)

     53,238       283,937       2,489,138       28,024       (2,899,197     (44,860

Transfer from (to) investment properties

     6,792       (8,848     —         —         —         (2,056

Scope change

     56       494       225       43       —         818  

Others

     (11,040     2,175       68,921       1,398       (16,899     44,555  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending, net

   W 1,334,627     W 2,038,022     W 9,314,983     W 205,652     W 1,042,835     W 14,206,119  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost

   W 1,334,759     W 4,402,691     W 39,182,265     W 1,619,822     W 1,046,795     W 47,586,332  

Less: Accumulated depreciation (including accumulated impairment loss and others)

     (132     (2,094,669     (29,867,282     (1,414,170     (3,960     (33,380,213

 

51


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

     2019  
(in millions of Korean won)    Land     Buildings and
structures
    Machinery and
equipment
    Others     Construction-
in-progress
    Total  

Acquisition cost

   W 1,281,319     W 3,873,074     W 36,327,007     W 1,981,646     W 826,583     W 44,289,629  

Less: Accumulated depreciation (including accumulated impairment loss and others)

     (132     (1,865,389     (27,851,991     (1,503,265     (595     (31,221,372
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Beginning, net

     1,281,187       2,007,685       8,475,016       478,381       825,988       13,068,257  

Changes in accounting policy1

     —         (149     (12,947     (196,932     —         (210,028

Acquisition and capital expenditure

     338       4,523       205,359       64,072       3,419,136       3,693,428  

Disposal and termination

     (1,352     (4,213     (76,457     (4,109     (1,362     (87,493

Depreciation

     —         (134,350     (2,278,286     (89,940     —         (2,502,576

Impairment (recovery of impairment)

     —         (32     (41,450     (1,751     (27     (43,260

Transfer in (out)

     126,066       270,980       2,742,671       16,218       (3,217,044     (61,109

Transfer from (to) investment properties

     (33,254     (8,081     —         —         —         (41,335
     (89,330     (1,121     —         —         —         (90,451

Others

     (21,474     26,822       79,345       1,596       (26,423     59,866  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending, net

   W 1,262,181     W 2,162,064     W 9,093,251     W 267,535     W 1,000,268     W 13,785,299  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost

   W 1,262,313     W 4,125,229     W 37,654,635     W 1,612,108     W 1,001,171     W 45,655,456  

Less: Accumulated depreciation (including accumulated impairment loss and others)

     (132     (1,963,165     (28,561,384     (1,344,573     (903     (31,870,157

 

1 

With the application of Korean IFRS 1116, the assets were reclassified from property and equipment to right-of-use assets.

 

52


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

Details of property and equipment provided as collateral as at December 31, 2020 and 2019, are as follows:

 

     December 31, 2020
(in millions of Korean won)    Carrying
amount
     Secured
amount
     Related line
item
     Related
amount
     Secured party

Land and Buildings

   W 11,644      W 15,502        Borrowings      W 3,072     

Industrial Bank of Korea,

Korea Development Bank

     4,142      249      Deposits      249      K Bank, Inc

 

     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      W 4,347     

Industrial Bank of Korea,

Korea Development Bank,

K Bank, Inc

Others

     45,851        41,681        Borrowings        3,473      Shinhan Bank

The borrowing costs capitalized for qualifying assets amount to W 8,452 million (2019: W 6,360 million) in 2020. The interest rate applied to calculate the capitalized borrowing costs in 2020 is 2.36% (2019: 2.63%).

 

53


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

12.

Investment Properties

Changes in investment properties for the years ended December 31, 2020 and 2019, are as follows:

 

     2020  
(in millions of Korean won)    Land      Buildings      Construction-
in-progress
     Total  

Acquisition cost

   W 555,164      W 1,323,518      W 1,902      W 1,880,584  

Less: Accumulated depreciation

     (1,568      (491,586      —          (493,154
  

 

 

    

 

 

    

 

 

    

 

 

 

Beginning, net

     553,596        831,932        1,902        1,387,430  
  

 

 

    

 

 

    

 

 

    

 

 

 

Acquisition

     11,723        7,096        34,243        53,062  

Disposal

     (1,536      (243      —          (1,779

Depreciation

     —          (64,531      —          (64,531

Transfer from property and equipment

     (6,792      8,848        —          2,056  

Transfer and others

     (18,656      469        10,402        (7,785
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending, net

   W 538,335      W 783,571      W 46,547      W 1,368,453  
  

 

 

    

 

 

    

 

 

    

 

 

 

Acquisition cost

   W 539,903      W 1,341,326      W 46,547      W 1,927,776  

Less: Accumulated depreciation

     (1,568      (557,755      —          (559,323
     2019  
(in millions of Korean won)    Land      Buildings      Construction-
in-progress
     Total  

Acquisition cost

   W 350,417      W 1,168,379      W 121      W 1,518,917  

Less: Accumulated depreciation

     (1,569      (426,264      —          (427,833
  

 

 

    

 

 

    

 

 

    

 

 

 

Beginning, net

     348,848        742,115        121        1,091,084  
  

 

 

    

 

 

    

 

 

    

 

 

 

Changes in accounting policy 1

     —          46,666        —          46,666  

Acquisition

     148,511        103,774        1,781        254,066  

Disposal

     (285      (1,408      —          (1,693

Depreciation

     —          (65,178      —          (65,178

Transfer from property and equipment

     33,254        8,081        —          41,335  

Transfer and others

     23,268        (2,118      —          21,150  
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending, net

   W 553,596      W 831,932      W 1,902      W 1,387,430  
  

 

 

    

 

 

    

 

 

    

 

 

 

Acquisition cost

   W 555,164      W 1,323,518      W 1,902      W 1,880,584  

Less: Accumulated depreciation

     (1,568      (491,586      —          (493,154

 

  1 

With the application of Korean IFRS 1116, right-of-use-assets were partially reclassified to investment properties.

 

54


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

The fair value of the Group’s investment properties is W 2,645,482 million as at December 31, 2020 (December 31, 2019: W 2,304,583 million). The fair value of investment properties is estimated based on the expected cash flow.

Rental income from investment properties is W 203,763 million in 2020 (2019: W 198,636 million) and direct operating expenses (including repairs and maintenance) arising from investment properties that generated rental income during the period are recognized as operating expenses.

As at December 31, 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 W 50,769 million for one year or less, W 92,728 million for more than one year and less than five years, W 78,435 million for over five years, and W 221,932 million in total.

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

 

     December 31, 2020  
(in millions of Korean won)    Carrying
amount
     Secured
amount
     Related
account
     Related
amount
 

Land and buildings

   W 790,414      W 62,968        Deposits      W 56,247  

Land and buildings

     2,861        3,434        Borrowings        2,928  

 

     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  

 

55


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

13.

Intangible Assets

Changes in intangible assets for the years ended December 31, 2020 and 2019, are as follows:

 

     2020  
(in millions of Korean won)    Goodwill     Development
costs
    Software    

Frequency

usage rights

    Others     Total  

Acquisition cost

   W 541,596     W 1,661,372     W 978,139     W 3,622,327     W  1,193,048     W 7,996,482  

Less: Accumulated amortization (including accumulated impairment loss and others)

     (306,026     (1,388,738     (840,758     (1,868,386     (758,537     (5,162,445
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Beginning, net

     235,570       272,634       137,381       1,753,941       434,511       2,834,037  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition and capital expenditure

     —         26,990       37,077       —         101,563       165,630  

Disposal and termination

     —         (1,849     (105     —         (11,866     (13,820

Amortization

     —         (104,938     (54,191     (399,348     (69,677     (628,154

Impairment1

     —         —         (1,776     (193,194     (16,667     (211,637

Scope change

     —         575       77       —         3,690       4,342  

Others

     (5,485     87,587       27,537       (736     (98,043     10,860  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending, net

   W 230,085     W 280,999     W 146,000     W 1,160,663     W 343,511     W 2,161,258  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost

   W 536,093     W 1,767,422     W  1,053,980     W 3,373,095     W 1,167,735     W 7,898,325  

Less: Accumulated amortization (including accumulated impairment loss and others)

     (306,008     (1,486,423     (907,980     (2,212,432     (824,224     (5,737,067

 

1 

For the year ended December 31, 2020, an impairment loss of W 190,929 million was recognized.

 

     2019  
(in millions of Korean won)    Goodwill     Development
costs
    Software    

Frequency

usage rights

    Others     Total  

Acquisition cost

   W 542,074     W 1,680,372     W 947,312     W 3,641,231     W 1,253,281     W 8,064,270  

Less: Accumulated amortization (including accumulated impairment loss and others)

     (306,016     (1,345,262     (781,368     (1,484,731     (739,769     (4,657,146
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Beginning, net

     236,058       335,110       165,944       2,156,500       513,512       3,407,124  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Changes in accounting policy 1

     —         —         —         —         (26,207     (26,207

Acquisition and capital expenditure

     —         47,903       30,965       —         99,826       178,694  

Disposal and termination

     —         (3,019     (1,267     (284     (11,109     (15,679

Amortization

     —         (115,839     (68,222     (399,382     (77,262     (660,705

Impairment

     (605     (1,333     (1,807     (3,035     (55,118     (61,898

Others

     117       9,812       11,768       142       (9,131     12,708  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending, net

   W 235,570     W 272,634     W 137,381     W 1,753,941     W 434,511     W 2,834,037  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisition cost

   W 541,596     W 1,661,372     W 978,139     W 3,622,327     W  1,193,048     W 7,996,482  

Less: Accumulated amortization (including accumulated impairment loss and others)

     (306,026     (1,388,738     (840,758     (1,868,386     (758,537     (5,162,445

 

1 

With the application of Korean IFRS 1116, intangible assets were reclassified to right-of-use assets.

 

56


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

The carrying amount of membership rights with an indefinite useful life not subject to amortization, except for goodwill, is W 221,099 million as at December 31, 2020 (December 31, 2019: W 203,240 million).

The Group recognized an impairment loss of W 190,929 million as the carrying amount of the 28GHz frequency usage right for the Controlling Company’s wireless business (acquisition cost: W 201,461 million) exceeded the recoverable amount during the current period, and was recognized as other expenses in the consolidated statement of profit or loss. The recoverable amount was calculated based on the value of use. Value of use was calculated by discounting the future cashflow that considers the remaining useful life (3 years) of frequency usage rights.

In relation to KT Skylife TV Co., Ltd., the Group recognized impairment loss of W 38,519 million as the carrying amount of cash-generating units exceeded its recoverable amount, and recognized other expenses in the consolidated statement of profit or loss during the prior period. The recoverable amount is based on fair value less value in use or disposal costs, and the discount rate applied in computing the recoverable amount is 7.3%. During the current year, KT Skylife Co., Ltd. did not recognize an impairment loss for indefinite useful life intangible assets.

Goodwill is allocated to the Group’s cash-generating unit which is identified by operating segments. As at December 31, 2020, goodwill allocated to each cash-generation unit is as follows:

 

(in millions of Korean won)       
Operating Segment Cash Generating Unit    Amount  

ICT

  

Telecom Wireless business 1

   W  65,057  

Finance

  

BC Card Co., Ltd. 1

     41,234  

Others

  

GENIE Music Corporation (KT Music Corporation) 1

     50,214  

PlayD Co., Ltd. (N SEARCH MARKETING Corporation) 1

     42,745  

KT Telecop Co., Ltd. 1

     15,418  

KT MOS Bukbu Co., Ltd and others

     15,417  
  

 

 

 

Total

   W  230,085  
  

 

 

 

 

1

The recoverable amounts of telecom wireless business, BC Card Co., Ltd. and PlayD Co., Ltd. (N SEARCH MARKETING Corporation), KT Telecop Co., Ltd. are calculated based on value-in use calculations. The recoverable amounts of GENIE Music Corporation (KT Music Corporation) are calculated based on fair value less costs to sell. These calculations use pre-tax cash flow projections for approximately 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.

 

57


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Financial Statements

December 31, 2020 and 2019

 

 

 

14.

Investments in Associates and Joint Ventures

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

 

     Percentage of ownership (%)     Location      Closing month  
  

December 31,

2020