6-K 1 d143433d6k.htm FORM 6-K Form 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF MARCH 2021

Commission File Number: 333-04906

 

 

SK Telecom Co., Ltd.

(Translation of registrant’s name into English)

 

 

65 Euljiro, Jung-gu

Seoul 04539, Korea

(Address of principal executive office)

 

 

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

Form 20-F  ☒             Form 40-F  ☐

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

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

 

 

 


SIGNATURES

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

 

SK Telecom Co., Ltd.
(Registrant)
By:  

/s/ Joong Suk Oh

(Signature)
Name:   Joong Suk Oh
Title:   Senior Vice President

Date: March 12, 2021


SK TELECOM CO., LTD. AND SUBSIDIARIES

Consolidated Financial Statements

December 31, 2020 and 2019

(With Independent Auditors’ Report Thereon)



Independent Auditors’ Report

Based on a report originally issued in Korean

To the Board of Directors and Shareholders of

SK Telecom Co., Ltd.:

Opinion

We have audited the accompanying consolidated financial statements of SK Telecom Co., Ltd. and its subsidiaries (the “Group”) which comprise the consolidated statements of financial position as of December 31, 2020 and 2019 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, comprising significant accounting policies and other explanatory information.

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

Basis for Opinion

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

Emphasis of Matter

Without qualifying our opinion, we draw attention to the following:

As described in Note 3 to the consolidated financial statements, the Group retrospectively applied changes in accounting policies regarding the method of determining lease term and restated the comparative financial statements as of and for the year ended December 31, 2019.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements as of and for the year ended December 31, 2020. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

1.

Revenue Recognition

As described in note 4 (21) and 5 (2) of the consolidated financial statements, the Group’s revenue from cellular services is primarily generated from the provision of a variety of telecommunications services at various rate plans and products. Revenue from wireless service amounted to W9,801,194 million in 2020. It is recognized based on data from complex information technology systems that process large volume of transactions with subscribers. Therefore, we have identified revenue recognition related to the Group’s wireless service as a key audit matter due to the complexity of information technology systems involved and the revenue recognition standard applied.

 

1


The primary procedures we performed to address this key audit matter included:

 

   

Testing certain internal controls relating to the Group’s revenue recognition process, including information technology (IT) systems used for the purposes of revenue recognition. Specifically, we assessed the IT system environment for data records, rating and billing systems, which aggregate data used for revenue recognition for voice usage, text and mobile data services, generate customer bills and support measurement of revenue.

 

   

Comparing a sample of revenue transactions to supporting evidence, such as customer bills, rating system information, subscriber contracts, and cash received, where applicable.

 

   

Inspecting major contracts with subscribers to assess the Group’s revenue recognition policies based on the terms and conditions as set out in the contracts, with reference to the requirements of K-IFRS No. 1115.

 

2.

Evaluation of impairment analysis for goodwill in the security services cash generating unit

As described in notes 4 (11) and 16 of the consolidated financial statements, the Group performs impairment test for goodwill at least annually or when there is an indication of possible impairment by comparing the recoverable amount and the carrying amount of a cash generating unit (“CGU”) to which goodwill is allocated. The Group’s security services-related operating segments included security services and information security services. The amount of goodwill that is allocated to the security services CGU is W1,176,274 million as of December 31, 2020. No goodwill is allocated to the information security services CGU.

In carrying out the impairment assessment of goodwill, management determined the recoverable amount based on the value in use (“VIU”). Determining the VIU of the security services CGU involves significant judgments in estimating the expected future cash flows including the estimates of revenue growth rate, labor costs, perpetual growth rate and discount rate. In the Group’s impairment test as of December 31, 2019, the VIU of security services CGU approximated its carrying value. In its impairment test as of December 31, 2020, while the Group does not expect the total carrying amount of the CGU will exceed the VIU due to reasonably possible changes in certain assumptions, there is still a high degree of uncertainty on the other significant assumptions applied, which may impact the goodwill impairment result. As such we have identified the evaluation of goodwill impairment in the security services CGU as a key audit matter.

The primary procedures we performed to address this key audit matter included:

 

   

Involving our internal valuation professionals to assist us in evaluating estimated revenue growth rate, labor costs and perpetual growth rate by comparison with industry reports as well as historical performance and evaluating the discount rate by comparing with the discount rate that was independently developed using publicly available market data for comparable entities.

 

   

Performing sensitivity analysis for both the discount rate and the perpetual growth rate applied to the discounted cash flow forecasts to assess the impact of changes in these key assumptions on the conclusion reached in management’s impairment assessment.

 

   

Evaluating estimated revenue growth rate and labor costs by comparison with the financial budgets approved by the Group and comparing the cash flow forecasts prepared in prior year with the actual results to assess the Group’s ability to accurately forecast.

 

3.

Evaluation of fair value for intangible assets – Customer relationships

As described in note 12 of the consolidated financial statements, as a result of the merger between SK Broadband Co., Ltd., a subsidiary of SK Telecom Co., Ltd., and Tbroad Co., Ltd., the Group recognized the acquired customer relationships arising from the business combination as an identifiable intangible asset. The fair value of customer relationships amounts to W374,019 million as of April 30, 2020, the acquisition date.

 

2


The Group estimated the fair value of customer relationships using the multi-period excess earnings method (“MPEEM”). In applying MPEEM, the Group estimates revenue and cash flows derived from the acquired customer relationships based on estimated revenue per subscriber, estimated customer attrition rate and discount rate. Considering the significant degree of the judgment in measuring the fair value of customer relationships, we identified the evaluation of fair value for customer relationships as a key audit matter.

The primary procedures we performed to address this key audit matter included:

 

   

Involving our internal valuation professionals to assist us in:

 

   

Assessing the MPEEM model used for the fair value estimate considering the nature of the intangible assets and requirement by K-IFRS

 

   

Assessing the revenue per subscriber and customer attrition rate used in the cashflow estimate by comparing with the aquiree’s historical performance; and

 

   

Evaluating the discount rate by comparing with the discount rate that was independently developed using publicly available market data.

 

   

For historical performance used in evaluating the reasonableness of the above assumptions, evaluating the accuracy by agreeing or recalculating using public or audited information, as applicable.

Other Matter

The procedures and practices utilized in the Republic of Korea to audit such consolidated financial statements may differ from those generally accepted and applied in other countries.

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

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

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

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

 

3


Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

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

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

 

   

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

 

   

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.

 

   

Evaluate the appropriateness of accounting policies used in the preparation of the consolidated financial statements and the reasonableness of accounting estimates and related disclosures made by management.

 

   

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

 

   

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

 

   

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

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

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

 

4


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

The engagement partner on the audit resulting in this independent auditors’ report is In Hye Kang.

KPMG Samjong Accounting Corp.

Seoul, Korea

March 11, 2021

 

This report is effective as of March 11, 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 the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

5


SK TELECOM CO., LTD. (the “Parent Company”) AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020, AND DECEMBER 31, 2019, AND

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

 

The accompanying consolidated financial statements, including all footnote disclosures, were prepared by, and are the responsibility of, the Parent Company.

Park, Jung-Ho

Chief Executive Officer

 

6


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Financial Position

As of December 31, 2020 and 2019

(In millions of won)    Note      December 31,
2020
     December 31,
2019
 

Assets

        

Current Assets:

        

Cash and cash equivalents

     36,37      W 1,369,653        1,270,824  

Short-term financial instruments

     6,36,37,39        1,426,952        830,647  

Short-term investment securities

     11,36,37        150,392        166,666  

Accounts receivable - trade, net

     7,36,37,38        2,188,893        2,230,979  

Short-term loans, net

     7,36,37,38        97,464        66,123  

Accounts receivable - other, net

     3,7,36,37,38,39        979,044        903,509  

Contract assets

     9,37        100,606        127,499  

Prepaid expenses

     3,8        2,128,349        2,018,690  

Prepaid income taxes

     33        1,984        63,748  

Derivative financial assets

     22,36,37,40        8,704        26,253  

Inventories, net

     10        171,443        162,882  

Advanced payments and others

     3,7,36,37        151,602        220,687  
     

 

 

    

 

 

 
        8,775,086        8,088,507  
     

 

 

    

 

 

 

Non-Current Assets:

        

Long-term financial instruments

     6,36,37        893        990  

Long-term investment securities

     11,36,37        1,648,837        857,215  

Investments in associates and joint ventures

     13        14,354,113        13,385,264  

Property and equipment, net

     3,14,15,38,39        13,377,077        12,933,460  

Goodwill

     12,16        3,357,524        2,949,530  

Intangible assets, net

     17        4,436,194        4,866,092  

Long-term contract assets

     9,37        47,675        64,359  

Long-term loans, net

     7,36,37,38        40,233        33,760  

Long-term accounts receivable - other

     3,7,36,37,38,39        332,803        351,663  

Long-term prepaid expenses

     3,8        1,063,711        1,239,865  

Guarantee deposits

     3,7,36,37,38        172,474        164,652  

Long-term derivative financial assets

     22,36,37,40        155,991        124,707  

Deferred tax assets

     33        105,088        109,057  

Defined benefit assets

     21        3,557        1,125  

Other non-current assets

     7,36,37        35,701        32,122  
     

 

 

    

 

 

 
        39,131,871        37,113,861  
     

 

 

    

 

 

 
      W 47,906,957        45,202,368  
     

 

 

    

 

 

 

See accompanying notes to the consolidated financial statements.

 

7


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Financial Position, Continued

As of December 31, 2020 and 2019

 

(In millions of won)    Note      December 31,
2020
     December 31,
2019
 

Liabilities and Shareholders’ Equity

        

Current Liabilities:

        

Accounts payable - trade

     36,37,38      W 372,909        438,297  

Accounts payable - other

     36,37,38        2,484,466        2,521,474  

Withholdings

     36,37,38        1,410,239        1,350,244  

Contract liabilities

     9        229,892        191,225  

Accrued expenses

     3,36,37        1,554,889        1,424,833  

Income tax payable

     33        219,766        5,450  

Short-term derivative financial liabilities

     22,36,37,40        77        —    

Provisions

     3,20,39        69,363        86,320  

Short-term borrowings

     18,36,37,40        109,998        20,603  

Current installments of long-term debt, net

     18,36,37,40        939,237        1,017,327  

Current installments of long-term payables - other

     19,36,37,40        424,600        423,839  

Lease liabilities

     3,36,37,38,40        359,936        371,742  

Other current liabilities

        2,595        319  
     

 

 

    

 

 

 
        8,177,967        7,851,673  
     

 

 

    

 

 

 

Non-Current Liabilities:

        

Debentures, excluding current installments, net

     18,36,37,40        7,690,169        7,253,894  

Long-term borrowings, excluding current installments, net

     18,36,37,39,40        1,979,261        1,972,149  

Long-term payables - other

     19,36,37,40        1,142,354        1,550,167  

Long-term lease liabilities

     3,36,37,38,40        1,076,841        919,265  

Long-term contract liabilities

     9        30,704        32,231  

Defined benefit liabilities

     21        154,944        172,258  

Long-term derivative financial liabilities

     22,36,37,40        375,083        1,043  

Long-term provisions

     3,20,39        81,514        78,841  

Deferred tax liabilities

     3,33        2,709,075        2,463,861  

Other non-current liabilities

     3,36,37,38        92,802        90,052  
     

 

 

    

 

 

 
        15,332,747        14,533,761  
     

 

 

    

 

 

 

Total Liabilities

        23,510,714        22,385,434  
     

 

 

    

 

 

 

Shareholders’ Equity:

        

Share capital

     1,23        44,639        44,639  

Capital surplus and others

     12,23,24,25,26        677,203        1,006,481  

Retained earnings

     3,27        22,981,913        22,228,683  

Reserves

     28        40,139        (329,576
     

 

 

    

 

 

 

Equity attributable to owners of the Parent Company

        23,743,894        22,950,227  

Non-controlling interests

        652,349        (133,293
     

 

 

    

 

 

 

Total Shareholders’ Equity

        24,396,243        22,816,934  
     

 

 

    

 

 

 
      W 47,906,957        45,202,368  
     

 

 

    

 

 

 

See accompanying notes to the consolidated financial statements.

 

8


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Income

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Operating revenue:

     3,5,38       

Revenue

      W 18,624,651       17,740,716  
     

 

 

   

 

 

 

Operating expenses:

     3,38       

Labor

        3,006,172       2,822,673  

Commissions

     8        5,347,086       5,002,066  

Depreciation and amortization

     3,5        3,991,083       3,856,662  

Network interconnection

        770,712       752,334  

Leased lines

     3        294,722       263,367  

Advertising

        431,679       434,561  

Rent

     3        173,294       154,843  

Cost of goods sold

        1,608,470       1,833,362  

Others

     30        1,652,109       1,512,671  
     

 

 

   

 

 

 
        17,275,327       16,632,539  
     

 

 

   

 

 

 

Operating profit

     5        1,349,324       1,108,177  

Finance income

     3,5,32        241,196       142,155  

Finance costs

     3,5,32        (497,193     (437,955

Gain relating to investments in subsidiaries, associates and joint ventures, net

     5,13        1,028,403       449,543  

Other non-operating income

     3,5,31        99,051       102,731  

Other non-operating expenses

     3,5,31        (343,741     (203,650
     

 

 

   

 

 

 

Profit before income tax

     5        1,877,040       1,161,001  

Income tax expense

     3,33        376,502       300,268  
     

 

 

   

 

 

 

Profit for the year

      W 1,500,538       860,733  
     

 

 

   

 

 

 

Attributable to:

       

Owners of the Parent Company

      W 1,504,352       888,698  

Non-controlling interests

        (3,814     (27,965

Earnings per share

     3,34       

Basic earnings per share (in won)

      W 20,463       12,127  
     

 

 

   

 

 

 

Diluted earnings per share (in won)

        20,459       12,127  

See accompanying notes to the consolidated financial statements.

 

9


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Profit for the year

      W 1,500,538       860,733  

Other comprehensive income (loss):

       

Items that will never be reclassified to profit or loss, net of taxes:

       

Remeasurement of defined benefit liabilities

     21        (2,637     (72,605

Net change in other comprehensive income (loss) of investments in associates and joint ventures

     13,28        271       (19,269

Valuation gain (loss) on financial assets at fair value through other comprehensive income

     28,32        579,678       (17,943

Items that are or may be reclassified subsequently to profit or loss, net of taxes:

       

Net change in other comprehensive income (loss) of investments in associates and joint ventures

     13,28        (114,478     75,763  

Net change in unrealized fair value of derivatives

     22,28,32        19,138       40,681  

Foreign currency translation differences for foreign operations

     28        (20,150     (5,618
     

 

 

   

 

 

 

Other comprehensive income for the year, net of taxes

        461,822       1,009  
     

 

 

   

 

 

 

Total comprehensive income

      W 1,962,360       861,742  
     

 

 

   

 

 

 

Total comprehensive income (loss) attributable to:

       

Owners of the Parent Company

      W 1,869,075       891,051  

Non-controlling interests

        93,285       (29,309

See accompanying notes to the consolidated financial statements.                

 

10


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

 

(In millions of won)                                                   
            Controlling interests     Non-
controlling
interests
    Total
equity
 
     Note      Share capital      Capital surplus
and
others
    Retained
earnings
    Reserves     Sub-total  

Balance, January 1, 2019(As reported)

        44,639        655,084       22,120,355       (373,442     22,446,636       (122,075     22,324,561  

Changes in accounting policies

     3        —          —         (5,393     —         (5,393     —         (5,393
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, January 1, 2019(Restated)

        44,639        655,084       22,114,962       (373,442     22,441,243       (122,075     22,319,168  

Total comprehensive income (loss):

                  

Profit (loss) for the year

        —          —         888,698       —         888,698       (27,965     860,733  

Other comprehensive income (loss)

     13,21,22,28,32        —          —         (41,513     43,866       2,353       (1,344     1,009  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          —         847,185       43,866       891,051       (29,309     861,742  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners:

                  

Annual dividends

     35        —          —         (646,828     —         (646,828     (21,150     (667,978

Interim dividends

     35        —          —         (71,870     —         (71,870     (8,650     (80,520

Share option

     26        —          295       —         —         295       764       1,059  

Interest on hybrid bonds

     25        —          —         (14,766     —         (14,766     —         (14,766

Disposal of treasury shares

     24        —          300,000       —         —         300,000       —         300,000  

Changes in ownership in subsidiaries

     12        —          51,102       —         —         51,102       47,127       98,229  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          351,397       (733,464 )      —         (382,067 )      18,091       (363,976 ) 
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2019

      W 44,639        1,006,481       22,228,683       (329,576     22,950,227       (133,293     22,816,934  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, January 1, 2020

      W 44,639        1,006,481       22,228,683       (329,576     22,950,227       (133,293     22,816,934  

Total comprehensive income (loss):

                  

Profit (loss) for the year

        —          —         1,504,352       —         1,504,352       (3,814     1,500,538  

Other comprehensive income (loss)

     13,21,22,28,32        —          —         (4,992     369,715       364,723       97,099       461,822  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          —         1,499,360       369,715       1,869,075       93,285       1,962,360  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners:

                  

Annual dividends

     35        —          —         (658,228     —         (658,228     (5,771     (663,999

Interim dividends

     35        —          —         (73,136     —         (73,136     —         (73,136

Share option

     26        —          179       —         —         179       1,256       1,435  

Interest on hybrid bonds

     25        —          —         (14,766     —         (14,766     —         (14,766

Acquisition of treasury shares

     24        —          (426,664     —         —         (426,664     —         (426,664

Changes in ownership in subsidiaries

     12        —          97,207       —         —         97,207       696,872       794,079  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        —          (329,278     (746,130     —         (1,075,408     692,357       (383,051
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2020

      W 44,639        677,203       22,981,913       40,139       23,743,894       652,349       24,396,243  
     

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

11


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Cash flows from operating activities:

       

Cash generated from operating activities:

       

Profit for the year

      W 1,500,538       860,733  

Adjustments for income and expenses

     40        4,256,654       4,435,039  

Changes in assets and liabilities related to operating activities

     40        302,458       (856,130
     

 

 

   

 

 

 
        6,059,650       4,439,642  

Interest received

        41,832       56,392  

Dividends received

        166,019       241,117  

Interest paid

        (397,351     (360,439

Income tax paid

        (48,274     (341,728
     

 

 

   

 

 

 

Net cash provided by operating activities

        5,821,876       4,034,984  
     

 

 

   

 

 

 

Cash flows from investing activities:

       

Cash inflows from investing activities:

       

Decrease in short-term financial instruments, net

        —         253,971  

Decrease in short-term investment securities, net

        17,684       29,503  

Collection of short-term loans

        77,114       113,345  

Decrease in long-term financial instruments

        99       231  

Proceeds from disposals of long-term investment securities

        46,065       234,683  

Proceeds from disposals of investments in associates and joint ventures

        2,715       220  

Proceeds from disposals of property and equipment

        102,526       18,478  

Proceeds from disposals of intangible assets

        39,654       7,327  

Collection of long-term loans

        4,608       4,435  

Decrease in deposits

        16,244       9,180  

Proceeds from settlement of derivatives

        845       601  

Collection of lease receivables

        —         27,712  

Proceeds from disposals of subsidiaries

        165       4,802  

Cash inflow from business combinations

        115,834       5,016  

Cash inflow from transfers of business

        5,395       45,658  
     

 

 

   

 

 

 
        428,948       755,162  

Cash outflows for investing activities:

       

Increase in short-term financial instruments, net

        (596,025     —    

Increase in short-term loans

        (103,604     (116,320

Increase in long-term loans

        (11,044     (11,541

Increase in long-term financial instruments

        (2     —    

Acquisitions of long-term investment securities

        (95,474     (383,976

Acquisitions of investments in associates and joint ventures

        (170,292     (264,015

Acquisitions of property and equipment

        (3,557,800     (3,375,883

Acquisitions of intangible assets

        (129,976     (141,010

Increase in deposits

        (12,175     (6,164

Cash outflow for business combinations

        (2,958     (36,910

Cash outflow for disposal of subsidiaries

        —         (927
     

 

 

   

 

 

 
        (4,679,350     (4,336,746
     

 

 

   

 

 

 

Net cash used in investing activities

      W (4,250,402     (3,581,584
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

12


SK TELECOM CO., LTD. and Subsidiaries

Consolidated Statements of Cash Flows, Continued

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Cash flows from financing activities:

       

Cash inflows from financing activities:

       

Proceeds from short-term borrowings, net

      W 76,375       —    

Proceeds from issuance of debentures

        1,420,962       1,633,444  

Proceeds from long-term borrowings

        1,947,848       —    

Cash inflows from settlement of derivatives

        36,691       12,426  

Proceeds from disposal of treasury shares

        —         300,000  

Transactions with non-controlling shareholders

        17,766       101,398  
     

 

 

   

 

 

 
        3,499,642       2,047,268  

Cash outflows for financing activities:

       

Repayments of short-term borrowings, net

        —         (59,860

Repayments of long-term payables - other

        (428,100     (428,153

Repayments of debentures

        (975,500     (940,000

Repayments of long-term borrowings

        (1,950,874     (89,882

Payments of dividends

        (742,136     (718,698

Payments of interest on hybrid bonds

        (14,766     (14,766

Repayments of lease liabilities

        (412,666     (443,238

Acquisition of treasury shares

        (426,664     —    

Transactions with non-controlling shareholders

        (6,515     (39,345
     

 

 

   

 

 

 
        (4,957,221     (2,733,942
     

 

 

   

 

 

 

Net cash used in financing activities

        (1,457,579     (686,674
     

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

        113,895       (233,274

Cash and cash equivalents at beginning of the year

        1,270,824       1,506,699  

Effects of exchange rate changes on cash and cash equivalents

        (15,066     (2,601
     

 

 

   

 

 

 

Cash and cash equivalents at end of the year

      W 1,369,653       1,270,824  
     

 

 

   

 

 

 

See accompanying notes to the consolidated financial statements.

 

13


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity

SK Telecom Co., Ltd. (“the Parent Company”) was incorporated in March 1984 under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The Parent Company mainly provides wireless telecommunications services in Korea. The head office of the Parent Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.

The Parent Company’s common shares and depositary receipts (DRs) are listed on the Stock Market of Korea Exchange, the New York Stock Exchange and the London Stock Exchange. As of December 31, 2020, the Parent Company’s total issued shares are held by the following shareholders:

 

     Number of
shares
     Percentage of
total shares
issued (%)
 

SK Holdings Co., Ltd.

     21,624,120        26.78  

National Pension Service

     8,853,906        10.97  

Institutional investors and other shareholders

     39,582,507        49.02  

Kakao Co., Ltd.

     1,266,620        1.57  

Treasury shares

     9,418,558        11.66  
  

 

 

    

 

 

 
     80,745,711        100.00  
  

 

 

    

 

 

 

These consolidated financial statements comprise the Parent Company and its subsidiaries (together referred to as the “Group” and individually as “Group entity”). SK Holdings Co., Ltd. is the ultimate controlling entity of the Parent Company.

 

14


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (2)

List of subsidiaries

The list of subsidiaries as of December 31, 2020 and 2019 is as follows:

 

                    Ownership (%)(*1)  

Subsidiary

   Location   

Primary business

   Dec. 31,
2020
     Dec. 31,
2019
 

Subsidiaries owned by the Parent Company

   SK Telink Co., Ltd.    Korea   

Telecommunication and Mobile Virtual Network Operator service

     100.0        100.0  
   SK Communications Co., Ltd.    Korea    Internet website services      100.0        100.0  
   SK Broadband Co., Ltd.(*2)    Korea    Telecommunication services      74.3        100.0  
   PS&Marketing Corporation    Korea    Communications device retail business      100.0        100.0  
   SERVICE ACE Co., Ltd.    Korea    Call center management service      100.0        100.0  
   SERVICE TOP Co., Ltd.    Korea    Call center management service      100.0        100.0  
   SK O&S Co., Ltd.    Korea    Base station maintenance service      100.0        100.0  
  

SK Telecom China Holdings Co., Ltd.

   China    Investment (Holdings company)      100.0        100.0  
  

SK Global Healthcare Business Group, Ltd.

   Hong Kong    Investment      100.0        100.0  
   YTK Investment Ltd.    Cayman Islands    Investment association      100.0        100.0  
   Atlas Investment    Cayman Islands    Investment association      100.0        100.0  
   SKT Americas, Inc.    USA    Information gathering and consulting      100.0        100.0  
   One Store Co., Ltd.(*3)    Korea    Telecommunication services      52.1        52.7  
   SK Planet Co., Ltd.    Korea   

Telecommunication services, system software development and supply services

     98.7        98.7  
   Eleven Street Co., Ltd.(*4)    Korea    E-commerce      80.3        80.3  
   DREAMUS COMPANY    Korea   

Manufacturing digital audio players and other portable media devices

     51.4        51.4  
   SK Infosec Co., Ltd.(*5)    Korea    Information security service      62.6        100.0  
   Life & Security Holdings Co., Ltd.(*5,6)    Korea    Investment (Holdings company)      —          55.0  
   Quantum Innovation Fund I    Korea    Investment      59.9        59.9  
   SK Telecom Japan Inc.    Japan   

Information gathering and consulting

     100.0        100.0  
   id Quantique SA(*7)    Switzerland   

Quantum information and communications service

     68.1        66.8  
   SK Telecom TMT Investment Corp.    USA    Investment      100.0        100.0  
   FSK L&S Co., Ltd.    Korea   

Freight and logistics consulting business

     60.0        60.0  
   Incross Co., Ltd.    Korea    Media representative business      34.6        34.6  
   Happy Hanool Co., Ltd.    Korea    Service      100.0        100.0  
   SK stoa Co., Ltd.(*8)    Korea   

Other telecommunication retail business

     100.0        —    
   Broadband Nowon Co., Ltd.(*6)    Korea    Cable broadcasting services      55.0        —    
   T map Mobility Co., Ltd.(*6)    Korea    Mobility business      100.0        —    

 

15


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (2)

List of subsidiaries, Continued

The list of subsidiaries as of December 31, 2020 and 2019 is as follows, Continued:

 

                Ownership (%)(*1)  

Subsidiary

  Location  

Primary business

  Dec. 31,
2020
    Dec. 31,
2019
 

Subsidiaries owned by
SK Planet Co., Ltd.

  SK m&service Co., Ltd.   Korea  

Database and Internet website service

    100.0       100.0  
  SK Planet Global Holdings Pte. Ltd.   Singapore   Investment (Holdings company)     100.0       100.0  
  SKP America LLC.   USA   Digital contents sourcing service     100.0       100.0  
 

K-net Culture and Contents Venture Fund

  Korea   Capital investing in startups     59.0       59.0  

Subsidiaries owned by
DREAMUS COMPANY

  iriver Enterprise Ltd.   Hong Kong  

Management of Chinese subsidiaries

    100.0       100.0  
  iriver China Co., Ltd.   China  

Sales and manufacturing of MP3 and 4

    100.0       100.0  
  Dongguan iriver Electronics Co., Ltd.   China  

Sales and manufacturing of e-book devices

    100.0       100.0  
  LIFE DESIGN COMPANY Inc.   Japan   Sales of goods in Japan     100.0       100.0  

Subsidiary owned by
SK Infosec Co., Ltd.

 

SKinfosec Information Technology(Wuxi) Co., Ltd.

  China  

System software development and supply services

    100.0       100.0  
  ADT CAPS Co., Ltd.   Korea   Unmanned security     100.0       100.0  
  CAPSTEC Co., Ltd.   Korea   Manned security     100.0       100.0  
  ADT SECURITY Co., Ltd.(*6)   Korea  

Sales and trade of anti-theft devices and surveillance devices

    —         100.0  

Subsidiary owned by
SK Telink Co., Ltd.

  SK TELINK VIETNAM Co., Ltd.(*6)   Vietnam  

Communications device retail business

    —         100.0  

Subsidiaries owned by
SK Broadband Co., Ltd.

  Home & Service Co., Ltd.   Korea  

Operation of information and communication facility

    100.0       100.0  
  SK stoa Co., Ltd.(*8)   Korea  

Other telecommunication retail business

    —         100.0  

Subsidiary owned by
Quantum Innovation
Fund I

 

PanAsia Semiconductor Materials LLC (*6, 9)

  Korea   Investment     66.4       —    

Subsidiary owned by
SK Telecom Japan Inc.

  SK Planet Japan, K. K.   Japan   Digital contents sourcing service     79.8       79.8  

Subsidiary owned by
id Quantique SA

  Id Quantique LLC   Korea  

Quantum information and communications service

    100.0       100.0  

Subsidiaries owned by
FSK L&S Co., Ltd.

  FSK L&S(Shanghai) Co., Ltd.   China   Logistics business     66.0       66.0  
  FSK L&S(Hungary) Co., Ltd.   Hungary   Logistics business     100.0       100.0  
 

FSK L&S VIETNAM COMPANY LIMITED(*6)

  Vietnam   Logistics business     100.0       —    

Subsidiaries owned by
Incross Co., Ltd.

  Infra Communications Co., Ltd.   Korea   Service operation     100.0       100.0  
  Mindknock Co., Ltd.   Korea   Software development     100.0       100.0  

Others(*10)

  SK Telecom Innovation Fund, L.P.   USA   Investment     100.0       100.0  
  SK Telecom China Fund I L.P.   Cayman
Islands
  Investment     100.0       100.0  

 

16


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (2)

List of subsidiaries, Continued

The list of subsidiaries as of December 31, 2020 and 2019 is as follows, Continued:

 

(*1)

The ownership interest represents direct ownership interest in subsidiaries either by the Parent Company or subsidiaries of the Parent Company.

(*2)

On April 30, 2020, SK Broadband Co., Ltd. merged with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. to strengthen competitiveness and enhance synergy as a comprehensive media company. The Parent Company’s ownership interest of SK Broadband Co., Ltd. has changed as SK Broadband Co., Ltd. issued new shares to the shareholders of the merged companies as the consideration for the merger. The Parent Company has entered into a shareholders’ agreement with the acquiree’s shareholders and W320,984 million of derivative financial liabilities are recognized for drag-along right of the acquiree’s shareholders and for call option of the Parent Company as of December 31, 2020. (See note 22)

(*3)

The ownership interest has changed as third-party share option of One Store Co., Ltd. was exercised during the year ended December 31, 2020.

(*4)

80.3% of the shares issued by Eleven Street Co., Ltd. are owned by the Parent Company and 18.2% of redeemable convertible preferred shares with voting rights by non-controlling shareholders. For the year ended December 31, 2019, Eleven Street Co., Ltd. acquired 1.5% of its outstanding shares from SK Planet Co., Ltd., which is currently held as treasury shares as of December 31, 2020. The Parent Company is obliged to guarantee dividend of at least 1% per annum of the preferred share’s issue price to the investor by the date on which Eleven Street Co., Ltd. is publicly listed or at the end of qualifying listing period, whichever occurs first. The present value of obligatory dividends amounting to W14,297 million are recognized as financial liabilities as of December 31, 2020.

(*5)

SK Infosec Co., Ltd. merged with Life & Security Holdings Co., Ltd., a subsidiary of the Parent Company, to improve business management efficiency on December 30, 2020. The Group acquired 34,200,560 shares of SK Infosec Co., Ltd. based on the exchange ratio on December 30, 2020. As a result of merger, the Group’s ownership interest of SK Infosec Co., Ltd. has changed from 100% to 62.6%.

(*6)

Details of changes in the consolidation scope for year ended December 31, 2020 are presented in note 1-(4).

(*7)

The Parent Company participated in a third-party allotment offering and acquired 4,166,667 shares on July 23, 2020.

(*8)

The Parent Company acquired 3,631,355 shares (100%) of SK stoa Co., Ltd. from SK Broadband Co., Ltd., a subsidiary of the Parent Company, at W 40,029 million in cash during the year ended December 31, 2020.

(*9)

PanAsia Semiconductor Materials LLC increased its capital by a third-party allotment, which has changed the Group’s ownership interest for the year ended December 31, 2020.

(*10)

Others are owned by Atlas Investment and another subsidiary of the Parent Company.

 

17


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (3)

Condensed financial information of subsidiaries

1) Condensed financial information of significant subsidiaries as of and for the year ended December 31, 2020 is as follows:

 

(In millions of won)  
     As of December 31, 2020      2020  

Subsidiary

   Total assets      Total
liabilities
     Total
equity
     Revenue      Profit
(loss)
 

SK Telink Co., Ltd.

   W 176,872        60,702        116,170        351,334        18,010  

Eleven Street Co., Ltd.

     999,225        542,534        456,691        545,556        (29,623

SK m&service Co., Ltd.

     129,738        74,962        54,776        214,949        2,759  

SK Broadband Co., Ltd.

     5,765,808        3,119,489        2,646,319        3,713,021        150,694  

K-net Culture and Contents Venture Fund

     377,683        65,896        311,787        —          (44,737

PS&Marketing Corporation

     470,521        257,809        212,712        1,427,218        (847

SERVICE ACE Co., Ltd.

     96,258        71,890        24,368        206,612        2,905  

SERVICE TOP Co., Ltd.

     69,496        51,584        17,912        195,479        2,592  

SK O&S Co., Ltd.

     88,663        54,012        34,651        278,948        778  

SK Planet Co., Ltd.

     536,981        214,846        322,135        276,462        1,305  

DREAMUS COMPANY(*1)

     172,443        76,642        95,801        226,329        (23,068

SK Infosec Co., Ltd.(*2)

     2,927,396        2,550,936        376,460        1,327,150        14,227  

One Store Co., Ltd.

     243,442        99,943        143,499        155,218        1,952  

Home & Service Co., Ltd.

     124,197        88,740        35,457        397,754        (20

SK stoa Co., Ltd.

     107,982        79,339        28,643        268,693        17,154  

FSK L&S Co., Ltd.(*3)

     66,117        35,192        30,925        205,623        3,022  

Incross Co., Ltd.(*4)

     179,308        104,778        74,530        39,440        12,307  

 

(*1)

The condensed financial information of DREAMUS COMPANY is consolidated financial information including iriver Enterprise Ltd. and three other subsidiaries of DREAMUS COMPANY.

(*2)

The condensed financial information of SK Infosec Co., Ltd. is consolidated financial information including SKinfosec Information Technology (Wuxi) Co., Ltd. and two other subsidiaries of SK Infosec Co., Ltd. and including profit and loss which Life Security & Holdings Co., Ltd. recognized prior to the merger.

(*3)

The condensed financial information of FSK L&S Co., Ltd. is consolidated financial information including FSK L&S (Shanghai) Co., Ltd. and two other subsidiaries of FSK L&S Co., Ltd.

(*4)

The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary of Incross Co., Ltd.

 

18


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (3)

Condensed financial information of subsidiaries, Continued

 

2) Condensed financial information of significant subsidiaries as of and for the year ended December 31, 2019 is as follows:

 

(In millions of won)  
     As of December 31, 2019      2019  

Subsidiary

   Total assets      Total
liabilities
     Total
equity
     Revenue      Profit
(loss)
 

SK Telink Co., Ltd.(*1)

   W 265,725        77,378        188,347        363,627        3,010  

Eleven Street Co., Ltd.

     923,424        446,432        476,992        530,489        (5,077

SK m&service Co., Ltd.

     109,699        58,605        51,094        218,848        2,448  

SK Broadband Co., Ltd.

     4,565,732        2,930,482        1,635,250        3,170,691        47,701  

K-net Culture and Contents Venture Fund

     151,493        21,163        130,330        —          (294

PS&Marketing Corporation

     439,947        225,942        214,005        1,684,576        96  

SERVICE ACE Co., Ltd.

     80,844        55,133        25,711        206,080        3,906  

SERVICE TOP Co., Ltd.

     66,932        50,060        16,872        193,377        2,230  

SK O&S Co., Ltd.

     96,446        62,086        34,360        281,634        1,724  

SK Planet Co., Ltd.

     595,838        278,438        317,400        275,544        1,214  

DREAMUS COMPANY(*2)

     171,586        53,669        117,917        196,961        (48,006

Life & Security Holdings Co., Ltd.(*3)

     2,639,781        2,330,920        308,861        913,301        12,703  

SK Infosec Co., Ltd. (*4)

     158,424        61,644        96,780        270,423        18,520  

One Store Co., Ltd.

     236,329        93,625        142,704        135,116        (5,415

Home & Service Co., Ltd.

     121,202        84,378        36,824        351,154        (427

SK stoa Co., Ltd.

     70,754        59,207        11,547        196,063        875  

FSK L&S Co., Ltd.(*5)

     47,550        19,651        27,899        130,872        306  

Incross Co., Ltd.(*6)

     144,263        78,519        65,744        19,787        5,756  

 

(*1)

The condensed financial information of SK Telink Co., Ltd. is consolidated financial information including SK TELINK VIETNAM Co., Ltd.

(*2)

The condensed financial information of DREAMUS COMPANY is consolidated financial information including iriver Enterprise Ltd. and three other subsidiaries of DREAMUS COMPANY.

(*3)

The condensed financial information of Life & Security Holdings Co., Ltd. is consolidated financial information including ADT CAPS Co., Ltd. and two other subsidiaries of Life & Security Holdings Co., Ltd.

(*4)

The condensed financial information of SK Infosec Co., Ltd. is consolidated financial information including SKinfosec Information Technology (Wuxi) Co., Ltd.

(*5)

The condensed financial information of FSK L&S Co., Ltd. is consolidated financial information including FSK L&S (Shanghai) Co., Ltd. and another subsidiary of FSK L&S Co., Ltd.

(*6)

The condensed financial information of Incross Co., Ltd. is consolidated financial information including Infra Communications Co., Ltd. and another subsidiary from the date of acquisition to December 31, 2019.

 

19


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (4)

Changes in subsidiaries

1) The list of subsidiaries that were newly included in consolidation during the year ended December 31, 2020 is as follows:

 

Subsidiary

  

Reason

Broadband Nowon Co., Ltd.    Acquired by the Parent Company
FSK L&S VIETNAM COMPANY LIMITED    Established by FSK L&S Co., Ltd.
Pan Asia Semiconductor Materials LLC    Established by Quantum Innovation Fund I
T map Mobility Co., Ltd.    Spin-off from the Parent Company

2) The list of subsidiaries that were excluded from consolidation during the year ended December 31, 2020 is as follows:

 

Subsidiary

  

Reason

ADT SECURITY Co., Ltd.

   Merged into ADT CAPS Co., Ltd.

SK TELINK VIETNAM Co., Ltd.

   Disposed

Life & Security Holdings Co., Ltd.

   Merged into SK Infosec Co., Ltd.

 

20


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity, Continued

 

  (5)

The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2020 and 2019 are as follows:

 

(In millions of won)                                    
    DREAMUS
COMPANY
    One Store Co., Ltd.     Eleven Street Co., Ltd.     SK Infosec Co., Ltd.(*)     Incross Co., Ltd.     SK Broadband Co., Ltd.  

Ownership of non-controlling interests (%)

    48.6       47.4       18.2       37.4       55.2       24.9  
    As of December 31, 2020  

Current assets

  W 146,278       215,672       896,828       306,520       165,668       1,179,743  

Non-current assets

    26,165       27,770       102,397       2,620,876       13,640       4,586,065  

Current liabilities

    (72,762     (96,139     (508,427     (417,194     (101,065     (1,279,132

Non-current liabilities

    (3,880     (3,804     (34,107     (2,133,742     (3,713     (1,840,357

Net assets

    95,801       143,499       456,691       376,460       74,530       2,646,319  

Fair value adjustment and others

    —         —         (14,297     (1,227,442     —         —    

Net assets on the consolidated financial statements

    95,801       143,499       442,394       (850,982     74,530       2,646,319  

Carrying amount of non-controlling interests

    47,452       68,573       81,754       (318,267     46,010       665,020  
    2020  

Revenue

  W 226,329       155,218       545,556       1,327,150       39,440       3,713,021  

Profit (loss) for the year

    (23,068     1,952       (29,623     14,227       12,307       150,694  

Depreciation of the fair value adjustment and others

    —         —         (492     (19,229     —         —    

Profit (loss) for the year on the consolidated financial statements

    (23,068     1,952       (30,115     (5,002     12,307       150,694  

Total comprehensive income (loss)

    (22,740     2,278       (15,793     (3,758     12,145       151,417  

Profit (loss) attributable to non-controlling interests

    (10,770     930       (5,565     (12,432     7,568       27,240  

Net cash provided by operating activities

  W 15,223       38,006       65,499       248,524       24,629       1,035,474  

Net cash used in investing activities

    (2,471     (62,816     (71,644     (229,130     (2,284     (844,454

Net cash provided by (used in) financing activities

    (2,329     (2,499     (18,059     11,134       (4,278     (93,259

Effects of exchange rate changes on cash and cash equivalents

    (2,053     —         (385     (554     —          

Net increase (decrease) in cash and cash equivalents

    8,370       (27,309     (24,589     29,974       18,067       97,761  

Dividends paid to non-controlling interests during the year ended December 31, 2020

  W —         —         5,000       17,273       —         —    

 

(*)

The condensed financial information of SK Infosec Co., Ltd. includes profit and loss, cash flows which Life Security & Holdings Co., Ltd. recognized prior to the merger.

 

21


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

1

Reporting Entity, Continued

 

  (5)

The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2020 and 2019 are as follows, Continued:

 

(In millions of won)                              
    DREAMUS
COMPANY
    One Store Co., Ltd.     Eleven Street Co., Ltd.     Life & Security Holdings Co., Ltd.     Incross Co., Ltd.  

Ownership of non-controlling interests (%)

    48.6       47.3       18.2       45.0       65.4  
    As of December 31, 2019  

Current assets

  W 136,269       208,527       779,568       126,437       133,741  

Non-current assets

    35,317       27,802       143,856       2,513,344       10,522  

Current liabilities

    (49,776     (88,842     (420,022     (279,403     (77,530

Non-current liabilities

    (3,893     (4,783     (26,410     (2,051,517     (989

Net assets

    117,917       142,704       476,992       308,861       65,744  

Fair value adjustment and others

    —         —         (18,805     (1,219,701     —    

Net assets on the consolidated financial statements

    117,917       142,704       458,187       (910,840     65,744  

Carrying amount of non-controlling interests

    57,175       67,742       84,673       (409,878     41,074  
    2019  

Revenue

  W 196,961       135,116       530,489       913,301       19,787  

Profit (loss) for the year

    (48,006     (5,415     (5,077     12,703       5,756  

Depreciation of the fair value adjustment and others

    —         —         (614     (14,913     —    

Profit (loss) for the year on the consolidated financial statements

    (48,006     (5,415     (5,691     (2,210     5,756  

Total comprehensive income (loss)

    (47,971     (5,856     (13,590     (5,413     5,396  

Profit (loss) attributable to non-controlling interests

    (23,281     (2,256     (1,064     (978     3,630  

Net cash provided by (used in) operating activities

  W (1,387     14,426       7,980       238,378       (9,331

Net cash provided by (used in) investing activities

    (2,596     (87,275     102,366       (194,472     5,053  

Net cash provided by (used in) financing activities

    (2,965     96,189       (72,686     (51,129     (4,644

Effects of exchange rate changes on cash and cash equivalents

    197       2       35       —         —    

Net increase (decrease) in cash and cash equivalents

    (6,751     23,342       37,695       (7,223     (8,922

Dividends paid to non-controlling interests during the year ended December 31, 2019

  W       —         17,500       28,786       —    

 

22


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

2.

Basis of Preparation

These consolidated financial statements were prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”), as prescribed in the Act on External Audits of Stock Companies, Etc in the Republic of Korea.

The accompanying consolidated financial statements comprise the Group and the Group’s investments in associates and joint ventures.

The consolidated financial statements were authorized for issuance by the Board of Directors on February 2, 2021, which will be submitted for approval at the shareholders’ meeting to be held on March 25, 2021.

 

  (1)

Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the consolidated statement of financial position:

 

   

derivative financial instruments measured at fair value;

 

   

financial instruments measured at fair value through profit or loss (“FVTPL”);

 

   

financial instruments measured at fair value through other comprehensive income (“FVOCI”);

 

   

liabilities (assets) for defined benefit plans recognized at the total present value of defined benefit obligations less the net of the fair value of plan assets

 

  (2)

Functional and presentation currency

Financial statements of Group entities within the Group are prepared in functional currency of each group entity, which is the currency of the primary economic environment in which each entity operates. Consolidated financial statements of the Group are presented in Korean won, which is the Parent Company’s functional and presentation currency.

 

  (3)

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with K-IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.

1) Critical judgments

Information about critical judgments in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in notes for the following areas: consolidation (whether the Group has de facto control over an investee), and determination of stand-alone selling prices.

 

23


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

2.

Basis of Preparation, Continued

 

  (3)

Use- of estimates and judgments, Continued

 

2) Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: loss allowance (notes 7 and 37), estimated useful lives of costs to obtain a contract (notes 8), property and equipment and intangible assets (notes 4 (7), (9), 14 and 17), impairment of goodwill (notes 4 (11) and 16), recognition of provision (notes 4 (16) and 20), measurement of defined benefit liabilities (notes 4 (15) and 21), and recognition of deferred tax assets (liabilities) (notes 4 (23) and 33).

3) Fair value measurement

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group has an established policies and processes with respect to the measurement of fair values including Level 3 fair values, and the measurement of fair values is reviewed and is directly reported to the finance executives.

The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Group assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of K-IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

   

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

 

   

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

 

   

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Information about assumptions used for fair value measurements are included in note 22 and note 37.

 

24


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

3.

Changes in Accounting Policies

The Group has initially adopted the amendments to the ’Definition of a Business’(Amendments to K-IFRS No. 1103, Business Combination) and ‘Interest Rate Benchmark Reform’(Amendments to K-IFRS No. 1109, Financial Instruments, K-IFRS No. 1039, Financial Instrument – Recognition and Measurement, K-IFRS No. 1107, Financial Instruments – Disclosures) from January 1, 2020. A number of other amended standards are effective from January 1, 2020, but they do not have a material effect on the Group’s consolidated financial statements.

The Group applied Definition of a Business (Amendments to K-IFRS No. 1103) to business combinations whose acquisition dates are on or after January 1, 2020 in assessing whether it had acquired a business or a group of assets. Details of the accounting policies are summarized in Note 4 (2).

The Group applied the interest rate benchmark reform amendments retrospectively to hedging relationships that existed at January 1, 2020 or were designated thereafter and that are directly affected by interest rate benchmark reform. The amendment also applied to the gain or loss accumulated in the cash flow hedging reserve that existed at January 1, 2020. The details of the accounting policies are disclosed in Note 4 (6). See also Note 37 for related disclosures about risks and hedge accounting.

During the annual period ended December 31, 2020, the Group changed its accounting policy by applying agenda decision, Lease Term and Useful Life of Leasehold Improvements (IFRS 16 Leases and IAS 16 Property, Plant and Equipment)—November 2019, published by International Financial Reporting Interpretations Committee (“IFRIC”) on December 16, 2019.

Prior to the change in accounting policy, the Group determined the lease term based on the assumption that the right to extent or terminate the lease is no longer enforceable if a lease contract requires the counterparty’s consent to be extended. The Group now determines the lease term as the non-cancellable period of a lease, together with both: periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the lessee is reasonably certain not to exercise that option. In the assessing the periods covered by an option to extend the lease if the lessee is reasonably certain to exercise that option, the Company considered if it would incur a penalty on termination that is more than insignificant.

The Group has retrospectively applied the changes in its accounting policies in connection with the IFRIC agenda decision in accordance with K-IFRS No. 1008 Accounting Policies, Changes in Accounting Estimates and Errors and restated its comparative consolidated financial statements.

 

25


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

3.

Changes in Accounting Policies, Continued

 

The following table summarizes the impacts of the change in accounting policies on the Group’s consolidated financial statements on the current and prior periods.

 

  (1)

Consolidated statements of financial position

 

(In millions of won)       
(Unaudited)    As of September 30, 2020 (*)  
     As reported      Adjustments      Restated  

Assets

        

Accounts receivable – other, net

   W 1,225,398        12,919        1,238,317  

Prepaid expenses and others

     3,511,068        (13,086      3,497,982  

Property and equipment, net

     12,190,268        827,569        13,017,837  
  

 

 

    

 

 

    

 

 

 
   W 16,926,734        827,402        17,754,136  
  

 

 

    

 

 

    

 

 

 

Liabilities

        

Accrued expenses

   W 1,557,433        (273      1,557,160  

Provisions

     130,181        24,279        154,460  

Lease liabilities

     641,334        818,652        1,459,986  

Deferred tax liabilities

     2,733,327        (4,061      2,729,266  
  

 

 

    

 

 

    

 

 

 
   W 5,062,275        838,597        5,900,872  
  

 

 

    

 

 

    

 

 

 

Shareholder’s Equity

        

Retained earnings

   W 22,595,716        (11,195      22,584,521  

 

  (*)

Subsequent to the adoption of the change in accounting policy, the Group does not maintain the information necessary to prepare financial statements using the previous accounting policy. Therefore, the Group presented the impact on unaudited interim financial information using available information.

 

(In millions of won)       
     As of December 31, 2019  
     As reported      Adjustments      Restated  

Assets

        

Accounts receivable – other, net

   W 1,250,098        5,074        1,255,172  

Prepaid expenses and others

     3,619,033        (13,506      3,605,527  

Property and equipment, net

     12,334,280        599,180        12,933,460  
  

 

 

    

 

 

    

 

 

 
   W 17,203,411        590,748        17,794,159  
  

 

 

    

 

 

    

 

 

 

Liabilities

        

Accrued expenses

   W 1,515,300        (415      1,514,885  

Provisions

     143,229        21,932        165,161  

Lease liabilities

     712,740        578,267        1,291,007  

Deferred tax liabilities

     2,466,295        (2,434      2,463,861  
  

 

 

    

 

 

    

 

 

 
   W 4,837,564        597,350        5,434,914  
  

 

 

    

 

 

    

 

 

 

Shareholder’s Equity

        

Retained earnings

   W 22,235,285        (6,602      22,228,683  

 

26


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

3.

Changes in Accounting Policies, Continued

 

  (1)

Consolidated statements of financial position, Continued

 

(In millions of won)    As of January 1, 2019  
     As reported(*)      Adjustments      Restated  

Assets

        

Accounts receivable – other, net

   W 1,243,245        12,803        1,256,048  

Prepaid expenses and others

     2,944,245        (39,010      2,905,235  

Property and equipment, net

     11,371,690        218,320        11,590,010  
  

 

 

    

 

 

    

 

 

 
   W 15,559,180        192,113        15,751,293  
  

 

 

    

 

 

    

 

 

 

Liabilities

        

Accrued expenses

   W 1,357,339        (1,388      1,355,951  

Provisions

     187,208        20,319        207,527  

Lease liabilities

     663,827        180,456        844,283  

Deferred tax liabilities

     2,260,433        (1,881      2,258,552  
  

 

 

    

 

 

    

 

 

 
   W 4,468,807        197,506        4,666,313  
  

 

 

    

 

 

    

 

 

 

Shareholder’s Equity

        

Retained earnings

   W 22,120,355        (5,393      22,114,962  

 

  (*)

Includes impact of initial adoption of K-IFRS No.1116.

 

  (2)

Consolidated statement of income

 

(In millions of won)    For the nine-month period ended
September 30, 2020 (*)
 
(Unaudited)    As reported      Adjustments      Restated  

Operating revenue

   W 13,784,051        1,322        13,785,373  

Operating expenses:

        

Depreciation and amortization

     2,948,492        40,383        2,988,875  

Rent

     148,437        (31,272      117,165  

Leased lines

     206,577        (1,857      204,720  

Others

     9,457,494        —          9,457,494  
  

 

 

    

 

 

    

 

 

 
     12,761,000        7,254        12,768,254  
  

 

 

    

 

 

    

 

 

 

Operating profit

     1,023,051        (5,932      1,017,119  

Finance income

     90,985        46        91,031  

Finance costs

     324,952        7,780        332,732  

Other non-operating income

     55,506        (641      54,865  

Other non-operating expenses

     78,309        (8,087      70,222  

Gain relating to investments in subsidiaries, associates and joint ventures, net

     673,800        —          673,800  
  

 

 

    

 

 

    

 

 

 

Profit before income tax

   W 1,440,081        (6,220      1,433,861  

Income tax expense

     305,405        (1,907      303,498  
  

 

 

    

 

 

    

 

 

 

Profit for the year

   W 1,134,676        (4,313      1,130,363  
  

 

 

    

 

 

    

 

 

 

Earnings per share:

        

Basic earnings per share (in won)

   W 15,218        (59      15,159  

Diluted earnings per share (in won)

     15,215        (59      15,156  

 

27


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

3.

Changes in Accounting Policies, Continued

 

  (2)

Consolidated statement of income, Continued

 

  (*)

Subsequent to the adoption of the change in accounting policy, the Group does not maintain the information necessary to continue to prepare financial statements using the previous accounting policy. Therefore, the Group presented the impact on unaudited interim financial information using available information.

 

(In millions of won)    2019  
     As reported      Adjustments      Restated  

Operating revenue

   W 17,743,702        (2,986      17,740,716  

Operating expenses:

        

Depreciation and amortization

     3,771,486        85,176        3,856,662  

Rent

     231,934        (77,091      154,843  

Leased lines

     272,616        (9,249      263,367  

Others

     12,357,686        (19      12,357,667  
  

 

 

    

 

 

    

 

 

 
     16,633,722        (1,183      16,632,539  
  

 

 

    

 

 

    

 

 

 

Operating profit

     1,109,980        (1,803      1,108,177  

Finance income

     141,977        178        142,155  

Finance costs

     429,758        8,197        437,955  

Other non-operating income

     103,140        (409      102,731  

Other non-operating expenses

     212,227        (8,577      203,650  

Gain relating to investments in subsidiaries, associates and joint ventures, net

     449,543        —          449,543  
  

 

 

    

 

 

    

 

 

 

Profit before income tax

   W 1,162,655        (1,654      1,161,001  

Income tax expense

     300,713        (445      300,268  
  

 

 

    

 

 

    

 

 

 

Profit for the year

   W 861,942        (1,209      860,733  
  

 

 

    

 

 

    

 

 

 

Earnings per share:

        

Basic earnings per share (in won)

   W 12,144        (17      12,127  

Diluted earnings per share (in won)

     12,144        (17      12,127  

 

  (3)

Consolidated statement changes in equity

The consolidated statement of changes in equity has been restated as a result of restated consolidated statement of financial position and statement of income.

 

  (4)

Consolidated statements of cash flows

 

(In millions of won)    For the nine-month period ended
September 30, 2020 (*1)
 
(Unaudited)    As reported      Adjustments      Restated  

Cash flows from operating activities(*2)

   W 4,525,676        21,102        4,546,778  

Cash flows from investing activities

     (3,047,428      —          (3,047,428

Cash flows from financing activities(*3)

     (870,621      (21,102      (891,723

 

  (*1)

Subsequent to the adoption of the change in accounting policy, the Group does not maintain the information necessary to continue prepare financial statements using the previous accounting policy. Therefore, the Group presented the impact on unaudited interim financial information using available information.

 

28


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

3.

Changes in Accounting Policies, Continued

 

  (4)

Consolidated statements of cash flows, Continued

 

(*2)

Adjustments within operating activities are mainly due to increase in depreciation expense and decrease in prepaid expense.

(*3)

The effect of changes in accounting policies resulted in an increase in repayment of lease liabilities from W292,441 million to W313,543 million.

 

(In millions of won)       
     2019  
     As reported      Adjustments      Restated  

Cash flows from operating activities(*1)

     W  3,986,082        48,902        4,034,984  

Cash flows from investing activities(*2)

     (3,582,523      939        (3,581,584

Cash flows from financing activities(*3)

     (636,834      (49,840      (686,674

 

(*1)

Adjustments within operating activities are mainly due to increase in depreciation expense and decrease in prepaid expense.

(*2)

The effect of changes in accounting policies resulted in an increase in lease receivables from W26,773 million to W27,712 million.

(*3)

The effect of changes in accounting policies resulted in an increase in repayment of lease liabilities from W393,398 million to W443,238 million.

 

4.

Significant Accounting Policies

The significant accounting policies applied by the Group in the preparation of its consolidated financial statements in accordance with K-IFRS are included below. The significant accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2019, except for the changes in accounting policies described in note 3.

 

  (1)

Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The Group’s operating segments have been determined to be each business unit, for which the Group generates separately identifiable financial information that is regularly reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. The Group has five reportable segments as described in note 5. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

 

29


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (2)

Basis of consolidation

1) Business combination

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.

Consideration transferred is generally measured at fair value, as are the identifiable net assets acquired. The amount of consideration in excess of the fair value of identifiable net assets acquired is recognized as goodwill. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Acquisition-related costs are expensed in the periods in which the costs are incurred and the services are received, except if related to the costs to issue debt or equity securities recognized based on K-IFRS No. 1032 and 1109.

Consideration transferred does not include the amount settled in relation to the pre-existing relationship. Such amounts are generally recognized through profit or loss.

Contingent consideration is measured at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. If contingent consideration is not classified as equity, the Group subsequently recognizes changes in fair value of contingent consideration through profit or loss.

2) Non-controlling interests

Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.

Changes in a Controlling Company’s ownership interest in a subsidiary that do not result in the Controlling Company losing control of the subsidiary are accounted for as equity transactions.

3) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of an investee begins from the date the Group obtains control of the investee and cease when the Group loses control of the investee.

4) Loss of control

If the Group loses control of a subsidiary, the Group derecognizes the assets and liabilities of the former subsidiary from the consolidated statement of financial position and recognizes gain or loss associated with the loss of control attributable to the former controlling interest. Any investment retained in the former subsidiary is recognized at its fair value when control is lost.

 

30


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (2)

Basis of consolidation, Continued

 

5) Interest in investees accounted for using the equity method

Interest in investees accounted for using the equity method composed of interest in associates and joint ventures. An associate is an entity in which the Group has significant influence, but not control, over the entity’s financial and operating policies. A joint venture is a joint arrangement whereby the Group that has joint control of the arrangement has rights to the net assets of the arrangement.

The investment in an associate and a joint venture is initially recognized at cost including transaction costs and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss and changes in equity of the associate or the joint venture after the date of acquisition.

6) Intra-group transactions

Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The Group’s share of unrealized gain incurred from transactions with investees accounted for using the equity method are eliminated and unrealized loss are eliminated using the same basis if there are no evidence of asset impairments.

7) Business combinations under common control

SK Holdings Co., Ltd. is the ultimate controlling entity of the Group. The assets and liabilities acquired under business combination under common control are recognized at the carrying amounts in the ultimate controlling shareholder’s consolidated financial statements. The difference between consideration and carrying amount of net assets acquired is added to or subtracted from capital surplus and others.

 

  (3)

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, call deposits and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.

 

  (4)

Inventories

Inventories are initially recognized at the acquisition cost and subsequently measured using the weighted average method. During the period, a perpetual inventory system is used to track inventory quantities, which is adjusted based on the physical inventory counts performed at the period end. When the net realizable value of inventories is less than cost, the carrying amount is reduced to the net realizable value, and any difference is charged to current period as operating expenses.

 

31


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

 

  (5)

Non-derivative financial assets

1) Recognition and initial measurement

Accounts receivable – trade and debt investments issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless an accounts receivable – trade without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. An accounts receivable – trade without a significant financing component is initially measured at the transaction price.

2) Classification and subsequent measurement

On initial recognition, a financial asset is classified as measured at:

 

   

FVTPL

 

   

FVOCI – equity investment

 

   

FVOCI – debt investment

 

   

Financial assets at amortized cost

A financial asset is classified based on the business model in which a financial asset is managed and its contractual cash flow characteristics.

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:

 

   

it is held within a business model whose objective is to hold assets to collect contractual cash flows; and

 

   

its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates.

 

32


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (5)

Non-derivative financial assets, Continued

2) Classification and subsequent measurement, Continued

 

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

 

   

it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

 

   

its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (“OCI”). This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

The following accounting policies are applied to the subsequent measurement of financial assets.

 

                     

  

Financial assets at FVTPL

   These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss.
  

Financial assets at amortized cost

   These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
  

Debt investments at FVOCI

   These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.
  

Equity investments at FVOCI

   These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss.

 

33


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (5)

Non-derivative financial assets, Continued

 

3) Impairment

The Group estimates the expected credit losses (ECL) for the debt instruments measured at amortized cost and FVOCI based on the Group’s historical experience and informed credit assessment that includes forward-looking information. The impairment approach is decided based on the assessment of whether the credit risk of a financial asset has increased significantly since initial recognition. However, the Group applies a practical expedient and recognizes impairment losses equal to lifetime ECLs for accounts receivable – trade and lease receivables from the initial recognition.

ECL is a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).

At each reporting date, the Group assesses whether financial assets measured at amortized cost and debt investments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Loss allowance on financial assets measured at amortized cost is deducted from the carrying amount of the respective assets, while loss allowance on debt instruments at FVOCI is recognized in OCI, instead of reducing the carrying amount of the transferred assets.

4) Derecognition

Financial assets are derecognized if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or transfers substantially all of the risks and rewards of asset.

The transferred assets are not derecognized when the Group enters into transactions whereby it transfers assets recognized in its statement of financial position but retains substantially all of the risks and rewards of the transferred assets.

5) Offsetting

Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position when the Group currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to settle the liability and realize the asset simultaneously.

A financial asset and a financial liability are offset only when the right to set off the amount is not contingent on future event and legally enforceable even on the event of default, insolvency or bankruptcy.

 

34


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (6)

Derivative financial instruments and hedge accounting

Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value at the end of each reporting period, and changes therein are accounted for as described below.

1) Hedge accounting

The Group holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Group designates derivatives as hedging instruments to hedge the variability in cash flow associated with highly probable forecasted transactions or firm commitments (a cash flow hedge).

On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.

Hedges directly affected by interest rate benchmark reform

For the purpose of evaluating whether there is an economic relationship between the hedged items and the hedging instruments, the Group assumes that the interest rate benchmark on which the hedged items and the hedging instruments are based is not altered as a result of interest rate benchmark reform.

For a cash flow hedge of a forecast transaction, the Group assumes that the benchmark interest rate will not be altered as a result of interest rate benchmark reform for the purpose of assessing whether the forecast transaction is highly probable and presents an exposure to variations in cash flows that could ultimately affect profit and loss. In determining whether a previously designated forecast transaction in a discontinued cash flow hedge is still expected to occur, the Group assumes that the interest rate benchmark cash flows designated as a hedge will not be altered as a result of interest rate benchmark reform.

The Group will cease applying the specific policy for assessing the economic relationship between the hedged item and the hedging instrument (i) to a hedged item or hedging instrument when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the respective item or instrument or (ii) when the hedging relationship is discontinued.

For its highly probable assessment of the hedged item, the Group will no longer apply the specific policy when the uncertainty arising from interest rate benchmark reform about the timing and the amount of the interest rate benchmark-based future cash flows of the hedged item is no longer present, or when the hedging relationship is discontinued.

 

35


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (6)

Derivative financial instruments and hedge accounting, Continued

1) Hedge accounting, Continued

 

Cash flow hedge

When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.

2) Other derivative financial instruments

Other derivative financial instrument not designated as a hedging instrument are measured at fair value, and the changes in fair value of the derivative financial instrument is recognized immediately in profit or loss.

 

  (7)

Property and equipment

Property and equipment are initially measured at cost. The cost of property and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Property and equipment, subsequently, are carried at cost less accumulated depreciation and accumulated impairment losses.

Subsequent costs are recognized in the carrying amount of property and equipment at cost or, if appropriate, as a separate item if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be reliably measured. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.

Property and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed. A component that is significant compared to the total cost of property and equipment is depreciated over its separate useful life.

Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognized as other non-operating income (loss).

 

36


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (7)

Property and equipment, Continued

 

The estimated useful lives of the Group’s property and equipment are as follows:

 

     Useful lives (years)
Buildings and structures    15 ~ 40
Machinery    3 ~ 15, 30
Other property and equipment    2 ~10

Depreciation methods, useful lives, and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.

 

  (8)

Borrowing costs

The Group capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale. Financial assets are not qualifying assets, and assets that are ready for their intended use or sale when acquired are not qualifying assets either.

To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Group capitalizes during a period do not exceed the amount of borrowing costs incurred during the period.

 

  (9)

Intangible assets

Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.

Intangible assets, except for goodwill, are amortized on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, club memberships and brand are expected to be available for use as there are no foreseeable limits to the periods. These intangible assets are determined as having indefinite useful lives and, therefore, not amortized.

 

37


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (9)

Intangible assets, Continued

 

The estimated useful lives of the Group’s intangible assets are as follows:

 

     Useful lives (years)

Frequency usage rights

   5 ~ 10

Land usage rights

   5

Industrial rights

   5, 10

Development costs

   3 ~ 5

Facility usage rights

   10, 20

Customer relations

   3 ~ 20

Other

   3 ~ 20

Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes, if appropriate, are accounted for as changes in accounting estimates.

Expenditures on research activities are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be reliably measured, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.

Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.

 

  (10)

Government grants

Government grants are not recognized unless there is reasonable assurance that the Group will comply with the grant’s conditions and that the grant will be received.

1) Grants related to assets

Government grants whose primary condition is that the Group purchases, constructs, or otherwise acquires a long-term asset are deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduction to depreciation expense.

2) Grants related to income

Government grants which are intended to compensate the Group for expenses incurred are deducted from the related expenses.

 

38


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4

Significant Accounting Policies, Continued

 

  (11)

Impairment of non-financial assets

The carrying amounts of the Group’s non-financial assets other than contract assets recognized for revenue arising from contracts with a customer, assets recognized for the costs to obtain or fulfill a contract with a customer, employee benefits, inventories, deferred tax assets, and non-current assets held for sale are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amounts to their carrying amounts.

The Group estimates the recoverable amount of an individual asset, and if it is impossible to measure the individual recoverable amount of an asset, the Group estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.

An impairment loss is recognized in profit or loss to the extent the carrying amount of the asset exceeds its recoverable amount.

Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergy arising from the business acquired. Any impairment identified at the CGU level will first reduce the carrying amount of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

 

39


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4

Significant Accounting Policies, Continued

 

  (12)

Leases

A contract is or contains, a lease if the contract transfers a right to control the identified asset for a period of time in exchange for consideration.

1) As a lessee

At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at of before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

 

   

fixed payments, including in-substance fixed payments;

 

   

variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

 

   

amounts expected to be payable under a residual value guarantee; and

 

   

the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension of termination option of if there is a revised in-substance fixed lease payment.

 

40


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4

Significant Accounting Policies, Continued

 

  (12)

Leases, Continued

1) As a lessee, Continued

 

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in ‘property and equipment’ in the statement of financial position.

The Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognizes the lease payments associated with lease as an expense on a straight-line basis over the lease term.

2) As a lessor

At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operation lease.

To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Group is an intermediate lessor, is accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.

If an arrangement contains lease and non-lease components, then the Group applies K-IFRS No. 1115 to allocate the consideration in the contract.

The Group applies derecognition and impairment requirements in K-IFRS No. 1109 to the net investment in the lease. The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.

The Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other revenue’.

 

41


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4

Significant Accounting Policies, Continued

 

  (13)

Non-current assets held for sale

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sales rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the assets (or disposal groups) must be available for immediate sale in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amounts and fair value less cost to sell. The Group recognizes an impairment loss for any initial or subsequent write-down of assets (or disposal groups) to fair value less costs to sell and a gain for any subsequent increase in fair value less costs to sell up to the cumulative impairment loss previously recognized in accordance with K-IFRS No. 1036, Impairment of Assets.

A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).

 

  (14)

Non-derivative financial liabilities

The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement. The Group recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liabilities.

1) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, these liabilities are measured at fair value. The amount of change in fair value of financial liability that is attributable to changes in the credit risk of that liability shall be presented in other comprehensive income, and the remaining amount of change in the fair value of the liability shall be presented in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issue of the financial liability are recognized in profit or loss as incurred.

2) Other financial liabilities

Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the issue of the financial liabilities. Subsequent to initial recognition, other financial liabilities are measured at amortized cost and the interest expenses are recognized using the effective interest method.

3) Derecognition of financial liability

The Group extinguishes a financial liability only when the contractual obligation is fulfilled, canceled or expires. The Group recognizes new financial liabilities at fair value based on new contracts and eliminates existing liabilities when the contractual terms of the financial liabilities change and the cash flows change substantially.

When a financial liability is derecognized, the difference between the carrying amount and the consideration paid (including any transferred non-cash assets or liabilities assumed) is recognized in profit or loss.

 

42


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4

Significant Accounting Policies, Continued

 

  (15)

Employee benefits

1) Short-term employee benefits

Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.

2) Other long-term employee benefits

Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render related services. The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.

3) Retirement benefits: defined contribution plans

When an employee has rendered a service to the Group during a period, the Group recognizes the contribution payable to a defined contribution plan in exchange for that service as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Group recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.

4) Retirement benefits: defined benefit plans

At the end of reporting period, defined benefit liabilities relating to defined benefit plans are recognized at present value of defined benefit obligations net of fair value of plan assets.

The calculation is performed annually by an independent actuary using the projected unit credit method. When the fair value of plan assets exceeds the present value of the defined benefit obligation, the Group recognizes an asset, to the extent of the present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.

Remeasurements of the net defined benefit liability (asset), which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Group determines net interests on net defined benefit liability (asset) by multiplying discount rate determined at the beginning of the annual reporting period and considers changes in net defined benefit liability (asset) from contributions and benefit payments. Net interest costs and other costs relating to the defined benefit plan are recognized through profit or loss.

When the plan amendment or curtailment occurs, gains or losses on amendment or curtailment in benefits for the past service provided are recognized through profit or loss. The Group recognizes a gain or loss on a settlement when the settlement of defined benefit plan occurs.

 

43


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (15)

Employee benefits, Continued

 

5) Termination benefits

The Group recognizes a liability and expense for termination benefits at the earlier of the period when the Group can no longer withdraw the offer of those benefits and the period when the Group recognizes costs for a restructuring that involves the payment of termination benefits. If benefits are payable more than 12 months after the reporting period, they are discounted to their present value.

 

  (16)

Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. If the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.

If some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement is recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.

A provision is used only for expenditures for which the provision was originally recognized.

 

  (17)

Transactions in foreign currencies

1) Foreign currency transactions

Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency using the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognized in profit or loss, except for the differences arising on the retranslation of available-for-sale equity instruments.

 

44


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (17)

Transactions in foreign currencies, Continued

 

2) Foreign operations

If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:

The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the closing rate at the reporting date.

When a foreign operation is disposed, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.

 

  (18)

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.

When the Parent Company repurchases its own shares, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The gains or losses from the purchase, disposal, reissue, or retirement of treasury shares are directly recognized in equity being as transaction with owners.

 

  (19)

Hybrid bond

The Group recognizes a financial instrument issued by the Group as an equity instrument if it does not include contractual obligation to deliver financial assets including cash to the counter party.

 

  (20)

Share-based Payment

For equity-settled share-based payment transaction, if the fair value of the goods or services received cannot be reliably estimated, the Group measures the value indirectly by reference to the fair value of the equity instruments granted. The related expense with a corresponding increase in capital surplus and others is recognized over the vesting period of the awards.

The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

 

45


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (20)

Share-based Payment, Continued

 

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period during which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share appreciation rights. Any changes in the liability are recognized in profit or loss.

 

  (21)

Revenue

1) Identification of performance obligations in contracts with customers

The Group identifies the distinct services or goods as performance obligations in contracts with customers such as (1) providing wireless telecommunications services, (2) sale of handsets and (3) providing other goods and services. In the case of providing both wireless telecommunications service and selling a handset together to one customer, the Group allocates considerations from the customer between the separate performance obligations for handset sale and wireless telecommunications service. The handset sale revenue is recognized when handset is delivered, and the wireless telecommunications service revenue is recognized over the period of the contract term as stated in the subscription contract.

2) Allocation of the transaction price to each performance obligation

The Group allocates the transaction price of a contract to each performance obligation identified on a relative stand-alone selling price basis. The Group uses “adjusted market assessment approach” for estimating the stand-alone selling price of a good or service. As an exception, the Group uses “expected cost plus a margin approach” for insignificant transactions.

3) Incremental costs of obtaining a contract

The Group pays commissions to its retail stores and authorized dealers in connection with acquiring service contracts. The commissions paid to these parties constituted a significant portion of the Group’s operating expenses. These commissions would not have been paid if there have been no binding contracts with subscribers and, therefore, the Group capitalizes certain costs associated with commissions paid to obtain new customer contracts and amortize them over the expected contract periods.

4) Customer loyalty programs

The Group provides customer loyalty points to customers based on the usage of the service to which the Group allocates a portion of consideration received as a performance obligation distinct from wireless telecommunications services. The amount to be allocated to the loyalty program is measured according to the relative stand-alone selling price of the customer loyalty points. The amount allocated to the loyalty program is deferred as a contract liability and is recognized as revenue when loyalty points are redeemed.

 

46


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (21)

Revenue, Continued

 

5) Consideration payable to a customer

Based on the subscription contract, a customer who uses the Group’s wireless telecommunications services may receive a discount for purchasing goods or services from a designated third party. The Group pays a portion of the price discounts that the customer receives to the third party which is viewed as consideration payable to a customer.

The Group accounts for the amounts payable to the third party as a reduction of the wireless telecommunications service revenue.

 

  (22)

Finance income and finance costs

Finance income comprises interest income on funds invested (including financial assets measured at fair value), dividend income, gains on disposal of financial assets at FVTPL, changes in fair value of financial instruments at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss when the right to receive the dividend is established.

Finance costs comprise interest expense on borrowings, changes in fair value of financial instruments at FVTPL, and losses on hedging instruments that are recognized in profit or loss. Interest expense on borrowings and debentures is recognized as it accrues in profit or loss using the effective interest rate method.

 

  (23)

Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.

The Group pays income tax in accordance with the tax-consolidation system when the Parent Company and its subsidiaries are economically unified.

1) Current tax

Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and includes interests and fines related to income taxes paid or payable. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.

 

47


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (23)

Income taxes, Continued

 

2) Deferred tax

Deferred tax is recognized by using the asset-liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Group recognizes a deferred tax liability for all taxable temporary differences, except for the difference associated with investments in subsidiaries and associates that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Group recognizes a deferred tax asset for all deductible temporary differences to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.

A deferred tax asset is recognized for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. Future taxable profit is dependent on the reversal of taxable temporary differences. If there are insufficient taxable temporary differences to recognize the deferred tax asset, the business plan of the Group and the reversal of existing temporary differences are considered in determining the future taxable profit.

The Group reviews the carrying amount of a deferred tax asset at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized, or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset only if the Group has a legally enforceable right to offset the amount recognized and intends to settle the current tax liabilities and assets on a net basis. Income tax expense in relation to dividend payments is recognized when liabilities relating to the dividend payments are recognized.

3) Uncertainty over income tax treatments

The Group assesses the uncertainty over income tax treatments pursuant to K-IFRS No. 1012. If the Group concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Group reflects the effect of uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the entity expects to better predict the resolution of the uncertainty:

 

   

The most likely amount: the single most likely amount in a range of possible outcomes.

 

   

The expected value: the sum of the probability-weighted amounts in a range of possible outcomes.

 

48


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (24)

Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees, if any.

 

  (25)

Standards issued but not yet effective

The following new standards are effective for annual periods beginning after January 1, 2020 and earlier application is permitted. However, the Group has not adopted the following new standards early in preparing the accompanying consolidated financial statements.

Interest Rate Benchmark Reform — Phase 2

(Amendments to K-IFRS No. 1109, Financial Instruments, K-IFRS No. 1039, Financial Instrument-Recognition and Measurement, K-IFRS No. 1107, Financial Instruments-Disclosures, K-IFRS No. 1104 Insurance Contracts and K-IFRS No. 1116, Leases)

The amendments address issues that might affect financial reporting as a result of the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate. The amendments provide practical relief from certain requirements in K-IFRS No. 1109, Financial Instruments, K-IFRS No. 1039, Financial Instrument-Recognition and Measurement, K-IFRS No. 1107, Financial Instruments-Disclosures, K-IFRS No. 1104 Insurance Contracts and K-IFRS No. 1116, Lease.

The amendments will require the Group to account for a change in the basis for determining the contractual cash flows of a financial asset or financial liability that is required by interest rate benchmark reform by updating the effective interest rate of the financial asset or financial liability.

As of December 31, 2020, the Group has LIBOR floating rate notes amounting to W326,400 million that will be subject to IBOR reform. The Group has not determined an alternative interest rate benchmark to LIBOR for these notes as of December 31, 2020 and these amendments are not expected to have a significant impact on the Group’s statement of income.

The amendments provide exceptions to the hedge accounting requirements in the following areas.

 

   

Allow amendment of the designation of a hedging relationship to reflect changes that are required by the reform.

 

   

When a hedged item in a cash flow hedge is amended to reflect the changes that are required by the reform, the amount accumulated in the cash flow hedge reserve will be deemed to be based on the alternative benchmark rate on which the hedged future cash flows are determined.

 

   

When a group of items is designated as a hedged item and an item in the Group is amended to reflect the changes that are required by the reform, the hedged items are allocated to sub- groups based on the benchmark rates being hedged.

 

   

If an entity reasonably expects that an alternative benchmark rate will be separately identifiable within a period of 24 months, it is not prohibited from designating the rate as a non-contractually specified risk component if it is not separately identifiable at the designation date.

 

49


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (25)

Standards issued but not yet effective, Continued

 

As of December 31, 2020, the Group has cash flow hedges of LIBOR risk. The Group has not identified the alternative interest rate benchmark to LIBOR for indexation of the hedged items and hedging instruments. When LIBOR is replaced by the alternative interest rate, the Group expects to apply the amendments related to hedge accounting. However, there is uncertainty about when and how replacement may occur. When the change occurs to the hedged item or the hedging instrument, the Group will remeasure the cumulative change in fair value of the hedged item or the fair value of the interest rate swap, respectively, based on the alternative interest rate to LIBOR. Hedging relationships may experience hedge ineffectiveness if there is a timing or other mismatch between the transition. The Group does not expect that the amounts accumulated in the cash flow hedge reserve will be immediately reclassified to profit or loss because of IBOR transition.

The amendments will require the Group to disclose additional information about the Group’s exposure to risks arising from interest rate benchmark reform and related risk management activities.

The Group plans to apply the amendments from January 1, 2021. Application will not impact amounts reported for 2020 or prior periods.

The following new and amended standards are not expected to have a significant impact on the Group’s separate financial statements.

 

   

COVID-19-Related Rent Concessions (Amendment to K-IFRS No. 1116).

 

   

Property, Plant and Equipment: Proceeds before Intended Use (Amendments to K-IFRS No. 1016).

 

   

Reference to Conceptual Framework (Amendments to K-IFRS No. 1103).

 

   

Classification of Liabilities as Current or Non-current (Amendments to K-IFRS No. 1001).

 

   

K-IFRS No. 1117 Insurance Contracts and amendments to K-IFRS No. 1117 Insurance Contracts.

 

5.

Operating Segments

The Group’s operating segments have been identified to be each business unit, by which the Group provides independent services and merchandise. The Group’s reportable segments are cellular services, which include cellular voice service, wireless data service and wireless internet services; fixed-line telecommunication services, which include telephone services, internet services, and leased line services; security services, which include unmanned security services, manned security services and system software development; commerce services, the open marketplace platform; and all other businesses, which include the Group’s internet portal services and other immaterial operations, each of which does not meet the quantitative threshold to be considered as a reportable segment and are presented collectively as others.

 

50


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

5.

Operating Segments, Continued

 

  (1)

Segment information for the years ended December 31, 2020 and 2019 are as follows:

 

(In millions of won)  
     2020  
     Cellular
services
     Fixed-line
telecommu-
nication

services
     Security
services
     Commerce
services
     Others     Sub-total      Adjustments     Total  

Total revenue

   W 13,853,274        4,467,863        1,332,363        814,250        1,186,015       21,653,765        (3,029,114     18,624,651  

Inter-segment revenue

     1,557,590        1,062,187        85,846        21,399        302,092       3,029,114        (3,029,114     —    

External revenue

     12,295,684        3,405,676        1,246,517        792,851        883,923       18,624,651        —         18,624,651  

Depreciation and amortization

     2,892,460        874,562        210,092        35,742        62,403       4,075,259        (84,176     3,991,083  

Operating profit (loss)

     1,031,887        258,973        137,830        11,000        (21,299     1,418,391        (69,067     1,349,324  

Finance income and costs, net

 

    (255,997

Gain relating to investments in subsidiaries, associates and joint ventures, net

 

    1,028,403  

Other non-operating income and expense, net

 

    (244,690

Profit before income tax

 

    1,877,040  

 

(In millions of won)  
     2019  
     Cellular
services
     Fixed-line
telecommu-
nication

services(*)
     Security
services(*)
     Commerce
services(*)
     Others(*)     Sub-total      Adjustments     Total  

Total revenue

   W 13,787,009        3,944,260        1,183,724        726,552        1,069,685       20,711,230        (2,970,514     17,740,716  

Inter-segment revenue

     1,609,467        1,004,193        74,247        15,899        266,708       2,970,514        (2,970,514     —    

External revenue

     12,177,542        2,940,067        1,109,477        710,653        802,977       17,740,716        —         17,740,716  

Depreciation and amortization

     2,828,285        792,334        193,247        35,939        63,765       3,913,570        (56,908     3,856,662  

Operating profit (loss)

     963,207        144,739        153,843        1,840        (77,892     1,185,737        (77,560     1,108,177  

Finance income and costs, net

 

    (295,800

Gain relating to investments in subsidiaries, associates and joint ventures, net

 

    449,543  

Other non-operating income and expense, net

 

    (100,919

Profit before income tax

 

    1,161,001  

 

(*)

During the year ended December 31, 2019, due to the change in the categorization of information reviewed by the chief operating decision maker in 2019, the Group reclassified SK stoa Co., Ltd. from Fixed-line telecommunication Service segment to Commerce Services segment. In addition, operating segment for Life & Security Holdings Co., Ltd. and SK Infosec Co., Ltd. was separately presented as a reportable segment (Security Services) and no longer included in Others segment.

In addition, as a result of change in accounting policy in connection with the determination of lease term (note 3), the Group restated the segment information for the year ended December 31, 2019.

Since there are no intersegment sales of inventory or depreciable assets, there is no unrealized intersegment profit to be eliminated on consolidation. The Group principally operates its businesses in Korea and the revenue amounts earned outside of Korea are immaterial. Therefore, no entity-wide geographical information is presented.

No single customer contributed 10% or more to the Group’s total revenue for the years ended December 31, 2020 and 2019.

 

51


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

5.

Operating Segments, Continued

 

  (2)

Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows:

 

(In millions of won)       
          2020      2019  

Goods and Services transferred at a point in time:

        

Cellular revenue

   Goods(*1)    W 975,247        1,142,868  

Fixed-line telecommunication revenue

   Goods      90,459        145,314  

Commerce services revenue

   Goods      71,519        56,699  
   Commerce      218,468        151,690  

Security services revenue

   Goods      136,504        79,732  

Other revenue

   Goods      60,002        86,793  
   Products      37,657        44,336  
   Others(*2)      505,076        497,768  
     

 

 

    

 

 

 
        2,094,932        2,205,200  
     

 

 

    

 

 

 

Goods and Services transferred over time:

 

Cellular revenue

   Wireless service(*3)      9,801,194        9,532,377  
   Cellular interconnection      472,215        494,267  
  

Other(*4)

     1,047,028        1,008,030  

Fixed-line telecommunication revenue

   Fixed-line service      215,827        224,453  
   Cellular interconnection      85,130        92,396  
   Internet Protocol Television(*5)      1,623,095        1,285,831  
   International calls      160,293        137,902  
   Internet service and miscellaneous(*6)      1,230,872        1,054,171  

Commerce services revenue

   Commerce service      502,864        502,264  

Security services revenue

   Service(*7)      1,110,013        1,029,745  

Other revenue

   Miscellaneous(*2)      281,188        174,080  
     

 

 

    

 

 

 
        16,529,719        15,535,516  
     

 

 

    

 

 

 
      W 18,624,651        17,740,716  
     

 

 

    

 

 

 

 

(*1)

Cellular revenue includes revenue from sales of handsets and other electronic accessories.

(*2)

Miscellaneous other revenue includes revenue from considerations received for the development and maintenance of system software, and digital contents platform services.

(*3)

Wireless service includes revenue from wireless voice and data transmission services principally derived from usage charges to wireless subscribers.

(*4)

Other revenue includes revenue from billing and collection services as well as other miscellaneous services.

(*5)

IPTV service revenue includes revenue from IPTV services principally derived from usage charges to IPTV subscribers.

 

52


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

5.

Operating Segments, Continued

 

  (2)

Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows, Continued:

 

(*6)

Internet service includes revenue from the high speed broadband internet service principally derived from usage charges to subscribers as well as other miscellaneous services.

(*7)

Security service includes revenue from rendering security services.

 

6.

Restricted Deposits

Deposits which are restricted in use as of December 31, 2020 and 2019 are summarized as follows:

 

(In millions of won)              
     December 31, 2020      December 31, 2019  

Short-term financial instruments(*)

   W 98,057        95,034  

Long-term financial instruments(*)

     890        988  
  

 

 

    

 

 

 
   W 98,947        96,022  
  

 

 

    

 

 

 

 

(*)

Financial instruments include charitable trust fund established by the Group where profits from the fund are donated to charitable institutions. As of December 31, 2020, the funds cannot be withdrawn before maturity.

 

7.

Trade and Other Receivables

 

  (1)

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

 

(In millions of won)    December 31, 2020  
     Gross
amount
     Loss
allowance
     Carrying
amount
 

Current assets:

        

Accounts receivable – trade

   W 2,453,149        (264,256      2,188,893  

Short-term loans

     98,366        (902      97,464  

Accounts receivable – other(*)

     1,034,119        (55,075      979,044  

Accrued income

     3,418        (166      3,252  

Guarantee deposits (Other current assets)

     112,733        —          112,733  
  

 

 

    

 

 

    

 

 

 
     3,701,785        (320,399      3,381,386  

Non-current assets:

        

Long-term loans

     84,355        (44,122      40,233  

Long-term accounts receivable – other(*)

     332,803        —          332,803  

Guarantee deposits

     172,774        (300      172,474  

Long-term accounts receivable – trade (Other non-current assets)

     25,702        (242      25,460  
  

 

 

    

 

 

    

 

 

 
     615,634        (44,664      570,970  
  

 

 

    

 

 

    

 

 

 
   W 4,317,419        (365,063      3,952,356  
  

 

 

    

 

 

    

 

 

 

 

  (*)

Gross and carrying amounts of accounts receivable – other as of December 31, 2020 include W 517,175 million of financial instruments classified as FVTPL.

 

53


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

7.

Trade and Other Receivables, Continued

 

  (1)

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

 

(In millions of won)    December 31, 2019  
     Gross
amount
     Loss
allowance
     Carrying
amount
 

Current assets:

        

Accounts receivable – trade

   W 2,480,419        (249,440      2,230,979  

Short-term loans

     66,706        (583      66,123  

Accounts receivable – other(*)

     951,888        (48,379      903,509  

Accrued income

     3,977        (166      3,811  

Guarantee deposits (Other current assets)

     145,039        —          145,039  
  

 

 

    

 

 

    

 

 

 
     3,648,029        (298,568      3,349,461  

Non-current assets:

        

Long-term loans

     81,231        (47,471      33,760  

Long-term accounts receivable – other(*)

     351,663        —          351,663  

Guarantee deposits

     164,951        (299      164,652  

Long-term accounts receivable – trade (Other non-current assets)

     16,977        (61      16,916  
  

 

 

    

 

 

    

 

 

 
     614,822        (47,831      566,991  
  

 

 

    

 

 

    

 

 

 
   W 4,262,851        (346,399      3,916,452  
  

 

 

    

 

 

    

 

 

 

 

  (*)

Gross and carrying amounts of accounts receivable – other as of December 31, 2019 include W 532,225 million of financial instruments classified as FVTPL.

 

  (2)

Changes in the loss allowance on accounts receivable – trade measured at amortized costs during the years ended December 31, 2020 and 2019 are as follows:

 

(In millions of won)  
     Beginning
balance
     Impairment      Write-offs(*)     Collection of
receivables
previously
written-off
     Business
combination
and others
     Ending
Balance
 

2020

   W 249,501        48,625        (48,278     12,771        1,879        264,498  

2019

     260,157        28,841        (55,756     14,772        1,487        249,501  

 

(*)

The Group writes off the trade and other receivables that are determined to be uncollectable due to reasons such as termination of operations or bankruptcy.

 

54


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

7.

Trade and Other Receivables, Continued

 

  (3)

The Group applies the practical expedient that allows the Group to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Group uses its historical credit loss experience over the past three years and classified the accounts receivable – trade by their credit risk characteristics and days overdue. Details of loss allowance on accounts receivable – trade as of December 31, 2020 are as follows:

 

(In millions of won)  
     Less than 6
months
     6 months ~
1 year
     1 ~ 3
years
     More than 3
years
 

Telecommunications service revenue

   Expected credit loss rate      2.04      70.29      86.21      99.18
   Gross amount    W 1,400,316        49,583        127,275        25,195  
   Loss allowance      28,574        34,854        109,727        24,988  
     

 

 

    

 

 

    

 

 

    

 

 

 

Other revenue

   Expected credit loss rate      2.82      77.52      61.76      56.19
   Gross amount    W 802,081        6,753        8,250        59,398  
   Loss allowance      22,652        5,235        5,095        33,373  
     

 

 

    

 

 

    

 

 

    

 

 

 

As the Group is a wireless and fixed-line telecommunications service provider, the Group’s financial assets measured at amortized cost primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.

Receivables related to other revenue mainly consist of receivables from corporate customers. The Group transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Group is not exposed to significant credit concentration risk as the Group regularly assesses their credit risk by monitoring their credit rating. While the contract assets are under the impairment requirements, no significant credit risk has been identified.

 

55


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

8.

Prepaid expenses

The Group pays commissions to its retail stores and authorized dealers for wireless and fixed-line telecommunication services. The Group capitalized certain costs associated with commissions paid to retail stores and authorized dealers to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Group expects to maintain its customers.

 

  (1)

Details of prepaid expenses as of December 31, 2020 and 2019 are as follows:

 

(In millions of won)              
     December 31, 2020      December 31, 2019  

Current assets:

 

Incremental costs of obtaining contracts

   W 2,016,570        1,897,233  

Others

     111,779        121,457  
  

 

 

    

 

 

 
     2,128,349        2,018,690  
  

 

 

    

 

 

 

Non-current assets:

 

Incremental costs of obtaining contracts

     982,952        1,152,748  

Others

     80,759        87,117  
  

 

 

    

 

 

 
   W 1,063,711        1,239,865  
  

 

 

    

 

 

 

 

  (2)

Incremental costs of obtaining contracts

The amortization and impairment losses in connection with incremental costs of obtaining contracts recognized during the years ended December 31, 2020 and 2019 are as follows:

 

(In millions of won)              
     2020      2019  

Amortization and impairment losses recognized

   W 2,418,947        2,193,333  

 

56


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

9.

Contract assets and liabilities

In case of providing both wireless telecommunication services and sales of handsets, the Group allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Group recognized receipts in advance for prepaid telecommunications services and unearned revenue for customer loyalty programs as contract liabilities.

 

  (1)

Details of contract assets and liabilities as of December 31, 2020 and 2019 are as follows:

 

(In millions of won)              
     December 31, 2020      December 31, 2019  

Contract assets:

     

Allocation of consideration between performance obligations

   W 148,281        191,858  

Contract liabilities:

     

Wireless service contracts

     22,026        20,393  

Customer loyalty programs

     16,709        21,945  

Fixed-line service contracts

     106,916        65,315  

Security services

     30,597        32,026  

Others

     84,348        83,777  
  

 

 

    

 

 

 
   W 260,596        223,456  
  

 

 

    

 

 

 

 

  (2)

The amount of revenue recognized during the year ended December 31, 2020 related to the contract liabilities carried forward from the prior period is W142,144 million and during the year ended December 31, 2019 related to the contract liabilities carried forward from the prior period is W 117,409 million. Details of revenue expected to be recognized from contract liabilities as of December 31, 2020 are as follows:

 

(In millions of won)                            
     Less than
1 year
     1 ~ 2 years      More than
2 years
     Total  

Wireless service contracts

   W 22,026        —          —          22,026  

Customer loyalty programs

     13,704        2,123        882        16,709  

Fixed-line service contracts

     91,966        9,687        5,263        106,916  

Security services

     22,953        5,764        1,880        30,597  

Others

     79,243        1,798        3,307        84,348  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 229,892        19,372        11,332        260,596  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

57


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

10.

Inventories

 

  (1)

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

 

(In millions of won)  
     December 31, 2020      December 31, 2019  
   Acquisition
cost
     Write-down     Carrying
amount
     Acquisition
cost
     Write-down     Carrying
amount
 

Merchandise

   W 172,762        (10,566     162,196        162,485        (14,557     147,928  

Finished goods

     3,730        (1,879     1,851        4,264        (2,265     1,999  

Work in process

     2,579        (818     1,761        2,674        (539     2,135  

Raw materials

     11,921        (6,905     5,016        12,369        (7,967     4,402  

Supplies

     619        —         619        7,112        (694     6,418  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
   W 191,611        (20,168     171,443        188,904        (26,022     162,882  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

  (2)

Inventories recognized as operating expenses for the years ended December 31, 2020 and 2019 are W1,385,016 million and W1,498,249 million, respectively, which are included in the cost of goods sold. In addition, valuation losses on inventories which are included in the cost of goods sold amount to W418 million and W15,460 million during the years ended December 31, 2020 and 2019, respectively. Write-downs included in other operating expenses during the years ended December 31, 2020 and 2019 are W364 million and W2,140 million, respectively.

 

11.

Investment Securities

 

  (1)

Details of short-term investment securities as of December 31, 2020 and 2019 are as follows:

 

(In millions of won)       
     Category    December 31, 2020      December 31, 2019  

Beneficiary certificates

   FVTPL    W 150,392        166,666  

 

  (2)

Details of long-term investment securities as of December 31, 2020 and 2019 are as follows:

 

(In millions of won)               
     Category     December 31, 2020      December 31, 2019  

Equity instruments

     FVOCI (*)    W 1,454,361        710,272  
     FVTPL       67,833        1,011  
    

 

 

    

 

 

 
    1,522,194        711,283  

Debt instruments

     FVOCI       1,080        4,627  
     FVTPL       125,563        141,305  
    

 

 

    

 

 

 
       126,643        145,932  
    

 

 

    

 

 

 
     W 1,648,837        857,215  
    

 

 

    

 

 

 

 

58


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

11.

Investment Securities, Continued

 

  (2)

Details of long-term investment securities as of December 31, 2020 and 2019 are as follows, Continued:

 

(*)

The Group designated investment in equity instruments that are not held for trading as financial assets at FVOCI, the amounts to those FVOCI as of December 31, 2020 and 2019 are W1,454,361 million and W 710,272 million, respectively. During the year ended December 31, 2019, the Group disposed of 6,109,000 common shares issued by Hana Financial Group Inc. in exchange for W 221,146 million in cash. The valuation gain on financial assets at FVOCI of W30,073 million was reclassified from reserves to retained earnings. Also, the Group acquired 2,177,401 shares of Kakao Co., Ltd. in exchange for W302,321 million in cash and designated the investments as financial assets at FVOCI. In relation to this transaction, the Parent Company disposed 1,266,620 of its treasury shares to Kakao Co., Ltd. in exchange for W300,000 million in cash. (See note 24) As this transaction is considered as a forward transaction, the Group recognized W28,787 million of gain of settlement of derivatives, the difference of fair value between the contract date and the transaction date.

 

12.

Business Combinations

 

  (1)

2020

 

  1)

Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd.

On April 30, 2020, SK Broadband Co., Ltd., a subsidiary of the Parent Company, merged with Tbroad Co., Ltd., Tbroad Dongdaemun Broadcasting Co., Ltd. and Korea Digital Cable Media Center Co., Ltd. in order to strengthen the competitiveness and enhance the synergy as a comprehensive media company. The considerations transferred included shares of SK Broadband Co., Ltd transferred based on the merger ratio and the obligations and rights due to shareholders’ agreement with the acquiree’s shareholders, both measured at fair value as of April 30, 2020. The Group recognized the difference between the fair value of net assets acquired and the consideration transferred amounting to W405,639 million as goodwill.

The Group’s consolidated revenue and profit for the year would have been W18,831,147 million and W1,516,857 million, respectively, if the acquisition has occurred on January 1, 2020. The Group cannot reasonably identify the acquiree’s revenue and profit for the year included in the consolidated statement of income, as the business of Tbroad Co., Ltd. and the other two companies were merged with the Group’s subsidiary, SK Broadband Co., Ltd, and no separate financial information post acquisition is available.

 

59


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

12.

Business Combinations, Continued

 

  (1)

2020, Continued

 

  1)

Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd., Continued

 

Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows:

 

(In millions of won)       
     Amounts  

I. Consideration transferred:

  

Fair value of shares of SK Broadband Co., Ltd.

   W 862,147  

Fair value of derivative liability (*1)

     320,984  

II. Fair value of identifiable assets acquired and liabilities assumed:

  

Cash and cash equivalents

     110,644  

Short-term financial instruments

     6  

Accounts receivable – trade and other

     66,241  

Prepaid expenses

     36,324  

Contract assets

     14,033  

Long-term investment securities

     6,239  

Investments in associates and joint ventures

     13,637  

Property and equipment, net

     245,654  

Intangible assets, net(*2)

     423,515  

Other assets

     3,261  

Deferred tax assets

     1,296  

Accounts payable – trade and other

     (105,179

Contract liabilities

     (1,674

Income tax payable

     (18,065

Provisions

     (2,755

Defined benefit liabilities

     (30

Other liabilities

     (15,655
  

 

 

 
   W 777,492  
  

 

 

 

III. Goodwill(I-II)

     405,639  
  

 

 

 

 

60


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

12.

Business Combination, Continued

 

  (1)

2020, Continued

 

  1)

Merger of Tbroad Co., Ltd. and two other companies by SK Broadband Co., Ltd., Continued

 

(*1)

The Parent Company has recognized fair value of obligations and rights in connection with the shareholders’ agreement with the acquiree’s shareholders as consideration for the business combination. (See note 22)

(*2)

Identifiable intangible assets recognized by the Group in the business combination included customer relationships measured at fair value on the acquisition date of W374,019 million. Fair value of the customer relationship was estimated based on the multi-period excess earnings method (“MPEEM”). MPEEM is a valuation technique under income approach which estimates fair value by discounting the expected future excess earnings attributable to an intangible asset using risk adjusted discount rate. The following table shows the details of valuation technique used in measuring fair values as well as the significant unobservable inputs used.

 

Type

  

Valuation

technique

  

Siginificant

unobservable inputs

  

Interrelationship between key unobservable
inputs and fair value measurement

Customer

relationship

   MPEEM   

•   Estimated revenue per user

•   Future churn rates

•   Weighted average cost of capital (“WACC”)

•   (7.7% for Tbroad Co., Ltd. and 8.3% for Tbroad Dongdaemun Broadcasting Co., Ltd.)

  

•   The fair value of customer relationship will increase if expected revenue per subscriber increases and customer churn rate in the future and WACC decrease.

•   The fair value of customer relationship will decrease if expected revenue per subscriber decreases and customer churn rate in the future and WACC increase.

 

61


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

12.

Business Combination, Continued

 

  (1)

2020, Continued

 

  2)

Acquisition of Broadband Nowon Co., Ltd. by the Parent Company

The Parent Company has obtained control by acquiring 627,000 shares(55%) of Tbroad Nowon Broadcasting Co., Ltd., and Tbroad Nowon Broadcasting Co., Ltd. changed its name to Broadband Nowon Co., Ltd. during the year ended December 31, 2020. The consideration transferred was W10,421 million in cash and the difference between the fair value of net assets acquired and the consideration transferred amounting to W733 million was recognized as other non-operating income. Subsequent to the acquisition, Broadband Nowon Co., Ltd. recognized revenue of W5,756 million, and net profit of W426 million.

 

  (i)

Summary of the acquiree

 

    

Information of Acquiree

Corporate name

   Broadband Nowon Co., Ltd.

Location

   21, 81gil, Dobong-ro, Gangbuk-gu, Seoul, Korea

CEO

   Yoo, Chang-Wan

Industry

   Cable broadcasting services

 

  (ii)

Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows:

 

(In millions of won)  
     Amounts  

I. Consideration transferred:

  

Cash and cash equivalents

   W 10,421  

II. Fair value of identifiable assets acquired and liabilities assumed:

 

Cash and cash equivalents

     18,106  

Accounts receivable – trade and other

     1,122  

Property and equipment, net

     1,784  

Intangible assets, net

     360  

Other assets

     595  

Accounts payable – trade and other

     (1,351

Other liabilities

     (336
  

 

 

 
     20,280  

III. Non-controlling interests:

  

Non-controlling interests

     9,126  
  

 

 

 

IV. Gain on bargain purchase(I-II+III)

   W (733
  

 

 

 

 

62


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

12.

Business Combination, Continued

 

  (1)

2020, Continued

 

  3)

Acquisition of security equipment construction and security services business of SK hystec inc. by ADT CAPS Co., Ltd.

ADT CAPS Co., Ltd., a subsidiary of the Parent Company, acquired the security equipment construction and security services business from SK hystec inc., a related party of the Group, in order to strengthen the expertise and the competitiveness of security business during the year ended December 31, 2020. The consideration transferred was W8,047 million, among which W2,958 million was paid in cash during the year ended December 31, 2020 and the remaining balance will be paid at W3,000 million annually in July 2021 and July 2022. The Group recognized the difference between the fair value of net assets acquired and the consideration transferred amounting to W2,892 million as goodwill.

Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows:

 

(In millions of won)  
     Amounts  

I. Consideration transferred:

  

Cash and cash equivalents

   W 8,047  

II. Fair value of identifiable assets acquired and liabilities assumed:

 

Accounts receivable – trade and other

     6,787  

Property and equipment, net

     363  

Intangible assets, net

     6,460  

Other assets

     4  

Accounts payable – trade and other

     (5,306

Defined benefit liabilities

     (1,227

Deferred tax liabilities

     (1,554

Other liabilities

     (372
  

 

 

 
     5,155  
  

 

 

 

III. Goodwill (I-II)

   W 2,892  
  

 

 

 

 

  4)

Business combination under common control: Merger of Life & Security Holdings Co., Ltd. by SK Infosec Co., Ltd.

SK Infosec Co., Ltd. merged with Life & Security Holdings Co., Ltd., a subsidiary of the Parent Company, to improve business management efficiency on December 30, 2020. As this transaction is a business combination under common control, the acquired assets and liabilities were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements and there is no effect on the assets and liabilities of consolidated financial statements. As a result of the merger, the Parent Company’s ownership interest of SK Infosec Co., Ltd. has changed from 100% to 62.6%.

 

63


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

12.

Business Combination, Continued

 

  (2)

2019

 

  1)

Acquisition of Incross Co., Ltd. by the Parent Company

The Parent Company acquired 2,786,455 shares of Incross Co., Ltd. at W53,722 million in cash during the year ended December 31, 2019 in order to expand digital advertising business through the integration of the Group’s technological capabilities. Although the Parent Company owns less than 50% of the investee, the management has determined that the Parent Company controls Incross Co., Ltd. considering the level of dispersion of remaining voting rights and voting patterns at previous shareholders’ meetings, and the fact that the Parent Company has a right to appoint the majority of the members of board of directors by the virtue of an agreement with the investee’s other shareholders. Incross Co., Ltd. reported W19,787 million of revenue and W5,756 million of profit since the Group obtained control.

 

  (i)

Summary of the acquiree

 

    

Information of Acquiree

Corporate name

   Incross Co., Ltd.

Location

   5th floor, 1926, Nambusunhwan-ro, Gwanak-gu, Seoul, Korea

CEO

   Lee Jae won

Industry

   Media representative business

 

  (ii)

Considerations transferred, identifiable assets acquired and liabilities assumed at the acquisition date are as follows:

 

(In millions of won)  
     Amount  

I. Considerations transferred:

  

Cash and cash equivalents

   W 53,722  

II. Fair value of identifiable assets acquired and liabilities assumed:

 

Cash and cash equivalents

     17,400  

Short-term financial instruments

     24,941  

Accounts receivable – trade and other

     67,259  

Property and equipment, net

     2,411  

Intangible assets, net

     2,709  

Other assets

     9,254  

Trade and other payables

     (57,309

Other liabilities

     (1,984
  

 

 

 
     64,681  

III. Non-controlling interests:

     40,592  
  

 

 

 

IV. Goodwill(I-II+III)

   W 29,633  
  

 

 

 

 

64


SK TELECOM CO., LTD. and Subsidiaries

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

 

13.

Investments in Associates and Joint Ventures

 

  (1)

Investments in associates and joint ventures accounted for using the equity method as of December 31, 2020 and 2019 are as follows:

 

(In millions of won)           December 31, 2020      December 31, 2019  
     Country      Ownership
(%)
     Carrying
amount
     Ownership
(%)
     Carrying
amount
 

Investments in associates:

              

SK China Company Ltd.

     China        27.3      W 555,133        27.3      W 568,459  

Korea IT Fund(*1)

     Korea        63.3        323,294        63.3        311,552  

KEB HanaCard Co., Ltd.(*2)

     Korea        15.0        314,930        15.0        294,756  

SK Telecom CS T1 Co., Ltd.(*1)

     Korea        54.9        53,010        54.9        60,305  

NanoEnTek, Inc.(*3)

     Korea        28.4        43,190        28.6        42,127  

UniSK

     China        49.0        15,700        49.0        14,342  

SK Technology Innovation Company

     Cayman Islands        49.0        41,579        49.0        43,997  

SK MENA Investment B.V.

     Netherlands        32.1        14,043        32.1        14,904  

SK hynix Inc.

     Korea        20.1        12,251,861        20.1        11,425,325  

SK Latin America Investment S.A.

     Spain        32.1        13,930        32.1        13,698  

Grab Geo Holdings PTE. LTD.

     Singapore        30.0        30,063        30.0        31,269  

SK South East Asia Investment Pte. Ltd.(*4)

     Singapore        20.0        311,990        20.0        250,034  

Pacific Telecom Inc.(*2)

     USA        15.0        39,723        15.0        40,016  

S.M. Culture & Contents Co., Ltd.(*5)

     Korea        23.3        62,248        23.4        63,469  

Content Wavve Co., Ltd.

     Korea        30.0        75,803        30.0        83,640  

Hello Nature Co., Ltd.(*6)

     Korea        49.9        11,969        49.9        13,620  

Digital Games International Pte. Ltd.(*7)

     Singapore        33.3        6,449        —          —    

Invites Healthcare Co., Ltd.(*8)

     Korea        43.5        25,536        —          —    

Nam Incheon Broadcasting Co., Ltd.(*9)

     Korea        27.3        10,902        —          —    

NANO-X IMAGING LTD.(*2,10)

     Israel        5.6        28,484        —          —    

Home Choice Corp.(*2,9)

     Korea        17.8        3,585        —          —    

Carrot General Insurance Co., Ltd.

(Formerly, Carrot Co., Ltd)(*11)

     Korea        21.4        13,469        9.9        6,459  

12CM JAPAN and others(*2,8,12)

     —          —          65,750        —          58,884  
        

 

 

       

 

 

 
           14,312,641           13,336,856  
        

 

 

       

 

 

 

Investments in joint ventures:

              

Dogus Planet, Inc.(*13)