6-K 1 d136454d6k.htm FORM 6-K Form 6-K
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF MARCH 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):  ☐

 

 

 


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SIGNATURES

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

 

SK TELECOM CO., LTD.
(Registrant)

By: /s/ Joong Suk Oh

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

Date: March 12, 2021


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SK TELECOM CO., LTD.

Separate Financial Statements

December 31, 2020 and 2019

(With Independent Auditors’ Report Thereon)


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

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

We also have audited, in accordance with the Korean Standards on Auditing, the Company’s Internal Control over Financial Reporting as of December 31, 2020, based on the criteria established in Conceptual Framework for Designing and Operating Internal Control over Financial Reporting issued by the Operating Committee of Internal Control over Financial Reporting in the Republic of Korea, and our report dated March 11, 2021 expressed an unmodified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

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

Emphasis of Matter

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

As described in Note 3 to the separate financial statements, the Company 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 then ended December 31, 2019.

Key Audit Matter

Key audit matter communicated below is a matter that, in our professional judgment, was of most significance in our audit of the separate financial statements as of and for the year ended December 31, 2020. This matter was addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.

 

1.

Revenue Recognition

As described in note 4 (21) and 27 of the separate financial statements, the Company’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 W9,989,461 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 Company’s wireless service as a key audit matter due to the complexity of information technology systems involved and the revenue recognition standard applied.

 

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

 

   

Testing certain internal controls relating to the Company’s revenue recognition process, including 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.

Other Matter

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

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

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

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

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

 

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Auditors’ Responsibilities for the Audit of the Separate Financial Statements

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

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

 

   

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

 

   

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

 

   

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

 

   

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

 

   

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

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

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

 

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

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

KPMG Samjong Accounting Corp.

Seoul, Korea

March 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 separate financial statements and notes thereto. Accordingly, the readers of the audit report should understand that the above audit report has not been updated to reflect the impact of such subsequent events or circumstances, if any.

 

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SK TELECOM CO., LTD. (the “Company”)

SEPARATE FINANCIAL STATEMENTS

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

FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

 

 

 

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

Park, Jung-Ho

Chief Executive Officer

 

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SK TELECOM CO., LTD.

Separate 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

     34,35      W 329,208        497,282  

Short-term financial instruments

     5,34,35        516,000        234,000  

Short-term investment securities

     9,34,35        31,854        31,920  

Accounts receivable – trade, net

     6,34,35,36        1,503,552        1,479,971  

Short-term loans, net

     6,34,35,36        89,280        57,751  

Accounts receivable – other, net

     3,6,34,35,36,37        434,713        506,642  

Contract assets

     8,35        8,388        7,173  

Prepaid expenses

     3,7        2,052,515        1,959,122  

Guarantee deposits

     6,34,35,36        51,069        73,345  

Prepaid income taxes

     31        —          70,528  

Derivative financial assets

     19,34,35,38        8,704        26,253  

Inventories, net

        5,181        11,125  

Advanced payments and others

     6,34,35        16,651        43,353  
     

 

 

    

 

 

 
            5,047,115      4,998,465  
     

 

 

    

 

 

 

Non-Current Assets:

        

Long-term financial instruments

     5,34,35        354        382  

Long-term investment securities

     9,34,35        983,688        510,633  

Investments in subsidiaries, associates and joint ventures

     10,39        11,357,504        10,578,158  

Property and equipment, net

     3,11,12,36        9,157,548        9,052,709  

Goodwill

     13        1,306,236        1,306,236  

Intangible assets, net

     14        2,665,083        3,461,152  

Long-term loans, net

     6,34,35,36        6,518        7,474  

Long-term accounts receivable – other

     3,6,34,35,37        348,335        335,574  

Long-term contract assets

     8,35        22,844        23,724  

Long-term prepaid expenses

     3,7        903,961        1,134,737  

Guarantee deposits

     6,34,35,36        110,555        108,141  

Long-term derivative financial assets

     19,34,35,38        76,461        99,998  

Other non-current assets

        249        249  
     

 

 

    

 

 

 
            26,939,336      26,619,167  
     

 

 

    

 

 

 
      W 31,986,451        31,617,632  
     

 

 

    

 

 

 

See accompanying notes to the separate financial statements.

 

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SK TELECOM CO., LTD.

Separate Statements of Financial Position, Continued

As of December 31, 2020 and 2019

 

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

Liabilities and Shareholders’ Equity

        

Current Liabilities:

        

Accounts payable – other

     34,35,36      W 1,955,472        2,266,958  

Contract liabilities

     8        83,216        88,257  

Withholdings

     34,35        659,181        685,822  

Accrued expenses

     3,34,35        724,992        793,252  

Income tax payable

     31        154,144        —    

Provisions

     3,17        43,437        47,786  

Current installments of long-term debt, net

     15,34,35,38        712,105        520,292  

Lease liabilities

     3,34,35,36,38        313,422        319,519  

Current installments of long-term payables – other

     16,34,35,38        424,600        423,839  

Other current liabilities

     34,35        5,835        20,019  
     

 

 

    

 

 

 
            5,076,404      5,165,744  
     

 

 

    

 

 

 

Non-Current Liabilities:

        

Debentures, excluding current installments, net

     15,34,35,38        6,175,576        5,900,829  

Long-term borrowings, excluding

current installments, net

     15,34,35,38        6,167        19,777  

Long-term payables – other

     16,34,35,38        1,141,723        1,544,699  

Long-term contract liabilities

     8        8,110        11,342  

Long-term derivative financial liabilities

     19,34,35,38        362,002        —    

Long-term lease liabilities

     3,34,35,36,38        999,776        856,385  

Long-term provisions

     3,17        55,953        41,145  

Deferred tax liabilities

     3,31        756,873        642,601  

Defined benefit liabilities

     18        7,421        25,093  

Other non-current liabilities

     34,35        46,588        26,118  
     

 

 

    

 

 

 
            9,560,189      9,067,989  
     

 

 

    

 

 

 

Total Liabilities

        14,636,593        14,233,733  
     

 

 

    

 

 

 

Shareholders’ Equity:

        

Share capital

     1,20        44,639        44,639  

Capital surplus and others

     20,21,22,23        289,134        715,619  

Retained earnings

     3,24,25        16,684,640        16,672,947  

Reserves

     26        331,445        (49,306
     

 

 

    

 

 

 

Total Shareholders’ Equity

        17,349,858        17,383,899  
     

 

 

    

 

 

 
      W 31,986,451        31,617,632  
     

 

 

    

 

 

 

See accompanying notes to the separate financial statements.

 

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SK TELECOM CO., LTD.

Separate Statements of Income

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Operating revenue:

     3,27,36       

Revenue

      W 11,746,630       11,421,342  

Operating expenses:

     3,36       

Labor

        804,982       783,124  

Commission

     7        4,647,773       4,419,845  

Depreciation and amortization

     3        2,841,755       2,776,140  

Network interconnection

        555,846       565,084  

Leased lines

        215,878       213,673  

Advertising

        114,794       154,124  

Rent

     3        121,032       123,517  

Cost of goods sold

        436,013       479,605  

Others

     28        985,490       954,427  
     

 

 

   

 

 

 
        10,723,563       10,469,539  
     

 

 

   

 

 

 

Operating profit

        1,023,067       951,803  

Finance income

     3,30        377,947       615,571  

Finance costs

     3,30        (256,737     (280,247

Other non-operating income

     3,29        82,673       76,928  

Other non-operating expenses

     3,29        (273,655     (110,627

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

     10        (11,840     (68,550
     

 

 

   

 

 

 

Profit before income tax

        941,455       1,184,878  

Income tax expense

     3,31        182,663       204,987  
     

 

 

   

 

 

 

Profit for the year

      W 758,792       979,891  
     

 

 

   

 

 

 

Earnings per share:

     3,32       

Basic earnings per share (in won)

      W 10,221       13,393  

Diluted earnings per share (in won)

        10,219       13,393  

See accompanying notes to the separate financial statements.

 

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SK TELECOM CO., LTD.

Separate Statements of Comprehensive Income

For the years ended December 31, 2020 and 2019

 

(In millions of won)    Note      2020     2019  

Profit for the year

      W 758,792       979,891  

Other comprehensive income (loss):

       

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

       

Remeasurement of defined benefit liabilities

     18        (2,325     (40,720

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

     26,30        366,600       (13,972

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

       

Net change in unrealized fair value of derivatives

     19,26,30        15,507       35,004  
     

 

 

   

 

 

 

Other comprehensive income (loss) for the year, net of taxes

        379,782       (19,688
     

 

 

   

 

 

 

Total comprehensive income

      W 1,138,574       960,203  
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

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SK TELECOM CO., LTD.

Separate Statements of Changes in Equity

For the years ended December 31, 2020 and 2019

 

(In millions of won)                                                      
                Capital surplus and others     Retained
earnings
    Reserves        
    Note     Share
capital
    Paid-in
surplus
    Treasury
shares
    Hybrid bonds     Share option     Other     Sub-total     Total
equity
 

Balance, January 1, 2019
(As reported)

    W 44,639       2,915,887       (1,979,475     398,759       1,007       (920,854     415,324       16,442,560       (40,265     16,862,258  

Changes in Accounting Policies

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, January 1, 2019 (Restated)

      44,639       2,915,887       (1,979,475     398,759       1,007       (920,854     415,324       16,437,167       (40,265     16,856,865  

Total comprehensive Income (loss):

                     

Profit for the year

      —         —         —         —         —         —         —         979,891       —         979,891  

Other comprehensive loss

    18,19,26,30       —         —         —         —         —         —         —         (10,647     (9,041     (19,688
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      —         —         —         —         —         —         —         969,244       (9,041     960,203  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners:

                     

Annual dividends

    33       —         —         —         —         —         —         —         (646,828     —         (646,828

Interim dividends

    33       —         —         —         —         —         —         —         (71,870     —         (71,870

Share option

    23       —         —         —         —         295       —         295       —         —         295  

Interest on hybrid bonds

    22       —         —         —         —         —         —         —         (14,766     —         (14,766

Disposal of treasury shares

    21       —         —         282,478       —         —         17,522       300,000       —         —         300,000  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      —         —         282,478       —         295       17,522       300,295       (733,464     —         (433,169
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2019

    W  44,639       2,915,887       (1,696,997     398,759       1,302       (903,332     715,619       16,672,947       (49,306     17,383,899  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, January 1, 2020

    W  44,639       2,915,887       (1,696,997     398,759       1,302       (903,332     715,619       16,672,947       (49,306     17,383,899  

Total comprehensive Income (loss):

                     

Profit for the year

      —         —         —         —         —         —         —         758,792       —         758,792  

Other comprehensive income (loss)

    18,19,26,30       —         —         —         —         —         —         —         (969     380,751       379,782  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      —         —         —         —         —         —         —         757,823       380,751       1,138,574  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners:

                     

Annual dividends

    33       —         —         —         —         —         —         —         (658,228     —         (658,228

Interim dividends

    33       —         —         —         —         —         —         —         (73,136     —         (73,136

Share option

    23       —         —         —         —         179       —         179       —         —         179  

Interest on hybrid bonds

    22       —         —         —         —         —         —         —         (14,766     —         (14,766

Acquisition of treasury shares

    21       —         —         (426,664     —         —         —         (426,664     —         —         (426,664
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
      —         —         (426,664     —         179       —         (426,485     (746,130     —         (1,172,615
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, December 31, 2020

    W  44,639       2,915,887       (2,123,661     398,759       1,481       (903,332     289,134       16,684,640       331,445       17,349,858  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to the separate financial statements

 

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Table of Contents

SK TELECOM CO., LTD.

Separate 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 758,792       979,891  

Adjustments for income and expenses

     38        3,361,118       2,898,842  

Changes in assets and liabilities related to operating activities

     38        169,589       (703,093
     

 

 

   

 

 

 
        4,289,499       3,175,640  

Interest received

        20,283       28,388  

Dividends received

        285,040       525,045  

Interest paid

        (212,921     (226,652

Income tax refund(paid)

        5,908       (311,680
     

 

 

   

 

 

 

Net cash provided by operating activities

        4,387,809       3,190,741  
     

 

 

   

 

 

 

Cash flows from investing activities:

       

Cash inflows from investing activities:

       

Decrease in short-term investment securities, net

        —         16,217  

Collection of short-term loans

        69,754       107,996  

Decrease in long-term financial instruments

        28       —    

Proceeds from disposals of long-term investment securities

        790       223,619  

Proceeds from disposal of investments in subsidiaries, associates and joint ventures

        659       —    

Proceeds from disposal of property and equipment

        89,922       10,767  

Proceeds from disposal of intangible assets

        4,475       3,843  

Collection of lease receivables

        —         6,881  
     

 

 

   

 

 

 
        165,628       369,323  

Cash outflows for investing activities:

       

Increase in short-term financial instruments, net

        (282,000     (135,000

Increase in short-term loans

        (100,739     (111,686

Acquisition of long-term investment securities

        (827     (321,124

Acquisition of investments in subsidiaries, associates and joint ventures

        (277,465     (379,821

Acquisition of property and equipment

        (2,480,297     (2,304,512

Acquisition of intangible assets

        (81,352     (109,853

Cash outflow for spin-off

        (121,100     —    
     

 

 

   

 

 

 
        (3,343,780     (3,361,996
     

 

 

   

 

 

 

Net cash used in investing activities

      W (3,178,152     (2,992,673
     

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

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SK TELECOM CO., LTD.

Separate 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 issuance of debentures

      W 1,062,500       1,195,274  

Cash inflows from settlement of derivatives

        36,691       12,426  

Proceeds from disposal of treasury shares

        —         300,000  
     

 

 

   

 

 

 
        1,099,191       1,507,700  

Cash outflows for financing activities:

       

Repayments of long-term borrowings

        (13,624     (12,882

Repayments of long-term payables – other

        (425,349     (425,349

Repayments of debentures

        (515,500     (550,000

Payments of cash dividends

        (731,364     (718,698

Payments of interest on hybrid bonds

        (14,766     (14,766

Repayments of lease liabilities

        (349,656     (364,614

Acquisition of treasury shares

        (426,664     —    
     

 

 

   

 

 

 
        (2,476,923     (2,086,309
     

 

 

   

 

 

 

Net cash used in financing activities

        (1,377,732     (578,609
     

 

 

   

 

 

 

Net decrease in cash and cash equivalents

        (168,075     (380,541

Cash and cash equivalents at beginning of the year

        497,282       877,823  

Effects of exchange rate changes on cash and cash equivalents

        1       —    
     

 

 

   

 

 

 

Cash and cash equivalents at end of the year

      W 329,208       497,282  
  

 

 

   

 

 

 

See accompanying notes to the separate financial statements.

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

1.

Reporting Entity

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

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

 

     Number of
shares
     Percentage of
total shares issued (%)
 

SK Holdings Co., Ltd.

     21,624,120        26.78  

National Pension Service

     8,853,906        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  
  

 

 

    

 

 

 

 

2.

Basis of Preparation

These separate 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.

These financial statements are separate financial statements prepared in accordance with K-IFRS No.1027, Separate Financial Statements, presented by a parent or an investor with joint control of or significant influence over an investee, in which the investments are accounted for at cost less impairment, if any.

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

 

  (1)

Basis of measurement

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

 

   

derivative financial instruments measured at fair value;

 

   

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

 

   

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

 

   

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

2.

Basis of Preparation, Continued

 

  (2)

Functional and presentation currency

These separate financial statements are presented in Korean won, which is the currency of the primary economic environment in which the Company operates.

 

  (3)

Use of estimates and judgments

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

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

1) Critical judgments

Information about critical judgments in applying accounting policies that have most significant effects on the amounts recognized in the separate financial statements is included in notes for the following areas: financial risk management.

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 is included in the following notes: loss allowance (notes 6 and 35), estimated useful lives of costs to obtain a contract (notes 4 (21), and 7), property and equipment and intangible assets (notes 4 (7), (9), 11 and 14), impairment of goodwill (notes 4 (11) and 13), recognition of provision (notes 4 (16) and 17), measurement of defined benefit liabilities (notes 4 (15) and 18), and recognition of deferred tax assets (liabilities) (notes 4 (23) and 31).

3) Fair value measurement

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

2.

Basis of Preparation, Continued

 

  (3)

Use of estimates and judgments, Continued

 

  3)

Fair value measurement, Continued

 

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

 

   

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

 

   

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

 

   

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

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

Information about assumptions used for fair value measurements are included in note 35.

 

3.

Changes in accounting policies

The Company has initially adopted 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 new standards are effective from January 1, 2020, but they do not have a material effect on the Company’s separate financial statements.

The Company 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. These amendments also apply 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 35 for related disclosures about risk and hedge accounting.

During the annual period ended December 31, 2020, the Company 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 changes in accounting principles, the Company 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 Company 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 Company 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 financial statements.

 

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SK TELECOM CO., LTD.

Notes to the Separate 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 policy on the Company’s separate financial statements on the current and prior periods.

 

  (1)

Statements of financial position

 

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

Assets

        

Accounts receivable – other, net

   W 702,082        6,179        708,261  

Prepaid expenses

     2,958,517        (10,922      2,947,595  

Property and equipment, net

     8,131,623        919,163        9,050,786  
  

 

 

    

 

 

    

 

 

 
   W 11,792,222        914,420        12,706,642  
  

 

 

    

 

 

    

 

 

 

Liabilities

        

Accrued expenses

   W 689,679        (273      689,406  

Provisions

     71,230        23,953        95,183  

Lease liabilities

     454,739        904,759        1,359,498  

Deferred tax liabilities

     765,218        (3,732      761,486  
  

 

 

    

 

 

    

 

 

 
   W 1,980,866        924,707        2,905,573  
  

 

 

    

 

 

    

 

 

 

Shareholder’s Equity

        

Retained earnings

   W 16,662,589        (10,287      16,652,302  

 

(*)

Subsequent to the adoption of the change in accounting policy, the Company does not maintain the information necessary to prepare financial statements using the previous accounting policy. Therefore, the Company 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 839,900        2,316        842,216  

Prepaid expenses

     3,105,731        (11,872      3,093,859  

Property and equipment, net

     8,264,888        787,821        9,052,709  
  

 

 

    

 

 

    

 

 

 
   W 12,210,519        778,265        12,988,784  
  

 

 

    

 

 

    

 

 

 

Liabilities

        

Accrued expenses

   W 793,669        (417      793,252  

Provisions

     67,271        21,660        88,931  

Lease liabilities

     410,889        765,015        1,175,904  

Deferred tax liabilities

     644,754        (2,153      642,601  
  

 

 

    

 

 

    

 

 

 
   W 1,916,583        784,105        2,700,688  
  

 

 

    

 

 

    

 

 

 

Shareholder’s Equity

        

Retained earnings

   W 16,678,787        (5,840      16,672,947  

 

16


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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

3.

Changes in accounting policies, Continued

 

  (1)

Statements of financial position, Continued

 

 

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

Assets

        

Accounts receivable – other, net

   W 809,707        (1,147      808,560  

Prepaid expenses

     2,387,807        (35,377      2,352,430  

Property and equipment, net

     7,360,042        345,266        7,705,308  
  

 

 

    

 

 

    

 

 

 
   W 10,557,556        308,742        10,866,298  
  

 

 

    

 

 

    

 

 

 

Liabilities

        

Accrued expenses

   W 664,286        —          664,286  

Provisions

     61,786        19,485        81,271  

Lease liabilities

     412,407        296,639        709,046  

Deferred tax liabilities

     514,427        (1,989      512,438  
  

 

 

    

 

 

    

 

 

 
   W 1,652,906        314,135        1,967,041  
  

 

 

    

 

 

    

 

 

 

Shareholder’s Equity

        

Retained earnings

   W 16,442,560        (5,393      16,437,167  

 

(*)

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

 

(2)

Statement of income

 

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

Operating revenue

   W 8,803,310        4,939        8,808,249  

Operating expenses:

        

Depreciation and amortization

     2,079,602        65,048        2,144,650  

Rent

     147,917        (58,095      89,822  

Others

     5,783,522        (197      5,783,325  
  

 

 

    

 

 

    

 

 

 
     8,011,041        6,756        8,017,797  
  

 

 

    

 

 

    

 

 

 

Operating profit

     792,269        (1,817      790,452  

Finance income

     332,051        (7      332,044  

Finance costs

     184,862        9,507        194,369  

Other non-operating income

     43,822        (751      43,071  

Other non-operating expenses

     51,597        (6,056      45,541  

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

     11,840        —          11,840  
  

 

 

    

 

 

    

 

 

 

Profit before income tax

   W 919,843        (6,026      913,817  

Income tax expense

     186,721        (1,578      185,143  
  

 

 

    

 

 

    

 

 

 

Profit for the year

   W 733,122        (4,448      728,674  
  

 

 

    

 

 

    

 

 

 

Earnings per share:

        

Basic earnings per share (in won)

   W 9,877        (61      9,816  

Diluted earnings per share (in won)

     9,876        (61      9,815  

 

(*)

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

3.

Changes in accounting policies, Continued

 

  (2)

Statement of income, Continued

 

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

Operating revenue

   W 11,416,215        5,127        11,421,342  

Operating expenses:

        

Depreciation and amortization

     2,672,597        103,543        2,776,140  

Rent

     223,439        (99,922      123,517  

Others

     7,570,070        (188      7,569,882  
  

 

 

    

 

 

    

 

 

 
     10,466,106        3,433        10,469,539  
  

 

 

    

 

 

    

 

 

 

Operating profit

     950,109        1,694        951,803  

Finance income

     615,589        (18      615,571  

Finance costs

     270,795        9,452        280,247  

Other non-operating income

     78,212        (1,284      76,928  

Other non-operating expenses

     119,075        (8,448      110,627  

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

     68,550        —          68,550  
  

 

 

    

 

 

    

 

 

 

Profit before income tax

   W 1,185,490        (612      1,184,878  

Income tax expense

     205,152        (165      204,987  
  

 

 

    

 

 

    

 

 

 

Profit for the year

   W 980,338        (447      979,891  
  

 

 

    

 

 

    

 

 

 

Earnings per share:

        

Basic earnings per share (in won)

   W 13,399        (6      13,393  

Diluted earnings per share (in won)

     13,399        (6      13,393  

 

(3)

Statement of changes in equity

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

3.

Changes in accounting policies, Continued

 

  (4)

Statement of cash flows

 

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

Cash flows from operating activities(*2)

   W 3,474,526        47,975        3,522,501  

Cash flows from investing activities

     (2,391,980      —          (2,391,980

Cash flows from financing activities(*3)

     (904,561      (47,975      (952,536

 

(*1)

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

(*2)

Adjustments 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 W205,966 million to W253,941 million.

 

(In millions of won)       
     2019  
     As reported      Adjustments      Restated  

Cash flows from operating activities(*1)

   W 3,115,408        75,333        3,190,741  

Cash flows from investing activities(*2)

     (2,984,059      (8,614      (2,992,673

Cash flows from financing activities(*3)

     (511,890      (66,719      (578,609

 

(*1)

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

(*2)

The effect of changes in accounting policies resulted in a decrease in collection of lease receivables from W15,495 million to W6,881 million.

(*3)

The effect of changes in accounting policies resulted in increase in repayment of lease liabilities from W297,895 million to W364,614 million.

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies

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

 

  (1)

Operating segments

The Company presents disclosures relating to operating segments on its consolidated financial statements in accordance with K-IFRS No. 1108, Operating Segments, and such disclosures are not separately disclosed on these separate financial statements.

 

  (2)

Investments in subsidiaries, associates, and joint ventures

These separate financial statements are prepared and presented in accordance with K-IFRS No. 1027, Separate Financial Statements. The Company applies the cost method to investments in subsidiaries, associates and joint ventures in accordance with K-IFRS No. 1027. Dividends from subsidiaries, associates, and joint ventures are recognized in profit or loss when the right to receive the dividends is established.

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

 

  (3)

Cash and cash equivalents

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

 

  (4)

Inventories

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

 

  (5)

Non-derivative financial assets

 

  1)

Recognition and initial measurement

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate 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

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

 

   

FVTPL

 

   

FVOCI – equity investment

 

   

FVOCI – debt investment

 

   

Financial assets at amortized cost

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

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

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

 

   

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

 

   

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

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

 

   

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

 

   

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

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate 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

 

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.

 

  3)

Impairment

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

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

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (5)

Non-derivative financial assets, Continued

 

  4)

Derecognition

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

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

 

  5)

Offsetting

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

A financial asset and a financial liability 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.

 

  (6)

Derivative financial instruments and hedge accounting

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

 

  1)

Hedge accounting

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (6)

Derivative financial instruments, including hedge accounting, Continued

 

  1)

Hedge accounting, Continued

 

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 Company 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 Company 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 or loss. In determining whether a previously designated forecast transaction in a discontinued cash flow hedge is still expected to occur, the Company 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 Company 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 Company 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.

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (6)

Derivative financial instruments, including 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 Company and the cost of the item can be reliably measured. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate 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 Company’s property and equipment are as follows:

 

     Useful lives (years)

Buildings and structures

   15, 30

Machinery

   3 ~ 8, 15, 30

Other property and equipment

   4 ~10

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

 

  (8)

Borrowing costs

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (9)

Intangible assets

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

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

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

 

     Useful lives (years)

Frequency usage rights

   5 ~ 10

Land usage rights

   5

Industrial rights

   5, 10

Facility usage rights

   10, 20

Other

   3 ~ 20

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

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (10)

Government grants

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

 

  1)

Grants related to assets

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

 

  2)

Grants related to income

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

 

  (11)

Impairment of non-financial assets

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

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

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate 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 conveys the right to control the use of an 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 Company allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, the Company has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying 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 Company by the end of the lease term or the cost of the right-of-use asset reflects that the Company 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 Company’s incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate.

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (12)

Leases, Continued

 

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 Company’s estimate of the amount expected to be payable under a residual value guarantee, if the Company changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in -substance fixed lease payment.

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 Company 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 Company has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Company recognizes the lease payments associated with these leases 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 Company allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.

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

To classify each lease, the Company 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 Company considers certain indicators such as whether the lease is for the major part of the economic life of the asset.

When the Company is an intermediate lessor, it 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 Company 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 Company applies K-IFRS No. 1115 to allocate the consideration in the contract.

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate 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 Company recognizes an impairment loss for any initial or subsequent write-down of assets (or disposal groups) to fair value less costs to sell and a gain for any subsequent increase in fair value less costs to sell up to the cumulative impairment loss previously recognized in accordance with K-IFRS No. 1036, Impairment of Assets.

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

 

  (14)

Non-derivative financial liabilities

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

 

  1)

Financial liabilities at fair value through profit or loss

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

 

  2)

Other financial liabilities

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

 

  3)

Derecognition of financial liability

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate 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 Company during an accounting period, the Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.

 

  2)

Other long-term employee benefits

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

 

  3)

Retirement benefits: defined contribution plans

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

 

  4)

Retirement benefits: defined benefit plans

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

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

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

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (15)

Employee benefits, Continued

 

  5)

Termination benefits

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

 

  (16)

Provisions

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

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

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

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

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

 

  (17)

Transactions in foreign currencies

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

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

 

  (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 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.

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (19)

Hybrid bond

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

 

  (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 Company measures the value indirectly by reference to the fair value of the equity instruments granted. The related expense with a corresponding increase in capital surplus and others is recognized over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.

 

  (21)

Revenue

 

  1)

Identification of performance obligations in contracts with customers

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

 

  2)

Allocation of the transaction price to each performance obligation

The Company allocates the transaction price of a contract to each performance obligation identified on a relative stand-alone selling price basis. The Company uses “adjusted market assessment approach” for estimating the stand-alone selling price of a good or service.

 

  3)

Incremental costs of obtaining a contract

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (21)

Revenue, Continued

 

  4)

Customer loyalty programs

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

 

  5)

Consideration payable to a customer

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

 

  (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 by using the effective interest rate method. Dividend income is recognized in profit or loss when the right to receive the dividend is established.

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (23)

Income taxes

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

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

 

  1)

Current tax

In accordance with the tax-consolidation system, the Company calculates current taxes on the consolidated taxable income for the Company and its subsidiaries that meet the criteria for the consolidated income tax returns and recognizes the income tax payable as current tax liabilities of the Company.

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

 

  2)

Deferred tax

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

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

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

 

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Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (23)

Income taxes, Continued

 

  2)

Deferred tax, Continued

 

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

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

 

  3)

Uncertainty over income tax treatments

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

 

   

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

 

   

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

 

  (24)

Earnings per share

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

 

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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (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 Company has not adopted the following new standards early in preparing the accompanying separate 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 Company 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 Company has LIBOR floating rate notes amounting to W326,400 million that will be subject to IBOR reform. The Company 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 Company’s statement of income.

 

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Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

4.

Significant Accounting Policies, Continued

 

  (25)

Standards issued but not yet effective, Continued

 

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 Company 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.

As of December 31, 2020, the Company has cash flow hedges of LIBOR risk. The Company 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 Company 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 Company 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 Company 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 Company to disclose additional information about the Company’s exposure to risks arising from interest rate benchmark reform and related risk management activities.

The Company 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 Company’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.

 

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Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

5.

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 79,000        79,000  

Long-term financial instruments(*)

     354        382  
  

 

 

    

 

 

 
   W  79,354        79,382  
  

 

 

    

 

 

 
     

 

(*)

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

 

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Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

6.

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 1,605,860        (102,308      1,503,552  

Short-term loans

     90,182        (902      89,280  

Accounts receivable – other(*)

     468,880        (34,167      434,713  

Guarantee deposits

     51,069        —          51,069  

Accrued income

     518        —          518  
  

 

 

    

 

 

    

 

 

 
     2,216,509        (137,377      2,079,132  

Non-current assets:

        

Long-term loans

     47,619        (41,101      6,518  

Long-term accounts receivable – other(*)

     348,335        —          348,335  

Guarantee deposits

     110,555        —          110,555  
  

 

 

    

 

 

    

 

 

 
     506,509        (41,101      465,408  
  

 

 

    

 

 

    

 

 

 
   W 2,723,018        (178,478      2,544,540  
  

 

 

    

 

 

    

 

 

 

 

(*)

Gross and carrying amounts of accounts receivable – other as of December 31, 2020 include W517,175 million of financial instruments classified as FVTPL.

 

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

Current assets:

        

Accounts receivable – trade

   W 1,583,727        (103,756      1,479,971  

Short-term loans

     58,334        (583      57,751  

Accounts receivable – other(*)

     541,406        (34,764      506,642  

Guarantee deposits

     73,345        —          73,345  

Accrued income

     336        —          336  
  

 

 

    

 

 

    

 

 

 
     2,257,148        (139,103      2,118,045  

Non-current assets:

        

Long-term loans

     48,585        (41,111      7,474  

Long-term accounts receivable – other(*)

     335,574        —          335,574  

Guarantee deposits

     108,141        —          108,141  
  

 

 

    

 

 

    

 

 

 
     492,300        (41,111      451,189  
  

 

 

    

 

 

    

 

 

 
   W 2,749,448        (180,214      2,569,234  
  

 

 

    

 

 

    

 

 

 

 

(*)

Gross and carrying amounts of accounts receivable – other as of December 31, 2019 include W532,225 million of financial instruments classified as FVTPL.

 

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Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

6.

Trade and Other Receivables, Continued

 

  (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
     Spin-off     Ending
Balance
 

2020

   W 103,756        23,611        (34,687     9,699        (71     102,308  

2019

     119,842        4,036        (29,972     9,850        —         103,756  

 

(*)

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

 

  (3)

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

   W 0.89      50.77      70.22      99.02
  

Gross amount

     1,095,863        18,455        45,318        21,126  
  

Loss allowance

     9,778        9,369        31,821        20,919  
     

 

 

    

 

 

    

 

 

    

 

 

 

Other revenue

  

Expected credit loss rate

     2.13      5.53      16.36      46.15
  

Gross amount

     373,224        976        3,558        47,340  
  

Loss allowance

     7,937        54        582        21,848  
     

 

 

    

 

 

    

 

 

    

 

 

 

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

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

 

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Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

7.

Prepaid expenses

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

 

  (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 2,022,314        1,920,023  

Others

     30,201        39,099  
  

 

 

    

 

 

 
   W 2,052,515        1,959,122  
  

 

 

    

 

 

 

Non-current assets:

     

Incremental costs of obtaining contracts

   W 885,951        1,112,595  

Others

     18,010        22,142  
  

 

 

    

 

 

 
   W 903,961        1,134,737  
  

 

 

    

 

 

 

 

  (2)

Incremental costs of obtaining contracts

The amortization 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 recognized

   W 2,422,977        2,196,482  

 

8.

Contract assets and liabilities

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

 

  (1)

Details of contract assets and liabilities as of December 31, 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 31,232        30,897  

Contract liabilities:

     

Wireless service contracts

     22,026        20,393  

Customer loyalty programs

     16,709        21,945  

Others

     52,591        57,261  
  

 

 

    

 

 

 
   W 91,326        99,599  
  

 

 

    

 

 

 

 

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Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

8.

Contract assets and liabilities, Continued

 

 

  (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 W73,016 million and during the year ended December 31, 2019 related to the contract liabilities carried forward from the prior period is W36,890 million. Details of revenue expected to be recognized from contract liabilities as of December 31, 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  

Others

     47,486        1,798        3,307        52,591  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 83,216        3,921        4,189        91,326  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

9.

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 31,854        31,920  

 

(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 916,387        435,210  

Debt instruments

   FVTPL      67,301        75,423  
     

 

 

    

 

 

 
      W 983,688        510,633  
  

 

 

    

 

 

 

 

(*)

The Company designated investments 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 W916,387 million and W 435,210 million, respectively. During the year ended December 31, 2019, the Company disposed of 6,109,000 common shares issued by Hana Financial Group Inc. in exchange for W 221,146 million in cash. The valuation gain on financial assets at FVOCI of W30,073 million was reclassified from reserves to retained earnings. Also, the Company acquired 2,177,401 shares of Kakao Co., Ltd. in exchange for W302,321 million in cash and designated the investments as financial assets at FVOCI. In relation to this transaction, the Company disposed 1,266,620 of its treasury shares to Kakao Co., Ltd. in exchange for W300,000 million in cash. (See note 21) As this transaction is considered as a forward transaction, the Company recognized W28,787 million of gain of settlement of derivatives, the difference of fair value between the contract date and the transaction date.

 

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Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

10.

Investments in Subsidiaries, Associates and Joint Ventures

 

  (1)

Investments in subsidiaries, associates and joint ventures as of December 31, 2020 and 2019 are as follows:

 

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

Investments in subsidiaries

   W 6,014,367        5,408,974  

Investments in associates and joint ventures

     5,343,137        5,169,184  
  

 

 

    

 

 

 
   W 11,357,504        10,578,158  
  

 

 

    

 

 

 

 

  (2)

Details of investments in subsidiaries as of December 31, 2020 and 2019 are as follows:

 

(In millions of won, except for share data)    December 31, 2020      December 31, 2019  
     Number of
shares
     Ownership
(%)
     Carrying
amount
     Carrying
amount
 

SK Telink Co., Ltd.

     1,432,627        100.0      W 243,988        243,988  

SK Broadband Co., Ltd.(*1)

     298,460,212        74.3        2,195,452        1,870,582  

SK Communications Co., Ltd.

     43,427,530        100.0        41,939        41,939  

PS&Marketing Corporation

     66,000,000        100.0        313,934        313,934  

SERVICE ACE Co., Ltd.

     4,385,400        100.0        21,927        21,927  

SK Planet Co., Ltd.

     69,593,562        98.7        404,833        404,833  

Eleven Street Co., Ltd.

     8,224,709        80.3        1,049,403        1,049,403  

DREAMUS COMPANY

     29,246,387        51.4        156,781        156,781  

SK Telecom China Holdings Co., Ltd.

     —          100.0        48,096        48,096  

Life & Security Holdings Co., Ltd.(*2)

     —          —          —          703,394  

SKT Americas, Inc.(*3)

     122        100.0        31,203        45,701  

Atlas Investment(*4)

     —          100.0        143,097        130,200  

One Store Co., Ltd.(*5)

     10,409,600        52.1        82,186        82,186  

id Quantique SA(*6)

     73,324,172        68.1        100,527        94,119  

SK Infosec Co., Ltd.(*2)

     46,836,584        62.6        747,804        44,410  

SK Telecom TMT Investment Corp.(*7)

     80,000        100.0        94,136        33,834  

FSK L&S Co., Ltd.

     2,415,750        60.0        17,757        17,757  

Incross Co., Ltd.(*8)

     2,786,455        34.6        53,722        53,722  

SK stoa Co., Ltd.(*9)

     3,631,355        100.0        40,029        —    

Broadband Nowon Co., Ltd.(*10)

     627,000        55.0        10,463        —    

Quantum Innovation Fund I(*11)

     —          59.9        15,969        4,807  

T map Mobility Co., Ltd.(*12)

     10,000,000        100.0        155,408        —    

SK O&S Co., Ltd. and others

     —          —          45,713        47,361  
        

 

 

    

 

 

 
         W 6,014,367        5,408,974  
        

 

 

    

 

 

 

 

45


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

10.

Investments in Subsidiaries, Associates and Joint ventures, Continued

 

  (2)

Details of investments in subsidiaries as of December 31, 2020 and 2019 are as follows, Continued:

 

(*1)

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 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 Company has entered into a shareholder’s 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 Company as of December 31, 2020. (See note 19)

(*2)

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

(*3)

The Company recognized W14,498 million of impairment loss for the investments in SKT Americas, Inc. during the year ended December 31, 2020.

(*4)

The Company additionally contributed W12,897 million in cash during the year ended December 31, 2020.

(*5)

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

(*6)

The Company additionally acquired 4,166,667 shares of id Quantique SA by contributing W6,408 million in cash in terms of an unequal paid-in capital increase during the year ended December 31, 2020.

(*7)

The Company additionally contributed W60,302 million in cash during the year ended December 31, 2020.

(*8)

Although the Company owns less than 50% of the investee, the management has determined that the 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 Company has a right to appoint the majority of the members of the board of directors by the virtue of an agreement with the investee’s other shareholders.

(*9)

The Company acquired 3,631,355 shares (100%) of SK stoa Co., Ltd. from SK Broadband Co., Ltd. at W40,029 million in cash during the year ended December 31, 2020.

(*10)

The Company has obtained control over Tbroad Nowon Broadcasting Co., Ltd. by acquiring 627,000 shares (55%) for W10,463 million in cash and Tbroad Nowon Broadcasting Co., Ltd. changed its name to Broadband Nowon Co., Ltd.

(*11)

The Company additionally contributed W11,162 million in cash during the year ended December 31, 2020, but there is no change in the ownership interest.

(*12)

The Company incorporated and acquired equity interest in T map Mobility Co., Ltd. on December 29, 2020 by spin-off in order to enhance business efficiency and expertise of the mobility business. (See note 39)

 

46


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

10.

Investments in Subsidiaries, Associates and Joint ventures, Continued

 

  (3)

Details of investments in associates and joint ventures as of December 31, 2020 and 2019 are as follows:

 

(In millions of won, except for share data)  
     December 31, 2020      December 31,
2019
 
     Number of
shares
     Ownership
(%)
     Carrying
amount
    

Carrying

amount

 

Investments in associates:

           

SK China Company Ltd.

     10,928,921        27.3      W 601,192        601,192  

Korea IT Fund(*1)

     190        63.3        220,957        220,957  

KEB HanaCard Co., Ltd.(*2)

     39,902,323        15.0        253,739        253,739  

NanoEnTek, Inc.(*3)

     7,600,649        28.4        51,138        51,138  

SK Technology Innovation Company

     14,700        49.0        45,864        45,864  

SK hynix Inc.

     146,100,000        20.1        3,374,725        3,374,725  

S.M. Culture & Contents Co., Ltd.(*4)

     22,033,898        23.3        65,341        65,341  

SK South East Asia Investment Pte. Ltd.(*5)

     300,000,000        20.0        344,240        224,470  

Pacific Telecom Inc.(*2)

     1,734,109        15.0        36,487        36,487  

Grab Geo Holdings PTE. LTD.

     300        30.0        30,517        30,517  

Content Wavve Co., Ltd.

     1,306,286        30.0        90,858        90,858  

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

     50,000        54.9        60,305        60,305  

Digital Games International Pte. Ltd.(*6)

     10,000,000        33.3        8,810        —    

Invites Healthcare Co., Ltd.(*7)

     419,999        43.5        28,000        —    

SK Telecom Smart City Management Co., Ltd.(*8)

     —          —          —          12,642  

Carrot General Insurance Co., Ltd.
(formerly, Carrot Co., Ltd.)(*9)

     4,000,000        21.4        20,000        6,800  

12CM JAPAN and others(*7)

     —          —          79,926        68,720  
        

 

 

    

 

 

 
         W 5,312,099        5,143,755  
        

 

 

    

 

 

 

Investment in a joint venture:

           

Finnq Co., Ltd.(*10)

     6,370,000        49.0      W 25,429        25,429  

Techmaker GmbH(*10)

     12,500        50.0        5,609        —    
        

 

 

    

 

 

 
           31,038        25,429  
        

 

 

    

 

 

 
         W 5,343,139        5,169,184  
        

 

 

    

 

 

 

 

47


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

10.

Investments in Subsidiaries, Associates and Joint ventures, Continued

 

  (3)

Details of investments in associates and joint ventures as of December 31, 2020 and 2019 are as follows, Continued:

 

(*1)

Investments in Korea IT Fund and SK Telecom CS T1 Co., Ltd. were classified as investment in associates as the Company does not have control over the investee under the contractual agreement.

(*2)

These investments were classified as investments in associates as the Company can exercise significant influence through its right to appoint the members of the board of directors even though the Company has less than 20% of equity interests.

(*3)

The ownership interest has changed as third-party share option was exercised and convertible bonds were converted during the year ended December 31, 2020.

(*4)

The ownership interest has changed as S.M. Culture & Contents Co., Ltd. issued 549,094 shares of common stock as a result of the merger with Hoteltrees Co., Ltd. during the year ended December 31, 2020.

(*5)

The Company additionally contributed W119,770 million in cash during the year ended December 31, 2020, but there is no change in the ownership interest.

(*6)

The Company newly invested W8,810 million in cash in Digital Games International Pte. Ltd. during the year ended December 31, 2020.

(*7)

The Company transferred the entire shares of Health Connect Co., Ltd. and assets related to the digital disease management business during the year ended December 31, 2020. The Company acquired 279,999 shares of common stock and 140,000 shares of convertible preferred stock of Invites Healthcare Co., Ltd. in consideration of the transfer and recognized W7,641 million of gain on investments in associates and W12,451 million of gain on the business transfer. After the transaction, Invites Healthcare Co., Ltd. increased its capital by a third-party allotment which changed the Company’s ownership interest.

(*8)

The Company disposed the entire shares of SK Telecom Smart City Management Co., Ltd. during the year ended December 31, 2020.

(*9)

The Company acquired 1,360,000 shares of common stock and 2,640,000 shares of preferred stock of Carrot General Insurance Co., Ltd. (formerly, Carrot Co., Ltd.) at W6,800 million and W13,200 million, respectively, during the year ended December 31, 2019, and has converted the entire preferred stock into common stock during the year ended December 31, 2020.

(*10)

This investment was classified as investment in a joint venture as the Company has joint control pursuant to the agreement with the other shareholders.

 

48


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

10.

Investments in Subsidiaries, Associates and Joint ventures, Continued

 

  (4)

The market value of investments in listed subsidiaries as of December 31, 2020 and 2019 are as follows:

 

(In millions of won, except for share data)

 

     December 31, 2020      December 31, 2019  
   Market
price per
share

(in won)
     Number of
shares
     Market
value
     Market
price per
share

(in won)
     Number of
shares
     Market
value
 

DREAMUS COMPANY

   W 5,280        29,246,387        154,421        5,970        29,246,387        174,601  

Incross Co., Ltd.

     54,000        2,786,455        150,469        25,150        2,786,455        70,079  

 

(5)   The market value of investments in listed associates as of December 31, 2020 and 2019 are as follows:

 

    

(In millions of won, except for share data)

 

     December 31, 2020      December 31, 2019  
   Market
price per
share

(in won)
     Number of
shares
     Market
value
     Market
price per
share

(in won)
     Number of
shares
     Market
value
 

NanoEnTek, Inc.

   W 8,620        7,600,649        65,518        5,620        7,600,649        42,716  

SK hynix Inc.

     118,500        146,100,000        17,312,850        94,100        146,100,000        13,748,010  

S.M.Culture & Contents Co., Ltd.

     1,630        22,033,898        35,915        1,530        22,033,898        33,712  

 

49


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

11.

Property and Equipment

 

  (1)

Property and equipment as of December 31, 2020 and 2019 are as follows:

 

(In millions of won)                            
     December 31, 2020  
     Acquisition cost      Accumulated
depreciation
     Accumulated
impairment
     Carrying
amount
 

Land

   W 638,371        —          —          638,371  

Buildings

     1,258,656        (670,248      (450      587,958  

Structures

     912,496        (594,000      (1,601      316,895  

Machinery

     26,263,114        (20,906,377      (1,745      5,354,992  

Right-of-use assets

     1,703,195        (380,084      —          1,323,111  

Other

     1,402,064        (996,924      —          405,140  

Construction in progress

     531,081        —          —          531,081  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 32,708,977        (23,547,633      (3,796      9,157,548  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(In millions of won)                            
     December 31, 2019  
     Acquisition cost      Accumulated
depreciation
     Accumulated
impairment
     Carrying
amount
 

Land

   W 618,012        —          —          618,012  

Buildings

     1,243,945        (642,870      (450      600,625  

Structures

     908,504        (560,169      (1,601      346,734  

Machinery

     25,007,286        (19,911,504      (21,117      5,074,665  

Right-of-use assets

     1,533,430        (294,236      —          1,239,194  

Other

     1,480,921        (980,034      —          500,887  

Construction in progress

     672,592        —          —          672,592  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 31,464,690        (22,388,813      (23,168      9,052,709  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

50


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

11.

Property and Equipment, Continued

 

  (2)

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

 

(In millions of won)  
     2020  
     Beginning
balance
     Acquisition      Disposal     Transfer     Depreciation     Impairment(*)     Spin-off     Ending
balance
 

Land

   W 618,012        84        (17,256     37,531       —         —         —         638,371  

Buildings

     600,625        1,607        (20,810     48,203       (41,667     —         —         587,958  

Structures

     346,734        2,393        (4,417     9,167       (36,982     —         —         316,895  

Machinery

     5,074,665        99,659        (19,180     1,845,507       (1,635,430     (1,745     (8,484     5,354,992  

Right-of-use assets

     1,239,194        514,681        (55,743     —         (374,974     —         (47     1,323,111  

Other

     500,887        824,205        (4,908     (822,401     (92,051     —         (592     405,140  

Construction in progress

     672,592        1,149,751        (5,573     (1,283,223     —         —         (2,466     531,081  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 9,052,709        2,592,380        (127,887     (165,216     (2,181,104     (1,745     (11,589     9,157,548  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(In millions of won)  
     2019  
     Beginning
balance
     Acquisition      Disposal     Transfer     Depreciation     Impairment(*)     Ending
balance
 

Land

   W 544,419        34,246        (150     39,497       —         —         618,012  

Buildings

     537,000        53,298        (1,126     50,738       (38,835     (450     600,625  

Structures

     355,739        18,200        (2     10,536       (36,138     (1,601     346,734  

Machinery

     4,364,805        256,819        (8,755     2,079,119       (1,596,206     (21,117     5,074,665  

Right-of-use assets

     779,388        880,013        (43,541     —         (376,666     —         1,239,194  

Other

     617,837        1,335,828        (1,046     (1,355,841     (95,891     —         500,887  

Construction in progress

     506,120        1,089,126        (5,847     (916,807     —         —         672,592  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   W 7,705,308        3,667,530        (60,467     (92,758     (2,143,736     (23,168     9,052,709  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*)

The Company recognized impairment losses for obsolete assets during the years ended December 31, 2020 and 2019.

 

51


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

12.

Lease

 

  (1)

As a lessee

 

  1)

Details of the right-of-use assets as of December 31, 2020 and 2019 are as follows:

 

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

Land, buildings and structures

   W 1,095,216        962,483  

Others

     227,895        276,711  
  

 

 

    

 

 

 
   W 1,323,111        1,239,194  
  

 

 

    

 

 

 

 

  2)

Details of amounts recognized in the separate statements of income for the years ended December 31, 2020 and 2019 as a lessee are as follows:

 

(In millions of won)              
     2020      2019  

Depreciation of right-of-use assets:

     

Land, buildings and structures

   W 291,883        293,488  

Others

     83,091        83,178  
  

 

 

    

 

 

 
   W 374,974        376,666  
  

 

 

    

 

 

 

Interest expense on lease liabilities

   W 18,875        17,519  

Expenses related to short-term leases and low-value assets leases are immaterial.

 

  3)

The total cash outflows due to lease payments for the years ended December 31, 2020 and 2019 amount to W368,542 million and W382,140 million, respectively.

 

52


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

12.

Lease, Continued

 

  (2)

As a lessor

 

  1)

Finance lease

The Company recognized interest income of W428 million and W 287 million for lease receivables for the years ended December 31, 2020 and 2019, respectively.

The following table sets out a maturity analysis of lease receivables, presenting the undiscounted lease payments to be received subsequent to December 31, 2020.

 

(In millions of won)       
     Amount  

Less than 1 year

   W 12,039  

1 ~ 2 years

     8,584  

2 ~ 3 years

     8,145  

3 ~ 4 years

     8,349  

4 ~ 5 years

     2,479  
  

 

 

 

Undiscounted lease payments

   W 39,596  
  

 

 

 

Unrealized finance income

     845  

Net investment in the lease

     38,751  

 

  2)

Operating lease

The Company recognized lease income of W113,400 million and W88,934 million for the year ended December 31, 2020 and 2019, respectively, of which variable lease payments received are W21,715 million and W25,228 million, respectively.

The following table sets out a maturity analysis of lease payments, presenting the undiscounted lease payments to be received subsequent to December 31, 2020.

 

(In millions of won)       
     Amount  

Less than 1 year

   W 45,870  

1 ~ 2 years

     15,081  

2 ~ 3 years

     4,043  

3 ~ 4 years

     1,211  

4 ~ 5 years

     12  

More than 5 year

     5  
  

 

 

 
   W 66,222  
  

 

 

 

 

53


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

13.

Goodwill

Goodwill as of December 31, 2020 and 2019 are as follows:

 

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

Goodwill related to merger of Shinsegi Telecom, Inc.

   W 1,306,236        1,306,236  

The recoverable amount of the CGU is based on its value in use calculated by applying the annual discount rate of 6.3(4.9% of 2019) to the estimated future cash flows based on financial budgets for the next five years. An annual growth rate of (-)0.2%((-)0.6% of 2019) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the Company’s long-term wireless telecommunication industry growth rate. Management of the Company does not expect the total carrying amount of the CGU will exceed the total recoverable amount due to reasonably possible changes from the major assumptions used to estimate the recoverable amount.

 

14.

Intangible Assets

 

  (1)

Intangible assets as of December 31, 2020 and 2019 are as follows:

 

(In millions of won)  
     December 31, 2020  
     Acquisition
cost
     Accumulated
amortization
    Accumulated
impairment
    Carrying
amount
 

Frequency usage rights(*1)

   W 6,210,882        (4,079,729     (198,388     1,932,765  

Land usage rights

     43,192        (39,089     —         4,103  

Industrial rights

     41,110        (31,451     —         9,659  

Facility usage rights

     58,638        (43,577     —         15,061  

Club memberships(*2)

     77,917        —         (27,219     50,698  

Other(*3)

     3,345,627        (2,692,830     —         652,797  
  

 

 

    

 

 

   

 

 

   

 

 

 
   W 9,777,366        (6,886,676     (225,607     2,665,083  
  

 

 

    

 

 

   

 

 

   

 

 

 

 

(In millions of won)  
     December 31, 2019  
     Acquisition
cost
     Accumulated
amortization
    Accumulated
impairment
    Carrying
amount
 

Frequency usage rights(*1)

   W 6,210,882        (3,563,381     —         2,647,501  

Land usage rights

     45,930        (40,222     —         5,708  

Industrial rights

     41,485        (29,431     —         12,054  

Facility usage rights

     56,479        (40,955     —         15,524  

Club memberships(*2)

     75,496        —         (27,885     47,611  

Other(*3)

     3,245,063        (2,512,309     —         732,754  
  

 

 

    

 

 

   

 

 

   

 

 

 
   W 9,675,335        (6,186,298     (27,885     3,461,152  
  

 

 

    

 

 

   

 

 

   

 

 

 

 

54


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SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

14.

Intangible Assets, Continued

 

  (1)

Intangible assets as of December 31, 2020 and 2019 are as follows, Continued:

 

(*1)

During the year ended December 31, 2020, the Ministry of Science and Information and Communication Technology approved the discontinuance of 2G service. The Company recognized an impairment loss of W12,388 million related to 800MHz frequency usage rights used for 2G service. In addition, as of December 31, 2020, due to the change in its business environment, the Company expects that it is no longer probable that its 28GHz frequency usage rights will be in the condition necessary for it to be capable of operating in the manner intended by management. As a result, the Company performed impairment test over the frequency usage rights. As a result, the recoverable amount (determining based on value in use) exceeded the carrying value, and an impairment loss of W186,000 million was recognized.

(*2)

Club memberships are classified as intangible assets with indefinite useful life and are not amortized.

(*3)

Other intangible assets primarily consist of computer software and others.

(2)

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

 

(In millions of won)        
     2020  
     Beginning
balance
     Acquisition      Disposal     Transfer      Amortization     Impairment     Spin-off     Ending
balance
 

Frequency usage rights

   W 2,647,501        —          —         —          (516,348     (198,388     —         1,932,765  

Land usage rights

     5,708        550        (88     —          (2,067     —         —         4,103  

Industrial rights

     12,054        750        (81     —          (2,415     —         (649     9,659  

Facility usage rights

     15,524        1,665        (3     537        (2,662     —         —         15,061  

Club memberships

     47,611        6,472        (1,999     —          —         —         (1,386     50,698  

Other

     732,754        71,915        (9,064     196,280        (307,030     —         (32,058     652,797  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W   3,461,152        81,352        (11,235     196,817        (830,522     (198,388     (34,093     2,665,083  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(In millions of won)  
     2019  
     Beginning
balance
     Acquisition      Disposal     Transfer      Amortization     Impairment     Ending
balance
 

Frequency usage rights

   W 3,139,978        —          —         —          (492,477     —         2,647,501  

Land usage rights

     6,498        2,017        (14     —          (2,793     —         5,708  

Industrial rights

     15,300        759        (1,206     —          (2,799     —         12,054  

Facility usage rights

     16,008        2,093        (25     177        (2,729     —         15,524  

Club memberships

     47,411        1,113        (850     —          —         (63     47,611  

Other

     783,395        103,871        (2,464     134,525        (286,573     —         732,754  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
   W   4,008,590        109,853        (4,559     134,702        (787,371     (63     3,461,152  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

55


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

14.

Intangible Assets, Continued

 

 

  (3)

Research and development expenditures recognized as expense for the years ended December 31, 2020 and 2019 are as follows:

 

(In millions of won)              
     2020      2019  

Research and development costs expensed as incurred

   W 352,907        324,053  

 

  (4)

Details of frequency usage rights as of December 31, 2020 are as follows:

 

(In millions of won)  
     Amount     

Description

   Commencement
of amortization
   Completion of
amortization
 

800 MHz license

   W 13,515      CDMA and LTE service    Jul. 2011      Jun. 2021  

1.8 GHz license

     125,620      LTE service    Sept. 2013      Dec. 2021  

2.6 GHz license

     728,510      LTE service    Sept. 2016      Dec. 2026  

2.1 GHz license

     94,963      W-CDMA and LTE service    Dec. 2016      Dec. 2021  

3.5 GHz license(*)

     953,474      5G service    Apr. 2019      Nov. 2028  

28 GHz license(*)

     16,683      5G service    —        Nov. 2023  
  

 

 

          
   W 1,932,765           
  

 

 

          

 

(*)

The Company participated in the frequency license allocation auction hosted by Ministry of Science and Information and Communication Technology and was assigned the 3.5GHz and 28GHz bands of frequency license during the year ended December 31, 2018. The considerations payable for the bands of frequency are W1,218,500 million and W207,300 million, respectively. These bands of frequency were assigned in December 2018 and the annual payments in installment of the remaining balances will be made for the next ten and five years, respectively. The Company recognized these frequency license as intangible assets at the date of initial lump sum payment and began amortization for 3.5GHz frequency license in April 2019. The amortization for 28GHz frequency license will begin when it is in the condition necessary for it to be capable of operating in the manner intended by management.

 

15.

Borrowings and Debentures

 

  (1)

Long-term borrowings as of December 31, 2020 and 2019 are as follows:

 

(In millions of won and thousands of U.S. dollars)  

Lender

   Annual interest
rate (%)
     Maturity      December 31,
2020
    December 31,
2019
 

Export Kreditnamnden(*)

     1.70        Apr. 29, 2022      W

 

18,726

(USD 17,211

 

   

33,266

(USD 28,732

 

        

 

 

   

 

 

 

Less present value discount

 

     (118     (332
  

 

 

   

 

 

 
     18,608       32,934  

Less current installments

 

     (12,441     (13,157
  

 

 

   

 

 

 
   W 6,167       19,777  
  

 

 

   

 

 

 

 

(*)

The long-term borrowings are to be repaid by installments on an annual basis from 2014 to 2022.

 

56


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

15.

Borrowings and Debentures, Continued

 

  (2)

Debentures as of December 31, 2020 and 2019 are as follows:

 

(In millions of won and thousands of U.S. dollars)                            
    

Purpose

   Maturity      Annual
interest rate
(%)
     December 31,
2020
     December 31,
2019
 

Unsecured corporate bonds

   Operating fund      2021        4.22        190,000        190,000  

Unsecured corporate bonds

   Operating and refinancing fund      2022        3.30        140,000        140,000  

Unsecured corporate bonds

        2032        3.45        90,000        90,000  

Unsecured corporate bonds

   Operating fund      2023        3.03        230,000        230,000  

Unsecured corporate bonds

        2033        3.22        130,000        130,000  

Unsecured corporate bonds

        2024        3.64        150,000        150,000  

Unsecured corporate bonds

   Refinancing fund      2021        2.66        150,000        150,000  

Unsecured corporate bonds

        2024        2.82        190,000        190,000  

Unsecured corporate bonds

   Operating and refinancing fund      2022        2.40        100,000        100,000  

Unsecured corporate bonds

        2025        2.49        150,000        150,000  

Unsecured corporate bonds

        2030        2.61        50,000        50,000  

Unsecured corporate bonds

   Operating fund      2025        2.66        70,000        70,000  

Unsecured corporate bonds

        2030        2.82        90,000        90,000  

Unsecured corporate bonds

   Operating and refinancing fund      2025        2.55        100,000        100,000  

Unsecured corporate bonds

        2035        2.75        70,000        70,000  

Unsecured corporate bonds

   Operating fund      2021        1.80        100,000        100,000  

Unsecured corporate bonds

        2026        2.08        90,000        90,000  

Unsecured corporate bonds

        2036        2.24        80,000        80,000  

Unsecured corporate bonds

        2021        1.71        50,000        50,000  

Unsecured corporate bonds

        2026        1.97        120,000        120,000  

Unsecured corporate bonds

        2031        2.17        50,000        50,000  

Unsecured corporate bonds

   Refinancing fund      2020        1.93        —          60,000  

Unsecured corporate bonds

        2022        2.17        120,000        120,000  

Unsecured corporate bonds

        2027        2.55        100,000        100,000  

Unsecured corporate bonds

   Operating and refinancing fund      2032        2.65        90,000        90,000  

Unsecured corporate bonds

   Refinancing fund      2020        2.39        —          100,000  

Unsecured corporate bonds

   Operating and refinancing fund      2022        2.63        80,000        80,000  

Unsecured corporate bonds

   Refinancing fund      2027        2.84        100,000        100,000  

Unsecured corporate bonds

        2021        2.57        110,000        110,000  

Unsecured corporate bonds

        2023        2.81        100,000        100,000  

Unsecured corporate bonds

        2028        3.00        200,000        200,000  

Unsecured corporate bonds

        2038        3.02        90,000        90,000  

Unsecured corporate bonds

   Operating and refinancing fund      2021        2.10        100,000        100,000  

Unsecured corporate bonds

        2023        2.33        150,000        150,000  

Unsecured corporate bonds

        2038        2.44        50,000        50,000  

Unsecured corporate bonds

   Operating fund      2022        2.03        180,000        180,000  

Unsecured corporate bonds

        2024        2.09        120,000        120,000  

Unsecured corporate bonds

        2029        2.19        50,000        50,000  

Unsecured corporate bonds

        2039        2.23        50,000        50,000  

Unsecured corporate bonds

   Operating and refinancing fund      2022        1.40        120,000        120,000  

Unsecured corporate bonds

        2024        1.49        60,000        60,000  

Unsecured corporate bonds

        2029        1.50        120,000        120,000  

Unsecured corporate bonds

        2039        1.52        50,000        50,000  

Unsecured corporate bonds

        2049        1.56        50,000        50,000  

 

57


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

15.

Borrowings and Debentures, Continued

 

  (2)

Debentures as of December 31, 2020 and 2019 are as follows, Continued:

 

(In millions of won and thousands of U.S. dollars)  
    

Purpose

   Maturity      Annual interest rate
(%)
     December 31,
2020
    December 31,
2019
 

Unsecured corporate bonds

   Operating fund      2022        1.69        230,000       230,000  

Unsecured corporate bonds

        2024        1.76        70,000       70,000  

Unsecured corporate bonds

        2029        1.79        40,000       40,000  

Unsecured corporate bonds

        2039        1.81        60,000       60,000  

Unsecured corporate bonds

   Operating and refinancing fund      2023        1.64        170,000       —    

Unsecured corporate bonds

   Operating fund      2025        1.75        130,000       —    

Unsecured corporate bonds

        2030        1.83        50,000       —    

Unsecured corporate bonds

        2040        1.87        70,000       —    

Unsecured corporate bonds

   refinancing fund      2025        1.40        140,000       —    

Unsecured corporate bonds

        2030        1.59        40,000       —    

Unsecured corporate bonds

        2040        1.76        110,000       —    

Unsecured global bonds

   Operating fund      2027        6.63       

435,200

(USD 400,000

 

   

463,120

(USD 400,000

 

Unsecured global bonds

        2023        3.75       

544,000

(USD 500,000

 

   

578,900

(USD 500,000

 

Floating rate notes(*)

        2020        3M LIBOR +0.88        —        

347,340

(USD 300,000

 

           

 

 

   

 

 

 

Floating rate notes (*)

        2025        3M LIBOR +0.91       

326,400

(USD 300,000

 

    —    
           

 

 

   

 

 

 
     6,895,600       6,429,360  

Less discounts on bonds

 

     (20,360     (21,396
  

 

 

   

 

 

 
     6,875,240       6,407,964  

Less current installments of bonds

 

     (699,664     (507,135
  

 

 

   

 

 

 
   W 6,175,576       5,900,829  
  

 

 

   

 

 

 

 

(*)

3M LIBOR rates are 0.24% and 1.91% as of December 31, 2020 and 2019, respectively.

 

58


Table of Contents

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2020 and 2019

 

16.

Long-term Payables - other

 

  (1)

As of December 31, 2020 and 2019, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 14):

 

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

Long-term payables – other

   W 1,626,040        2,051,389  

Present value discount on long-term payables – other

     (59,717      (82,851

Current installments of long-term payables – other

     (424,600      (423,839
  

 

 

    

 

 

 

Carrying amount at December 31

   W 1,141,723        1,544,699  
  

 

 

    

 

 

 

 

  (2)

Principal amounts of long-term payables repaid during the year ended December 31, 2020 and 2019 are W425,349 million, respectively. The repayment schedule of the principal amount of long-term payables – other as of December 31, 2020 is as follows:

 

(In millions of won)       
     Amount  

Less than 1 year

   W 425,349  

1~3 years

     444,480  

3~5 years

     382,290  

More than 5 years

     373,921  
  

 

 

 
   W 1,626,040  
  

 

 

 

 

17.

Provisions