As filed with the Securities and Exchange Commission on April 27, 201229, 2015
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20112014
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
¨ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
For the transition period from to
Commission file number 1-14926
KT Corporation
(Exact name of Registrant as specified in its charter)
KT Corporation | The Republic of Korea | |
(Translation of Registrant’s name into English) | (Jurisdiction of incorporation or organization) |
206 Jungja-dongKT Gwanghwamun Building East
Bundang-gu, Sungnam-si, Gyeonggi-do33, Jong-ro 3-Gil, Jongno-gu
463-711 Seoul, Korea
(Address of principal executive offices)
Thomas Bum Joon KimKwang Suk Shin
206 Jungja-dongKT Gwanghwamun Building East
Bundang-gu, Sungnam-si, Gyeonggi-do33, Jong-ro 3-Gil, Jongno-gu
463-711 Seoul, Korea
Telephone: +82-31-727-0150;+82-31-727-0114; E-mail: thomaskim@kt.comks.shin@kt.com
(Name, telephone, e-mail and/or facsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class | Name of each exchange on which registered | |
American Depositary Shares, each representing | New York Stock Exchange, Inc. | |
one-half of one share of common stock | ||
Common Stock, par value | New York Stock Exchange, Inc.* |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
As of December 31, 2011,2014, there were 261,111,808 shares of common stock, par value(Won)₩5,000 per share, outstanding (not
(not including 17,897,14716,249,100 shares of common stock held by the company as treasury shares)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes¨Nox
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesxNo¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerxAccelerated filer¨Non-accelerated filer¨
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.
U.S. GAAP¨IFRSx Other¨
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ¨ Item 18 ¨
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
* | Not for trading, but only in connection with the registration of the American Depositary Shares. |
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ITEM 1. | 1 | |||||||
Item 1.A. | 1 | |||||||
Item 1.B. | 1 | |||||||
Item 1.C. | 1 | |||||||
ITEM 2. | 1 | |||||||
Item 2.A. | 1 | |||||||
Item 2.B. | 1 | |||||||
ITEM 3. | ||||||||
Item 3.A. | ||||||||
Item 3.B. | ||||||||
Item 3.C. | ||||||||
Item 3.D. | ||||||||
ITEM 4. | ||||||||
Item 4.A. | ||||||||
Item 4.B. | ||||||||
Item 4.C. | ||||||||
Item 4.D. | ||||||||
ITEM 4A. | ||||||||
ITEM 5. | ||||||||
Item 5.A. | ||||||||
Item 5.B. | ||||||||
Item 5.C. | ||||||||
Item 5.D. | ||||||||
Item 5.E. | ||||||||
Item 5.F. | ||||||||
Item 5.G. | ||||||||
ITEM 6. | ||||||||
Item 6.A. | ||||||||
Item 6.B. | ||||||||
Item 6.C. | ||||||||
Item 6.D. | ||||||||
Item 6.E. |
i
TABLE OF CONTENTS
(continued)
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ITEM 7. | ||||||||
Item 7.A. | ||||||||
Item 7.B. | ||||||||
Item 7.C. | ||||||||
ITEM 8. | ||||||||
Item 8.A. | ||||||||
Item 8.B. | ||||||||
ITEM 9. | ||||||||
Item 9.A. | ||||||||
Item 9.B. | ||||||||
Item 9.C. | ||||||||
Item 9.D. | ||||||||
Item 9.E. | ||||||||
Item 9.F. | ||||||||
ITEM 10. | ||||||||
Item 10.A. | ||||||||
Item 10.B. | ||||||||
Item 10.C. | ||||||||
Item 10.D. | ||||||||
Item 10.E. | ||||||||
Item 10.F. | ||||||||
Item 10.G. | ||||||||
Item 10.H. | ||||||||
Item 10.I. | ||||||||
ITEM 11. | ||||||||
ITEM 12. | ||||||||
Item 12.A. | ||||||||
Item 12.B. | ||||||||
Item 12.C. | ||||||||
Item 12.D. | ||||||||
ITEM 13. |
ii
TABLE OF CONTENTS
(continued)
Page | ||||||||
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | |||||||
ITEM 15. | ||||||||
ITEM 16. | ||||||||
ITEM 16A. | ||||||||
ITEM 16B. | ||||||||
ITEM 16C. | ||||||||
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | |||||||
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | |||||||
ITEM 16F. | CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT | |||||||
ITEM 16G. | CORPORATE GOVERNANCE | |||||||
ITEM 16H. | MINE SAFETY DISCLOSURE | |||||||
ITEM 17. | FINANCIAL STATEMENTS | |||||||
ITEM 18. | FINANCIAL STATEMENTS | |||||||
ITEM 19. | EXHIBITS |
iii
PRESENTATION
All references to “Korea” or the “Republic” contained in this annual report mean the Republic of Korea. All references to the “Government” are to the government of the Republic of Korea. All references to “we,” “us” or the “Company” are to KT Corporation and, as the context may require, its subsidiaries.
All references to “Won” or “(Won)₩” in this annual report are to the currency of the Republic and all references to “Dollars,” “$,” “US$” or “U.S. dollars” are to the currency of the United States of America. Our monetary assets and liabilities denominated in foreign currency are translated into Won at the market average exchange rate announced by Seoul Money Brokerage Services, Ltd. (the “Market Average Exchange Rate”) on the balance sheet dates, which were, for U.S. dollars,(Won)₩1,138.91,071.1 to US$1.00,₩1,055.3 to US$1.00 and(Won)₩1,153.31,099.2 to US$1.00 at December 31, 20102012, 2013 and 2011,2014, respectively. Our consolidated financial statements are expressed in Won and, solely for the convenience of the reader, the consolidated financial statements as of and for the year ended December 31, 20112014 have been translated into United States dollars at the rate of(Won)₩1,153.31,099.2 to US$1.00, the Market Average Exchange Rate in effect on December 31, 2011.2014.
Any discrepancies in any table between totals and the sums of the amounts listed are due to rounding.
All market share data contained in this annual report, unless otherwise specified, are based on the number of subscribers announced by the Korea Communications Commission (the “KCC”) or the Korea Telecommunications Operators Association.
Item 1. Identity of Directors, Senior Managers and Advisers
Item 1.A. Directors and Senior Management
Not applicable.
Not applicable.
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 2.B. Method and Expected Timetable
Not applicable.
Item 3.A.Selected Financial Data
You should read the selected consolidated financial data below in conjunction with the Consolidated Financial Statements as of December 31, 20102012, 2013 and 20112014 and for each of the years
in the two-yearthree-year period ended December 31, 2011,2014, and the report of the independent registered public accounting firm on these statements included herein. These audited financial statements and the related notes have been prepared under IFRSInternational Financial Reporting Standards (“IFRS”) as issued by the IASB.International Accounting Standards Board (“IASB”). The selected consolidated financial data for the twothree years ended December 31, 20112014 have been derived from our audited consolidated financial statements.
In addition to preparing financial statements in accordance with IFRS as issued by the IASB included in this annual report, we also prepare financial statements in accordance with IFRS as adopted by the Republic of Korea (“K-IFRS”), which we are required to file with the Financial Services Commission and the Korea Exchange under the Financial Investment Services and Capital Markets Act of Korea (“FSCMA”). English translations of such financial statements are furnished to the Securities and Exchange Commission under Form 6-K. During the three years ended December 31, 2014, we are required to adopt certain amendments and interpretations to K-IFRS, relating to presentation of operating profit. Additionally, under K-IFRS, revenue from the development and sale of real estate is recognized using the percentage of completion method. However, under IFRS as issued by the IASB, revenue from the development and sale of real estate is recognized when an individual unit of residential real estate is delivered to the buyer. Furthermore, in connection with the exercise of early redemption rights for certain commercial paper guaranteed by KT ENGCORE Co., Ltd. (formerly known as KT ENS Corporation until April 2015) (“KT ENS”), our previously consolidated subsidiary, we recognized financial losses relating to the resulting estimation of guarantee liabilities in our consolidated statements of operations prepared in accordance with IFRS as issued by the IASB for the year ended December 31, 2013 (which were issued on April 28, 2014), which were not reflected in our financial statements prepared in accordance with K-IFRS for the year ended December 31, 2013 (which were issued on March 13, 2014) as it was not possible to make a reasonable estimate of the liabilities at the time of issuing the K-IFRS financial statements. We subsequently reflected such losses in our K-IFRS financial statements for the year ended December 31, 2014. As a result, the presentation of operating results in our consolidated statements of operations prepared in accordance with IFRS as issued by the IASB included in this annual report differs from the presentation of operating results in our consolidated statements of operations prepared in accordance with K-IFRS. See “Item 5.A. Operating Results—Explanatory Note Regarding Presentation of Certain Financial Information under K-IFRS” for additional information. In accordance with rule amendments adopted by the U.S. Securities and Exchange Commission which became effective on March 4, 2008, we are not required to provide a reconciliation to U.S. GAAP. Furthermore, pursuant to the transitional relief granted by the U.S. Securities and Exchange Commission in respect of the first-time application of IFRS, no audited financial statements and financial information prepared under IFRS for the year ended December 31, 2009 have been included in this annual report.
The information set forth below is not necessarily indicative of the results of future operations and should be read in conjunction with “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements and related notes included in this annual report.
Consolidated statement of incomeoperations data
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 (1) | 2010(1) | 2011(1) | 2012(1) | 2013 | 2014 | 2014(2) | ||||||||||||||||||||||||||||
(In billions of Won and millions of Dollars, except per share data) | (In billions of Won and millions of Dollars, except per share data) | |||||||||||||||||||||||||||||||||||
Continuing Operations: | ||||||||||||||||||||||||||||||||||||
Operating revenue | (Won) | 20,326 | (Won) | 21,990 | US$ | 19,067 | ₩ | 20,310 | ₩ | 22,088 | ₩ | 24,644 | ₩ | 24,058 | ₩ | 23,727 | US$ | 21,586 | ||||||||||||||||||
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Revenue | 19,993 | 21,311 | 23,856 | 23,729 | 23,469 | 21,351 | ||||||||||||||||||||||||||||||
Others | 317 | 777 | 787 | 329 | 258 | 235 | ||||||||||||||||||||||||||||||
Operating expenses | 18,318 | 20,016 | 17,356 | 18,303 | 20,101 | 22,964 | 23,734 | 24,390 | 22,189 | |||||||||||||||||||||||||||
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Operating profit | 2,008 | 1,974 | 1,711 | 2,007 | 1,987 | 1,680 | 323 | (662 | ) | (603 | ) | |||||||||||||||||||||||||
Finance income | 239 | 267 | 232 | 238 | 270 | 499 | 279 | 255 | 232 | |||||||||||||||||||||||||||
Finance expenses | (599 | ) | (640 | ) | (555 | ) | ||||||||||||||||||||||||||||||
Income (loss) from jointly controlled entities and associates | 33 | (3 | ) | (3 | ) | |||||||||||||||||||||||||||||||
Profit from continuing operations before income tax | 1,681 | 1,598 | 1,385 | |||||||||||||||||||||||||||||||||
Income tax expense | (397 | ) | (317 | ) | (275 | ) | ||||||||||||||||||||||||||||||
Profit for the period from the continuing operations | 1,285 | 1,281 | 1,111 | |||||||||||||||||||||||||||||||||
Finance costs | (596 | ) | (642 | ) | (782 | ) | (648 | ) | (818 | ) | (745 | ) | ||||||||||||||||||||||||
Income from jointly controlled entities and associates | 33 | (6 | ) | 18 | 7 | 18 | 17 | |||||||||||||||||||||||||||||
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Profit (loss) from continuing operations before income tax | 1,681 | 1,609 | 1,415 | (38 | ) | (1,208 | ) | (1,099 | ) | |||||||||||||||||||||||||||
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Income tax expense (benefit) | (396 | ) | 318 | 278 | 50 | (266 | ) | (242 | ) | |||||||||||||||||||||||||||
Profit (loss) for the year from the continuing operations | 1,285 | 1,291 | 1,137 | (88 | ) | (941 | ) | (856 | ) | |||||||||||||||||||||||||||
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Discontinued operations: | ||||||||||||||||||||||||||||||||||||
Profit from discontinued operations | 30 | 171 | 148 | |||||||||||||||||||||||||||||||||
Profit for the period | (Won) | 1,315 | (Won) | 1,452 | US$ | 1,259 | ||||||||||||||||||||||||||||||
Profit for the period attributable to: | ||||||||||||||||||||||||||||||||||||
Profit (loss) from discontinued operations | 29 | 165 | (32 | ) | — | — | — | |||||||||||||||||||||||||||||
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Profit (loss) for the year | ₩ | 1,314 | ₩ | 1,455 | ₩ | 1,105 | ₩ | (88 | ) | ₩ | (941 | ) | US$ | (865 | ) | |||||||||||||||||||||
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Profit (loss) for the year attributable to: | ||||||||||||||||||||||||||||||||||||
Equity holders of the parent company | (Won) | 1,296 | (Won) | 1,447 | US$ | 1,254 | ₩ | 1,296 | ₩ | 1,446 | ₩ | 1,046 | ₩ | (190 | ) | ₩ | (1,030 | ) | US$ | (937 | ) | |||||||||||||||
Profit from continuing operations | 1,273 | 1,277 | 1,107 | |||||||||||||||||||||||||||||||||
Profit from discontinued operations | 23 | 170 | 147 | |||||||||||||||||||||||||||||||||
Profit (loss) from continuing operations | 1,273 | 1,280 | 1,076 | (190 | ) | (1,030 | ) | (937 | ) | |||||||||||||||||||||||||||
Profit (loss) from discontinued operations | 23 | 166 | (30 | ) | — | — | — | |||||||||||||||||||||||||||||
Non-controlling interest | (Won) | 19 | (Won) | 5 | US$ | 5 | ₩ | 19 | ₩ | 10 | ₩ | 59 | ₩ | 102 | ₩ | 89 | US$ | 81 | ||||||||||||||||||
Profit from continuing operations | 12 | 5 | 5 | 13 | 11 | 61 | 102 | 89 | 81 | |||||||||||||||||||||||||||
Profit from discontinued operations | 7 | 1 | 1 | |||||||||||||||||||||||||||||||||
Profit (loss) from discontinued operations | 6 | (1 | ) | (2 | ) | — | — | — | ||||||||||||||||||||||||||||
Earnings per share attributable to the equity holders of the Parent Company during the period (in won): | ||||||||||||||||||||||||||||||||||||
Basic earnings per share | (Won) | 5,328 | (Won) | 5,946 | US$ | 5 | ||||||||||||||||||||||||||||||
Basic earnings (loss) per share | ₩ | 5,326 | ₩ | 5,943 | ₩ | 4,296 | ₩ | (779 | ) | ₩ | (4,215 | ) | US$ | (4.00 | ) | |||||||||||||||||||||
From continuing operations | 5,235 | 5,247 | 5 | 5,293 | 5,262 | 4,417 | (779 | ) | (4,215 | ) | (4.00 | ) | ||||||||||||||||||||||||
From discontinued operations | 93 | 699 | 1 | 33 | 681 | (121 | ) | — | — | — | ||||||||||||||||||||||||||
Diluted earnings per share | (Won) | 5,328 | (Won) | 5,946 | US$ | 5 | ||||||||||||||||||||||||||||||
Diluted earnings (loss) per share | ₩ | 5,326 | ₩ | 5,942 | ₩ | 4,296 | ₩ | (782 | ) | ₩ | (4,215 | ) | US$ | (4.00 | ) | |||||||||||||||||||||
From continuing operations | 5,235 | 5,247 | 5 | 5,293 | 5,261 | 4,417 | (782 | ) | (4,215 | ) | (4.00 | ) | ||||||||||||||||||||||||
From discontinued operations | 93 | 699 | 1 | 33 | 681 | (121 | ) | — | — | — |
Consolidated statement of financial position data
As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||
2010 | 2011 | 2011 (1) | ||||||||||||||||||||||||||||||
Selected Statement of Financial Position Data | 2010(1) | 2011(1) | 2012(1) | 2013 | 2014 | |||||||||||||||||||||||||||
(In billions of Won and millions of Dollars) | (In billions of Won) | |||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | (Won) | 1,162 | (Won) | 1,445 | US$ | 1,253 | ₩ | 1,162 | ₩ | 1,462 | ₩ | 2,058 | ₩ | 2,071 | ₩ | 1,889 | ||||||||||||||||
Trade and other receivables, net | 4,193 | 6,159 | 5,340 | 4,193 | 6,191 | 5,908 | 5,240 | 4,811 | ||||||||||||||||||||||||
Short-term loans, net | 725 | 698 | 605 | 725 | 698 | 668 | 839 | 710 | ||||||||||||||||||||||||
Current finance lease receivables, net | 195 | 249 | 216 | 195 | 249 | 340 | 294 | 259 | ||||||||||||||||||||||||
Other financial assets | 270 | 254 | 220 | 270 | 259 | 246 | 480 | 333 | ||||||||||||||||||||||||
Current income tax assets | 0 | 1 | 1 | — | 1 | 1 | 35 | 4 | ||||||||||||||||||||||||
Inventories, net | 711 | 675 | 585 | 711 | 676 | 935 | 674 | 419 | ||||||||||||||||||||||||
Other current assets | 264 | 311 | 269 | 264 | 311 | 362 | 340 | 350 | ||||||||||||||||||||||||
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Total current assets | 7,519 | 9,791 | 8,489 | 7,519 | 9,847 | 10,517 | 9,972 | 8,774 | ||||||||||||||||||||||||
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Non-current assets: | ||||||||||||||||||||||||||||||||
Trade and other receivables, net | 1,125 | 1,723 | 1,494 | 1,125 | 1,725 | 1,073 | 813 | 849 | ||||||||||||||||||||||||
Long-term loans, net | 408 | 491 | 426 | 408 | 491 | 513 | 510 | 585 | ||||||||||||||||||||||||
Non-current finance lease receivables, net | 403 | 488 | 423 | 403 | 488 | 522 | 416 | 325 | ||||||||||||||||||||||||
Other financial assets | 269 | 622 | 539 | 269 | 622 | 672 | 673 | 705 | ||||||||||||||||||||||||
Property and equipment, net | 13,398 | 14,023 | 12,159 | 13,398 | 14,090 | 15,806 | 16,387 | 16,468 | ||||||||||||||||||||||||
Investment property, net | 1,146 | 1,159 | 1,005 | 1,146 | 1,159 | 1,155 | 1,105 | 1,060 | ||||||||||||||||||||||||
Intangible assets, net | 1,419 | 2,643 | 2,292 | 1,419 | 2,645 | 3,214 | 3,827 | 3,544 | ||||||||||||||||||||||||
Investments in jointly controlled entities and associates | 638 | 529 | 459 | 638 | 500 | 379 | 364 | 339 | ||||||||||||||||||||||||
Deferred income tax assets | 565 | 530 | 459 | 565 | 530 | 611 | 707 | 1,079 | ||||||||||||||||||||||||
Other non-current assets | 50 | 86 | 75 | 50 | 86 | 95 | 76 | 72 | ||||||||||||||||||||||||
Total non-current assets | 19,422 | 22,295 | 19,331 | 19,422 | 22,336 | 24,040 | 24,878 | 25,025 | ||||||||||||||||||||||||
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Total assets | (Won) | 26,942 | (Won) | 32,085 | US$ | 27,821 | ₩ | 26,942 | ₩ | 32,183 | ₩ | 34,558 | ₩ | 34,850 | ₩ | 33,799 | ||||||||||||||||
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Liabilities and Equity: | ||||||||||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||||||
Trade and other payables | (Won) | 4,424 | (Won) | 5,890 | US$ | 5,107 | ₩ | 4,424 | ₩ | 5,902 | ₩ | 7,221 | ₩ | 7,414 | ₩ | 6,408 | ||||||||||||||||
Current finance lease liabilities, net | 33 | 46 | 40 | 33 | 46 | 14 | 19 | 20 | ||||||||||||||||||||||||
Borrowings | 2,722 | 2,112 | 1,832 | 2,722 | 2,125 | 3,197 | 3,021 | 2,956 | ||||||||||||||||||||||||
Other financial liabilities | 1 | 8 | 7 | 1 | 8 | 72 | 64 | 24 | ||||||||||||||||||||||||
Current income tax liabilities | 284 | 187 | 162 | 284 | 187 | 144 | 100 | 46 | ||||||||||||||||||||||||
Provisions | 58 | 123 | 106 | 58 | 123 | 206 | 115 | 111 | ||||||||||||||||||||||||
Deferred income | 177 | 168 | 146 | 177 | 168 | 171 | 144 | 144 | ||||||||||||||||||||||||
Other current liabilities | 185 | 210 | 182 | 185 | 220 | 242 | 348 | 279 | ||||||||||||||||||||||||
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Total current liabilities | 7,885 | 8,745 | 7,583 | 7,885 | 8,780 | 11,267 | 11,224 | 9,987 | ||||||||||||||||||||||||
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Non-current liabilities: | ||||||||||||||||||||||||||||||||
Trade and other payables | 382 | 652 | 565 | 382 | 652 | 701 | 1,059 | 909 | ||||||||||||||||||||||||
Non-current finance lease liabilities, net | 61 | 90 | 78 | 61 | 90 | 28 | 49 | 35 | ||||||||||||||||||||||||
Borrowings | 6,660 | 8,886 | 7,705 | 6,660 | 8,897 | 8,239 | 8,463 | 9,860 | ||||||||||||||||||||||||
Other financial liabilities | 38 | 288 | 250 | 38 | 288 | 70 | 179 | 191 | ||||||||||||||||||||||||
Retirement benefit liabilities | 264 | 426 | 369 | 264 | 426 | 549 | 586 | 594 | ||||||||||||||||||||||||
Provisions | 110 | 143 | 124 | 110 | 143 | 150 | 134 | 106 | ||||||||||||||||||||||||
Deferred income | 157 | 161 | 140 | 157 | 161 | 157 | 148 | 147 | ||||||||||||||||||||||||
Deferred income tax liabilities | 4 | 124 | 108 | 4 | 126 | 137 | 169 | 144 | ||||||||||||||||||||||||
Other non-current liabilities | 27 | 32 | 28 | 27 | 32 | 41 | 2 | 39 | ||||||||||||||||||||||||
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Total non-current liabilities | 7,703 | 10,802 | 9,367 | 7,703 | 10,815 | 10,073 | 10,789 | 12,025 | ||||||||||||||||||||||||
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Total liabilities | (Won) | 15,588 | (Won) | 19,548 | US$ | 16,949 | ₩ | 15,588 | ₩ | 19,595 | ₩ | 21,340 | ₩ | 22,013 | ₩ | 22,012 | ||||||||||||||||
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Equity attributable to owners of the Parent Company | ||||||||||||||||||||||||||||||||
Paid-in capital | ||||||||||||||||||||||||||||||||
Capital stock | (Won) | 1,564 | (Won) | 1,564 | US$ | 1,357 | ₩ | 1,564 | ₩ | 1,564 | ₩ | 1,564 | ₩ | 1,564 | ₩ | 1,564 | ||||||||||||||||
Share premium | 1,440 | 1,440 | 1,249 | 1,440 | 1,440 | 1,440 | 1,440 | 1,440 | ||||||||||||||||||||||||
Retained earnings | 9,466 | 10,220 | 8,861 | 9,466 | 10,219 | 10,646 | 10,019 | 8,568 | ||||||||||||||||||||||||
Accumulated other comprehensive income (expense) | (79 | ) | (23 | ) | (20 | ) | (79 | ) | (23 | ) | 1 | 25 | 26 | |||||||||||||||||||
Other components of equity | (1,258 | ) | (1,497 | ) | (1,298 | ) | (1,258 | ) | (1,497 | ) | (1,343 | ) | (1,321 | ) | (1,261 | ) | ||||||||||||||||
11,133 | 11,704 | 10,148 | 11,133 | 11,704 | 12,309 | 11,728 | 10,338 | |||||||||||||||||||||||||
Non-controlling interest | 221 | 834 | 723 | 221 | 884 | 909 | 1,110 | 1,449 | ||||||||||||||||||||||||
Total equity | 11,354 | 12,538 | 10,871 | 11,354 | 12,588 | 13,218 | 12,837 | 11,788 | ||||||||||||||||||||||||
Total liabilities and shareholders’ equity | (Won) | 26,942 | (Won) | 32,085 | US$ | 27,821 | ||||||||||||||||||||||||||
Total liabilities and equity | ₩ | 26,942 | ₩ | 32,183 | ₩ | 34,558 | ₩ | 34,850 | ₩ | 33,799 |
Consolidated statement of cash flow data
Year Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||||||||||||
2010 | 2011 | 2011 (1) | 2010(1) | 2011(1) | 2012(1) | 2013 | 2014 | 2014(2) | ||||||||||||||||||||||||||||
(In billions of Won and millions of Dollars) | (In billions of Won and millions of Dollars) | |||||||||||||||||||||||||||||||||||
Net cash generated from operating activities | (Won) | 2,973 | (Won) | 2,150 | US$ | 1,864 | ₩ | 2,973 | ₩ | 2,164 | ₩ | 5,725 | ₩ | 4,111 | ₩ | 1,916 | US$ | 1,743 | ||||||||||||||||||
Net cash (used in) investing activities | (2,949 | ) | (2,648 | ) | (2,296 | ) | (2,949 | ) | (2,666 | ) | (3,851 | ) | (3,783 | ) | (3,171 | ) | (2,885 | ) | ||||||||||||||||||
Net cash provided by (used in) financing activities | (398 | ) | 768 | 666 | (398 | ) | 772 | (1,278 | ) | (312 | ) | 1,072 | 975 |
Operating Data
As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||
2007 | 2008 | 2009 | 2010 | 2011 | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||||||||||||||||||
Lines installed (thousands) | 26,671 | 26,008 | 25,907 | 25,524 | 23,925 | 25,524 | 23,925 | 25,242 | 24,264 | 23,930 | ||||||||||||||||||||||||||||||
Lines in service (thousands) | 19,980 | 18,883 | 17,069 | 16,620 | 15,900 | 16,620 | 15,900 | 15,121 | 14,032 | 13,713 | ||||||||||||||||||||||||||||||
Lines in service per 100 inhabitants | 41.2 | 38.8 | 35.0 | 34.0 | 30.8 | 34.0 | 30.8 | 30.2 | 27.4 | 26.7 | ||||||||||||||||||||||||||||||
Mobile subscribers (thousands) | 13,721 | 14,365 | 15,016 | 16,041 | 16,563 | 16,041 | 16,563 | 16,502 | 16,454 | 17,328 | ||||||||||||||||||||||||||||||
Broadband Internet subscribers (thousands) | 6,516 | 6,712 | 6,953 | 7,424 | 7,823 | 7,424 | 7,823 | 8,037 | 8,067 | 8,129 |
(1) | As a result of adoption of IFRS 10 in 2013, the comparative 2011 and 2012 consolidated financial data were retrospectively restated, but 2010 consolidated financial data was not restated as IFRS 10 does not require restatement of the earlier periods presented beyond the immediately preceding period. Also, the amendment to IAS 19 were applied retrospectively and the comparative 2010, 2011 and 2012 consolidated statement of operations data were restated by reflecting the adjustments resulted from this retrospective application. |
(2) | For convenience, the Won amounts are expressed in U.S. dollars at the rate of |
Including public telephones. |
Exchange Rate Information
The following table sets out information concerning the Market Average Exchange Rate for the periods and dates indicated.indicated:
Period | At End of Period | Average Rate(1) | High | Low | At End of Period | Average Rate (1) | High | Low | ||||||||||||||||||||||||
(Won per US$1.00) | (Won per US$1.00) | |||||||||||||||||||||||||||||||
2007 | 938.2 | 929.2 | 950.0 | 902.2 | ||||||||||||||||||||||||||||
2008 | 1,257.5 | 1,102.6 | 1,509.0 | 934.5 | ||||||||||||||||||||||||||||
2009 | 1,167.6 | 1,276.4 | 1,573.6 | 1,152.8 | 1,167.6 | 1,276.4 | 1,573.6 | 1,152.8 | ||||||||||||||||||||||||
2010 | 1,138.9 | 1,156.3 | 1,261.5 | 1,104.0 | 1,138.9 | 1,156.3 | 1,261.5 | 1,104.0 | ||||||||||||||||||||||||
2011 | 1,153.3 | 1,108.1 | 1,199.5 | 1,049.5 | 1,153.3 | 1,108.1 | 1,199.5 | 1,049.5 | ||||||||||||||||||||||||
2012 | 1,071.1 | 1,126.9 | 1,181.8 | 1,071.1 | ||||||||||||||||||||||||||||
2013 | 1,055.3 | 1,095.0 | 1,159.1 | 1,051.5 | ||||||||||||||||||||||||||||
2014 | 1,099.2 | 1,053.2 | 1,118.3 | 1,008.9 | ||||||||||||||||||||||||||||
November | 1,101.1 | 1,095.1 | 1,113.1 | 1,058.8 | ||||||||||||||||||||||||||||
December | 1,153.3 | 1,147.5 | 1,169.5 | 1,126.8 | 1,099.2 | 1,104.3 | 1,118.3 | 1,088.1 | ||||||||||||||||||||||||
2012 (through April 26) | 1,139.4 | 1,132.4 | 1,164.3 | 1,114.5 | ||||||||||||||||||||||||||||
2015 (through April 29) | 1,070.9 | 1,097.5 | 1,133.9 | 1,070.9 | ||||||||||||||||||||||||||||
January | 1,125.0 | 1,145.9 | 1,164.3 | 1,121.6 | 1,090.8 | 1,088.9 | 1,108.7 | 1,077.3 | ||||||||||||||||||||||||
February | 1,126.5 | 1,123.4 | 1,128.4 | 1,116.7 | 1,099.2 | 1,098.4 | 1,109.8 | 1,088.3 | ||||||||||||||||||||||||
March | 1,137.8 | 1,125.9 | 1,138.1 | 1,114.5 | 1,105.0 | 1,112.6 | 1,133.9 | 1,096.5 | ||||||||||||||||||||||||
April (through April 26) | 1,139.4 | 1,135.5 | 1,142.3 | 1,123.4 | ||||||||||||||||||||||||||||
April (through April 29) | 1,070.9 | 1,089.6 | 1,109.4 | 1,070.9 |
Source:Seoul Money Brokerage Services, Ltd.
(1) | Represents the average of the Market Average Exchange Rates on each business day during the relevant period (or portion thereof). |
Our monetary assets and liabilities denominated in foreign currency are translated into Won at the Market Average Exchange Rate on the balance sheet dates, which were, for U.S. dollars,
(Won)₩1,138.91,071.1 to US$1.00,₩1,055.3 to US$1.00 and(Won)₩1,153.31,099.2 to US$1.00 at December 31, 20102012, 2013 and 2011,2014, respectively.
Our consolidated financial statements are expressed in Won and, solely for the convenience of the reader, the consolidated financial statements as of and for the year ended December 31, 20112014 have been translated into United States dollars at the rate of(Won)₩1,153.31,099.2 to US$1.00, the Market Average Exchange Rate in effect on December 31, 2011.2014.
We make no representation that the Won or Dollar amounts contained in this annual report could have been or could be converted into Dollar or Won, as the case may be, at any particular rate or at all.
Item 3.B.Capitalization and Indebtedness
Not applicableapplicable.
Item 3.C.Reasons for the Offer and Use of Proceeds
Not applicable.
You should carefully consider the following factors.
Risks Relating to Our Business
Competition in the Korean telecommunications industry is intense.
Competition in the telecommunications sector in Korea is intense. In recent years, business combinations in the telecommunications industry have significantly changed the competitive landscape of the Korean telecommunications industry. In particular, SK Telecom Co., Ltd. (or SK Telecom) acquired a controlling stake in Hanarotelecom Incorporated in 2008, which was renamed SK Broadband Co., Ltd. (or SK Broadband). The acquisition enablesenabled SK Telecom to provide fixed-line telecommunications, broadband Internet access and Internet television (or IP-TV)Protocol Television (“IPTV”) services together with its mobile telecommunications services. OnIn January 1, 2010, LG Dacom Corporation (or LG Dacom) and LG Powercom Co., Ltd. (or LG Powercom) merged into LG Telecom Co., Ltd., which subsequently changed its name to LG U+. The merger enablesenabled LG U+ to provide a similar range of services as SK Telecom and us. Our inability to adapt to such changes in the competitive landscape could have a material adverse effect on our business, financial condition and results of operations.
In addition to our competition with integrated telecommunications service providers, we face increasing competition from specific service providers, such as Internet phone service providers, Internet text message service providers, voice resellers and call-back service providers. In recent years, the increasing popularity of Internet phone and free text message services, such as Skype and Kakao Talk, have had a negative impact on demand for our telecommunications and text message services while creating additional data transmission usage by our Internet and mobile subscribers. Our inability to adapt to such changes in the competitive landscape could have a material adverse effect on our business, financial condition and results of operations.
Mobile Service.Service. We provide mobile services based on Wideband Code Division Multiple Access (or W-CDMA) technology and Long-Term Evolution (or LTE) technology. Competitors in the mobile telecommunications service industry are SK Telecom and LG U+. We had a market share of 31.5%
30.3% as of December 31, 2011,2014, making us the second largest mobile telecommunications service provider in Korea. SK Telecom had a market share of 50.6%50.0% as of December 31, 2011.2014.
Mobile subscribers are allowed to switch their service provider while retaining the same mobile phone number. Mobile service providers also grant subsidies to subscribers who purchase new handsets and agree to a minimum subscription period. Mobile number portability and handset subsidies have intensified competition among the mobile service providers and increased their marketing expenses. If the mobile service providers adopt a strategy of expanding market share through price competition, it could lead to a decrease in our net profit margins.
Since 2011, SK Telecom, LG U+ and we have launched fourth-generation mobile telecommunications services based on LTE technology, which we believe has further intensified competition among the three companies and resulted in an increase in marketing expenses and capital expenditures related to implementing and providing 4G LTE services. SK Telecom and LG U+ began providing 4G LTE services in July 2011, and we commenced providing commercial 4G LTE services onin January 3, 2012 utilizing our bandwidths in the 1.8 GHz spectrum that became available upon termination of our 2G services based on Code Division Multiple Access (or CDMA) technology. In September 2013, we commenced providing wideband LTE services, which utilizes our adjoining 20 MHz of bandwidth in the 1.8 GHz spectrum to provide transmission speed of up to 150 Mbps, twice faster than those offered under standard LTE services. SK Telecom also began providing its wideband LTE services in September 2013 and LG U+ commenced providing its wideband LTE services in January 2014. In March 2014, our wideband LTE services covered five metropolitan cities in Korea, and we expanded our wideband LTE services to all of Korea in July 2014. As of December 31, 2014, the number of our LTE subscribers exceeded 10.5 million. Furthermore, in March 2014, we commercialized advanced wideband LTE (“Wideband LTE-A”) services, which interconnects our 20 MHz of bandwidth in the 1.8 GHz spectrum used to offer wideband LTE services with the 10 MHz of bandwidth in the 900 MHz spectrum used to offer standard LTE services by utilizing inter-band carrier aggregation technology to support transmission speed of up to 225 Mbps, and began additionally interconnecting 10 MHz of bandwidth in the 2.1 GHz spectrum in January 2015 to support transmission speed of up to 300 Mbps under the “Wideband LTE-A X4” service, which offers transmission speed four times faster than those offered under standard LTE services.
In April 2014, LG U+, SK Telecom and we began offering various unlimited mobile service packages, offering mobile subscribers with unlimited voice calls, text messaging, and LTE data. Although we expect that SK Telecom and LG U+ will face similar challenges to those that we expect to face in offering LTE services and in implementing this fourth-generationimprovements to LTE technology, such as increased fees and expenses and unforeseeable market responses to the new technology, we cannot assure you that we will continue to be able to successfully compete in fourth-generation mobile telecommunications services. Furthermore, we believe that the continuing intense competition among major telecommunications operators in Korea and the resulting pressure on our fees, including from offerings of unlimited usage plans, may have a material adverse impact on our results of operations.
Fixed-line Telephone Services. Before December 1991, we were the sole provider of local, domestic long-distance and international long-distance telephone services in Korea. Since then, various competitors have entered the local, domestic long-distance and international long-distance telephone service markets in Korea, which have eroded our market shares. LG U+ and SK Broadband currently provide local, domestic long-distance and international long-distance telephone services. In addition, Onse Telecom Corporation and SK Telink, Inc. currently provide domestic long-distance and international long-distance telephone services. We also compete with specific service providers, such as Internet phone service providers, voice resellers and call-back service providers, that offer international long-distance service in Korea. While we offer our own Internet phone service, the entry of these and other potential competitors into the local, domestic long-distance and international long-distancelong-
distance telephone service markets has had and may continue to have a material adverse effect on our revenues and profitability from these businesses. As of December 31, 2011,2014, we had a market share in local telephone service of 84.3%81.0% and a market share in domestic long distance service of 80.5%78.9%. Further increase in competition may decrease our market shares in such businesses. As part of our efforts to improve our operational efficiencies, we transferred all operations relating to fixed-line sales activities (including on-site sales, line activation, after service, and customer center operations) to our subsidiaries in 2014.
Internet Services.The Korean broadband Internet access service market has experienced significant growth in the past decade. SK Broadband (formerly Hanarotelecom) entered the broadband market in 1999 offering both Hybrid Fiber Coaxial (or HFC) and Asymmetric Digital Subscriber Line (or ADSL) services. We also began offering broadband Internet access service in 1999, followed by Dreamline, Onse and LG U+. In recent years, numerous cable television operators have also begun to offer HFC-based services at rates lower than ours. We had a market share of 43.8%42.3% as of December 31, 2011.2014. As a result of having to compete with a number of competitors and the maturing of the Internet access service market, we currently encounter, and we expect to encounter, pressure to increase marketing expenses in the future.
The market for other Internet-related services in Korea, including IP-TVIPTV and Internet phone services, is also very competitive. We anticipate that competition will continue to intensify as the usage and popularity of the Internet grows and as new domestic and international competitors enter the Internet industry in Korea. The substantial growth of the Internet industry in Korea has attracted many competitors and as a result may lead to increasing price competition to provide Internet-related services. Increased competition in the Internet industry could have a material adverse effect on the number of subscribers of our Internet-related service and on our results of operations.
Failure to renew existing bandwidth spectrum, acquire adequate additional bandwidth spectrum or use our bandwidth efficiently may adversely affect our mobile telecommunications business and results of operations.
One of the principal limitations on a wireless network’s subscriber capacity is the amount of bandwidth spectrum allocated to the service provider. We have a license to use 40 MHz of bandwidth in the 2.1 GHz spectrum that we use to provide IMT-2000 services based on W-CDMA wireless network standards. Such license expires in December 2016, and we are required to pay approximately(Won)₩1.3 trillion during the license period of 15 years. In April 2010, the Korea Communications
CommissionKCC announced its decision to allocate 20 MHz of bandwidth in the 900 MHz spectrum to us, which became effective in July 2011, for which we willare required to pay a portion of the actual sales generated from using the bandwidth in the 900 MHz spectrum during the license period of 10 years as a usage fee for the bandwidth, as well as a portion of expected sales that was determined by the Korea Communications CommissionKCC at the time of allocation. In June 2011, our right to use 40 MHz of bandwidth in the 1.8 GHz spectrum expired, and the Korea Communications CommissionKCC allocated back to us the right to use 20 MHz of such bandwidth in the 1.8 GHz spectrum upon expiration pursuant to our application, for which we willare required to pay a portion of the actual sales generated from using the bandwidth in the 1.8 GHz spectrum during the license period of 10 years as a usage fee for the bandwidth, as well as a portion of expected sales that was determined by the Korea Communications CommissionKCC at the time of allocation.
In August 2011, the Korea Communications CommissionKCC auctioned the right to use the remaining 20 MHz of bandwidth in the 1.8 GHz spectrum that we relinquished, 10 MHz of additional bandwidth in the 800 MHz spectrum and 20 MHz of additional bandwidth in the 2.1 GHz spectrum. We acquired the right to use the 10 MHz of bandwidth in the 800 MHz spectrum, for which we willare required to pay a total usage fee of(Won)₩261 billion during the license period of 10 years, SK Telecom acquired the right to use the 20 MHz of bandwidth in the 1.8 GHz spectrum and LG U+ acquired the right to use the 20 MHz of bandwidth in the 2.1 GHz
spectrum. We began using the 20 MHz of bandwidth in the 1.8 GHz spectrum, which became available upon termination of our 2G PCS services, to provide our 4G LTE services starting in January 2012, and expect to utilizealso began using the newly allocated bandwidths20 MHz of bandwidth in the 800 MHz and 900 MHz spectrumsspectrum to further expandprovide our 4G LTE services starting in September 2013.
In August 2013, the Ministry of Science, ICT and Future Planning further auctioned 50 MHz of bandwidth in the future, if necessary.1.8 GHz spectrum, which had been used by governmental entities such as the military, and 80 MHz of bandwidth in the 2.6 GHz spectrum, which had been used for digital multimedia broadcasting services. We acquired the right to use 15 MHz of bandwidth in the 1.8 GHz spectrum, for which we are required to pay a total usage fee of approximately₩900 billion during a license period of eight years. SK Telecom acquired the right to use 35 MHz of bandwidth in the 1.8 GHz spectrum and LG U+ acquired the right to use 40 MHz of bandwidth in the 2.6 GHz spectrum. Acquiring the right to use additional bandwidth in the 1.8 GHz spectrum has enabled us to provide Wideband LTE services beginning in September 2013, as 15 MHz of the newly acquired bandwidth in the 1.8 GHz spectrum was adjacent to our existing 20 Mhz of bandwidth in the 1.8 GHz spectrum.
The growth of our mobile telecommunications business and the increase in usage of wireless data transmission services have been significant factors in the increased utilization of our bandwidth, since wireless data applications are generally more bandwidth-intensive than voice services. The current trend of increasing data transmission use and the increasing sophistication of multimedia contents are likely to put additional strain on the bandwidth capacity of mobile service providers. In the event we are unable to maintain sufficient bandwidth capacity by renewing existing bandwidth spectrum, receiving additional bandwidth allocation, or cost-effectively implementing technologies that enhance bandwidth usage efficiency, our subscribers may perceive a general decrease in quality of mobile telecommunications services. No assurance can be given that bandwidth constraints will not adversely affect the growth of our mobile telecommunications business.
Introduction of new services, including our 4G LTE services, poses challenges and risks to us.
The telecommunications industry is characterized by continual advances and improvements in telecommunications technology, and we have been continually researching and implementing technology upgrades and additional telecommunication services to maintain our competitiveness. For example, in March 2005, we acquired a license to provide wireless broadband Internet access (or WiBro) service for(Won)₩126 billion, and commercially launched our service in June 2006. We completed the upgrade of our 4G WiBro network and expanded our WiBro service coverage to 8284 cities nationwide and major highways as ofin March 2011, which we believe allows us to provide WiBro services at speeds that are approximately three times faster than our previous 3G network at a lower cost, and had approximately 740,000753,000 subscribers as of December 31, 2011.2014. The number of our WiBro subscribers decreased in 2014 compared to 2013, as more WiBro subscribers chose to access the internet using our 4G LTE network rather than WiBro following the introduction and proliferation of 4G LTE services during 2013 and 2014. Furthermore, we focused our subscriber retention efforts during 2014 on our mobile subscribers rather than our WiBro subscribers. We are also continually upgrading our broadband network to enable better FTTH connection, which enhances downstreamdata transmission speed and connection quality. FTTH is a telecommunication architecture in which a communication path is provided over optical fiber cables extending from the telecommunications operator’s switching equipment to the boundary of home or office. FTTH uses fiber optic cable, which is able to carry a high-bandwidth signal for longer distances without degradation. FTTH also enables us to deliver enhanced products and services that require high bandwidth,digital media content, such as IP-TV service and delivery of other digital media content.IPTV, with higher stability.
In addition, we have been building more advanced mobile telecommunications networks based on LTE technology, which is generally referred to as a 4G technology, and commenced providing
commercial 4G LTE services in the Seoul metropolitan area onin January 3, 2012. We completed the expansion of our 4G LTE service coverage to 84 cities throughout Koreanationwide in AprilOctober 2012. Several wireless carriers in the United States, Europe and Asia commenced LTE services in recent years and LTE technology is expected to becurrently widely accepted as the standard 4G technology. LTE technology enables data to be transmitted faster than W-CDMA, up to 75300 Mbps for downloading and up to 37.5 Mbps for uploading.downloading. We expectbelieve that the faster data transmission speed of the LTE network combined with our existing 4G nationwide WiBro network, will allowallows us to offer significantly improved wireless data transmission services providing our subscribers with faster wireless access to multimedia content. No assurance can be given that our new services will gain broad market acceptance such that we will be able to derive revenues from such services to justify the license fee, capital expenditures and other investments required to provide such services.
Termination of our second generation Personal Communications Service (or 2G PCS) services may pose risks to us.
As part of our decision to apply for reallocation of the 20 MHz bandwidth in the 1.8 GHz spectrum, we applied to the Korea Communications Commission to terminate our 2G PCS services, and on November 23, 2011, the Korea Communications Commission approved our plan. However, on November 30, 2011, approximately 900 of our 2G PCS service subscribers filed a class-action suit against the Korea Communications Commission for its approval of our plan, claiming that we used improper means to reduce our 2G PCS subscribers to comply with regulatory requirements before terminating the 2G PSC services and that the Korea Communications Commission did not consider such factor in approving our plan. On December 6, 2011, the Seoul Administrative Court issued a preliminary injunction, which temporarily suspended our termination of the 2G PCS services until the case went to trial. We immediately appealed the decision and the Seoul High Court overruled the preliminary injunction on December 26, 2011 and reinstated the Korea Communications Commission’s approval. Accordingly, we terminated our 2G PCS services in the Seoul metropolitan area and began the termination process for the rest of Korea on January 3, 2012. On January 12, 2012, the 2G subscribers filed an appeal of the Seoul High Court’s decision with the Supreme Court of Korea, and on February 1, 2012, the Supreme Court of Korea denied such appeal. On January 17, 2012, trial for the original class-action suit filed by the 2G subscribers began in the Seoul Administrative Court. The outcome of the trial, and any effect it may have on us, cannot be determined at this time. There can be no assurance that we will not incur reputational damage from terminating our 2G PCS services, or that further complaints and other potential actions of our 2G PCS subscribers will not adversely affect our business, financial condition and results of operations.
We may not be able to successfully pursue our strategy to acquire businesses and enter into joint ventures that complement or diversify our current business, and we may need to incur additional debt to finance such expansion activities.
One key aspect of our overall business strategy calls for acquisitions of businesses and entering into joint ventures that complement or diversify our current business. In October 2011, we, through our subsidiary KT Capital Co., Ltd., acquired 1,622,520 common shares of BC Card Co., Ltd. to further diversify our business and to create synergies through utilization of our mobile telecommunications network in financial services. In December 2011, we entered into a memorandum of understanding for a strategic partnership with, and acquisition ofWe acquired an additional 1,349,920 common shares of Telkom SA Limited,BC Card Co., Ltd. in January 2012 for approximately₩287 billion, and owned a South African comprehensive telecommunications service provider.69.54% interest in BC Card Co., Ltd. as of December 31, 2014. In January 2011, we acquired 5,600,000 shares of redeemable convertible preferred stock with voting rights and convertible bonds that arewere convertible into 5,600,000 shares of common stock of KT Skylife Co., Ltd., a provider of satellite TV service which may also be packaged with our IP-TVIPTV services, from Dutch Savings Holdings
B.V. for approximately(Won)₩246 billion. We exercised the conversion rights on the redeemable convertible preferred stock and the convertible bonds in March 2011, and owned a 50.3%50.1% interest in KT Skylife Co., Ltd. as of December 31, 2011.2014.
While we plan to continue our search for other suitable acquisition and joint venture opportunities, we cannot provide assurance that we will be able to identify additional attractive opportunities or that we will successfully complete the transactions, including the proposed transaction with Telkom SA Limited, without encountering administrative, technical, political, financial or other difficulties, or at all. Even if we were to successfully complete the transactions, success of an acquisition or a joint venture depends largely on our ability to achieve the anticipated synergies, cost savings and growth opportunities from integrating the business of the acquired company or the joint venture with our business. There can be no assurance that we will achieve the anticipated benefits of the transaction, which may adversely affect our business, financial condition and results of operations.
Pursuing acquisitions or joint venture transactions also requires significant capital, and as we pursue further growth opportunities for the future, we may need to raise additional capital through incurring loans or through issuances of bonds or other securities in the international capital markets. The proposed transaction with Telkom SA Limited may also require significant capital resources if the acquisition is eventually successful. However, we cannot guarantee that such capital will be available when needed due to conditions in the capital markets, or that even if such capital is available, it will be available on commercially acceptable terms or in sufficient amounts to make the expenditures required.
Disputes with our labor union may disrupt our business operations.
In the past, we have experienced opposition from our labor union for our strategy of restructuring to improve our efficiency and profitability by disposing of non-core businesses and reducing our employee base. Although we have not experienced any significant labor disputes or unrests in recent years, there can be no assurance that we will not experience labor disputes or unrests in the future, including expanded protests and strikes, which could disrupt our business operations and have an adverse effect on our financial condition and results of operations.
We also negotiate collective bargaining agreements every two years with our labor union and annually negotiate a wage agreement. Our current collective bargaining agreement expires on May 23, 2013.
2015. Although we have been able to reach collective bargaining agreements and wage agreements with our labor union in recent years, there can be no assurance that we will not experience labor disputes and unrests resulting from disagreements with the labor union in the future.
The Korean telecommunications and Internet protocol broadcasting industries are subject to extensive Government regulations, and changes in Government policy relating to these industries could have a material adverse effect on our operations and financial conditioncondition..
The Government, primarily through the Korea Communications Commission,Ministry of Science, ICT & Future Planning (the “MSIP”) (ICT standing for Information & Communication Technology) and the KCC, has authority to regulate the telecommunications industry. Until March 2013, regulation of the telecommunications industry had mainly been the responsibility of the KCC. With the establishment of the newly created MSIP on March 23, 2013, however, such regulatory responsibility has mostly been transferred to the MSIP. The Korea Communications Commission’sMSIP’s policy is to promote competition in the Korean telecommunications markets through measures designed to prevent the dominant service provider in any such market from exercising its market power in such a way as to prevent the emergence and development of viable competitors.
Under current Government regulations, if a network service provider has the largest market share for a specified type of service and its revenue from that service for the previous year exceeds a specific revenue amount set by the Korea Communications Commission,MSIP, it must obtain prior approval from the Korea Communications CommissionMSIP for the rates and the general terms for that service. Each year the Korea Communications CommissionMSIP designates service providers the rates and the general
terms of which must be approved by the Korea Communications Commission.MSIP. In recent years, the Korea Communications Commission hasMSIP had so designated us for local telephone service and SK Telecom for mobile service, and the Korea Communications Commission,MSIP, in consultation with the Ministry of Strategy and Finance, currently approves rates charged by us and SK Telecom for such services.
The Korea Communications CommissionMSIP currently does not regulate our domestic long-distance, international long-distance, broadband internet access and mobile service rates, but the inability to freely set our local telephone service rates may hurt profits from such business and impede our ability to compete effectively against our competitors. See “Item 4. Information on the Company—Item 4.B. Business Overview—Regulation—Rates.” The form of our standard agreement for providing local network service and each agreement for interconnection with other service providers are also subject to approval by the Korea Communications Commission.MSIP. In addition, the Korea Communications CommissionMSIP may periodically announce public policy guidelines or suggestions that we take into consideration in setting our tariff for non-regulated services. In June 2011, upon recommendation of the Korea Communications Commission,KCC, SK Telecom announced tariff reduction measures, including a reduction of the monthly fee by(Won)₩1,000 for every subscriber, an exemption of usage charges for short text message service, or SMS, up to 50 messages per month and the introduction of flexible service plans for smart phonesmartphone users. In August 2011, after discussions with the Korea Communications Commission,KCC, we announced the adoption ofadopted various tariff reduction measures, including a reduction of the monthly fee by(Won)₩1,000 for every mobile subscriber, (effective October 21, 2011), an exemption of usage charges for SMS, of up to 50 messages per month (effective November 1, 2011) and the introduction of customized fixedflat rate plans for smart phone users (effective October 24, 2011)smartphone users. The MSIP, which took over the KCC’s tariff regulation function in March 2013, is planning to gradually reduce and abolish activation fees by the end of 2015. As a result of discussions with the MSIP, in August 2013, we, LG U+ and SK Telecom reduced activation fees by approximately 40%. We reduced our activation fee from₩24,000 to₩14,400, SK Telecom reduced its activation fee from₩39,600 to₩23,760 and LG U+ reduced its activation fee from₩30,000 to₩18,000. In January 2014, the MSIP announced its plans to further reduce activation fees in the second half of 2014 so that such fees would be reduced to 50% of levels then-existing. In August 2014, we, SK Telecom and LG U+ reduced activation fees for new subscribers by approximately 50%. Our activation fee was reduced from₩14,400 to₩7,200, SK Telecom’s activation fee was reduced from₩23,760 to₩11,880 and LG U+’s activation fee was reduced from₩18,000 to₩9,000. SK Telecom abolished its activation fee completely in November 2014 and we abolished our activation fee completely in March 2015. There can be no assurance that we will not adopt other tariff-reducing measures in the future to comply with the Korea Communications Commission’sGovernment’s public policy guidelines or suggestions.
Based on investigations conducted in December 2012 and January 2013, the KCC imposed a combined fine of approximately₩12 billion on SK Telecom, LG U+ and us in January 2013 (our fine being approximately₩2.9 billion), for providing subsidies that were higher than those allowed under current regulations to new mobile phone purchasers and subscribers, and also imposed temporary suspensions from recruiting new subscribers ranging from 20 days to 24 days. In March 2013, the KCC again imposed a combined fine of approximately₩5 billion on SK Telecom, LG U+ and us (our fine being approximately₩1.6 billion) for continuing to offer subsidies during the suspension period. In July 2013, the KCC imposed a combined fine of approximately₩67 billion on SK Telecom, LG U+ and us (our fine being approximately₩20 billion) and also imposed a seven day suspension on us from recruiting new subscribers, also in connection with providing excessive handset subsidies to new subscribers. In December 2013, the KCC again imposed a combined fine of approximately₩106 billion on SK Telecom, LG U+ and us (our fine being approximately₩30 billion), which is the largest fine ever imposed by the KCC on local mobile operators for providing excessive subsidies to new subscribers. In March 2014, the MSIP imposed a 45-day suspension on each of us, SK Telecom and LG U+ from recruiting new subscribers as a result of continuing to offer excessive handset subsidies to new subscribers, despite the order from the KCC prohibiting such subsidies. Additionally, the MSIP announced that it plans to bring criminal charges with fines of up to₩150 million and imprisonment of less than three years against any carrier and responsible personnel that fails to adhere to the suspension or continues to offer illegal subsidies after the suspension is completed. In August 2014, the KCC again imposed a combined fine of approximately₩58 billion on SK Telecom, LG U+ and us (our fine being approximately₩11 billion) for providing excessive handset subsidies, and also imposed temporary suspensions on recruiting new subscribers for seven days on SK Telecom and LG U+. In December 2014, the KCC further imposed a fine of approximately₩8 billion on each of SK Telecom, LG U+ and us for providing excessive handset subsidies and in March 2015 the KCC again imposed a combined fine of approximately₩34 billion on SK Telecom, LG U+ and us (our fine being approximately₩9 billion) for violation of regulations relating to handset sales, in connection with a used handset buyback program that we and the other telecommunications operators were promoting.
President Park Geun-hye, who took office on February 25, 2013 as the 18th President of Korea, announced that the new Government will work toward reducing telecommunications service charges and promoting transparency in the decision making of telecommunications service providers. Accordingly, the new Government has set detailed policy objectives to (1) gradually reduce and abolish activation fees by 2015, (2) expand mobile virtual network operator and mobile voice over Internet protocol (“m-VoIP”) service, (3) intensify regulations on handset subsidies and (4) construct a data-based tariff system. If the new Government goes forward with its new telecommunications policy, it will increase competition among wireless service providers and our business and our profitability may be adversely affected.
On October 1, 2014, the Act on Improvement of Mobile Telecommunication Device Distribution System (the “Mobile Device Act”), which seeks to lower the cost of communication and reduce handset factory prices by establishing fair and transparent order in the distribution of mobile telecommunication devices, went into effect. The Mobile Device Act regulates, inter alia, the sale and subsidies of mobile devices such as smartphones, with one of its purposes being to induce telecommunication operators to compete in lowering the costs of communications and encourage the manufacturers to reduce handset factory prices, while improving service quality. Under the Mobile Device Act, consumers may not be discriminated in terms of subsidies based on their age, place of residence or monthly subscription plan when using their existing mobile phones, buying a new phone or switching their mobile carriers. Furthermore, everyone, regardless of their status, is entitled to receive either a handset subsidy for the purchase of mobile phone models that were launched within the last 15 months, or a tariff discount (with the current discount rate set at 20%, effective as of April 24, 2015). The maximum amount of handset subsidy that telecommunications operators and handset manufacturers may offer is determined by Korean telecommunication regulators (such limit to be determined between₩250,000 and₩350,000, and may be adjusted every six months, with the current limit set at₩330,000, effective
as of April 8, 2015). Telecommunications operators are also required to publicly announce the amount of handset subsidy that they offer, which may not be readjusted within one week after such announcement. In addition, telecommunications operators are prohibited from using misleading or exaggerated advertisements, such as advertisements that mobile phones are free without adequately explaining that it is preconditioned on signing up for high-priced monthly subscription plans.
The Government also sets the policies regarding the use of radio frequencies and allocates the spectrum of radio frequencies used for wireless telecommunications. For a discussion of the Government’s recent policies and practices on bandwidth spectrum allocation, see “Item 3. Key information—Item 3.D. Risk Factors—“Failure to renew existing bandwidth spectrum, acquire adequate additional bandwidth spectrum or use our bandwidth efficiently may adversely affect our mobile telecommunications business and results of operations.” The new allocations of bandwidth could increase competition among wireless service providers, which may have an adverse effect on our business.
We also plan to put more focus on the Internet protocol (or IP) media market, and we began offering IP-TV service onIPTV services in November 17, 2008. IP-TVIPTV is a service which combines video-on-demand services with real-time high definition broadcasting via broadband networks. The Korea Communications Commission hasMSIP and the KCC have the authority to regulate the IP media market, including IP-TVIPTV services. Under the Internet Multimedia Broadcasting Business Act, anyone intending to engage in the IP media broadcastingIPTV services business must first obtain a license from the Korea Communications Commission, andMSIP. Moreover, anyone intending to engage inprovide contents focused on news or contents that generally combine news, culture entertainment, and any other similar contents with IPTV providers, must obtain approval from the broadcastingKCC. Furthermore, anyone intending to provide contents relating to the introduction of certain contentsconsumer products and other similar marketing content with IPTV providers must obtain additional approval offrom the Korea Communications Commission.MSIP. In addition, KT Skylife Co. (formerly Korea Digital Satellite Broadcasting Co., Ltd.), which became our consolidated subsidiary starting in January 2011, offers satellite TV services, which may also be packaged with our IP-TVIPTV services. KT Skylife is also subject to regulation by the regulation ofMSIP and the Korea Communications CommissionKCC pursuant to the Korea Broadcasting Act. In March 2015, amendments to the Internet Multimedia Broadcasting Business Act were passed at a plenary session of the National Assembly, which will become effective three months after it is promulgated, unless the President of Korea vetoes the amendments. Under such amendments, which will be in effect until June 2018, a single broadcasting operator may not have more than one-third of the market share of all paid broadcasting subscribers in Korea. As these amendments and the regulations thereunder have not yet become effective, their effects are currently uncertain.
Government policies and regulations relating to the above as well as other regulations involving the Korean telecommunications and IP broadcasting industries (including as a result of the implementation of free trade agreements between Korea and other countries, including the United States and the European Union) may change, which could have a material adverse effect on our operations and financial condition. See “Item 4. Information on the Company—Item 4.B. Business Overview—Regulation.”
We are subject to various regulations under the Monopoly Regulation and Fair Trade Act.
The Monopoly Regulation and Fair Trade Act provides for various regulations and restrictions on large business groups enforced by the Korea Fair Trade Commission. The Korea Fair Trade Commission initially designated us as a large business group under the Monopoly Regulation and Fair Trade Act on April 1, 2002. Our business relationships and transactions with our subsidiaries, affiliates and other companies within the KT Groupgroup are subject to ongoing scrutiny by the Fair Trade Commission as to, among other things, whether such relationships and transactions constitute undue financial support among companies of the same business group. We are also subject to the fair trade regulations limiting cross-guarantee of debt and cross-shareholdings amongguarantees for other domestic member companies of the same group and cross-shareholdings among domestic member companies of the same group. Additionally, we are subject to
a prohibition, in effect since July 25, 2014, against circular shareholding among any three or more entities within our business group. Any future determination by the Korea Fair Trade Commission that we have engaged in transactions that violate the fair trade laws and regulations may result in fines or other punitive measures and may have a material adverse effect on our reputation and our business.
The reported investigations of and any adverse publicity associated with Mr. Suk-Chae Lee, our former Chief Executive Officer, and our other former executive officers or directors could have a material adverse effect on our business, reputation and stock price.
On November 12, 2013, Mr. Suk-Chae Lee resigned from his position as the president and chief executive officer of KT Corporation following the investigation by prosecutors for alleged embezzlement and breach of fiduciary duty. A warrant for Mr. Lee’s arrest and detainment was submitted for approval to the Seoul Central District Court in January 2014, but was denied due to lack of ascertainable evidence for his arrest. In April 2014, the Seoul Central District prosecutor’s office charged Mr. Lee with embezzlement and breach of fiduciary duty, and also charged Mr. Il Yung Kim, our former non-independent director and former president of the KT Corporate Center, as a co-conspirator in the breach of fiduciary duty by Mr. Lee, and Mr. Yu-Yeol Seo, our former president of Home Business Group, as a co-conspirator in Mr. Lee’s embezzlement. The trials against these former employees are still ongoing, and we cannot be certain at this time what the outcome will be. However, there can be no assurance that any further developments in the trials will not adversely affect our business or cause our stock price to decline.
The reported investigation of and any adverse publicity associated with one of our subsidiaries could have a material adverse effect on our business, reputation and stock price.
An employee of KT ENS and several companies, some of which are KT ENS’s subcontractors, allegedly worked together to forge documents, including a forged proof of accounts receivable, to incur borrowings, of which₩290 billion remains unpaid, from 16 Korean banks since 2008 in over 460 transactions, which were allegedly secured by the forged accounts receivable and endorsed by KT ENS. KT ENS’s management neither had knowledge of nor approved such transactions. On February 11, 2014, police raided the offices of the subcontractors in connection with their investigation of the loans. Upon discovery of the incident, KT ENS immediately suspended the employee in question without pay, pending the results of the investigations for any further disciplinary actions. The employee and several other persons involved in the incident were sentenced to prison terms by the Seoul Central District Court in August 2014. The appeals regarding the sentences are currently ongoing.
In March 2014, KT ENS filed for court receivership with the Seoul Central District Court, based on its inability to pay approximately₩49 billion in commercial paper that became due after early redemption rights were exercised. The commercial paper had been issued in connection with construction of a solar power plant by a contractor of the project and guaranteed by KT ENS. KT ENS faced difficulties in preventing such exercise of redemption rights following the above incident, and we declined to provide additional financial support to KT ENS to repay the redeemed commercial paper. In August 2014, the Seoul Central District Court approved KT ENS’s restructuring plan, and determined that KT ENS is only responsible for 15% of the borrowings which remain unpaid, or approximately₩46 billion. Pursuant to the plan, KT ENS is expected to repay all of its currently outstanding obligations. The banks have appealed the decision of the Seoul Central District Court, and the trial over the appeal is currently ongoing. While KT ENS’s restructuring is unlikely to have a material impact on our results of operations or financial condition on a consolidated basis, as KT ENS was not a consolidated subsidiary for 2014 due to its filing for court receivership, and our interest in KT ENS was classified as available-for-sale securities, any future legal proceedings against KT ENS and/or us may lead to significant losses. Such losses, as well as any adverse publicity associated with the incident, could have a material adverse effect on our business, reputation and stock price.
The data breach incidents involving us in recent years have resulted in government investigations and private litigation, and if our efforts to protect the personal information of our subscribers are unsuccessful, future issues may result in further government enforcement actions and private litigation and may significantly impact our results of operation and reputation.
The nature of our business involves the receipt and storage of personal information of our subscribers. The uninterrupted operation of our information systems and confidentiality of the customer information that resides in such systems are critical to our successful operations. As such, we have a program in place to detect and respond to data security incidents. However, even though we may take all steps we believe are necessary to protect personal information, hardware, software or applications we develop or procure from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. Unauthorized parties may also attempt to circumvent our security measures to gain access to our systems or facilities through fraud, trickery or other forms of deceiving our employees, contractors and temporary staff. In addition, because the techniques used to obtain unauthorized access or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures.
For example, in July 2012, the police arrested two individuals in connection with the alleged theft of personal information relating to approximately 8.7 million of our mobile phone subscribers. The individuals in question stole personal information through a series of hackings starting from February 2012 into our New Service and Technology Evolution Program (“N-STEP”), our mobile customer information system. Since the incident, approximately 29,800 of our mobile phone subscribers filed a total of 15 lawsuits against us in connection with the N-STEP hackings, alleging that we failed to protect their personal information, and are seeking total damages of approximately₩15 billion. From August 2014 to January 2015, various district courts have awarded damages of₩100,000 per plaintiff for 11 of the cases involving a total of approximately 29,000 of the subscribers, resulting in damages of approximately₩3 billion to us, while the remaining trials are currently ongoing at various district courts. We have appealed the district courts’ decisions and the appeals are currently ongoing at the Seoul High Court.
Furthermore, in March 2014, the police arrested three individuals in connection with their alleged theft of personal information relating to approximately 9.8 million of our subscribers. The individuals in question stole the personal information of our subscribers through a series of hackings into our main homepage starting from February 2014. Since the incident, approximately 13,450 subscribers filed 18 lawsuits against us in connection with the information theft, seeking total damages of approximately₩7 billion. The trials are currently ongoing at various district courts. In June 2014, we were fined₩85 million by the KCC and were ordered to take corrective measures in connection with the most recent hacking incident. We filed an administrative appeal in August 2014 in connection with the KCC fine, and the appeal is currently ongoing at the Seoul Administrative Court.
We are unable to predict with any degree of certainty the outcome of these incidents at this time, including the scope of investigations or the maximum potential exposure. However, if we experience additional significant data security breaches or fail to detect and appropriately respond to significant data security breaches, we could be subject to additional government enforcement actions, regulatory sanctions and litigation in the future. In addition, our mobile phone subscribers could lose confidence in our ability to protect their information, which could cause them to discontinue using our services altogether. Furthermore, adverse final determinations, decisions or resolutions in such matters could encourage other parties to bring related claims and actions against us. Accordingly, the outcome of these incidents may materially and adversely impact our business, reputation, results of operations and financial condition.
Concerns that radio frequency emissions may be linked to various health concerns could adversely affect our business and we could be subject to litigation relating to these health concerns.
In the past, allegations that serious health risks may result from the use of wireless telecommunications devices or other transmission equipment have adversely affected share prices of some wireless telecommunications companies in the United States. In May 2011, the International Agency for Research on Cancer (“IARC”) announced that it has classified radiofrequency electromagnetic fields associated with wireless phone use as possibly carcinogenic to humans, based on an increased risk for glioma, a malignant type of brain cancer. The IARC is part of the World Health Organization that conducts research on the causes of human cancer and the mechanisms of carcinogenesis, and aims to develop scientific strategies for cancer control. We cannot assure you that such health concerns will not adversely affect our business. Several class action and personal injury lawsuits have been filed in the United States against several wireless phone manufacturers and carriers, asserting product liability, breach of warranty and other claims relating to radio transmissions to and from wireless phones. Certain of these lawsuits have been dismissed. We could be subject to liability or incur significant costs defending lawsuits brought by our subscribers or other parties who claim to have been harmed by or as a result of our services. In addition, the actual or perceived risk of wireless telecommunications devices could have an adverse effect on us by reducing our number of subscribers or our usage per subscriber.
Depreciation of the value of the Won against the Dollar and other major foreign currencies may have a material adverse effect on the results of our operations and on the prices of our securities.
Substantially all of our revenues are denominated in Won. Depreciation of the Won may materially affect the results of our operations because, among other things, it causes an increase in the amount of Won required by us to make interest and principal payments on our foreign-currency-denominated debt, the costs of telecommunications equipment that we purchase from overseas sources, net settlement payments to foreign carriers and certain payments related to our derivative instruments entered into for foreign exchange risk hedging purposes. Of the(Won)₩8,91812,815 billion total principal amount of long-term borrowings (less current portion) outstanding as of December 31, 2011,2014,(Won)₩2,5962,859 billion was denominated in foreign currencies with ana weighted average weighted interest rate of 3.93%3.49%. The interest rates of such long-term debt denominated in foreign currencies ranged from 1.05% (for US$100 million floating rate notes due 2013 with an interest rate of three month London Interbank Offered Rate plus 0.47%)0.59% (Japanese Yen 5 billion bond issued in 2013) to 6.50% (for US$100 million fixed rate notes due 2034 issued under our medium-term note program). Upon identification and evaluation of our currency risk exposures, we, having considered various circumstances, enter into derivative financial instruments to try to manage some of such risks. Although the impact of exchange rate fluctuations has in the past been partially mitigated by such strategies, our results of operations have historically been affected by exchange rate fluctuations and there can be no assurance that such strategies will be sufficient to reduce or eliminate the adverse impact of such fluctuations in the future. See “Item 3. Key Information—Item 3.A. Select Financial Data—
Exchange Rate Information”, “Item 5. Operating and Financial Review and Prospects—Item 5.B. Liquidity and Capital Resources” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk.”
Fluctuations in the exchange rate between the Won and the Dollar will also affect the Dollar equivalent of the Won price of the shares of our common stock on the KRX KOSPI Market and, as a result, will likely affect the market price of the ADSs. These fluctuations will also affect the Dollar conversion by the depositary for the ADRs of cash dividends, if any, paid in Won on shares of common stock represented by the ADSs.
Risks Relating to Korea
Korea is our most important market, and our current business and future growth could be materially and adversely affected if economic conditions in Korea deteriorate.
Substantially all of our operations, customers and assets are located in Korea. Accordingly, the performance and successful fulfillment of our operational strategies are necessarily dependent on the overall Korean economy and the resulting impact on the demand for telecommunications services. The economic indicators in Korea in recent years have shown mixed signs of growth and uncertainty, and future growth of the Korean economy is subject to many factors beyond our control.control, including developments in the global economy.
In recent years, adverse conditions and volatility in the worldwide financial markets, fluctuations in oil and commodity prices and the general weakness of the U.S. and global economy have contributed to the uncertainty of global economic prospects in general and have adversely affected, and may continue to adversely affect, the Korean economy. From the second half of 2008 to the first half of 2010, theThe value of the Won relative to major foreign currencies in general and the U.S. dollar in particular has also fluctuated widely. While such fluctuations generally stabilized in the second half of 2010 and into 2011, there has been increased volatility in the value of the Won in recent months reflecting the general volatility in the global financial markets. There is no guarantee that they will not occur again in the future.See “Item 3. Key Information—Item 3.A. SelectSelected Financial Data—Exchange Rate Information”Rates.” A depreciation of the Won increases the cost of imported goods and services and the Won revenue needed by Korean companies to service foreign currency-denominatedcurrency denominated debt. An appreciation of the Won, on the other hand, causes export products of Korean companies to be less competitive by raising their prices in terms of the relevant foreign currency and reduces the Won value of such export sales. Furthermore, as a result of adverse global and Korean economic conditions, there has been an overall decline and continuing volatility in the stock prices of Korean companies. The Korea Composite Stock Price Index, (known as the “KOSPI”)or KOSPI, declined from 1,897.1 on December 31, 2007 to 938.8 on October 24, 2008. While the KOSPI havehas recovered since 2008, closing at 2,142.6 on April 29, 2015, there has been increased volatility in the KOSPI in recent months, particularly following the downgrading by Standard & Poor’s Rating Services of the long-term sovereign credit rating of the United States to “AA+” from “AAA” in August 2011 and in light of the financial difficulties affecting many other governments worldwide, in particular Greece, Portugal, Spain, Italy and other countries in Europe. There is no guarantee that the stock prices of Korean companies will not decline again in the future. Future declines in the KOSPI and large amounts of sales of Korean securities by foreign investors and subsequent repatriation of the proceeds of such sales may continue to adversely affect the value of the Won, the foreign currency reserves held by financial institutions in Korea, and the ability of Korean companies to raise capital. Any future deterioration of the Korean or global economy could adversely affect our business, financial condition and results of operations.
Developments that could have an adverse impact on Korea’s economy in the future include:
difficulties in the financial sectors in Europe and elsewhere and increased sovereign default risks in selectselected countries and the resulting adverse effects on the global financial markets;
declines in consumer confidence and a slowdown in consumer spending;
adverse changes or volatility in foreign currency reserve levels, commodity prices (including oil prices), exchange rates (including fluctuation of the DollarU.S. dollar or Japanese Yen exchange rates or revaluation of the Chinese renminbi)Renminbi), interest rates, inflation rates or stock markets;
increasing levels of household debt;
continuing adverse conditions in the economies of countries that are important export markets for Korea, such as the United States, Japan and China, or in emerging market economies in Asia or elsewhere;
further decreases in the market prices of Korean real estate;
increasing delinquencies and credit defaults by retailconsumer and small- and medium-sized enterprise borrowers;
declines in consumer confidence and a slowdown in consumer spending;
the continued emergence of the Chinese economy, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and the relocation of the manufacturing base from Korea to China);
the economic impact of any pending or future free trade agreements;
social and labor unrest;
substantial decreases in the market prices of Korean real estate;
a decrease in tax revenues and a substantial increase in the Korean government’s expenditures for fiscal stimulus measures, unemployment compensation and other economic and social programs that, together, would lead to an increased Korean government budget deficit;
financial problems or lack of progress in the restructuring of Korean conglomerates, other large troubled companies, their suppliers or the financial sector;
loss of investor confidence arising from corporate accounting irregularities andor corporate governance issues at certain Korean conglomerates;companies;
the economic impact of any pending or future free trade agreements;
geo-political uncertainty and risk of further attacks by terrorist groups around the world;
the occurrence of severe health epidemics in Korea andor other parts of the world;world, including the recent Ebola outbreak;
deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from territorial or trade disputes or disagreements in foreign policy;
political uncertainty or increasing strife among or within political parties in Korea;
natural disasters that have a significant adverse economic or other impact on Korea or its major trading partners;
hostilities or political or social tensions involving oil producing countries in the Middle East and North Africa, including Iraq, Syria and Yemen, as well as in Ukraine and Russia, and any material disruption in the supply of oil or significant decrease or increase in the price of oil;
the occurrence of severe earthquakes, tsunamis and other natural disasters in Korea and other parts of the world, particularly in trading partners (such as the March 2011 earthquake in Japan, which also resulted in the release of radioactive materials from a nuclear plant that had been damaged by the earthquake); and
an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States.
Escalations in tensions with North Korea could have an adverse effect on us.
Relations between Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In particular, since the death of Kim Jong-il in December 2011, there has been increased uncertainty with respect to the future of North Korea’s political leadership and concern regarding its implications for political and economic stability in the region. Although Kim Jong-il designated hisJong-il’s third
son, Kim Jong-eun, has assumed power as his father’s designated successor, prior to his death, the eventuallong-term outcome of such leadership transition remains uncertain. Only limited information is available about Kim Jong-eun, who is reported to be in his late twenties, and it remains unclear which individuals or factions, if any, will share political power with Kim Jong-eun or assume the leadership if the transition is not successful.
In addition, there have been heightened security concerns in recent years stemming from North Korea’s nuclear weapon and long-range missile programs as well as its hostile military actions against Korea. Some of the significant incidents in recent years include the following:
In April 2013, North Korea blocked access to the inter-Korean industrial complex in its border city of Gaeseong to South Koreans, while the U.S. deployed nuclear-capable stealth bombers and destroyers to Korean air and sea space;
In March 2013, North Korea stated that it had entered “a state of war” with Korea, declaring the 1953 armistice invalid, and put its artillery at the highest level of combat readiness to protest the Korea-United States allies’ military drills and additional sanctions imposed on North Korea for its missile and nuclear tests;
North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty in January 2003 followed by aand conducted three rounds of nuclear test intests between October 2006 to February 2013, which increased tensions in the region and elicited strong objections worldwide. In May 2009, North Korea announced that it had successfully conducted a second nuclear test and test-fired three short-range surface-to-air missiles. In response, the United Nations Security Council unanimously passed a resolutionresolutions that condemned North Korea for the nuclear testtests and decided to expand and tightenexpanded sanctions against North Korea. Korea, most recently in March 2013;
In December 2012, North Korea launched a satellite into orbit using a long-range rocket, despite concerns in the international community that such a launch would be in violation of the agreement with the United States as well as United Nations Security Council resolutions that prohibit North Korea from conducting launches that use ballistic missile technology; and
In March 2010, a Korean warshipnaval vessel was destroyed by an underwater explosion, killing many of the crewmen on board. The Government formally accused North Korea of causing the sinking, while North Korea has denied responsibility. InMoreover, in November 2010, North Korea reportedly fired more than one hundred artillery shells that hit Korea’s Yeonpyeong Island near the Northern Limit Line, which acts as the de facto maritime borderboundary between Korea and North Korea on the west coast of Korea, killing twothe Korean soldierspeninsula, causing casualties and two civilians, wounding many others and causing significant property damage. The Government condemned North Korea for the attack and vowed stern retaliation should there be further provocation. On April 13, 2012, North Korea launched a long-range rocket over the Yellow Sea. Korea, Japan and the United States condemned the launch and the United Nations Security Council adopted a chairman’s statement condemning North Korea for the launch.
North Korea’s economy also faces severe challenges. In November 2009, the North Korean government redenominated its currency at a ratio of 100 to 1 as part of a currency reform undertaken in an attempt to control inflation and reduce income gaps. In tandem with the currency redenomination, the North Korean government banned the use or possession of foreign currency by its residents and closed down privately run markets,challenges, which led to severe inflation and food shortages. Such developments may further aggravate social and political tensionspressure within North Korea. There can be no assurance that the level of tension onaffecting the Korean peninsula will not escalate in the future. Any further increase in tensions, which may occur, for example, if North Korea experiences a leadership crisis, high level contacts between Korea and North Korea break down or military hostilities occur, could have a material adverse effect on the Korean economy and on our business, results of operations and financial condition.
Risks Relating to the Securities
If an investor surrenders his ADSs to withdraw the underlying shares, he may not be allowed to deposit the shares again to obtain ADSs.
Korean law currently limits foreign ownership of the ADSs and our shares. In addition, under our deposit agreement, the depositary bank cannot accept deposits of shares and deliver ADSs
representing those shares unless (1) we have consented to such deposit or (2) Korean counsel has advised the depositary bank that the consent required under (1) is no longer required under Korean laws and regulations. Under current Korean laws and regulations, the depositary bank is required to obtain our prior consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number of shares deposited by us or with our consent for the issuance of ADSs (including deposits in connection with the initial and all subsequent offerings of ADSs and stock dividends or other distributions related to these ADSs) and (2) the number of shares on deposit with the depositary bank at the time of such proposed deposit. The depositary bank has informed us that, at a time it considers to be appropriate, the depositary bank plans to start accepting deposits of shares without our consent and to deliver ADSs representing those shares up to the amount allowed under current Korean laws and regulations. Until such time, however, the depositary bank will continue to obtain our consent for such deposits of shares and delivery of ADSs, which we may not provide. Consequently, if an investor surrenders his ADSs to withdraw the underlying shares, he may not be allowed to deposit the shares again to obtain ADSs. See “Item 10. Additional Information—Item 10.D. Exchange Controls.”
A foreign investor may not be able to exercise voting rights with respect to common shares exceeding the number of common shares held by our largest domestic shareholder.
Under the Telecommunications Business Act, a foreign shareholder who holds 5.0% or more of our total shares is prohibited from becoming our largest shareholder. However, any foreign shareholder who held 5.0% or more of our total shares and was our largest shareholder on or prior to May 9, 2004 is exempt from the regulations, provided that such foreign shareholder may not acquire any more of our shares. Under the Telecommunications Business Act, the Korea Communications CommissionMSIP may, if it deems it necessary to preserve substantial public interests, prohibit a foreign shareholder from being our largest shareholder. In addition, the Foreign Investment Promotion Act prohibits any foreign shareholder from being our largest shareholder if such shareholder owns 5.0% or more of our shares with voting rights. In the event that any foreigner or foreign government acquires our shares in violation of the above provisions, such foreign shareholder may not be able to exercise voting rights with respect to common shares exceeding such threshold. The Korea Communications CommissionMSIP may also order us or the foreign shareholder to take corrective measures in respect of the excess shares within a specified period of six months or less. See “Item 10. Additional Information—Item 10.B. Memorandum and Articles of Association.”
Holders of ADSs will not be able to exercise dissenter’sappraisal rights unless they have withdrawn the underlying common stock and become our direct shareholders.
In some limited circumstances, including the transfer of the whole or any significant part of our business and our merger or consolidation with another company, dissenting shareholders have the right to require us to purchase their shares under Korean law. A holder of ADSs will not be able to exercise dissenter’sappraisal rights unless he has withdrawn the underlying common stock and become our direct shareholder. See “Item 10. Additional Information—Item 10.B. Memorandum and Articles of Association.”
An investor may not be able to exercise preemptive rights for additional shares and may suffer dilution of his equity interest in us.
The Commercial Code of Korea and our articles of incorporation require us, with some exceptions, to offer shareholders the right to subscribe for new shares in proportion to their existing ownership percentage whenever new shares are issued. If we offer any rights to subscribe for additional shares of our common stock or any rights of any other nature, the depositary bank, after consultation with us, may make the rights available to an ADS holder or use reasonable efforts to dispose of the rights on behalf of the ADS holder and make the net proceeds available to the ADS
holder. The depositary bank, however, is not required to make available to an ADS holder any rights to purchase any additional shares unless it deems that doing so is lawful and feasible and:
a registration statement filed by us under the Securities Act of 1933, as amended, is in effect with respect to those shares; or
the offering and sale of those shares is exempt from or is not subject to the registration requirements of the Securities Act.
We are under no obligation to file any registration statement. If a registration statement is required for an ADS holder to exercise preemptive rights but is not filed by us, the ADS holder will not be able to exercise his preemptive rights for additional shares. As a result, the ADS holder may suffer dilution of his equity interest in us.
Forward-looking statements may prove to be inaccurate.
This annual report contains “forward-looking statements” that are based on our current expectations, assumptions, estimates and projections about our company and our industry. The forward-looking statements are subject to various risks and uncertainties. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “project,” “should,” and similar expressions. Those statements include, among other things, the discussions of our business strategy and expectations concerning our market position, future operations, margins, profitability, liquidity and capital resources. We caution you that reliance on any forward-looking statement involves risks and uncertainties, and that although we believe that the assumptions on which our forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions could be incorrect. The uncertainties in this regard include, but are not limited to, those identified in the risk factors discussed above. In light of these and other uncertainties, you should not conclude that we will necessarily achieve any plans and objectives or projected financial results referred to in any of the forward-looking statements. We do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances.
Item 4. Information on the Company
Item 4.A. History and Development of the Company
In 1981, the Government established us under the Korea Telecom Act to operate the telecommunications services business that it previously directly operated. Under the Korea Telecom Act and the Government-Invested Enterprises Management Basic Act, the Government exercised substantial control over our business and affairs. Effective October 1, 1997, the Korea Telecom Act was repealed and the Government-Invested Enterprises Management Basic Act became inapplicable
to us. As a result, we became a corporation under the Commercial Code, and our corporate organization and shareholders’ rights were governed by the Privatization Law and the Commercial Code. Among other things, we began to exercise greater autonomy in setting our annual budget and making investments in the telecommunications industry, and our shareholders began electing our directors, who used to behad previously been appointed by the Government under the Korea Telecom Act.
Prior to 1993, the Government owned all of the issued shares of our common stock. From 1993 through May 2002, the Government disposed of all of its equity interest in us, and the Privatization Law ceased to apply to us in August 2002. We amended our legal name from Korea Telecom Corp. to KT Corporation in March 2002.
Before December 1991, we were the sole provider of local, domestic long-distance and international long-distance telephone services in Korea. The Government began to introduce competition in the telecommunications services market in the early 1990’s. As a result, including ourselves, there are currently three local telephone service providers, five domestic long-distance carriers and numerous international long-distance carriers (including voice resellers) in Korea. In addition, the Government awarded licenses to several service providers to promote competition in other telecommunications business areas such as mobile telephone services and data network services. OnIn June 1, 2009, KTF, a subsidiary providing mobile telephone services, merged into KT Corporation, with KT Corporation surviving the merger, with the objective of maximizing management efficiencies of our fixed-line and mobile telecommunications operations as well as more effectively responding to the convergence trends in the telecommunications industry. See “Item 4.B. Business Overview—Competition.”
Our legal and commercial name is KT Corporation. Our principal executive offices are located at 206 Jungja-dong, Bundang-gu, Sungnam-si, Gyeonggi-do,KT Gwanghwamun Building East, 33, Jong-ro 3-gil, Jongno-gu, 110-130, Seoul, Korea and our telephone number is (8231) 727-0114.
We are the leading telecommunications service provider in Korea and one of the largest and most advanced in Asia. As an integrated telecommunications service provider, our principal services include:
mobile voice and data telecommunications services;services based on 3G W-CDMA technology and 4G LTE technology;
telephonefixed-line services, including local, domestic long-distance and international long-distance fixed-line and VoIP telephone services and interconnection services to other telecommunications companies;which include:
Ø | telephone services, including local, domestic long-distance and international long-distance fixed-line and VoIP telephone services and interconnection services to other telecommunications companies; |
Ø | broadband Internet access service and other Internet-related services, including IPTV services; and |
Ø | data communication service, including leased line service and dedicated broadband internet connection service to institutional customers; |
credit card processing and other Internet-relatedfinancial services including IP-TV services;through KT Capital Co., Ltd. and BC Card Co., Ltd.; and
various other services, including leased linesatellite service and other data communicationinformation technology, real estate business, satellite TV service, satellite service, credit cardmedia contents business and information technology and network services such as cloud computing services.
We also offered automobile rental services through KT Rental Co., Ltd. An agreement to sell KT Rental to the Lotte Group for approximately₩1.02 trillion (with estimated proceeds to KT Corporation being approximately₩772 billion) was entered into in March 2015, and the sale is expected to be completed in May 2015.
Leveraging on our dominant position in the fixed-line telephone services market and our established customer base in Korea, we have successfully pursued new growth opportunities during the past decade and obtained strong market positions in each of our principal lines of business. In particular:
in the mobile services market in Korea, we achieved a market share of 31.5%30.3% with approximately 16.517.3 million subscribers as of December 31, 2011;2014;
in the fixed-line telephone services market in Korea, we continue to be the dominant provider with approximately 24.023.9 million installed lines, of which 15.813.7 million lines were in service as of December 31, 2011.2014. As of such date, our market share of the local market was 84.3%81.0% and our market share of the domestic long-distance market was 80.5%78.9%;
we are Korea’s largest broadband Internet access provider with 7.88.1 million subscribers as of December 31, 2011,2014, representing a market share of 43.8%42.3%; and
we are also the leading provider of data communication services in Korea.
For the year ended December 31, 2011,2014, our operating revenues were(Won)₩21,99023,727 billion, our profitloss for the period was(Won)₩1,452941 billion and our basic earningsloss per share was(Won)₩5,946.4,215. As of December 31, 2011,2014, our total assets were₩33,799 billion, total liabilities were₩22,012 billion and total equity was(Won)₩12,53811,788 billion.
Business Strategy
We believe the telecommunications market in Korea will continue to expandis nearing saturation, despite certain areas of growth remaining due to Korea’s growing economy, consumers’ willingness to adopt new technologies, relatively high income and a relatively large middle class. To maintain our competitiveness, we believe we need to pursue growth in other areas, while maintaining our strength in existing businesses. In order to enhance the management efficiencies of our mobile and fixed-line telecommunications operations as well as more effectively respond to the convergence trends in the telecommunications industry, KTF merged into KT Corporation onin June 1, 2009, with KT Corporation surviving the merger. We alsoIn 2014, we restructured our organization into three sub-groups,five business groups, the HomeMarketing Group, the Customer Group, the Personal CustomerEnterprise Operations Group, the Global Business Group and the Global & Enterprise CustomerFuture Convergence Business Group, so that we may achieve higher synergies, more effectively address differing needs of our customer segments.segments, as well as strengthen our competitiveness and discover new growth opportunities. As part of our efforts to improve our operational efficiencies, we transferred all operations relating to fixed-line sales activities (including on-site sales, line activation, after service, and customer center operations) to our subsidiaries in 2014.
We also established subsidiaries to oversee our satellite and real estate operations, and expanded the number of specialized employees for each business, to further strengthen such operations and to pursue strategic alliances with other global corporates. In May 2014, we announced our “GiGAtopia” corporate vision, which seeks to converge ultra-fast broadband services to our smartphone services, and launched our olleh GiGA Internet service, which provides transmission speed of up to 1 Gbps, in October 2014 (“olleh GiGA Internet Service”). We also seek to provide other services that converge information & communication technology with other fields such as energy, security, media, healthcare and transportation, utilizing our fixed-line and wireless infrastructure based on our olleh GiGA Internet Services and LTE mobile services. By promoting our convergence services, we aim to contribute in changing the current subsidy-based Korean telecommunication market competition to one based on innovative technology, products and enhanced services. Consistent with our strategic objectives,overall goals, we aim to pursue growth through the following four core areas:strategy for our business groups:
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In line with this strategy, we began offering Apple’s iPhone for the first time in Korea in November 2009 and have expanded our offerings of smartphones from other mobile handset manufacturers. We believe that our WiBro network, which enables two-way wireless broadband Internet access to portable computers, mobile phones and other portable devices, as well as our extensive wireless LAN networks installed nationwide, enable our subscribers to maximize effective usage of their smartphones. We plan to take advantage of our industry-leading network infrastructure to attract more customers as this market further develops. In addition, we aim to further enhance our position in the mobile telecommunications market by leveraging on our strong brand, nationwide marketing network, competitive data usage rates, call centers dedicated to smartphone users, creative marketing strategies that address our potential customers’ needs and ability to bundle various mobile and fixed-line services. We also plan to further expand our contents and applications for smartphone users and mobile data users by cooperating with application developers in Korea and abroad, in order to further solidify our position as a leader in the convergence market.
In 2010, we launched a new brand “olleh” to promote our bundled products, which include broadband Internet access service, IPTV service, Internet phone service and fixed-line telephone service. We aim to differentiate ourselves from our competitors by providing broadband Internet access service using high-speed fiber-to-the-home (or FTTH) connection and offering Internet phone service with value-added features such as video communication, short message service and phone banking. We also began offering real-time broadcasting service on our IPTV service starting in November 2008.
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(1) | All of our executive officers beneficially own less than one percent of the issued shares of KT Corporation in the aggregate. |
(2) | Does not include period of employment by KT Corporation’s affiliates. |
Compensation of Directors
In 2011,2014, the total amount of salaries, bonuses (including long-term performance-based incentives for directors) and allowances paid and accrued to all directors of KT Corporation for services in all capacities was approximately(Won)₩5 billion.3.0 billion, which were paid on a cash basis.
Until February 2010, we had no incentive based compensation program for outside directors. Instead, compensation was paid to outside directors in fixed amounts as an allowance for any expenses they incurred in executing their duties. The aggregate amount accrued by usboard of directors introduced a new compensation program for outside directors in March 2010, which consists of cash and stock grants and requires a one year lock-up period, at a ratio of 3 to provide retirement benefits to such persons1. The total cash basis remuneration for outside directors for 2014 was recorded at(Won)₩270617 million.
The compensation of our directors and executive officers who received total annual compensation exceeding₩500 million in 2011. Starting in 2009, we no longer pay long-term performance-based incentives to our outside directors.2014 were as follows:
Name | Position | Total Compensation in 2014 | Composition of Total | |||
(In millions of Won) | ||||||
Hwang, Chang-Gyu | Representative Director | ₩507 | ₩429 million (salary);₩75 million (bonus);₩3 million (benefits) | |||
Pyo, Hyeon Myeong | Former President | ₩641 | ₩71 million (salary);₩92 million (bonus);₩10 million (benefits);₩468 million (severance) |
The chairperson of the Chief Executive Officer Candidate Nominating Committee enters into an employment agreement on our behalf with our Chief Executive Officer. The employment agreement sets certain management targets to be achieved by the Chief Executive Officer, including a target for the amount of “EBITDA” to be achieved in each year. EBITDA is defined as earnings before interest, tax, depreciation and amortization. Failure to achieve certain thresholds below the targets will allow the board of directors to take actions with respect to the Chief Executive Officer’s employment, including proposing to the shareholders’ meeting an early termination of his employment. In addition, the head of each of our functional departments, the president of each of our subsidiaries and the heads of each regional head office have entered into employment agreements with the Chief Executive Officer that provide for similar management targets to be achieved by each of our departments, subsidiaries and regional head offices.
As of December 31, 2011,2014, none of our non-independent or outside directors maintained directors’ service contracts with us or with any of our subsidiaries providing for benefits upon termination of employment.
Corporate Governance Committee
The Corporate Governance Committee is comprised of four outside directors and one non-independent director, Choon-Ho Lee, E. Han Kim,Suk-Gwon Chang, Do Kyun Song, Sang Kyun Cha, Dae-Keun Park and Hyun-Myung Pyo.Jeong-Tae Park. The chairperson is Choon-Ho Lee.Suk-Gwon Chang. The committee is responsible for the review of matters with respect to our Corporate Governance Guidelines and our performance under such guidelines to monitor effectiveness of our corporate governance.
Outside Director Candidate Nominating Committee
The Outside Director Candidate Nominating Committee consists of one non-independent director and all of our outside directors, other than for election of an outside director resulting from the expiration of the term of the office, in which case such outside director whose term is expiring may not be a member of the committee. The committee’s duties include reviewing the qualifications of potential candidates and proposing nominees to serve as outside directors on our board of directors to the shareholders at the general meeting of shareholders. The committee members’ terms expire immediately after the adjournment of the shareholders’ meeting where the outside directors are elected.
Evaluation and Compensation Committee
The Evaluation and Compensation Committee is currently comprised of four outside directors, Hyun-Nak Lee, Choon-Ho Lee, Jong-HwanChu-Hwan Yim, Do Kyun Song, Suk-Gwon Chang and Keuk Je Sung.Daiwon Hyun. The chairperson is Hyun-Nak Lee.Chu-Hwan Yim. The committee’s duties include prior review of the Chief Executive Officer’s management goals, terms and conditions proposed for inclusion in the management contract of the Chief Executive Officer, including, but not limited to, determining whether the Chief Executive Officer has achieved the management goals, and the determination of compensation of the Chief Executive Officer and the non-independent directors. The committee members are elected by the board after the closing of the annual meeting, and the term of the committee members is for one year.
Executive Committee
The Executive Committee is currently comprised of all of the non-independent directors. The chairperson is Suk-Chae Lee.Chang-Gyu Hwang. The committee’s duties include the establishment and management of
branch offices, the acquisition and disposal of real estate having market value between(Won)₩15 billion to(Won)₩30 billion, making investments and providing guarantees upbetween₩15 billion to(Won)₩30 billion, the disposal and sale of stocks of our subsidiaries, which stocks have a market value of between(Won)₩15 billion and(Won)₩30 billion, provided that no change of control with respect to such subsidiary occurs as a result of such disposal or sale for stocks with market value of₩10 billion or more, the authorization of charitable contributions between(Won)₩100 million to(Won)₩1 billion and the issuance of certain debt securities.
Related-Party Transactions Committee
The Related-Party Transactions Committee is currently comprised of four outside directors, Jong-Hwan Song, Byong Won Bahk, Keuk Je SungDong-Wook Chung, Jong-Goo Kim, Chu-Hwan Yim and Sang Kyun Cha.Daiwon Hyun. The chairperson is Jong-Hwan Song.Dong-Wook Chung. This committee reviews transactions between KT Corporation and its subsidiaries and ensures compliance with applicable antitrust laws. The committee members are elected by the board after the annual meeting, and the term of the committee members is for one year.
Audit Committee
Under the Commercial Code of Korea and our articles of incorporation, we are required to establish an audit committee comprised of three or more outside directors comprised of at least two-thirds of the audit committee members. Audit Committee members must also meet the applicable independence criteria set forth under the rules and regulations of the Sarbanes-Oxley Act of 2002. The committee is currently comprised of Hyun-Nak Lee, E. HanJong-Goo Kim, Sang Kyun Cha, Dae-Keun Park and Byong Won Bahk.Dong-Wook Chung. The chairperson is Hyun-Nak Lee.Jong-Goo Kim and the financial expert is Dae-Keun Park. Members of the committee are elected by our shareholders at the shareholders’ meeting. Our internal and external auditors report directly to the committee.
The duties of the committee include:
appointing independent auditors;
approving the appointment and recommending the dismissal of the internal auditor;
evaluating performance of independent auditors;
approving services to be provided by the independent auditors;
reviewing annual financial statements;
reviewing audit results and reports;
reviewing and evaluating our system of internal controls and policies; and
examining improprieties or suspected improprieties.
In addition, in connection with the shareholders’ meeting, the committee examines the agenda for, and financial statement and other reports to be submitted by the board of directors, at each shareholders’ meeting.
On a non-consolidated basis, we had 31,21523,371 employees as of December 31, 2011,2014, compared to 31,15532,451 employees as of December 31, 20102013 and 30,84132,186 employees as of December 31, 2009.
The Voluntary Early Retirement Plans
We regularly sponsor a voluntary early retirement planplans where we provide additional financial incentives for our employees to retire early, as part of our efforts to improve operational efficiencies. In 2008, 1,1412012, 2013 and 2014, 183, 269 and 8,345 employees, respectively, retired under KT Corporation’s voluntary early retirement plan.this program.
In 2009,April 2014, we had a voluntary early retirement plan where we received applications from employees who had been employed by us for more than 20 years. In addition, we heldannounced the commencement of a special voluntary early retirement program in the fourth quarter of 2009 where we received applications for voluntary early retirement from employees who hadhave been employed by us for more than 15 years and provided themyears. This special early retirement program provides our employees with additional financial incentives to retire early.early as part of our efforts to improve operational efficiencies. Our employees will be offered the option of either receiving additional severance payment or employment for two years at certain of our subsidiaries or affiliates as part of the special retirement scheme. The special voluntary early retirement program resulted in the early retirement of 8,304 employees. In aggregate, 6,5158,345 employees retired in 20092014 under the regular voluntary early retirement plan and the special voluntary early retirement program.
In 2010 and 2011, 124 and 334 employees, respectively, retired under KT Corporation’s voluntary We paid₩1.3 trillion as severance benefits in connection with our early retirement plan. We did not have a special voluntary early retirement program in 2010 or 2011.programs during 2014, which was financed through cash on hand and bond issuances.
Labor Relations
We consider our current relations with our work force to be good. However, in the past, we have experienced opposition from our labor union for our strategy of restructuring to improve our efficiency and profitability by disposing of non-core businesses and reducing our employee base.
As of December 31, 2011,2014, about 78.5%75.8% of allthe employees of KT Corporation were members of the KT Trade Union. On behalf of its members, the Union negotiates with us a collective bargaining agreement every two years, and our current collective bargaining agreement expires on May 23, 2013.2015. The current collective bargaining agreement provides that even in the event of a strike, the minimum number of employees necessary to operate the telecommunications business must continue to work.
The Union also negotiates with us an annual agreement on wages on behalf of its members. Under the Act of the Promotion of Worker’s Participation and Cooperation, our Employee-Employer Cooperation Committees, which are composed of representatives of management and labor for each business unit and regional office, meet quarterly to discuss employee grievances, working conditions and potential employee-initiated improvements in service or management.
Recent amendments to the Trade Union and Labor Relations Adjustment Act (“Labor Act”), which became effective on July 1, 2011, allow multiple labor unions to be formed within one company. Therefore, additional labor unions may be formed by our employees. Pursuant to such amendments, our employees formed a new labor union called “KT New Union” in August 2011. The amended Labor Act also requires such multiple unions to consolidate themselves into a single channel when negotiating with the company on behalf of their members and to enter into a single collective bargaining agreement with the company. As a result of the recent consolidation of labor unions, KT Trade Union was selected as the bargaining representative of the labor unions. Its term as the bargaining representative will last for two years from January 1, 2014, and will expire on December 31, 2015.
Employee Stock Ownership and Benefits
We have an employee stock ownership association, which may purchase on behalf of its members up to 20.0% of any of our shares offered publicly in Korea. The employee stock ownership association owned 1.36%0.64% of our issued shares as of December 31, 2011.2014.
In accordance with the National Pension Act of Korea, we contribute an amount equal to 4.5% of an employee’s standard monthly wages, and each employee contributes 4.5% of his or her standard monthly wages, into his or her personal pension account. Our employees, including executive officers
as well as non-executive employees, are subject to a pension insurance system, under which we make monthly contributions to the pension accounts of the employees, and upon retirement, such employees are paid the pension amount due from their pension accounts. Prior to April 2011, our executive and non-executive employees were subject to a lump-sum severance payment system, under which they were entitled to receive a lump-sum severance payment upon termination of their employment, based on their length of service and salary level at the time of termination. Starting in April 2011, in accordance with the Korean Employee Retirement Income Security Act, we replaced such lump-sum severance payment system with our current pension insurance system in the form of a defined benefit plan, and also introduced a defined contribution plan in December 2012, with a total combined unfunded portion of approximately(Won)₩426503 billion as of December 31, 2011.2014. Lump-sum severance amounts previously accrued prior to our adoption of the current pension insurance system continue to remain payable. We also provide a wide range of fringe benefits to our employees, including housing, housing loans, company-provided hospitals and schools, a company-sponsored pension program, an employee welfare fund, industrial disaster insurance, cultural and athletic facilities, physical education grants, meal allowances, medical examinations and training and resort centers. See “Item 5. Operating and Financial Review and Prospects—Item. 5.A. Operating Results—Salaries and Related Costs.”
Employee Training
The objective of our training program is to develop information and technology specialists who are able to create value for our customers. In order to develop skills of our employees, we require 60 hours of training per year from most of our employees, using individually-tailored curriculums based on individual assessments. We also operate Cyber Academy to provide online classes to our employees, as well as offer various foreign language classes to our employees. In addition, we provide tuition and living expense reimbursements to our high potential individuals who pursue graduate programs in Korea and abroad, as well as provide financial assistance to those who pursue work-related professional licenses or participate in after-work study programs.
Common Stock
The persons who are currently our directors held, as a group, 57,33910,919 common shares as of March 31, 2012,2015, the most recent date for which this information is available. The table below shows the ownership of our common shares by directors:
Shareholders | Number of Common Shares Owned | |||
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Do Kyun Song | 337 | |||
Sang Kyun Cha | ||||
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Suk-Gwon Chang | — | |||
Dae-Keun Park | — | |||
Dong-Wook Chung | — | |||
Daiwon Hyun | — |
Stock Options
We have not granted any stock options to our current directors and executive officers.
Item 7. Major Shareholders and Related Party Transactions
The following table sets forth certain information relating to the shareholders of our common stock as of December 31, 2011:2014:
Shareholders | Number of Shares | Percent of Total Shares Issued | ||||||
National Pension Corporation | 22,373,434 | 8.57 | % | |||||
NTTDoCoMo, Inc. | 14,257,813 | 5.46 | % | |||||
Employee stock ownership association | 3,558,570 | 1.36 | % | |||||
Directors as a group | 57,339 | 0.01 | % | |||||
Public | 203,054,090 | 77.77 | % | |||||
KT Corporation (held in the form of treasury stock)(1) | 17,810,562 | 6.82 | % | |||||
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Total issued shares | 261,111,808 | 100.00 | % | |||||
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Shareholders | Number of Shares | Percent of Total Shares Issued | ||||||
National Pension Corporation | 22,082,607 | 8.46 | % | |||||
NTTDoCoMo, Inc. | 14,257,813 | 5.46 | % | |||||
Silchester International Investors LLP | 13,809,192 | 5.29 | % | |||||
Employee stock ownership association | 1,663,392 | 0.64 | % | |||||
Directors as a group | 10,919 | 0.01 | % | |||||
Public | 193,038,785 | 73.93 | % | |||||
KT Corporation (held in the form of treasury stock) | 16,249,100 | 6.22 | % | |||||
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Total issued shares | 261,111,808 | 100.00 | % | |||||
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Item 7.B.Related Party Transactions
We have engaged in various transactions with our subsidiaries and affiliated companies. See Notes 35Note 34 to the Consolidated Financial Statements. We have not issued any guarantees in favor of our consolidated subsidiaries.
Item 7.C.Interests of Experts and Counsel
Not applicable.
Item 8.A.Consolidated Statements and Other Financial Information
See “Item 18—Financial Statements” and pages F-1 through F-96.F-106.
Legal Proceedings
In November 2009, 56 of our former customers began a claim against us for an aggregate(Won)130 million in damages, alleging that we improperly subscribed them to our optional flat rate plans for fixed-line services without properly obtaining their consent or giving notification. The Seoul Central District Court ruled in favor of us on all claims in May 2011, and the plaintiffs filed an appeal in June 2011. The Seoul High Court overruled the plaintiffs’ appeal in December 2011, and the plaintiffs subsequently filed an appeal to the Supreme Court of Korea. In March 2012, the Supreme Court of Korea denied the plaintiffs’ appeal. In connection with this complaint, the Korea Communications Commission investigated our past practices regarding our subscription of customers to optional flat rate plans, and issued an administrative decision in April 2011 which imposed several corrective orders including amendments to our standard terms of use and issuance of an administrative fine of approximately(Won)10 billion. We paid such fines to the Korea Communications Commission and implemented its corrective orders.
As part of our decision to apply for reallocation of the 20 MHz bandwidth in the 1.8 GHz spectrum, we applied to the Korea Communications Commission to terminate our 2G PCS services,
and on November 23, 2011, the Korea Communications Commission approved our plan. However, on November 30, 2011, approximately 900 of our 2G PCS service subscribers filed a class-action suit against the Korea Communications Commission for its approval of our plan, claiming that we used improper means to reduce our 2G PCS subscribers to comply with regulatory requirements before terminating the 2G PSC services and that the Korea Communications Commission did not consider such factor in approving our plan. On December 6, 2011, the Seoul Administrative Court issued a preliminary injunction, which temporarily suspended our termination of the 2G PCS services until the case went to trial. We immediately appealed the decision and the Seoul High Court overruled the preliminary injunction on December 26, 2011 and reinstated the Korea Communications Commission’s approval. Accordingly, we terminated our 2G PCS services in the Seoul metropolitan area and began the termination process for the rest of Korea on January 3, 2012. On January 12, 2012, the 2G subscribers filed an appeal of the Seoul High Court’s decision with the Supreme Court of Korea, and on February 1, 2012, the Supreme Court of Korea denied such appeal. On January 17, 2012, trial for the original class-action suit filed by the 2G subscribers began in the Seoul Administrative Court. The outcome of the trial, and any effect it may have on us, cannot be determined at this time.
In MarchJuly 2012, the Fair Trade Commission issued to us an administrative fine of approximately(Won)₩5 billion as well as certain corrective orders, after investigating certain pricing and subsidy practices of mobile service carriers and handset manufacturers. Samsung Electronics Co., Ltd., LG Electronics Co., Ltd., Pantech Curitel Co., Ltd., SK Telecom and LG U+ were also issued administrative fines as a result of the investigation. We expectfiled for a stay of execution of the Fair Trade Commission’s decision, and in September 2012, the Seoul High Court granted a stay of execution with respect to paythe corrective order, and denied the stay of execution with respect to the administrative fine. We paid the entire fine in September 2012. In September 2012, we filed a lawsuit with the Seoul High Court against the Fair Trade Commission to appeal the administrative fine and the corrective order, and on February 6, 2014, the Seoul High Court ruled against us on our appeal. In February 2014, we filed another appeal with respect to the administrative fine with the Supreme Court of Korea and filed for a stay of execution with respect to the corrective order in March 2014, which was accepted and became effective in April 2014. The appeal is currently ongoing. The outcome of this case will not result in any fine in addition to the fine we already paid in September 2012.
Based on investigations conducted in December 2012 and January 2013, the KCC imposed a combined fine of approximately₩12 billion on SK Telecom, LG U+ and us in January 2013 (our fine being approximately₩2.9 billion), for providing subsidies that were higher than those allowed under current regulations to new mobile phone purchasers and subscribers, and also imposed temporary suspensions from recruiting new subscribers ranging from 20 days to 24 days. In March 2013, the KCC again imposed a combined fine of approximately₩5 billion on SK Telecom, LG U+ and us (our fine being approximately₩1.6 billion) for continuing to offer subsidies during the suspension period. In July 2013, the KCC imposed a combined fine of approximately₩67 billion on SK Telecom, LG U+ and us (our fine being approximately₩20 billion) and also imposed a seven day suspension on us from recruiting new subscribers, also in connection with providing excessive handset subsidies to new subscribers. In December 2013, the KCC again imposed a combined fine of approximately₩106 billion on SK Telecom, LG U+ and us (our fine being approximately₩30 billion), which is the largest fine ever imposed by the KCC on local mobile operators for providing excessive subsidies to new subscribers. On March 7, 2014, the MSIP imposed a temporary suspension on us for 45 days (from March 13, 2014 to April 26, 2014), SK Telecom for 45 days (from April 5, 2014 to May 19, 2014), and LG U+ for 45 days (from March 13, 2014 to April 4, 2014 and again from April 27, 2014 to May 18, 2014) from recruiting new subscribers as a result of continuing to offer excessive handset subsidies to new subscribers, despite the order from the KCC prohibiting such subsidies. Additionally, the MSIP announced that it plans to bring criminal charges with fines of up to₩150 million and imprisonment of less than three years against any carrier and responsible personnel that fails to adhere to the suspension or continues to offer illegal subsidies after the suspension is completed. In August 2014, the KCC imposed a fine of approximately₩58 billion on SK Telecom, LG U+ and us (our fine being approximately₩11 billion) for continuing to provide excessive subsidies to new subscribers. In December 2014, the KCC further imposed a fine of approximately₩8 billion on each of SK Telecom, LG U+ and us for providing excessive handset subsidies and in March 2015 the KCC again imposed a combined fine of approximately₩34 billion on SK Telecom, LG U+ and us (our fine being approximately₩9 billion) for violation of regulations relating to handset sales, in connection with a used handset buyback program that we and the other telecommunications operators were promoting. We have paid all of such fines as of the date hereof.
In July 2012, the police arrested two individuals in connection with the second halfalleged theft of 2012.personal information relating to approximately 8.7 million of our mobile phone subscribers. The individuals in question stole personal information through a series of hackings starting from February 2012 into our N-STEP. Since the incident, approximately 29,800 of our mobile phone subscribers filed a total of 15 lawsuits against us in connection with the N-STEP hackings, alleging that we failed to protect their personal information, and are seeking total damages of approximately₩15 billion. From August 2014 to January 2015, various district courts have awarded damages of₩100,000 per plaintiff for 11 of the cases involving a total of approximately 29,000 of the subscribers, resulting in damages of approximately₩3 billion to us, while the remaining trials are currently ongoing at various district courts. We have appealed the district courts’ decisions and the appeals are currently ongoing at the Seoul High Court.
Furthermore, in March 2014, the police arrested three individuals in connection with their alleged theft of personal information relating to approximately 9.8 million of our subscribers. The individuals in question stole the personal information of our subscribers through a series of hackings into our main homepage starting from February 2014. Since the incident, approximately 13,450 subscribers filed 18 lawsuits against us in connection with the information theft, seeking total damages of approximately₩7 billion. The trials are currently ongoing at various district courts. In June 2014, we were fined₩85 million by the KCC and were ordered to take corrective measures in connection with the most recent hacking incident. We filed an administrative appeal in August 2014 in connection with the KCC fine, and the appeal is currently ongoing at the Seoul Administrative Court.
In December 2013, the MSIP declared that the contract over our sale of Koreasat 3 was null and void, on the grounds that the satellite was sold without obtaining proper government approval. We are currently involved in an arbitration proceeding against ABS pursuant to the Rules of the International Chamber of Commerce over the Koreasat 3 satellite ownership and contract violation claims.
We are a defendant in various other court proceedings involving claims for civil damages arising in the ordinary course of our business. As of December 31, 2014, we have established provisions relating to litigations of₩20 billion, of which₩4 billion related to the litigations involving the hacking incidents. See Note 17 to the Consolidated Financial Statements. While we are unable to predict the ultimate disposition of these claims, in the opinion of our management, the ultimate disposition of these claims will not have a material adverse effect on our business, financial condition and results of operations.
Dividends
The table below sets out the annual dividends declared on the outstanding common stock to shareholders of record on December 31 of the years indicated and the interim dividends declared on the outstanding common stock to shareholders of record on June 30 of the years indicated.indicated:
Year | Annual Dividend per Common Stock | Interim Dividend per Common Stock | Average Total Dividend per Common Stock | Annual Dividend per Common Stock | Interim Dividend per Common Stock | Average Total Dividend per Common Stock | ||||||||||||||||||
(In Won) | (In Won) | (In Won) | (In Won) | (In Won) | (In Won) | |||||||||||||||||||
2007 | 2,000 | — | 2,000 | |||||||||||||||||||||
2008 | 1,120 | — | 1,120 | |||||||||||||||||||||
2009 | 2,000 | — | 2,000 | |||||||||||||||||||||
2010 | 2,410 | — | 2,410 | 2,410 | — | 2,410 | ||||||||||||||||||
2011 | 2,000 | — | 2,000 | 2,000 | — | 2,000 | ||||||||||||||||||
2012 | 2,000 | — | 2,000 | |||||||||||||||||||||
2013 | 800 | — | 800 | |||||||||||||||||||||
2014 | — | — | — |
If sufficient profits are available, the Board of Directors may propose annual dividends on the outstanding common stock, which our shareholders must approve by a resolution at the ordinary general meeting of shareholders. This meeting is generally held in March of the following year and if
our shareholders at such ordinary general meeting of shareholders approve the annual dividend, we must pay such dividend within one month following the date of such resolution. Typically, we pay such dividends shortly after the meeting. The declaration of annual dividends is subject to the vote of our shareholders, and consequently, there can be no assurance as to the amount of dividends per common stock or that any such dividends will be declared. Interim dividends paid in cash can be declared by a resolution of the board of directors. See “Item 10. Additional Information—Item 10.B. Memorandum and Articles of Association—Dividends” and “Item 12. Description of Securities Other than Equity Securities—Description of American Depositary Shares—Dividends and Distributions.”
The Commercial Code provides that shares of a company of the same class must receive equal treatment. However, major shareholders may consent to receive dividend distributions at a lesser rate than minor shareholders.Previously,shareholders. Previously, the Government consented to receiving a smaller dividend compared to other shareholders. The Government no longer holds any interest in us.
Any cash dividends relating to the shares held in the form of ADSs will be paid to the depositary bank in Won. The deposit agreement provides that, except in certain circumstances, cash dividends received by the depositary bank will be converted by the depositary bank into Dollars and distributed to the holders of the ADRs, less withholding tax, other governmental charges and the depositary bank’s fees and expenses. See “Item 12. Description of Securities Other than Equity Securities—Description of the American Depositary Shares—Dividends and Distributions.”
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
Item 9.A.Offer and Listing Details
Market Price Information
Common Stock
Our shares were listed on the KRX KOSPI Market on December 23, 1998. The price of the shares on the KRX KOSPI Market as of the close of trading on April 26, 201229, 2015 was(Won)₩29,65030,900 per share. The table below shows the high and low closing prices and the average daily volume of trading activity on the KRX KOSPI Market for the shares since January 2007.2009:
Price | Average Daily Trading Volume | Price | Average Daily Trading Volume | |||||||||||||||||||||
High | Low | High | Low | |||||||||||||||||||||
(In Won) | (Number of shares) | (In Won) | (Number of shares) | |||||||||||||||||||||
2007 | 56,100 | 40,150 | 917,274 | |||||||||||||||||||||
2008 | 52,200 | 29,500 | 1,019,430 | |||||||||||||||||||||
2009 | 42,000 | 33,100 | 1,371,110 | 42,000 | 33,100 | 1,371,110 | ||||||||||||||||||
2010 | 50,600 | 39,150 | 1,343,486 | 50,600 | 39,150 | 1,343,486 | ||||||||||||||||||
2011 | 45,500 | 34,200 | 1,063,506 | |||||||||||||||||||||
2012 | 39,750 | 27,700 | 1,067,315 | |||||||||||||||||||||
2013 | 40,850 | 29,950 | 1,149,143 | |||||||||||||||||||||
First quarter | 50,600 | 39,150 | 1,838,430 | 38,750 | 34,600 | 1,037,037 | ||||||||||||||||||
Second quarter | 49,350 | 44,650 | 1,353,466 | 40,850 | 34,000 | 1,112,465 | ||||||||||||||||||
Third quarter | 45,700 | 41,100 | 1,148,613 | 37,300 | 33,900 | 1,018,216 | ||||||||||||||||||
Fourth quarter | 49,200 | 43,500 | 1,033,436 | 36,900 | 29,850 | 1,427,046 | ||||||||||||||||||
2011 | 45,500 | 34,200 | 1,063,506 | |||||||||||||||||||||
2014 | 36,800 | 28,300 | 1,051,396 | |||||||||||||||||||||
First quarter | 45,500 | 37,850 | 1,131,917 | 31,900 | 28,300 | 981,580 | ||||||||||||||||||
Second quarter | 40,700 | 36,350 | 874,054 | 32,800 | 28,700 | 1,240,382 | ||||||||||||||||||
Third quarter | 40,700 | 34,200 | 1,287,651 | 36,800 | 29,650 | 1,121,896 | ||||||||||||||||||
Fourth quarter | 38,300 | 35,450 | 960,651 | 35,250 | 30,700 | 866,696 | ||||||||||||||||||
2012 (through April 26) | 35,450 | 29,650 | 969,569 | |||||||||||||||||||||
First quarter | 35,450 | 30,650 | 1,025,698 | |||||||||||||||||||||
January | 35,450 | 33,150 | 1,182,018 | |||||||||||||||||||||
February | 33,700 | 32,100 | 1,070,467 | |||||||||||||||||||||
March | 33,100 | 30,650 | 863,037 | |||||||||||||||||||||
Second quarter (through April 26) | 31,600 | 29,650 | 755,923 | |||||||||||||||||||||
April (through April 26) | 31,600 | 29,650 | 755,923 |
2015 (through April 29) First quarter January February March Second quarter (through April 29) April (through April 29) Price Average Daily
Trading Volume High Low (In Won) (Number of shares) 31,900 28,500 1,066,783 31,900 28,500 1,032,769 31,900 29,800 1,002,611 30,600 28,500 1,251,760 30,700 29,000 892,335 30,900 28,800 1,167,822 30,900 28,800 1,167,822
Source: | KRX KOSPI Market. |
ADSs
The outstanding ADSs, each of which represents one-half of one share of our common stock, have been traded on the New York Stock Exchange and the London Stock Exchange since May 25, 1999.
The price of the ADSs on the New York Stock Exchange as of the close of trading on April 26, 201228, 2015 was $12.93$14.18 per ADS.TheADS. The table below shows the high and low trading prices and the average daily volume of trading activity on the New York Stock Exchange for our ADSs since January 2007.2009:
Price | Average Daily Trading Volume | Price | Average Daily Trading Volume | |||||||||||||||||||||
High | Low | High | Low | |||||||||||||||||||||
(In US$) | (Number of ADSs) | (In US$) | (Number of ADSs) | |||||||||||||||||||||
2007 | 29.22 | 21.51 | 592,205 | |||||||||||||||||||||
2008 | 27.10 | 10.10 | 819,733 | |||||||||||||||||||||
2009 | 17.64 | 11.42 | 639,566 | 17.64 | 11.42 | 639,566 | ||||||||||||||||||
2010 | 22.62 | 17.12 | 784,905 | 22.62 | 17.12 | 784,905 | ||||||||||||||||||
2011 | 20.86 | 14.49 | 1,124,692 | |||||||||||||||||||||
2012 | 18.23 | 11.65 | 1,004,064 | |||||||||||||||||||||
2013 | 18.16 | 14.33 | 528,291 | |||||||||||||||||||||
First quarter | 21.43 | 17.12 | 718,461 | 18.07 | 15.65 | 766,282 | ||||||||||||||||||
Second quarter | 22.62 | 18.61 | 744,727 | 18.16 | 14.92 | 518,995 | ||||||||||||||||||
Third quarter | 20.46 | 17.79 | 868,906 | 17.25 | 15.00 | 368,603 | ||||||||||||||||||
Fourth quarter | 22.07 | 20.29 | 803,784 | 17.24 | 14.33 | 474,159 | ||||||||||||||||||
2011 | 20.86 | 14.49 | 1,124,692 | |||||||||||||||||||||
2014 | 17.46 | 13.24 | 440,020 | |||||||||||||||||||||
First quarter | 20.72 | 18.34 | 1,380,642 | 14,75 | 13.24 | 515,373 | ||||||||||||||||||
Second quarter | 20.86 | 17.75 | 1,184,508 | 16.07 | 13.45 | 410,942 | ||||||||||||||||||
Third quarter | 19.86 | 14.78 | 1,132,314 | 17.46 | 14.31 | 380,780 | ||||||||||||||||||
Fourth quarter | 17.52 | 14.49 | 805,246 | 16.31 | 14.05 | 456,065 | ||||||||||||||||||
2012 (through April 26) | 15.49 | 12.93 | 1,331,248 | |||||||||||||||||||||
2015 (through April 29) | 14.17 | 12.87 | 361,119 | |||||||||||||||||||||
First quarter | 15.49 | 13.69 | 1,436,313 | 14.17 | 12.87 | 378,430 | ||||||||||||||||||
January | 15.49 | 14.36 | 1,529,210 | 14.17 | 13.44 | 377,870 | ||||||||||||||||||
February | 15.20 | 14.18 | 1,298,580 | 14.01 | 12.99 | 400,405 | ||||||||||||||||||
March | 14.80 | 13.69 | 1,386,164 | 13.98 | 12.87 | 359,959 | ||||||||||||||||||
Second quarter (through April 26) | 13.90 | 12.93 | 969,356 | |||||||||||||||||||||
April (through April 26) | 13.90 | 12.93 | 969,356 | |||||||||||||||||||||
Second quarter (through April 29) | 14.18 | 13.22 | 305,542 | |||||||||||||||||||||
April (through April 29) | 14.18 | 13.22 | 305,542 |
Source: | New York Stock Exchange. |
Not applicable.
The KRX KOSPI Market
On January 27, 2005, the Korea Exchange was established pursuant to the Korea Securities and Futures Exchange Act through the consolidation of the Korea Stock Exchange, the Korea Futures Exchange, the KOSDAQ Stock Market, Inc. (the “KOSDAQ”) and the KOSDAQ Committee within the Korea Securities Dealers Association, which was in charge of the management of the KOSDAQ. There are threefour different markets operated by the Korea Exchange: the KRX KOSPI Market, the KRX KOSDAQ Market, the KRX KONEX Market and the KRX Derivatives Market. The Korea Exchange has twothree trading floors located in Seoul, one for the KRX KOSPI Market, and one for the KRX KOSDAQ Market, one for the KRX KONEX Market, and one trading floor in Busan for the KRX Derivatives Market. The Korea Exchange is a limited liability company, the shares of which are held by (i) securities companies and futures companies that were formerly members of the Korea Stock Exchange or the Korea Futures Exchange, (ii) the Small & Medium Business Corporation, (iii) the Korea Securities Finance Corporation and (iv) the Korea Securities Dealers
Financial Investment Association. Currently, the Korea Exchange is the only stock exchange in Korea and is operated by membership, having as its members most of the Korean securities companies and some Korean branches of foreign securities companies.
The KRX KOSPI Market has the power in some circumstances to suspend trading in the shares of a given company or to de-list a security. The KRX KOSPI Market also restricts share price movements. All listed companies are required to file accounting reports annually and quarterly and to release immediately all information that may affect trading in a security.
The Government has in the past exerted, and continues to exert, substantial influence over many aspects of the private sector business community which can have the intention or effect of depressing or boosting the market. In the past, the Government has informally both encouraged and restricted the declaration and payment of dividends, induced mergers to reduce what it considers excess capacity in a particular industry and induced private companies to offer publicly their securities.
The KRX KOSPI Market publishes the Korea Composite Stock Price Index every twoten seconds, which is an index of all equity securities listed on the KRX KOSPI Market. The Korea Composite Stock Price Index is calculated using the aggregate value method, in which the market capitalizations of all listed companies are aggregated, subject to certain adjustments, and this aggregate is expressed as a percentage of the aggregate market capitalization of all listed companies as of the base date, January 4, 1980.
Movements in Korea Composite Stock Price Index are set out in the following table together with the associated dividend yields and price earnings ratios.ratios:
Year | Opening | High | Low | Closing | Period Average | |||||||||||||||||||||||||||||||||||||||||||
Period Average | ||||||||||||||||||||||||||||||||||||||||||||||||
Year | Opening | High | Low | Closing | Dividend Yield (1) (2) (Percent) | Price Earnings Ratio (2) (3) | Opening | High | Low | Closing | Dividend Yield (1) (2) (Percent) | Price Earnings Ratio (2) (3) | ||||||||||||||||||||||||||||||||||||
5.3 | 5.2 | 139.53 | 163.37 | 131.40 | 163.37 | 5.3 | 5.2 | |||||||||||||||||||||||||||||||||||||||||
1986 | 161.40 | 279.67 | 153.85 | 272.61 | 4.3 | 7.6 | 161.40 | 279.67 | 153.85 | 272.61 | 4.3 | 7.6 | ||||||||||||||||||||||||||||||||||||
1987 | 264.82 | 525.11 | 264.82 | 525.11 | 2.6 | 10.9 | 264.82 | 525.11 | 264.82 | 525.11 | 2.6 | 10.9 | ||||||||||||||||||||||||||||||||||||
1988 | 532.04 | 922.56 | 527.89 | 907.20 | 2.4 | 11.2 | 532.04 | 922.56 | 527.89 | 907.20 | 2.4 | 11.2 | ||||||||||||||||||||||||||||||||||||
1989 | 919.61 | 1,007.77 | 844.75 | 909.72 | 2.0 | 13.9 | 919.61 | 1,007.77 | 844.75 | 909.72 | 2.0 | 13.9 | ||||||||||||||||||||||||||||||||||||
1990 | 908.59 | 928.82 | 566.27 | 696.11 | 2.2 | 12.8 | 908.59 | 928.82 | 566.27 | 696.11 | 2.2 | 12.8 | ||||||||||||||||||||||||||||||||||||
1991 | 679.75 | 763.10 | 586.51 | 610.92 | 2.6 | 11.2 | 679.75 | 763.10 | 586.51 | 610.92 | 2.6 | 11.2 | ||||||||||||||||||||||||||||||||||||
1992 | 624.23 | 691.48 | 459.07 | 678.44 | 2.2 | 10.9 | 624.23 | 691.48 | 459.07 | 678.44 | 2.2 | 10.9 | ||||||||||||||||||||||||||||||||||||
1993 | 697.41 | 874.10 | 605.93 | 866.18 | 1.6 | 12.7 | 697.41 | 874.10 | 605.93 | 866.18 | 1.6 | 12.7 | ||||||||||||||||||||||||||||||||||||
1994 | 879.32 | 1,138.75 | 855.37 | 1,027.37 | 1.2 | 16.2 | 879.32 | 1,138.75 | 855.37 | 1,027.37 | 1.2 | 16.2 | ||||||||||||||||||||||||||||||||||||
1995 | 1,027.45 | 1,016.77 | 847.09 | 882.94 | 1.2 | 16.4 | 1,027.45 | 1,016.77 | 847.09 | 882.94 | 1.2 | 16.4 | ||||||||||||||||||||||||||||||||||||
1996 | 882.29 | 986.84 | 651.22 | 651.22 | 1.3 | 17.8 | 882.29 | 986.84 | 651.22 | 651.22 | 1.3 | 17.8 | ||||||||||||||||||||||||||||||||||||
1997 | 647.67 | 792.29 | 350.68 | 376.31 | 1.5 | 17.0 | 647.67 | 792.29 | 350.68 | 376.31 | 1.5 | 17.0 | ||||||||||||||||||||||||||||||||||||
1998 | 374.41 | 579.86 | 280.00 | 562.46 | 1.9 | 10.8 | 374.41 | 579.86 | 280.00 | 562.46 | 1.9 | 10.8 | ||||||||||||||||||||||||||||||||||||
1999 | 565.10 | 1,028.07 | 498.42 | 1,028.07 | 1.1 | 13.5 | 565.10 | 1,028.07 | 498.42 | 1,028.07 | 1.1 | 13.5 | ||||||||||||||||||||||||||||||||||||
2000 | 1,028.33 | 1,059.04 | 500.60 | 504.62 | 2.1 | 12.9 | 1,028.33 | 1,059.04 | 500.60 | 504.62 | 2.1 | 12.9 | ||||||||||||||||||||||||||||||||||||
2001 | 503.31 | 704.50 | 468.76 | 693.70 | 1.7 | 16.4 | 503.31 | 704.50 | 468.76 | 693.70 | 1.7 | 16.4 | ||||||||||||||||||||||||||||||||||||
2002 | 698.00 | 937.61 | 584.04 | 627.55 | 1.6 | 15.2 | 698.00 | 937.61 | 584.04 | 627.55 | 1.6 | 15.2 | ||||||||||||||||||||||||||||||||||||
2003 | 633.03 | 822.16 | 515.24 | 810.71 | 2.0 | 11.8 | ||||||||||||||||||||||||||||||||||||||||||
2004 | 821.26 | 936.06 | 719.59 | 895.92 | 2.0 | 13.8 | ||||||||||||||||||||||||||||||||||||||||||
2005 | 896.00 | 1,379.37 | 870.84 | 1,379.37 | 1.8 | 10.6 | ||||||||||||||||||||||||||||||||||||||||||
2006 | 1,383.32 | 1,464.70 | 1,203.86 | 1,434.46 | 1.6 | 11.1 | ||||||||||||||||||||||||||||||||||||||||||
2007 | 1,438.89 | 2,064.85 | 1,355.79 | 1,897.13 | 1.4 | 15.8 | ||||||||||||||||||||||||||||||||||||||||||
2008 | 1,891.45 | 1,888.88 | 938.75 | 1,124.47 | 2.6 | 8.9 | ||||||||||||||||||||||||||||||||||||||||||
2009 | 1,132.87 | 1,718.88 | 1,018.81 | 1,682.77 | 1.6 | 22.9 | ||||||||||||||||||||||||||||||||||||||||||
2010 | 1,696.14 | 2,051.00 | 1,552.79 | 2,051.00 | 1.1 | 17.8 | ||||||||||||||||||||||||||||||||||||||||||
2011 | 2,078.08 | 2,228.96 | 1,652.71 | 1,825.74 | 1.5 | 10.9 | ||||||||||||||||||||||||||||||||||||||||||
2012 (through April 26) | 1,826.37 | 2,029.29 | 1,875.68 | 1,964.04 | 1.4 | 11.5 |
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (through April 29) Period Average Opening High Low Closing Dividend
Yield (1) (2)
(Percent) Price
Earnings
Ratio (2) (3) 633.03 822.16 515.24 810.71 2.0 11.8 821.26 936.06 719.59 895.92 2.0 13.8 896.00 1,379.37 870.84 1,379.37 1.8 10.6 1,383.32 1,464.70 1,203.86 1,434.46 1.6 11.1 1,438.89 2,064.85 1,355.79 1,897.13 1.4 15.8 1,891.45 1,888.88 938.75 1,124.47 2.6 8.9 1,132.87 1,718.88 1,018.81 1,682.77 1.6 22.9 1,696.14 2,051.00 1,552.79 2,051.00 1.1 17.8 2,078.08 2,228.96 1,652.71 1,825.74 1.5 10.5 1,826.37 2,049.28 1,769.31 1,997.05 1.3 12.3 2,031.10 2,059.58 1,780.63 2,011.34 1.2 13.5 1,967.19 2,082.61 1,886.85 1,915.59 1.1 15.3 1,926.44 1,882.45 2,173.41 2,142.63 1.1 16.7
Source: | The KRX KOSPI Market |
(1) | Dividend yields are based on daily figures. Dividend yields after January 3, 1984 include cash dividends only. |
(2) | Starting in April 2000, dividend yield and price earnings ratio are calculated based on KOSPI 200, an index of 200 equity securities listed on the KRX KOSPI Market. Starting in April 2000, KOSPI 200 excludes classified companies, companies which did not submit annual reports to the KRX KOSPI Market, and companies which received qualified opinion from external auditors. |
(3) | The price earnings ratio is based on figures for companies that record a profit in the preceding year. |
Shares are quoted “ex-dividend” on the first trading day of the relevant company’s accounting period; since the calendar year is the accounting period for the majority of listed companies, this may account for the drop in the Korea Composite Stock Price Index between its closing level at the end of one calendar year and its opening level at the beginning of the following calendar year.
With certain exceptions, principally to take account of a share being quoted “ex-dividend” and “ex-rights,” permitted upward and downward movements in share prices of any category of shares on any day are limited under the rules of the KRX KOSPI Market to 15% of the previous day’s closing price of the shares, rounded down as set out below:
Previous Days’ Closing Price | Rounded Down To | |||
Less than | 5 | |||
| 10 | |||
| 50 | |||
| 100 | |||
| 500 | |||
| 1,000 |
As a consequence, if a particular closing price is the same as the price set by the fluctuation limit, the closing price may not reflect the price at which persons would have been prepared, or would be prepared to continue, if so permitted, to buy and sell shares. Orders are executed on an auction system with priority rules to deal with competing bids and offers.
Due to a deregulation of restrictions on brokerage commission rates, the brokerage commission rate on equity securities transactions may be determined by the parties, subject to commission schedules being filed with the KRX KOSPI Market by the securities companies. In addition, a securities transaction tax will generally be imposed on the transfer of shares or certain securities representing rights to subscribe for shares at the rate of 0.15% if such transfer is made through the KRX KOSPI Market. A special agricultural and fishery tax of 0.15% of the sales prices will also be imposed on transfer of these shares and securities on the KRX KOSPI Market. See “Item 10. Additional Information—Item 10.A. Taxation—Korean Taxation.”
The number of companies listed on the KRX KOSPI Market, the corresponding total market capitalization at the end of the periods indicated and the average daily trading volume for those periods are set forth in the following table:
Market Capitalization on the Last Day of Each Period | Average Daily Trading Volume, Value | |||||||||||||||||||||||
Year | Number of Listed Companies | (Billions of Won) | (Millions of Dollars)(1) | Thousands of Shares | (Millions of Won) | (Thousands of Dollars) (1) | ||||||||||||||||||
1985 | 342 | 6,570 | 7,381 | 18,925 | 12,315 | 13,834 | ||||||||||||||||||
1986 | 355 | 11,994 | 13,924 | 31,755 | 32,870 | 38,159 | ||||||||||||||||||
1987 | 389 | 26,172 | 33,033 | 20,353 | 70,185 | 88,583 | ||||||||||||||||||
1988 | 502 | 64,544 | 94,348 | 10,367 | 198,364 | 289,963 | ||||||||||||||||||
1989 | 626 | 95,477 | 140,490 | 11,757 | 280,967 | 414,430 | ||||||||||||||||||
1990 | 669 | 79,020 | 110,301 | 10,866 | 183,692 | 256,411 | ||||||||||||||||||
1991 | 686 | 73,118 | 96,107 | 14,022 | 214,263 | 281,629 | ||||||||||||||||||
1992 | 688 | 84,712 | 107,448 | 24,028 | 308,246 | 390,977 |
Market Capitalization on the Last Day of Each Period | Average Daily Trading Volume, Value | Market Capitalization on the Last Day of Each Period | Average Daily Trading Volume, Value | |||||||||||||||||||||||||||||||||||||||||||||
Year | Number of Listed Companies | (Billions of Won) | (Millions of Dollars)(1) | Thousands of Shares | (Millions of Won) | (Thousands of Dollars) (1) | Number of Listed Companies | (Billions of Won) | (Millions of Dollars) (1) | Thousands of Shares | (Millions of Won) | (Thousands of Dollars)(1) | ||||||||||||||||||||||||||||||||||||
1985 | 342 | 6,570 | 7,381 | 18,925 | 12,315 | 13,834 | ||||||||||||||||||||||||||||||||||||||||||
1986 | 355 | 11,994 | 13,924 | 31,755 | 32,870 | 38,159 | ||||||||||||||||||||||||||||||||||||||||||
1987 | 389 | 26,172 | 33,033 | 20,353 | 70,185 | 88,583 | ||||||||||||||||||||||||||||||||||||||||||
1988 | 502 | 64,544 | 94,348 | 10,367 | 198,364 | 289,963 | ||||||||||||||||||||||||||||||||||||||||||
1989 | 626 | 95,477 | 140,490 | 11,757 | 280,967 | 414,430 | ||||||||||||||||||||||||||||||||||||||||||
1990 | 669 | 79,020 | 110,301 | 10,866 | 183,692 | 256,411 | ||||||||||||||||||||||||||||||||||||||||||
1991 | 686 | 73,118 | 96,107 | 14,022 | 214,263 | 281,629 | ||||||||||||||||||||||||||||||||||||||||||
1992 | 688 | 84,712 | 107,448 | 24,028 | 308,246 | 390,977 | ||||||||||||||||||||||||||||||||||||||||||
1993 | 693 | 112,665 | 139,420 | 35,130 | 574,048 | 710,367 | 693 | 112,665 | 139,420 | 35,130 | 574,048 | 710,367 | ||||||||||||||||||||||||||||||||||||
1994 | 699 | 151,217 | 191,730 | 36,862 | 776,257 | 984,223 | 699 | 151,217 | 191,730 | 36,862 | 776,257 | 984,223 | ||||||||||||||||||||||||||||||||||||
1995 | 721 | 141,151 | 182,201 | 26,130 | 487,762 | 629,613 | 721 | 141,151 | 182,201 | 26,130 | 487,762 | 629,613 | ||||||||||||||||||||||||||||||||||||
1996 | 760 | 117,370 | 139,031 | 26,571 | 486,834 | 575,680 | 760 | 117,370 | 139,031 | 26,571 | 486,834 | 575,680 | ||||||||||||||||||||||||||||||||||||
1997 | 776 | 70,989 | 50,162 | 41,525 | 555,759 | 392,707 | 776 | 70,989 | 50,162 | 41,525 | 555,759 | 392,707 | ||||||||||||||||||||||||||||||||||||
1998 | 748 | 137,799 | 114,091 | 97,716 | 660,429 | 546,803 | 748 | 137,799 | 114,091 | 97,716 | 660,429 | 546,803 | ||||||||||||||||||||||||||||||||||||
1999 | 725 | 349,504 | 305,137 | 278,551 | 3,481,620 | 3,039,655 | 725 | 349,504 | 305,137 | 278,551 | 3,481,620 | 3,039,655 | ||||||||||||||||||||||||||||||||||||
2000 | 704 | 188,042 | 149,275 | 306,163 | 2,602,211 | 2,065,739 | 704 | 188,042 | 149,275 | 306,163 | 2,602,211 | 2,065,739 | ||||||||||||||||||||||||||||||||||||
2001 | 689 | 253,843 | 191,421 | 473,241 | 1,997,420 | 1,506,237 | 689 | 253,843 | 191,421 | 473,241 | 1,997,420 | 1,506,237 | ||||||||||||||||||||||||||||||||||||
2002 | 683 | 258,681 | 215,496 | 857,245 | 3,041,598 | 2,533,815 | 683 | 258,681 | 215,496 | 857,245 | 3,041,598 | 2,533,815 | ||||||||||||||||||||||||||||||||||||
2003 | 684 | 355,363 | 296,679 | 542,010 | 2,216,636 | 1,850,589 | 684 | 355,363 | 296,679 | 542,010 | 2,216,636 | 1,850,589 | ||||||||||||||||||||||||||||||||||||
2004 | 683 | 412,588 | 395,275 | 372,895 | 2,232,109 | 2,138,445 | 683 | 412,588 | 395,275 | 372,895 | 2,232,109 | 2,138,445 | ||||||||||||||||||||||||||||||||||||
2005 | 702 | 655,075 | 646,668 | 467,629 | 3,157,662 | 3,117,139 | 702 | 655,075 | 646,668 | 467,629 | 3,157,662 | 3,117,139 | ||||||||||||||||||||||||||||||||||||
2006 | 731 | 704,588 | 757,948 | 279,096 | 3,435,180 | 3,695,332 | 731 | 704,588 | 757,948 | 279,096 | 3,435,180 | 3,695,332 | ||||||||||||||||||||||||||||||||||||
2007 | 746 | 951,887 | 1,014,589 | 363,732 | 5,539,588 | 5,904,485 | 746 | 951,887 | 1,014,589 | 363,732 | 5,539,588 | 5,904,485 | ||||||||||||||||||||||||||||||||||||
2008 | 765 | 576,888 | 458,757 | 355,205 | 5,189,644 | 4,126,953 | 765 | 576,888 | 458,757 | 355,205 | 5,189,644 | 4,126,953 | ||||||||||||||||||||||||||||||||||||
2009 | 770 | 887,316 | 759,949 | 483,902 | 5,783,552 | 4,953,367 | 770 | 887,316 | 759,949 | 483,902 | 5,783,552 | 4,953,367 | ||||||||||||||||||||||||||||||||||||
2010 | 777 | 1,141,885 | 1,002,621 | 380,859 | 5,619,768 | 4,934,382 | 777 | 1,141,885 | 1,002,621 | 380,859 | 5,619,768 | 4,934,382 | ||||||||||||||||||||||||||||||||||||
2011 | 791 | 1,041,999 | 903,493 | 353,760 | 6,863,146 | 5,950,877 | 791 | 1,041,999 | 903,493 | 353,760 | 6,863,146 | 5,950,877 | ||||||||||||||||||||||||||||||||||||
2012 (through April 26) | 788 | 1,129,236 | 991,080 | 518,357 | 5,659,853 | 4,967,398 | ||||||||||||||||||||||||||||||||||||||||||
2012 | 784 | 1,154,294 | 1,077,672 | 486,480 | 4,823,643 | 4,503,448 | ||||||||||||||||||||||||||||||||||||||||||
2013 | 777 | 1,185,974 | 1,123,826 | 328,325 | 3,993,422 | 3,784,158 | ||||||||||||||||||||||||||||||||||||||||||
2014 | 773 | 1,192,253 | 1,084,655 | 278,802 | 3,983,580 | 3,624,345 | ||||||||||||||||||||||||||||||||||||||||||
2015 (through April 29) | 762 | 1,339,024 | 1,250,373 | 398,583 | 5,159,864 | 4,818,250 |
Source: | The KRX KOSPI Market |
(1) | Converted at the Concentration Base Rate of The Bank of Korea or the Market Average Exchange Rate as announced by Seoul Money Brokerage Services Limited, as the case may be, at the end of the periods indicated. |
The Korean securities markets are principally regulated by the Financial Services Commission of Korea and the Financial Investment Services and Capital Markets Act. The Securities and Exchange Act which regulated the securities markets in the past was replaced with the Financial Investment Services and Capital Markets Act on February 4, 2009. The new law, as did the Securities and Exchange Act, imposes restrictions on insider trading and price manipulation, requires specified information to be made available by listed companies to investors and establishes rules regarding margin trading, proxy solicitation, takeover bids, acquisition of treasury shares and reporting requirements for shareholders holding substantial interests.
Further Opening of the Korean Securities Market
A stock index futures market was opened on May 3, 1996 and a stock index option market was opened on July 7, 1997, in each case at the KRX KOSPI Market. Remittance and repatriation of funds in connection with investment in stock index futures and options are subject to regulations similar to those that govern remittance and repatriation in the context of foreign investment in Korean stocks.
Foreign investors are permitted to invest in warrants representing the right to subscribe for shares of a company listed on the KRX KOSPI Market or registered on the KRX KOSDAQ Market, subject to certain investment limitations. A foreign investor may not acquire such warrants with respect to shares of a class of a company for which the ceiling on aggregate investment by foreigners has been reached or exceeded.
Foreign investors are permitted to invest in all types of corporate bonds, bonds issued by national or local governments and bonds issued in accordance with certain special laws without being subject to any aggregate or individual investment ceiling. The Financial Services Commission sets forth procedural requirements for such investments. Foreigners are permitted to invest in certificates of deposit and repurchase agreements.
Currently, foreigners are permitted to invest in securities including shares of all Korean companies which are not listed on the KRX KOSPI Market nor registered on the KRX KOSDAQ Market and in bonds which are not listed.
Protection of Customer’s Interest in Case of Insolvency of Securities Companies
Under Korean law, the relationship between a customer and a securities company in connection with a securities sell or buy order is deemed to be consignment and the securities acquired by a consignment agent (i.e., the securities company) through such sell or buy order are regarded as belonging to the customer in so far as the customer and the consignment agent’s creditors are concerned. Therefore, in the event of a bankruptcy or reorganization procedure involving a securities company, the customer of the securities company is entitled to the proceeds of the securities sold by the securities company.
When a customer places a sell order with a securities company which is not a member of the KRX KOSPI Market and this securities company places a sell order with another securities company which is a member of the KRX KOSPI Market, the customer is still entitled to the proceeds of the securities sold received by the non-member company from the member company regardless of the bankruptcy or reorganization of the non-member company.
Under the Financial Investment Services and Capital Markets Act, the KRX KOSPI Market is obliged to indemnify any loss or damage incurred by a counterparty as a result of a breach by its members. If a securities company which is a member of the KRX KOSPI Market breaches its obligation in connection with a buy order, the KRX KOSPI Market is obliged to pay the purchase price on behalf of the breaching member. Therefore, the customer can acquire the securities that have been ordered to be purchased by the breaching member.
When a customer places a buy order with a non-member company and the non-member company places a buy order with a member company, the customer has the legal right to the securities received by the non-member company from the member company because the purchased securities are regarded as belonging to the customer in so far as the customer and the non-member company’s creditors are concerned.
As the cash deposited with a securities company is regarded as belonging to the securities company, which is liable to return the same at the request of its customer, the customer cannot take back deposited cash from the securities company if a bankruptcy or reorganization procedure is instituted against the securities company and, therefore, can suffer from loss or damage as a result. However, the Depositor Protection Act provides that Korea Deposit Insurance Corporation will, upon the request of the investors, pay investors up to(Won)₩50 million in case of the securities company’s bankruptcy, liquidation, cancellation of securities business license or other insolvency events. Pursuant to the Financial
Investment Services and Capital Markets Act, securities companies are required to deposit the cash received from its customers to the extent the amount not covered by the insurance with the Korea Securities Finance Corporation, a special entity established pursuant to the Securities and Exchange ActAct.
Set-off or attachment of cash deposits by securities companies is prohibited. The premiums related to this insurance are paid by securities companies.
Not applicable.
Not applicable.
Item 9.F.Expenses of the Issuer
Not applicable.
Item 10. Additional10.Additional Information
Currently, our authorized share capital is 1,000,000,000 shares, which consists of shares of common stock, par value(Won)₩5,000 per share (“Common Shares”) and shares of non-voting preferred stock, par value(Won)₩5,000 per share (“Non-Voting Shares”). Common Shares and Non-Voting Shares together are referred to as “Shares.” Under our articles of incorporation, we are authorized to issue Non-Voting Shares up to one-fourth of our total issued capital stock. As of December 31, 2011,2014, 261,111,808 Common Shares were issued, of which 17,897,14716,249,100 shares were held by the treasury stock fund or us as treasury shares. We have never issued any Non-Voting Shares. All of the issued Common Shares are fully-paid and non-assessable and are in registered form. We issue share certificates in denominations of 1, 5, 10, 50, 100, 500, 1,000 and 10,000 shares.
Item 10.B.Memorandum and Articles of Association
This section provides information relating to our capital stock, including brief summaries of material provisions of our articles of incorporation, the Financial Investment Services and Capital Markets Act, the Commercial Code and related laws of Korea, all as currently in effect. The following summaries are subject to, and are qualified in their entirety by reference to, our articles of incorporation and the applicable provisions of the Financial Investment Services and Capital Markets Act and the Commercial Code. We have filed a copy of our articles of incorporation as an exhibit to registration statements under the Securities Act or the Securities Exchange Act previously filed by us.
Dividends
We distribute dividends to our shareholders in proportion to the number of shares owned by each shareholder. No dividends are distributed with respect to shares held by us or our treasury stock fund. The Common Shares represented by the ADSs have the same dividend rights as other outstanding Common Shares.
Holders of Non-Voting Shares are entitled to receive dividends in priority to the holders of Common Shares in an amount of not less than 9% of the par value of the Non-Voting Shares as determined by the board of directors at the time of their issuance, provided that if the dividends on the Common Shares exceed those on the Non-Voting Shares, the Non-Voting Shares will also participate
in the distribution of such excess dividend amount in the same proportion as the Common Shares. If the amount available for dividends is less than the aggregate amount of such minimum dividend, the holders of Non-Voting Shares will be entitled to receive such accumulated unpaid dividend in priority to the holders of Common Shares from the dividends payable in respect of the next fiscal year.
We declare dividends annually at the annual general meeting of shareholders which is held within three months after the end of the fiscal year. We pay the annual dividend shortly after the annual general meeting to the shareholders of record as of the end of the preceding fiscal year. We may distribute the annual dividend in cash or in Shares. However, a dividend of Shares must be distributed
at par value. If the market price of the Shares is less than their par value, dividends in Shares may not exceed one-half of the annual dividend. We may pay interim dividends in cash once a year to shareholders or registered pledgees who are registered in the registry of shareholders as of June 30 of each fiscal year by a resolution of the board of directors. We have no obligation to pay any annual dividend unclaimed for five years from the payment date.
Under the Commercial Code, we may pay our dividend only out of the excess of our net assets, on a non-consolidated basis, over the sum of (1) our stated capital and (2) the total amount of our capital surplus reserve and legalearned surplus reserve (the “Legal Reserve”) accumulated up to the end of the relevant dividend period. In addition, we may not pay any dividend unless we have set aside as legalearned surplus reserve an amount equal to at least 10% of the cash portion of the dividend or unless we have accumulated a legalan earned surplus reserve of not less than one-half of our stated capital. We may not use legal reservethe Legal Reserve to pay cash dividends but may transfer amounts from legal reservethe Legal Reserve to capital stock or use legal reservethe Legal Reserve to reduce an accumulated deficit.
Distribution of Free Shares
In addition to paying dividends in Shares out of our retained or current earnings, we may also distribute to our shareholders an amount transferred from our capital surplus or legal reservethe Legal Reserve to our stated capital in the form of free shares. We must distribute such free shares to all our shareholders in proportion to their existing shareholdings.
Preemptive Rights and Issuance of Additional Shares
We may issue authorized but unissued shares at times and, unless otherwise provided in the Commercial Code, on terms our board of directors may determine. Subject to the limitation described in “Limitation on Shareholdings” below, all our shareholders are generally entitled to subscribe for any newly issued Shares in proportion to their existing shareholdings. We must offer new Shares on uniform terms to all shareholders who have preemptive rights and are listed on our shareholders’ register as of the relevant record date. Under the Commercial Code, we may vary, without shareholders’ approval, the terms of these preemptive rights for different classes of shares. We must give notice to all persons who are entitled to exercise preemptive rights regarding new Shares and their transferability at least two weeks before the relevant record date. Our board of directors may determine how to distribute Shares for which preemptive rights have not been exercised or where fractions of Shares occur.
Under the Commercial Code, it is required that the new Shares, convertible bonds or bonds with warrants be issued to persons other than the existing shareholders solely for the purpose of achieving managerial objectives. Under our articles of incorporation, we may issue new Shares pursuant to a board resolution to persons other than existing shareholders, who in these circumstances will not have preemptive rights, if the new Shares are:
publicly offered pursuant to Articles 4 and 119 of the Financial Investment Services and Capital Markets Act;
issued to members of our employee stock ownership association;
represented by depositary receipts;
issued upon exercise of stock options granted to our officers and employees;
issued through an offering to public investors pursuant to Article 165-6 of the Financial Investment Services and Capital Markets Act, the amount of which is no more than 10% of the issued Shares;
issued in order to satisfy specific needs such as strategic alliance, inducement of foreign funds or new technology, improvement of financial structure or other capital raising requirement; or
issued to domestic or foreign financial institutions when necessary for raising funds in emergency cases.
In addition, we may issue convertible bonds or bonds with warrants, each up to an aggregate principal amount of(Won)₩2,000 billion, to persons other than existing shareholders in the situations described above.
Members of our employee stock ownership association, whether or not they are our shareholders, generally have a preemptive right to subscribe for up to 20.0% of the Shares publicly offered pursuant to the Financial Investment Services and Capital Markets Act. This right is exercisable only to the extent that the total number of Shares so acquired and held by members of our employee stock ownership association does not then exceed 20.0% of the total number of Shares then issued (including in such total both: (i) all issued and outstanding Shares at the time the preemptive rights are exercised; and (ii) all Shares to be newly issued in the applicable share issuance transaction in connection with which such preemptive rights are exercised). As of December 31, 2011, 1.36%2014, 0.64% of the issued Shares were held by members of our employee stock ownership association.
Limitation on Shareholdings
The Telecommunications Business Act permits maximum aggregate foreign shareholding in us to be 49.0% of our total issued and outstanding Shares with voting rights (including equivalent securities with voting rights, e.g., depositary certificates and certain other equity interests). For the purposes of the foregoing, a shareholder is a “foreign shareholder” if such shareholder is: (1) a foreign person; (2) a foreign government; or (3) a company whose largest shareholder is a foreign person (including any “specially related persons” as determined under the Financial Investment Services and Capital Markets Act) or a foreign government, in circumstances where (i) such foreign person or foreign government holds, in aggregate, 15.0% or more of such company’s total voting shares, and (ii) such company holds at least 1.0% of our total issued and outstanding Shares with voting rights. For the avoidance of doubt, both of conditions (i) and (ii) in the foregoing item (3) must exist for such a company to be counted as a “foreign shareholder” for the purposes of calculating whether the 49.0% foreign shareholding threshold is reached under the Telecommunications Business Act. In addition, the Telecommunications Business Act prohibits a foreign shareholder from being our largest shareholder if such shareholder owns 5.0% or more of our Shares with voting rights. For the purposes of this restriction, any two or more foreign persons or foreign governments who enter into an agreement to act in concert in the exercise of their voting rights will be counted together and prohibited from becoming our largest shareholder in the event that they collectively hold 5.0% or more of our Shares. The Foreign Investment Promotion Act also prohibits any foreign shareholder from being our largest shareholder, if such shareholder owns 5.0% or more of our Shares with voting rights. For the purposes of this restriction under the Foreign Investment Promotion Act, a “foreign shareholder” is defined in the same manner as described above with respect to the foreign shareholding restriction under the Telecommunications Business Act, provided, however, that no exception is made under the Foreign Investment Promotion Act regulations for companies that own less than 1.0% of our Shares (see
(see item (3)(ii) above in this paragraph). A foreigner who has acquired the Shares in excess of such ceiling described above may not exercise its voting rights for shares in excess of such limitation, and the Korea Communications CommissionMSIP may require corrective measures to comply with the ownership restrictions.
General Meeting of Shareholders
We hold the annual general meeting of shareholders within three months after the end of each fiscal year. Subject to a board resolution or court approval, we may hold an extraordinary general meeting of shareholders:
as necessary;
at the request of shareholders of an aggregate of 3.0% or more of our issued Common Shares;
at the request of shareholders holding an aggregate of 1.5% or more of our issued Shares for at least six months; or
at the request of our audit committee.
Holders of Non-Voting Shares may request a general meeting of shareholders only after the Non-Voting Shares become entitled to vote or are enfranchised, as described under “—Voting Rights” below.
We must give shareholders written notice setting out the date, place and agenda of the meeting at least two weeks before the date of the general meeting of shareholders. However, for holders of less than 1.0% of the total number of issued and outstanding Common Shares, we may give notice by placing at least two public notices in at least two daily newspapers at least two weeks in advance of the meeting. Currently, we use Seoul Shinmun, Maeil Business Newspaper and The Korea Economic Daily published in Seoul for this purpose. Shareholders not on the shareholders’ register as of the record date are not entitled to receive notice of the general meeting of shareholders or attend or vote at the meeting. Holders of Non-Voting Shares unless enfranchised, are not entitled to receive notice of general meetings of shareholders, but may attend such meetings.
Our general meetings of shareholders are held at our head office, in Sungnam,Seognam, or if necessary, may be held anywhere near our head office or in Seoul.
Voting Rights
Holders of our Common Shares are entitled to one vote for each Common Share, except that voting rights of Common Shares held by us, or by a corporate shareholder that is more than 10.0% owned by us either directly or indirectly, may not be exercised. The Commercial Code permits cumulative voting, under which voting method each shareholder has multiple voting rights corresponding to the number of directors to be appointed in the voting and may exercise all voting rights cumulatively to elect one director. Our articles of incorporation permit cumulative voting at our shareholders’ meeting. Under the Commercial Code of Korea, any shareholder holding shares equivalent to not less than 1/100 of the total number of shares issued may apply to us for selecting and appointing such directors by cumulative voting.
Our shareholders may adopt resolutions at a general meeting by an affirmative majority vote of the voting shares present or represented at the meeting, where the affirmative votes also represent at least one-fourth of our total voting shares then outstanding. However, under the Commercial Code and our articles of incorporation, the following matters, among others, require approval by the holders of at least two-thirds of the voting shares present or represented at a meeting, where the affirmative votes also represent at least one-third of our total voting shares then outstanding:
amending our articles of incorporation;
removing a director;
reduction of our capital stock;
effecting any dissolution, merger or consolidation of us;
transferring the whole or any significant part of our business;
effecting our acquisition of all of the business of any other company or our acquisition of a part of the business of any other company which will significantly affect our business; or
issuing any new Shares at a price lower than their par value.
In general, holders of Non-Voting Shares are not entitled to vote on any resolution or receive notice of any general meeting of shareholders. However, in the case of amendments to our articles of incorporation, any merger or consolidation of us, or in some other cases that affect the rights or interests of the Non-Voting Shares, approval of the holders of Non-Voting Shares is required. We may obtain such approval by a resolution of holders of at least two-thirds of the Non-Voting Shares present or represented at a class meeting of the holders of Non-Voting Shares, where the affirmative votes also represent at least one-third of our total outstanding Non-Voting Shares. In addition, if we are unable to pay dividends on Non-Voting Shares as provided in our articles of incorporation, the holders of Non-Voting Shares will become enfranchised and will be entitled to exercise voting rights until those dividends are paid. The holders of enfranchised Non-Voting Shares have the same rights as holders of Common Shares to request, receive notice of, attend and vote at a general meeting of shareholders.
Shareholders may exercise their voting rights by proxy. The proxy must present a document evidencing an appropriate power of attorney prior to the start of the general meeting of shareholders. Additionally, shareholders may exercise their voting rightsin absentiaby submission of signed write-in voting forms. To make it possible for our shareholders to proceed with voting on a write-in basis, we are required to attach the appropriate write-in voting form and related informational material to the notices distributed to shareholders for convening the relevant general meeting of shareholders. Any of our shareholders who desires to vote on such write-in basis must submit their completed and signed write-in voting forms to us no later than one day prior to the date that the relevant general meeting of shareholders is convened.
Holders of ADRs exercise their voting rights through the ADR depositary, an agent of which is the record holder of the underlying Common Shares. Subject to the provisions of the deposit agreement, ADR holders are entitled to instruct the ADR depositary how to vote the Common Shares underlying their ADSs. See “Item 12. Description of Securities Other than Equity Securities—Description of American Depositary Shares—Voting Rights.”
Appraisal Rights of Dissenting Shareholders
In some limited circumstances, including the transfer of the whole or any significant part of our business and our merger or consolidation with another company, dissenting shareholders have the right to require us to purchase their Shares. To exercise this right, shareholders must submit to us a written notice of their intention to dissent before the general meeting of shareholders. Within 20 days after the relevant resolution is passed at a meeting, the dissenting shareholders must request us in writing to purchase their Shares. We are obligated to purchase the Shares of dissenting shareholders within one month after the expiration of the 20-day period. The purchase price for the Shares is required to be determined through negotiation between the dissenting shareholders and us. If we cannot agree on a price through negotiation, the purchase price will be the average of (1) the weighted average of the daily Share prices on the KRX KOSPI Market for the two-month period before the date of the adoption of the relevant board resolution, (2) the weighted average of the daily Share price on
the KRX KOSPI Market for the one month period before the date of the adoption of the relevant board resolution and (3) the weighted average of the daily Share price on the KRX KOSPI Market for the one week period before the date of the adoption of the
relevant board resolution. However, if we or any of the dissenting shareholders do not accept the purchase price calculated using the above method, the rejecting party may request the court to determine the purchase price. Holders of ADSs will not be able to exercise dissenter’sappraisal rights unless they have withdrawn the underlying common stock and become our direct shareholders.
Register of Shareholders and Record Dates
Our transfer agent, Kookmin Bank, maintains the register of our shareholders at its office in Seoul, Korea. It registers transfers of Shares on the register of shareholders on presentation of the Share certificates.
The record date for annual dividends is December 31. For the purpose of determining the shareholders entitled to annual dividends, the register of shareholders may be closed for the period from the day after the record date to January 31 of the following year. Further, for the purpose of determining the shareholders entitled to some other rights pertaining to the Shares, we may, on at least two weeks’ public notice, set a record date and/or close the register of shareholders for not more than three months. The trading of Shares and the delivery of share certificates may continue while the register of shareholders is closed.
Annual Reports
At least one week before the annual general meeting of shareholders, we must make our annual report and audited non-consolidatedconsolidated financial statements available for inspection at our principal office and at all of our branch offices. In addition, copies of annual reports, the audited non-consolidatedconsolidated financial statements and any resolutions adopted at the general meeting of shareholders will be available to our shareholders.
Under the Financial Investment Services and Capital Markets Act, we must file with the Financial Services Commission and the KRX KOSPI Market (1) an annual report within 90 days after the end of our fiscal year and (2) interim reports with respect to the three month period, six month period and nine month period from the beginning of each fiscal year within 45 calendar days following the end of each period. Copies of these reports are or will be available for public inspection at the Financial Services Commission and the KRX KOSPI Market.
Transfer of Shares
Under the Commercial Code, the transfer of Shares is effected by delivery of share certificates. However, to assert shareholders’ rights against us, the transferee must have his name and address registered on our register of shareholders. For this purpose, a shareholder is required to file his name, address and seal with our transfer agent. A non-Korean shareholder may file a specimen signature in place of a seal, unless he is a citizen of a country with a sealing system similar to that of Korea. In addition, a non-resident shareholder must appoint an agent authorized to receive notices on his behalf in Korea and file a mailing address in Korea. The above requirements do not apply to the holders of ADSs.
Under current Korean regulations, Korean securities companies and banks, including licensed branches of non-Korean securities companies and banks, investment management companies, futures trading companies, internationally recognized foreign custodians and the Korea Securities Depository
may act as agents and provide related services for foreign shareholders. Certain foreign exchange controls and securities regulations apply to the transfer of Shares by non-residents or non-Koreans. See “Item 10. Additional Information—Item 10.D. Exchange Controls.”
Our transfer agent is Kookmin Bank, located at 24-3, Yoido-dong, Youngdungpo-ku,24, Gukjegeumyung-ro, Yeongdeungpo-gu, Seoul, Korea.
Acquisition of Shares by Us
WeUnder the Commercial Code, we may not acquire our own Shares exceptby (i) purchasing on the KRX KOSPI Market, or (ii) purchasing from shareholders on a pro rata basis in limited circumstances, such as a reduction in capital. In addition, pursuant toaccordance with the number of shares held by each shareholder. The aggregate purchase price for the Shares may not exceed the total amount available for distribution of dividends at the end of the preceding fiscal year. Moreover, we must acquire our own Shares from dissenting shareholders who exercise their appraisal rights.
Under the Financial Investment Services and Capital Markets Act, we may acquire Shares only by (i) purchasing on the KRX KOSPI Market, (ii) purchasing from shareholders on a tender offer,pro rata basis in accordance with the number of shares held by each shareholder, or (iii) receiving Shares returned to us upon the cancellation or termination of a trust agreement with a trustee who acquired the Shares by either of the methods indicated above. The aggregate purchase price for the Shares may not exceed the total amount available for distribution of dividends at the end of the preceding fiscal year, subject to certain procedural requirements, provided that, in case of acquisition of our own Shares by us for the purpose of cancellation, the aggregate purchase price may not exceed the total amount available for distribution of dividends at the end of the preceding fiscal year minus certain reserves.year.
In general, corporate entities in which we own a 50.0% or more equity interest may not acquire our Shares.
As of December 31, 2011,2014, there were 17,897,14716,249,100 treasury shares including shares held by our treasury stock fund.
Liquidation Rights
In the event of our liquidation, after payment of all debts, liquidation expenses and taxes, our remaining assets will be distributed among shareholders in proportion to their shareholdings. Holders of Non-Voting Shares have no preference in liquidation.
We have not entered into any material contracts since January 1, 2010, other than in the ordinary course of our business. For information regarding our agreements and transactions with certain related parties, see “Item 7.B. Related Party Transactions” and Note 3536 to the Consolidated Financial Statements. For a description of certain agreements entered into during the past two years related to our capital commitments and obligations, see “Item 5.B. Liquidity and Capital Resources.”
General
The Foreign Exchange Transaction Act and the Presidential Decree and regulations under that Act and Decree (collectively the “Foreign Exchange Transaction Laws”) regulate investment in Korean securities by non-residents and issuance of securities outside Korea by Korean companies. Under the Foreign Exchange Transaction Laws, non-residents may invest in Korean securities only in compliance with the provisions of, and to the extent specifically allowed by, these laws or otherwise permitted by the Ministry of Strategy and Finance. The Financial Services Commission has also adopted, pursuant to its authority under the Korean Financial Investment Services and Capital Markets Act, regulations that control investment by foreigners in Korean securities and regulate the issuance of securities outside Korea by Korean companies.
Under the Foreign Exchange Transaction Laws, if the Government deems that certain emergency circumstances, including, but not limited to, the outbreak of natural calamities, wars or grave and sudden changes in domestic or foreign economies, are likely to occur, the Ministry of
Strategy and Finance may temporarily suspend the transactions where Foreign Exchange Transaction Laws are applicable, or impose an obligation to deposit or sell capital to certain Korean governmental agencies or financial institutions. In addition, if the Government deems that it is confronted or is likely to be confronted with serious difficulty in movement of capital between Korea and abroad which will bring serious obstacles in carrying out its currency policies, exchange rate policies and other macroeconomic policies, the Ministry of Strategy and Finance may take measures to require any person who performs transactions to deposit such capital to certain Korean governmental agencies or financial institutions.
Government Review of Issuance of ADSs
In order for us to issue shares represented by ADSs, we are required to file a prior report of the issuance with the Ministry of Strategy and Finance if our securities and borrowings denominated in foreign currencies issued during the one-year period preceding such filing date exceed US$30 million in aggregate. No further Korean governmental approval is necessary for the initial offering and issuance of the ADSs.
Under current Korean laws and regulations, the depositary bank is required to obtain our prior consent for the number of shares to be deposited in any given proposed deposit which exceeds the difference between (1) the aggregate number of shares deposited by us or with the consent of us for the issuance of ADSs (including deposits in connection with the initial and all subsequent offerings of ADSs and stock dividends or other distributions related to these ADSs) and (2) the number of shares on deposit with the depositary bank at the time of such proposed deposit. We can give no assurance that we would grant our consent, if our consent is required. Therefore, a holder of ADRs who surrenders ADRs and withdraws shares may not be permitted subsequently to deposit those shares and obtain ADRs.
Reporting Requirements for Holders of Substantial Interests
Any person whose direct or beneficial ownership of shares, whether in the form of shares or ADSs, certificates representing the rights to subscribe for Shares and equity-related debt securities including convertible bonds and bonds with warrants (collectively, the “Equity Securities”) together with the Equity Securities beneficially owned by certain related persons or by any person acting in concert with the person accounts for 5.0% or more of the total issued Equity Securities is required to report the status of the holdings to the Financial Services Commission and the KRX KOSPI Market within five business days after reaching the 5.0% ownership interest. In addition, any change in the ownership interest subsequent to the report which equals or exceeds 1.0% of the total issued Equity Securities is required to be reported to the Financial Services Commission and the KRX KOSPI Market within five business days from the date of the change. The required information to be included in the 5.0% report may be different if the acquisition of such shareholding interest is for the purpose of exercising influence over the management, as opposed to an acquisition for investment purposes. Any person reporting the holding of 5.0% or more of the total issued Equity Securities and any person reporting the change in the ownership interest which equals or exceeds 1.0% of the total issued Equity Securities pursuant to the requirements described above must also deliver a copy of such reports to us.
Violation of these reporting requirements may subject a person to criminal sanctions such as fines or imprisonment and may result in a loss of voting rights with respect to the unreported ownership of Equity Securities exceeding 5.0%. Furthermore, the Financial Services Commission may issue an order to dispose of non-reported Equity Securities.
Restrictions Applicable to ADSs
No Korean governmental approval is necessary for the sale and purchase of ADSs in the secondary market outside Korea or for the withdrawal of shares underlying ADSs and the delivery
inside Korea of shares in connection with the withdrawal, provided that a foreigner who intends to acquire the shares must obtain an investment registration certificate from the Financial Supervisory Service as described below. In general, the acquisition of the shares by a foreigner must be reported by the foreigner or his standing proxy in Korea immediately to the Governor of the Financial Supervisory Service; provided, however, that in cases where a foreigner acquires shares through the exercise of rights as a holder of ADSs (or other depositary certificates), the foreigner must cause such report to the Governor of the Financial Supervisory Service to be filed by the Korea Securities Depository.
Persons who have acquired shares as a result of the withdrawal of shares underlying the ADSs may exercise their preemptive rights for new shares, participate in free distributions and receive dividends on shares without any further governmental approval.
Restrictions Applicable to Shares
As a result of amendments to the Foreign Exchange Transaction Laws and Financial Services Commission regulations adopted in connection with the stock market opening from January 1992, which we refer to collectively as the Investment Rules, foreigners may invest, with limited exceptions and subject to procedural requirements, in all shares of Korean companies, whether listed on the KRX KOSPI Market or the KRX KOSDAQ Market, unless prohibited by specific laws. Foreign investors may trade shares listed on the KRX KOSPI Market or the KRX KOSDAQ Market only through the KRX KOSPI Market or the KRX KOSDAQ Market, except in limited circumstances, including:
odd-lot trading of shares;
acquisition of shares (“Converted Shares”) by exercise of warrant, conversion right under convertible bonds or withdrawal right under depositary receipts issued outside of Korea by a Korean company;
acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders’ rights, including preemptive rights or rights to participate in free distributions and receive dividends;
over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been reached or exceeded;
shares acquired by foreign direct investment as defined in the Foreign Investment Promotion Law;Act;
disposal of shares pursuant to the exercise of appraisal rights of dissenting shareholders;
disposal of shares in connection with a tender offer;
acquisition of shares by a foreign depositary in connection with the issuance of depositary receipts;
acquisition and disposal of shares through overseas stock exchange market if such shares are simultaneously listed on the KRX KOSPI Market or the KRX KOSDAQ Market and such overseas stock exchange;
acquisition and disposal of shares through alternative trading systems (ATS);
arm’s length transactions between foreigners, if all of such foreigners belong to an investment group managed by the same person.
For over-the-counter transactions of shares between foreigners outside the KRX KOSPI Market or the KRX KOSDAQ Market for shares with respect to which the limit on aggregate foreign ownership has been reached or exceeded, an investment broker licensed in Korea must act as an intermediary. Odd-lot trading of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market must involve a licensed investment trader in Korea as the other party. Foreign investors are prohibited from engaging in margin transactions through borrowing shares from a securities company with respect to shares which are subject to a foreign ownership limit.
The Investment Rules require a foreign investor who wishes to invest in shares on the KRX KOSPI Market or the KRX KOSDAQ Market (including Converted Shares) to register its identity with the Financial Supervisory Service prior to making any such investment; however, the registration requirement does not apply to foreign investors who acquire Converted Shares with the intention of selling such Converted Shares within three months from the date of acquisition of the Converted Shares or who acquire the shares in an over-the-counter transaction or dispose of shares where such acquisition or disposal is deemed to be a foreign direct investment pursuant toas defined in the FinancialForeign Investment Services and Capital MarketsPromotion Act. Upon registration, the Financial Supervisory Service will issue to the foreign investor an investment registration certificate that must be presented each time the foreign investor opens a brokerage account with a financial investment business entity. Foreigners eligible to obtain an investment registration certificate include foreign nationals who are individuals residing abroad for more than six months, foreign governments, foreign municipal authorities, foreign public institutions, corporations incorporated under foreign laws, international organizations, funds and associations as defined under the Financial Investment Services and Capital Markets Act. All Korean offices of a foreign corporation as a group are treated as a separate entity from the offices of the corporation outside Korea. However, a foreign corporation or depositary bank issuing depositary receipts may obtain one or more investment registration certificates in its name in certain circumstances as described in the relevant regulations.
Upon a foreign investor’s purchase of shares through the KRX KOSPI Market or the KRX KOSDAQ Market, no separate report by the investor is required because the investment registration certificate system is designed to control and oversee foreign investment through a computer system. However, a foreign investor’s acquisition or sale of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market (as discussed above) must be reported by the foreign investor or his standing proxy to the Governor of the Financial Supervisory Service at the time of each such acquisition or sale; provided, however, that in cases where a foreigner acquires shares through the exercise of rights as a holder of ADSs (or other depositary certificates), the foreigner must cause such report to the Governor of the Financial Supervisory Service to be filed by the Korea Securities Depository; and further provided that a foreign investor must ensure that any acquisition or sale by it of shares outside the KRX KOSPI Market or the KRX KOSDAQ Market in the case of trades in connection with a tender offer, odd-lot trading of shares or trades of a class of shares for which the aggregate foreign ownership limit has been reached or exceeded, is reported to the Governor of the Financial Supervisory Service by the investment trader, the investment broker, the Korea Securities Depository or the financial securities company engaged to facilitate such transaction. A foreign investor mustmay appoint one or more standing proxies from among the Korea Securities Depository, foreign exchange banks, including domestic branches of foreign banks, investment traders, investment brokers, the Korea Securities Depository, financial securities companies and internationally recognized custodians that satisfies all relevant requirements under the Financial Investment Services and Capital Markets Act and will act as a standing proxy to exercise shareholders’ rights or perform any matters related to the foregoing activities if the foreign investor does not perform these activities himself. However, a foreign investor may be exempted from complying with these standing proxy rules with the approval of the Governor of the Financial Supervisory Service in cases deemed inevitable by reason of conflict between laws of Korea and the home country of the foreign investor.Act.
Certificates evidencing shares of Korean companies must be kept in custody with an eligible custodian in Korea. Only the Korea Securities Depository, foreign exchange banks including domestic branches of foreign banks, investment traders, investment brokers, collective investment business entities and internationally recognized custodians satisfying the relevant requirements under the Financial Investment Services and Capital Markets Act are eligible to act as a custodian of shares for a
non-resident or foreign investor. A foreign investor must ensure that his custodian deposits its shares with the Korea Securities Depository. However, a foreign investor may be exempted from complying with this deposit requirement with the approval of the Governor of the Financial Supervisory Service in circumstances where compliance with that requirement is made impracticable, including cases where compliance would contravene the laws of the home country of such foreign investor.
Under the Investment Rules, with certain exceptions, foreign investors may acquire shares of a Korean company without being subject to any foreign investment ceiling. As one such exception, designated public corporations are subject to a 40.0% ceiling on the acquisition of shares by foreigners in the aggregate and a ceiling on the acquisition of shares by a single foreign investor pursuant to the articles of incorporation of such corporation. Currently, Korea Electric Power Corporation is the only designated public corporation which has set such a ceiling. Furthermore, an investment by a foreign investor of not less than 10.0% of the issued shares with voting rights of a Korean company is defined as a direct foreign investment under the Foreign Investment Promotion Act, which is, in general, subject to the report to, and acceptance, by the Ministry of Knowledge Economy.Trade Industry & Energy. The acquisition of shares of a Korean company by a foreign investor may also be subject to certain foreign shareholding restrictions in the event that the restrictions are prescribed in each specific law which regulates the business of the Korean company. A foreigner who has acquired shares of our common stock in excess of this ceiling may not exercise his voting rights with respect to the shares of our common stock exceeding the limit.
Under the Foreign Exchange Transaction Laws, a foreign investor who intends to acquire shares must designate a foreign exchange bank at which he must open a foreign currency account and a Won account exclusively for stock investments. No approval is required for remittance into Korea and deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be transferred from the foreign currency account at the time required to place a deposit for, or settle the purchase price of, a stock purchase transaction to a Won account opened at an investment broker or an investment trader. Funds in the foreign currency account may be remitted abroad without any governmental approval.
Dividends on Shares are paid in Won. No governmental approval is required for foreign investors to receive dividends on, or the Won proceeds of the sale of, any shares to be paid, received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any shares held by a non-resident of Korea must be deposited either in a Won account with the investor’s investment broker or investment trader or his Won Account. Funds in the investor’s Won Account may be transferred to his foreign currency account or withdrawn for local living expenses up to certain limitations. Funds in the Won Account may also be used for future investment in shares or for payment of the subscription price of new shares obtained through the exercise of preemptive rights.
Investment brokers and investment traders are allowed to open foreign currency accounts with foreign exchange banks exclusively for accommodating foreign investors’ stock investments in Korea. Through these accounts, these investment brokers and investment traders may enter into foreign exchange transactions on a limited basis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or on behalf of foreign investors, without the investors having to open their own accounts with foreign exchange banks.
The following summary is based upon tax laws of the United States and the Republic of Korea as in effect on the date of this annual report on Form 20-F, and is subject to any change in United States or Korean law that may come into effect after such date. Investors in the shares of common stock or ADSs are advised to consult their own tax advisers as to the United States, Korean or other tax consequences of the purchase, ownership and disposition of such securities, including the effect of any national, state or local tax laws.
Korean Taxation
The following summary of Korean tax considerations applies to you as long as you are not:
a resident of Korea;
a corporation organized under Korean law; or
engaged in a trade or business in Korea through a permanent establishment or a fixed base.
Shares or ADSs
Dividends on Shares of Common Stock or ADSs
Unless an applicable tax treaty provides otherwise, we will deduct Korean withholding tax from dividends paid to you either in cash or shares at a rate of 22.0% (including local income tax). If you are a resident of a country that has entered into a tax treaty with Korea, you may qualify for a reduced rate of Korean withholding tax under such a treaty. For example, if you are a qualified resident of the United States for purposes of the US-Korea Tax Treaty (the “Treaty”) and you are the beneficial owner of a dividend, a reduced withholding tax rate of 16.5% (including local income tax) generally will apply. You will not be entitled to claim treaty benefits if you are not the beneficial owner of a dividend.
In order to obtain the benefits of a reduced withholding tax rate under a tax treaty, you must submit to us, prior to the dividend payment date, an application for entitlement to a reduced tax rate. If you hold ADSs and receive the dividends through a depositary, you are not required to submit the application for entitlement to a reduced tax rate. If you are an overseas investment vehicle (an “OIV”), which is defined as an organization established in a non-Korean jurisdiction that manages funds collected through investment solicitation by way of acquiring, disposing, or otherwise investing in any such evidence of tax residence as may be required byassets and distributes the Korean tax authorities. In the case of ADSs, evidence of tax residence may be submittedyield therefrom to investors), you must submit to us througha report of the depositary.OIV and a schedule of beneficial owners together with their applications for entitlement to a reduced tax rate, which you should collect from each beneficial owner. Excess taxes withheld may be recoverable if you subsequently produce satisfactory evidence that you were entitled to have tax withheld at a lower rate.
If we distribute to you free shares representing a transfer of certain capital reserves or asset revaluation reserves into paid-in capital, that distribution may be a deemed dividend subject to Korean tax.
Capital Gains
Capital gaingains from a sale of shares of common stock will generally be exempt from Korean taxation if you have owned, together with certain related parties, less than 25.0% of our total issued shares during the year of sale and the five calendar years before the year of sale, and the sale is made through the KRX KOSPI Market, and you have no permanent establishment in Korea. Capital gaingains earned by a non-Korean holder from a sale of ADSs outside of Korea are exempt from Korean taxation by virtue of the Special Tax Treatment Control Law of Korea (the “STTCL”), provided that the issuance of the ADSs is deemed to be an overseas issuance under the STTCL.
If you are subject to taxKorean taxation on capital gaingains from a sale of ADSs, or shares of common stock that you acquired as a result of a withdrawal, your gain will be calculated based on your cost of acquiring the ADSs representing the shares of common stock, although there are no specific
Korean tax provisions or rulings on this issue. In the absence of the application of a tax treaty that exempts tax on capital gain,gains, the amount of Korean tax imposed on such capital gains will be the lesser of 11.0% (including local income tax) of the gross realization proceeds or, subject to the production of satisfactory evidence of the acquisition cost and the transaction costs of the ADSs, 22.0% (including local income tax) of the net capital gain.
If you are subject to Korean taxation on capital gains from a sale of ADSs, or shares of common stock that you acquire as a result of a withdrawal, and you sell your shares of common stock or ADSs, the purchaser or, in the case of a sale of shares of common stock on the KRX KOSPI Market or through a licensed securities company in Korea, the licensed securities company, is required to withhold Korean tax from the sales price in an amount equal to 11% (including local income tax) of the gross realization proceeds and to make payment thereof to the Korean tax authorities, unless you establish your entitlement to an exemption offrom taxation under an applicable tax treaty or produce satisfactory evidence of your acquisition cost and the transaction costs for the shares of common stock or ADSs. In order to obtain the benefit of an exemption offrom tax pursuant to a tax treaty, you must submit to the purchaser or the securities company (or through the depositary), as the case may be, prior to the first payment, an exemption application, together with a certificate of your tax residence issued by a competent authority of your residence country. If you are an OIV, you must submit to us a report of the OIV and a schedule of beneficial owners together with their applications for exception, which you should collect from each beneficial owner. This requirement will not apply to exemptions under Korean tax law. Excess taxes withheld may be recoverable if you subsequently produce satisfactory evidence that you were entitled to have taxes withheld at a lower rate.
Most tax treaties that Korea has entered into provide exemptions for capital gains tax for capital gains from sale and purchase of shares of common stock. However, Korea’s tax treaties with Japan, Austria, Spain and a few other countries do not provide an exemption from such capital gains tax. For example, Article 13 of Korea’s tax treaty with Japan provides that if a taxpayer holding 25% or more (including those shares held by any related party of the taxpayer) of total issued shares of a company in a taxable year sells 5% or more (including those sold by any related party of the taxpayer) of total issued shares of the same company in the same taxable year, the country where the company is a resident may impose tax on such taxpayer.
Inheritance Tax and Gift Tax
Korean inheritance tax is imposed upon (a) all assets (wherever located) of the deceased if at the time of his death he was domiciled in Korea or had resided in Korea for a continuous period of one year or more immediately prior to his death and (b) all property located in Korea which passes on death (irrespective of the domicile of the deceased). Gift tax is imposed in similar circumstances to the above. Taxes are currently imposed at the rate of 10% to 50% if the value of the relevant property is above a certain limit and vary according to the identity of the parties involved.
Under Korean Inheritance and Gift Tax Law, shares issued by a Korean corporation are deemed located in Korea irrespective of where they are physically located or by whom they are owned. It remains unclear whether, for Korean inheritance and gift tax purposes, a non-resident holder of ADSs will be treated as the owner of the shares underlying the ADSs. If such non-resident is treated as the owner of the shares, the heir or donee of such non-resident (or in certain circumstances, the non-resident as the donor) will be subject to Korean inheritance or gift tax at the same rate as described above.
Securities Transaction Tax
If you transfer shares of common stock on the KRX KOSPI Market, you will be subject to the securities transaction tax at a rate of 0.15% and an agriculture and fishery special tax at a rate of 0.15%,
0.15%, calculated based on the sales price of the shares. If you transfer shares of common stock and your transfer is not made on the KRX KOSPI Market you will generally be subject to the securities transaction tax at a rate of 0.5% and will generally not be subject to the agriculture and fishery special tax.
With respect to transfers of ADSs, a tax ruling recently issued in 2004 by the Korean tax authority appears to hold that depositary receipts (such as the ADSs) constitute share certificates subject to the securities transaction tax. In May 2007, the Seoul Administrative Court held that depositary receipts do not constitute share certificates subject to the securities transaction tax. In 2008, the caseSeoul Administrative Court’s holding was upheld by the Seoul High Court and was further upheld by the Supreme Court. However, asSubsequent to this series of rulings, however, the Supreme Court dismissed the tax authorities’ appeal without ruling on the substantive law issue, it is not clear if the Supreme Court’s decision for this case will serve as the Supreme Court’s precedent on this issue. Even ifSecurities Transaction Tax Law was amended to expressly provide that depositary receipts (such as the ADSs) constituteconstituted a form of share certificates subject to the securities transaction tax undertax. However, the Securities Transaction Tax Law, sale price of ADSs from a transfer of depositary receipts listed on the New York Stock Exchange, the Nasdaq National Market or other qualified foreign exchanges are exempt from the securities transaction tax.
United States Federal Income Taxation
This summary describes the material U.S. federal income tax consequences to you, if you are a U.S. holder (as defined below), of owning our shares of common stock or ADSs. This summary applies to you only if you hold shares of common stock or ADSs as capital assets for tax purposes. This summary does not apply to you if you are a member of a class of holders subject to special rules, such as:
a dealer in securities or currencies;
a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings;
a bank;
an insurance company;
a tax-exempt organization;
a person that holds shares of common stock or ADSs that are a hedge or that are hedged against interest rate or currency risks;
a person that holds shares of common stock or ADSs as part of a straddle or conversion transaction for tax purposes;
a person whose functional currency for tax purposes is not the U.S. dollar; or
a person that owns or is deemed to own 10% or more of any class of our stock.
Further, this summary does not address the alternative minimum tax, the Medicare tax on net investment income or other aspects of U.S. federal income or state and local taxation that may be relevant to a holder in light of such holder’s particular circumstances.
This summary is based on laws, treaties and regulatory interpretations in effect on the date hereof, all of which are subject to change, possibly on a retroactive basis.
Please consult your own tax advisers concerning the U.S. federal, state, local and other national tax consequences of purchasing, owning and disposing of shares of common stock or ADSs in your particular circumstances.
For purposes of this summary, you are a “U.S. holder” if you are a beneficial owner of shares of common stock or ADSs and are:
a citizen or resident of the United States;
an entity treated as a U.S. domestic corporation; or
otherwise subject to U.S. federal income tax on a net income basis with respect to income from the shares of common stock or ADSs.
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds shares of common stock or ADSs, the U.S. federal income tax treatment of a partner will depend upon the status of the partnership and the activities of the partner. A partner of a partnership holding shares of common stock or ADSs should consult its own tax adviser regarding the U.S. federal income tax consequences to the partner of the acquisition, ownership and disposition by the partnership of shares of common stock or ADSs.
Shares of Common Stock and ADSs
In general, if you hold ADSs, you will be treated as the holder of the shares of common stock represented by those ADSs for U.S. federal income tax purposes, and no gain or loss will be recognized if you exchange an ADS for the shares of common stock represented by that ADS.
Dividends
The gross amount of cash dividends that you receive (prior to deduction of Korean taxes) generally will be subject to U.S. federal income taxation as foreign source dividend income. Dividends paid in Won will be included in your income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date of your (or, in the case of ADSs, the depositary’s) receipt of the dividend, regardless of whether the payment is in fact converted into U.S. dollars. If such a dividend is converted into U.S. dollars on the date of receipt, you generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. U.S. holders should consult their own tax advisers regarding the treatment of any foreign currency gain or loss on any Won received by U.S. holders that are converted into U.S. dollars on a date subsequent to receipt.
Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual prior to January 1, 2013 with respect to the ADSs and common stock will be subject to taxation at a maximum rate of 15%the reduced rates applicable to capital gains if the dividends are “qualified dividends.” Dividends paid on the ADSs and common stock will be treated as qualified dividends if (i) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the Internal Revenue Service has approved for the purposes of the qualified dividend rules and (ii) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company (“PFIC”). The income tax treaty between Korea and the United States (the “Treaty”) has been approved for the purposes of the qualified dividend rules, and we believe we are eligible for benefits under the Treaty. Based on our audited financial statements and relevant market and shareholder data, we do not anticipate being classified as a PFIC. You should consult your own tax advisers regarding the availability of the reduced dividend tax rate in light of your own particular circumstances.
Distributions of additional shares in respect of shares of common stock or ADSs that are made as part of a pro-rata distribution to all of our shareholders generally will not be subject to U.S. federal income tax.
Sales and Other Dispositions
For U.S. federal income tax purposes, gain or loss that you realize on the sale or other disposition of shares of common stock or ADSs will be capital gain or loss, and will be long-term capital gain or loss if the shares of common stock or ADSs were held for more than one year.
Foreign Tax Credit Considerations
You should consult your own tax advisers to determine whether you are subject to any special rules that limit your ability to make effective use of foreign tax credits, including the possible adverse impact of failing to take advantage of benefits under the income tax treaty between the United States and Korea. If no such rules apply, you generally may claim a credit, up to any applicable reduced rates provided under the Treaty, against your U.S. federal income tax liability for Korean taxes withheld from dividends on shares of common stock or ADSs, so long as you have owned the shares of common stock or ADSs (and not entered into certain kinds of hedging transactions) for at least a 16-day period that includes the ex-dividend date. Instead of claiming a credit, you may generally elect to deduct such Korean taxes in computing your taxable income provided that you do not elect to claim a foreign tax credit for any foreign income taxes paid or accrued for the relevant tax year. Foreign tax credits will not be allowed for withholding taxes imposed in respect of certain hedged positions in securities and may not be allowed in respect of arrangements in which your expected economic profit is insubstantial. You may not be able to use the foreign tax credit associated with any Korean withholding tax imposed on a distribution of additional shares that is not subject to U.S. tax unless you can use the credit against United States tax due on other foreign-source income.
Any Korean securities transaction tax or agriculture and fishery special tax that you pay will not be creditable for foreign tax credit purposes.
The calculation of foreign tax credits and, in the case of a U.S. holder that elects to deduct foreign taxes, the availability of deductions involve the application of complex rules that depend on a U.S. holder’s particular circumstances. You should consult your own tax advisers regarding the creditability or deductibility of such taxes.
U.S. Information Reporting and Backup Withholding Rules
Payments in respect of the shares of common stock or ADSs that are made within the United States or through certain U.S.-related financial intermediaries are subject to information reporting and may be subject to backup withholding unless the holder (1) is a corporation or other exempt recipient or (2) provides a taxpayer identification number and certifies that no loss of exemption from backup withholding has occurred. Holders that are not U.S. persons generally are not subject to information reporting or backup withholding. However, such a holder may be required to provide a certification of its non-U.S. status in connection with payments received within the United States or through a U.S.-related financial intermediary.
Item 10.F. Dividends and Paying Agents
See “Item 8. Financial Information—Consolidated Statements and Other Financial Information—Dividends” for information concerning our dividend policies and our payment of dividends. See “Item 10. Additional Information—Item 10.B. Memorandum and Articles of Association—Dividends” for a discussion of the process by which dividends are paid on our common shares. See “Item 12. Description of Securities Other than Equity Securities—Description of American Depositary Shares—Dividends and Distributions” for a discussion of the process by which dividends are paid on our ADSs. The paying agent for payment of our dividends on ADSs in the United States is Citibank, N.A.
Item 10.G. Statements by Experts
Not applicable.
Item 10.H. Documents on Display
We are subject to the information requirements of the U.S. Securities Exchange Act of 1934, as amended, and, in accordance therewith, are required to file reports, including annual reports on Form 20-F, and other information with the U.S. Securities and Exchange Commission. These materials, including this annual report and the exhibits thereto, may be inspected and copied at the Commission’s public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. We are required to make filings with the Commission by electronic means, which will be available to the public over the Internet at the Commission’s web site at http://www.sec.gov.
Item 10.I.Subsidiary Information
Not applicable.
Item 11.Quantitative and Qualitative Disclosures About Market Risk
We are exposed to foreign exchange rate and interest rate risks primarily associated with underlying liabilities, and to equity price risk as a result of our investment in equity securities. Our long-term financial policies are annually reported to our Board of Directors, and our Value ManagementFinance Office conducts financial risk management and assessment. Upon identification and evaluation of our risk exposures, we, selectivelyhaving considered various circumstances, enter into derivative financial instruments to try to manage thesome of such risks. These contracts are entered into with major financial institutions, thereby minimizing the risk of credit loss. The activities of our finance division are subject to policies approved by our foreign exchange and interest rate risk management committee. These policies address the use of derivative financial instruments, including the approval of counterparties, setting of limits and investment of excess liquidity. Our general policy is to hold or issue derivative financial instruments largely for hedging purposes.
For our trading derivative contracts,financial instruments, we recognized a valuation gain of(Won)₩210 billion and a valuation loss of(Won)₩0 billion in 2010 and2012, a valuation gain of(Won)₩134 billion and a valuation loss of(Won)₩010 billion in 2011.2013 and a valuation gain of₩1 billion and a valuation loss of₩1 billion in 2014. For our hedging derivative contracts, we recognized a valuation gain of(Won)₩350 billion, a valuation loss of(Won)₩47241 billion and accumulated other comprehensive expenseloss of(Won)₩49171 billion in 20102012, a valuation gain of₩0 billion, a valuation loss of₩97 billion and accumulated other comprehensive loss of₩95 billion in 2013 and a valuation gain of(Won)₩5493 billion, a valuation loss of(Won)₩925 billion and accumulated other comprehensive income of(Won)₩22 billion in 2011.2014. For further details regarding the assets, liabilities, gains and losses recorded relating to our derivative contracts outstanding as of December 31, 20102012, 2013 and 2011,2014, see Note 98 to the Consolidated Financial Statements.
Exchange Rate Risk
Substantially all of our cash flow is denominated in Won. We are exposed to foreign exchange risk related to foreign currency denominated liabilities and anticipated foreign exchange payments. Anticipated foreign exchange payments, mostly in Dollars, relate primarily to payments of foreign currency denominated debt, net settlements paid to foreign telecommunication carriers and payments for equipment purchased from foreign suppliers. We have entered into several currency swap contracts, combined interest currency swap contracts and currency forward contracts to hedge our foreign currency risks.
The following table shows our assets and liabilities denominated in foreign currency as of December 31, 20102012, 2013 and 2011.2014:
As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||
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(in thousands of foreign currencies) | Financial assets | Financial liabilities | Financial assets | Financial liabilities | Financial assets | Financial liabilities | Financial assets | Financial liabilities | Financial assets | Financial liabilities | ||||||||||||||||||||||||||||||
U.S. Dollar | 201,620 | 2,421,054 | 209,742 | 2,299,644 | 217,488 | 2,377,137 | 254,917 | 2,225,700 | 197,221 | 2,532,614 | ||||||||||||||||||||||||||||||
Special Drawing Right | 5,721 | 4,256 | 1,160 | 744 | 494 | 1,130 | 1,105 | 1,211 | 573 | 1,027 | ||||||||||||||||||||||||||||||
Japanese Yen | 970,586 | 19,913,770 | 1,080,392 | 35,446,361 | 657,947 | 35,102,877 | 190,520 | 30,054,316 | 34,168 | 30,051,367 | ||||||||||||||||||||||||||||||
British Pound | 6 | 131 | 7 | 108 | 1 | 9 | — | 134 | — | 257 | ||||||||||||||||||||||||||||||
Euro | 632 | 1,317 | 1,239 | 3,357 | 5,395 | 2,614 | 1,342 | 4,943 | 134 | 177 | ||||||||||||||||||||||||||||||
Algerian Dinar | 20,339 | — | 18,714 | — | 3,770 | — | 2,798 | — | 929 | — | ||||||||||||||||||||||||||||||
Chinese Yuan | 14,772 | 991 | 14,495 | 700 | 10,236 | 197 | — | — | 3,957 | — | ||||||||||||||||||||||||||||||
Russian Ruble | 1,412,479 | 238,975 | — | — | ||||||||||||||||||||||||||||||||||||
Uzbekistani Sum | 16,679,037 | 59,788,523 | — | — | ||||||||||||||||||||||||||||||||||||
Uzbekistani Som | 7,920,825 | 38,727,985 | 1,805,565 | — | 7,978,633 | — | ||||||||||||||||||||||||||||||||||
Rwandan Franc | — | — | 11,962 | — | 13,593 | — | ||||||||||||||||||||||||||||||||||
Indonesian Rupiah | — | — | 411,687 | 10,000 | 347,447 | — | — | — | — | — | ||||||||||||||||||||||||||||||
Hong Kong Dollar | — | — | — | — | 158 | — | ||||||||||||||||||||||||||||||||||
Bangladeshi Taka | — | — | — | — | 299 | — | ||||||||||||||||||||||||||||||||||
Colombian Peso | — | — | — | — | 23,583 | — | ||||||||||||||||||||||||||||||||||
Polish Zloty | — | — | — | — | 28,195 | — | ||||||||||||||||||||||||||||||||||
Vietnamese Dong | — | — | — | — | 273,313 | 93,756 | ||||||||||||||||||||||||||||||||||
Swiss Franc | — | — | — | — | — | 78 |
As of December 31, 20102012, 2013 and 2011,2014, a 10% increase in the exchange rate between the Won and all foreign currencies, with all other variables held constant, would have decreased our profitincome before income tax by(Won)₩6165 billion,₩46 billion and(Won)₩5745 billion, respectively, and shareholders’total equity by(Won)₩4652 billion,₩48 billion and(Won)₩5038 billion, respectively, with a 10% decrease in the exchange rate having the opposite effect. The foregoing sensitivity analysis assumes that all variables other than foreign exchange rates are held constant, and as such, does not reflect any correlation between foreign exchange rates and other variables, nor our decision to decrease the risk. See Note 3635 to the Consolidated Financial Statements.
Interest Rate Risk
We are also subject to market risk exposure arising from changing interest rates. A reduction of interest rates increases the fair value of our debt portfolio, which is primarily of a fixed interest nature. We use, to a limited extent, interest rate swap contracts and combined interest rate and currency swap contracts to reduce interest rate volatility on some of our debt and manage our interest expense by achieving a balanced mixture of floating and fixed rate debt. We entered into several interest rate swap contracts in which we exchange fixed interest rate payments with variable interest rate payments for a specified period, as well as entered into the combined interest rate and currency swap contracts to hedge our interest rate risk.
The following table summarizes the principal amounts, fair values, principal cash flows by maturity date and weighted average interest rates of our short-term and long-term liabilities as of December 31, 20112014 which are sensitive to exchange rates and/or interest rates. The information is presented in Won, which is our reporting currency.currency:
Maturities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2011 |
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2012 | 2013 | 2014 | 2015 | 2016 | Thereafter | Total | Fair Value | 2015 | 2016 | 2017 | 2018 | Thereafter | Total | Fair Value | ||||||||||||||||||||||||||||||||||||||||||||||
(In Won millions except rates) | (in millions of Won, except rates) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Local currency: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed rate | 1,690,076 | 1,527,610 | 1,239,051 | 612,648 | 1,239,476 | 1,618,963 | 7,927,824 | 7,975,810 | 2,325,559 | 1,934,968 | 1,505,000 | 1,161,409 | 2,967,024 | 9,893,960 | 9,864,603 | |||||||||||||||||||||||||||||||||||||||||||||
Average weighted rate (1) | 4.75 | % | 5.46 | % | 5.03 | % | 5.35 | % | 4.31 | % | 4.61 | % | 4.21 | % | — | 3.61 | % | 4.16 | % | 3.47 | % | 3.86 | % | 3.64 | % | 3.73 | % | — | ||||||||||||||||||||||||||||||||
Variable rate | 51,342 | 15,000 | 30,000 | 40,000 | 0 | 0 | 136,342 | 137,048 | 40,000 | 40,000 | — | — | — | 80,000 | 79,782 | |||||||||||||||||||||||||||||||||||||||||||||
Average weighted rate (1) | 3.77 | % | 4.94 | % | 4.54 | % | 4.97 | % | 0 | % | 0 | % | 4.42 | % | — | 2.52 | % | 2.94 | % | — | % | — | % | — | % | 2.73 | % | — | ||||||||||||||||||||||||||||||||
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Sub-total | 1,741,418 | 1,542,610 | 1,269,051 | 652,648 | 1,239,476 | 1,618,963 | 8,064,166 | 8,112,858 | 2,365,559 | 1,974,968 | 1,505,000 | 1,161,409 | 2,967,024 | 9,973,960 | 9,944,385 | |||||||||||||||||||||||||||||||||||||||||||||
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Foreign currency: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fixed rate | 235,243 | 519,806 | 691,980 | 461,320 | 230,660 | 115,330 | 2,254,339 | 2,327,392 | 492,515 | 387,305 | 1,099,200 | 62,570 | 494,640 | 2,536,230 | 2,568,710 | |||||||||||||||||||||||||||||||||||||||||||||
Average weighted rate (1) | 5.35 | % | 1.58 | % | 5.88 | % | 4.88 | % | 5.88 | % | 6.50 | % | 4.66 | % | — | 4.49 | % | 3.64 | % | 2.50 | % | 0.86 | % | 3.49 | % | 3.21 | % | — | ||||||||||||||||||||||||||||||||
Variable rate | 136,842 | 461,320 | 115,330 | 0 | 0 | 0 | 713,492 | 686,780 | 2,198 | — | — | 329,760 | — | 331,958 | 308,347 | |||||||||||||||||||||||||||||||||||||||||||||
Average weighted rate (1) | 2.08 | % | 1.59 | % | 1.52 | % | 0 | % | 0 | % | 0 | % | 1.67 | % | — | 2.62 | % | — | % | — | % | 1.41 | % | — | % | 1.42 | % | — | ||||||||||||||||||||||||||||||||
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Subtotal | 372,085 | 981,126 | 807,310 | 461,320 | 230,660 | 115,330 | 2,967,831 | 3,014,172 | 494,713 | 387,305 | 1,099,200 | 392,330 | 494,640 | 2,868,188 | 2,877,057 | |||||||||||||||||||||||||||||||||||||||||||||
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Total | 2,113,503 | 2,523,736 | 2,076,361 | 1,113,968 | 1,470,136 | 1,734,293 | 11,031,997 | 11,127,030 | 2,860,272 | 2,362,273 | 2,604,200 | 1,553,739 | 3,461,664 | 12,842,148 | 12,821,442 | |||||||||||||||||||||||||||||||||||||||||||||
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(1) | Weighted average rates of the portfolio at the period end. |
As of December 31, 20102012 and 2011,2014 a 100 basis point increase in the market interest rates, with all other variables held constant, would have decreased our profit before income tax by(Won)₩1 billion562 million and(Won)₩15 billion, respectively and shareholders’increased our profit before income tax by₩10 billion, as of December 31, 2013. As of December 31, 2012, a 100 basis point increase in the market interest rates, with all other variables held constant would have decreased total equity by(Won)₩4368 million, and increased our total equity by₩13 billion and(Won)₩345 million, respectively,5 billion, as of December 31, 2013 and 2014, respectively.
As of December 31, 2012, 2013 and 2014, a 100 basis point decrease in the market interest rates, with all other variables held constant, would have decreased our profit before income tax by(Won)₩5 billion,₩17 billion and(Won)₩135 billion, respectively, and shareholders’total equity by(Won)₩155 billion,₩19 billion and 14₩11 billion, respectively. The foregoing sensitivity analysis assumes that all variables other than market interest rates are held constant, and as such, does not reflect any correlation between market interest rates and other variables, nor our decision to decrease the risk, but reflects the effects of derivative contracts in place at the time of conducting the analysis.
Equity Price Risk
We are also subject to market risk exposure arising from changes in the equity securities market, which affect the fair value of our equity portfolio. As of December 31, 20102012, 2013 and 2011,2014, a 10% increase in the equity indices where our marketable equity securities are listed, with all other variables held constant, would have increased our shareholders’total equity by(Won)₩25 billion,₩6 billion and(Won)₩47 billion, respectively, with a 10% decrease in the equity index having the opposite effect. The foregoing sensitivity analysis assumes that all variables other than changes in the equity index are held constant, and that our marketable equity instruments had moved according to the historical correlation to the index, and as such, does not reflect any correlation between the equity index and other variables.
Item 12.Description of Securities Other than Equity Securities
Not applicable.
Item 12.B. Warrants and Rights
Not applicable.
Not applicable.
Item 12.D. American Depositary Shares
Fees and Charges
Under the terms of the deposit agreement, holders of our ADSs are required to pay the following service fees to the depositary:
Services | Fees | |
Issuance of ADSs upon deposit of shares | Up to $0.05 per ADS issued | |
Delivery of deposited shares against surrender of ADSs | Up to $0.05 per ADS surrendered | |
Distribution delivery of ADSs pursuant to sale or exercise of rights | Up to $0.02 per ADS held | |
Distributions of dividends | None | |
Distribution of securities other than ADSs | Up to $0.02 per ADS held | |
Other corporate action involving distributions to shareholders | Up to $0.02 per ADS held |
Holders of our ADSs are also responsible for paying certain fees and expenses incurred by the depositary and certain taxes and governmental charges such as:
• | fees for the transfer and registration of shares charged by the registrar and transfer agent for the shares in Korea (i.e., upon deposit and withdrawal of shares); |
expenses incurred for converting foreign currency into U.S. dollars;
expenses for cable, telex and fax transmissions and for delivery of securities;
• | taxes and duties upon the transfer of securities (i.e., when shares are deposited or withdrawn from deposit); and |
fees and expenses incurred in connection with the delivery or servicing of shares on deposit.
Depositary fees payable upon the issuance and surrender of ADSs are typically paid to the depositary by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for surrender. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date.
The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than cash (i.e., stock dividend, rights), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via the Depository Trust Company, or DTC), the depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary.
In the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse to provide the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to such holder of ADSs.
The fees and charges that holders of our ADSs may be required to pay may vary over time and may be changed by us and by the depositary. Holders of our ADSs will receive prior notice of such changes.
Fees and Payments from the Depositary to Us
In 2011,2014, we received the following payments, after deduction of applicable U.S. taxes, from the depositary:
Reimbursement of NYSE listing fees: | $ | 103,750 | ||
Reimbursement of SEC filing fees: | $ | 11,779 | ||
Reimbursement of settlement infrastructure fees (including maintenance fees): | $ | 180,269 | ||
Reimbursement of proxy process expenses (printing, postage and distribution): | $ | 40,292 | ||
Reimbursement of legal fees (reimbursement received in April 2012 in respect of 2011): | $ | 363,953 | ||
Contributions toward our investor relations efforts (including non-deal roadshows, investor conferences and investor relations agency fees): | $ | 456,951 |
Reimbursement of NYSE listing fees | $ | 100,030,00 | ||
Reimbursement of SEC filing fees | $ | 49,606.15 | ||
Reimbursement of settlement infrastructure fees (including maintenance fees) | $ | 102,436.90 | ||
Reimbursement of proxy process expenses (printing, postage and distribution) | $ | 71,805.20 | ||
Reimbursement of legal fees (reimbursement received in April 2015 in respect of 2014) | $ | 371,615.61 | ||
Contributions toward our investor relations efforts (including non-deal roadshows, investor conferences and investor relations agency fees) | $ | 355,728.86 |
Item 13.Defaults, Dividend Arrearages and Delinquencies
Not applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
Item 15.Controls and Procedures
Disclosure Controls and Procedures
Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2011.2014. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including
the possibility of human error and the circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.December 31, 2014. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms,forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that itinformation required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed by, and under the supervision of, our principal executive, principal operating and principal financial officers, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Originally issued in 1992, the “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “1992 Framework”) was amended in May 2013 (as amended, the “2013 Framework”), with application of the 1992 Framework available until December 15, 2014, after which only the 2013 Framework will be available. Our management has completedperformed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2011 based on2014 utilizing the criteria discussed in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).2013 Framework. Based on this assessment, managementwe concluded that our internal control over financial reporting was effective as of December 31, 2011.2014.
Samil PricewaterhouseCoopers, an independent registered public accounting firm, which also audited our consolidated financial statements as of, and for the year ended December 31, 2011,2014, as stated in their report which is included herein, has issued an attestation report on the effectiveness of our internal control over financial reporting.
Attestation Report of the Registered Public Accounting Firm
The attestation report of our independent registered public accounting firm on the effectiveness of our internal control over financial reporting is furnished in Item 18 of this Form 20-F.
Changes in Internal Control Over Financial Reporting
There has been no changeWe completed the implementation of the New ERP System in July 2012, and changed, established or reevaluated any related parts in our internal control over financial reporting duringaccordingly. We also conducted evaluations prior to and after the year covered by this annual reportimplementation of the New ERP System, and confirmed that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.reporting remains effective.
Item 16A. Audit Committee Financial Expert
AtIn March 2015, our shareholders elected Dae-Keun Park and Dong-Wook Chung as members of the Audit Committee at our annual shareholders’ meetings in March 2012, our shareholders reelected E. Han Kim as a member of the Audit Committee.meeting. Our Audit Committee is comprised of Hyun-Nak Lee, E. HanJong-Goo Kim, Sang Kyun Cha, Dae-Keun Park and Byong Won Bahk.Dong-Wook Chung. The board of directors has determined that E. Han Kim and Byong Won Bahk areDae-Keun Park is the audit committee financial experts.expert.
We have adopted a code of ethics, as defined in Item 16B. of Form 20-F under the Securities Exchange Act of 1934, as amended. Our code of ethics applies to our Chief Executive Officer, Chief Financial Officer and persons performing similar functions, as well as to our directors, other officers and employees. Our code of ethics is available on our web site at www.kt.com. If we amend the provisions of our code of ethics that apply to our Chief Executive Officer, Chief Financial Officer and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our web site.website.
Item 16C. Principal Accountant Fees and Services
Audit and Non-Audit Fees
The following table sets forth the fees billed to us by Samil PricewaterhouseCoopers, our independent auditors,registered public accounting firm, during the fiscal year ended December 31, 20102013 and 2011:2014:
Year Ended December 31, | Year Ended December 31, | |||||||||||||||
2010 | 2011 | 2013 | 2014 | |||||||||||||
(In millions) | (In millions) | |||||||||||||||
Audit fees | (Won) | 2,380 | (Won) | 2,492 | ₩ | 2,843 | ₩ | 3,493 | ||||||||
Audit-related fees | 70 | 100 | — | — | ||||||||||||
Tax fees | 43 | 146 | 1,778 | 525 | ||||||||||||
Other fees | 0 | 0 | — | — | ||||||||||||
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Total fees | (Won) | 2,493 | (Won) | 2,738 | ₩ | 4,621 | ₩ | 4,018 | ||||||||
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Audit fees in the above table are the aggregate fees billed by our auditors in connection with the audit of our annual financial statements and the review of our interim financial statements.
(1) | Audit fees consist of fees for the annual audit and quarterly review services engagement and the comfort letters. |
(2) | Tax fees consist of fee for tax services which are mainly the preparation or non-recurring tax compliance review of original or amended tax returns. |
Audit Committee Pre-Approval Policies and Procedures
Our audit committee has established pre-approval policies and procedures to pre-approve all audit services to be provided by Samil PricewaterhouseCoopers, our independent registered public accounting firm. Our audit committee’s policy regarding the pre-approval of non-audit services to be
provided to us by our independent auditorsregistered public accounting firm is that all such services shall be pre-approved by our audit committee. Non-audit services that are prohibited to be provided to us by our independent auditorsregistered public accounting firm under the rules of the SEC and applicable law may not be pre-approved. In addition, prior to the
granting of any pre-approval, our audit committee must be satisfied that the performance of the services in question will not compromise the independence of our independent registered public accounting firm and does not include delegation of the audit committee’s responsibilities to the management under the Securities Exchange Act of 1934, as amended.
Our audit committee did not pre-approve any non-audit services under thede minimis exception of Rule 2-01 (c)(7)(i)(C) of Regulation S-X as promulgated by the SEC.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table sets forth the repurchases of common shares by us or any affiliated purchasers during the fiscal year ended December 31, 2011:2014:
Period | Total Number of Shares Purchased | Average Price Paid per Share (In Won) | Total Number of Shares Purchased as Part of Publicly Announced Plans | Maximum Number of Shares that May Yet be Purchased Under the Plans | ||||||||||||
January 1 to January 31 | — | — | — | — | ||||||||||||
February 1 to February 29 | — | — | — | — | ||||||||||||
March 1 to March 31 | — | — | — | — | ||||||||||||
April 1 to April 30 | — | — | — | — | ||||||||||||
May 1 to May 31 | — | — | — | — | ||||||||||||
June 1 to June 30 | — | — | — | — | ||||||||||||
July 1 to July 31 | — | — | — | — | ||||||||||||
August 1 to August 31 | — | — | — | — | ||||||||||||
September 1 to September 30 | — | — | — | — | ||||||||||||
October 1 to October 31 | — | — | — | — | ||||||||||||
November 1 to November 30 | — | — | — | — | ||||||||||||
December 1 to December 31 | — | — | — | — | ||||||||||||
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| |||||||||
Total | — | — | — | — | ||||||||||||
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|
Neither we nor any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act, purchased any of our equity securities during the period covered by this annual report.
Item 16F. Change in Registrant’s Certifying Accountant
Not Applicableapplicable.
Item 16G. Corporate Governance
The following is a summary of the significant differences between the New York Stock Exchange’s corporate governance standards and those that we follow under Korean law.law:
NYSE Corporate Governance Standards | KT Corporation’s Corporate Governance Practice | |
Director Independence | ||
Independent directors must comprise a majority of the board. | The Commercial Code of Korea requires that our board of directors must comprise no less than a majority of outside directors. Our outside directors must meet the criteria for outside directorship set forth under the Commercial Code of Korea.
The majority of our board of directors is independent (as defined in accordance with the New York Stock Exchange’s standards), and 8 out of 11 directors are outside directors. |
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| |
| ||
Listed companies must have a | We have not established a | |
Compensation Committee | ||
Listed companies must have a compensation committee composed entirely of independent directors. | We maintain an Evaluation and Compensation Committee composed of four outside directors. | |
Executive Session | ||
Our outside directors hold meetings solely attended by outside directors in accordance with the charter of our board of directors. | ||
Audit Committee | ||
Listed companies must have an audit committee that is composed of more than three directors and satisfy the requirements of Rule 10A-3 under the Exchange Act. | We maintain an Audit Committee comprised of four outside directors who meet the applicable independence criteria set forth under Rule 10A-3 under the Exchange Act. | |
Shareholder Approval of Equity Compensation Plan | ||
Listed companies must allow their shareholders to exercise their voting rights with respect to any material revision to the company’s equity compensation plan. | We currently have two equity compensation plans: one providing for the grant of stock options to officers and non-independent directors; and an employee stock ownership association program.
All material matters related to the granting stock options are provided in our articles of incorporation, and any amendments to the articles of incorporation are subject to shareholders’ approval. Matters related to the employee stock ownership association program are not subject to shareholders’ approval under Korean law. |
NYSE Corporate Governance Standards | KT Corporation’s Corporate Governance Practice | |
Corporate Governance Guidelines | ||
Listed companies must adopt and disclose corporate governance guidelines. | We have adopted Corporate Governance Guidelines in March 2007 setting forth our practices with respect to corporate governance matters. Our Corporate Governance Guidelines are in compliance with Korean law but do not meet all requirements established by the New York Stock Exchange for U.S. companies listed on the exchange. A copy of our Corporate Governance Guidelines in Korean is available on our website at www.kt.com. | |
Code of Business Conduct and Ethics | ||
Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for executive officers. | We have adopted a Code of Ethics for all directors, officers and employees. A copy of our Code of Ethics in Korean is available on our website at www.kt.com |
Item 16H. Mine Safety Disclosure
Not Applicableapplicable.
Not applicable.
AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS OF KT CORPORATION
Page | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
Consolidated Statements of Cash Flows for the Years Ended December 31, | ||||
1 | Articles of Incorporation of KT Corporation (English translation) | |
2.1* | Deposit Agreement dated as of May 25, 1999 entered into among KT Corporation, Citibank, N.A., as depositary, and all Holders and Beneficial Owners of American Depositary Shares evidenced by the American Depositary Receipts issued thereunder, including the form of American depositary receipt (incorporated herein by reference to Exhibit (a)(i) of the Registrant’s Registration Statement (Registration No. 333-13578) on Form F-6) | |
2.2* | Form of Amendment No. 1 Deposit Agreement dated as of May 25, 1999 entered into among KT Corporation, Citibank, N.A., as depositary, and all Holders and Beneficial Owners of American Depositary Shares evidenced by the American Depositary Receipts issued thereunder, including the form of American depositary receipt (incorporated herein by reference to Exhibit (a)(ii) of the Registrant’s Registration Statement (Registration No. 333-13578) on Form F-6) | |
2.3* | Letter from Citibank, N.A., as depositary, to the Registrant relating to the pre-release of the American depositary receipts (incorporated herein by reference to the Registrant’s Registration Statement (Registration No. 333-10330) on Form F-6) | |
2.4* | Letter from Citibank, N.A., as depositary, to the Registrant relating to the establishment of a direct registration system for ADSs and the issuance of uncertified ADSs as part of the direct registration system. (incorporated herein by reference to Exhibit 2.4 of the Registrant’s Annual Report on Form 20-F filed on June 30, 2008) | |
8.1 | List of subsidiaries of KT Corporation | |
12.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
12.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
13.1 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
15.1 | The Framework Act on Telecommunications (English translation) | |
15.2 | Enforcement Decree of the Framework Act on Telecommunications (English translation) | |
15.3 | The Telecommunications Business Act (English translation) | |
15.4 | Enforcement Decree of the Telecommunications Business Act (English translation) |
* Filed previously.
F-2 | ||
Consolidated Statements of Financial Position as of December 31, 2013 and 2014 | F-3 | |
Consolidated Statements of Operations for the years ended December 31, 2012, 2013 and 2014 | F-5 | |
Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2013 and 2014 | F-6 | |
F-7 | ||
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2013 and 2014 | F-11 | |
F-12 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
KT Corporation
In our opinion, the accompanying consolidated statements of financial position and the related consolidated statements of income,operations, of comprehensive income, of changes in shareholders’ equity and of cash flows present fairly, in all material respects, the financial position of KT Corporation and its subsidiaries at December 31, 20112014 and 2010 and January 1, 20102013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 and 20102014 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011,2014, based on criteria established inInternal Control—IntegratedControl-Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Management’s Annual Report on Internal Control over Financial Reporting in Item 15 of Form 20-F. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Samil PricewaterhouseCoopers
Seoul Korea
April 26, 201229, 2015
KT Corporation and Subsidiaries
Consolidated Statements of Financial Position
January 1, 2010 and December 31, 20102013 and 20112014
(in thousands of U.S dollars) | (in thousands of U.S dollars) | |||||||||||||||||||||||||||||||
(in millions of Korean won) | Notes | 1.1.2010 | 12.31.2010 | 12.31.2011 | 12.31.2011 | Notes | 2013 | 2014 | 2014 | |||||||||||||||||||||||
(Note 2) | (Unaudited) (Note 2) | |||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | 2, 5, 6, 36 | (Won) | 1,542,872 | (Won) | 1,161,641 | (Won) | 1,445,169 | $ | 1,253,073 | 4, 5 | ₩ | 2,070,869 | ₩ | 1,888,663 | $ | 1,718,216 | ||||||||||||||||
Trade and other receivables, net | 2, 5, 7, 35, 36 | 3,735,368 | 4,193,377 | 6,158,914 | 5,340,253 | 4, 6 | 5,239,569 | 4,811,050 | 4,376,865 | |||||||||||||||||||||||
Short-term loans, net | 2, 5, 8, 36 | 443,722 | 725,342 | 698,030 | 605,246 | 4, 7 | 838,724 | 710,368 | 646,259 | |||||||||||||||||||||||
Current finance lease receivables, net | 2, 5, 21, 36 | 198,987 | 194,771 | 248,703 | 215,645 | 4, 21 | 294,208 | 258,982 | 235,610 | |||||||||||||||||||||||
Other financial assets | 2, 5, 9, 36 | 386,717 | 269,692 | 253,625 | 219,912 | 4, 8 | 480,062 | 332,708 | 302,682 | |||||||||||||||||||||||
Current income tax assets | 2 | 26,664 | 287 | 838 | 727 | 35,273 | 3,566 | 3,244 | ||||||||||||||||||||||||
Inventories, net | 2, 10 | 765,378 | 710,617 | 674,727 | 585,040 | 9 | 673,618 | 418,883 | 381,080 | |||||||||||||||||||||||
Other current assets | 11, 35 | 211,682 | 263,720 | 310,653 | 269,360 | 10 | 339,596 | 349,615 | 318,064 | |||||||||||||||||||||||
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| ||||||||||||||||||||||||||
Total current assets | 7,311,390 | 7,519,447 | 9,790,659 | 8,489,256 | 9,971,919 | 8,773,835 | 7,982,020 | |||||||||||||||||||||||||
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Non-current assets | ||||||||||||||||||||||||||||||||
Trade and other receivables, net | 2, 5, 7, 35, 36 | 779,639 | 1,125,336 | 1,723,415 | 1,494,334 | 4, 6 | 813,471 | 848,863 | 772,255 | |||||||||||||||||||||||
Long-term loans, net | 2, 5, 8, 36 | 467,507 | 407,879 | 491,301 | 425,996 | 4, 7 | 509,873 | 584,914 | 532,127 | |||||||||||||||||||||||
Non-current finance lease receivables, net | 2, 5, 21, 36 | 323,778 | 402,568 | 487,957 | 423,096 | 4, 21 | 415,729 | 325,431 | 296,062 | |||||||||||||||||||||||
Other financial assets | 2, 5, 9, 36 | 403,667 | 269,358 | 621,699 | 539,061 | 4, 8 | 672,645 | 704,760 | 641,157 | |||||||||||||||||||||||
Property and equipment, net | 2, 12, 21, 34 | 14,032,578 | 13,398,272 | 14,022,695 | 12,158,757 | 11 | 16,386,964 | 16,468,196 | 14,981,983 | |||||||||||||||||||||||
Investment property, net | 2, 13, 34 | 1,030,018 | 1,146,250 | 1,159,105 | 1,005,033 | 12 | 1,105,495 | 1,059,630 | 964,001 | |||||||||||||||||||||||
Intangible assets, net | 2, 14, 34 | 1,385,694 | 1,418,920 | 2,643,485 | 2,292,105 | 13 | 3,827,393 | 3,544,033 | 3,224,193 | |||||||||||||||||||||||
Investments in jointly controlled entities and associates | 2, 15 | 306,064 | 638,061 | 529,184 | 458,843 | 14 | 363,903 | 338,780 | 308,206 | |||||||||||||||||||||||
Deferred income tax assets | 2, 30 | 570,778 | 565,329 | 529,856 | 459,426 | 29 | 706,977 | 1,078,792 | 981,434 | |||||||||||||||||||||||
Other non-current assets | 2, 11 | 52,581 | 50,183 | 86,053 | 74,616 | 10 | 75,748 | 72,041 | 65,541 | |||||||||||||||||||||||
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Total non-current assets | 19,352,304 | 19,422,156 | 22,294,750 | 19,331,267 | 24,878,198 | 25,025,440 | 22,766,959 | |||||||||||||||||||||||||
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Total assets | (Won) | 26,663,694 | (Won) | 26,941,603 | (Won) | 32,085,409 | $ | 27,820,523 | ₩ | 34,850,117 | ₩ | 33,799,275 | $ | 30,748,979 | ||||||||||||||||||
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KT Corporation and Subsidiaries
Consolidated Statements of Financial Position (Continued)(continued)
January 1, 2010 and December 31, 20102013 and 20112014
(in thousands of U.S dollars) | ||||||||||||||||||
(in millions of Korean won) | Notes | 1.1.2010 | 12.31.2010 | 12.31.2011 | 12.31.2011 | |||||||||||||
(Note 2) | ||||||||||||||||||
Liabilities and Equity | ||||||||||||||||||
Current liabilities | ||||||||||||||||||
Trade and other payables | 5, 16, 35, 36 | (Won) | 5,288,058 | (Won) | 4,424,198 | (Won) | 5,890,425 | $ | 5,107,453 | |||||||||
Current finance lease liabilities, net | 5, 21, 35, 36 | 6,224 | 33,089 | 46,155 | 40,020 | |||||||||||||
Borrowings | 5, 17, 36 | 2,049,155 | 2,722,458 | 2,112,438 | 1,831,647 | |||||||||||||
Other financial liabilities | 5, 9, 20, 36 | 7,378 | 1,143 | 8,287 | 7,185 | |||||||||||||
Current income tax liabilities | 9,702 | 283,828 | 187,070 | 162,204 | ||||||||||||||
Provisions | 18, 20 | 28,906 | 58,477 | 122,585 | 106,291 | |||||||||||||
Deferred revenue | 128,308 | 176,652 | 167,907 | 145,588 | ||||||||||||||
Other current liabilities | 11, 35 | 222,838 | 184,828 | 210,258 | 182,309 | |||||||||||||
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Total current liabilities | 7,740,569 | 7,884,673 | 8,745,125 | 7,582,697 | ||||||||||||||
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Non-current liabilities | ||||||||||||||||||
Trade and other payables | 5, 16, 35, 36 | 295,621 | 381,507 | 651,713 | 565,085 | |||||||||||||
Non-current finance lease liabilities, net | 5, 21, 35, 36 | 1,329 | 60,767 | 90,042 | 78,073 | |||||||||||||
Borrowings | 5, 17, 36 | 7,517,545 | 6,659,906 | 8,886,114 | 7,704,946 | |||||||||||||
Other financial liabilities | 5, 9, 20, 36 | 19,487 | 37,783 | 288,473 | 250,128 | |||||||||||||
Retirement benefit liabilities | 19 | 86,026 | 263,978 | 425,712 | 369,125 | |||||||||||||
Provisions | 18, 20 | 102,999 | 110,400 | 142,965 | 123,962 | |||||||||||||
Deferred revenue | 154,448 | 156,873 | 160,981 | 139,583 | ||||||||||||||
Deferred income tax liabilities | 30 | 2,242 | 4,449 | 124,437 | 107,896 | |||||||||||||
Other non-current liabilities | 11, 35 | 28,612 | 27,212 | 32,038 | 27,781 | |||||||||||||
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Total non-current liabilities | 8,208,309 | 7,702,875 | 10,802,475 | 9,366,579 | ||||||||||||||
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Total liabilities | (Won) | 15,948,878 | (Won) | 15,587,548 | (Won) | 19,547,600 | $ | 16,949,276 | ||||||||||
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KT Corporation and Subsidiaries
Consolidated Statements of Financial Position (Continued)
January 1, 2010 and December 31, 2010 and 2011
(in thousands of U.S dollars) | ||||||||||||||||||
(in millions of Korean won) | Notes | 1.1.2010 | 12.31.2010 | 12.31.2011 | 12.31.2011 | |||||||||||||
Equity attributable to owners of the Parent Company | ||||||||||||||||||
Capital stock | 22 | (Won) | 1,564,499 | (Won) | 1,564,499 | (Won) | 1,564,499 | $ | 1,356,541 | |||||||||
Share premium | 1,440,258 | 1,440,258 | 1,440,258 | 1,248,815 | ||||||||||||||
Retained earnings | 23 | 9,693,037 | 9,466,168 | 10,219,633 | 8,861,210 | |||||||||||||
Accumulated other comprehensive income | (40,557 | ) | (79,370 | ) | (22,865 | ) | (19,826 | ) | ||||||||||
Other components of equity | 24, 25 | (2,154,147 | ) | (1,258,293 | ) | (1,497,289 | ) | (1,298,265 | ) | |||||||||
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10,503,090 | 11,133,262 | 11,704,236 | 10,148,475 | |||||||||||||||
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Non-controlling interest | 211,726 | 220,793 | 833,573 | 722,772 | ||||||||||||||
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Total equity | 10,714,816 | 11,354,055 | 12,537,809 | 10,871,247 | ||||||||||||||
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Total liabilities and shareholders’ equity | (Won) | 26,663,694 | (Won) | 26,941,603 | (Won) | 32,085,409 | $ | 27,820,523 | ||||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
KT Corporation and Subsidiaries
Consolidated Statements of Income
Years ended December 31, 2010 and 2011
(in millions of Korean won, except | Notes | 2010 | 2011 | (in thousands of U.S dollars) | ||||||||||
2011 | ||||||||||||||
(Note 2) | ||||||||||||||
Continuing Operations: | ||||||||||||||
Operating revenue | 2, 5, 9, 15, 26, 34, 35 | (Won) | 20,326,275 | (Won) | 21,990,051 | $ | 19,067,069 | |||||||
Operating expenses | 2, 5, 9, 15, 27, 35 | 18,318,404 | 20,016,330 | 17,355,701 | ||||||||||
Operating profit | 28, 34 | 2,007,871 | 1,973,721 | 1,711,368 | ||||||||||
Finance income | 29 | 239,379 | 267,419 | 231,873 | ||||||||||
Finance costs | 29 | (598,663 | ) | (640,216 | ) | (555,117 | ) | |||||||
Income (loss) from jointly controlled entities and associates | 15 | 32,686 | (3,038 | ) | (2,634 | ) | ||||||||
Profit from continuing operations before income tax | 1,681,273 | 1,597,886 | 1,385,490 | |||||||||||
Income tax expense | 2, 30 | (396,369 | ) | (316,735 | ) | (274,634 | ) | |||||||
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Profit for the period from the continuing operations | 1,284,904 | 1,281,151 | 1,110,856 | |||||||||||
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Discontinued Operations: | ||||||||||||||
Profit from discontinued operations | 38 | 29,980 | 170,868 | 148,156 | ||||||||||
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Profit for the period | (Won) | 1,314,884 | (Won) | 1,452,019 | $ | 1,259,012 | ||||||||
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Profit for the period attributable to: | ||||||||||||||
Equity holders of the Parent Company | (Won) | 1,295,841 | (Won) | 1,446,551 | $ | 1,254,271 | ||||||||
Profit from continuing operations | 1,273,191 | 1,276,512 | 1,106,834 | |||||||||||
Profit from discontinued operations | 22,650 | 170,039 | 147,437 | |||||||||||
Non-controlling interest | (Won) | 19,043 | (Won) | 5,468 | $ | 4,741 | ||||||||
Profit from continuing operations | 11,713 | 4,639 | 4,022 | |||||||||||
Profit from discontinued operations | 7,330 | 829 | 719 | |||||||||||
Earnings per share attributable to the equity holders of the Parent Company during the period (in won): | ||||||||||||||
Basic earnings per share | 31 | (Won) | 5,328 | (Won) | 5,946 | $ | 5.156 | |||||||
From continuing operations | 5,235 | 5,247 | 4.550 | |||||||||||
From discontinued operations | 93 | 699 | 0.606 | |||||||||||
Diluted earnings per share | (Won) | 5,328 | (Won) | 5,946 | $ | 5.156 | ||||||||
From continuing operations | 5,235 | 5,247 | 4.550 | |||||||||||
From discontinued operations | 93 | 699 | 0.606 |
The accompanying notes are an integral part of these consolidated financial statements.
KT Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
Years ended December 31, 2010 and 2011
(in millions of Korean won) | Notes | 2010 | 2011 | (in thousands of U.S dollars) | ||||||||||
2011 | ||||||||||||||
(Note 2) | ||||||||||||||
Profit for the period | (Won) | 1,314,884 | (Won) | 1,452,019 | $ | 1,259,012 | ||||||||
Other comprehensive income | ||||||||||||||
Changes in value of available-for-sale financial assets | 9 | (1,033 | ) | 60,834 | 52,748 | |||||||||
Net reclassification adjustment for realized losses of available-for-sale financial assets | 9 | 2,771 | (1,376 | ) | (1,193 | ) | ||||||||
Actuarial loss on retirement benefit liabilities | 19 | (146,728 | ) | (108,065 | ) | (93,701 | ) | |||||||
Net gains(losses) on cashflow hedges | 9 | (37,899 | ) | 16,459 | 14,271 | |||||||||
Net reclassification adjustment for cashflow hedges | 9 | 2,746 | 11,712 | 10,155 | ||||||||||
Shares of other comprehensive income (expense) from jointly controlled entities and associates | 15 | 2,379 | (2,633 | ) | (2,283 | ) | ||||||||
Net reclassification to income for jointly controlled entities and associates | 15 | — | (2,055 | ) | (1,782 | ) | ||||||||
Shares of actuarial gain (loss) of jointly controlled entities and associates | 15 | (238 | ) | (1,918 | ) | (1,663 | ) | |||||||
Currency translation differences | (10,819 | ) | 12,029 | 10,430 | ||||||||||
Net reclassification adjustment for currency translation differences | — | 22,661 | 19,649 | |||||||||||
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Total comprehensive income for the period | (Won) | 1,126,063 | (Won) | 1,459,667 | $ | 1,265,643 | ||||||||
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Comprehensive income for the period attributable to: | ||||||||||||||
Equity holders of the Parent Company | 1,111,361 | 1,396,415 | 1,210,799 | |||||||||||
Non-controlling interest | 14,702 | 63,252 | 54,844 |
The accompanying notes are an integral part of these consolidated financial statements.
KT Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
Years ended December 31, 2010 and 2011
Attributable to equity holders of the Parent Company | ||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Notes | Capital stock | Share premium | Retained earnings | Accumulated Other Comprehensive income (loss) | Other Components of equity | Total | Non-controlling interest | Total equity | |||||||||||||||||||||||||
Balance at January 1, 2010 | (Won) | 1,564,499 | (Won) | 1,440,258 | (Won) | 9,693,037 | (Won) | (40,557 | ) | (Won) | (2,154,147 | ) | (Won) | 10,503,090 | (Won) | 211,726 | (Won) | 10,714,816 | ||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||
Profit for the period | — | — | 1,295,841 | — | — | 1,295,841 | 19,043 | 1,314,884 | ||||||||||||||||||||||||||
Changes in value of available-for-sale financial assets | 9 | — | — | — | 1,603 | — | 1,603 | 135 | 1,738 | |||||||||||||||||||||||||
Actuarial loss on retirement benefit liabilities | 9 | — | — | (145,429 | ) | — | — | (145,429 | ) | (1,299 | ) | (146,728 | ) | |||||||||||||||||||||
Net losses on cashflow hedge | 9 | — | — | — | (35,153 | ) | — | (35,153 | ) | — | (35,153 | ) | ||||||||||||||||||||||
Shares of other comprehensive income of jointly controlled entities and associates | 15 | — | — | — | 2,384 | — | 2,384 | (5 | ) | 2,379 | ||||||||||||||||||||||||
Shares of actuarial gain of jointly controlled entities and associates | 15 | — | — | (238 | ) | — | — | (238 | ) | — | (238 | ) | ||||||||||||||||||||||
Currency translation differences | — | — | — | (7,647 | ) | — | (7,647 | ) | (3,172 | ) | (10,819 | ) | ||||||||||||||||||||||
Transactions with equity holders | ||||||||||||||||||||||||||||||||||
Dividends | 32 | — | — | (486,393 | ) | — | — | (486,393 | ) | (6,792 | ) | (493,185 | ) | |||||||||||||||||||||
Appropriations of loss on disposal of treasury stock | — | — | (890,650 | ) | — | 890,650 | — | — | — | |||||||||||||||||||||||||
Change in ownership interest in subsidiaries | — | — | — | — | (520 | ) | (520 | ) | 2,175 | 1,655 | ||||||||||||||||||||||||
Others | — | — | — | — | 5,724 | 5,724 | (1,018 | ) | 4,706 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance at December 31, 2010 | (Won) | 1,564,499 | (Won) | 1,440,258 | (Won) | 9,466,168 | (Won) | (79,370 | ) | (Won) | (1,258,293 | ) | (Won) | 11,133,262 | (Won) | 220,793 | (Won) | 11,354,055 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance at January 1, 2011 | (Won) | 1,564,499 | (Won) | 1,440,258 | (Won) | 9,466,168 | (Won) | (79,370 | ) | (Won) | (1,258,293 | ) | (Won) | 11,133,262 | (Won) | 220,793 | (Won) | 11,354,055 | ||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||
Profit for the period | — | — | 1,446,551 | — | — | 1,446,551 | 5,468 | 1,452,019 | ||||||||||||||||||||||||||
Changes in value of available-for-sale financial assets | 9 | — | — | — | 5,090 | — | 5,090 | 54,368 | 59,458 | |||||||||||||||||||||||||
Actuarial loss on retirement benefit liabilities | 9 | — | — | (104,723 | ) | — | — | (104,723 | ) | (3,342 | ) | (108,065 | ) | |||||||||||||||||||||
Net gains on cashflow hedge | 9 | — | — | — | 28,178 | — | 28,178 | (7 | ) | 28,171 |
KT Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity (Continued)
Years ended December 31, 2010 and 2011
Attributable to equity holders of the Parent Company | ||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Notes | Capital stock | Share premium | Retained earnings | Accumulated Other Comprehensive income (loss) | Other Components of equity | Total | Non-controlling interest | Total equity | |||||||||||||||||||||||||
Shares of other comprehensive income of jointly controlled entities and associates | 15 | — | — | — | (5,283 | ) | — | (5,283 | ) | 595 | (4,688 | ) | ||||||||||||||||||||||
Shares of actuarial gain of jointly controlled entities and associates | 15 | — | — | (1,918 | ) | — | — | (1,918 | ) | — | (1,918 | ) | ||||||||||||||||||||||
Currency translation differences | — | — | — | 28,520 | — | 28,520 | 6,170 | 34,690 | ||||||||||||||||||||||||||
Transactions with equity holders | ||||||||||||||||||||||||||||||||||
Dividends | 32 | — | — | (586,150 | ) | — | — | (586,150 | ) | (9,050 | ) | (595,200 | ) | |||||||||||||||||||||
Appropriations of loss on disposal of treasury stock | — | — | (295 | ) | — | 295 | — | — | — | |||||||||||||||||||||||||
Changes in consolidation scope | — | — | — | — | — | — | 503,588 | 503,588 | ||||||||||||||||||||||||||
Change in ownership interest in subsidiaries | — | — | — | — | (253,445 | ) | (253,445 | ) | 36,457 | (216,988 | ) | |||||||||||||||||||||||
Others | — | — | — | — | 14,154 | 14,154 | 18,533 | 32,687 | ||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
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|
|
|
|
| |||||||||||||||||||
Balance at December 31, 2011 | (Won) | 1,564,499 | (Won) | 1,440,258 | (Won) | 10,219,633 | (Won) | (22,865 | ) | (Won) | (1,497,289 | ) | (Won) | 11,704,236 | (Won) | 833,573 | (Won) | 12,537,809 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands of U.S dollars) | ||||||||||||||
(in millions of Korean won) | Notes | 2013 | 2014 | 2014 | ||||||||||
(Unaudited) (Note 2) | ||||||||||||||
Liabilities and Equity | ||||||||||||||
Current liabilities | ||||||||||||||
Trade and other payables | 4, 15 | ₩ | 7,413,823 | ₩ | 6,408,111 | $ | 5,829,795 | |||||||
Current finance lease liabilities, net | 4 | 19,487 | 20,155 | 18,336 | ||||||||||
Borrowings | 4, 16 | 3,020,706 | 2,955,644 | 2,688,905 | ||||||||||
Other financial liabilities | 4, 8 | 63,820 | 23,717 | 21,577 | ||||||||||
Current income tax liabilities | 99,848 | 45,799 | 41,666 | |||||||||||
Provisions | 17 | 114,755 | 111,439 | 101,382 | ||||||||||
Deferred revenue | 143,601 | 143,530 | 130,577 | |||||||||||
Other current liabilities | 10 | 348,076 | 278,752 | 253,595 | ||||||||||
|
|
|
|
|
| |||||||||
Total current liabilities | 11,224,116 | 9,987,147 | 9,085,833 | |||||||||||
|
|
|
|
|
| |||||||||
Non-current liabilities | ||||||||||||||
Trade and other payables | 4, 15 | 1,058,884 | 909,192 | 827,140 | ||||||||||
Non-current finance lease liabilities, net | 4 | 48,723 | 34,852 | 31,707 | ||||||||||
Borrowings | 4, 16 | 8,463,187 | 9,859,741 | 8,969,924 | ||||||||||
Other financial liabilities | 4, 8 | 178,812 | 190,525 | 173,331 | ||||||||||
Defined benefit liabilities, net | 18 | 586,083 | 593,838 | 540,246 | ||||||||||
Provisions | 17 | 133,561 | 106,430 | 96,825 | ||||||||||
Deferred revenue | 147,837 | 147,439 | 134,133 | |||||||||||
Deferred income tax liabilities | 29 | 169,498 | 143,964 | 130,972 | ||||||||||
Other non-current liabilities | 10 | 2,000 | 38,590 | 35,107 | ||||||||||
|
|
|
|
|
| |||||||||
Total non-current liabilities | 10,788,585 | 12,024,571 | 10,939,385 | |||||||||||
|
|
|
|
|
| |||||||||
Total liabilities | 22,012,701 | 22,011,718 | 20,025,218 | |||||||||||
|
|
|
|
|
| |||||||||
Equity attributable to owners of the Parent Company | ||||||||||||||
Capital stock | 22 | 1,564,499 | 1,564,499 | 1,423,307 | ||||||||||
Share premium | 1,440,258 | 1,440,258 | 1,310,278 | |||||||||||
Retained earnings | 23 | 10,019,389 | 8,568,399 | 7,795,123 | ||||||||||
Accumulated other comprehensive income | 24 | 24,538 | 25,790 | 23,463 | ||||||||||
Other components of equity | 24 | (1,320,943 | ) | (1,260,709 | ) | (1,146,933 | ) | |||||||
|
|
|
|
|
| |||||||||
11,727,741 | 10,338,237 | 9,405,238 | ||||||||||||
|
|
|
|
|
| |||||||||
Non-controlling interest | 1,109,675 | 1,449,320 | 1,318,523 | |||||||||||
|
|
|
|
|
| |||||||||
Total equity | 12,837,416 | 11,787,557 | 10,723,761 | |||||||||||
|
|
|
|
|
| |||||||||
Total liabilities and equity | ₩ | 34,850,117 | ₩ | 33,799,275 | $ | 30,748,979 | ||||||||
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
KT Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity (Continued)Operations
Years ended December 31, 20112012, 2013 and 2014
Attributable to equity holders of the Parent Company | ||||||||||||||||||||||||||||||||||
(in thousands of U.S dollars) | Notes | Capital stock | Share premium | Retained earnings | Accumulated Other Comprehensive income (loss) | Other Components of equity | Total | Non-controlling interest | Total equity | |||||||||||||||||||||||||
Balance at January 1, 2011 | $ | 1,356,541 | $ | 1,248,815 | $ | 8,207,898 | $ | (68,820 | ) | $ | (1,091,037 | ) | $ | 9,653,397 | $ | 191,446 | $ | 9,844,843 | ||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||
Profit for the period | — | — | 1,254,271 | — | — | 1,254,271 | 4,741 | 1,259,012 | ||||||||||||||||||||||||||
Changes in value of available-for-sale financial assets | 9 | — | — | — | 4,414 | — | 4,414 | 47,141 | 51,555 | |||||||||||||||||||||||||
Actuarial loss on retirement benefit liabilities | 9 | — | — | (90,803 | ) | — | — | (90,803 | ) | (2,898 | ) | (93,701 | ) | |||||||||||||||||||||
Net gains on cashflow hedge | 9 | — | — | — | 24,432 | — | 24,432 | (6 | ) | 24,426 | ||||||||||||||||||||||||
Shares of other comprehensive income of jointly controlled entities and associates | 15 | — | — | — | (4,581 | ) | — | (4,581 | ) | 516 | (4,065 | ) | ||||||||||||||||||||||
Shares of actuarial gain of jointly controlled entities and associates | 15 | — | — | (1,663 | ) | — | — | (1,663 | ) | — | (1,663 | ) | ||||||||||||||||||||||
Currency translation differences | — | — | — | 24,729 | — | 24,729 | 5,350 | 30,079 | ||||||||||||||||||||||||||
Transactions with equity holders | ||||||||||||||||||||||||||||||||||
Dividends | 32 | — | — | (508,237 | ) | — | — | (508,237 | ) | (7,847 | ) | (516,084 | ) | |||||||||||||||||||||
Appropriations of loss on disposal of treasury stock | — | — | (256 | ) | — | 256 | — | — | — | |||||||||||||||||||||||||
Changes in consolidation scope | — | — | — | — | — | — | 436,650 | 436,650 | ||||||||||||||||||||||||||
Change in ownership interest in subsidiaries | — | — | — | — | (219,756 | ) | (219,756 | ) | 31,610 | (188,146 | ) | |||||||||||||||||||||||
Others | — | — | — | — | 12,272 | 12,272 | 16,069 | 28,341 | ||||||||||||||||||||||||||
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|
| |||||||||||||||||||
Balance at December 31, 2011 | $ | 1,356,541 | $ | 1,248,815 | $ | 8,861,210 | $ | (19,826 | ) | $ | (1,298,265 | ) | $ | 10,148,475 | $ | 722,772 | $ | 10,871,247 | ||||||||||||||||
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|
|
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|
|
|
|
|
|
|
|
|
(in millions of Korean won, except per share amounts) | (in thousands of U.S dollars) | |||||||||||||||||||
Notes | 2012 | 2013 | 2014 | 2014 | ||||||||||||||||
(Unaudited) (Note 2) | ||||||||||||||||||||
Continuing Operations | ||||||||||||||||||||
Operating revenue | 26 | ₩ | 24,643,772 | ₩ | 24,057,881 | ₩ | 23,727,378 | $ | 21,586,043 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Revenue | 23,856,375 | 23,728,673 | 23,469,287 | 21,351,244 | ||||||||||||||||
Others | 787,397 | 329,208 | 258,091 | 234,799 | ||||||||||||||||
Operating expenses | 27 | 22,963,673 | 23,734,497 | 24,389,781 | 22,188,665 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Operating profit | 1,680,099 | 323,384 | (662,403 | ) | (602,622 | ) | ||||||||||||||
Finance income | 28 | 498,657 | 279,349 | 254,900 | 231,896 | |||||||||||||||
Finance costs | 28 | (781,993 | ) | (647,500 | ) | (818,443 | ) | (744,581 | ) | |||||||||||
Income from jointly controlled entities and associates | 14 | 18,079 | 6,601 | 18,198 | 16,556 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Profit(loss) from continuing operations before income tax | 1,414,842 | (38,166 | ) | (1,207,748 | ) | (1,098,751 | ) | |||||||||||||
Income tax expense (income) | 29 | 277,869 | 49,579 | (266,335 | ) | (242,299 | ) | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Profit(loss) for the year from the continuing operations | 1,136,973 | (87,745 | ) | (941,413 | ) | (856,452 | ) | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Discontinued Operations | ||||||||||||||||||||
Loss from discontinued operations | 40 | (31,534 | ) | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Profit(loss) for the year | ₩ | 1,105,439 | ₩ | (87,745 | ) | ₩ | (941,413 | ) | $ | (856,452 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||||||
Profit(loss) for the year attributable to: | ||||||||||||||||||||
Equity holders of the Parent Company | ₩ | 1,046,127 | ₩ | (189,931 | ) | ₩ | (1,030,240 | ) | $ | (937,263 | ) | |||||||||
Profit(loss) from continuing operations | 1,075,694 | (189,931 | ) | (1,030,240 | ) | (937,263 | ) | |||||||||||||
Loss from discontinued operations | (29,567 | ) | — | — | — | |||||||||||||||
Non-controlling interest | ₩ | 59,312 | ₩ | 102,186 | ₩ | 88,827 | $ | 80,811 | ||||||||||||
Profit from continuing operations | 61,279 | 102,186 | 88,827 | 80,811 | ||||||||||||||||
Loss from discontinued operations | (1,967 | ) | — | — | — | |||||||||||||||
Earnings(loss) per share attributable to the equity holders of the Parent Company during the year (in won): | ||||||||||||||||||||
Basic earnings(loss) per share | 30 | ₩ | 4,296 | ₩ | (779 | ) | ₩ | (4,215 | ) | $ | (4 | ) | ||||||||
From continuing operations | 4,417 | (779 | ) | (4,215 | ) | (4 | ) | |||||||||||||
From discontinued operations | (121 | ) | — | — | — | |||||||||||||||
Diluted earnings(loss) per share | 30 | ₩ | 4,296 | ₩ | (782 | ) | ₩ | (4,215 | ) | $ | (4 | ) | ||||||||
From continuing operations | 4,417 | (782 | ) | (4,215 | ) | (4 | ) | |||||||||||||
From discontinued operations | (121 | ) | — | — | — |
The accompanying notes are an integral part of these consolidated financial statements.
KT Corporation and Subsidiaries
Consolidated Statements of Cash FlowsComprehensive Income
Years ended December 31, 20102012, 2013 and 20112014
(in millions of Korean won) | Notes | 2010 | 2011 | (in thousands of U.S dollars) | ||||||||||
2011 | ||||||||||||||
(Note2) | ||||||||||||||
Cash flows from operating activities | ||||||||||||||
Cash generated from operations | 33 | (Won) | 3,272,059 | (Won) | 2,905,037 | $ | 2,518,891 | |||||||
Interest paid | (554,054 | ) | (512,643 | ) | (444,501 | ) | ||||||||
Interest received | 252,161 | 156,932 | 136,072 | |||||||||||
Dividends received | 50,194 | 15,330 | 13,293 | |||||||||||
Income tax paid | (79,470 | ) | (414,631 | ) | (359,517 | ) | ||||||||
Income tax refund received | 32,218 | 284 | 246 | |||||||||||
|
|
|
|
|
| |||||||||
Net cash generated from operating activities | 2,973,108 | 2,150,309 | 1,864,484 | |||||||||||
|
|
|
|
|
| |||||||||
Cash flows from investing activities | ||||||||||||||
Collection of loans | 13,523 | 66,713 | 57,845 | |||||||||||
Origination of loans | (53,621 | ) | (71,450 | ) | (61,953 | ) | ||||||||
Disposal of available-for-sale financial assets | 74,363 | 65,760 | 57,019 | |||||||||||
Acquisition of available-for-sale financial assets | (86,289 | ) | (188,752 | ) | (163,663 | ) | ||||||||
Disposal of investments in jointly controlled entities and associates | 48,703 | 102,563 | 88,930 | |||||||||||
Acquisition of investments in jointly controlled entities and associates | (276,404 | ) | (65,055 | ) | (56,407 | ) | ||||||||
Disposal of current and non-current financial instruments | 476,443 | 240,779 | 208,774 | |||||||||||
Acquisition of current and non-current financial instruments | (252,035 | ) | (257,619 | ) | (223,376 | ) | ||||||||
Disposal of property and equipment | 181,425 | 594,250 | 515,261 | |||||||||||
Acquisition of property and equipment | (2,713,358 | ) | (3,208,337 | ) | (2,781,875 | ) | ||||||||
Disposal of intangible assets | 6,008 | 14,763 | 12,801 | |||||||||||
Acquisition of intangible assets | (331,779 | ) | (476,888 | ) | (413,499 | ) | ||||||||
Acquisition of subsidiaries, net of cash acquired | (2,749 | ) | 208,752 | 181,004 | ||||||||||
Cash inflow(outflow) from changes in scope of consolidation | (33,298 | ) | 326,524 | 283,121 | ||||||||||
|
|
|
|
|
| |||||||||
Net cash used in investing activities | (2,949,068 | ) | (2,647,997 | ) | (2,296,018 | ) | ||||||||
|
|
|
|
|
| |||||||||
Cash flows from financing activities | ||||||||||||||
Proceeds from borrowings and bonds | 5,698,981 | 7,224,666 | 6,264,342 | |||||||||||
Repayments of borrowings and bonds | (5,575,825 | ) | (6,025,054 | ) | (5,224,186 | ) | ||||||||
Settlement of derivative assets and liabilities, net | 8,959 | 130,119 | 112,823 | |||||||||||
Cash inflow from consolidated capital transaction | 1,205 | 83,855 | 72,709 | |||||||||||
Cash outflow from consolidated capital transaction | (300 | ) | (2,213 | ) | (1,919 | ) | ||||||||
Dividends paid to shareholders | (486,393 | ) | (586,150 | ) | (508,237 | ) | ||||||||
Dividends paid to non-controlling interest | (6,792 | ) | (9,050 | ) | (7,847 | ) | ||||||||
Decrease in finance leases liabilities | (38,183 | ) | (47,701 | ) | (41,360 | ) | ||||||||
|
|
|
|
|
| |||||||||
Net cash provided by (used in) financing activities | (398,348 | ) | 768,472 | 666,325 | ||||||||||
|
|
|
|
|
| |||||||||
Effect of exchange rate change on cash and cash equivalents | (6,923 | ) | 12,744 | 11,050 | ||||||||||
|
|
|
|
|
| |||||||||
Net increase(decrease) in cash and cash equivalents | (381,231 | ) | 283,528 | 245,841 | ||||||||||
Cash and cash equivalents | ||||||||||||||
Beginning of the period | 6 | 1,542,872 | 1,161,641 | 1,007,232 | ||||||||||
|
|
|
|
|
| |||||||||
End of the period | 6 | (Won) | 1,161,641 | (Won) | 1,445,169 | $ | 1,253,073 | |||||||
|
|
|
|
|
|
(in millions of Korean won) | (in thousands of U.S dollars) | |||||||||||||||||
Notes | 2012 | 2013 | 2014 | 2014 | ||||||||||||||
(Unaudited) (Note 2) | ||||||||||||||||||
Profit(loss) for the year | ₩ | 1,105,439 | ₩ | (87,745 | ) | ₩ | (941,413 | ) | $ | (856,452 | ) | |||||||
Other comprehensive income | ||||||||||||||||||
Items not reclassifiable subsequently to profit or loss: | ||||||||||||||||||
Remeasurements of the net defined benefit liability | 18 | (130,492 | ) | 56,583 | (236,637 | ) | (215,281 | ) | ||||||||||
Shares of remeasurement loss from jointly controlled entities and associates | (1,131 | ) | (455 | ) | (394 | ) | (358 | ) | ||||||||||
Items reclassifiable subsequently to profit or loss: | ||||||||||||||||||
Changes in value of available-for-sale financial assets | 4, 8 | 23,952 | 49,778 | 39,336 | 35,786 | |||||||||||||
Other comprehensive income(loss) from available-for sale financial assets reclassified to income(loss) | (4,865 | ) | 6,554 | (17,173 | ) | (15,623 | ) | |||||||||||
Net gains(losses) on cashflow hedges | 4, 8 | (129,290 | ) | (72,303 | ) | 16,990 | 15,457 | |||||||||||
Other comprehensive income(loss) from cashflow hedges reclassified to income(loss) | 154,867 | 67,607 | (44,795 | ) | (40,753 | ) | ||||||||||||
Shares of other comprehensive income from jointly controlled entities and associates | (8,730 | ) | 2,896 | 3,902 | 3,550 | |||||||||||||
Currency translation differences | (6,645 | ) | (2,053 | ) | 3,526 | 3,208 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Other comprehensive income after income tax for the year | (102,334 | ) | 108,607 | (235,245 | ) | (214,014 | ) | |||||||||||
|
|
|
|
|
|
|
| |||||||||||
Total comprehensive income for the year | ₩ | 1,003,105 | ₩ | 20,862 | ₩ | (1,176,658 | ) | $ | (1,070,466 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||||
Comprehensive income for the year attributable to: | ||||||||||||||||||
Equity holders of the Parent Company | 937,542 | (109,539 | ) | (1,252,456 | ) | (1,139,424 | ) | |||||||||||
Non-controlling interest | 65,563 | 130,401 | 75,798 | 68,958 |
The accompanying notes are an integral part of these consolidated financial statements.
KT Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholder’s Equity
Years ended December 31, 2012, 2013 and 2014
Attributable to equity holders of the Parent Company | ||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Notes | Capital stock | Share premium | Retained earnings | Accumulated Other Comprehensive income (loss) | Other Components of equity | Total | Non-controlling interest | Total equity | |||||||||||||||||||||||||
Balance at January 1, 2012 | ₩ | 1,564,499 | ₩ | 1,440,258 | ₩ | 10,219,633 | ₩ | (22,865 | ) | ₩ | (1,497,289 | ) | ₩ | 11,704,236 | ₩ | 883,524 | ₩ | 12,587,760 | ||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||
Profit for the year | — | — | 1,046,127 | — | — | 1,046,127 | 59,312 | 1,105,439 | ||||||||||||||||||||||||||
Changes in value of available-for-sale financial assets | 4 | — | — | — | 12,019 | — | 12,019 | 7,068 | 19,087 | |||||||||||||||||||||||||
Remeasurements of the net defined benefit liability | 18 | — | — | (131,644 | ) | — | — | (131,644 | ) | 1,152 | (130,492 | ) | ||||||||||||||||||||||
Valuation gains(losses) on cashflow hedge | 4 | — | — | — | 25,628 | — | 25,628 | (51 | ) | 25,577 | ||||||||||||||||||||||||
Shares of other comprehensive income of jointly controlled entities and associates | — | — | — | (8,440 | ) | — | (8,440 | ) | (290 | ) | (8,730 | ) | ||||||||||||||||||||||
Shares of remeasurement loss from jointly controlled entities and associates | — | — | (1,131 | ) | — | — | (1,131 | ) | — | (1,131 | ) | |||||||||||||||||||||||
Currency translation differences | — | — | — | (5,017 | ) | — | (5,017 | ) | (1,628 | ) | (6,645 | ) | ||||||||||||||||||||||
Transactions with equity holders | ||||||||||||||||||||||||||||||||||
Dividends | — | — | (486,602 | ) | — | — | (486,602 | ) | (11,455 | ) | (498,057 | ) | ||||||||||||||||||||||
Disposal of treasury stock | — | — | — | — | 13,353 | 13,353 | — | 13,353 | ||||||||||||||||||||||||||
Changes in consolidation scope | — | — | — | — | — | — | 133,767 | 133,767 | ||||||||||||||||||||||||||
Change in ownership interest in subsidiaries | — | — | — | — | 141,303 | 141,303 | (163,404 | ) | (22,101 | ) | ||||||||||||||||||||||||
Others | — | — | — | — | (653 | ) | (653 | ) | 801 | 148 | ||||||||||||||||||||||||
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Balance at December 31, 2012 | ₩ | 1,564,499 | ₩ | 1,440,258 | ₩ | 10,646,383 | ₩ | 1,325 | ₩ | (1,343,286 | ) | ₩ | 12,309,179 | ₩ | 908,796 | ₩ | 13,217,975 | |||||||||||||||||
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KT Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholder’s Equity (Continued)
Years ended December 31, 2012, 2013 and 2014
Attributable to equity holders of the Parent Company | ||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Notes | Capital stock | Share premium | Retained earnings | Accumulated Other Comprehensive income (loss) | Other Components of equity | Total | Non-controlling interest | Total equity | |||||||||||||||||||||||||
Balance at January 1, 2013 | ₩ | 1,564,499 | ₩ | 1,440,258 | ₩ | 10,646,383 | ₩ | 1,325 | ₩ | (1,343,286 | ) | ₩ | 12,309,179 | ₩ | 908,796 | ₩ | 13,217,975 | |||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||
Profit(loss) for the year | — | — | (189,931 | ) | — | — | (189,931 | ) | 102,186 | (87,745 | ) | |||||||||||||||||||||||
Changes in value of available-for-sale financial assets | 4, 8 | — | — | — | 32,098 | — | 32,098 | 24,234 | 56,332 | |||||||||||||||||||||||||
Remeasurements of the net defined benefit liability | 18 | — | — | 57,641 | — | — | 57,641 | (1,058 | ) | 56,583 | ||||||||||||||||||||||||
Valuation gains(losses) on cashflow hedge | 4, 8 | — | — | — | (4,711 | ) | — | (4,711 | ) | 15 | (4,696 | ) | ||||||||||||||||||||||
Shares of other comprehensive income of jointly controlled entities and associates | — | — | — | 2,570 | — | 2,570 | 326 | 2,896 | ||||||||||||||||||||||||||
Shares of remeasurement gain(loss) from jointly controlled entities and associates | — | — | (463 | ) | — | — | (463 | ) | 7 | (456 | ) | |||||||||||||||||||||||
Currency translation differences | — | — | — | (6,744 | ) | — | (6,744 | ) | 4,691 | (2,053 | ) | |||||||||||||||||||||||
Transactions with equity holders | ||||||||||||||||||||||||||||||||||
Dividends | — | — | (487,445 | ) | — | — | (487,445 | ) | (23,830 | ) | (511,275 | ) | ||||||||||||||||||||||
Appropriations of loss on disposal of treasury stock | — | — | (6,796 | ) | — | 6,796 | — | — | — | |||||||||||||||||||||||||
Changes in consolidation scope | — | — | — | — | — | — | 9,452 | 9,452 | ||||||||||||||||||||||||||
Change in ownership interest in subsidiaries | — | — | — | — | 14,150 | 14,150 | 85,971 | 100,121 | ||||||||||||||||||||||||||
Others | — | — | — | — | 1,397 | 1,397 | (1,115 | ) | 282 | |||||||||||||||||||||||||
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Balance at December 31, 2013 | ₩ | 1,564,499 | ₩ | 1,440,258 | ₩ | 10,019,389 | ₩ | 24,538 | ₩ | (1,320,943 | ) | ₩ | 11,727,741 | ₩ | 1,109,675 | ₩ | 12,837,416 | |||||||||||||||||
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KT Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholder’s Equity (Continued)
Years ended December 31, 2012, 2013 and 2014
Attributable to equity holders of the Parent Company | ||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Notes | Capital stock | Share premium | Retained earnings | Accumulated Other Comprehensive income (loss) | Other Components of equity | Total | Non-controlling interest | Total equity | |||||||||||||||||||||||||
Balance at January 1, 2014 | ₩ | 1,564,499 | ₩ | 1,440,258 | ₩ | 10,019,389 | ₩ | 24,538 | ₩ | (1,320,943 | ) | ₩ | 11,727,741 | ₩ | 1,109,675 | ₩ | 12,837,416 | |||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||
Profit(loss) for the year | — | — | (1,030,240 | ) | — | — | (1,030,240 | ) | 88,827 | (941,413 | ) | |||||||||||||||||||||||
Changes in value of available-for-sale financial assets | 4, 8 | — | — | — | 20,889 | — | 20,889 | 1,274 | 22,163 | |||||||||||||||||||||||||
Remeasurements of the net defined benefit liability | 18 | — | — | (223,157 | ) | — | — | (223,157 | ) | (13,480 | ) | (236,637 | ) | |||||||||||||||||||||
Valuation gains(losses) on cashflow hedge | 4, 8 | — | — | — | (27,821 | ) | — | (27,821 | ) | 16 | (27,805 | ) | ||||||||||||||||||||||
Shares of other comprehensive income of jointly controlled entities and associates | — | — | — | 3,726 | — | 3,726 | 176 | 3,902 | ||||||||||||||||||||||||||
Shares of remeasurement loss from jointly controlled entities and associates | — | — | (311 | ) | — | — | (311 | ) | (83 | ) | (394 | ) | ||||||||||||||||||||||
Currency translation differences | — | — | — | 4,458 | — | 4,458 | (932 | ) | 3,526 | |||||||||||||||||||||||||
Transactions with equity holders | ||||||||||||||||||||||||||||||||||
Dividends | — | — | (195,112 | ) | — | — | (195,112 | ) | (27,683 | ) | (222,795 | ) | ||||||||||||||||||||||
Appropriations of loss on disposal of treasury stock | — | — | (2,170 | ) | — | 2,170 | — | — | — | |||||||||||||||||||||||||
Changes in consolidation scope | — | — | — | — | — | — | 198,260 | 198,260 | ||||||||||||||||||||||||||
Change in ownership interest in subsidiaries | — | — | — | — | 26,601 | 26,601 | (6,372 | ) | 20,229 | |||||||||||||||||||||||||
Disposal of treasury stock | — | — | — | — | 34,148 | 34,148 | — | 34,148 | ||||||||||||||||||||||||||
Rights issue | — | — | — | — | — | — | 99,033 | 99,033 | ||||||||||||||||||||||||||
Others | — | — | — | — | (2,685 | ) | (2,685 | ) | 609 | (2,076 | ) | |||||||||||||||||||||||
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Balance at December 31, 2014 | ₩ | 1,564,499 | ₩ | 1,440,258 | ₩ | 8,568,399 | ₩ | 25,790 | ₩ | (1,260,709 | ) | ₩ | 10,338,237 | ₩ | 1,449,320 | ₩ | 11,787,557 | |||||||||||||||||
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KT Corporation and Subsidiaries
Consolidated Statements of Changes in Shareholder’s Equity (Continued)
Years ended December 31, 2012, 2013 and 2014
Attributable to equity holders of the Parent Company | ||||||||||||||||||||||||||||||||||
(in thousands of U.S dollars) | Notes | Capital stock | Share premium | Retained earnings | Accumulated Other Comprehensive income (loss) | Other Components of equity | Total | Non-controlling interest | Total equity | |||||||||||||||||||||||||
Balance at January 1, 2014 | $ | 1,423,307 | $ | 1,310,278 | $ | 9,115,165 | $ | 22,324 | $ | (1,201,731 | ) | $ | 10,669,343 | $ | 1,009,530 | $ | 11,678,873 | |||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||||
Profit(loss) for the year | — | — | (937,263 | ) | — | — | (937,263 | ) | 80,811 | (856,452 | ) | |||||||||||||||||||||||
Changes in value of available-for-sale financial assets | 4, 8 | — | — | — | 19,004 | — | 19,004 | 1,159 | 20,163 | |||||||||||||||||||||||||
Remeasurements of the net defined benefit liability | 18 | — | — | (203,018 | ) | — | — | (203,018 | ) | (12,263 | ) | (215,281 | ) | |||||||||||||||||||||
Valuation gains(losses) on cashflow hedge | 4, 8 | — | — | — | (25,311 | ) | — | (25,311 | ) | 15 | (25,296 | ) | ||||||||||||||||||||||
Shares of other comprehensive income of jointly controlled entities and associates | — | — | — | 3,390 | — | 3,390 | 160 | 3,550 | ||||||||||||||||||||||||||
Shares of remeasurement loss from jointly controlled entities and associates | — | — | (282 | ) | — | — | (282 | ) | (76 | ) | (358 | ) | ||||||||||||||||||||||
Currency translation differences | — | — | — | 4,056 | — | 4,056 | (848 | ) | 3,208 | |||||||||||||||||||||||||
Transactions with equity holders | ||||||||||||||||||||||||||||||||||
Dividends | — | — | (177,504 | ) | — | — | (177,504 | ) | (25,185 | ) | (202,689 | ) | ||||||||||||||||||||||
Appropriations of loss on disposal of treasury stock | — | — | (1,975 | ) | — | 1,975 | — | — | — | |||||||||||||||||||||||||
Changes in consolidation scope | — | — | — | — | — | — | 180,368 | 180,368 | ||||||||||||||||||||||||||
Change in ownership interest in subsidiaries | — | — | — | — | 24,200 | 24,200 | (5,797 | ) | 18,403 | |||||||||||||||||||||||||
Disposal of treasury stock | — | — | — | — | 31,066 | 31,066 | — | 31,066 | ||||||||||||||||||||||||||
Rights issue | — | — | — | — | — | — | 90,096 | 90,096 | ||||||||||||||||||||||||||
Others | — | — | — | — | (2,443 | ) | (2,443 | ) | 553 | (1,890 | ) | |||||||||||||||||||||||
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Balance at December 31, 2014 | $ | 1,423,307 | $ | 1,310,278 | $ | 7,795,123 | $ | 23,463 | $ | (1,146,933 | ) | $ | 9,405,238 | $ | 1,318,523 | $ | 10,723,761 | |||||||||||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
KT Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Years ended December 31, 2012, 2013 and 2014
(in thousands of U.S dollars) | ||||||||||||||||||
(in millions of Korean won) | Notes | 2012 | 2013 | 2014 | 2014 | |||||||||||||
(Unaudited) (Note 2) | ||||||||||||||||||
Cash flows from operating activities | ||||||||||||||||||
Cash generated from operations | 32 | ₩ | 6,439,692 | ₩ | 4,677,260 | ₩ | 2,379,311 | $ | 2,164,584 | |||||||||
Interest paid | (561,378 | ) | (546,802 | ) | (604,012 | ) | (549,501 | ) | ||||||||||
Interest received | 208,640 | 194,065 | 192,563 | 175,185 | ||||||||||||||
Dividends received | 17,742 | 24,641 | 32,106 | 29,209 | ||||||||||||||
Income tax paid | (379,211 | ) | (238,091 | ) | (83,555 | ) | (76,014 | ) | ||||||||||
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Net cash generated from operating activities | 5,725,485 | 4,111,073 | 1,916,413 | 1,743,463 | ||||||||||||||
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Cash flows from investing activities | ||||||||||||||||||
Collection of loans | 106,896 | 70,451 | 37,589 | 34,197 | ||||||||||||||
Origination of loans | (130,425 | ) | (31,279 | ) | (82,258 | ) | (74,834 | ) | ||||||||||
Disposal of available-for-sale financial assets | 113,068 | 78,811 | 77,365 | 70,383 | ||||||||||||||
Acquisition of available-for-sale financial assets | (86,622 | ) | (127,052 | ) | (78,095 | ) | (71,047 | ) | ||||||||||
Disposal of investments in jointly controlled entities and associates | 21,818 | 22,455 | 22,251 | 20,243 | ||||||||||||||
Acquisition of investments in jointly controlled entities and associates | (59,464 | ) | (16,338 | ) | (18,396 | ) | (16,736 | ) | ||||||||||
Disposal of current and non-current financial instruments | 362,481 | 319,465 | 630,216 | 573,341 | ||||||||||||||
Acquisition of current and non-current financial instruments | (511,914 | ) | (588,893 | ) | (427,585 | ) | (388,997 | ) | ||||||||||
Disposal of property, equipment and investment property | 618,786 | 100,469 | 77,644 | 70,637 | ||||||||||||||
Acquisition of property and equipment and investment property | (3,760,255 | ) | (3,088,185 | ) | (2,852,869 | ) | (2,595,405 | ) | ||||||||||
Disposal of intangible assets | 7,061 | 18,336 | 9,438 | 8,586 | ||||||||||||||
Acquisition of intangible assets | (526,878 | ) | (549,967 | ) | (578,377 | ) | (526,180 | ) | ||||||||||
Increase in cash due to exclusion from consolidation scope | 25,857 | 7,498 | 6,228 | 5,666 | ||||||||||||||
Cash inflow(outflow) from changes in scope of consolidation | (31,588 | ) | 1,646 | 5,891 | 5,359 | |||||||||||||
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Net cash used in investing activities | (3,851,179 | ) | (3,782,583 | ) | (3,170,958 | ) | (2,884,787 | ) | ||||||||||
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Cash flows from financing activities | ||||||||||||||||||
Proceeds from borrowings and bonds | 4,258,995 | 6,199,601 | 10,037,067 | 9,131,247 | ||||||||||||||
Repayments of borrowings and bonds | (4,590,608 | ) | (5,956,340 | ) | (8,757,284 | ) | (7,966,961 | ) | ||||||||||
Settlement of derivative assets and liabilities, net | 39,001 | (67,413 | ) | (66,484 | ) | (60,486 | ) | |||||||||||
Disposal of treasury stock | 11,369 | — | 34,053 | 30,980 | ||||||||||||||
Cash inflow from consolidated capital transaction | 7,232 | 34,581 | 99,211 | 90,257 | ||||||||||||||
Cash outflow from consolidated capital transaction | (315,356 | ) | (4,107 | ) | — | — | ||||||||||||
Dividends paid to shareholders | (498,057 | ) | (511,275 | ) | (222,773 | ) | (202,668 | ) | ||||||||||
Decrease in finance leases liabilities | (190,380 | ) | (6,841 | ) | (52,099 | ) | (47,397 | ) | ||||||||||
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Net cash provided by(used in) financing activities | (1,277,804 | ) | (311,794 | ) | 1,071,691 | 974,972 | ||||||||||||
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Effect of exchange rate change on cash and cash equivalents | (1,038 | ) | (3,440 | ) | 648 | 590 | ||||||||||||
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Net increase in cash and cash equivalents | 595,464 | 13,256 | (182,206 | ) | (165,762 | ) | ||||||||||||
Cash and cash equivalents | ||||||||||||||||||
Beginning of the year | 5 | 1,462,149 | 2,057,613 | 2,070,869 | 1,883,978 | |||||||||||||
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End of the year | 5 | ₩ | 2,057,613 | ₩ | 2,070,869 | ₩ | 1,888,663 | $ | 1,718,216 | |||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
January 1, 2010 and December 31, 20102012, 2013 and 20112014
1. General Information
The consolidated financial statements include the accounts of KT Corporation, which is the controlling company as defined under IAS 27,IFRS 10,Consolidated and Separate Financial Statements, and its 5165 controlled subsidiaries as described in Note 1.2 (collectively referred to as the “Company”).
The Controlling Company
KT Corporation (the “Controlling Company”) commenced operations on January 1, 1982, when it spun off from the Korea Communications Commission (formerly the Korean Ministry of Information and Communications) to provide telephone services and to engage in the development of advanced communications services under the Act of Telecommunications of Korea. The headquarters are located in Seongnam-si, Gyeonggi-do,Seongnam City, Gyeonggi Province, Republic of Korea, and the address of its registered head office is 206, Jungja-dong,90, Buljeong-ro, Bundang-gu, Seongnam-si, Gyeonggi-do.Seongnam City, Gyeonggi Province.
On October 1, 1997, upon the announcement of the Government-Investment Enterprises Management Basic Act and the Privatization Law, the Controlling Company became a government-funded institution under the Commercial Code of Korea.
On December 23, 1998, the Controlling Company’s shares were listed on the Korea Exchange.
On May 29, 1999, the Controlling Company issued 24,282,195 additional shares and issued American Depository Shares (ADS), representing new shares and government-owned shares, at the New York Stock Exchange and the London Stock Exchange. On July 2, 2001, the additional ADS representing 55,502,161 government-owned shares were issued at the New York Stock Exchange and London Stock Exchange.
In 2002, the Controlling Company acquired 60,294,575the entire government-owned shares in accordance with the Korean government’s privatization plan. As of December 31, 2011,the end of the reporting period, the Korean government does not own any share in the Controlling Company.
On June 1, 2009, the Controlling Company, which is an existing company, was merged with KT Freetel Co., Ltd., which was a subsidiary, to enhance the efficiency of business management.
Consolidated Subsidiaries
The consolidated subsidiaries as of December 31, 2011,2013 and 2014, are as follows:
(in millions of Korean won) | Type of Business | Location | Percentage of ownership (%) 1 | Financial year end | ||||||||
KT Powertel Co.,Ltd. 2 | Trunk radio system business | Domestic | 44.8 | 12.31 | ||||||||
KT Networks Corporation | Group telephone management | Domestic | 100.0 | 12.31 | ||||||||
KT Linkus Co.,Ltd. | Public telephone maintenance | Domestic | 93.8 | 12.31 | ||||||||
KT Telecop Co.,Ltd. | Security service | Domestic | 88.1 | 12.31 | ||||||||
KT Hitel Co.,Ltd. | Data communication | Domestic | 65.9 | 12.31 | ||||||||
KT Commerce Inc. | B2C, B2B service | Domestic | 100.0 | 12.31 | ||||||||
KT Tech, Inc. | PCS handset development | Domestic | 93.8 | 12.31 | ||||||||
KT Capital Co.,Ltd. | Financing service | Domestic | 100.0 | 12.31 | ||||||||
KT New Business Fund No.1 | Investment fund | Domestic | 100.0 | 12.31 | ||||||||
Gyeonggi-KT Green Growth Fund | Venture investment of Green Growth Business | Domestic | 56.5 | 12.31 |
(in millions of Korean won) | Controlling percentage ownership 1 (%) | Financial year end | ||||||||||||
Subsidiary | Type of Business | Location | 2013 | 2014 | ||||||||||
KT Powertel Co., Ltd. 2 | Trunk radio system business | Domestic | 44.8 | 44.8 | December 31 | |||||||||
KT Linkus Co., Ltd. | Public telephone maintenance | Domestic | 93.8 | 93.8 | December 31 | |||||||||
KT Submarine Co., Ltd. 2 | Submarine cable construction and maintenance | Domestic | 36.9 | 36.9 | December 31 | |||||||||
KT Telecop Co., Ltd. | Security service | Domestic | 86.8 | 86.8 | December 31 | |||||||||
KT Hitel Co., Ltd. | Data communication | Domestic | 63.7 | 63.7 | December 31 | |||||||||
KT Commerce Inc. | B2C, B2B service | Domestic | 100.0 | 100.0 | December 31 | |||||||||
KT Capital Co., Ltd. | Financing service | Domestic | 100.0 | 100.0 | December 31 | |||||||||
KT New Business Fund No.1 | Investment fund | Domestic | 100.0 | 100.0 | December 31 | |||||||||
Gyeonggi-KT Green Growth Fund | Venture investment of Green Growth Business | Domestic | 56.5 | 56.5 | December 31 |
(in millions of Korean won) Type of Business Location KTC Media Contents Fund 1 3 KTC Media Contents Fund 2 KT Strategic Investment Fund No.1 BC card co., Ltd. 4 VP Inc. H&C Network 1 BC card China Co.,Ltd. U Payment Co., Ltd INITECH Co., Ltd. InitechSmartro Holdings Co., Ltd. Smartro Co.Ltd. Pay N Mobile Co., Ltd. Sidus FNH Corporation Nasmedia, Inc. Sofnics, Inc. KT Edui Co.,Ltd. KTDS Co., Ltd. KT M Hows Co.,Ltd. KT M&S Co.,Ltd. KT Music Corporation 2 Online music production and distribution KT Innotz Inc., Software and solution related cloud computing KT Skylife Co., Ltd. Satellite broadcasting business Korea HD Broadcasting Corp. TV contents provider KT Estate Inc. Residential Building Development and Supply KT AMC Co., Ltd. Asset management and consulting services NEXR Co., Ltd. Cloud system implementation KTSB Data service Data centre development and related service KT Cloudware Corporation Development of cloud computing operation KC smart service Co., Ltd. U-City solution business Enswers Inc. Video-clip searching service Revlix Inc. Development of mobile SNS application Soompi Meidia, LLC Domestic marketing for a website “soompi.com” Soompi USA, LLC Operation service for “soompi.com” OIC Korea Co., Ltd. Development and distribution of education contents and software Korea Telecom Japan Co., Ltd. Foreign telecommunication business Korea Telecom China Co., Ltd. Foreign telecommunication business KTSC Investment Management B.V Management of Investment in Super iMax and East Telecom Super iMax Wireless high speed internet business East Telecom Fixed line telecommunication business Korea Telecom America, Inc. Foreign telecommunication business PT. KT Indonesia Foreign telecommunication business Percentage of
ownership (%) 1 Financial
year end New technology investment fund Domestic 1.8 4.30 New technology investment fund Domestic 85.7 12.31 Investment fund Domestic 100.0 12.31 Credit card business Domestic 38.9 12.31 Payment security service for credit card and etc. Domestic 50.9 12.31 Call centre for financial sectors Domestic 100.0 12.31 Research and development of calculation system and software Domestic 100.0 12.31 Transportation card issuance and operations Domestic 99.1 12.31 Internet banking ASP and security solutions Domestic 57.0 12.31 Holdings company Domestic 100.0 12.31 VAN(Value Added Network) business Domestic 74.5 12.31 Wired and wireless communication resale Domestic 100.0 12.31 Movie production Domestic 51.0 12.31 Online advertisement Domestic 51.4 12.31 Software development and sales Domestic 60.0 12.31 Online education business Domestic 54.5 12.31 System integration and maintenance Domestic 95.3 12.31 Mobile marketing Domestic 51.0 12.31 PCS distribution Domestic 100.0 12.31 Domestic 48.7 12.31 Domestic 100.0 12.31 Domestic 50.3 12.31 Domestic 92.6 12.31 Domestic 100.0 12.31 Domestic 100.0 12.31 Domestic 65.7 12.31 Domestic 51.0 12.31 Domestic 100.0 12.31 Domestic 82.8 12.31 Domestic 56.3 12.31 Domestic 100.0 12.31 Domestic 100.0 12.31 USA 100.0 12.31 Domestic 79.2 12.31 Japan 100.0 12.31 China 100.0 12.31 Netherlands 60.0 12.31 Uzbekistan 100.0 12.31 Uzbekistan 91.0 12.31 USA 100.0 12.31 Indonesia 99.0 12.31
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(in millions of Korean won) | Controlling percentage ownership 1 (%) | Financial year end | ||||||||||||
Subsidiary | Type of Business | Location | 2013 | 2014 | ||||||||||
KTC Media Contents Fund 2 | New technology investment fund | Domestic | 85.7 | 85.7 | December 31 | |||||||||
KT Strategic Investment Fund No.1 | Investment fund | Domestic | 100.0 | 100.0 | December 31 | |||||||||
KT Strategic Investment Fund No.2 | Investment fund | Domestic | 100.0 | 100.0 | December 31 | |||||||||
BC Card Co., Ltd. | Credit card business | Domestic | 69.5 | 69.5 | December 31 | |||||||||
VP Inc. | Payment security service for credit card and etc. | Domestic | 50.9 | 50.9 | December 31 | |||||||||
H&C Network | Call centre for financial sectors | Domestic | 100.0 | 100.0 | December 31 | |||||||||
BC Card China Co., Ltd. | Research and development of calculation system and software | China | 100.0 | 100.0 | December 31 | |||||||||
INITECH Co., Ltd. | Internet banking ASP and security solutions | Domestic | 57.0 | 57.0 | December 31 | |||||||||
Smartro Co., Ltd. | VAN (Value Added Network) business | Domestic | 81.1 | 81.1 | December 31 | |||||||||
Sofnics, Inc. | Software development and sales | Domestic | 80.6 | 80.6 | December 31 | |||||||||
KTDS Co., Ltd. | System integration and maintenance | Domestic | 95.3 | 95.3 | December 31 | |||||||||
KT M Hows Co., Ltd. | Mobile marketing | Domestic | 51.0 | 51.0 | December 31 | |||||||||
KT M&S Co., Ltd. | PCS distribution | Domestic | 100.0 | 100.0 | December 31 | |||||||||
KT Music Corporation 4 | Online music production and distribution | Domestic | 57.8 | 49.9 | December 31 | |||||||||
KT Skylife Co., Ltd. 2 | Satellite broadcasting business | Domestic | 50.1 | 49.9 | December 31 | |||||||||
SkylifeTV co., Ltd. (formerly Korea HD Broadcasting Corp.) | TV contents provider | Domestic | 92.6 | 92.6 | December 31 | |||||||||
KT Estate Inc. | Residential building development and supply | Domestic | 100.0 | 100.0 | December 31 | |||||||||
KT AMC Co., Ltd. | Asset management and consulting services | Domestic | 100.0 | 100.0 | December 31 | |||||||||
KT NEXR CO., LTD. (formerly NEXR Co., Ltd.) | Cloud system implementation | Domestic | 99.8 | 99.8 | December 31 | |||||||||
KTSB Data service | Data centre development and related service | Domestic | 51.0 | 51.0 | December 31 | |||||||||
CENTIOS Co., Ltd. | U-City solution business | Domestic | 82.8 | 82.8 | December 31 | |||||||||
Centios Philippines, Inc. | Smart space business | Philippines | 100.0 | 100.0 | December 31 | |||||||||
Enswers Inc. 3 | Video-clip searching service | Domestic | 45.2 | 45.2 | December 31 | |||||||||
Ustream Korea Inc. | Live video-streaming service business | Domestic | 51.0 | 51.0 | December 31 | |||||||||
Incheonucity Co., Ltd. | U-City development and operation agent | Domestic | 51.4 | 51.4 | December 31 | |||||||||
KT Innoedu Co., Ltd. 3 | E-learning business | Domestic | 48.4 | 48.4 | December 31 | |||||||||
KT Rental | Car rental and general rental business | Domestic | 58.0 | 58.0 | December 31 | |||||||||
KT Auto Lease Corporation | Car rental business | Domestic | 100.0 | 100.0 | December 31 | |||||||||
Kumho Rent-a-car Co., Ltd. | Car rental business | Vietnam | 100.0 | 100.0 | December 31 | |||||||||
KT Rental Auto Care Corporation | Car rental business | Domestic | 100.0 | 100.0 | December 31 | |||||||||
KT Sat Co., Ltd. | Satellite communication business | Domestic | 100.0 | 100.0 | December 31 | |||||||||
KT Media Hub Co. Ltd. | Media contents development and distribution | Domestic | 100.0 | 100.0 | December 31 | |||||||||
Best Partners Co., Ltd. | Outsourcing service for HR, administration, and accounting service | Domestic | 100.0 | 100.0 | December 31 | |||||||||
Nasmedia, Inc. 3 | Online advertisement | Domestic | 45.4 | 45.4 | December 31 | |||||||||
T-ON Telecom | Trunk radio system business and data communication | Domestic | 100.0 | 100.0 | December 31 | |||||||||
KT Sports | Management of sports group | Domestic | 100.0 | 100.0 | December 31 | |||||||||
KT Music Contents Fund No.1 | Music contents investment business | Domestic | 80.0 | 80.0 | December 31 | |||||||||
Consus-Changwon Private REIT | Investment in real estate | Domestic | 93.6 | 93.6 | December 31 | |||||||||
KT-Michigan Global Content Fund | Content investment business | Domestic | 81.3 | 81.3 | December 31 | |||||||||
Autopion Co., Ltd. | Service for information and communication | Domestic | 100.0 | 100.0 | December 31 |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(in millions of Korean won) | Controlling percentage ownership 1 (%) | Financial year end | ||||||||||||
Subsidiary | Type of Business | Location | 2013 | 2014 | ||||||||||
GREEN CAR (formerly GREEN POINT) | Car sharing business | Domestic | 52.3 | 52.3 | December 31 | |||||||||
K-REALTY CR-REIT 7 | Investment in real estate | Domestic | — | 100.0 | December 31 | |||||||||
ktcs Corporation 2 | Database and online information provider | Domestic | — | 30.3 | December 31 | |||||||||
ktis Corporation 2 | Database and online information provider | Domestic | — | 29.3 | December 31 | |||||||||
olleh Rwanda Networks Ltd. | Network installation and management | Rwanda | 51.0 | 51.0 | December 31 | |||||||||
Africa Olleh Services Ltd. | System integration and maintenance | Rwanda | — | 51.0 | December 31 | |||||||||
KT Belgium | Foreign investment business | Belgium | 100.0 | 100.0 | December 31 | |||||||||
KT ORS Belgium | Foreign investment business | Belgium | 100.0 | 100.0 | December 31 | |||||||||
Korea Telecom Japan Co., Ltd. | Foreign telecommunication business | Japan | 100.0 | 100.0 | December 31 | |||||||||
KBTO sp.zo.o., | Electronic communication business | Poland | — | 60.0 | December 31 | |||||||||
Korea Telecom China Co., Ltd. | Foreign telecommunication business | China | 100.0 | 100.0 | December 31 | |||||||||
KT Dutch B.V | Super iMax and East Telecom management | Netherlands | 100.0 | 100.0 | December 31 | |||||||||
Super iMax LLC | Wireless high speed internet business | Uzbekistan | 100.0 | 100.0 | December 31 | |||||||||
East Telecom LLC | Fixed line telecommunication business | Uzbekistan | 91.0 | 91.0 | December 31 | |||||||||
Korea Telecom America, Inc. | Foreign telecommunication business | USA | 100.0 | 100.0 | December 31 | |||||||||
PT. KT Indonesia | Foreign telecommunication business | Indonesia | 99.0 | 99.0 | December 31 |
1 | Sum of the ownership interests owned by the Controlling Company and subsidiaries. |
2 | Even though the |
3 | Even though |
4 | Even though the Company has less than 50% ownership in this subsidiary, this entity is |
Changes in scope of consolidation in 20112014 are as follows:
Changes | Location | Subsidiaries | Reason | |||
| Domestic | Acquisition of ownership interest | ||||
Acquisition of ownership interest | ||||||
Newly incorporated | ||||||
K-REALTY CR-REIT 7 | Newly incorporated | |||||
Rwanda | Africa Olleh Services Ltd. | Newly incorporated | ||||
Poland | KBTO sp.zo.o., | Acquisition of ownership interest | ||||
| ||||||
Domestic | KT (formerly KT ENS corporation) | |||||
K-REALTY CR-REIT 6 | Decrease in percentage of ownership due to unequal stock issuance | |||||
Sidus FNH Corporation | Disposal of ownership interest | |||||
KT OIC Korea Co., Ltd. | Disposal of ownership interest | |||||
KT Cloudware Corporation | Merged | |||||
InitechSmartro Holdings Co., Ltd. | Merged | |||||
K-REALTY CR-REIT 4 | Liquidated | |||||
K-REALTY CR-REIT 5 | Liquidated | |||||
USA | Soompi USA. LLC | Liquidated |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
A summary of financial data of the major consolidated subsidiaries as of and for the years ended December 31, 20102012, 2013 and 2011,2014, are as follows:
(in millions of Korean won) | 2010 | |||||||||||||||
Total assets | Total liabilities | Operating revenue | Net income(loss) | |||||||||||||
KT Powertel Co.,Ltd. | (Won) | 167,370 | (Won) | 73,547 | (Won) | 127,548 | (Won) | 15,158 | ||||||||
KT Networks Corporation | 187,123 | 135,764 | 327,181 | 2,909 | ||||||||||||
KT Linkus Co.,Ltd. | 70,910 | 59,797 | 76,197 | 2,577 | ||||||||||||
KT Telecop Co.,Ltd. | 139,234 | 99,274 | 217,057 | 11,956 | ||||||||||||
KT Hitel Co.,Ltd. 1 | 254,292 | 70,045 | 312,576 | (4,824 | ) | |||||||||||
KT Tech, Inc. | 129,176 | 157,707 | 189,137 | (13,641 | ) | |||||||||||
KT Capital Co.,Ltd. 1 | 2,084,227 | 1,838,254 | 192,332 | 11,212 | ||||||||||||
Sidus FNH Corporation | 13,932 | 6,760 | 19,951 | 358 | ||||||||||||
Nasmedia, Inc. | 77,919 | 58,778 | 18,877 | 4,507 | ||||||||||||
Sofnics, Inc. | 1,071 | 135 | 609 | (233 | ) | |||||||||||
KT Edui Co.,Ltd. | 1,995 | 1,659 | 4,335 | (2,577 | ) | |||||||||||
KTDS Co., Ltd. | 148,685 | 115,791 | 356,160 | 10,760 | ||||||||||||
KT M Hows Co.,Ltd. | 15,939 | 8,804 | 37,638 | 603 | ||||||||||||
KT M&S Co.,Ltd. | 267,454 | 240,077 | 616,070 | (17,261 | ) | |||||||||||
KT Music Corporation | 32,885 | 10,352 | 43,332 | 530 | ||||||||||||
KT Innotz Inc. | 5,277 | 1,643 | 3,741 | (1,343 | ) | |||||||||||
KT Estate Inc. | 8,443 | 427 | 1,152 | 16 | ||||||||||||
KT Internal venture Fund No 2 | 5,200 | 70 | — | 63 | ||||||||||||
Korea Telecom Japan Co., Ltd. | 13,627 | 9,154 | 14,632 | 51 | ||||||||||||
Korea Telecom China Co., Ltd. | 2,610 | 193 | 2,089 | 237 | ||||||||||||
New Telephone Company, Inc. | 220,209 | 18,610 | 129,248 | 30,962 | ||||||||||||
KTSC Investment Management B.V 1 | 76,094 | 20,122 | 21,271 | (471 | ) | |||||||||||
Korea Telecom America, Inc. | 5,645 | 1,548 | 8,828 | 136 | ||||||||||||
PT. KT Indonesia | 70 | 1 | — | (43 | ) |
2012 | ||||||||||||||||
(in millions of Korean won) | Total assets | Total liabilities | Operating revenue | Net income (loss) | ||||||||||||
KT Powertel Co., Ltd. | ₩ | 175,862 | ₩ | 55,613 | ₩ | 124,936 | ₩ | 12,527 | ||||||||
KT ENGCORE Co., Ltd. (formerly kt ens Corporation) | 258,430 | 201,076 | 500,555 | 4,644 | ||||||||||||
KT Linkus Co., Ltd. | 68,260 | 62,686 | 81,564 | 2,302 | ||||||||||||
KT Submarine Co., Ltd. | 109,787 | 25,037 | 68,900 | 7,953 | ||||||||||||
KT Telecop Co., Ltd. | 180,870 | 130,719 | 296,180 | 2,642 | ||||||||||||
KT Hitel Co., Ltd. 1 | 249,231 | 79,511 | 443,431 | (8,902 | ) | |||||||||||
KT Tech, Inc. | 13,190 | 42,562 | 175,861 | 2,731 | ||||||||||||
KT Capital Co., Ltd. 1 | 5,058,883 | 4,519,485 | 3,348,952 | 98,353 | ||||||||||||
H&C Network 1 | 244,031 | 119,086 | 199,143 | 8,713 | ||||||||||||
Sidus FNH Corporation | 9,534 | 1,921 | 2,066 | 209 | ||||||||||||
Nasmedia, Inc. | 90,675 | 47,053 | 23,463 | 6,445 | ||||||||||||
Sofnics, Inc. | 1,564 | 207 | 782 | (279 | ) | |||||||||||
KTDS Co., Ltd. | 171,546 | 115,994 | 570,703 | 17,155 | ||||||||||||
KT M Hows Co., Ltd. | 26,498 | 16,511 | 28,874 | 1,933 | ||||||||||||
KT M&S Co., Ltd. | 257,809 | 224,430 | 1,009,331 | (78,241 | ) | |||||||||||
KT Music Corporation1 | 73,050 | 33,086 | 31,393 | (2,124 | ) | |||||||||||
KT Innotz Inc. | 3,012 | 344 | 2,609 | (1,411 | ) | |||||||||||
KT Skylife Co., Ltd. 1 | 641,564 | 292,649 | 574,829 | 55,546 | ||||||||||||
KT Estate Inc. 1 | 1,460,511 | 145,885 | 24,861 | 3,124 | ||||||||||||
NEXR Co., Ltd. | 2,305 | 1,964 | 2,651 | (1,787 | ) | |||||||||||
KTSB Dataservice | 32,733 | 265 | 439 | (4,383 | ) | |||||||||||
KT Cloudware Corporation | 21,345 | 2,321 | 3,878 | (5,397 | ) | |||||||||||
Centios Co., Ltd1 | 32,848 | 9,259 | 171 | (3,163 | ) | |||||||||||
Enswers Inc. 1 | 13,966 | 18,330 | 4,896 | (3,010 | ) | |||||||||||
KT OIC Korea Co., Ltd. | 3,968 | 406 | 325 | (1,569 | ) | |||||||||||
Ustream Korea Inc. | 3,171 | 858 | 321 | (2,683 | ) | |||||||||||
KT Innoedu Co., Ltd.2 | 10,561 | 5,218 | 10,522 | 308 | ||||||||||||
KT Rental1,2 | 1,694,021 | 1,426,484 | 368,228 | 11,072 | ||||||||||||
KT Media Hub Co., Ltd.2 | 95,703 | 13,679 | 14,381 | 2,237 | ||||||||||||
KT Sat Co., Ltd.2 | 417,886 | 16,269 | 10,310 | 1,739 | ||||||||||||
Best Partners Co., Ltd.2 | 1,526 | 79 | 15 | (57 | ) | |||||||||||
Korea Telecom Japan Co., Ltd. | 8,284 | 3,955 | 14,458 | (324 | ) | |||||||||||
Korea Telecom China Co., Ltd. | 1,895 | 38 | 1,863 | (675 | ) | |||||||||||
KT Dutch B.V. 1 | 47,277 | 14,748 | 12,086 | (9,837 | ) | |||||||||||
Korea Telecom America, Inc. | 5,850 | 1,904 | 13,392 | (31 | ) | |||||||||||
PT. KT Indonesia | 38 | — | — | (6 | ) |
KT Corporation and Subsidiaries
(in millions of Korean won) KT Powertel Co.,Ltd. KT Networks Corporation KT Linkus Co.,Ltd. KT Telecop Co.,Ltd. KT Hitel Co.,Ltd. 1 KT Tech, Inc. KT Capital Co.,Ltd. 1 H&C Network 1 Sidus FNH Corporation Nasmedia, Inc. Sofnics, Inc. KT Edui Co.,Ltd. KTDS Co., Ltd. KT M Hows Co.,Ltd. KT M&S Co.,Ltd. KT Music Corporation KT Innotz Inc. KT Skylife Co.,Ltd. 1 KT Estate Inc. 1 NEXR Co.,Ltd. KTSB Dataservice KT Cloudware Corporation KC smart service Co.,Ltd. Enswers Inc. 1 OIC Korea Co.,Ltd. Korea Telecom Japan Co., Ltd. Korea Telecom China Co.,Ltd. KTSC Investment Management B.V 1 Korea Telecom America, Inc. PT. KT IndonesiaNotes to Consolidated Financial Statements 2011 Total assets Total liabilities Operating
revenue Net
income(loss) (Won) 167,075 (Won) 59,061 (Won) 126,759 (Won) 14,569 212,867 161,864 375,773 389 67,419 64,081 78,198 (6,667 ) 156,479 106,836 261,172 7,075 249,730 69,376 468,489 (2,002 ) 110,923 139,873 247,443 641 4,454,475 4,043,072 1,011,342 25,195 197,726 81,351 45,013 1,124 9,838 5,824 7,227 (2,975 ) 92,384 53,744 21,718 6,004 970 521 626 (481 ) 1,119 1,589 3,997 (2,336 ) 146,236 106,006 498,107 10,298 15,148 7,078 34,933 1,092 249,280 226,651 917,410 (3,256 ) 27,840 7,691 31,432 (2,385 ) 5,520 1,727 3,829 (4,623 ) 550,443 258,231 485,225 26,649 33,382 3,175 7,838 1,337 3,887 1,726 3,737 756 58,755 21,904 — (149 ) 916 81 — (165 ) 25,493 357 — (377 ) 16,543 18,185 797 (331 ) 5,201 68 30 (396 ) 15,359 9,813 33,114 731 2,804 128 3,419 111 65,587 18,458 17,470 (5,026 ) 6,368 2,069 11,134 149 52 1 — (8 )
December 31, 2012, 2013 and 2014
2013 | ||||||||||||||||
(in millions of Korean won) | Total assets | Total liabilities | Operating revenue | Net income (loss) | ||||||||||||
KT Powertel Co., Ltd. | ₩ | 167,131 | ₩ | 44,012 | ₩ | 112,905 | ₩ | 5,453 | ||||||||
KT ENGCORE Co., Ltd. (formerly KT ENS corporation) | 291,636 | 225,285 | 587,438 | 11,133 | ||||||||||||
KT Linkus Co., Ltd. | 70,562 | 62,993 | 103,003 | 1,920 | ||||||||||||
KT Submarine Co., Ltd. | 115,781 | 27,449 | 83,006 | 6,146 | ||||||||||||
KT Telecop Co., Ltd. | 192,126 | 138,357 | 239,166 | 3,840 | ||||||||||||
KT Hitel Co., Ltd. 1 | 293,665 | 102,644 | 582,925 | 3,551 | ||||||||||||
KT Capital Co., Ltd. 1 | 5,462,028 | 4,759,100 | 3,317,337 | 129,354 | ||||||||||||
H&C Network 1 | 257,390 | �� | 110,126 | 225,402 | 18,870 | |||||||||||
Sidus FNH Corporation | 9,481 | 2,549 | 5,729 | (387 | ) | |||||||||||
Nasmedia, Inc. | 97,140 | 40,943 | 24,769 | 5,615 | ||||||||||||
Sofnics, Inc. | 1,431 | 267 | 881 | (178 | ) | |||||||||||
KTDS Co., Ltd. | 189,983 | 125,172 | 574,792 | 18,245 | ||||||||||||
KT M Hows Co., Ltd. | 25,845 | 14,341 | 48,047 | 1,739 | ||||||||||||
KT M&S Co., Ltd. | 281,011 | 223,089 | 884,125 | 22,614 | ||||||||||||
KT Music Corporation 1 | 82,997 | 48,289 | 51,350 | (5,088 | ) | |||||||||||
KT Skylife Co., Ltd. 1 | 684,651 | 283,068 | 630,469 | 72,724 | ||||||||||||
KT Estate Inc. 1 | 1,434,685 | 109,634 | 253,367 | 22,692 | ||||||||||||
NEXR Co., Ltd. | 2,814 | 4,451 | 4,540 | (1,965 | ) | |||||||||||
KTSB Dataservice | 28,001 | 321 | 1,447 | (4,802 | ) | |||||||||||
KT Cloudware Corporation | 15,995 | 1,128 | 4,682 | (2,913 | ) | |||||||||||
Centios Co., Ltd 1 | 27,873 | 9,793 | 1,060 | (5,097 | ) | |||||||||||
Enswers Inc. 1 | 8,722 | 20,148 | 5,922 | (4,990 | ) | |||||||||||
KT OIC Korea Co., Ltd. | 3,626 | 512 | 2,039 | (448 | ) | |||||||||||
Ustream Korea Inc. | 2,677 | 1,050 | 2,831 | (2,363 | ) | |||||||||||
KT Innoedu Co., Ltd. | 12,618 | 8,450 | 21,578 | (1,020 | ) | |||||||||||
KT Rental 1 | 2,188,271 | 1,896,259 | 886,959 | 32,400 | ||||||||||||
KT Media Hub Co., Ltd. | 184,702 | 81,578 | 304,713 | 21,146 | ||||||||||||
KT Sat Co., Ltd. | 492,965 | 35,237 | 169,463 | 56,859 | ||||||||||||
Best Partners Co., Ltd. | 882 | 116 | 265 | (681 | ) | |||||||||||
T-ON Telecom 2 | 3,347 | 2,298 | 1,152 | (2,358 | ) | |||||||||||
KT Sports 2 | 15,672 | 6,750 | 21,794 | (970 | ) | |||||||||||
KT Music Contents Fund No.1 2 | 10,529 | 185 | 72 | (157 | ) | |||||||||||
KT-Michigan Global Content Fund 2 | 6,227 | — | 26 | (173 | ) | |||||||||||
Autopion co., ltd. 2 | 5,314 | 3,314 | — | — | ||||||||||||
Korea Telecom Japan Co., Ltd. | 17,752 | 14,204 | 22,154 | 30 | ||||||||||||
Korea Telecom China Co., Ltd. | 1,178 | 367 | 1,338 | (1,108 | ) | |||||||||||
KT Dutch B.V. 1 | 46,347 | 14,684 | 22,077 | (4,131 | ) | |||||||||||
Korea Telecom America, Inc. | 5,773 | 1,825 | 13,881 | 32 | ||||||||||||
PT. KT Indonesia | 30 | — | — | 1 | ||||||||||||
olleh Rwanda Networks Ltd. 2 | 226,776 | 217,132 | — | (943 | ) | |||||||||||
KT Belgium 2 | 38,033 | — | — | (11 | ) | |||||||||||
KT ORS Belgium 2 | 95 | — | — | — |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2014 | ||||||||||||||||
(in millions of Korean won) | Total assets | Total liabilities | Operating revenue | Net income (loss) | ||||||||||||
KT Powertel Co., Ltd. | ₩ | 157,330 | ₩ | 29,996 | ₩ | 105,250 | ₩ | 5,368 | ||||||||
KT Linkus Co., Ltd. | 70,718 | 64,043 | 106,642 | 1,076 | ||||||||||||
KT Submarine Co., Ltd. | 111,877 | 16,188 | 77,292 | 9,018 | ||||||||||||
KT Telecop Co., Ltd. | 305,988 | 161,188 | 258,692 | (6,576 | ) | |||||||||||
KT Hitel Co., Ltd. 1 | 226,994 | 31,429 | 494,455 | 12,205 | ||||||||||||
KT Capital Co., Ltd. 1 | 2,038,263 | 1,759,641 | 186,114 | 69,491 | ||||||||||||
BC Card Co., Ltd. 1 | 2,700,388 | 1,794,923 | 3,297,308 | 134,450 | ||||||||||||
H&C Network 1 | 223,896 | 69,537 | 217,256 | 8,506 | ||||||||||||
Nasmedia, Inc. | 97,502 | 34,933 | 29,865 | 7,956 | ||||||||||||
Sofnics, Inc. | 213 | 48 | 349 | (1,029 | ) | |||||||||||
KTDS Co., Ltd 1. | 92,676 | 58,486 | 354,094 | (11,394 | ) | |||||||||||
KT M Hows Co., Ltd. | 22,846 | 17,446 | 23,683 | (5,626 | ) | |||||||||||
KT M&S Co., Ltd. | 281,787 | 221,227 | 885,456 | 6,391 | ||||||||||||
KT Music Corporation | 83,386 | 27,069 | 86,449 | 3,240 | ||||||||||||
KT Skylife Co., Ltd. 1 | 683,009 | 246,326 | 656,430 | 55,162 | ||||||||||||
KT Estate Inc. 1 | 1,496,815 | 169,788 | 247,256 | 11,212 | ||||||||||||
KTSB Dataservice | 25,094 | 1,384 | 2,457 | (3,960 | ) | |||||||||||
Centios Co., Ltd 1 | 40,503 | 26,464 | 21,954 | (4,012 | ) | |||||||||||
Enswers Inc. | 7,260 | 23,244 | 4,644 | (4,533 | ) | |||||||||||
Ustream Korea Inc. | 635 | 246 | 1,818 | (1,313 | ) | |||||||||||
KT Innoedu Co., Ltd. | 8,761 | 11,913 | 21,010 | (7,291 | ) | |||||||||||
KT Rental 1 | 2,656,385 | 2,317,650 | 1,074,569 | 51,388 | ||||||||||||
KT Media Hub Co., Ltd. | 172,621 | 76,995 | 335,451 | 14,054 | ||||||||||||
KT Sat Co., Ltd. | 480,689 | 45,540 | 139,865 | 30,016 | ||||||||||||
Best Partners Co., Ltd. | 113 | 100 | 346 | (753 | ) | |||||||||||
T-ON Telecom | 2,543 | 1,903 | 469 | (1,802 | ) | |||||||||||
KT Sports | 15,753 | 8,220 | 42,320 | (1,305 | ) | |||||||||||
KT Music Contents Fund No.1 | 10,573 | 304 | 230 | (74 | ) | |||||||||||
KT-Michigan Global Content Fund | 5,610 | — | 29 | (617 | ) | |||||||||||
Autopion Co., Ltd. | 5,791 | 3,194 | 9,892 | 662 | ||||||||||||
ktcs Corporation 1,2 | 303,574 | 155,603 | 234,852 | 4,704 | ||||||||||||
ktis Corporation 2 | 215,741 | 68,046 | 83,850 | (539 | ) | |||||||||||
Korea Telecom Japan Co., Ltd. | 16,551 | 21,279 | 34,717 | (22,769 | ) | |||||||||||
Korea Telecom China Co., Ltd. | 1,011 | 213 | 1,532 | (25 | ) | |||||||||||
KT Dutch B.V. 1 | 42,951 | 10,332 | 26,148 | 30 | ||||||||||||
Korea Telecom America, Inc. | 5,627 | 1,295 | 6,318 | 211 | ||||||||||||
PT. KT Indonesia | 32 | — | — | 1 | ||||||||||||
olleh Rwanda Networks Ltd. | 201,130 | 105,095 | 3,809 | (18,984 | ) | |||||||||||
KT Belgium | 72,405 | 14 | — | (192 | ) | |||||||||||
KT ORS Belgium | 1,932 | 6 | — | (82 | ) | |||||||||||
KBTO sp.zo.o., 2 | 3 | 33 | — | (32 | ) | |||||||||||
Africa Olleh Services Ltd. 2 | 9,870 | 255 | 4,773 | (1,772 | ) |
1 | These companies are the intermediate parent companies of other subsidiaries and the above financial information is from their consolidated financial statements. |
2 | These entities were newly consolidated for the years ended December 31, 2012, 2013 and 2014. Only operating revenues and net income subsequent to the inclusion of consolidation scope are disclosed above. |
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Company in the preparation of its financial statements. These policies have been consistently applied to all the periods presented, unless otherwise stated.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2.1 Basis of Preparation
The consolidated financial statements of the Company determined to adopthave been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) for the annual periods beginning on or after January 1, 2011.
The Company’s IFRS transition date from accounting principles generally accepted in the Republic of Korea (“Korean GAAP”) to IFRS according to IFRS 1,First-time Adoption of IFRS, is January 1, 2010, and reconciliations and descriptions of the effect of the transition from Korean GAAP to IFRS on the Company’s assets, liabilities, equity, and comprehensive income are provided in Note 4..
The preparation of the consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment andor complexity, or the areas where assumptions and estimates are significant to thesethe consolidated financial statements are disclosed in Note 3.
2.2 Changes in Accounting Policy and Disclosures
(1) New standards and amendments adopted by the Company
The Company newly applied the following enacted and amended standards for the annual period beginning on January 1, 2014.
—Amendment to IAS 32, Financial Instruments: Presentation
Amendment to IAS 32, Financial Instruments: Presentation, provides that the right to offset must not be contingent on a future event and must be legally enforceable in all of circumstances; and if an entity can settle amounts in a manner such that outcome is, in effect, equivalent to net settlement, the entity will meet the net settlement criterion. The adoption of this amendment does not have a material impact on the consolidated financial statements.
—Amendment to IAS 39, Financial Instruments: Recognition and Measurement
Amendment to IAS 39, Financial Instruments: Recognition and Measurement, allows the continuation of hedge accounting for a derivative that has been designated as a hedging instrument in a circumstance in which that derivative is novated to a central counterparty (CCP) as a consequence of laws or regulations. The adoption of this amendment does not have a material impact on the consolidated financial statements.
—Enactment of IFRIC interpretations 2121, Levies
IFRIC interpretations 2121, Levies, are applied to a liability to pay a levy imposed by a government in accordance with the legislation. The interpretation requires that the liability to pay a levy is recognized when the activity that triggers the payment of the levy occurs, as identified by the legislation. The adoption of this enactment does not have a material impact on the consolidated financial statements.
—Amendment to IFRS 2, Share-based payment
IFRS 2,Share-based payment, clarifies the definition of ‘vesting conditions’ such as ‘performance condition’, ‘service condition’ and others. This amendment is applied to share-based payment transactions for which the grant date is on or after July 1, 2014. The application of this amendment does not have a material impact on the consolidated financial statements.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
—Amendment to IAS 36, Impairment of Assets
Amendment to IAS 36,Impairment of Assets, removed certain disclosures of the recoverable amount of cash-generating units which had been included in this amendment by the issuance of IFRS 13.
Other standards, amendments and interpretations which are effective for the annual period beginning on January 1, 2014, do not have a material impact on the separate financial statements of the Company.
(2) New standards, amendments and interpretations not yet adopted
—Enactment of IFRS 15, Revenue from Contracts with Customers
IFRS 15 ‘Revenue from Contracts with Customers’ requires that an entity recognizes revenue by sequentially judging the steps of ‘Identify the contract(s) with a customer’, ‘Identify the performance obligations in the contract’, ‘Determine the transaction price’, ‘Allocate the transaction price to the performance obligations in the contract’, ‘Recognize revenue when (or as) the entity satisfies a performance obligation’. This standard is effective for annual periods beginning on or after January 1, 2017, with early adoption permitted. The Company is assessing the impact of application of this standard on its consolidated financial statements.
The Company is assessing the impact of application of new standards, amendments and interpretations issued but not effective for the financial year beginning January 1, 2011,2014, and not early adopted are as follows.by the Company.
—Amendments to IFRS 1, Hyperinflation and Removal of Fixed Dates for first-time adopters
As an exception to retrospective application requirements, this amendment to IFRS 1 allows a prospective application of derecognition of financial assets for transactions occurring on or after the date of transition to IFRS, instead of fixed date (January 1, 2004). Accordingly, the Company is not required to restate and recognize those assets or liabilities that were derecognized as a result of a transaction that occurred before the dated of transition to IFRS. This amendment will be effective for the Company from annual periods beginning on or after July 1, 2011. The Controlling Company expects that the application of this amendment would not have material impact on its consolidated financial statements
—Amendments to IAS 12, Income Taxes2.3 Consolidation
According to the amendments to IAS 12,Income Taxes, for the investment property that is measured using the fair value model, the measurement of deferred tax liability and deferred tax asset should reflect the tax consequences of recovering the carrying amount of the investment property entirely through sale, unless evidences support otherwise. This amendment will be effective for the Company as of January 1, 2012. The Controlling Company expects that the application of this amendment would not have material impact on its consolidated financial statements.
—Amendments to IAS 19, Employee Benefits
According to the amendments to IAS 19,Employee Benefits, use of a ‘corridor’ approach is no longer permitted, and therefore all actuarial gains and losses incurred are immediately recognized in other comprehensive income. All past service costs incurred from changes in pension plan are immediately recognized, and expected returns on interest costs and plan assets that used to be separately calculated are now changed to calculating net interest expense (income) by applying discount rate used in measuring defined benefit obligation in net defined benefit liabilities (assets). This amendment will be effective for the Company as of January 1, 2013, and The Controlling Company is assessing the impact of application of the amended IAS 19 on its consolidated financial statements as of the report date.
—Amendments to IFRS 7, Financial Instruments: Disclosures
According to the amendment, an entity should provide the required disclosures of nature, carrying amount, risk and rewards associated with all transferred financial instruments that are not derecognized from an entity’s financial statements. In addition, an entity is required to disclose additional information related to transferred and derecognized financial instruments for any continuing involvement in transferred assets. This amendment will be effective for the Company from annual periods beginning on or after July 1, 2011. The Company expects additional disclosures in relation to transfer of financial instruments upon application of the above amended IFRS requirement.
—Additions to IFRS 9, Financial instruments
IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortized cost. The determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair
value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Controlling Company is yet to assess IFRS 9’s full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after January 1, 2013.
—IFRS 10, Consolidated Financial Statements
IFRS 10, Consolidated financial statements’ builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included withinhas prepared the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Controlling Company is yet to assess IFRS 10’s full impact and intends to adopt IFRS 10 no later than the accounting period beginning on or after January 1, 2013
—IFRS 11, Joint arrangements
IFRS 11 is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. The Controlling Company expects that it would not have a material impact on the consolidated financial statements.
—IFRS 12, Disclosures of interests in other entities
IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The company is yet to assess IFRS 12’s full impact and intends to adopt IFRS 12 no later than the accounting period beginning on or after January 1, 2013.
—Enactment of IFRS 13, Fair value measurement
IFRS 13,Fair value measurement, aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. IFRS 1 does not extend the use of fair value accounting but provides guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs. This amendment will be effective for the Company as of January 1, 2013, and the Controlling Company expects that it would not have a material impact on the consolidated financial statements.
2.2 Consolidation
The Company’s consolidated financial statements are prepared in accordance with IAS 27,IFRS 10,Consolidated and Separate Financial Statements.Statements.
(1) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Company has the power to govern the financial and operating policies, generally which have more than half of the voting rights.control. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing
whether the Company controls another entity. The company also assesses existencethe corresponding investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the Company’s voting rights relative to the size and dispersion of holdings of other shareholders give the company the power to govern the financial and operating policies and others.
Subsidiaries are fully consolidateda subsidiary begins from the date on whichthe Company obtains control is transferred toof a subsidiary and ceases when the Company. Subsidiaries are de-consolidated fromCompany loses control of the date that control ceases.subsidiary.
The Company usesapplies the acquisition method to account for business combinations. The consideration transferred for the acquisition of subsidiary is measured at the fair valuevalues of the assets transferred, equity interests issued and liabilities incurred or assumed at the date of acquisition. The consideration transferred includes the fair value of any assets or liability resulting from a contingent consideration arrangement. Identifiableidentifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured initially at their fair values at the acquisition date. The Company measuresrecognizes any non-controlling interestsinterest in the acquiree on an acquisition-by-acquisition basis in the event of liquidation, either at fair value or at the non-controlling interests’interest’s proportionate share inof the recognized amounts of the acquiree’s identifiable net assets in the event of liquidation. Otherassets. All other non-controlling interests are measured at thetheir acquisition-date fair valuevalues, unless otherwiseanother measurement basis is required by other standards.
IFRSs. Acquisition-related costs are expenseexpensed as incurred. If a business combination is achieved in stages, the acquirer’s previously held ownership of the acquire is re-measured at the fair value at the acquisition date
KT Corporation and the resulting gain or lossSubsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Goodwill is recognized as the profit and loss.
Any contingent consideration to be transferred by the Company is recognized at fair value at the acquisition date. Subsequent changes to the fair valueexcess of the contingent consideration that is deemed to be an asset or liability is recognized in accordance with IAS 39, either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.
The excessaggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the acquisition-date fair value of any previousthe acquirer’s previously held equity interest in the acquiree over the fair value of the Company’s share of the identifiable net assets acquired is recorded as goodwill.acquired. If this consideration is lesslower than the fair value of the net assets of the subsidiary acquired, in case of a bargain purchase, the difference is recognized directly in the statementprofit or loss.
Balances of income.
Intercompany transactions, balancesreceivables and payables, income and expenses and unrealized gains and losses on transactions between consolidated companiesthe Company’s subsidiaries are eliminated after considering impairment of the asset transferred. Unrealized gains and losses are eliminated after recognizing impairment of transferred assets, accountingeliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company.
(2) Changes in ownership interests in subsidiaries without change of control
TransactionsIn transactions with non-controlling interests, thatwhich do not result in loss of control, are accounted for asthe Company recognizes directly in equity transactions; that is, as transactions with the owners in their capacity as owners. Theany difference between the amount by which the non-controlling interests are adjusted and the fair value of anythe consideration paid or received, and attribute it to the relevant share acquiredowners of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.parent.
(3) Disposal of subsidiaries
WhenIf the Company ceases to haveloses control of a subsidiary, any investment continuously retained interest in the entitysubsidiary is re-measured toat its fair value at the date when control is lost with the change in carrying amountand any resulting differences are recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Company had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.
(4) Associates
Associates are all entities over which the Company has significant influence, but not control, generally holding of between 20% and 50% of the voting rights. Investmentsinvestments in associates are accounted for using the equity method and are initially recognized at cost. The Company’s investment in associates includes goodwill identified on acquisition net of any accumulated impairment loss.
Ifcost using the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognized in other comprehensive income is reclassified to profit or loss where appropriate.
The Company’s share of its associates’ post-acquisition profits or losses is recognized in the statement of income, and its share of post-acquisition movements in other reserves is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Company’s share of losses of an associate equals or exceeds its interest in the associate, including any unsecured receivables, the Company does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate.
The Company should assess at the end of each reporting period whether there is any objective evidence that an investment in associates is impaired. If any such evidence exists, the Company should recognize difference between recoverable amount and carrying amount of the associates as impairment loss.
equity method. Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates. Unrealized losses are also eliminated unlessIf there is any objective evidence that the transaction provides evidence of an impairmentinvestment in the associate is impaired, the Company recognizes the difference between the recoverable amount of the asset transferred. Accounting policies of associates have been changed, where necessary, to ensure consistency with the policies adopted by the Company. Dilution gainsassociate and losses arising from investments in associates are recognized in the statement of income.its book value as impairment loss.
(5) Jointly controlled entitiesJoint arrangement
A joint venture is a contractual arrangement wherebyof which two or more parties (venturers) undertake an economic activityhave joint control is classified as either a joint operation or a joint venture. A joint operator has rights to the assets, and obligations for the liabilities, relating to the joint operation and recognizes the assets, liabilities, revenues and expenses relating to its interest in a joint operation. A joint venturer has rights to the net assets relating to the joint venture and accounts for that is subject to joint control. As with associates, investments in jointly controlled entities are accounted forinvestment using the equity method and are initially recognized at cost. The Company’s investment in jointly controlled entities includes goodwill identified on acquisition, net of any accumulated impairment loss. The Company does not recognize its share of profits or losses from the joint venture that result from the Company’s purchase of assets from the joint venture until it re-sells the assets to an independent party. However, a loss on the transaction is recognized immediately if the loss provides evidence of a reduction in the net realizable value of current assets, or an impairment loss.
2.32.4 Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (Note 34)33). The chief operating decision-maker is responsible for making strategic decisions on resource allocation and performance assessment of the operating segments.
2.4KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2.5 Foreign Currency Translation
(1) Functional and presentation currency
Items included in the financial statements of each of the consolidated companiesCompany’s entities are measured using the currency of the primary economic environment in which the each entity operates (“the functional currency”(the “functional currency’). The consolidated financial statements are presented in ‘Korean won’,Korean won, which is the Controlling Company’s functional and presentation currency.
(2) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income, except when deferred in other comprehensive incomeprofit or loss.
Exchange differences arising on non-monetary financial assets and liabilities such as qualifying cash flow hedges.
Changes in theequity instruments at fair value of monetary securities denominated in foreign currency classified asthrough profit or loss and available-for-sale are analyzed between translation differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortized costequity instruments are recognized in profit or loss and other changes in carrying amount are recognizedincluded in other comprehensive income.
Foreign currency translation differences on non-monetary financial assets and liabilities are recognizedincome, respectively, as a part of the fair value gain or loss. Translation differences on equity instruments classified as available-for-sale are included in other comprehensive income, while translation differences on equity instruments classified as financial assets and liabilities at fair value through profit or loss are included in the statement of income.
(3) Overseas subsidiariesTranslation into presentation currency
TheDifferent functional currency of all overseas subsidiaries is the local currency of the countries where the subsidiaries are located. The results and financial position of all consolidated companies whose functional currency is different from the presentation currencycurrencies are translated into the presentation currency as follows:using the following procedures.
Assets and liabilities are translated at the closing rate at the enddate of the reporting period;that statement of financial position
Income and expenses are translated at an average rate for the period. However, if exchange rates fluctuate significantly, the actualperiod
Equity at historical rate at the date of the transaction is used; and
All resulting exchange differences are recognized in other comprehensive income.income
When the Controlling Company ceases to have control, exchange differences that were recorded in equity are recognized in profit and loss on disposal of the investment.
Goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity. These are presented in functional currency of the foreign entity, and translated at the closing rate.
2.52.6 Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term highly liquid investments with original maturities of less than three months.
2.6 Trade Receivables
Trade receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. Where, otherwise, they are presented as non-current assets.
Trade receivables are recognized initially at fair value, less allowance for doubtful accounts. Non-current trade receivables are measured at amortized cost using the effective interest method.
2.7 Financial Assets
(1) Classification and measurement
The Company classifies its financial instrumentsassets in the following categories: financial assets and liabilities at fair value through profit or loss, loans and receivables, available-for-sale financial assets, held-to-maturity investments and financial liabilities measured at amortized cost. Management determines the classification of financial instruments at initial recognition.
1) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss, areavailable-for-sale financial instruments held for trading. Financial assets, are classified in this category if acquired or incurred principally for the purpose of selling or repurchase in the short term. Derivatives that are not subject to hedge accounting are also categorized in this category.
2) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period, which are classified as non-current assets. The Company’s loans and receivables, are classified as ‘cash and cash equivalents’, ‘trade and other receivables’, ‘loans receivable’, ‘finance lease receivables’ and ‘other financial assets’ in the financial statements.
3) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months from the end of the reporting period. The available-for-sale financial assets of the Company are classified to the ‘other financial assets’ in the financial statements.
4) Held-to-maturity investments
Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company’s management has the positive intention and ability to hold to maturity and are categorized in ‘other financial assets’ in the financial statements. If the Company were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-for-sale financial assets. Held-to-maturity financial assets are included in non-current assets, except for those with maturities of less than 12 months from the end of the reporting period which are classified as current assets.
(2) Recognition and Measurement
Regular purchases and sales of financial assets are recognized on thetrade date.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
A regular way purchase of financial assets shall be recognized as applicable, using trade date (the date on which the Company commits to purchase or sell the assets). Investmentsaccounting. At initial recognition, financial assets are initially recognizedmeasured at fair value plus, transaction costs for allin the case of financial assets not carried at fair value through profit or loss. Financialloss, transaction costs. Transaction costs of financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the statement of income. Financial assets are derecognized whenAfter the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Available-for-saleinitial recognition, available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables, and held-to-maturity investments are subsequently carried at amortized cost using the effective interest rate method.
Gains or losses arising from changesChanges in the fair value of the financial assets and liabilities at fair value through profit or loss are presented in the statement of income within ‘financial income and expenses’ in the period in which they arise. The Company recognizes a dividend income from financial assets at fair value through profit or loss in the statement of income when the Company’s right to receive payments is established.
Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are recognized at cost. Other than these investments, all available-for-sale financial assets are measured at fair value.
Changes in theprofit or loss and changes in fair value of monetary and non-monetary securities classified as available-for-sale financial assets are recognized in other comprehensive income. Generally, when securities classified asWhen the available-for-sale financial assets are sold or impaired, the accumulated fair value adjustments recognizedrecorded in equity are reported in the statement of income as ‘gains (losses) from investment securities’.
Interest on available-for-sale financial assets calculated using the effective interest method is recognized in the statement of income as part of ‘financial income’. Dividends on available-for-sale equity instruments are recognized in the statement of income as part of ‘financial income’ when the Company’s right to receive payments is established. However, in case a subsidiary is engaged in the financial industry, the realized accumulated fair value adjustment, interest and dividends on available-for-sale are recognized as ‘operating income and expense’ in the statement of income.reclassified into profit or loss.
(3) Offsetting Financial Instruments
Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
(4) Derecognition of Financial Assets
Financial assets are derecognized when the contractual rights to receive cash flows from the investments have expired or have been transferred and the Company has substantially transferred all risks and rewards of ownership. If the risk and rewards of ownership of transferred assets have not been substantially transferred, the Company reviews the level of control retained over that asset and the extent of its continuing involvement to determine if transfers do not qualify for derecognition.
Collaterals (trade receivables and other) provided in transactions of discount and factoring of trade receivables do not meet the requirements for asset derecognition if risks and rewards do not substantially transfer in the event the debtor defaults. Financial liabilities recognized in relation to these transactions are included as borrowings in the Company’s statement of financial position.
2.8(2) Impairment of Financial Assets
(1) Assets carried at amortized cost
The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or a group of financial assets that can be reliably estimated.
Impairment of loans and receivables is presented as a deduction in an allowance account. Impairment of other financial assets is directly deducted from their carrying amount. The Company writes off financial assets when the assets are determined to be no longer recoverable.
The criteria that the Company uses to determine that there is objective evidence of an impairment loss include:
Significant financial difficulty of the issuer or obligor;
A breach of contract, such as a default or delinquency in interest or principal payments;
The Company, forFor economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;
It becomes probable that the borrower will enter bankruptcy or other financial reorganization;
The disappearance of an active market for that financial asset because of financial difficulties; or
Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:portfolio.
KT Corporation and Subsidiaries
Adverse changesNotes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(3) Derecognition
If the Company transfers a financial asset and the transfer does not result in derecognition because the Company has retained substantially of all risks and rewards of ownership of the transferred asset due to a recourse in the payment status of borrowersevent the debtor defaults, the Company continues to recognize the transferred asset in its entirety and recognizes a financial liability for the portfolio;
National or local economic conditions that correlate with defaults on the assets in the portfolio.
consideration received. The amount of the lossrelated financial liability is measuredclassified as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the
asset is reduced and the amount of the loss is recognized‘borrowings’ in the statement of income.financial position.
(4) Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the statements of financial position where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously. The Company may measure impairmentlegally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the financial instruments onCompany or the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in the statement of income.counterparty.
(2) Assets classified as available-for-sale
The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the Company uses the criteria referred to (1) above. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the asset is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss—measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss—is removed from equity and recognized in the statement of income. Impairment losses recognized in the statement of income on equity instruments are not reversed through the statement of income. The fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through the statement of income.
2.92.8 Derivative Financial Instruments
Derivatives are initially recognized at fair value on the date when a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Company designates certain derivatives as either:
Hedges ofChanges in the fair value of a recognized asset or liability or a firm commitment (fair value hedge); or
Hedges of a particular risk associated with a recognized asset or liability on a highly probable forecast transaction (cash flow hedge)
The Company documents at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are usednot qualified for hedge accounting are recognized in hedging transactions are highly effective in offsetting changes onthe statement of income within ‘operating income (expenses)’ and ‘finance income (expenses)’ according to the nature of transactions.
If the Company uses a valuation technique that incorporates data not obtained from observable markets for the fair values or cash flowsvalue at initial recognition of hedged items.
The fair values of various derivative instruments used for hedging purposesthe financial instrument, there may be a difference between the transaction price and movements on the hedging reserve in shareholders’ equity are shown in Note 9. The fullamount determined using that valuation technique (Day 1 profit and loss). In these circumstances, the fair value of a hedging derivativethe financial instrument is classifiedrecognized as a non-current asset or liability whenthe transaction price and the difference is amortized by using the straight-line method over the life of the financial instrument. If the fair value of the financial instrument is subsequently determined using observable market inputs, the remaining hedged itemdeferred amount is more than 12 months,recognized in profit or loss in the statement of income.
The Company applies cash flow hedge accounting to hedge the risks of foreign exchange and as a current asset or liability when the remaining maturityinterest rates of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
(1) Fair value hedge.
Changesvariable rate foreign currency bonds. The effective portion of changes in the fair value of derivatives that are designated and qualify as fair valuecash flow hedges are recordedis recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately as finance income (expenses) in the income statement together with anyof income. Amounts of changes in the fair value of effective hedging instruments accumulated in other comprehensive income are recognized as ‘finance income (expenses)’ for the hedged assetperiods when the corresponding transactions affect profit or liabilityloss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that are attributable to the hedged risk.is reported in other comprehensive income is recognized as ‘finance income (expenses)’.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized to profit or loss over the period to maturity.
(2) Cash flow hedgeKT Corporation and Subsidiaries
The effective portion of changes in the fair value of derivatives that are designatedNotes to Consolidated Financial Statements
December 31, 2012, 2013 and qualify as cash flow hedges is hedges is recognized in other comprehensive income. The gain of loss relating to the ineffective portion is recognized immediately as financial income (costs) in the statement of income.2014
Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example, when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable rate foreign borrowings is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized as financial income in the statement of income.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to profits or losses in the statement of income.
2.102.9 Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted-average method, except for inventories in-transit which is determined using the specific identification method. Net realizable
2.10 Non-current Assets (or Disposal Group) Held-for-sale
Non-current assets (or disposal group) are classified as assets held-for-sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. The assets are measured at the lower amount between their carrying amount and the fair value is the estimated selling price in the ordinary course of business, less applicable selling expenses.costs to sell.
2.11 Property and Equipment
All propertyProperty and equipment are stated at historicalits cost less depreciation.accumulated depreciation and accumulated impairment losses. Historical cost includes expenditureexpenditures that is directly attributedattributable to the acquisition of the items. However, in accordance with IFRS 1,First-time Adoption of IFRS, the Company measured certain buildings and telecommunications equipment at fair value at the date of transition to IFRS and the fair value is used as their deemed cost at that date.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of income during the financial period in which they are incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate the difference between their cost and their residual values over their estimated useful lives, as follows:
Estimated Useful Lives | ||
Buildings | 5 – 40 years | |
Structures | 5 – 40 years | |
Machinery and equipment | 3 – 40 years | |
(Telecommunications equipment and others) | ||
Others | ||
Vehicles | 4 – 6 years | |
Tools | 4 – 6 years | |
Office equipment | 4 – 6 years |
The assets’depreciation method, residual values and useful lives of property and equipment are reviewed and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amountperiod and, if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognizedappropriate, accounted for as operating revenue or expenseschanges in the statement of income.accounting estimates.
2.12 Investment Property
Investment property isProperty held to earn rentals or for capital appreciation or both.both is classified as investment property. Investment property is measured initially at its cost including transaction costs incurred in acquiring the asset.cost. After recognition as an asset, investment property is carried at its cost less any accumulated depreciation and impairment losses.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of income during the financial period in which they are incurred.
Land held for investment is not depreciated. Investment property, except for land, is depreciated using the straight-line method over their estimated useful lives.
The depreciation method, the residual value and the useful life of an asset are reviewed at least at the end of each reporting period and, if management judges that previous estimates should be adjusted, the change is accounted for as a change in an accounting estimate.
Gains or losses arisinglives from the disposal of investment property shall be determined as the difference between the net disposal proceeds and the carrying amount of the asset and shall be recognized in the operating revenue and expenses in the income statement.10 to 40 years.
2.13 Intangible Assets
(1) Goodwill
Goodwill is measured as explained in Note 2.22.3 (1) and goodwill arising from acquisition of subsidiaries and business are included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. The calculation of the gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the acquirer’s cash-generating units, or groups of cash-generating units (“CGU”), that is expected to benefit from the synergies of the combination. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. Any impairment is recognized immediately as an expense and is not subsequently reversed.
(2) Intangible assets except goodwill
Separately acquired Intangible assets except for goodwill are measuredshown at historical cost. These assets have definite useful lives and are carried at historical cost less accumulated amortization. Amortization is calculatedAssets with definite useful lives are amortized using the straight-line method according to allocate the cost of assets over their estimated useful lives.lives presented below. However, facility usage rights (condominium membership and golf membership) and broadcast license are regarded as intangible assets with indefinite useful life and not amortized, because there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the Company.
The useful life of an asset with indefinite useful life is reviewed each period to determine whether events and circumstances continue to support the indefinite useful life assessment for that asset. If management judges that previous estimates should be adjusted, the change is accounted for as a change in an accounting estimate. The depreciation method and useful life of an asset with definite useful life are reviewed at the end of each reporting period.inflows.
The estimated useful life used for amortizing intangible assets is as follows:
Estimated Useful Lives | ||
| ||
| ||
Development costs | 5 – 6 years | |
Goodwill | Unlimited useful life | |
Software | ||
Industrial property rights | 5 – 10 years | |
Frequency usage rights | 5.75 – | |
Others 1 |
1 | Facility usage rights (condominium membership and golf membership) and broadcast license included in others are classified as intangible assets with indefinite useful life. |
(3) Research and development costs
Expenditure on research is recognized as an expense as incurred. If the expense as incurred that is identifiable and when the probable future economic benefits are expected, the cost for the new merchandises and technology is recognized as intangible assets when all the following criteria are met:
It is technically feasible to complete the intangible asset so that it will be available for use;
Management intends to complete the intangible asset and use or sell it;
There is the ability to use or sell the intangible asset;
It can be demonstrated how the intangible asset will generate probable future economic benefits;
Adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and
The expenditure attributable to the intangible asset during its development can be reliably measured
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Other development expenditures that do not meet these criteria are recognized as expenses as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Capitalized development costs, which are stated as intangible assets, are amortized using the straight-line method when the assets are available for use and are tested for impairment.
2.14 Borrowing Costs
General and specific borrowingBorrowing costs directly attributable toincurred in the acquisition or construction or production of a qualifying assets, whichasset are assets that necessarily take a substantialcapitalized in the period of time to get readywhen it is prepared for theirits intended use, or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investmentand investment income earned on the temporary investment of specific borrowings pending their expenditure onmade specifically for the purpose obtaining a qualifying assetsasset is deducted from the borrowing costs eligible for capitalization. All othercapitalization during the period. Other borrowing costs are recognized in profit or loss inas expenses for the period in which they are incurred.
2.15 Government Grants
Grants from a governmentGovernment grants related to assets are recognized at their fair value where there isin profit or loss on a reasonable assurance thatsystematic and rational basis over the useful life of the asset by setting up the grant will be receivedas deferred income, and the Company will comply with all attached conditions.
Governmentgovernment grants relatingrelated to costsincome are deferred and recognized in the statement of income overas part of ‘other non-operating income’ for the period necessary to match them within which the costs that they are intended to compensate. Government grants relating to property and equipment are deferred and are credited torelated expenses for the statement of income on a straight-line basis over the expected livespurpose of the related assets.government grants are incurred.
2.16 Impairment of Non-Financial Assets
Assets that have anGoodwill or intangible assets with indefinite useful life such as goodwill are not subject to amortization andlives are tested annually for impairment. Depreciable assets are tested for impairment when there is any indication an asset may be impaired. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets, other than goodwill, that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
2.17 Financial liabilitiesLiabilities
(1) Financial assets at fair value through profit or lossClassification and measurement
Financial liabilities at fair value through profit or loss are financial instruments held for trading. Financial liabilities are classified in this category if acquired or incurred principally for the purpose of selling or repurchaserepurchasing them in the shortnear term. Derivatives that are not subject to hedge accountingdesignated as hedges or bifurcated from financial instruments containing embedded derivatives are also categorized in this category.
(2) Financial liabilities measured at amortized costas held-for-trading.
The Company classifies non-derivative financial liabilities, as financial liabilities measured at amortized cost, except for financial liabilities at fair value through profit or loss, or forfinancial guarantee contracts and financial liabilities that arise when a transfer of a financial assetassets does not qualify for derecognition. For cases not qualifying for derecognition, the transferred asset continues to be recognized and aas financial liability is measured as the consideration received. Financial liabilities measuredcarried at amortized cost are includedand presented as ‘trade payables’, ‘borrowings’, and ‘other financial liabilities’ in non-current liabilities, exceptthe statement of financial position.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Preferred shares that provide for liabilities with maturities of less than 12 months as of the end of the reporting period, whicha mandatory redemption at a particular date are classified as currentliabilities. Interest expenses on these preferred shares calculated using the effective interest method are recognized in the statement of income as ‘finance costs’, together with interest expenses recognized on other financial liabilities.
The Company’s financial liabilities at fair value through profit or loss are financial instruments held for trading and designated as financial liabilities at fair value through profit or loss. Financial liabilities held for trading are financial liabilities that are incurred principally for the purpose of repurchasing them in the near term and derivatives that are not designated as hedges or bifurcated from financial instruments containing embedded derivatives. Financial liabilities at fair value through profit or loss are structured financial liabilities containing embedded derivatives issued by the Company.
As it was unable to measure the embedded derivatives separately from its host contract, the Company designated the entire hybrid contact as at fair value through profit or loss. The financial liability that the Company designated as at fair value through profit or loss is a foreign convertible bond.
(2) Derecognition
Financial liabilities are removed from the statement of financial position when it is extinguished, for example, when the obligation specified in the contract is discharged, cancelled or expired or when the terms of an existing financial liability are substantially modified.
2.18 Trade PayablesFinancial Guarantee Contracts
Trade payablesFinancial guarantees contracts provided by the Company are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year. If not, they are presented as non-current liabilities. Trade payables are initially recognized at fair value.
2.19 Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument. Financial guarantee is initially measured at fair value on the date the guarantee was given. Subsequent to initial recognition, the Company’s liabilities under such guarantees are measured at the higher of the amounts below. Any increase in the liability relating to guarantees is reportedbelow and recognized as other‘other financial liabilities:liabilities’:
• | The |
The amounts initially recognized less the accumulated amortization accordance with IAS 18 Revenue
• | The initial amount, less accumulated amortization recognized in accordance with IAS 18,Revenue. |
2.20 Borrowings2.19 Compound Financial Instruments
BorrowingsCompound financial instruments are convertible bonds that can be converted into equity instruments at the option of the holder. The liability component of a compound financial instrument is recognized initially at the fair value net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the statement of income over the period of the borrowings using the effective interest method. However, in case a subsidiary is engaged in the financial industry, the interest expenses are recognized as operating expenses since it is considered as a main business activity of the subsidiary.
The Company classifies thesimilar liability as current when itthat does not have an unconditional rightequity conversion option. The equity component is recognized initially on the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to defer its settlement for at least 12 months after the reporting date.liability and equity components in proportion to their initial carrying amounts.
KT Corporation and Subsidiaries
2.21Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2.20 Employee Benefits
(1) Retirement benefit liabilitiesPost-employment benefits
The Company has both defined benefit and defined contribution plans.
A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The contributions are recognized as employee benefit expenses when an employee has rendered service.
A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the statement of financial position in respect of the defined benefit pension planplans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments and changesobligation. The remeasurements of the net defined benefit liability are recognized in actuarial assumptions are charged or credited to other comprehensive income in the period in which they arise. To the extent that the benefits are already vested following the introduction ofincome.
If any plan amendments, curtailments, or changes to, a defined benefit plan, past-servicesettlements occur, past service costs or any gains or losses on settlement are recognized immediately in income, while costs are amortized over the vesting periodas profit or loss for the unvested benefits.year.
(2) Termination benefits
Termination benefits are payable when employment is terminated by the Company before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination benefits at the earlier of the following dates: when it is demonstrably committed to either: terminating the employmententity can no longer withdraw the offer of current employees according tothose benefits or when the entity recognizes costs for a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy.restructuring.
2.222.21 Share-based payments
The Controlling Company operatesEquity-settled share-based compensation plans, under whichpayments granted to employees are estimated at the Controlling Company receives services from employees as consideration for equity instruments (options) of the Controlling Company. Thegrant date fair value of the employee services received in exchange for the grant of the options isequity instruments and recognized as a compensation expense in the statement of incomeemployee benefit expenses over the vesting period. The number of equity instruments expected to vest is remeasured with consideration to non-market vesting conditions at the end of the reporting period, with any changes from the original measurement recognized in the profit for the year and equity.
2.232.22 Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events and an outflow of resources required to settle the obligation is probable and can be reliably estimated. Provisions are not recognized for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation. Theobligation and the increase in the provisionsprovision due to passage of time is recognized as an interest expense.
2.24KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2.23 Leases
(1) The Company as the Lessee
A lease is an agreement, whereby the lessor conveys to the lessee, in return for a payment or series of payments, the right to use an asset for an agreed period of time. Leases in which a significant portion ofwhere all the risks and rewards of ownership are retained bynot transferred to the lessorCompany are classified as operating leases. Payments madeLease payments under operating leases are charged to the statement of incomerecognized as expenses on a straight-line basis over the period of the lease.lease term.
Lease of property and equipmentLeases where the lesseeCompany has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease’s commencementand recognized as lease assets and liabilities at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant ratepayments on the outstanding balance. The corresponding rental obligations, net of finance charges, are included in the finance lease liabilities.
The interest elementopening date of the finance cost is charged to the statement of income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful life of the asset and the lease term.
(2) The Company as the Lessor
ForA lease is classified as a finance leases, lease receivables are recognizedif it transfers substantially all the risks and rewards incidental to ownership at the amount equivalent toinception of the net investment in thelease. A lease asset. The Company recognizes interest income, which is calculated for netother than a finance lease receivable based on effective interest rate.is classified as an operating lease. Lease income from operating leases shall be
is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred by lessorsthe lessor in negotiating and arranging an operating leases shall belease is added to the carrying amount of the leaseleased asset and recognized as the expensesan expense over the lease term corresponding toon the same basis as the lease income.
2.25 Dividend Distribution
Dividend distribution to the Company’s shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the Company’s shareholders.
2.262.24 Capital Stock
Common stocks are classified as equity. Incremental costs directly attributable to the issue of new common stocks or options are shown in equity as a deduction, net of tax, from the proceeds.
Where the Controlling Company purchases its own equity share capital, the consideration paid, including any directly attributable incremental costs, is deducted from equity attributable to the Controlling Company’s equity holders until the stocks are cancelled or reissued. Where such shares are subsequently reissued, any consideration received is included in equity attributable to the Controlling Company’s equity holders.
2.272.25 Revenue Recognition
Revenue comprisesis measured at the fair value of the consideration received or receivable for the salessale of goods andor rendering of services inarising from the ordinary coursenormal activities of the Company’s activities. RevenueCompany. It is shownstated as net of value-added tax,value added taxes, returns, rebates and discounts, and after eliminating sales within the Company. elimination of intra-company transactions.
The Company recognizes revenue when the amount of revenue can be reliably measured,measured; when it is probable that future economic benefits will flow to the entityentity; and when specific criteria have been met for each of the Company’s activities, as described below. The Company bases its estimatesestimate on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.
(1) Sales of Services
When providing interconnection or telecommunications service to a customer based on service plans, the related revenue is recognized at the time service is provided. If the customer uses the telecommunications equipment according to the service plans, the related revenue is recognized on straight-line basis over the contract period. Revenue related to the other telecommunications services is recognized when the service is provided to the customer.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
For other services, when the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with such a transaction is recognized by reference to the stage of performance of the services. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognized only to the extent of the expenses recognized that are recoverable.
Total consideration for combined services is allocated to each service in proportion to its fair value and the allocated amount is recognized as revenue according to revenue recognition policy for the service.
(2) Sales of goods
SalesThe Company sells a range of handsets. Revenue from the sale of goods such as selling handsets areis recognized when the Company hasproducts are delivered products to the customer. Delivery does not occur until the products have been shipped to the
specified location, the risks of obsolescence and loss have been transferred to the customer, and either the customer has accepted the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Company has objective evidence that all criteria for acceptance have been satisfied.purchaser.
(3) Interest income
Interest income is recognized using the effective interest method.method according to the time passed. When a loan and receivable is impaired, the Company reduces the carrying amount to its recoverable amount and continues unwinding the discount as interest income. Interest income on impaired loans and receivables is recognized using the original effective interest rate.
(4) Commission fees.fees
Commission fees related to credit card business recognized when it is probable that future economic benefits will flow to the entity and these benefits can be reliably measured. Revenues from acquiree fee, agent fee, optional service fees, member service fees and credit card service charge are measured at the fair value of the consideration received and recognized on ana accrual basis.
(5) Royalty income
Royalty income is recognized on an accrual basis in accordance with the substance of the relevant agreements.
(6) Dividend income
Dividend income is recognized when the right to receive payment is established.
2.28(7) Customer loyalty program
The Company operates a customer loyalty program where customers accumulate points for purchases made which entitle them to discounts on future purchases. The reward points are recognized as a separately identifiable component of the initial sale transaction. The fair value of the consideration received or receivable in respect of the initial sale is allocated between the reward points and the other components of the sale. The fair value of the reward points is measured by taking into account the proportion of the reward points that are not expected to be redeemed by customers. Revenue from the reward points is recognized when the points are redeemed and the reward points expire 12 months after the initial sale.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2.26 Current and Deferred Income Tax
The tax expense for the period consists of current and deferred tax. Tax is recognized on the profit for the period in the statement of income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this exception,case, the tax is also recognized in other comprehensive income or directly in equity, respectively.
The current income tax chargeexpense is calculated on the basis of the tax laws enacted or substantiallysubstantively enacted at the end of the reporting date in the countries where the Company operates and generates taxable income. period.
Management periodically evaluates positions takentax policies that are applied in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriateThe Company recognizes current income tax on the basis of amountsthe amount expected to be paid to the tax authorities.
Deferred income tax is recognized using the liability method, onfor temporary differences arising between the tax bases of assets and liabilities and their carrying amounts inas expected tax consequences at the financial statements.recovery or settlement of the carrying amounts of the assets and liabilities. However, the deferred income tax isassets and liabilities are not accounted forrecognized if it arisesthey arise from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit noror loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized.
Deferred income tax liabilities are provided onliability is recognized for taxable temporary differences arising onassociated with investments in subsidiaries, associates, and associates,interests in joint ventures, except whereto the extent that the Company is able to control the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred incomeIn addition, deferred tax asset is recognized onlyfor deductible temporary differences arising from such investments 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.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention either to settle the balances on a net basis or to realize the asset and settle the liability simultaneously.basis.
2.292.27 Deferred Loan Fees and Costs
Loan origination fees in relation to loan origination process such as upfront fee, are deferred and amortized over the life of the loan as an adjustment to the yield of the loan using the effective interest rate method. Loan origination costs, which relates to loan origination activities such as commissions to brokers, are deferred and amortized over the life of the loan as an adjustment to the yield of the loan, using the effective interest rate method, if the future economic benefit related costs incurred can be matched with each loan.
In addition, the amortizationamortizations of the deferred loan origination fees on costs isare offset and the net amounts are presented in the consolidated statement of financial position.
2.30KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2.28 Non-current Assets Held for Sale and Discontinued Operations
Non-current assets (or disposal groups) are classified as ‘assets and liabilities classified as held for sale’ (or ‘groups classified as held for sale’) when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount or fair value less costs to sell.
When a component of the CompanyGroup representing a separate major line of business or geographical area of operation has been disposed of, or is subject to a sale plan involving loss of control of a subsidiary, the CompanyGroup discloses in the statement of income the post-tax profit or loss of discontinued operations and the post-tax gain or loss recognized on the measurement to fair value less costs to sell or on the disposal of the assets or group to be sold constituting the discontinued operation. The net cash flows attributable to the operating, investing and financing activities of discontinued operations are presented in the notes to the financial statements.statements (Note 40).
2.29 Dividend
Dividend distribution to the Company’s shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the Company’s shareholders.
2.30 Approval of Issuance of the Financial Statements
The issuance of the December 31, 2014 financial statements of the Company was approved by the directors on April 23, 2015.
2.31 US Dollar ConvenienceConvention Translation
The December 31, 20112014 consolidated financial statements are expressed in Korean Won and have been translated intoin U.S. dollars at the rate of(Won)₩1,153.31,099.2 to US$1, the market average exchange rate announced by Seoul Money Brokerage Services, Ltd. and in effect on December 31, 2011,2014, solely for the convenience of the reader. These translations should not be construed as a representation that any or all of the amounts shown could be converted into U.S. dollars at this or any other rate.
3. Critical Accounting Estimates and Assumptions
The Company makes estimates and assumptions concerning the future. EstimatesThe estimates and assumptions are continuallycontinuously evaluated and are based onwith consideration to factors such as events reasonably predictable in the foreseeable future within the present circumstance according to historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.experience. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
3.1 Estimated Impairment of Goodwill
The Company tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated in Note 2.16.impairment. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. (Note 14)13).
3.2 Income Taxes
CurrentThe Company is operating in numerous countries and deferredthe income generated from these operations is subject to income taxes based on tax laws and interpretations of tax authorities in numerous jurisdictions. There are determined usingmany transactions and calculations for which the ultimate tax rates and laws that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.uncertain.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
3.3 Fair Value of Derivatives and Financial Instruments
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses its judgment to select a variety of methods and makesmake assumptions that are mainly based on market conditions existing at the end of each reporting period.period (Note 36).
3.4 Allowance for Doubtful Accounts
The Company usesrecognizes provisions for accounting of estimated loss in customers’ insolvency. When the allowance for doubtful accounts is estimated, it is based on the aging analysis of trade receivables balances, incurred loss experience, customers’ credit rates and changes of payment terms. If the customer’s financial position becomes worse, the actual amortizationloss amount will be increased more than the estimated.
3.5 Defined Benefit ObligationNet defined benefit liability
The present value of thenet defined benefit obligationliability depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the defined benefit obligation includeincluding the discount rate. Any changes in these assumptions will impact the carrying amount of the defined benefit obligation.
The Company determines the appropriate discount rate at the end of each reporting period. This is the interest rate that is used to determine the present value of estimated future cash outflows expected to be required to settle the defined benefit obligation. In determining the appropriate discount rate, the Company considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related liability. Other key assumptions for defined benefit obligation are based in part on current market conditions. Additional information is disclosed in Note 19.(Note 18).
3.6 Deferred Revenue
Service installation fees and initial subscription fees related to activation of service are deferred and recognized as revenue over the expected terms of customer relationships. The estimate
of expected terms of customer relationship is based on the historical rate. If management’s estimation is amended, it may cause significant differences in the timing of revenue recognition and amount recognized.
3.7 Provisions
As described in Note 18,17, the Company records provisions for litigation and assets retirement obligations as of the end of the reporting period. The provisions are estimated based on the factors such as the historical experiences.
3.8 Useful lives of Property and equipmentEquipment, Intangible Assets and Investment Property
Depreciation on the property and equipment, intangible assets and investment property excluding land, condominium memberships, golf club memberships, and broadcasting concession is calculated using straight linethe straight-line method over their useful lives. The estimated useful lives are determined based on expected usage of the assets and the estimates can be materially affected by technical changes and other factors. The Company will increase depreciation if the useful lives are considered shorter than the previously estimated useful lives.
4. Transition to IFRS
The Company’s transition date to IFRS is January 1, 2010,KT Corporation and adoption date is January 1, 2011. The Company prepared the opening statement of financial position as of January 1, 2010.
In preparing these consolidated financial statements in accordance with IFRS 1,First-time Adoption of international Financial Reporting Standards, the Company has applied the mandatory exceptions and certain optional exemptions allowed by IFRS.Subsidiaries
4.1 Exemptions options under IFRS 1
The Company has electedNotes to apply the following optional exemptions from full retrospective application of the IFRS.
(1) Business combination
The Company has not retrospectively applied IFRS 3 to the business combinations that took place prior to the transition date of January 1, 2010 (the date of transition to IFRS).
(2) Deemed cost for property and equipmentConsolidated Financial Statements
The Company has elected to measure certain propertyDecember 31, 2012, 2013 and equipment at fair value as of January 1, 2010, (the date of transition to IFRS) and uses that fair value as its deemed cost at that date. The certain buildings and telecommunications equipment were measured using fair value as its deemed cost at transition date. The adjusted amount resulting from fair value revaluation is(Won)256,781 million (before the income tax effects), with the total fair value of(Won)6,492,658 million.
(3) Decommissioning liabilities included in the cost of property and equipment
According to IFRIC 1,Changes in Existing Decommissioning, Restoration and Similar liabilities, changes in a decommissioning, restoration or similar liability are added to or deducted from the cost of the asset to which it relates. The Company elects not to comply with these requirements for changes in such liabilities that occurred before the date of transition to IFRS. The amounts to be included as costs of decommissioning assets are measured by discounting the liability over the intervening period and the accumulated depreciation on that amount is calculated at the date of transition to IFRS.2014
(4) Borrowing costs
In respect of capitalizing borrowing costs incurred in the construction of a qualifying asset, the Company capitalizes interest on all qualifying assets for which the commencement date for capitalization is after the transition date subject to IAS 23.
(5) Contribution for construction
Subject to IFRIC 18, the Company applies this interpretation prospectively to contribution for construction received on or after January 1, 2010 (the date of transition to IFRS).
4.2 Mandatory exceptions to retrospective application of IFRS 1
The Company has applied the following mandatory exceptions.
(1) Derecognition of financial assets
The Company has prospectively applied IAS 39,Financial Instruments: Recognition and Measurement, to the transactions of financial assets after January 1, 2004. The Company has not applied IFRS to transactions of financial assets before January 1, 2004, even if they met the requirements of derecognition .
(2) Exception for estimates
The Company’s estimates in accordance with IFRS, at the date of transition (January 1, 2010) are consistent with estimates made for the same date in accordance with previous accounting standards(after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.
4.3 Significant Differences in Accounting Policies
Significant differences between the accounting policies chosen by the Company under IFRS and under Korean GAAP are as follows:
(1) Revenue recognition
Under Korean GAAP, non-refundable service installation fees for telephone and initial subscription fees for Personal Communications Services(PCS) and leased-line services are recognized as revenue when installation and initiation services are rendered. Under IFRS, service installation fees, and an initial subscription fees related to activation of service, are deferred and recognized as revenue over the expected terms of customer relationship.
In addition, under Korean GAAP, as the certain real estate revenue is considered as a construction type contract, the real estate revenue is recognized on a percentage of completion basis. Under IFRS, as the related real estate revenue is considered as a sale of goods, real estate revenue is recognized at the time of the transfer to customer.
(2) Employee benefits
Under Korean GAAP, provisions for severance benefits were estimated assuming all eligible employees were to terminate their employment at the end of reporting period. Under IFRS, the defined benefit obligations are measured by using actuarial method.
(3) Government grants
Under Korean GAAP, government grants were presented by deducting the grant in arriving at the carrying amount of the asset. Under IFRS, government grants are presented as liabilities for deferred revenue and recognized as revenue over the useful life of the asset.
(4) Goodwill or bargain purchase arising from business combinations
Under Korean GAAP, goodwill recognized at the business combination was amortized using the straight-line basis over 4~10 years from the year of acquisition and negative goodwill was recognized as income using the straight-line basis over the weighted average useful life of the acquired depreciable assets. Under IFRS, goodwill is not amortized or reversed but tested for impairment at least annually. Gain on bargain purchase is recognized immediately in the statement of income.
(5) Capitalization of borrowing costs
Under Korean GAAP, borrowing costs were expensed as incurred from the initial date of manufacture, acquisition, construction and development until getting ready for its intended use or sale. Under IFRS, the Company capitalizes borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset, acquired after the date of transition, as part of the cost of that asset.
(6) Customer loyalty programs
Under Korean GAAP, the amount of future obligation was recognized as expense and liability provision when sales occur. Under IFRS, awarded credits are separately accounted for as an identifiable component of the sales transaction in which they are granted and the related revenue is deferred.
(7) Transfer of financial assets
Under Korean GAAP, if the Company transferred a financial asset to financial institutions and it was determined that control over the asset has been transferred to financial institutions, the Company derecognized the financial asset. Under IFRS, if the Company retains substantially all the risks and rewards of ownership of the asset, the asset is not derecognized but instead the related cash proceeds are recognized as financial liabilities.
(8) Deferred income tax
Under Korean GAAP, deferred tax assets and liabilities were either classified as current or non-current based on the classification of their underlying assets and liabilities. If there are no corresponding assets or liabilities the deferred tax assets and liabilities are classified based on their expected recoverable periods.
Under IFRS, deferred tax and liabilities, are classified as non-current on the statement of financial position.
Under Korean GAAP, temporary differences related to investments in subsidiaries, associates and joint ventures were treated as a single difference in determining whether to recognize deferred tax assets or liabilities. Under IFRS, deferred tax assets and liabilities are recognized reflecting the manner of recovery or settlement of temporary difference of each component.
4.4 Changes in Scope of Consolidation
At January 1, 2010, the date of transition, changes in the scope of consolidation as a result of adoption of IFRS are as follows:
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As a result of adoption of IFRS, three subsidiaries are excluded from scope of consolidation at the date of transition.
4.5 Reconciliation between IFRS and Korean GAAP
(1) Effects on the consolidated total assets, liabilities and equity as of January 1, 2010, the transition date of IFRS
(in millions of Korean won) | Total assets | Total liabilities | Total equity | |||||||||
Reported amount under Korean GAAP | (Won) | 26,620,317 | (Won) | 15,952,878 | (Won) | 10,667,439 | ||||||
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Adjustments : | ||||||||||||
Change in revenue recognition of certain real estate sales | (176,352 | ) | 23,345 | (199,697 | ) | |||||||
Deferred revenue such as initial subscription fees | — | 255,034 | (255,034 | ) | ||||||||
Deemed cost of property and equipment | 256,781 | — | 256,781 | |||||||||
Valuation of financial instruments (present value and others) | (6,503 | ) | (122 | ) | (6,381 | ) | ||||||
Actuarial estimation of post employment benefit | 259 | (251,011 | ) | 251,270 | ||||||||
Readjustments of asset retirement obligation | 3,335 | 9,639 | (6,304 | ) | ||||||||
Reclassifications of government grants | 8,227 | 8,610 | (383 | ) | ||||||||
Effect of changes in the scope of consolidation | (77,759 | ) | (13,349 | ) | (64,410 | ) | ||||||
Others | 36,541 | (36,069 | ) | 72,610 | ||||||||
Tax-effect on adjustments | (1,152 | ) | (77 | ) | (1,075 | ) | ||||||
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Total | 43,377 | (4,000 | ) | 47,377 | ||||||||
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Adjusted amount under IFRS | (Won) | 26,663,694 | (Won) | 15,948,878 | (Won) | 10,714,816 | ||||||
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(2) Effects on the consolidated total assets, liabilities and equity as of December 31, 2010
(in millions of Korean won) | Total Assets | Total liabilities | Total equity | Comprehensive income | ||||||||||||
Reported amount under Korean GAAP | (Won) | 27,713,459 | (Won) | 16,217,787 | (Won) | 11,495,672 | (Won) | 1,151,049 | ||||||||
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Adjustments : | ||||||||||||||||
Change in revenue recognition of certain real estate sales | 11,127 | 23,536 | (12,409 | ) | 187,288 | |||||||||||
Deferred revenue such as initial subscription fees | 1,519 | 239,614 | (238,095 | ) | 16,939 | |||||||||||
Deemed cost of property and equipment | 256,781 | — | 256,781 | — | ||||||||||||
Effect of depreciation cost to apply deemed cost and others | (112,190 | ) | — | (112,190 | ) | (112,215 | ) | |||||||||
Valuation of financial instruments (present value and others) | (7,919 | ) | (211 | ) | (7,708 | ) | (1,118 | ) | ||||||||
Actuarial estimation of post employment benefit | 280 | (91,869 | ) | 92,149 | (158,984 | ) | ||||||||||
Readjustments of asset retirement obligation | 1,320 | 8,229 | (6,909 | ) | (613 | ) | ||||||||||
Reclassifications of government grants | 26,258 | 25,604 | 654 | 654 | ||||||||||||
Capitalization of borrowing cost | 16,550 | — | 16,550 | 16,550 | ||||||||||||
Effect of changes in the scope of consolidation | (1,083,170 | ) | (847,697 | ) | (235,473 | ) | (14,673 | ) | ||||||||
Others | 105,129 | 10,642 | 94,487 | 30,804 | ||||||||||||
Tax-effect on adjustments | 12,459 | 1,913 | 10,546 | 10,382 | ||||||||||||
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Total | (771,856 | ) | (630,239 | ) | (141,617 | ) | (24,986 | ) | ||||||||
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Adjusted amount under IFRS | (Won) | 26,941,603 | (Won) | 15,587,548 | (Won) | 11,354,055 | (Won) | 1,126,063 | ||||||||
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(3) Adjustments to the statement of cash flows
According to IFRS, cash flows of the related income (expenses) and assets (liabilities) are adjusted to separately disclose the cash flows from interest received, interest paid and cash payments of income taxes that were not presented separately under Korean GAAP. Also, other IFRS transition effects are reflected on cash flows if they have an effect on cash flow.
5.4. Financial Instruments by category
Financial instruments by category as of January 1, 2010 and December 31, 20102013 and 20112014, are as follows:
(In millions of Korean won) | 01.01.2010 | 2013 | ||||||||||||||||||||||||||||||||||||||||||||||
Financial assets | Loans and receivables | Assets at fair value through the profit and loss | Derivatives used for hedge | Available- for-sale | Held-to- maturity | Total | Loans and receivables | Assets at fair value through the profit and loss | Derivatives used for hedge | Available- for-sale | Held-to- Maturity | Total | ||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | (Won) | 1,542,872 | (Won) | — | (Won) | — | (Won) | — | (Won) | — | (Won) | 1,542,872 | ₩ | 2,070,869 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | 2,070,869 | ||||||||||||||||||||||||
Trade and other receivables | 4,515,007 | — | — | — | — | 4,515,007 | 6,053,040 | — | — | — | — | 6,053,040 | ||||||||||||||||||||||||||||||||||||
Loans receivable | 911,229 | — | — | — | — | 911,229 | 1,348,597 | — | — | — | — | 1,348,597 | ||||||||||||||||||||||||||||||||||||
Finance lease receivables | 522,765 | — | — | — | — | 522,765 | 709,937 | — | — | — | — | 709,937 | ||||||||||||||||||||||||||||||||||||
Other financial assets | 346,596 | 31,368 | 295,058 | 117,280 | 82 | 790,384 | 582,693 | 15,643 | 3,496 | 547,627 | 3,248 | 1,152,707 | ||||||||||||||||||||||||||||||||||||
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Total | ₩ | 10,765,136 | ₩ | 15,643 | ₩ | 3,496 | ₩ | 547,627 | ₩ | 3,248 | ₩ | 11,335,150 | ||||||||||||||||||||||||||||||||||||
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In millions of Korean won) | 1.1.2010 | |||||||||||||||
Financial liabilities | Liabilities at fair value through the profit and loss | Derivatives used for hedge | Financial liabilities at amortized cost | Total | ||||||||||||
Trade and other payables | (Won) | — | (Won) | — | (Won) | 5,583,679 | (Won) | 5,583,679 | ||||||||
Finance lease liabilities | — | — | 7,553 | 7,553 | ||||||||||||
Borrowings | — | — | 9,566,700 | 9,566,700 | ||||||||||||
Other financial liabilities | 7,497 | 3,782 | 15,586 | 26,865 |
(In millions of Korean won) Financial assets Cash and cash equivalents Trade and other receivables Loans receivable Finance lease receivables Other financial assets (In millions of Korean won) Financial liabilities Trade and other payables Finance lease liabilities Borrowings Other financial liabilities Total 12.31.2010 Loans
and
receivables Assets at fair
value through
the profit and
loss Derivatives
used for
hedge Available-
for-sale Held-to-maturity Total (Won) 1,161,641 (Won) — (Won) — (Won) — (Won) — (Won) 1,161,641 5,318,713 — — — — 5,318,713 1,133,221 — — — — 1,133,221 597,339 — — — — 597,339 106,630 6,010 247,794 178,609 7 539,050 2013 Liabilities at
fair value through
the profit and loss Derivatives
used for
hedge Financial
liabilities at
amortized
cost Other
liabilities Total ₩ — ₩ — ₩ 8,472,707 ₩ — ₩ 8,472,707 — — 68,210 — 68,210 — — 11,483,893 — 11,483,893 2,956 150,612 73,080 15,984 242,632 ₩ 2,956 ₩ 150,612 ₩ 20,097,890 ₩ 15,984 ₩ 20,267,442
(In millions of Korean won) | 12.31.2010 | |||||||||||||||
Financial liabilities | Liabilities at fair value through the profit and loss | Derivatives used for hedge | Financial liabilities at amortized cost | Total | ||||||||||||
Trade and other payables | (Won) | — | (Won) | — | (Won) | 4,805,705 | (Won) | 4,805,705 | ||||||||
Finance lease liabilities | — | — | 93,856 | 93,856 | ||||||||||||
Borrowings | — | — | 9,382,364 | 9,382,364 | ||||||||||||
Other financial liabilities | 634 | 19,837 | 18,455 | 38,926 |
(In millions of Korean won) | 2014 | |||||||||||||||||||||||
Financial assets | Loans and receivables | Assets at fair value through the profit and loss | Derivatives used for hedge | Available- for-sale | Held-to- Maturity | Total | ||||||||||||||||||
Cash and cash equivalents | ₩ | 1,888,663 | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | 1,888,663 | ||||||||||||
Trade and other receivables | 5,659,913 | — | — | — | — | 5,659,913 | ||||||||||||||||||
Loans receivable | 1,295,282 | — | — | — | — | 1,295,282 | ||||||||||||||||||
Finance lease receivables | 584,413 | — | — | — | — | 584,413 | ||||||||||||||||||
Other financial assets | 455,622 | 6,983 | 41,540 | 525,556 | 7,767 | 1,037,468 | ||||||||||||||||||
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Total | ₩ | 9,883,893 | ₩ | 6,983 | ₩ | 41,540 | ₩ | 525,556 | ₩ | 7,767 | ₩ | 10,465,739 | ||||||||||||
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(In millions of Korean won) | 12.31.2011 | |||||||||||||||||||||||
Financial assets | Loans and receivables | Assets at fair value through the profit and loss | Derivatives used for hedge | Available- for-sale | Held-to-Maturity | Total | ||||||||||||||||||
Cash and cash equivalents | (Won) | 1,445,169 | (Won) | — | (Won) | — | (Won) | — | (Won) | — | (Won) | 1,445,169 | ||||||||||||
Trade and other receivables | 7,882,329 | — | — | — | — | 7,882,329 | ||||||||||||||||||
Loans receivable | 1,189,331 | — | — | — | — | 1,189,331 | ||||||||||||||||||
Finance lease receivables | 736,660 | — | — | — | — | 736,660 | ||||||||||||||||||
Other financial Assets | 280,700 | 5,538 | 160,283 | 428,796 | 7 | 875,324 |
(In millions of Korean won) | 2014 | |||||||||||||||||||
Financial liabilities | Liabilities at fair value through the profit and loss | Derivatives used for hedge | Financial liabilities at amortized cost | Other liabilities | Total | |||||||||||||||
Trade and other payables | ₩ | — | ₩ | — | ₩ | 7,317,303 | ₩ | — | ₩ | 7,317,303 | ||||||||||
Finance lease liabilities | — | — | 55,007 | — | 55,007 | |||||||||||||||
Borrowings | — | — | 12,815,385 | — | 12,815,385 | |||||||||||||||
Other financial liabilities | 3,980 | 122,012 | 82,816 | 5,434 | 214,242 | |||||||||||||||
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Total | ₩ | 3,980 | ₩ | 122,012 | ₩ | 20,270,511 | ₩ | 5,434 | ₩ | 20,401,937 | ||||||||||
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KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(In millions of Korean won) | 12.31.2011 | |||||||||||||||
Financial liabilities | Liabilities at fair value through the profit and loss | Derivatives used for hedge | Financial liabilities at amortized cost | Total | ||||||||||||
Trade and other payables | (Won) | — | (Won) | — | (Won) | 6,542,138 | (Won) | 6,542,138 | ||||||||
Finance lease liabilities | — | — | 136,197 | 136,197 | ||||||||||||
Borrowings | — | — | 10,998,552 | 10,998,552 | ||||||||||||
Other financial liabilities | 2,730 | 6,076 | 287,954 | 296,760 |
Income or expense (gain or loss) by financial instruments category for the years ended December 31, 20102012, 2013 and 2011,2014 are as follows:
(In millions of Korean won | 12.31.2010 | 12.31.2011 | ||||||
Loans and receivables | ||||||||
Interest income 1 | (Won) | 253,437 | (Won) | 314,125 | ||||
Gain or loss on valuation | (194,005 | ) | (146,177 | ) | ||||
Foreign currency transaction gain or loss | (15,227 | ) | 5,284 | |||||
Foreign currency translation gain or loss | (2,967 | ) | 4,646 | |||||
Gain or loss on disposal | (482 | ) | (3,807 | ) | ||||
Assets at fair value through the profit and loss | ||||||||
Interest income 1 | 3,048 | 10,684 | ||||||
Dividend income | 2 | 13 | ||||||
Gain or loss on valuation | 14,460 | 10,263 | ||||||
Foreign currency transaction gain or loss | 352 | 8 | ||||||
Foreign currency translation gain or loss | 3 | 116 | ||||||
Gain or loss on disposal | 92 | (1,120 | ) | |||||
Reclassified to profit or loss from other comprehensive income 2, 3 | — | 879 |
(In millions of Korean won | 12.31.2010 | 12.31.2011 | ||||||||||||||||||
(In millions of Korean won) | 2012 | 2013 | 2014 | |||||||||||||||||
Loans and receivables | ||||||||||||||||||||
Interest income 1 | ₩ | 387,254 | ₩ | 279,047 | ₩ | 237,771 | ||||||||||||||
gain(loss) on foreign currency transaction | (1,198 | ) | 23,509 | (1,181 | ) | |||||||||||||||
gain(loss) on foreign currency translation | (3,208 | ) | (5,245 | ) | 7,917 | |||||||||||||||
Loss on disposal | (15,809 | ) | (7,534 | ) | (16,464 | ) | ||||||||||||||
Bad debts expense | (150,389 | ) | (189,665 | ) | (231,934 | ) | ||||||||||||||
Assets at fair value through the profit and loss | ||||||||||||||||||||
Gain(loss) on disposal | 10 | 375 | (587 | ) | ||||||||||||||||
Loss on valuation | (80 | ) | (5,427 | ) | (794 | ) | ||||||||||||||
Derivatives used for hedging | ||||||||||||||||||||
Transaction gain or loss | (824 | ) | (26,882 | ) | ||||||||||||||||
Gain or loss on valuation | 114 | 43,755 | ||||||||||||||||||
Other comprehensive income 2 | (27,897 | ) | 13,509 | |||||||||||||||||
Reclassified to profit or loss from other comprehensive income 2, 4 | 3,259 | 6,374 | ||||||||||||||||||
Gain(loss) on transaction | (4,023 | ) | 1,134 | (34,653 | ) | |||||||||||||||
Gain on valuation | (49,729 | ) | 127 | 64,700 | ||||||||||||||||
Other comprehensive income(loss) 2 | (9,407 | ) | (1,936 | ) | 28,928 | |||||||||||||||
Reclassified to profit or loss from other comprehensive income(loss) 2,3 | 24,764 | 1,408 | (49,524 | ) | ||||||||||||||||
Available -for-sale | ||||||||||||||||||||
Interest income 1 | 998 | 219 | 142 | 345 | 45 | |||||||||||||||
Dividend income | 561 | 7,840 | 6,370 | 20,841 | 15,007 | |||||||||||||||
Gain or loss on disposal | 2,305 | 6,724 | ||||||||||||||||||
Gain(loss) on disposal | 7,991 | 2,339 | (13,495 | ) | ||||||||||||||||
Impairment loss | (6,043 | ) | (4,727 | ) | (3,401 | ) | (5,053 | ) | (70,022 | ) | ||||||||||
Other comprehensive income 2 | (1,324 | ) | 80,521 | 23,952 | 49,778 | 39,336 | ||||||||||||||
Reclassified to profit or loss from other comprehensive income 2 | 3,553 | (1,764 | ) | (4,865 | ) | 6,554 | (17,173 | ) | ||||||||||||
Held-to-Maturity | ||||||||||||||||||||
Interest income 1 | — | — | 159 | |||||||||||||||||
Liabilities at fair value through the profit and loss | ||||||||||||||||||||
Interest expense 1 | (5,380 | ) | (11,777 | ) | ||||||||||||||||
Gain or loss on valuation | 4,998 | (142 | ) | |||||||||||||||||
Gain or loss on disposal | (732 | ) | 40 | |||||||||||||||||
Gain on foreign currency transaction | 199 | 42 | (134 | ) | ||||||||||||||||
Gain(loss) on disposal | (78 | ) | (676 | ) | 13 | |||||||||||||||
Gain on valuation | 331 | 156 | 32 | |||||||||||||||||
Derivatives used for hedging | ||||||||||||||||||||
Gain or loss on valuation | (12,810 | ) | 1,041 | |||||||||||||||||
Other comprehensive income 2 | (20,692 | ) | 8,205 | |||||||||||||||||
Gain(loss) on disposal | 2,352 | (3,339 | ) | 2,121 | ||||||||||||||||
Gain(loss) on valuation | (191,627 | ) | (97,289 | ) | 3,179 | |||||||||||||||
Other comprehensive loss 2 | (119,883 | ) | (70,367 | ) | (11,938 | ) | ||||||||||||||
Reclassified to profit or loss from other comprehensive income 2,3 | 130,103 | 66,199 | 4,729 | |||||||||||||||||
Financial liabilities at amortized cost | ||||||||||||||||||||
Interest expense 1, 5 | (580,082 | ) | (576,589 | ) | ||||||||||||||||
Foreign currency transaction gain or loss | 11,685 | 4,063 | ||||||||||||||||||
Foreign currency translation gain or loss | 36,303 | (83,939 | ) | |||||||||||||||||
Financial guarantee gain or loss | (239 | ) | (4,973 | ) | ||||||||||||||||
Interest expense 1,4 | (589,727 | ) | (548,129 | ) | (578,210 | ) | ||||||||||||||
Gain(loss) foreign currency transaction | 3,383 | (330 | ) | 12,443 | ||||||||||||||||
Gain(loss) foreign currency translation | 262,383 | 104,820 | (99,145 | ) | ||||||||||||||||
Other liabilities | ||||||||||||||||||||
Financial guarantee reversal(expense) | (11,216 | ) | (9,034 | ) | 15,736 | |||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | (533,534 | ) | (Won) | (343,588 | ) | ₩ | (305,406 | ) | ₩ | (387,349 | ) | ₩ | (693,138 | ) | |||||
|
|
|
|
|
1 | KT Capital Co., Ltd. and KT Rental, a subsidiary of the Company, recognizes interest income and expense as operating revenue and expense. Interest income recognized as operating revenue is |
2 | The amounts directly reflected in equity before adjustments of deferred income tax. |
3 |
During the |
The amounts reflected as interest expense arising from derivatives. |
6.KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
5. Cash and Cash Equivalents
Cash and cash equivalents as of January 1, 2010 and December 31, 20102013 and 20112014, are as follows:
(In millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Cash on hand | (Won) | 3,212 | (Won) | 8,646 | (Won) | 11,330 | ₩ | 5,712 | ₩ | 3,918 | ||||||||||
Cash in banks | 351,243 | 418,984 | 652,374 | 885,620 | 805,145 | |||||||||||||||
Money market trust | 108,000 | 320,000 | 464,000 | 817,466 | 699,879 | |||||||||||||||
Other financial instruments | 1,080,417 | 414,011 | 317,465 | 362,071 | 379,721 | |||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | 1,542.872 | (Won) | 1,161,641 | (Won) | 1,445,169 | ₩ | 2,070,869 | ₩ | 1,888,663 | ||||||||||
|
|
|
|
|
Cash and cash equivalents in the statement of financial position equal cash and cash equivalents in the statementsstatement of cash flows.
Restricted cash and cash equivalents as of January 1, 2010 and December 31, 20102013 and 20112014, are as follows:
(In millions of Korean won) | Type | 1.1.2010 | 12.31.2010 | 12.31.2011 | Description | |||||||||||||
Cash and cash equivalents | Restricted deposit | (Won) | 10,341 | (Won) | 9,494 | (Won) | 8,707 | | Deposit restricted for governmental project | |
(In millions of Korean won) Description Cash and cash equivalents Type 2013 2014 Restricted deposit ₩ 1,998 ₩ 3,318 Deposit restricted for governmental project and others
7.6. Trade and Other Receivables
Trade and other receivables as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
1.1.2010 | 2013 | |||||||||||||||||||||||||||||||
(in millions of Korean won) | Total amounts | Allowance for doubtful accounts | Present value discount | Carrying value | Total amounts | Allowance for doubtful accounts | Present value discount | Carrying value | ||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||||||
Trade receivables | (Won) | 3,886,679 | (Won) | (462,430 | ) | (Won) | (28,167 | ) | (Won) | 3,396,082 | ₩ | 3,791,089 | ₩ | (523,098 | ) | ₩ | (28,248 | ) | ₩ | 3,239,743 | ||||||||||||
Other receivables | 500,423 | (160,173 | ) | (964 | ) | 339,286 | 2,143,203 | (142,821 | ) | (556 | ) | 1,999,826 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | (Won) | 4,387,102 | (Won) | (622,603 | ) | (Won) | (29,131 | ) | (Won) | 3,735,368 | ₩ | 5,934,292 | ₩ | (665,919 | ) | ₩ | (28,804 | ) | ₩ | 5,239,569 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Non-current assets | ||||||||||||||||||||||||||||||||
Trade receivables | (Won) | 448,218 | (Won) | (2,778 | ) | (Won) | (48,592 | ) | (Won) | 396,848 | ₩ | 404,372 | ₩ | (2,568 | ) | ₩ | (33,539 | ) | ₩ | 368,265 | ||||||||||||
Other receivables | 419,652 | (102 | ) | (36,759 | ) | 382,791 | 500,028 | (9,775 | ) | (45,047 | ) | 445,206 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | (Won) | 867,870 | (Won) | (2,880 | ) | (Won) | (85,351 | ) | (Won) | 779,639 | ₩ | 904,400 | ₩ | (12,343 | ) | ₩ | (78,586 | ) | ₩ | 813,471 | ||||||||||||
|
|
|
|
|
|
|
|
12.31.2010 | 2014 | |||||||||||||||||||||||||||||||
(in millions of Korean won) | Total amounts | Allowance for doubtful accounts | Present value discount | Carrying value | Total amounts | Allowance for doubtful accounts | Present value discount | Carrying value | ||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||||||
Trade receivables | (Won) | 4,318,381 | (Won) | (495,049 | ) | (Won) | (48,699 | ) | (Won) | 3,774,633 | ₩ | 3,657,814 | ₩ | (524,865 | ) | ₩ | (9,589 | ) | ₩ | 3,123,360 | ||||||||||||
Other receivables | 563,403 | (144,408 | ) | (251 | ) | 418,744 | 1,872,095 | (183,987 | ) | (418 | ) | 1,687,690 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | (Won) | 4,881,784 | (Won) | (639,457 | ) | (Won) | (48,950 | ) | (Won) | 4,193,377 | ₩ | 5,529,909 | ₩ | (708,852 | ) | ₩ | (10,007 | ) | ₩ | 4,811,050 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Non-current assets | ||||||||||||||||||||||||||||||||
Trade receivables | (Won) | 880,214 | (Won) | (7,199 | ) | (Won) | (76,636 | ) | (Won) | 796,379 | ₩ | 393,354 | ₩ | (2,752 | ) | ₩ | (25,217 | ) | ₩ | 365,385 | ||||||||||||
Other receivables | 361,402 | (307 | ) | (32,138 | ) | 328,957 | 552,190 | (26,659 | ) | (42,053 | ) | 483,478 | ||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | (Won) | 1,241,616 | (Won) | (7,506 | ) | (Won) | (108,774 | ) | (Won) | 1,125,336 | ₩ | 945,544 | ₩ | (29,411 | ) | ₩ | (67,270 | ) | ₩ | 848,863 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
12.31.2011 | ||||||||||||||||||||||||||||||||
(in millions of Korean won) | Total amounts | Allowance for doubtful accounts | Present value discount | Carrying value | ||||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||||||||
Trade receivables | (Won) | 5,318,171 | (Won) | (462,502 | ) | (Won) | (64,229 | ) | (Won) | 4,791,440 | ||||||||||||||||||||||
Other receivables | 1,536,616 | (169,042 | ) | (100 | ) | 1,367,474 | ||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total | (Won) | 6,854,787 | (Won) | (631,544 | ) | (Won) | (64,329 | ) | (Won) | 6,158,914 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Non-current assets | ||||||||||||||||||||||||||||||||
Trade receivables | (Won) | 1,452,685 | (Won) | (10,716 | ) | (Won) | (115,171 | ) | (Won) | 1,326,798 | ||||||||||||||||||||||
Other receivables | 442,640 | (97 | ) | (45,926 | ) | 396,617 | ||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total | (Won) | 1,895,325 | (Won) | (10,813 | ) | (Won) | (161,097 | ) | (Won) | 1,723,415 | ||||||||||||||||||||||
|
|
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
The fair values of trade and other receivables with original maturities less than one year equal their carrying values because the discounting effect is immaterial. The fair value of trade and other receivables with original maturities longer than one year, which are mainly from sales of goods, is determined discounting the expected future cash flow at the weighted average borrowing rate.
Details of changes in allowance for doubtful accounts for the yearyears ended December 31, 20102013 and 2011,2014, are as follows:
2010 | 2011 | 2013 | 2014 | |||||||||||||||||||||||||||||
(in millions of Korean won) | Trade receivables | Other receivables | Trade receivables | Other receivables | Trade receivables | Other receivables | Trade receivables | Other receivables | ||||||||||||||||||||||||
Beginning balance | (Won) | 465,208 | (Won) | 160,275 | (Won) | 502,248 | (Won) | 144,715 | ₩ | 468,118 | ₩ | 175,940 | ₩ | 525,666 | ₩ | 152,596 | ||||||||||||||||
Provision | 151,475 | 6,672 | 109,034 | 24,408 | 151,240 | 8,926 | 127,881 | 71,254 | ||||||||||||||||||||||||
Reversal or written-off | (110,464 | ) | (21,467 | ) | (160,173 | ) | (7,183 | ) | (92,979 | ) | (34,227 | ) | (124,993 | ) | (16,201 | ) | ||||||||||||||||
Changes in the scope of consolidation | (2,064 | ) | (437 | ) | 21,954 | 5,016 | 338 | 2,349 | (334 | ) | 3,759 | |||||||||||||||||||||
Others | (1,907 | ) | (328 | ) | 155 | 2,183 | (1,051 | ) | (392 | ) | (603 | ) | (762 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Ending balance | (Won) | 502,248 | (Won) | 144,715 | (Won) | 473,218 | (Won) | 169,139 | ₩ | 525,666 | ₩ | 152,596 | ₩ | 527,617 | ₩ | 210,646 | ||||||||||||||||
|
|
|
|
|
|
|
|
Provisions for doubtful trade and other receivables are recognized as operating expenses.expenses or finance costs.
Details of aging analysis of trade receivables as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won) | Trade receivables | 2013 | 2014 | |||||||||||||||||
1.1.2010 | 12.31.2010 | 12.31.2011 | ||||||||||||||||||
Neither past due nor impaired | (Won) | 2,870,902 | (Won) | 3,949,439 | (Won) | 5,381,202 | ₩ | 2,959,284 | ₩ | 2,893,083 | ||||||||||
|
| |||||||||||||||||||
Past due and impaired | ||||||||||||||||||||
Up to six months | 580,042 | 643,801 | 560,314 | 725,681 | 707,140 | |||||||||||||||
Six months to twelve months | 204,807 | 144,260 | 162,911 | 105,607 | 101,297 | |||||||||||||||
Over twelve months | 602,387 | 335,760 | 487,029 | 343,102 | 314,842 | |||||||||||||||
Subtotal | 1,387,236 | 1,123,821 | 1,210,254 | |||||||||||||||||
|
| |||||||||||||||||||
1,174,390 | 1,123,279 | |||||||||||||||||||
Allowance for doubtful accounts | (465,208 | ) | (502,248 | ) | (473,218 | ) | (525,666 | ) | (527,617 | ) | ||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | 3,792,930 | (Won) | 4,571,012 | (Won) | 6,118,238 | ₩ | 3,608,008 | ₩ | 3,488,745 | ||||||||||
|
|
|
|
|
The detail of other receivables as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Loans | (Won) | 109,512 | (Won) | 107,274 | (Won) | 100,251 | ₩ | 89,134 | ₩ | 81,963 | ||||||||||
Receivables 1 | 433,564 | 494,455 | 1,489,040 | 2,096,086 | 1,834,813 | |||||||||||||||
Accrued income | 22,536 | 13,093 | 17,651 | 22,603 | 26,032 | |||||||||||||||
Refundable deposits | 315,903 | 277,526 | 325,603 | 389,199 | 434,846 | |||||||||||||||
Others | 837 | 68 | 685 | 606 | 4,160 | |||||||||||||||
Allowance | (160,275 | ) | (144,715 | ) | (169,139 | ) | (152,596 | ) | (210,646 | ) | ||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | 722,077 | (Won) | 747,701 | (Won) | 1,764,091 | ₩ | 2,445,032 | ₩ | 2,171,168 | ||||||||||
|
|
|
|
| ||||||||||||||||
Current | 339,286 | 418,744 | 1,367,474 | 1,999,826 | 1,687,690 | |||||||||||||||
Non-current | 382,791 | 328,957 | 396,617 | |||||||||||||||||
|
| |||||||||||||||||||
Non-Current | 445,206 | 483,478 | ||||||||||||||||||
|
|
1 | The settlement receivables of BC Card Co., Ltd. of |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Details of aging analysis of other receivables as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as followsfollows:
(in millions of Korean won) | Other receivables | |||||||||||
1.1.2010 | 12.31.2010 | 12.31.2011 | ||||||||||
Neither past due nor impaired | (Won) | 712,373 | (Won) | 726,812 | (Won) | 1,712,284 | ||||||
Past due and impaired | ||||||||||||
Up to six months | 100,060 | 38,312 | 160,612 | |||||||||
Six months to twelve months | 18,000 | 77,841 | 12,322 | |||||||||
Over twelve months | 51,919 | 49,451 | 48,012 | |||||||||
Subtotal | 169,979 | 165,604 | 220,946 | |||||||||
Allowance for doubtful accounts | (160,275 | ) | (144,715 | ) | (169,139 | ) | ||||||
|
|
|
|
|
| |||||||
Total | (Won) | 722,077 | (Won) | 747,701 | (Won) | 1,764,091 | ||||||
|
|
|
|
|
|
(in millions of Korean won) | 2013 | 2014 | ||||||
Neither past due nor impaired | ₩ | 2,312,757 | ₩ | 2,046,235 | ||||
|
|
|
| |||||
Past due and impaired | ||||||||
Up to six months | 105,712 | 87,852 | ||||||
Six months to twelve months | 16,641 | 77,773 | ||||||
Over twelve months | 162,518 | 169,954 | ||||||
|
|
|
| |||||
284,871 | 335,579 | |||||||
Allowance for doubtful accounts | (152,596 | ) | (210,646 | ) | ||||
|
|
|
| |||||
Total | ₩ | 2,445,032 | ₩ | 2,171,168 | ||||
|
|
|
|
The maximum exposure of trade and other receivables to credit risk is the carrying value of each class of receivables mentioned above as of December 31, 2011.2014. As of December 31, 2014, the Company is provided with guarantees of₩674,768 million by Seoul Guarantee Insurance related to the collection of certain accounts receivable arising from the handset sales.
8.7. Loans Receivable
Loans receivable as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
Current
1.1.2010 | ||||||||||||
(in millions of Korean won) | Original amount | Allowance for doubtful accounts | Carrying Value | |||||||||
Factoring receivables | (Won) | 492 | (Won) | (4 | ) | (Won) | 488 | |||||
Loans | 422,293 | (8,167 | ) | 414,126 | ||||||||
Accounts receivable-loans | 2,149 | (427 | ) | 1,722 | ||||||||
Loans for installment credit | 29,298 | (2,882 | ) | 26,416 | ||||||||
Deferred loan origination costs | 170 | — | 170 | |||||||||
Accounts receivable-loans for installment credit | 924 | (124 | ) | 800 | ||||||||
|
|
|
|
|
| |||||||
Total | (Won) | 455,326 | (Won) | (11,604 | ) | (Won) | 443,722 | |||||
|
|
|
|
|
|
12.31.2010 | ||||||||||||
(in millions of Korean won) | Original amount | Allowance for doubtful accounts | Carrying Value | |||||||||
Factoring receivables | (Won) | 35,737 | (Won) | (647 | ) | (Won) | 35,090 | |||||
Loans | 676,273 | (19,030 | ) | 657,243 | ||||||||
Accounts receivable-loans | 13,307 | (2,402 | ) | 10,905 | ||||||||
Loans for installment credit | 22,849 | (1,191 | ) | 21,658 | ||||||||
Accounts receivable-loans for installment credit | 528 | (82 | ) | 446 | ||||||||
|
|
|
|
|
| |||||||
Total | (Won) | 748,694 | (Won) | (23,352 | ) | (Won) | 725,342 | |||||
|
|
|
|
|
|
12.31.2011 | 2013 | 2014 | ||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Original amount | Allowance for doubtful accounts | Carrying value | Original amount | Allowance for doubtful accounts | Carrying Value | Original amount | Allowance for doubtful accounts | Carrying Value | |||||||||||||||||||||||||||
Factoring receivables | (Won) | 47,201 | (Won) | (1,012 | ) | (Won) | 46,189 | ₩ | 82,994 | ₩ | (1,245 | ) | ₩ | 81,749 | ₩ | 64,231 | ₩ | (2,916 | ) | ₩ | 61,315 | |||||||||||||||
Loans | 640,580 | (22,352 | ) | 618,228 | 752,165 | (32,722 | ) | 719,443 | 645,955 | (28,331 | ) | 617,624 | ||||||||||||||||||||||||
Accounts receivable-loans | 3,084 | (221 | ) | 2,863 | ||||||||||||||||||||||||||||||||
Loans for installment credit | 31,044 | (655 | ) | 30,389 | 38,799 | (1,205 | ) | 37,594 | 32,875 | (1,231 | ) | 31,644 | ||||||||||||||||||||||||
Accounts receivable-loans for installment credit | 393 | (32 | ) | 361 | ||||||||||||||||||||||||||||||||
Deferred loan origination profit and loss | (62 | ) | — | (62 | ) | (215 | ) | — | (215 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Total | (Won) | 722,302 | (Won) | (24,272 | ) | (Won) | 698,030 | ₩ | 873,896 | ₩ | (35,172 | ) | ₩ | 838,724 | ₩ | 742,846 | ₩ | (32,478 | ) | ₩ | 710,368 | |||||||||||||||
|
|
|
|
|
|
|
|
|
Non-Current
1.1.2010 | 2013 | 2014 | ||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Original amount | Allowance for doubtful accounts | Carrying value | Original amount | Allowance for doubtful accounts | Carrying Value | Original amount | Allowance for doubtful accounts | Carrying Value | |||||||||||||||||||||||||||
Factoring receivables | (Won) | 17,528 | (Won) | (96 | ) | (Won) | 17,432 | ₩ | 1,073 | ₩ | (103 | ) | ₩ | 970 | ₩ | 6,721 | ₩ | (173 | ) | ₩ | 6,548 | |||||||||||||||
Loans | 404,028 | (4,870 | ) | 399,158 | 426,218 | (15,929 | ) | 410,289 | 497,153 | (18,349 | ) | 478,804 | ||||||||||||||||||||||||
Deferred loan origination fees | (3,746 | ) | — | (3,746 | ) | |||||||||||||||||||||||||||||||
Loans for installment credit | 42,570 | (2,881 | ) | 39,689 | 46,849 | (5,007 | ) | 41,842 | 54,580 | (2,336 | ) | 52,244 | ||||||||||||||||||||||||
Deferred loan origination profit and loss | 3,432 | — | 3,432 | 4,209 | — | 4,209 | ||||||||||||||||||||||||||||||
New technology financial investment assets | 5,846 | (1,027 | ) | 4,819 | 6,629 | (803 | ) | 5,826 | 8,884 | (1,707 | ) | 7,177 | ||||||||||||||||||||||||
New technology financial loans | 10,213 | (58 | ) | 10,155 | 63,575 | (16,061 | ) | 47,514 | 59,992 | (24,060 | ) | 35,932 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Total | (Won) | 476,439 | (Won) | (8,932 | ) | (Won) | 467,507 | ₩ | 547,776 | ₩ | (37,903 | ) | ₩ | 509,873 | ₩ | 631,539 | ₩ | (46,625 | ) | ₩ | 584,914 | |||||||||||||||
|
|
|
|
|
|
|
|
|
KT Corporation and Subsidiaries
(in millions of Korean won) Loans Deferred loan origination fees Loans for installment credit Deferred loan origination costs New technology financial investment assets New technology financial loans Total Notes to Consolidated Financial Statements 12.31.2010 Original
amount Allowance for
doubtful
accounts Carrying
value (Won) 349,734 (Won) (8,904 ) (Won) 340,830 (1,030 ) — (1,030 ) 30,564 (1,382 ) 29,182 951 — 951 7,876 (1,371 ) 6,505 32,015 (574 ) 31,441 (Won) 420,110 (Won) (12,231 ) (Won) 407,879
December 31, 2012, 2013 and 2014
12.31.2011 | ||||||||||||
(in millions of Korean won) | Original amount | Allowance for doubtful accounts | Carrying value | |||||||||
Factoring receivables | (Won) | 23,948 | (Won) | (513 | ) | (Won) | 23,435 | |||||
Loans | 388,870 | (11,474 | ) | 377,396 | ||||||||
Deferred loan origination fees | (987 | ) | — | (987 | ) | |||||||
Loans for installment credit | 45,358 | (954 | ) | 44,404 | ||||||||
Deferred loan origination costs | 1,457 | — | 1,457 | |||||||||
New technology financial investment assets | 10,241 | (3,668 | ) | 6,573 | ||||||||
New technology financial loans | 41,729 | (2,706 | ) | 39,023 | ||||||||
|
|
|
|
|
| |||||||
Total | (Won) | 510,616 | (Won) | (19,315 | ) | (Won) | 491,301 | |||||
|
|
|
|
|
|
The fair values of trade and other receivablesloans receivable with maturities less than one year equal their carrying values because the discounting effect is immaterial. The fair value of loans receivables with original maturities longer than one year is determined discounting the future cash flow at the weighted average borrowing rate.
Details of changes in allowance for doubtful accounts for the years ended December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won) | 2010 | 2011 | 2013 | 2014 | ||||||||||||
Beginning | (Won) | 20,536 | (Won) | 35,583 | ₩ | 65,196 | ₩ | 73,075 | ||||||||
Provision | 30,808 | 30,808 | 40,743 | 31,656 | ||||||||||||
Reversal or written-off | (8,470 | ) | (22,804 | ) | (30,448 | ) | (23,618 | ) | ||||||||
Others | (7,291 | ) | — | (2,416 | ) | (2,010 | ) | |||||||||
|
|
|
| |||||||||||||
Ending | (Won) | 35,583 | (Won) | 43,587 | ₩ | 73,075 | ₩ | 79,103 | ||||||||
|
|
|
|
Provisions for doubtful loans receivable are recognized as operating expenses.
Details of aging analysis of loans receivablesreceivable as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Neither past due nor impaired | (Won) | 881,471 | (Won) | 1,094,265 | (Won) | 1,147,671 | ₩ | 1,322,206 | ₩ | 1,236,387 | ||||||||||
|
| |||||||||||||||||||
Past due and impaired | ||||||||||||||||||||
Up to six months | 38,840 | 64,672 | 85,247 | 54,263 | 101,071 | |||||||||||||||
Six months to twelve months | 7,510 | 8,955 | — | 27,312 | 3,718 | |||||||||||||||
Over twelve months | 3,944 | 912 | — | 7,891 | 33,209 | |||||||||||||||
Subtotal | 50,294 | 74,539 | 85,247 | |||||||||||||||||
|
| |||||||||||||||||||
89,466 | 137,998 | |||||||||||||||||||
Allowance for doubtful accounts | (20,536 | ) | (35,583 | ) | (43,587 | ) | (73,075 | ) | (79,103 | ) | ||||||||||
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|
|
|
| ||||||||||||||||
Total | (Won) | 911,229 | (Won) | 1,133,221 | (Won) | 1,189,331 | ₩ | 1,348,597 | ₩ | 1,295,282 | ||||||||||
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|
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The maximum exposure of loans receivables to credit risk is carrying value as of December 31, 2011.
9.KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
8. Other Financial Assets and Liabilities
Other financial assets and liabilities as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(In millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Other financial assets | ||||||||||||||||||||
Derivatives | (Won) | 308,324 | (Won) | 250,630 | (Won) | 164,434 | ||||||||||||||
Assets at fair value through the profit and loss | ₩ | 15,643 | ₩ | 6,983 | ||||||||||||||||
Derivatives used for hedge | 3,496 | 41,540 | ||||||||||||||||||
Financial instruments1 | 370,262 | 116,269 | 289,628 | 582,693 | 455,622 | |||||||||||||||
Available-for-sale financial assets | 111,716 | 172,144 | 421,255 | 547,627 | 525,556 | |||||||||||||||
Held-to-maturity investments | 82 | 7 | 7 | 3,248 | 7,767 | |||||||||||||||
Less: Non-current | (403,667 | ) | (269,358 | ) | (621,699 | ) | (672,645 | ) | (704,760 | ) | ||||||||||
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|
|
|
| ||||||||||||||||
Current | (Won) | 386,717 | (Won) | 269,692 | (Won) | 253,625 | ₩ | 480,062 | ₩ | 332,708 | ||||||||||
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| ||||||||||||||||
Other financial liabilities | ||||||||||||||||||||
Derivatives | (Won) | 11,279 | (Won) | 20,471 | (Won) | 8,806 | ||||||||||||||
Financial liabilities | 15,586 | 18,455 | 287,954 | |||||||||||||||||
Liabilities at fair value through the profit and loss | ₩ | 2,956 | ₩ | 3,980 | ||||||||||||||||
Derivatives used for hedge | 150,612 | 122,012 | ||||||||||||||||||
Financial guarantee liabilities 2 | 15,984 | 5,434 | ||||||||||||||||||
Other financial liabilities | 73,080 | 82,816 | ||||||||||||||||||
Less: Non-current | (19,487 | ) | (37,783 | ) | (288,473 | ) | (178,812 | ) | (190,525 | ) | ||||||||||
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|
|
|
| ||||||||||||||||
Current | (Won) | 7,378 | (Won) | 1,143 | (Won) | 8,287 | ₩ | 63,820 | ₩ | 23,717 | ||||||||||
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|
|
1 | Financial assets amounting to |
Derivatives
2 | As of December 31, 2014, the Company has funding obligation to Smart Channel Co., Ltd. The related financial guarantee liabilities of₩5,393 million are recognized. |
Financial instruments at fair value through the profit and loss as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | ||||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||||||||||||
Financial instruments held for trading | ||||||||||||||||||||||||||||||||||||||||
Interest rate swap | (Won) | 23 | (Won) | 5,775 | (Won) | 1,213 | (Won) | 213 | (Won) | 49,485 | (Won) | 180 | ₩ | 1 | ₩ | — | ₩ | — | ₩ | — | ||||||||||||||||||||
Currency swap | 295,035 | 3,782 | 246,716 | 19,852 | 110,798 | 6,076 | 7,238 | — | — | — | ||||||||||||||||||||||||||||||
Currency forward | 288 | 1,722 | — | 406 | — | 292 | 499 | 6 | — | — | ||||||||||||||||||||||||||||||
Other derivatives 1 | 12,978 | — | 2,701 | — | 4,151 | 2,258 | ||||||||||||||||||||||||||||||||||
Other derivatives | 7,905 | 148 | 6,983 | 646 | ||||||||||||||||||||||||||||||||||||
Financial instruments at fair value through the profit and loss | — | 2,802 | — | 3,334 | ||||||||||||||||||||||||||||||||||||
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|
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|
|
| |||||||||||||||||||||||||||||||
Total | (Won) | 308,324 | (Won) | 11,279 | (Won) | 250,630 | (Won) | 20,471 | (Won) | 164,434 | (Won) | 8,806 | ₩ | 15,643 | ₩ | 2,956 | ₩ | 6,983 | ₩ | 3,980 | ||||||||||||||||||||
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| |||||||||||||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||||||||||||
Non-current | ||||||||||||||||||||||||||||||||||||||||
Interest rate swap | (23 | ) | (119 | ) | — | — | (3 | ) | (45 | ) | ||||||||||||||||||||||||||||||
Currency swap | (295,035 | ) | (3,782 | ) | (97,166 | ) | (19,837 | ) | (110,798 | ) | (1,076 | ) | ||||||||||||||||||||||||||||
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|
| |||||||||||||||||||||||||||||||||||
(295,058 | ) | (3,901 | ) | (97,166 | ) | (19,837 | ) | (110,801 | ) | (1,121 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||
Current | (Won) | 13,266 | (Won) | 7,378 | (Won) | 153,464 | (Won) | 634 | (Won) | 53,633 | (Won) | 7,685 | ||||||||||||||||||||||||||||
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|
|
|
|
|
The valuation gains and losses on financial instruments held for trading for the years ended December 31, 2012, 2013 and 2014 are as follows:
2012 | 2013 | 2014 | ||||||||||||||||||||||
(in millions of Korean won) | Valuation gain | Valuation loss | Valuation gain | Valuation loss | Valuation gain | Valuation loss | ||||||||||||||||||
Interest rate swap | ₩ | — | ₩ | 2 | ₩ | — | ₩ | — | ₩ | — | ₩ | 1 | ||||||||||||
Currency swap | — | — | — | 8,395 | — | — | ||||||||||||||||||
Currency forward | 118 | — | 499 | 6 | — | — | ||||||||||||||||||
Other derivatives | — | — | 3,789 | 1,467 | 643 | 1,006 | ||||||||||||||||||
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|
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|
|
|
|
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|
| |||||||||||||
Total | ₩ | 118 | ₩ | 2 | ₩ | 4,288 | ₩ | 9,868 | ₩ | 643 | ₩ | 1,007 | ||||||||||||
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|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
The valuation gains and losses on financial instruments at fair value through the profit and loss for the years ended December 31, 2012, 2013 and 2014 are as follows:
(In millions of Korean won) | 2012 | 2013 | 2014 | |||||||||
Foreign currency translation gain(loss) | ₩ | 199 | ₩ | 42 | ₩ | (134 | ) | |||||
Gain on transactions | 547 | — | — | |||||||||
Gain(loss) on valuations | 135 | 309 | (398 | ) | ||||||||
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|
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|
|
| |||||||
Total | ₩ | 881 | ₩ | 351 | ₩ | (532 | ) | |||||
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|
|
|
The maximum exposure of debt securities of financial instruments at fair value through the profit and loss to credit risk is carrying value as of December 31, 2014.
Derivatives used for hedge as of December 31, 2013 and 2014, are as follows:
2013 | 2014 | |||||||||||||||
(in millions of Korean won) | Assets | Liabilities | Assets | Liabilities | ||||||||||||
Interest rate swap 1 | ₩ | — | ₩ | 934 | ₩ | — | ₩ | 601 | ||||||||
Currency swap 2 | 3,496 | 149,678 | 41,540 | 121,411 | ||||||||||||
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|
| |||||||||
Total | 3,496 | 150,612 | 41,540 | 122,012 | ||||||||||||
Less: non-current | (3,496 | ) | (105,679 | ) | (34,198 | ) | (107,667 | ) | ||||||||
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| |||||||||
Current | ₩ | — | ₩ | 44,933 | ₩ | 7,342 | ₩ | 14,345 | ||||||||
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1 |
2 | The currency swap contract is to hedge the risk of variability in cash flow from the bond. In applying the cash flow hedge accounting, the Company |
The full value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.
The valuation gains and losses on the derivatives contracts for the years ended December 31, 20102012, 2013 and 2011,2014 are as follows:
2010 | ||||||||||||||||||||
(in millions of Korean won) | For trading | For hedging | ||||||||||||||||||
Type of Transaction | Valuation gain | Valuation loss | Valuation gain | Valuation loss | Accumulated other comprehensive income 1 | |||||||||||||||
Interest rate swap2, 5 | (Won) | 4,999 | (Won) | — | (Won) | 1,190 | (Won) | — | (Won) | — | ||||||||||
Currency swap3, 4 | 1,311 | — | 33,595 | 47,481 | (48,589 | ) | ||||||||||||||
Currency forward 5 | 136 | 15 | — | — | — | |||||||||||||||
Other derivatives | 14,379 | — | — | — | — | |||||||||||||||
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|
|
|
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|
| |||||||||||
Total | (Won) | 20,825 | (Won) | 15 | (Won) | 34,785 | (Won) | 47,481 | (Won) | (48,589 | ) | |||||||||
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|
| |||||||||||
2011 | ||||||||||||||||||||
(in millions of Korean won) | For trading | For hedging | ||||||||||||||||||
Type of Transaction | Valuation gain | Valuation loss | Valuation gain | Valuation loss | Accumulated other comprehensive income 1 | |||||||||||||||
Interest rate swap2 | (Won) | 3 | (Won) | 45 | (Won) | — | (Won) | — | (Won) | — | ||||||||||
Currency swap3, 4 | 10,230 | — | 53,727 | 8,931 | 21,714 | |||||||||||||||
Currency forward 5 | 294 | 180 | — | — | — | |||||||||||||||
Other derivatives 5 | 2,270 | 36 | — | — | — | |||||||||||||||
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|
|
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|
|
| |||||||||||
Total | (Won) | 12,797 | (Won) | 261 | (Won) | 53,727 | (Won) | 8,931 | (Won) | 21,714 | ||||||||||
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|
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|
|
(in millions of Korean | 2012 | 2013 | 2014 | |||||||||||||||||||||||||||||||||
Type of Transaction | Valuation gain | Valuation loss | Accumulated other comprehensive income 1 | Valuation gain | Valuation loss | Accumulated other comprehensive income 1 | Valuation gain | Valuation loss | Accumulated other comprehensive income 1 | |||||||||||||||||||||||||||
Interest rate swap | ₩ | — | ₩ | — | ₩ | (1,206 | ) | ₩ | — | ₩ | — | ₩ | 405 | ₩ | — | ₩ | — | ₩ | 334 | |||||||||||||||||
Currency swap | — | 241,356 | (169,361 | ) | 127 | 97,289 | (95,792 | ) | 93,235 | 25,356 | 22,080 | |||||||||||||||||||||||||
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| |||||||||||||||||||
Total | ₩ | — | ₩ | 241,356 | ₩ | (170,567 | ) | ₩ | 127 | ₩ | 97,289 | ₩ | (95,387 | ) | ₩ | 93,235 | ₩ | 25,356 | ₩ | 22,414 | ||||||||||||||||
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|
1 | The amounts before adjustments of deferred income tax directly reflected in equity and allocation to the non-controlling interest. |
There is no gain or loss on valuation due to fair value valuation of bond to hedge fair value in 2011 (2010: gain on valuation of(Won)1,190 million).
The ineffective portion of recognized in profit or loss on the cash flow hedge is gain on valuation income of(Won)₩2,7141,178 million in 2011. (2010: gain onfor the current period (2012: valuation loss of(Won)₩10,34129,183 million, 2013: valuation loss of₩1,241 million).
The Company discontinued prospectively hedge accounting for certain currency swaps that were previously designated as hedging instruments for cash flows because the hedge effectiveness could not be demonstrated. The derivatives were reclassified
KT Corporation and Subsidiaries
Notes to the financial instruments at fair value through profit or loss.Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Details of available-for-sale financial assets as of January 1, 2010 and December 31, 20102013 and 2011, 2010,2014, are as follows:
(In millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | |||||||||
Marketable equity securities | (Won) | 15,587 | (Won) | 25,469 | (Won) | 101,183 | ||||||
Non-marketable equity securities | 92,978 | 145,110 | 294,243 | |||||||||
Marketable debt securities | — | — | 18,400 | |||||||||
Non-marketable debt securities | 3,151 | 1,565 | 7,429 | |||||||||
Others | 5,564 | 6,465 | 7,541 | |||||||||
Total | 117,280 | 178,609 | 428,796 | |||||||||
Less: non-current | (111,716 | ) | (172,144 | ) | (421,255 | ) | ||||||
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|
|
| |||||||
Current | (Won) | 5,564 | (Won) | 6,465 | (Won) | 7,541 | ||||||
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|
(In millions of Korean won) Marketable equity securities Non-marketable equity securities Marketable debt securities Non-marketable debt securities Total Less: non-current Current 2013 2014 ₩ 55,347 ₩ 55,631 466,302 442,055 25,211 10,301 767 17,569 547,627 525,556 (544,968 ) (509,253 ) ₩ 2,659 ₩ 16,303
Changes of available-for-sale financial assets for the years ended December 31, 20102013 and 2011,2014, are as follows;follows:
(In millions of Korean won) | 2010 | 2011 | 2013 | 2014 | ||||||||||||
Beginning | (Won) | 117,280 | (Won) | 178,609 | ₩ | 429,875 | ₩ | 547,627 | ||||||||
Acquisition | 108,492 | 168,060 | 127,052 | 78,095 | ||||||||||||
Disposal | (52,062 | ) | (21,216 | ) | (66,917 | ) | (138,394 | ) | ||||||||
Valuation 1 | (1,324 | ) | 80,521 | |||||||||||||
Gain (loss) reclassified from equity 1 | 3,553 | (1,764 | ) | |||||||||||||
Impairment | (6,043 | ) | (4,727 | ) | ||||||||||||
Reclassification 1 | (3,000 | ) | 48,684 | |||||||||||||
Impairment 2 | (5,053 | ) | (70,022 | ) | ||||||||||||
Valuation 3 | 65,670 | 51,894 | ||||||||||||||
Changes in scope of consolidation | — | 14,094 | — | 7,672 | ||||||||||||
Others | 8,713 | 15,219 | ||||||||||||||
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| |||||||||||||
Ending | (Won) | 178,609 | (Won) | 428,796 | ₩ | 547,627 | ₩ | 525,556 | ||||||||
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|
1 | During the year ended December 31, 2014, KT ENGCORE Co., Ltd. (formerly KT ENS corporation) was reclassified to available-for-sale financial securities from investment in subsidiaries due to the commencement of rehabilitation procedures (Note 1.2). |
2 | Includes impairment losses of₩48,684 million on KT ENGCORE Co., Ltd. (formerly KT ENS corporation) recognized in 2014. |
3 | The amount before adjustment of deferred income tax directly reflected in equity and allocation to the non-controlling interest. |
The maximum exposure of debt securities of available-for-sale financial assets to credit risk is carrying value as of December 31, 2011.2014.
Available-for-sale financial assets are measured at fair value. However, non-marketable equity securities that do not have quoted market prices in an active market and the fair value of which cannot be reliably measured are recognized at cost and the impairment loss is recognized if any.
10.None of the available-for-sale financial assets are past due and the impaired assets amount to₩12,942 million as of December 31, 2014.
Investment in Korea Software Financial Cooperative amounting to₩1,000 million is provided as collateral as consideration for payment guarantees provided by Korea Software Financial Cooperative (Note 20).
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
9. Inventories
Inventories as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Acquisition cost | Valuation allowance 1 | Book Value | Acquisition cost | Valuation allowance 1 | Book Value | Acquisition cost | Valuation allowance 1 | Book Value | Acquisition cost | Valuation allowance | Book Value | Acquisition cost | Valuation allowance | Book Value | |||||||||||||||||||||||||||||||||||||||||||||
Merchandise | (Won) | 635,778 | (Won) | (45,116 | ) | (Won) | 590,662 | (Won) | 617,919 | (Won) | (39,695 | ) | (Won) | 578,224 | (Won) | 622,196 | (Won) | (29,022 | ) | (Won) | 593,194 | ₩ | 719,164 | ₩ | (122,919 | ) | ₩ | 596,245 | ₩ | 445,644 | ₩ | (62,902 | ) | ₩ | 382,742 | |||||||||||||||||||||||||
Supplies | 31,989 | (662 | ) | 31,327 | 29,595 | (196 | ) | 29,399 | 20,396 | (144 | ) | 20,252 | ||||||||||||||||||||||||||||||||||||||||||||||||
Goods in transit | 69,250 | — | 69,250 | 55,564 | — | 55,564 | — | — | — | 611 | — | 611 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Others | 77,107 | (2,968 | ) | 74,139 | 48,627 | (1,197 | ) | 47,430 | 62,274 | (993 | ) | 61,281 | 77,051 | (289 | ) | 76,762 | 36,474 | (333 | ) | 36,141 | ||||||||||||||||||||||||||||||||||||||||
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| ||||||||||||||||||||||||||||||||||||||||||||||
Total | (Won) | 814,124 | (Won) | (48,746 | ) | (Won) | 765,378 | (Won) | 751,705 | (Won) | (41,088 | ) | (Won) | 710,617 | (Won) | 704,866 | (Won) | (30,139 | ) | (Won) | 674,727 | ₩ | 796,826 | ₩ | (123,208 | ) | ₩ | 673,618 | ₩ | 482,118 | ₩ | (63,235 | ) | ₩ | 418,883 | |||||||||||||||||||||||||
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11.10. Other Assets and Liabilities
Other assets and liabilities as of January 1, 2010 and December 31, 20102013 and 2011, 2010,2014, are as follows:
(In millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Other assets | ||||||||||||||||||||
Advance payments | (Won) | 102,140 | (Won) | 141,820 | (Won) | 136,172 | ₩ | 134,758 | ₩ | 126,674 | ||||||||||
Prepaid expenses | 154,955 | 165,107 | 218,638 | 258,387 | 284,887 | |||||||||||||||
Others | 7,168 | 6,976 | 41,896 | 22,199 | 10,095 | |||||||||||||||
Less: Non-current | (52,581 | ) | (50,183 | ) | (86,053 | ) | (75,748 | ) | (72,041 | ) | ||||||||||
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|
|
|
| ||||||||||||||||
Current | (Won) | 211,682 | (Won) | 263,720 | (Won) | 310,653 | ₩ | 339,596 | ) | ₩ | 349,615 | ) | ||||||||
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|
| ||||||||||||||||
Other liabilities | ||||||||||||||||||||
Advances received | (Won) | 178,941 | (Won) | 172,560 | (Won) | 117,178 | ₩ | 191,767 | ₩ | 193,900 | ||||||||||
Withholdings | 43,318 | 36,971 | 52,995 | 129,484 | 100,345 | |||||||||||||||
Unearned revenue | 27,868 | 2,054 | 71,290 | 27,313 | 22,208 | |||||||||||||||
Others | 1,323 | 455 | 833 | 1,512 | 889 | |||||||||||||||
Less: Non-current | (28,612 | ) | (27,212 | ) | (32,038 | ) | (2,000 | ) | (38,590 | ) | ||||||||||
|
|
|
|
| ||||||||||||||||
Current | (Won) | 222,838 | (Won) | 184,828 | (Won) | 210,258 | ₩ | 348,076 | ) | ₩ | 278,752 | ) | ||||||||
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12.KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
11. Property, Plant and Equipment
The changes in property, plant and equipment for the years ended December 31, 20102013 and 2011,2014, are as follows:
2010 | ||||||||||||||||||||||||
(in millions of Korean won) | Land | Buildings and structures | Machinery and equipment | Others | Construction -in-progress | Total | ||||||||||||||||||
Acquisition cost | (Won) | 1,202,008 | (Won) | 3,759,859 | (Won) | 31,414,707 | (Won) | 2,351,662 | (Won) | 650,978 | (Won) | 39,379,214 | ||||||||||||
Accumulated depreciation (including accumulated impairment loss and others) | (132 | ) | (1,037,237 | ) | (22,427,855 | ) | (1,820,789 | ) | (60,623 | ) | (25,346,636 | ) | ||||||||||||
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Balance at 1.1.2010 | (Won) | 1,201,876 | (Won) | 2,722,622 | (Won) | 8,986,852 | (Won) | 530,873 | (Won) | 590,355 | (Won) | 14,032,578 | ||||||||||||
Acquisition | — | 913 | 54,184 | 71,463 | 2,594,060 | 2,720,620 | ||||||||||||||||||
Disposal | (19,823 | ) | (42,723 | ) | (109,038 | ) | (45,435 | ) | — | (217,019 | ) | |||||||||||||
Depreciation | — | (196,724 | ) | (2,565,191 | ) | (164,656 | ) | — | (2,926,571 | ) | ||||||||||||||
Transfer in (out) | 6,997 | 125,348 | 2,199,428 | 108,388 | (2,440,161 | ) | — | |||||||||||||||||
Exclusion in the scope of consolidation | (1,412 | ) | (2,984 | ) | — | (97,376 | ) | — | (101,772 | ) | ||||||||||||||
Others | (59,996 | ) | (98,893 | ) | (23,363 | ) | 33,225 | 39,463 | (109,564 | ) | ||||||||||||||
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Balance at 12.31.2010 | (Won) | 1,127,642 | (Won) | 2,507,559 | (Won) | 8,542,872 | (Won) | 436,482 | (Won) | 783,717 | (Won) | 13,398,272 | ||||||||||||
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Acquisition cost | (Won) | 1,127,774 | (Won) | 3,675,370 | (Won) | 31,441,259 | (Won) | 1,806,746 | (Won) | 822,637 | (Won) | 38,873,786 | ||||||||||||
Accumulated depreciation (including accumulated impairment loss and others) | (132 | ) | (1,167,811 | ) | (22,898,387 | ) | (1,370,264 | ) | (38,920 | ) | (25,475,514 | ) |
2011 | 2013 | |||||||||||||||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Land | Buildings and structures | Machinery and equipment | Others | Construction -in-progress | Total | Land | Buildings and structures | Machinery and equipment | Others | Construction- in-progress | Total | ||||||||||||||||||||||||||||||||||||
Acquisition cost | (Won) | 1,127,774 | (Won) | 3,675,370 | (Won) | 31,441,259 | (Won) | 1,806,746 | (Won) | 822,637 | (Won) | 38,873,786 | ₩ | 1,243,388 | ₩ | 3,264,020 | ₩ | 32,184,133 | ₩ | 3,632,642 | ₩ | 867,842 | ₩ | 41,192,025 | ||||||||||||||||||||||||
Accumulated depreciation (including accumulated impairment loss and others) | (132 | ) | (1,167,811 | ) | (22,898,387 | ) | (1,370,264 | ) | (38,920 | ) | (25,475,514 | ) | (132 | ) | (1,078,090 | ) | (22,331,175 | ) | (1,961,444 | ) | (14,818 | ) | (25,385,659 | ) | ||||||||||||||||||||||||
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Balance at 1.1.2011 | (Won) | 1,127,642 | (Won) | 2,507,559 | (Won) | 8,542,872 | (Won) | 436,482 | (Won) | 783,717 | (Won) | 13,398,272 | ||||||||||||||||||||||||||||||||||||
Balance at 2013.1.1 | 1,243,256 | 2,185,930 | 9,852,958 | 1,671,198 | 853,024 | 15,806,366 | ||||||||||||||||||||||||||||||||||||||||||
Acquisition | 5 | 3,541 | 48,258 | 35,901 | 3,158,247 | 3,245,952 | 2,718 | 14,178 | 417,218 | 1,051,278 | 2,843,801 | 4,329,193 | ||||||||||||||||||||||||||||||||||||
— Disposal 1 | (35,475 | ) | (104,079 | ) | (108,415 | ) | (56,414 | ) | (363 | ) | (304,746 | ) | ||||||||||||||||||||||||||||||||||||
Disposal/Abandonment | (3,297 | ) | (21,448 | ) | (173,102 | ) | (157,278 | ) | (283,677 | ) | (638,802 | ) | ||||||||||||||||||||||||||||||||||||
Depreciation | — | (146,096 | ) | (2,313,287 | ) | (165,254 | ) | — | (2,624,637 | ) | — | (112,046 | ) | (2,428,859 | ) | (553,709 | ) | — | (3,099,738 | ) | ||||||||||||||||||||||||||||
Transfer in (out) | 3,802 | 94,763 | 3,048,999 | 132,114 | (3,279,678 | ) | — | 9,671 | 12,544 | 2,188,686 | 104,024 | (2,314,925 | ) | — | ||||||||||||||||||||||||||||||||||
Inclusion in scope of consolidation | 115,978 | 46,445 | 175,758 | 28,668 | 50,424 | 417,273 | 42 | 39 | 293 | 9 | — | 383 | ||||||||||||||||||||||||||||||||||||
Exclusion in scope of consolidation | — | (6,626 | ) | (96,067 | ) | (4,662 | ) | (32,606 | ) | (139,961 | ) | |||||||||||||||||||||||||||||||||||||
Exclusion from scope of consolidation | — | (379 | ) | (87 | ) | (348 | ) | — | (814 | ) | ||||||||||||||||||||||||||||||||||||||
Others | (10,942 | ) | (40,097 | ) | (76,767 | ) | 110,327 | 48,021 | 30,542 | 1,090 | (18,848 | ) | 36,618 | (13,792 | ) | (19,816 | ) | (14,748 | ) | |||||||||||||||||||||||||||||
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Balance at 12.31.2011 | (Won) | 1,201,010 | (Won) | 2,355,410 | (Won) | 9,221,351 | (Won) | 517,162 | (Won) | 727,762 | (Won) | 14,022,695 | ||||||||||||||||||||||||||||||||||||
Balance at 2013.12.31 | ₩ | 1,253,480 | ₩ | 2,059,970 | ₩ | 9,893,725 | ₩ | 2,101,382 | ₩ | 1,078,407 | ₩ | 16,386,964 | ||||||||||||||||||||||||||||||||||||
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Acquisition cost | (Won) | 1,201,142 | (Won) | 3,570,608 | (Won) | 33,455,278 | (Won) | 1,944,129 | (Won) | 754,648 | (Won) | 40,925,805 | ₩ | 1,253,612 | ₩ | 3,270,339 | ₩ | 32,103,084 | ₩ | 4,232,627 | ₩ | 1,092,155 | ₩ | 41,951,817 | ||||||||||||||||||||||||
Accumulated depreciation (including accumulated impairment loss and others) | (132 | ) | (1,215,198 | ) | (24,233,927 | ) | (1,426,967 | ) | (26,886 | ) | (26,903,110 | ) | (132 | ) | (1,210,369 | ) | (22,209,359 | ) | (2,131,245 | ) | (13,748 | ) | (25,564,853 | ) |
2014 | ||||||||||||||||||||||||
(in millions of Korean won) | Land | Buildings and structures | Machinery and equipment | Others | Construction- in-progress | Total | ||||||||||||||||||
Acquisition cost | ₩ | 1,253,612 | ₩ | 3,270,339 | ₩ | 32,103,084 | ₩ | 4,232,627 | ₩ | 1,092,155 | ₩ | 41,951,817 | ||||||||||||
Accumulated depreciation (including accumulated impairment loss and others) | (132 | ) | (1,210,369 | ) | (22,209,359 | ) | (2,131,245 | ) | (13,748 | ) | (25,564,853 | ) | ||||||||||||
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Balance at 2014.1.1 | 1,253,480 | 2,059,970 | 9,893,725 | 2,101,382 | 1,078,407 | 16,386,964 | ||||||||||||||||||
Acquisition | — | 4,293 | 255,419 | 1,129,330 | 2,268,594 | 3,657,636 | ||||||||||||||||||
Disposal/Abandonment | (8,781 | ) | (16,972 | ) | (171,691 | ) | (182,466 | ) | (16,759 | ) | (396,669 | ) | ||||||||||||
Depreciation | — | (105,402 | ) | (2,450,216 | ) | (635,282 | ) | — | (3,190,900 | ) | ||||||||||||||
Transfer in (out) | 24,072 | 75,422 | 2,295,290 | 83,380 | (2,478,164 | ) | — | |||||||||||||||||
Inclusion in scope of consolidation | 8,657 | 4,189 | 2,921 | 3,024 | — | 18,791 | ||||||||||||||||||
Exclusion from scope of consolidation | (4,234 | ) | (5,064 | ) | (3,462 | ) | (2,493 | ) | — | (15,253 | ) | |||||||||||||
Others | 14,495 | (7,186 | ) | 11,683 | (1,245 | ) | (10,120 | ) | 7,627 | |||||||||||||||
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Balance at 2014.12.31 | ₩ | 1,287,689 | ₩ | 2,009,250 | ₩ | 9,833,669 | ₩ | 2,495,630 | ₩ | 841,958 | ₩ | 16,468,196 | ||||||||||||
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Acquisition cost | ₩ | 1,287,821 | ₩ | 3,345,587 | ₩ | 33,390,640 | ₩ | 4,806,849 | ₩ | 845,662 | ₩ | 43,676,559 | ||||||||||||
Accumulated depreciation (including accumulated impairment loss and others) | (132 | ) | (1,336,337 | ) | (23,556,971 | ) | (2,3211,219 | ) | (3,704 | ) | (27,208,363 | ) |
Certain landKT Corporation and buildings are pledgedSubsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Details of property, plant and equipment provided as collaterals for borrowings of up to(Won)1,940 millioncollateral as of December 31, 2011 (2010.12.31:(Won)3,498 million, 1.1.2010:(Won)8,300 million).2013 and 2014 are as follows:
2013 | ||||||||||||||||||
(in millions of Korean won) | Carrying amount | Secured amount | Related line item | Related amount | Secured party | |||||||||||||
Buildings | ₩ | 11,356 | ₩ | 7,800 | Borrowings | ₩ | 6,000 | Shin-Han Bank | ||||||||||
Machinery and equipment | 37,248 | 2,786 | Borrowings | 2,322 | Korea Exchange Bank |
2014 | ||||||||||||||||||
(in millions of Korean won) | Carrying amount | Secured amount | Related line item | Related amount | Secured party | |||||||||||||
Land/Buildings | ₩ | 12,839 | ₩ | 12,000 | Borrowings | ₩ | 10,000 | SC Bank | ||||||||||
Buildings | 10,875 | 7,800 | Borrowings | 6,000 | Hana Bank |
The borrowing costs capitalized for qualifying assets amount to(Won)₩14,67514,493 million (2010:(2013:(Won)₩17,02420,144 million) in 2011.2014. The interest rate applied to calculate the capitalized borrowing costs in 20112014 is 5.23%3.56% to 6.83%4.05%. (2010: 5.08%(2013: 3.95% to 6.76%4.44%).
13.12. Investment Property
The changes in investment property for the years ended December 31, 20102013 and 2011,2014 are as follows:
2010 | 2011 | |||||||||||||||||||||||
(in millions of Korean won) | Land | Buildings | Total | Land | Buildings | Total | ||||||||||||||||||
Acquisition cost | (Won) | 260,190 | (Won) | 1,026,880 | (Won) | 1,287,070 | (Won) | 320,739 | (Won) | 1,158,558 | (Won) | 1,479,297 | ||||||||||||
Accumulated depreciation (including accumulated impairment loss and others) | — | (257,052 | ) | (257,052 | ) | — | (333,047 | ) | (333,047 | ) | ||||||||||||||
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Beginning balance | (Won) | 260,190 | (Won) | 769,828 | (Won) | 1,030,018 | (Won) | 320,739 | (Won) | 825,511 | (Won) | 1,146,250 | ||||||||||||
Disposal 1 | (2,952 | ) | (5,710 | ) | (8,662 | ) | (10,660 | ) | (27,023 | ) | (37,683 | ) | ||||||||||||
Depreciation | — | (45,932 | ) | (45,932 | ) | — | (47,221 | ) | (47,221 | ) | ||||||||||||||
Transfer in | 63,501 | 107,325 | 170,826 | 15,079 | 82,680 | 97,759 | ||||||||||||||||||
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Ending balance | (Won) | 320,739 | (Won) | 825,511 | (Won) | 1,146,250 | (Won) | 325,158 | (Won) | 833,947 | (Won) | 1,159,105 | ||||||||||||
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Acquisition cost | 320,739 | 1,158,558 | 1,479,297 | 325,158 | 1,195,175 | 1,520,333 | ||||||||||||||||||
Accumulated depreciation (including accumulated impairment loss and others) | — | (333,047 | ) | (333,047 | ) | — | (361,228 | ) | (361,228 | ) |
2013 | ||||||||||||||||
(in millions of Korean won) | Land | Buildings | Construction- in-progress | Total | ||||||||||||
Acquisition cost | ₩ | 335,447 | ₩ | 1,022,454 | ₩ | — | ₩ | 1,357,901 | ||||||||
Accumulated depreciation | — | (202,688 | ) | — | (202,688 | ) | ||||||||||
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Beginning | ₩ | 335,447 | ₩ | 819,766 | ₩ | — | ₩ | 1,155,213 | ||||||||
Acquisition | 3,053 | 11,352 | 3,778 | 18,183 | ||||||||||||
Disposal/Abandonment | (420 | ) | (7,657 | ) | — | (8,077 | ) | |||||||||
Depreciation | — | (47,232 | ) | — | (47,232 | ) | ||||||||||
Transfer | (9,116 | ) | (3,476 | ) | — | (12,592 | ) | |||||||||
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Ending | ₩ | 328,964 | ₩ | 772,753 | ₩ | 3,778 | ₩ | 1,105,495 | ||||||||
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Acquisition cost | ₩ | 328,964 | ₩ | 1,015,079 | ₩ | 3,778 | ₩ | 1,347,821 | ||||||||
Accumulated depreciation | — | (242,326 | ) | — | (242,326 | ) |
2014 | ||||||||||||||||
(in millions of Korean won) | Land | Buildings | Construction- in-progress | Total | ||||||||||||
Acquisition cost | ₩ | 328,964 | ₩ | 1,015,079 | ₩ | 3,778 | ₩ | 1,347,821 | ||||||||
Accumulated depreciation | — | (242,326 | ) | — | (242,326 | ) | ||||||||||
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Beginning | ₩ | 328,964 | ₩ | 772,753 | ₩ | 3,778 | ₩ | 1,105,495 | ||||||||
Acquisition | — | 4,443 | 15,600 | 20,043 | ||||||||||||
Disposal/Abandonment | (1,487 | ) | (5,740 | ) | — | (7,227 | ) | |||||||||
Depreciation | — | (51,446 | ) | — | (51,446 | ) | ||||||||||
Transfer | (11,683 | ) | 4,448 | — | (7,235 | ) | ||||||||||
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Ending | ₩ | 315,794 | ₩ | 724,458 | ₩ | 19,378 | ₩ | 1,059,630 | ||||||||
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Acquisition cost | ₩ | 315,794 | ₩ | 1,003,031 | ₩ | 19,378 | ₩ | 1,338,203 | ||||||||
Accumulated depreciation | — | (278,573 | ) | — | (278,573 | ) |
KT Corporation and Subsidiaries
The buildings mentioned above are depreciated over 10Notes to 40 years using the straight-line method.Consolidated Financial Statements
December 31, 2012, 2013 and 2014
The fair value of investment property is(Won)₩2,524,0392,277,234 million as of December 31, 2011. (12.31.2010:2014 (2013: (Won)₩2,207,754 million, 1.1.2010:(Won)2,026,0232,051,183 million). The fair value of investment property is estimated based on the expected cash flow.
Rental income from investment property is(Won)₩150,752216,976 million in 2011(2010:2013 (2013:(Won)₩114,779197,673 million) and direct operating expenses (including repairs and maintenance) arising from investment property that generated rental income during the period are recognized as operating expenses.
Certain lands and buildings are pledgedDetails of investment property provided as collateral related to the rental contracts up to(Won)70,317million as of December 31, 2011 (12.31.2010:(Won)67,206 million, 1.1.2010: 65,092 million).2013 and 2014, are as follows:
2013 | ||||||||||||||
(in millions of Korean won) | Carrying amount | Secured amount | Collateral for | Amount of deposits received | ||||||||||
Land | ₩ | 23,258 | ₩ | 1,484 | Deposits received | ₩ | 31,727 | |||||||
Buildings | 360,489 | 40,713 |
2014 | ||||||||||||||
(in millions of Korean won) | Carrying amount | Secured amount | Collateral for | Amount of deposits received | ||||||||||
Land | ₩ | 10,773 | ₩ | 6,773 | borrowings | ₩ | 5,210 | |||||||
Buildings | 345,281 | 47,350 | Deposits received | ₩ | 34,675 |
14.13. Intangible Assets
The changes in intangible assets for the years ended December 31, 20102013 and 2011,2014 are as follows:
2010 | 2013 | |||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions of Korean | Goodwill | Industrial rights | Development costs | Software | Frequency usage rights | Others | Total | Goodwill | Development costs | Software | Frequency usage rights | Others | Total | |||||||||||||||||||||||||||||||||||||||
Acquisition cost | (Won) | 91,513 | (Won) | 24,109 | (Won) | 782,749 | (Won) | 390,858 | (Won) | 1,342,023 | (Won) | 357,371 | (Won) | 2,988,623 | ₩ | 605,776 | ₩ | 1,393,089 | ₩ | 614,069 | ₩ | 1,924,869 | ₩ | 1,013,046 | ₩ | 5,550,849 | ||||||||||||||||||||||||||
Accumulated amortization (including accumulated impairment loss and others) | (7,749 | ) | (13,625 | ) | (555,155 | ) | (225,309 | ) | (647,395 | ) | (153,696 | ) | (1,602,929 | ) | (7,749 | ) | (764,426 | ) | (374,043 | ) | (880,511 | ) | (310,482 | ) | (2,337,211 | ) | ||||||||||||||||||||||||||
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Balance at 1.1.2010 | (Won) | 83,764 | (Won) | 10,484 | (Won) | 227,594 | (Won) | 165,549 | (Won) | 694,628 | (Won) | 203,675 | (Won) | 1,385,694 | ||||||||||||||||||||||||||||||||||||||
Acquisition | — | 738 | 243,198 | 63,862 | — | 23,556 | 331,354 | |||||||||||||||||||||||||||||||||||||||||||||
Balance at 2013.1.1 | 598,027 | 628,663 | 240,026 | 1,044,358 | 702,564 | 3,213,638 | ||||||||||||||||||||||||||||||||||||||||||||||
Acquisition 1 | 9,272 | 137,420 | 87,898 | 844,462 | 125,563 | 1,204,615 | ||||||||||||||||||||||||||||||||||||||||||||||
Disposal | — | — | (14,248 | ) | (5,788 | ) | — | (4,421 | ) | (24,457 | ) | — | (57,956 | ) | (5,645 | ) | — | (7,617 | ) | (71,218 | ) | |||||||||||||||||||||||||||||||
Amortization | — | (1,775 | ) | (69,824 | ) | (54,507 | ) | (115,418 | ) | (24,775 | ) | (266,299 | ) | — | (155,280 | ) | (61,413 | ) | (161,226 | ) | (100,983 | ) | (478,902 | ) | ||||||||||||||||||||||||||||
Impairment loss | — | — | — | (2,072 | ) | — | (1,631 | ) | (3,703 | ) | ||||||||||||||||||||||||||||||||||||||||||
Changes in scope of Consolidation | — | — | (829 | ) | (11 | ) | — | (2,134 | ) | (2,974 | ) | |||||||||||||||||||||||||||||||||||||||||
Impairment | (12,954 | ) | (4,743 | ) | (1,019 | ) | — | (17,490 | ) | (36,206 | ) | |||||||||||||||||||||||||||||||||||||||||
Inclusion in scope of consolidation | — | — | 501 | — | — | 501 | ||||||||||||||||||||||||||||||||||||||||||||||
Exclusion in scope of consolidation | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Others | — | (143 | ) | (889 | ) | 1,760 | — | (1,423 | ) | (695 | ) | (2,006 | ) | (30 | ) | 1,968 | (388 | ) | (4,579 | ) | (5,035 | ) | ||||||||||||||||||||||||||||||
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Balance at 12.31.2010 | (Won) | 83,764 | (Won) | 9,304 | (Won) | 385,002 | (Won) | 168,793 | (Won) | 579,210 | (Won) | 192,847 | (Won) | 1,418,920 | ||||||||||||||||||||||||||||||||||||||
Balance at 2013.12.31 | ₩ | 592,339 | ₩ | 548,074 | ₩ | 262,316 | ₩ | 1,727,206 | ₩ | 697,458 | ₩ | 3,827,393 | ||||||||||||||||||||||||||||||||||||||||
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Acquisition cost | (Won) | 91,513 | (Won) | 24,840 | (Won) | 947,053 | (Won) | 438,302 | (Won) | 1,342,023 | (Won) | 351,630 | (Won) | 3,195,361 | ₩ | 610,715 | ₩ | 1,359,478 | ₩ | 681,176 | ₩ | 2,768,943 | ₩ | 1,100,540 | ₩ | 6,520,852 | ||||||||||||||||||||||||||
Accumulated amortization (including accumulated impairment loss and others) | (7,749 | ) | (15,536 | ) | (562,051 | ) | (269,509 | ) | (762,813 | ) | (158,783 | ) | (1,776,441 | ) | (18,376 | ) | (811,404 | ) | (418,860 | ) | (1,041,737 | ) | (403,082 | ) | (2,693,459 | ) |
1 | The Company had acquired the 1.8GHz frequency amortized during its uselife using the straight-line method. |
KT Corporation and Subsidiaries
(in millions of Korean won) Acquisition cost Accumulated amortization (including accumulated impairment loss and others) Balance at 1.1.2011 Acquisition Disposal Amortization Impairment loss Changes in scope of Consolidation Others Balance at 12.31.2011 Acquisition cost Accumulated amortization (including accumulated impairment loss and others)Notes to Consolidated Financial Statements 2011 Goodwill Industrial
rights Development
costs Software Frequency
usage
rights Others 1 Total (Won) 91,513 (Won) 24,840 (Won) 947,053 (Won) 438,302 (Won) 1,342,023 (Won) 351,630 (Won) 3,195,361 (7,749 ) (15,536 ) (562,051 ) (269,509 ) (762,813 ) (158,783 ) (1,776,441 ) (Won) 83,764 (Won) 9,304 (Won) 385,002 (Won) 168,793 (Won) 579,210 (Won) 192,847 (Won) 1,418,920 366,858 116 156,114 100,870 441,485 415,399 1,480,842 — (491 ) (1,849 ) (105 ) — (9,444 ) (11,889 ) — (2,668 ) (102,806 ) (54,976 ) (124,998 ) (34,427 ) (319,875 ) (1,227 ) — (430 ) (297 ) — (593 ) (2,547 ) — 42 257 11,467 — 80,986 92,752 — (78 ) (9,660 ) (1,433 ) — (3,547 ) (14,718 ) (Won) 449,395 (Won) 6,225 (Won) 426,628 (Won) 224,319 (Won) 895,697 (Won) 641,221 (Won) 2,643,485 (Won) 457,630 (Won) 18,294 (Won) 1,069,158 (Won) 555,154 (Won) 1,783,508 (Won) 867,700 (Won) 4,751,444 (8,235 ) (12,069 ) (642,530 ) (330,835 ) (887,811 ) (226,479 ) (2,107,959 )
December 31, 2012, 2013 and 2014
2014 | ||||||||||||||||||||||||
(in millions of Korean won) | Goodwill | Development costs | Software | Frequency usage rights | Others | Total | ||||||||||||||||||
Acquisition cost | ₩ | 610,715 | ₩ | 1,359,478 | ₩ | 681,176 | ₩ | 2,768,943 | ₩ | 1,100,540 | ₩ | 6,520,852 | ||||||||||||
Accumulated amortization (including accumulated impairment loss and others) | (18,376 | ) | (811,404 | ) | (418,860 | ) | (1,041,737 | ) | (403,082 | ) | (2,693,459 | ) | ||||||||||||
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Balance at 2014.1.1 | 592,339 | 548,074 | 262,316 | 1,727,206 | 697,458 | 3,827,393 | ||||||||||||||||||
Acquisition | — | 286,516 | 95,781 | — | 51,633 | 433,930 | ||||||||||||||||||
Disposal | (1,519 | ) | (16,713 | ) | (2,205 | ) | — | (6,359 | ) | (26,796 | ) | |||||||||||||
Amortization | — | (171,817 | ) | (101,344 | ) | (253,588 | ) | (85,669 | ) | (612,418 | ) | |||||||||||||
Impairment 1 | (11,693 | ) | — | (5,210 | ) | (69,428 | ) | (944 | ) | (87,275 | ) | |||||||||||||
Inclusion in scope of consolidation | — | 733 | 1,363 | — | 13,548 | 15,644 | ||||||||||||||||||
Exclusion in scope of consolidation | — | (3,297 | ) | (4,960 | ) | — | (2,052 | ) | (10,309 | ) | ||||||||||||||
Others | 621 | 7,191 | (2,080 | ) | — | (1,868 | ) | 3,864 | ||||||||||||||||
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Balance at 2014.12.31 | ₩ | 579,748 | ₩ | 650,687 | ₩ | 243,661 | ₩ | 1,404,190 | ₩ | 665,747 | ₩ | 3,544,033 | ||||||||||||
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Acquisition cost | ₩ | 609,817 | ₩ | 1,589,994 | ₩ | 747,343 | ₩ | 2,768,943 | ₩ | 1,154,915 | ₩ | 6,871,012 | ||||||||||||
Accumulated amortization (including accumulated impairment loss and others) | (30,069 | ) | (939,307 | ) | (503,682 | ) | (1,364,753 | ) | (489,168 | ) | (3,326,979 | ) |
1 |
The carrying value of facility usage rights with indefinite useful life not subject to amortization is(Won)₩153,797149,832 million (12.31.2010:(2013:(Won)₩149,847 million, 1.1.2010:(Won)162,556150,654 million) as of December 31, 2011.2014.
Goodwill is allocated to the Company’s cash-generating unit which is identified by operating segments. As of December 31, 2011,2014, goodwill allocated to each cash-generation unit is as follows:
| ||||
Customer/Marketing | ||||
Wireless business 1 | 65,057 | |||
Finance and Rental | ||||
KT Rental 2 | 131,426 | |||
BC Card Co., Ltd. 2 | 41,234 | |||
Others | ||||
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KT Skylife Co., | 306,303 | |||
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Total | ||||
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1 | The |
2 | The recoverable amounts of KT |
Goodwill impairment reviews are undertaken annually. The recoverable amounts for some goodwill ofKT Corporation and Subsidiaries
(Won)328,759 million allocatedNotes to others are determined based on the related CGUs’ fair value less costs to sellConsolidated Financial Statements
December 31, 2012, 2013 and the recoverable amounts of all other CGUs, to which goodwill of(Won)120,636 is allocated, have been determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management. Cash flows beyond the Company’s financial plan are extrapolated using the estimated growth rates and the growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.2014
The Company determined the gross margin rate based on past performance and its expectations of market development. The average growth rates used are estimated based on the historical growth rate. In addition, the Company estimated the pre-tax cash flow based on past performance and its expectation of market growth and the discount rates used are pre-tax and reflect specific risks relating to the relevant CGUs.
on past performance and its estimation of market growth. Specific risk of related operating segment is reflected in its discount rate. As a result of the impairment test, there is no impairment loss on goodwill allocated to KT Rental, BC Card Co., Ltd., and KT Skylife Co., Ltd., respectively, as of December 31, 2014. |
As a result of the impairment test, the Company recognized the impairment losses of(Won)₩1,22711,693 million on goodwill allocated to KT EduiInnoedu Co., Ltd. and three other subsidiaries included in the others segment. And recognized the losses as operating expenses in the consolidated statement of the consolidated income. The Company considers that the carrying value of other cash generating units does not exceed the recoverablerecoverable amount of the CGUs other than KT Edui Co., Ltd.CGUs.
15.14. Investments in Associates and Jointly Controlled Entities and Associates
The changes in investments in jointly controlled entities andDetails of associates for the years endedas of December 31, 2010 and 2011,2014, are as follows:
12.31.2010 | ||||||||||||||||||||||||
(in millions of Korean won) | Beginning | Acquisition (Disposal) | Reclassification | Interest in jointly controlled entities and associates 3 | Others | Ending | ||||||||||||||||||
KT Submarine Co., Ltd. | (Won) | 24,462 | (Won) | — | (Won) | — | (Won) | 2,884 | (Won) | (518 | ) | (Won) | 26,828 | |||||||||||
KT Rental | — | — | 162,413 | 61 | 9,080 | 171,554 | ||||||||||||||||||
KTCS corporation | 16,154 | — | — | 3,369 | (388 | ) | 19,135 | |||||||||||||||||
KTIS Corporation | 15,661 | — | — | 4,411 | (1,024 | ) | 19,048 | |||||||||||||||||
KT Skylife Co.,Ltd. 1 | 15,353 | 65,296 | — | 12,892 | 215 | 93,756 | ||||||||||||||||||
Korea Information & Technology Fund | 115,636 | — | — | 6,914 | (508 | ) | 122,042 | |||||||||||||||||
KT-Global New Media Fund | 12,932 | — | — | (270 | ) | — | 12,662 | |||||||||||||||||
Company K Movie Asset Fund No.1 | 8,806 | — | — | 556 | — | 9,362 | ||||||||||||||||||
Boston Global Film & Contents Fund L.P. | 8,768 | — | — | 54 | — | 8,822 | ||||||||||||||||||
Mongolian Telecommunications | 11,135 | — | — | (27 | ) | 1,204 | 12,312 | |||||||||||||||||
Metropol Property LLC | 1,684 | — | — | 253 | (266 | ) | 1,671 | |||||||||||||||||
KT wibro infra Co., Ltd. | — | 65,000 | — | 505 | (3 | ) | 65,502 | |||||||||||||||||
KTF-CJ Music Contents Investment Fund | 4,954 | — | — | (3 | ) | — | 4,951 | |||||||||||||||||
KT-DoCoMo Mobile Investment Fund | 4,473 | — | — | 384 | — | 4,857 | ||||||||||||||||||
Others | 66,046 | 114,464 | (116,176 | ) | 1,199 | 26 | 65,559 | |||||||||||||||||
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Total | (Won) | 306,064 | (Won) | 244,760 | (Won) | 46,237 | (Won) | 33,182 | (Won) | 7,818 | (Won) | 638,061 | ||||||||||||
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(in millions of Korean won) KT Submarine Co., Ltd. KT Rental KTCS corporation KTIS Corporation KT Skylife Co.,Ltd. 1 Korea Information & Technology Fund KT-Global New Media Company K Movie Asset Fund No.1 Boston Global Film & Contents Fund L.P Mongolian Telecommunications Metropol Property LLC KT wibro infra Co., Ltd. SMART CHANNEL Co., Ltd. 2 Kan Communications Co., Ltd. KTF-CJ Music Contents Investment Fund KT-DoCoMo Mobile Investment Fund Others Total 12.31.2011 Beginning Acquisition
(Disposal) Reclassification Interest in jointly
controlled entities
and associates 3 Others Ending (Won) 26,828 (Won) — (Won) — (Won) 2,365 (Won) (7 ) (Won) 29,186 171,554 (15,849 ) — 21,817 (2,287 ) 175,235 19,135 — — 3,350 (2,158 ) 20,327 19,048 — — 3,473 (1,433 ) 21,088 93,757 — (280,772 ) — 187,015 — 122,041 — — 1,556 (4,106 ) 119,491
Fund 12,662 — — (19 ) — 12,643 9,362 — — 231 — 9,593 8,822 — — (1,287 ) — 7,535 12,312 — — 409 (1,489 ) 11,232 1,671 — — 137 (62 ) 1,746 65,502 — — 704 — 66,206 — 6,000 500 (3,752 ) — 2,748 — 3,000 — (184 ) — 2,816 4,951 — — 86 — 5,037 4,857 (393 ) — (11 ) (346 ) 4,107 65,559 (14,394 ) 32,632 (29,348 ) (14,255 ) 40,194 (Won) 638,061 (Won) (21,636 ) (Won) (247,640 ) (Won) (473 ) (Won) 160,872 (Won) 529,184
Percentage of ownership (%) | Location | Date of financial statements | ||||||||||
Company | 2013 | 2014 | ||||||||||
ktcs Corporation 1 | 17.8 | % | — | Korea | December 31 | |||||||
ktis Corporation 1 | 17.8 | % | — | Korea | December 31 | |||||||
Korea Information & Technology Fund | 33.3 | % | 33.3 | % | Korea | December 31 | ||||||
KT-SB Venture Investment 2 | 50.0 | % | 50.0 | % | Korea | December 31 | ||||||
Mongolian Telecommunications | 40.0 | % | 40.0 | % | Mongolia | December 31 | ||||||
KT Wibro Infra Co., Ltd. | 26.2 | % | 26.2 | % | Korea | December 31 | ||||||
KT-CKP New Media Investment Fund | 49.7 | % | 49.7 | % | Korea | December 31 | ||||||
QTT Global (Group) Company Limited | 25.0 | % | 25.0 | % | China | December 31 | ||||||
How Smartmall Private Special Asset Investment Trust 3 | 80.8 | % | 80.8 | % | Korea | December 31 |
1 | As |
The summary of financial information of joint ventures and associates as of and for the years ended January 1, 2010 and December 31, 2010 and 2011, are as follows:
1.1.2010 | ||||||||||||||
(In millions of Korean won) | Location | % of ownership interest | Assets | Liabilities | ||||||||||
KT Submarine Co., Ltd. | Domestic | 36.92 | % | 109,996 | 43,877 | |||||||||
KTCS corporation | Domestic | 20.06 | % | 130,587 | 48,486 | |||||||||
KTIS Corporation | Domestic | 20.32 | % | 126,501 | 45,990 | |||||||||
KT Skylife Co.,Ltd | Domestic | 26.74 | % | 448,079 | 344,151 | |||||||||
Korea Information & Technology Fund | Domestic | 33.33 | % | 346,908 | — | |||||||||
KT-Global New Media Fund | Domestic | 50.00 | % | 26,139 | 274 | |||||||||
Company K movie asset fund No.1 3 | Domestic | 60.00 | % | 14,676 | — | |||||||||
Boston Global Film & Contents Fund L.P | Domestic | 27.69 | % | 31,860 | 195 | |||||||||
Mongolian Telecommunications | Mongolia | 40.00 | % | 33,775 | 6,263 | |||||||||
Metropol Property LLC | Uzbekistan | 34.00 | % | 1,951 | 437 | |||||||||
KTF-CJ Music Contents Investment Fund | Domestic | 50.00 | % | 9,959 | 50 | |||||||||
KT-DoCoMo Mobile Investment Fund | Domestic | 45.00 | % | 10,048 | 107 | |||||||||
Others | 428,198 | 182,561 | ||||||||||||
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Total | (Won) | 1,718,677 | (Won) | 672,391 | ||||||||||
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|
(In millions of Korean won) KT Submarine Co., Ltd. KT Rental1 KTCS corporation 2 KTIS Corporation 2 KT Skylife Co.,Ltd Korea Information & Technology Fund KT-Global New Media Fund Company K movie asset fund No.1 3 Boston Global Film & Contents Fund L.P. Monogolian Telecommunications Metropol Property LLC KT wibro infra Co., Ltd KTF-CJ Music Contents Investment Fund KT-DoCoMo Mobile Investment Fund Others Total 12.31.2010 Location % of ownership
interest Assets Liabilities Operating
revenue Net profit
(loss) Domestic 36.92 % (Won) 106,037 (Won) 33,366 (Won) 71,153 (Won) 8,182 Domestic 58.00 % 933,556 673,211 378,775 13,797 Domestic 17.05 % 168,242 53,237 353,950 16,269 Domestic 17.80 % 160,555 54,849 349,114 20,536 Domestic 37.41 % 533,246 385,935 431,356 42,956 Domestic 33.33 % 367,721 — 28,376 22,014 Domestic 50.00 % 25,356 31 — (539 ) Domestic 60.00 % 15,603 — 1,708 926 Domestic 27.69 % 32,054 204 995 186 Mongolia 40.00 % 41,074 10,294 19,635 1,363 Uzbekistan 34.00 % 2,119 273 418 418 Domestic 26.22 % 338,491 88,829 373 1,739 Domestic 50.00 % 9,903 — 627 6 Domestic 45.00 % 10,944 149 944 854 450,294 186,794 746,670 (5,225 ) (Won) 3,195,195 (Won) 1,487,172 (Won) 2,384,094 (Won) 123,482
(In millions of Korean won) | 12.31.2011 | |||||||||||||||||||||||
Location | % of ownership interest | Assets | Liabilities | Operating revenue | Net profit (loss) | |||||||||||||||||||
KT Submarine Co., Ltd. | Domestic | 36.92 | % | (Won) | 127,062 | (Won) | 48,004 | (Won) | 111,453 | (Won) | 6,700 | |||||||||||||
KT Rental 1 | Domestic | 58.00 | % | 1,419,392 | 1,167,454 | 657,971 | 27,320 | |||||||||||||||||
KTCS corporation 2 | Domestic | 17.49 | % | 172,267 | 56,071 | 380,506 | 19,922 | |||||||||||||||||
KTIS corporation 2 | Domestic | 17.80 | % | 174,459 | 56,013 | 373,397 | 21,077 | |||||||||||||||||
Korea Information & Technology Fund | Domestic | 33.33 | % | 358,475 | — | 15,630 | 2,880 | |||||||||||||||||
KT-Global New Media Fund | Domestic | 50.00 | % | 25,822 | 535 | — | (38 | ) | ||||||||||||||||
Company K Movie Asset Fund No.1 3 | Domestic | 60.00 | % | 15,997 | 8 | 2,751 | 385 | |||||||||||||||||
Boston Global Film & Contents Fund L.P. | Domestic | 27.69 | % | 27,411 | 204 | 933 | (4,643 | ) | ||||||||||||||||
Mongolian Telecommunications | Mongolia | 40.00 | % | 28,080 | — | 20,747 | 779 | |||||||||||||||||
Metropol Property LLC | Uzbekistan | 34.00 | % | 4,075 | 846 | 1,512 | 486 | |||||||||||||||||
KT wibro infra Co., Ltd | Domestic | 26.22 | % | 257,744 | 5,220 | 2,294 | 2,863 | |||||||||||||||||
SMART CHANNEL Co., Ltd 1 | Domestic | 65.00 | % | 91,383 | 98,306 | 9,785 | (9,471 | ) | ||||||||||||||||
Kan Communications Co.,Ltd. | Domestic | 50.00 | % | 5,797 | 167 | — | (369 | ) | ||||||||||||||||
KTF-CJ Music Contents Investment Fund | Domestic | 50.00 | % | 10,076 | — | 318 | 173 | |||||||||||||||||
KT-DoCoMo Mobile Investment Fund | Domestic | 45.00 | % | 9,286 | 162 | 92 | (26 | ) | ||||||||||||||||
Others | 756,795 | 392,769 | 417,142 | 15,990 | ||||||||||||||||||||
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Total | (Won) | 3,484,121 | (Won) | 1,825,759 | (Won) | 1,994,531 | (Won) | 84,028 | ||||||||||||||||
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At the end of the reporting period, even though the Company has 50% ownership, |
3 | At the end of the reporting period, even though the Company has 80.8% ownership, the equity method of accounting has been applied as the Company, which is a limited partner of investment fund, cannot determine the operating and financial policies without other partner’s consent. |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
MarketableDecember 31, 2012, 2013 and 2014
The changes in investments in joint venturesassociates and associates as of January 1, 2010 andjointly controlled entities for the years ended December 31, 20102013 and 2011,2014, are as follows:
1.1.2010 | 2013 | |||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Beginning | Acquisition (Disposal) | Share in income (loss) of jointly controlled entities and associates 1 | Others | Ending | |||||||||||||||||||||||||||||||
ktcs Corporation | ₩ | 21,784 | ₩ | — | ₩ | 2,702 | ₩ | (2,306 | ) | ₩ | 22,180 | |||||||||||||||||||||||||
ktis Corporation | 21,870 | — | 2,511 | (1,053 | ) | 23,328 | ||||||||||||||||||||||||||||||
Korea Information & Technology Fund | 121,113 | — | 2,910 | (241 | ) | 123,782 | ||||||||||||||||||||||||||||||
KT-SB Venture Investment | 12,385 | 3,750 | 216 | (421 | ) | 15,930 | ||||||||||||||||||||||||||||||
Mongolian Telecommunications | 9,999 | — | 172 | (1,475 | ) | 8,696 | ||||||||||||||||||||||||||||||
Metropol Property LLC | 1,783 | — | 558 | (982 | ) | 1,359 | ||||||||||||||||||||||||||||||
KT Wibro Infra Co., Ltd. | 66,741 | — | 812 | — | 67,553 | |||||||||||||||||||||||||||||||
KTF-CJ Music Contents Investment Fund | 5,052 | (3,561 | ) | (1,491 | ) | — | — | |||||||||||||||||||||||||||||
KT-CKP new media Investment Fund | — | 2,250 | (73 | ) | — | 2,177 | ||||||||||||||||||||||||||||||
QTT Global (Group) Company Limited | 12,949 | — | 121 | 45 | 13,115 | |||||||||||||||||||||||||||||||
How Smartmall Private Special Asset Investment Trust | 32,503 | — | 2,967 | (7,064 | ) | 28,406 | ||||||||||||||||||||||||||||||
Others | 73,316 | (9,188 | ) | (1,183 | ) | (5,568 | ) | 57,377 | ||||||||||||||||||||||||||||
Number of shares | Market Price per Share (Korean won) | Fair Value (In millions of Korean won) | Book Value (In millions of Korean won) |
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KT Submarine Co., Ltd. | 1,617,000 | (Won) | 15,200 | (Won) | 24,578 | (Won) | 24,370 | |||||||||||||||||||||||||||||
Mongolian Telecommunications | 10,348,111 | 1,878 | 19,434 | 11,135 | ||||||||||||||||||||||||||||||||
Total | ₩ | 379,495 | ₩ | (6,749 | ) | ₩ | 10,222 | ₩ | (19,065 | ) | ₩ | 363,903 | ||||||||||||||||||||||||
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12.31.2010 | ||||||||||||||||
Number of shares | Market Price per Share (Korean won) | Fair Value (In millions of Korean won) | Book Value (In millions of Korean won) | |||||||||||||
KT Submarine Co., Ltd. | 1,617,000 | (Won) | 20,550 | (Won) | 33,229 | (Won) | 26,828 | |||||||||
KTCS Corporation | 8,132,130 | 2,210 | 17,972 | 19,135 | ||||||||||||
KTIS Corporation | 6,196,190 | 3,510 | 21,749 | 19,048 | ||||||||||||
Mongolian Telecommunications | 10,348,111 | 3,413 | 35,319 | 12,312 |
2014 | ||||||||||||||||||||||||
(in millions of Korean won) | Beginning | Acquisition (Disposal) | Reclassification | Share in income (loss) of jointly controlled entities and associates 1 | Others | Ending | ||||||||||||||||||
ktcs Corporation 2 | ₩ | 22,180 | ₩ | — | ₩ | (22,505 | ) | ₩ | 1,703 | ₩ | (1,378 | ) | ₩ | — | ||||||||||
ktis Corporation 3 | 23,328 | — | (24,343 | ) | 1,766 | (751 | ) | — | ||||||||||||||||
Korea Information & Technology Fund | 123,782 | — | — | (42 | ) | (773 | ) | 122,967 | ||||||||||||||||
KT-SB Venture Investment | 15,930 | (1,938 | ) | — | 13,302 | (4,737 | ) | 22,557 | ||||||||||||||||
Mongolian Telecommunications | 8,696 | — | — | 97 | (1,316 | ) | 7,477 | |||||||||||||||||
KT Wibro Infra Co., Ltd. | 67,553 | — | — | 938 | — | 68,491 | ||||||||||||||||||
KT-CKP New Media Investment Fund | 2,177 | 2,250 | — | (441 | ) | — | 3,986 | |||||||||||||||||
QTT Global (Group) Company Limited | 13,115 | — | — | 222 | (361 | ) | 12,976 | |||||||||||||||||
How Smartmall Private Special Asset Investment Trust | 28,406 | — | — | 2,747 | (3,523 | ) | 27,630 | |||||||||||||||||
Others | 58,736 | (12,203 | ) | — | 4,069 | 22,094 | 72,696 | |||||||||||||||||
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Total | ₩ | 363,903 | ₩ | (11,891 | ) | ₩ | (46,848 | ) | ₩ | 24,361 | ₩ | 9,255 | ₩ | 338,780 | ||||||||||
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12.31.2011 | ||||||||||||||||
Number of shares | Market Price per Share (Korean won) | Fair Value (In millions of Korean won) | Book Value (In millions of Korean won) | |||||||||||||
KT Submarine Co., Ltd. | 1,617,000 | (Won) | 13,200 | (Won) | 21,344 | (Won) | 29,186 | |||||||||
KTCS Corporation | 8,132,130 | 2,070 | 16,834 | 20,327 | ||||||||||||
KTIS Corporation | 6,196,190 | 2,800 | 17,349 | 21,088 | ||||||||||||
Mongolian Telecommunications | 10,348,111 | 2,268 | 23,470 | 11,232 |
1 | KT Capital Co., Ltd., a subsidiary of the Company, recognizes its share in income (loss) from jointly controlled entities and associates as operating revenue and expense. These include its share in income of jointly controlled entities and associates of₩6,605 million (2012:₩6,591 million, 2013:₩4,155 million) recognized as operating revenue and its share in loss of jointly controlled entities and associates of₩442 million (2012:₩362 million, 2013:₩534 million) recognized as operating expense. |
2 | As the Company obtained control over the entity in 2014, the entity was reclassified as a subsidiary. As a result of the reclassification, the Company recognized differences of₩2,469 million between the fair value of₩22,907 million and the book value of₩25,376 million (including reclassification adjustment of accumulated other comprehensive income of₩2,871 million) as operating expenses. |
3 | As the Company obtained control over the entity in 2014, the entity was reclassified as a subsidiary. As a result of the reclassification, the Company recognized differences of₩4,667 million between the fair value of₩21,992 million and the book value of₩26,659 million (including reclassification adjustment of accumulated other comprehensive income of₩2,316 million) as operating expenses. |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
The summary of financial information of associates and joint ventures as of and for the years ended December 31, 2013 and 2014, follows:
2013 | ||||||||||||||||
(In millions of Korean won) | Current assets | Non-current assets | Current liabilities | Non-current liabilities | ||||||||||||
ktcs corporation | ₩ | 130,585 | ₩ | 50,403 | ₩ | 54,115 | ₩ | 2,061 | ||||||||
ktis corporation | 140,119 | 41,733 | 48,636 | 2,124 | ||||||||||||
Korea Information & Technology Fund | 132,143 | 239,203 | — | — | ||||||||||||
KT-SB Venture Investment | 5,578 | 26,964 | 682 | — | ||||||||||||
Mongolian Telecommunications | 14,670 | 12,869 | 5,798 | — | ||||||||||||
Metropol Property LLC | 4,267 | — | 3,340 | — | ||||||||||||
KT Wibro Infra Co., Ltd | 159,309 | 103,401 | 5,004 | 45 | ||||||||||||
KT-CKP New Media Investment Fund | 1,722 | 2,666 | 4 | — | ||||||||||||
QTT Global(Group) Company Limited | 20,117 | 1,310 | 5,019 | — | ||||||||||||
K- Realty CR-REITs No.1 | 11,620 | 484,204 | 3,534 | 294,474 | ||||||||||||
How Smartmall Private Special Asset Investment Trust | 38,374 | — | 899 | — | ||||||||||||
Others | 79,606 | 302,427 | 116,967 | 62,038 | ||||||||||||
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| |||||||||
Total | ₩ | 738,110 | ₩ | 1,265,180 | ₩ | 243,998 | ₩ | 360,742 | ||||||||
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2013 | ||||||||||||||||||||
(In millions of Korean won) | Operating revenue | Net profit (loss) | Other comprehensive income(loss) | Total comprehensive income(loss) | Dividends received from associates | |||||||||||||||
ktcs Corporation | ₩ | 396,212 | ₩ | 14,480 | ₩ | (4,293 | ) | ₩ | 10,187 | ₩ | 813 | |||||||||
ktis Corporation | 387,720 | 13,573 | (3,274 | ) | 10,299 | 620 | ||||||||||||||
Korea Information & Technology Fund | 17,345 | 8,730 | — | 8,730 | — | |||||||||||||||
KT-SB Venture Investment | 370 | 637 | — | 637 | 421 | |||||||||||||||
Mongolian Telecommunications | 10,877 | 447 | (42 | ) | 405 | 23 | ||||||||||||||
Metropol Property LLC | 502 | 133 | 6 | 139 | 911 | |||||||||||||||
KT Wibro Infra Co., Ltd | 1,660 | 3,169 | — | 3,169 | — | |||||||||||||||
KT-CKP New Media Investment Fund | 33 | (146 | ) | — | (146 | ) | — | |||||||||||||
QTT Global(Group) Company Limited | 21,024 | 2,105 | 82 | 2,187 | — | |||||||||||||||
K- Realty CR-REITs No.1 | 39,064 | 11,091 | — | 11,091 | 2,521 | |||||||||||||||
How Smartmall Private Special Asset Investment Trust | 3,870 | 3,673 | — | 3,673 | 3,848 | |||||||||||||||
Others | 371,120 | (9,882 | ) | (418 | ) | (10,300 | ) | 1,444 | ||||||||||||
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Total | ₩ | 1,249,797 | ₩ | 48,010 | ₩ | (7,939 | ) | ₩ | 40,071 | ₩ | 10,601 | |||||||||
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2014 | ||||||||||||||||
(In millions of Korean won) | Current assets | Non-current assets | Current liabilities | Non-current liabilities | ||||||||||||
Korea Information & Technology Fund | ₩ | 122,026 | ₩ | 246,874 | ₩ | — | ₩ | — | ||||||||
KT-SB Venture Investment | 22,402 | 23,368 | 656 | — | ||||||||||||
Mongolian Telecommunications | 12,636 | 10,648 | 4,591 | — | ||||||||||||
KT Wibro Infra Co., Ltd. | 205,147 | 61,068 | 4,960 | 40 | ||||||||||||
KT-CKP New Media Investment Fund | 4,588 | 3,441 | 4 | — | ||||||||||||
QTT Global(Group) Company Limited | 15,439 | 414 | — | — | ||||||||||||
K- Realty CR-REITs No.1 | 36,017 | 461,720 | 6,477 | 291,583 | ||||||||||||
How Smartmall Private Special Asset Investment Trust | 37,412 | — | 875 | — | ||||||||||||
Others | 321,497 | 188,435 | 144,915 | 118,904 | ||||||||||||
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| |||||||||
Total | ₩ | 777,164 | ₩ | 995,968 | ₩ | 162,478 | ₩ | 410,527 | ||||||||
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KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2014 | ||||||||||||||||||||
(In millions of Korean won) | Operating revenue | Net profit (loss) | Other comprehensive income (loss) | Total comprehensive income (loss) | Dividends received from associates | |||||||||||||||
Korea Information & Technology Fund | ₩ | 10,411 | ₩ | (128 | ) | ₩ | (835 | ) | ₩ | (963 | ) | ₩ | 494 | |||||||
KT-SB Venture Investment | 1,056 | 26,603 | — | 26,603 | 4,238 | |||||||||||||||
Mongolian Telecommunications | 8,745 | 242 | — | 242 | — | |||||||||||||||
KT Wibro Infra Co., Ltd. | 1,237 | 3,555 | — | 3,555 | — | |||||||||||||||
KT-CKP New Media Investment Fund | 89 | (888 | ) | 80 | (808 | ) | — | |||||||||||||
QTT Global(Group) Company Limited | 9,462 | 887 | (156 | ) | 731 | — | ||||||||||||||
K-Realty CR-REITs No.1 | 39,233 | 17,822 | — | 17,822 | 2,394 | |||||||||||||||
How Smartmall Private Special Asset Investment Trust | 3,580 | 3,401 | — | 3,401 | 2,767 | |||||||||||||||
Others | 463,322 | (13,134 | ) | (2,754 | ) | (15,888 | ) | 7,738 | ||||||||||||
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| |||||||||||
Total | ₩ | 537,135 | ₩ | 38,360 | ₩ | (3,665 | ) | ₩ | 34,695 | ₩ | 17,631 | |||||||||
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Details of a reconciliation of the summarized financial information to the carrying amount of interests in the associates and joint ventures as of and for the years end December 31, 2013 and 2014, are as follows:
2013 | ||||||||||||||||||||||||
(in millions of Korean won) | Net assets | Percentage of ownership | Share in net assets | Goodwill | Intercompany transaction and others | Book value | ||||||||||||||||||
ktcs Corporation | ₩ | 124,812 | 17.8 | % | ₩ | 22,217 | ₩ | — | ₩ | (37 | ) | ₩ | 22,180 | |||||||||||
ktis Corporation | 131,092 | 17.8 | % | 23,340 | — | (12 | ) | 23,328 | ||||||||||||||||
Korea Information & Technology Fund | 371,346 | 33.3 | % | 123,782 | — | — | 123,782 | |||||||||||||||||
KT-SB Venture Investment | 31,860 | 50.0 | % | 15,930 | — | — | 15,930 | |||||||||||||||||
Mongolian Telecommunications | 21,741 | 40.0 | % | 8,696 | — | — | 8,696 | |||||||||||||||||
Metropol Property LLC | 927 | 34.0 | % | 315 | 1,044 | — | 1,359 | |||||||||||||||||
KT-CKP New Media Investment Fund | 4,384 | 49.7 | % | 2,177 | — | — | 2,177 | |||||||||||||||||
QTT Global(Group) Company Limited | 16,408 | 25.0 | % | 4,102 | 9,013 | — | 13,115 | |||||||||||||||||
KT Wibro Infra Co., Ltd. | 257,661 | 26.2 | % | 67,553 | — | — | 67,553 | |||||||||||||||||
How Smartmall Private Special Asset Investment Trust | 37,475 | 80.8 | % | 30,269 | — | (1,863 | ) | 28,406 |
2014 | ||||||||||||||||||||||||
(in millions of Korean won) | Net assets | Percentage of ownership | Share in net assets | Goodwill | Intercompany transaction and others | Book value | ||||||||||||||||||
Korea Information & Technology Fund | ₩ | 368,900 | 33.3 | % | ₩ | 122,967 | ₩ | — | ₩ | — | ₩ | 122,967 | ||||||||||||
KT-SB Venture Investment | 45,114 | 50.0 | % | 22,557 | — | — | 22,557 | |||||||||||||||||
Mongolian Telecommunications | 18,693 | 40.0 | % | 7,477 | — | — | 7,477 | |||||||||||||||||
KT Wibro Infra Co., Ltd. | 261,215 | 26.2 | % | 68,491 | — | — | 68,491 | |||||||||||||||||
KT-CKP New Media Investment Fund | 8,025 | 49.7 | % | 3,986 | — | — | 3,986 | |||||||||||||||||
QTT Global (Group) Company Limited | 15,853 | 25.0 | % | 3,963 | 9,013 | — | 12,976 | |||||||||||||||||
How Smartmall Private Special Asset Investment Trust | 36,537 | 80.8 | % | 29,511 | — | (1,881 | ) | 27,630 |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Marketable investments in associates and joint ventures as of December 31, 2013 and 2014, are as follows:
2013 | ||||||||||||
Number of shares | Book Value (In millions of Korean won) | Fair Value (In millions of Korean won) | ||||||||||
ktcs Corporation | 8,132,130 | ₩ | 22,180 | ₩ | 28,218 | |||||||
ktis Corporation | 6,196,190 | 23,328 | 31,539 | |||||||||
Mongolian Telecommunications | 10,348,111 | 8,696 | 10,083 |
2014 | ||||||||||||
Number of shares | Book Value (In millions of Korean won) | Fair Value (In millions of Korean won) | ||||||||||
Mongolian Telecommunications | 10,348,111 | ₩ | 7,477 | ₩ | 8,247 |
The Company has not recognized loss from associates and jointly controlled entities of₩11,425 million for the year (2012:₩7,308 million, 2013:₩17,428 million). The accumulated comprehensive loss of joint ventures and associates as of December 31, 20112014, which was not recognized by the Company is(Won)₩22,00450,996 million (2010.12.31(2012:(Won)₩ 9,857million, 2010.1.1 2010.12.3122,143 million, 2013:(Won)₩ 23,91539,571 million).
The following equity securities owned by the Company are pledged as collaterals for Investees’the investee’s borrowings.
(In millions of Korean won) | Investee | Amount | ||||||
Investments in | Smart Channel Co., Ltd. | 6,500 |
16.15. Trade and other payables
The Company’s trade and other payables as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(In millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | |||||||||
Current liabilities | ||||||||||||
Trade payables | (Won) | 1,492,503 | (Won) | 1,523,983 | (Won) | 1,635,361 | ||||||
Other payables | 3,795,555 | 2,900,215 | 4,255,064 | |||||||||
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Total | 5,288,058 | (Won) | 4,424,198 | (Won) | 5,890,425 | |||||||
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Non-current liabilities | ||||||||||||
Trade payables | 14,602 | (Won) | 41,186 | (Won) | 24,222 | |||||||
Other payables | 281,019 | 340,321 | 627,491 | |||||||||
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Total | (Won) | 295,621 | (Won) | 381,507 | (Won) | 651,713 | ||||||
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(In millions of Korean won) Current liabilities Trade payables Other payables Total Non-current liabilities Trade payables Other payables Total 2013 2014 ₩ 1,716,686 ₩ 1,200,032 5,697,137 5,208,079 ₩ 7,413,823 ₩ 6,408,111 ₩ 10,430 ₩ 6,457 1,048,454 902,735 ₩ 1,058,884 ₩ 909,192
Details of other payables as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(In millions of Korean won) | 1.1.2010 | 12.31.2010 | 31.12.2011 | 2013 | 2014 | |||||||||||||||
Non-trade payables 1 | (Won) | 2,449,146 | (Won) | 1,513,325 | (Won) | 3,214,585 | ₩ | 4,469,781 | ₩ | 3,768,923 | ||||||||||
Accrued expenses | 628,263 | 716,316 | 543,972 | 937,307 | 949,392 | |||||||||||||||
Operating deposits | 755,568 | 738,091 | 764,660 | 863,494 | 886,165 | |||||||||||||||
Others | 243,597 | 272,804 | 359,338 | 475,009 | 506,334 | |||||||||||||||
(non-current) | (281,109 | ) | (340,321 | ) | (627,491 | ) | ||||||||||||||
Less: non-current | (1,048,454 | ) | (902,735 | ) | ||||||||||||||||
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| ||||||||||||||||
Current | (Won) | 3,795,555 | (Won) | 2,900,215 | (Won) | 4,255,064 | ₩ | 5,697,137 | ₩ | 5,208,079 | ||||||||||
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1 | Settlement payables of BC |
17.KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
16. Bonds Payable and Borrowings
Details of bonds payable and borrowings as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
Bonds Payable
(in millions of Korean won and | 1.1.2010 | 12.31.2010 | 12.31.2011 | |||||||||||||||||||||||||||||
Type | Maturity | Annual interest rates | Foreign currency | Korean won | Foreign currency | Korean won | Foreign currency | Korean won | ||||||||||||||||||||||||
MTNP notes 1 | 06.24.2014 | 5.88 | % | USD 600,000 | (Won) | 700,560 | USD 600,000 | (Won) | 683,340 | USD 600,000 | (Won) | 691,980 | ||||||||||||||||||||
MTNP notes 1 | 09.07.2034 | 6.50 | % | USD 100,000 | 116,760 | USD 100,000 | 113,890 | USD 100,000 | 115,330 | |||||||||||||||||||||||
MTNP notes 1 | 07.14.2015 | 4.88 | % | USD 400,000 | 467,040 | USD 400,000 | 455,560 | USD 400,000 | 461,320 | |||||||||||||||||||||||
MTNP notes 1 | 05.03.2016 | 5.88 | % | USD 200,000 | 233,520 | USD 200,000 | 227,780 | USD 200,000 | 230,660 | |||||||||||||||||||||||
MTNP notes | 04.11.2012 | 5.13 | % | USD 200,000 | 233,520 | USD 200,000 | 227,780 | USD 200,000 | 230,660 | |||||||||||||||||||||||
The 170th Public bond | 01.11.2011 | — | JPY12,500,000 | 157,853 | JPY12,500,000 | 174,635 | — | — | ||||||||||||||||||||||||
The 172-1st Public bond | 03.31.2011 | — | USD 50,000 | 58,380 | USD 50,000 | 56,945 | — | — | ||||||||||||||||||||||||
The 172-2nd Public bond 2 | 03.31.2012 |
| LIBOR(3M)+ 1.60% |
| USD 110,000 | 128,436 | USD 110,000 | 125,279 | USD 110,000 | 126,863 | ||||||||||||||||||||||
FR notes 2 | 09.11.2013 |
| LIBOR(3M)+ 1.50% |
| USD 200,000 | 233,520 | USD 200,000 | 227,780 | USD 200,000 | 230,660 | ||||||||||||||||||||||
FR notes 2 | 04.09.2013 |
| LIBOR(3M)+ 0.47% |
| — | — | USD 100,000 | 113,890 | USD 100,000 | 115,330 | ||||||||||||||||||||||
The 178-1st Public bond 2 | 01.18.2013 |
| LIBOR(3M)+ 1.00% |
| — | — | — | — | USD 100,000 | 115,330 | ||||||||||||||||||||||
The 178-2nd Public bond2 | 01.17.2014 |
| LIBOR(3M)+ 1.05% |
| — | — | — | — | USD 100,000 | 115,330 | ||||||||||||||||||||||
MTNP notes | 01.25.2013 | 1.58% | — | — | — | — | JPY 35,000,000 | 519,806 | ||||||||||||||||||||||||
The 49th Public bond | 02.25.2011 | — | USD 175,000 | 204,330 | USD 175,000 | 199,308 | — | — | ||||||||||||||||||||||||
The 50th Public bond | 04.28.2011 | — | JPY 7,000,000 | 88,397 | JPY 7,000,000 | 97,795 | — | — | ||||||||||||||||||||||||
The 51-1st Public bond | 06.20.2011 | — | USD 95,000 | 110,922 | USD 95,000 | 108,196 | — | — |
(in millions of Korean won and thousands of foreign Type The 132nd Public bond The 159th Public bond The 160th Public bond The 161st Public bond The 162nd Public bond The 163rd Public bond The 164th Public bond The 165-1st Public bond The 165-2nd Public bond The 166-1st Public bond The 166-2nd Public bond The 167-1st Public bond The 167-2nd Public bond The 168-1st Public bond The 168-2nd Public bond The 169th Public bond The 171st Public bond The 173-1st Public bond The 173-2nd Public bond The 174-1st Public bond The 174-2nd Public bond The 175-1st Public bond The 175-2nd Public bond The 176-1st Public bond The 176-2nd Public bond The 176-3rd Public bond The 177-1st Public bond The 177-2nd Public bond The 177-3rd Public bond The 179th Public bond The 180-1st Public bond The 180-2nd Public bond The 47-2nd Public bond The 48th Public bond The 51-2nd Public bond The 52-1st Private bond The 52-2nd Public bond The 53-1st Public bond The 53-2nd Public bond The 181-1st Public bond The 181-2nd Public bond The 181-3rd Public bond The 182-1st Public bond The182-2nd Public bond The 183-1st Public bond The 183-2nd Public bond The 183-3rd Public bond The 24th Public bond The 25th Public bond The 26th Public bond The 27th Public bond The 19-2nd Public bond The 10th Public bond The 11st Private bond The 12nd Public bond The 13-2nd Public bond The 14th Public bond
currencies) 1.1.2010 12.31.2010 12.31.2011 Maturity Annual
interest
rates Foreign
currency Korean
won Foreign
currency Korean
won Foreign
currency Korean
won 02.09.2011 — — 70,000 — 70,000 — — 10.27.2013 5.39 % — 300,000 — 300,000 — 300,000 11.24.2010 — — 200,000 — — — — 12.23.2010 — — 230,000 — — — — 02.27.2011 — — 320,000 — 320,000 — — 03.30.2014 5.51 % — 170,000 — 170,000 — 170,000 06.21.2011 — — 260,000 — 260,000 — — 08.26.2011 — — 130,000 — 130,000 — — 08.26.2014 4.44 % — 140,000 — 140,000 — 140,000 03.21.2010 — — 220,000 — — — — 03.21.2012 4.57 % — 100,000 — 100,000 — 100,000 04.20.2012 4.59 % — 100,000 — 100,000 — 100,000 04.20.2015 4.84 % — 100,000 — 100,000 — 100,000 06.21.2012 4.43 % — 240,000 — 240,000 — 240,000 06.21.2015 4.66 % — 90,000 — 90,000 — 90,000 04.03.2012 5.01 % — 140,000 — 140,000 — 140,000 02.28.2013 5.41 % — 100,000 — 100,000 — 100,000 08.06.2013 6.49 % — 100,000 — 100,000 — 100,000 08.06.2018 6.62 % — 100,000 — 100,000 — 100,000 12.19.2010 — — 100,000 — — — — 12.19.2011 — — 130,000 — 130,000 — — 02.27.2012 4.80 % — 40,000 — 40,000 — 40,000 02.27.2014 5.47 % — 360,000 — 360,000 — 360,000 05.28.2012 4.37 % — 100,000 — 100,000 — 100,000 05.28.2014 5.06 % — 170,000 — 170,000 — 170,000 05.28.2016 5.24 % — 260,000 — 260,000 — 260,000 02.09.2013 4.86 % — — — 240,000 — 240,000 02.09.2015 5.26 % — — — 190,000 — 190,000 02.09.2017 5.38 % — — — 170,000 — 170,000 03.29.2018 4.47 % — — — — — 260,000 04.26.2016 4.35 % — — — — — 210,000 04.26.2021 4.71 % — — — — — �� 380,000 07.12.2011 — — 70,000 — 70,000 — — 02.15.2010 — — 200,000 — — — — 06.20.2013 6.41 % — 70,000 — 70,000 — 70,000 08.04.2011 — — 100,000 — 100,000 — — 08.04.2013 6.64 % — 100,000 — 100,000 — 100,000 12.01.2010 — — 20,000 — — — — 12.01.2011 — — 180,023 — 181,213 — — 08.26.2016 3.94 % — — — — — 260,000 08.26.2018 3.99 % — — — — — 90,000 08.26.2021 4.09 % — — — — — 250,000 10,28.2016 4.11 % — — — — — 320,000 10.28.2021 4.31 % — — — — — 100,000 12.22.2016 3.81 % — — — — — 50,000 12.22.2021 4.09 % — — — — — 90,000 12.22.2031 4.27 % — — — — — 160,000 04.17.2010 — — 10,000 — — — — 07.24.2011 — — 5,000 — 5,000 — — 04.19.2013 5.15 % — — — 10,000 — 10,000 07.25.2014 5.04 % — — — — — 5,000 05.10.2010 — — 10,000 — — — — 06.18.2010 — — 40,000 — — — — 12.06.2010 — — 20,000 — — — — 05.23.2011 — — 20,000 — — — — 04.02.2010 — — 10,000 — — — — 01.08.2012 — — 30,000 — — — —
(in millions of Korean won and thousands of foreign Type The 15th Public bond The 16th Public bond The 1st Private bond The 2nd Private bond The 4th Public bond The 5th Private bond The 6-2nd Public bond The 7-2nd Public bond The 8th Private bond The 9-2nd Public bond The 11st Public bond The 13-1st Public bond The 13-2nd Public bond The 14-1st Public bond The 14-2nd Public bond The 15th Private bond The 16-1st Public bond The 16-2nd Public bond The 17-3rd Public bond The 18-2nd Public bond The 18-3rd Public bond The 18-4th Public bond The 19-2nd Public bond The 19-3rd Public bond The 19-4st Public bond The 22-1st Public bond The 22-2nd Public bond The 22-3rd Public bond The 23th Public bond The 24th Public bond The 25-1st Public bond The 25-2nd Public bond The 26th Public bond The 27th Private bond The 28-1st Public bond The 28-2nd Public bond The 29-1st Public bond The 29-2nd Public bond The 30-1st Public bond The 30-2nd Public bond The 30-3rd Public bond The 31st Public bond The 32-1st Public bond The 32-2nd Public bond The 32-3rd Public bond The 33rd Public bond The 34-1st Public bond The 34-2nd Public bond The 35-1st Public bond The 35-2nd Public bond The 36-1st Public bond2 The 36-2nd Public bond The 36-3rd Public bond The 37-1st Public bond The 37-2nd Public bond The 37-3rd Public bond
currencies) 1.1.2010 12.31.2010 12.31.2011 Maturity Annual
interest rates Foreign
currency Korean
won Foreign
currency Korean
won Foreign
currency Korean
won 10.26.2011 — — 30,000 — — — — 11.27.2012 — — 30,000 — — — — 03.16.2010 — — 30,000 — — — — 04.16.2010 — — 20,000 — — — — 05.30.2010 — — 40,000 — — — — 06.29.2010 — — 20,000 — — — — 08.03.2010 — — 30,000 — — — — 08.31.2010 — — 20,000 — — — — 09.28.2010 — — 30,000 — — — — 10.18.2010 — — 20,000 — — — — 12.27.2010 — — 20,000 — — — — 02.21.2010 — — 30,000 — — — — 02.21.2011 — — 30,000 — 30,000 — — 03.28.2010 — — 10,000 — — — — 03.28.2011 — — 10,000 — 10,000 — — 04.21.2010 — — 20,000 — — — — 01.30.2010 — — 60,000 — — — — 04.30.2011 — — 10,000 — 10,000 — — 05.30.2013 7.14 % — 50,000 — 50,000 — 50,000 06.23.2010 — — 40,000 — — — — 06.23.2011 — — 20,000 — 20,000 — — 06.23.2013 7.55 % — 10,000 — 10,000 — 10,000 03.11.2010 — — 10,000 — — — — 09.11.2010 — — 20,000 — — — — 09.11.2010 — — 10,000 — — — — 07.23.2010 — — 10,000 — — — — 01.23.2011 — — 35,000 — 35,000 — — 01.23.2012 8.95 % — 25,000 — 25,000 — 25,000 05.29.2011 — — 20,000 — 20,000 — — 06.29.2012 6.28 % — 30,000 — 30,000 — 30,000 07.30.2011 — — 20,000 — 20,000 — — 07.30.2012 6.20 % — 25,000 — 25,000 — 25,000 08.27.2012 6.33 % — 50,000 — 50,000 — 50,000 09.04.2012 6.33 % — 10,000 — 10,000 — 10,000 11.12.2011 — — 20,000 — 20,000 — — 11.12.2012 6.08 % — 30,000 — 30,000 — 30,000 11.30.2011 — — 10,000 — 10,000 — — 11.30.2012 6.00 % — 40,000 — 40,000 — 40,000 06.23.2011 — — 10,000 — 10,000 — — 12.23.2011 — — 10,000 — 10,000 — — 12.23.2012 5.95 % — 10,000 — 10,000 — 10,000 12.31.2012 5.98 % — 10,000 — 10,000 — 10,000 01.22.2012 5.65 % — — — 10,000 — 10,000 01.22.2013 5.95 % — — — 50,000 — 50,000 01.22.2015 6.70 % — — — 30,000 — 30,000 02.11.2015 6.45 % — — — 50,000 — 50,000 02.26.2012 5.30 % — — — 30,000 — 30,000 02.26.2013 5.60 % — — — 10,000 — 10,000 03.22.2012 4.65 % — — — 20,000 — 20,000 03.22.2013 5.05 % — — — 30,000 — 30,000 04.30.2012 CD(91D)+ 1.09 % — — — 20,000 — 20,000 04.30.2013 4.75 % — — — 30,000 — 30,000 04.30.2015 5.65 % — — — 20,000 — 20,000 12.30.2011 — — — — 10,000 — — 06.30.2012 5.13 % — — — 10,000 — 10,000 06.30.2013 5.45 % — — — 20,000 — 20,000
(in millions of Korean won and thousands of Type The 37-4th Public bond The 38-1st Public bond The 38-2nd Public bond The 38-3rd Public bond The 39th Public bond The 40-1st Public bond The 40-2nd Public bond The 40-3rd Public bond The 41-1st Public bond The 41-2nd Public bond The 41-3rd Public bond The 42-1st Public bond The 42-2nd Public bond The 42-3rd Public bond The 43-1st Public bond The 43-2nd Public bond The 43-3rd Private bond The 44-1st Public bond The 44-2nd Public bond The 44-3rd Public bond The 45th Public bond The 46-1st Public bond The 46-2nd Public bond The 46-3rd Public bond The 46-4th Public bond The 47th Public bond The 48th Public bond The 49th Public bond2 The 50-1st Public bond The 50-2nd Public bond The 51-1st Public bond The 51-2nd Public bond The 52-1st Public bond The 52-2nd Public bond 2 The 53rd Public bond The 54th Public bond The 55-1st Public bond The 55-2nd Public bond The 55-3rd Public bond The 56th Public bond Unsecured private convertible bond The 14-2nd unsecured bond The 15th unsecured bond Redeemable convertible preferred stock The 1st unsecured redeemable convertible preferred stock The 1st private bond The A Redeemable convertible preferred stock
foreign currencies) 1.1.2010 12.31.2010 12.31.2011 Maturity Annual
interest
rates Foreign
currency Korean
won Foreign
currency Korean
won Foreign
currency Korean
won 06.30.2014 5.85% — — — 10,000 — 10,000 01.19.2012 4.80% — — — 30,000 — 30,000 07.19.2012 5.08% — — — 30,000 — 30,000 07.19.2014 5.85% — — — 10,000 — 10,000 07.30.2013 5.35% — — — 30,000 — 30,000 05.10.2012 4.69% — — — 40,000 — 40,000 08.10.2013 5.33% — — — 20,000 — 20,000 08.10.2015 5.95% — — — 20,000 — 20,000 09.17.2012 4.22% — — — 30,000 — 30,000 09.17.2013 4.63% — — — 20,000 — 20,000 09.17.2014 5.10% — — — 10,000 — 10,000 11.22.2013 4.62% — — — 30,000 — 30,000 11.22.2014 5.10% — — — 20,000 — 20,000 11.22.2015 5.44% — — — 10,000 — 10,000 01.28.2014 5.05% — — — — — 40,000 01.28.2015 5.32% — — — — — 10,000 01.28.2016 5.75% — — — — — 30,000 10.28.2012 4.30% — — — — — 30,000 04.28.2013 4.53% — — — — — 30,000 10.28.2013 4.76% — — — — — 20,000 05.18.2014 4.80% — — — — — 30,000 02.26.2013 4.10% — — — — — 20,000 05.26.2014 4.50% — — — — — 40,000 05.26.2015 4.71% — — — — — 20,000 05.26.2016 4.90% — — — — — 20,000 06.23.2014 4.50% — — — — — 30,000 08.11.2016 4.71% — — — — — 10,000 08.23.2014
CD(91D)+
0.93%
— — — — — 20,000 03.21.2013 4.30% — — — — — 20,000 09.21.2016 4.87% — — — — — 5,000 09.30.2014 4.69% — — — — — 10,000 09.30.2016 4.92% — — — — — 20,000 10.11.2013 4.49% — — — — — 10,000 10.11.2014
CD(91D)+
1.10%
— — — — — 10,000 10.17.2013 4.39% — — — — — 20,000 10.28.2014 4.64% — — — — — 10,000 11.16.2014 4.46% — — — — — 40,000 11.16.2015 4.56% — — — — — 20,000 11.16.2016 4.74% — — — — — 5,000 12.13.2014 4,18% — — — — — 35,000 01.20.2016 2.00% — — — — — 15,000 05.22.2012 6.00% — — — — — 50,000 06.22.2012 5.90% — — — — — 50,000 12.17.2013 10.27% — — — — — 950 12.30.2014 3.00% — — — — — 2,000 03.24.2010 — — 40,000 — — — — 08.14.2018 5.00% — — — — — 1,927
(in millions of Korean won and thousands of Type The B Redeemable convertible preferred stock The C Redeemable convertible preferred stock Total Less:Current portion Discount on bonds Conversion right adjustment Premium on bonds redemption Net (in millions of Korean won and Type Maturity MTNP notes1 MTNP notes1 MTNP notes1 MTNP notes1 Reg S bonds FR notes 2 FR notes FR notes Japanese yen bonds Japanese yen bonds Japanese yen bonds The 163rd Public bond The 165-2nd Public bond The 167-2nd Public bond The 168-2nd Public bond
foreign currencies) 1.1.2010 12.31.2010 12.31.2011 Maturity Annual
interest
rates Foreign
currency Korean
won Foreign
currency Korean
won Foreign
currency Korean
won 11.24.2019 5.00 % — — — — — 634 11.30.2021 5.00 % — — — — — 9,987 (Won) 8,913,261 (Won) 8,603,391 (Won) 10,133,767 (1,540,000 ) (2,108,092 ) (1,657,524 ) (36,056 ) (27,841 ) (31,104 ) — — (3,026 ) — — 1,750 (Won) 7,337,205 (Won) 6,467,458 (Won) 8,443,863
thousands of foreign currencies) 2013 2014 Annual interest
rates Foreign
currency Korean won Foreign
currency Korean won — — USD 600,000 ₩ 633,180 — ₩ — Sep 07, 2034 6.50 % USD 100,000 105,530 USD 100,000 109,920 Jul 15, 2015 4.88 % USD 400,000 422,120 USD 400,000 439,680 May 03, 2016 5.88 % USD 200,000 211,060 USD 200,000 219,840 Jan 20, 2017 3.88 % USD 350,000 369,355 USD 350,000 384,720 Aug 28, 2018 LIBOR(3M)+1.15 % USD 300,000 316,590 USD 300,000 329,760 Apr 22, 2017 1.75 % — — USD 650,000 714,480 Apr 22, 2019 2.63 % — — USD 350,000 384,720 Jan 29, 2015 0.59 % JPY 5,000,000 50,233 JPY 5,000,000 46,007 Jan 29, 2016 0.70 % JPY 18,200,000 182,848 JPY 18,200,000 167,465 Jan 29, 2018 0.86 % JPY 6,800,000 68,317 JPY 6,800,000 62,570 — — — 170,000 — — — — — 140,000 — — Apr 20, 2015 4.84 % — 100,000 — 100,000 Jun 21, 2015 4.66 % — 90,000 — 90,000
(in millions of Korean won and thousands of foreign currencies) | 2013 | 2014 | ||||||||||||||||||||
Type | Maturity | Annual interest rates | Foreign currency | Korean won | Foreign currency | Korean won | ||||||||||||||||
The 173-2nd Public bond | Aug 06, 2018 | 6.62 | % | — | 100,000 | — | 100,000 | |||||||||||||||
The 175-2nd Public bond | — | — | — | 360,000 | — | — | ||||||||||||||||
The 176-2nd Public bond | — | — | — | 170,000 | — | — | ||||||||||||||||
The 176-3rd Public bond | May 28, 2016 | 5.24 | % | — | 260,000 | — | 260,000 | |||||||||||||||
The 177-2nd Public bond | Feb 09, 2015 | 5.26 | % | — | 190,000 | — | 190,000 | |||||||||||||||
The 177-3rd Public bond | Feb 09, 2017 | 5.38 | % | — | 170,000 | — | 170,000 | |||||||||||||||
The 178-2nd Public bond | — | — | USD | 100,000 | 105,530 | — | — | |||||||||||||||
The 179th Public bond | Mar 29, 2018 | 4.47 | % | — | 260,000 | — | 260,000 | |||||||||||||||
The 180-1st Public bond | Apr 26, 2016 | 4.35 | % | — | 210,000 | — | 210,000 | |||||||||||||||
The 180-2nd Public bond | Apr 26, 2021 | 4.71 | % | — | 380,000 | — | 380,000 | |||||||||||||||
The 181-1st Public bond | Aug 26, 2016 | 3.94 | % | — | 260,000 | — | 260,000 | |||||||||||||||
The 181-2nd Public bond | Aug 26, 2018 | 3.99 | % | — | 90,000 | — | 90,000 | |||||||||||||||
The 181-3rd Public bond | Aug 26, 2021 | 4.09 | % | — | 250,000 | — | 250,000 | |||||||||||||||
The 182-1st Public bond | Oct 28, 2016 | 4.11 | % | — | 320,000 | — | 320,000 | |||||||||||||||
The 182-2nd Public bond | Oct 28, 2021 | 4.31 | % | — | 100,000 | — | 100,000 | |||||||||||||||
The 183-1st Public bond | Dec 22, 2016 | 3.81 | % | — | 50,000 | — | 50,000 | |||||||||||||||
The 183-2nd Public bond | Dec 22, 2021 | 4.09 | % | — | 90,000 | — | 90,000 | |||||||||||||||
The 183-3rd Public bond | Dec 22, 2031 | 4.27 | % | — | 160,000 | — | 160,000 | |||||||||||||||
The 184-1st Public bond | Apr 10, 2018 | 2.74 | % | — | 120,000 | — | 120,000 | |||||||||||||||
The 184-2nd Public bond | Apr 10, 2023 | 2.95 | % | — | 190,000 | — | 190,000 | |||||||||||||||
The 184-3rd Public bond | Apr 10, 2033 | 3.17 | % | — | 100,000 | — | 100,000 | |||||||||||||||
The 185-1st Public bond | Sep 16, 2018 | 3.46 | % | — | 200,000 | — | 200,000 | |||||||||||||||
The 185-2nd Public bond | Sep 16, 2020 | 3.65 | % | — | 300,000 | — | 300,000 | |||||||||||||||
The 186-1st Public bond | Jun 26, 2017 | 2.86 | % | — | — | — | 120,000 | |||||||||||||||
The 186-2nd Public bond | Jun 26, 2019 | 3.08 | % | — | — | — | 170,000 | |||||||||||||||
The 186-3rd Public bond | Jun 26, 2024 | 3.42 | % | — | — | — | 110,000 |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(in millions of Korean won and thousands of foreign currencies) | 2013 | 2014 | ||||||||||||||||||||
Type | Maturity | Annual interest rates | Foreign currency | Korean won | Foreign currency | Korean won | ||||||||||||||||
The 186-4th Public bond | Jun 26, 2034 | 3.70 | % | — | — | — | 100,000 | |||||||||||||||
The 187-1st Public bond | Sep 02, 2017 | 2.69 | % | — | — | — | 110,000 | |||||||||||||||
The 187-2nd Public bond | Sep 02, 2019 | 2.97 | % | — | — | — | 220,000 | |||||||||||||||
The 187-3rd Public bond | Sep 02, 2024 | 3.31 | % | — | — | — | 170,000 | |||||||||||||||
The 187-4th Public bond | Sep 02, 2034 | 3.55 | % | — | — | — | 100,000 | |||||||||||||||
The 32-3rd Public bond | Jan 22, 2015 | 6.70 | % | — | 30,000 | — | 30,000 | |||||||||||||||
Asset backed short-term bond | — | — | — | 10,000 | — | — | ||||||||||||||||
The 33rd Public bond | Feb 11, 2015 | 6.45 | % | — | 50,000 | — | 50,000 | |||||||||||||||
The 36-3rd Public bond | Apr 30, 2015 | 5.65 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 37-4th Public bond | — | — | — | 10,000 | — | — | ||||||||||||||||
The 38-3rd Public bond | — | — | — | 10,000 | — | — | ||||||||||||||||
The 40-3rd Public bond | Aug 10, 2015 | 5.95 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 41-3rd Public bond | — | — | — | 10,000 | — | — | ||||||||||||||||
The 42-2nd Public bond | — | — | — | 20,000 | — | — | ||||||||||||||||
The 42-3rd Public bond | Nov 22, 2015 | 5.44 | % | — | 10,000 | — | 10,000 | |||||||||||||||
The 43-1st Public bond | — | — | — | 40,000 | — | — | ||||||||||||||||
The 43-2nd Public bond | Jan 28, 2015 | 5.32 | % | — | 10,000 | — | 10,000 | |||||||||||||||
The 43-3rd Public bond | Jan 28, 2016 | 5.75 | % | — | 30,000 | — | 30,000 | |||||||||||||||
The 45th Private bond | — | — | — | 30,000 | — | — | ||||||||||||||||
The 46-2nd Public bond | — | — | — | 40,000 | — | — | ||||||||||||||||
The 46-3rd Public bond | May 26, 2015 | 4.71 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 46-4th Public bond | May 26, 2016 | 4.90 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 47th Public bond | — | — | — | 30,000 | — | — | ||||||||||||||||
The 48th Public bond | Aug 11, 2016 | 4.71 | % | — | 10,000 | — | 10,000 | |||||||||||||||
The 49th Public bond | — | — | — | 20,000 | — | — | ||||||||||||||||
The 50-2nd Public bond | Sep 21, 2016 | 4.87 | % | — | 5,000 | — | 5,000 | |||||||||||||||
The 51-1st Public bond | — | — | — | 10,000 | — | — | ||||||||||||||||
The 51-2nd Public bond | Sep 30, 2016 | 4.92 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 52-2nd Public bond | — | — | — | 10,000 | — | — | ||||||||||||||||
The 54th Public bond | — | — | — | 10,000 | — | — | ||||||||||||||||
The 55-1st Public bond | — | — | — | 40,000 | — | — | ||||||||||||||||
The 55-2nd Public bond | Nov 16, 2015 | 4.56 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 55-3rd Public bond | Nov 16, 2016 | 4.74 | % | — | 5,000 | — | 5,000 | |||||||||||||||
The 56th Public bond | — | — | — | 35,000 | — | — | ||||||||||||||||
The 57-1st Public bond | — | — | — | 50,000 | — | — | ||||||||||||||||
The 57-2nd Public bond | Jan 05, 2016 | 4.44 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 57-3rd Public bond | Jan 05, 2017 | 4.61 | % | — | 30,000 | — | 30,000 | |||||||||||||||
The 58-1st Public bond | — | — | — | 30,000 | — | — | ||||||||||||||||
The 58-2nd Public bond | Jul 10, 2015 | 4.37 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 59-1st Public bond | May 25, 2015 | 3.78 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 59-2nd Public bond | May 25, 2016 | 3.87 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 59-3rd Public bond | May 25, 2017 | 4.03 | % | — | 40,000 | — | 40,000 | |||||||||||||||
The 60th Public bond 2 | Jul 13, 2015 | CD(91D)+0.39 | % | — | 40,000 | — | 40,000 | |||||||||||||||
The 61st Public bond | Sep 22, 2017 | 3.65 | % | — | 45,000 | — | 45,000 | |||||||||||||||
The 62-1st Public bond | Aug 27, 2015 | 3.19 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 62-2nd Public bond | Oct 11, 2017 | 3.43 | % | — | 50,000 | — | 50,000 | |||||||||||||||
The 63rd Public bond | Sep 27, 2017 | 3.44 | % | — | 40,000 | — | 40,000 | |||||||||||||||
The 64-1st Public bond | Oct 29, 2015 | 3.26 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 64-2nd Public bond | Dec 21, 2017 | 3.46 | % | — | 50,000 | — | 50,000 | |||||||||||||||
The 65th Public bond | Mar 22, 2018 | 3.47 | % | — | 55,000 | — | 55,000 | |||||||||||||||
The 66th Public bond | Apr 02, 2018 | 3.52 | % | — | 54,000 | — | 54,000 | |||||||||||||||
The 67-1st Public bond | Mar 22, 2017 | 3.00 | % | — | 30,000 | — | 30,000 |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(in millions of Korean won and thousands of foreign currencies) | 2013 | 2014 | ||||||||||||||||||||
Type | Maturity | Annual interest rates | Foreign currency | Korean won | Foreign currency | Korean won | ||||||||||||||||
The 67-2nd Public bond | Mar 22, 2018 | 3.10 | % | — | 40,000 | — | 40,000 | |||||||||||||||
The 67-3rd Public bond | Mar 22, 2020 | 3.37 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 68-1st Public bond | Apr 30, 2016 | 2.85 | % | — | 40,000 | — | 40,000 | |||||||||||||||
The 68-2nd Public bond | Apr 30, 2017 | 2.92 | % | — | 10,000 | — | 10,000 | |||||||||||||||
The 69-1st Public bond | — | — | — | 20,000 | — | — | ||||||||||||||||
The 69-2nd Public bond 2 | Jun 27, 2016 | CD(91D)+0.43 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 69-3rd Public bond | Jun 27, 2018 | 3.81 | % | — | 20,000 | — | 20,000 | |||||||||||||||
The 70-1st Public bond | Oct 28, 2016 | 3.29 | % | — | 40,000 | — | 40,000 | |||||||||||||||
The 70-2nd Public bond | Oct 28, 2018 | 3.63 | % | — | 10,000 | — | 10,000 | |||||||||||||||
The 71-1st Public bond | Nov 29, 2016 | 3.46 | % | — | 10,000 | — | 10,000 | |||||||||||||||
The 71-2nd Public bond | Nov 29, 2020 | 4.14 | % | — | 30,000 | — | 30,000 | |||||||||||||||
The 72-1st Public bond | Dec 23, 2015 | 3.18 | % | — | 10,000 | — | 10,000 | |||||||||||||||
The 72-2nd Public bond | Dec 23, 2016 | 3.41 | % | — | 30,000 | — | 30,000 | |||||||||||||||
The 73-1st Public bond | Mar 17, 2016 | 2.73 | % | — | — | — | 30,000 | |||||||||||||||
The 73-2nd Public bond | Sep 17, 2017 | 3.16 | % | — | — | — | 20,000 | |||||||||||||||
The 74 Public bond | Oct 02, 2017 | 2.97 | % | — | — | — | 50,000 | |||||||||||||||
The 75-1st Public bond | Nov 23, 2015 | 2.65 | % | — | — | — | 50,000 | |||||||||||||||
The 75-2nd Public bond | Nov 21, 2017 | 2.94 | % | — | — | — | 50,000 | |||||||||||||||
Asset backed short-term bond | — | — | — | 10,000 | — | — | ||||||||||||||||
Asset backed short-term bond | — | — | — | 10,000 | — | — | ||||||||||||||||
Asset backed short-term bond | — | — | — | 10,000 | — | — | ||||||||||||||||
Asset backed short-term bond | Feb 27, 2015 | 2.66 | % | — | — | — | 25,000 | |||||||||||||||
Asset backed short-term bond | Jan 13, 2015 | 2.70 | % | — | — | — | 10,000 | |||||||||||||||
Unsecured private convertible bond 3 | Jan 20, 2016 | 2.00 | % | — | 15,000 | — | 15,000 | |||||||||||||||
Unsecured public bond in won | Jan 24, 2016 | 3.43 | % | — | 30,000 | — | 30,000 | |||||||||||||||
The 16th unsecured bond | Apr 23, 2015 | 3.80 | % | — | 80,000 | — | 80,000 | |||||||||||||||
The 1st convertible preferred stock | — | — | — | 2,000 | — | — | ||||||||||||||||
The 2nd convertible preferred stock 3 | Oct 17, 2015 | — | — | — | — | 2,100 | ||||||||||||||||
The 2nd unsecured convertible bond3 | Sep 30, 2018 | 2.00 | % | — | 179 | — | 179 | |||||||||||||||
The 32-1st Public bond | Nov 20, 2015 | 3.19 | % | — | 100,000 | — | 100,000 | |||||||||||||||
The 32-2nd Public bond | Nov 20, 2017 | 3.33 | % | — | 100,000 | — | 100,000 | |||||||||||||||
The 33rd Public bond | Mar 21, 2018 | 3.26 | % | — | 53,000 | — | 53,000 | |||||||||||||||
The 28-1st Public bond | — | — | — | 50,000 | — | — | ||||||||||||||||
The 28-2nd Public bond | Apr 05, 2016 | 5.25 | % | — | 65,000 | — | 65,000 | |||||||||||||||
The 29th Public bond | Sep 05, 2016 | 4.85 | % | — | 45,000 | — | 45,000 | |||||||||||||||
The 30th Public bond | — | — | — | 90,000 | — | — | ||||||||||||||||
The 31-1st Public bond | Jun 15, 2015 | 3.73 | % | — | 100,000 | — | 100,000 | |||||||||||||||
The 31-2nd Public bond | Jun 15, 2017 | 3.98 | % | — | 100,000 | — | 100,000 | |||||||||||||||
The 34th Public bond | Mar 21, 2018 | 3.21 | % | — | 54,000 | — | 54,000 | |||||||||||||||
The 35th Public bond | — | — | — | 50,000 | — | — | ||||||||||||||||
The 36th Public bond | Jun 21, 2018 | 2.92 | % | — | 50,000 | — | 50,000 | |||||||||||||||
The 37th Public bond | Jun 21, 2018 | 2.98 | % | — | 50,000 | — | 50,000 | |||||||||||||||
The 38-1st Public bond | Nov 20, 2015 | 3.13 | % | — | 40,000 | — | 40,000 |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(in millions of Korean won and thousands of foreign currencies) | 2013 | 2014 | ||||||||||||||||||||
Type | Maturity | Annual interest rates | Foreign currency | Korean won | Foreign currency | Korean won | ||||||||||||||||
The 38-2nd Public bond | Nov 20, 2016 | 3.39 | % | — | 60,000 | — | 60,000 | |||||||||||||||
The 39-1st Public bond | Aug 28, 2017 | 3.05 | % | — | — | — | 150,000 | |||||||||||||||
The 39-2nd Public bond | Aug 28, 2019 | 3.41 | % | — | — | — | 50,000 | |||||||||||||||
The 40-1st Public bond | Oct 31, 2017 | 2.62 | % | — | — | — | 50,000 | |||||||||||||||
The 40-2nd Public bond | Oct 31, 2019 | 2.94 | % | — | — | — | 50,000 | |||||||||||||||
The 8th unsecured convertible bond | — | — | — | 19,052 | — | — | ||||||||||||||||
The 27th Public bond | — | — | — | 5,000 | — | — | ||||||||||||||||
|
|
|
| |||||||||||||||||||
10,011,994 | 10,532,441 | |||||||||||||||||||||
Less: Current portion |
| (2,185,017 | ) | (1,597,732 | ) | |||||||||||||||||
Discount on bonds |
| (22,350 | ) | (28,258 | ) | |||||||||||||||||
Conversion right adjustment |
| 3,566 | 1,483 | |||||||||||||||||||
Add: Premium on bonds redemption |
| (3,987 | ) | 12 | ||||||||||||||||||
|
|
|
| |||||||||||||||||||
₩ | 7,804,206 | ₩ | 8,907,946 | |||||||||||||||||||
|
|
|
|
1 | As of December 31, |
2 | Libor (3M) and CD (91D) are approximately |
3 | At the end of the reporting period, the terms and conditions of the convertible bonds are as follows: |
Issuers | ||||||||||||
Type | KT Telecop Co., Ltd. | GREEN CAR Co., Ltd (formerly GREEN POINT) | Enswers Inc. | |||||||||
Issue date | Jan 20, 2011 | Oct 1, 2013 | Apr 18, 2014 | |||||||||
Issue price | ₩ | 15,000 million | ₩ | 179 million | ₩ | 2,100 million | ||||||
Coupon rate | 2.00 | % | 2.00 | % | — | |||||||
Guaranteed margin ratio | 4.00 | % | | Compound annual 5.00 | % | 8.00 | % | |||||
Conversion period | | From one year after the issue date to bond maturity | | | From the day succeeding the issue date till bond maturity | | | From the day succeeding the issue date till bond maturity | | |||
Conversion price | ₩ | 26,000 | ₩ | 27,952 | | a) If qualified financing is obtained: 75% of stock price b) If qualified financing is | | |||||
₩ | 1,191,200 |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Short-term borrowings
(in millions of Korean won and | 1.1.2010 | 12.31.2010 | 12.31.2011 | |||||||||||||||||||||||||||
Financial institution | Type | Annual interest rates | Foreign Currency | Korean won | Foreign Currency | Korean won | Foreign currency | Korean won | ||||||||||||||||||||||
Shinhan Bank | Commercial papers | 3,81 | % | (Won) | 60,000 | — | (Won) | 45,000 | — | (Won) | 10,000 | |||||||||||||||||||
General loan 1 |
| 5.09~CD(91D) +1.44 | % | 20,000 | — | 88,000 | — | 73,500 | ||||||||||||||||||||||
Usance(EUR) 1 | | LIBOR(3M) +1.70 | % | 3,066 | EUR 116 | 2,274 | — | 2,036 | ||||||||||||||||||||||
Usance(USD) 1 | USD 2,611 | USD 1,842 | USD 1,671 | |||||||||||||||||||||||||||
Usance(JPY) 1 | JPY 1,456 | — | JPY 7,354 | |||||||||||||||||||||||||||
Samsung Securities | Commercial papers | 3.92%~3,94 | % | — | 12,000 | — | 10,000 | — | 20,000 | |||||||||||||||||||||
Meritz Securities | Commercial papers | 3.85~3.92 | % | — | 15,000 | — | 20,000 | — | 25,000 | |||||||||||||||||||||
Woori Bank | Commercial papers | — | — | 10,000 | — | — | — | — | ||||||||||||||||||||||
General loans 1 | | CD(91D) +1.61~1.79% | | — | 27,300 | — | 5,000 | — | 18,000 | |||||||||||||||||||||
Usance(USD) 1 | | LIBOR(3M) +1.70 | % | USD 428 | 499 | USD 1,324 | 1,508 | USD 2,192 | 2,527 | |||||||||||||||||||||
Korea Exchange Bank | Commercial papers | 3.76 | % | — | — | — | 50,000 | — | 10,000 | |||||||||||||||||||||
General loans | — | — | 8,000 | — | — | — | — | |||||||||||||||||||||||
Usance(EUR 1 | | LIBOR(3M) +1.70 | % | — | — | — | — | EUR1,740 | 2,600 | |||||||||||||||||||||
Kookmin Bank | General loans | 1.42~4.80 | % | — | — | — | 20,890 | — | 22,397 | |||||||||||||||||||||
Shinhan Investment Corp. | Commercial papers | — | — | — | — | 20,000 | — | — | ||||||||||||||||||||||
Woori Investment & Securities | Commercial papers | 3.76 | % | — | 25,000 | — | 5,000 | — | 5,000 | |||||||||||||||||||||
Dongbu Securities | Commercial papers | — | — | 21,000 | — | 21,200 | — | — |
(in millions of Korean won and Financial KTB Investment & Securities Hanyang Securities HI Investment & Securities Standard Chartered Securities Eugene Investment & Securities Kumho Investment Bank Tong Yang Securities SK Securities Shinyoung Securities Korea Development Bank General loans Hana Bank Usance(JPY) IBK Bank Usance Korea Investment & Securities Shinhan Investment Corp Daewoo Securities Daegu Bank Others Factoring Receivables Total (in millions of Korean won and Financial institution Type Shinhan Bank Standard Chartered Bank Samsung Securities Korea Investment & Securities Co., Ltd. Woori Bank Korea Exchange Bank Kookmin Bank Hanyang Securities SK Securities Citibank Korea Development Bank IBK Bank NH Investment & Securities HYUNDAI Securities Dongbu Securities Woori Investment & Securities Korea Money Brokerage Corporation Meritz Securities KTB Investment & Securities Hana Daetoo Securities Co., Ltd. NongHyup Bank Shinyoung Securities Co., Ltd. UFJ Bank Others Total
thousands of foreign currencies) 1.1.2010 12.31.2010 12.31.2011
institution Type Annual
interest rates Foreign
Currency Korean
won Foreign
Currency Korean
won Foreign
currency Korean
won Commercial
papers 3.91~3.95 % — — — 40,000 — 20,000 Commercial
papers 3.95 % — — — 25,000 — 10,000 Commercial
papers — — — — 20,000 — — Commercial
papers 3.90 % — — — 10,000 — 10,000 Commercial
papers — — 10,000 — 10,000 — — Commercial
papers — — 30,000 — 10,000 — — Commercial
papers — — 17,000 — 40,000 — — Commercial
papers 3.99~4.00 % — — — — — 40,000 Commercial
papers 3.76 % — — — — — 10,000 General loans 16.50 % — — USD 3,995 7,474 USD 3,973 4,583 5.10~5.51 % — 30,276 — 25,000 — 22,500 Usance(USD) 1
LIBOR(3M)
+1.70
% USD 4,202 5,376 USD 1,525 1,978 USD 2,442 2,816 — JPY 37,189 JPY 17,314 — General loans 4.33 % — — — — — 2,342 — — 50 — — — — Commercial
papers — — 20,000 — — — — Commercial
papers — — 20,000 — — — — Commercial
papers — — 20,000 — — — — General loans 5.55 % — — — — — 10,000 Others 8.00~8.50 % — 14,239 — — — 170 Factoring
Receivables — — — — — — 69,252 (Won) 368,806 (Won) 478,324 (Won) 392,723
thousands of foreign currencies) 2013 2014 Annual
interest rates Foreign
Currency Korean
won Foreign
Currency Korean
Won Commercial papers 2.21%~3.05 % — ₩ 40,000 — ₩ 140,000 Commercial papers 7.79 % — — VND 32,000,000 1,667 Commercial papers 1 LIBOR(3M)+2.36 % — — USD 2,000 2,198 General loan 3.93%~5.18 % — 81,200 — 101,200 Credit loan 4.31%~5.50 % — 12,000 — 12,383 Usance 1
3.35% /Financial
bonds(6M)
+1.27
% — 5,000 — 19,000 Facility loans 3.24 % — — — 40,000 Secured loans 4.34 % — — — 10,000 Commercial papers 2.21 % — 15,000 — 50,000 Commercial papers 2.21%~2.39 % — — — 230,000 Commercial papers 7.79 % — — VND 61,756,000 3,218 General loans 4.88%~6.50 % — 500 — 1,246 Usance — — 9,000 — — Commercial papers 3.39%~4.59 % — 30,000 — 50,000 Credit loans 5.23 % — — — 4,000 Revolving loan 3.65 % — — — 2,000 General loans 3.39%~4.59 % — 1,500 — 3,500 Facility loans 3.53 % — — — 50,000 Credit loans 5.18 % — — — 1,000 Commercial papers — — 10,494 — 25,000 Commercial papers — — 50,000 — — Commercial papers — — 10,000 — — Usance 1
3.35%(fixed rate)
/(91D) +
1.2%(variable
rate)
— 10,000 — 11,000 Credit loans 4.86 % — — — 10,000 Usance 1
2.66%~3.41%
/Industrial
financial
debentures(1Y) +
1.28
% — 7,000 — 80,000 Credit loans 6.15 % — 8,000 — 6,000 Commercial papers 2.98 % — 10,000 — 25,000 Commercial papers 3.09 % — 100,000 — 30,000 Commercial papers — — 95,000 — — Commercial papers 3.60 % — 30,000 — 10,000 Commercial papers — — 20,000 — — Commercial papers — — 30,000 — — Commercial papers 2.21 % — — — 70,000 Commercial papers 4.88 % — — — 5,000 Facility loans 3.49 % — — — 50,000 Commercial papers 2.70%~3.50 % — — — 55,000 LC 1.48 % — — JPY 194,236 1,943 General loans — — 60,000 — — ₩ 634,694 ₩ 1,100,355
1 |
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Long-term borrowings
(in millions of Korean won and | 1.1.2010 | 12.31.2010 | 12.31.2011 | |||||||||||||||||||||||||||
Financial institution | Type | Annual interest rates | Foreign currency | Korean won | Foreign currency | Korean won | Foreign currency | Korean won | ||||||||||||||||||||||
Kookmin Bank | Informatization promotion funds 1 | 3.80 | % | — | (Won) | 21,643 | — | (Won) | 13,126 | — | (Won) | 5,541 | ||||||||||||||||||
Capital Factoring | — | — | — | — | 1,498 | — | — | |||||||||||||||||||||||
Loans for operation | 5.96 | % | — | 10,000 | — | 10,000 | — | 10,000 | ||||||||||||||||||||||
General loans | 4.88~6.30 | % | — | 40,000 | — | 20,000 | — | 30,000 | ||||||||||||||||||||||
Facility loans | 4.56~4.98 | % | — | 2,250 | — | 10,000 | — | 60,000 | ||||||||||||||||||||||
Foreign Currency Loans | — | USD 15,000 | 17,514 | USD 11,000 | 12.527 | — | — | |||||||||||||||||||||||
Redeemable convertible preferred stock | 1.00 | % | — | — | — | — | — | 35,196 | ||||||||||||||||||||||
Shinhan Bank | Informatization 1 | 3.80 | % | — | 8,575 | — | 17,812 | — | 16,383 | |||||||||||||||||||||
Loans for operation | 5.88~6.39 | % | — | 7,000 | — | 14,000 | — | 14,000 | ||||||||||||||||||||||
General loans | 5.70%~6.80 | % | — | — | — | 35,000 | — | 47,000 | ||||||||||||||||||||||
Mortgage loan | 4.00 | % | — | 797 | — | 677 | — | 517 | ||||||||||||||||||||||
Facility loans 2 | | 3.38%~ Financing bonds + 1.47 | % | — | — | — | — | — | 40,878 | |||||||||||||||||||||
Commercial papers | — | — | 10,000 | — | — | — | — | |||||||||||||||||||||||
Export-Import Bank of Korea | Inter-Korean | 2.00 | % | — | 6,415 | — | 6,415 | — | 6,415 | |||||||||||||||||||||
Bank of Communications | Facility loans | — | USD 30,000 | 35,028 | USD 30,000 | 34,167 | — | — | ||||||||||||||||||||||
Woori Bank | General loans 2 | | 5.98~ CD(91D) + 1.39 | % | — | 15,815 | — | 45,000 | — | 45,000 | ||||||||||||||||||||
Facility loans | — | — | — | — | 164 | — | — | |||||||||||||||||||||||
Hana Bank | General loans | — | — | 10,000 | — | — | — | — | ||||||||||||||||||||||
Kwangju Bank | General loans | — | — | 10,000 | — | 10,000 | — | — | ||||||||||||||||||||||
National Federation of Fisheries Cooperatives | General loans | — | — | 10,000 | — | 10,000 | — | — | ||||||||||||||||||||||
NH Bank | Loans for operation | — | — | 15,000 | — | — | — | — | ||||||||||||||||||||||
General loans | 5.80~6.00 | % | — | 28,800 | — | 50,000 | — | 50,000 | ||||||||||||||||||||||
Facility loans | 4.68 | % | — | — | — | — | — | 50,000 | ||||||||||||||||||||||
Standard Chartered Securities | Commercial | — | — | — | — | 10,000 | — | — | ||||||||||||||||||||||
Korea Development Bank | Informatization | — | — | 1,300 | — | — | — | — | ||||||||||||||||||||||
General loans | — | USD 40,000 | 46,704 | USD 83 | 93 | — | — | |||||||||||||||||||||||
Facility loans | 4.49 | % | — | — | — | — | — | 20,000 | ||||||||||||||||||||||
IBK Bank | Facility loans | 4.33 | % | — | — | — | — | — | 2,000 | |||||||||||||||||||||
Korea Development Bank | Capital | 1.90 | % | — | — | — | — | — | 2,577 | |||||||||||||||||||||
Samsung Securities | Commercial papers | 4.02 | % | — | — | — | — | — | 10,000 |
(in millions of Korean won and Financial institution Dongbu Securities SK Securities KTB Investment & Securities Commercial Hanyang securities RCPS(Redeemable Convertible Preferred Stock) Loans for Shinhan Investment Corp. Korea Credit Guarantee Fund Loans for Others Total Less: Current portion Net (in millions of Korean won and thousands of foreign currencies) Financial institution Kookmin Bank Shinhan Bank Export-Import Bank of Korea Korea Exchange Bank National Federation of Fisheries Cooperatives NH Bank Korea Development Bank Industrial Bank of Korea Samsung Securities HYUNDAI Securities IBK Securities Shinhan Invest corp NH INVESTMENT & SECURITIES CO., LTD. The Jeonbuk Bank Ltd. Others Less: Current portion
thousands of foreign currencies) 1.1.2010 12.31.2010 12.31.2011 Type Annual
interest rates Foreign
currency Korean
won Foreign
currency Korean
won Foreign
currency Korean
won Commercial
papers 4.12 % — — — — — 20,000 Commercial
papers 4.12 % — — — — — 10,000
papers 4.02 % — — — — — 20,000 Commercial
papers 4.02 % — — — — — 10,000
operation — — — — 30,000 — — Commercial
papers — — 20,000 — — — —
operation — — 2,893 — — — — General
loans — — 1,537 — — — — (Won) 321,271 (Won) 330,479 (Won) 505,507 (140,931 ) (138,031 ) (63,256 ) (Won) 180,340 (Won) 192,448 (Won) 442,251 2013 2014 Type Annual
interest rates Foreign
currency Korean
won Foreign
currency Korean
won Facility loans — — ₩ 60,000 — ₩ — Informatization
promotion funds 1 3.19 % — 6,048 — 1,539 General loans 3.95%~5.70 % — 20,000 — 21,000 Facility loans 2.22%~5.23 % — 42,331 — 100,320 Inter-Korean
Cooperation Fund 1 2.00 % — 6,415 — 5,922 General loans — USD 2,200 2,322 — — General loans 3.94%~4.18 % — 25,210 — 25,210 General loans 4.63 % — 50,000 — 50,000 General loans 3.99%~6.00 % — 60,000 — 58,000 Facility loans 2.00%~4.68 % — 135,000 — 183 General loans 3.56%~4.91 % — 3,750 — 20,000 Facility loans 3.13%~4.49 % — 20,000 — 170,000 Facility loans 2.22%~2.61 % — 833 — 167 Commercial papers 2.78%~3.08 % — 100,000 — 100,000 Commercial papers 2.81%~3.08 % — 179,945 — 160,000 Commercial papers 2.78 % — 50,000 — 50,000 Commercial papers 2.93 % — 39,963 — 40,000 Commercial papers 3.17 % — — — 300,000 General loans 2
Financial
Bond
(12M)+1.17
% — — — 20,000 Facility loans 3.55 % — — — 30,000 Redeemable
convertible preferred
stock 3 — — 53,736 — 56,768 Other 5.00 % — 4,423 — 243 Total 859,976 1,209,352 (200,997 ) (257,557 ) Net ₩ 658,979 ₩ 951,795
1 | The above Informatization Promotion Funds are repayable in installments over three years after a two-year grace period, while Inter-Korean Cooperation Fund is repayable in installments over |
2 |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
3 | As of the end of the reporting period, the terms and conditions of the redeemable convertible preferred stocks are as follows: |
Issuers | ||||||||||
Enswers Inc. | SkylifeTV Co., Ltd. (formerly Korea HD Broadcasting Corp.) | KT Telecop Co., Ltd. | ||||||||
Type | The A Redeemable convertible preferred stock | The B Redeemable convertible preferred stock | The C Redeemable convertible preferred stock | Redeemable convertible preferred stock | Redeemable convertible preferred stock | |||||
Issue date | 2008.08.14 | 2009.11.24 | 2011.11.30 | 2010.12.21 | 2011.1.20 | |||||
Issue price | ₩1,598 millions | ₩500 millions | ₩10,001 millions | ₩950 millions | ₩35,000 millions | |||||
Issue price (per share) | ₩272,000 | ₩408,400 | ₩893,400 | ₩500 | ₩26,000 | |||||
Number of share issued | 5,875 | 1,225 | 11,194 | 1,900,000 | 1,346,154 | |||||
Conversion price (per share) | ₩272,000 | ₩408,400 | ₩893,400 | ₩500 | ₩26,000 | |||||
Exercisable date of conversion rights | From the issue Aug 14, 2018 | From the issue Nov 24, 2019 | From the issue | — | From one year | |||||
Redemption price | Issue price + 5% compound annual interest | Issue price + 5% compound annual interest | Issue price + 5% compound annual interest | Issue price + 1% compound annual interest | Issue price of preferred stock not converted + 5% less dividends | |||||
Exercisable date of redemption Rights | From three years | From three years | From three years | From two years | From five years |
Repayment schedule of the Company’s bonds payable and borrowings including the portion of current liabilities as of December 31, 2011,2014, is as follows:
Bonds | Borrowings | Total | ||||||||||||||||||||||||||
(in millions of Korean | In local currency | In foreign currency | Sub- total | In local currency | In foreign currency | Sub- total | ||||||||||||||||||||||
2012.01.01~ 2012.12.31 | (Won) | 1,300,000 | (Won) | 357,523 | (Won) | 1,657,523 | (Won) | 441,418 | (Won) | 14,562 | (Won) | 455,980 | (Won) | 2,113,503 | ||||||||||||||
2013.01.01~ 2013.12.31 | 1,340,950 | 981,126 | 2,322,076 | 201,660 | — | 201,660 | 2,523,736 | |||||||||||||||||||||
2014.01.01~ 2014.12.31 | 1,162,000 | 807,310 | 1,969,310 | 107,051 | — | 107,051 | 2,076,361 | |||||||||||||||||||||
2015.01.01~ 2015.12.31 | 560,000 | 461,320 | 1,021,320 | 92,648 | — | 92,648 | 1,113,968 | |||||||||||||||||||||
Thereafter | 2,817,548 | 345,990 | 3,163,538 | 40,891 | — | 40,891 | 3,204,429 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
(Won) | 7,180,498 | (Won) | 2,953,269 | (Won) | 10,133,767 | (Won) | 883,668 | (Won) | 14,562 | (Won) | 898,230 | (Won) | 11,031,997 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds | Borrowings | Total | ||||||||||||||||||||||||||
(in millions of | In local currency | In foreign currency | Sub-total | In local currency | In foreign currency | Sub-total | ||||||||||||||||||||||
2015 | ₩ | 1,112,045 | ₩ | 485,687 | ₩ | 1,597,732 | ₩ | 1,348,886 | ₩ | 9,026 | ₩ | 1,357,912 | ₩ | 2,955,644 | ||||||||||||||
2016 | 1,621,950 | 387,305 | 2,009,255 | 354,576 | — | 354,576 | 2,363,831 | |||||||||||||||||||||
2017 | 1,219,900 | 1,099,200 | 2,319,100 | 290,493 | — | 290,493 | 2,609,593 | |||||||||||||||||||||
2018 | 1,156,000 | 392,330 | 1,548,330 | 5,723 | — | 5,723 | 1,554,053 | |||||||||||||||||||||
Thereafter | 2,563,384 | 494,640 | 3,058,024 | 301,003 | — | 301,003 | 3,359,027 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | ₩ | 7,673,279 | ₩ | 2,859,162 | ₩ | 10,532,441 | ₩ | 2,300,681 | ₩ | 9,026 | ₩ | 2,309,707 | ₩ | 12,842,148 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Book value and fair value of the Company’s bonds payable and borrowings as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
1.1.2010 | 12.31.2010 | 12.31.2011 | ||||||||||||||||||||||
(in millions of Korean won) Type | Book Value | Fair Value | Book Value | Fair Value | Book Value | Fair Value | ||||||||||||||||||
Bonds payable | (Won) | 8,876,623 | (Won) | 9,092,948 | (Won) | 8,573,561 | (Won) | 8,876,175 | (Won) | 10,100,322 | (Won) | 10,253,221 | ||||||||||||
Short-term borrowings | 368,806 | 368,806 | 478,324 | 478,324 | 392,723 | 392,723 | ||||||||||||||||||
Long-term borrowings (Including current borrowings) | 321,271 | 293,625 | 330,479 | 409,871 | 505,507 | 481,086 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | (Won) | 9,566,700 | (Won) | 9,755,379 | (Won) | 9,382,364 | (Won) | 9,764,370 | (Won) | 10,998,552 | (Won) | 11,127,030 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of short-term borrowings equals its book value because the discounting effect is immaterial.
2013 | 2014 | |||||||||||||||
(in millions of Korean won) Type | Book Value | Fair Value | Book Value | Fair Value | ||||||||||||
Bonds payable | ₩ | 9,989,223 | ₩ | 10,066,124 | ₩ | 10,505,678 | ₩ | 10,537,442 | ||||||||
Long-term borrowings (Including current borrowings) | 859,976 | 798,827 | 1,209,352 | 1,183,645 | ||||||||||||
Short-term borrowings | 634,694 | 634,694 | 1,100,355 | 1,100,355 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 11,483,893 | ₩ | 11,499,645 | ₩ | 12,815,385 | ₩ | 12,821,442 | ||||||||
|
|
|
|
|
|
|
|
The fair values of bonds payable and long-term borrowings are calculated by discounting the expected future cash flows at weighted average borrowing rate. The weighted average borrowing rate is approximately 4.64%3.36% ~ 4.28% as of December 31, 2011 (2010.12.31: 4.83%, 2010.1.1: 5.12%2014 (2013: 4.53%).
18.17. Provisions
The changes in provisions duringfor the years ended December 31, 20102013 and 2011,2014, are as follows:
2010 | 2013 | |||||||||||||||||||||||||||||||
(in millions of Korean won) | Litigation 1 | Asset retirement obligation 2 | Others 3 | Total | Litigation | Asset retirement obligation | Other | Total | ||||||||||||||||||||||||
Balance at 1.1.2010 | (Won) | 17,011 | (Won) | 102,863 | (Won) | 12,031 | (Won) | 131,905 | ||||||||||||||||||||||||
Increase | 9,630 | 20,552 | 43,048 | 73,230 | ||||||||||||||||||||||||||||
Balance at 2013.1.1 | ₩ | 49,083 | ₩ | 109,598 | ₩ | 196,850 | ₩ | 355,531 | ||||||||||||||||||||||||
Increase (Transfer) | 4,440 | 1,936 | 59,462 | 65,838 | ||||||||||||||||||||||||||||
Usage | (2,117 | ) | (6,977 | ) | (18,651 | ) | (27,745 | ) | (714 | ) | (1,966 | ) | (143,911 | ) | (146,591 | ) | ||||||||||||||||
Reversal | (964 | ) | (4,925 | ) | (7,487 | ) | (13,376 | ) | (1,897 | ) | (5,251 | ) | (20,276 | ) | (27,424 | ) | ||||||||||||||||
Others | — | (2,114 | ) | 6,977 | 4,863 | |||||||||||||||||||||||||||
Changes in scope of consolidation | — | 962 | — | 962 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Balance at 12.31.2010 | (Won) | 23,560 | (Won) | 109,399 | (Won) | 35,918 | (Won) | 168,877 | ||||||||||||||||||||||||
Balance at 2013.12.31 | ₩ | 50,912 | ₩ | 105,279 | ₩ | 92,125 | ₩ | 248,316 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Current portion | 23,560 | — | 34,917 | 58,477 | 35,507 | 46 | 79,202 | 114,755 | ||||||||||||||||||||||||
Non-current portion | — | 109,399 | 1,001 | 110,400 | 15,405 | 105,233 | 12,923 | 133,561 |
2011 | ||||||||||||||||
(in millions of Korean won) | Litigation 1 | Asset retirement obligation 2 | Others 3 | Total | ||||||||||||
Balance at 1.1.2011 | (Won) | 23,560 | (Won) | 109,399 | (Won) | 35,918 | (Won) | 168,877 | ||||||||
Increase | 5,377 | 5,444 | 104,940 | 115,761 | ||||||||||||
Usage | (2,499 | ) | (2,962 | ) | (11,822 | ) | (17,283 | ) | ||||||||
Reversal | (936 | ) | (3,285 | ) | (1,128 | ) | (5,349 | ) | ||||||||
Changes in scope of consolidation | 3,413 | — | — | 3,413 | ||||||||||||
Others | — | 55 | 76 | 131 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at 12.31.2011 | (Won) | 28,915 | (Won) | 108,651 | (Won) | 127,984 | (Won) | 265,550 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Current portion | 25,502 | 19 | 97,064 | 122,585 | ||||||||||||
Non-current portion | 3,413 | 108,632 | 30,920 | 142,965 |
2014 | ||||||||||||||||
(in millions of Korean won) | Litigation | Asset retirement obligation | Other | Total | ||||||||||||
Balance at 2014.1.1 | ₩ | 50,912 | ₩ | 105,279 | ₩ | 92,125 | ₩ | 248,316 | ||||||||
Increase (Transfer) | 4,574 | 5,515 | 61,342 | 71,431 | ||||||||||||
Usage | (11,988 | ) | (4,022 | ) | (43,285 | ) | (59,295 | ) | ||||||||
Reversal | (23,259 | ) | (9,549 | ) | (9,963 | ) | (42,771 | ) | ||||||||
Changes in scope of consolidation | — | 899 | (711 | ) | 188 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at 2014.12.31 | ₩ | 20,239 | ₩ | 98,122 | ₩ | 99,508 | ₩ | 217,869 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Current portion | 20,239 | 718 | 90,482 | 111,439 | ||||||||||||
Non-current portion | — | 97,404 | 9,026 | 106,430 |
19. Retirement18. Net Defined Benefit ObligationLiabilities
The amounts recognized in the statements of financial position are determined as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Present value of defined benefit obligations | (Won) | 1,235,683 | (Won) | 1,129,912 | (Won) | 1,462,720 | ₩ | 1,636,593 | ₩ | 1,460,957 | ||||||||||
Fair value of plan assets | (1,149,657 | ) | (865,934 | ) | (1,037,008 | ) | (1,050,510 | ) | (867,119 | ) | ||||||||||
|
|
|
|
| ||||||||||||||||
Liabilities | (Won) | 86,026 | (Won) | 263,978 | (Won) | 425,712 | ₩ | 586,083 | ₩ | 593,838 | ||||||||||
|
|
|
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
The changes in the defined benefit obligations for the years ended December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won) | 2010 | 2011 | 2013 | 2014 | ||||||||||||
Beginning | (Won) | 1,235,683 | (Won) | 1,129,912 | ₩ | 1,724,246 | ₩ | 1,636,593 | ||||||||
Current service cost | 145,119 | 174,089 | 210,466 | 184,870 | ||||||||||||
Interest expense | 68,140 | 53,257 | 57,891 | 48,863 | ||||||||||||
Past service cost | (38,416 | ) | 26 | |||||||||||||
Benefit paid | (53,230 | ) | (81,284 | ) | (97,956 | ) | (131,796 | ) | ||||||||
Costs on settlements | 29,966 | — | ||||||||||||||
Changes due to settlements of plan | (429,751 | ) | — | |||||||||||||
Actuarial losses | 174,499 | 144,856 | ||||||||||||||
Losses on settlements of plan | 2,171 | 666,299 | ||||||||||||||
Changes due to settlements of plan 1 | (188,512 | ) | (1,321,683 | ) | ||||||||||||
Remeasurements: | ||||||||||||||||
Actuarial gains and losses arising from changes in demographic assumptions | 81,616 | 27,745 | ||||||||||||||
Actuarial gains and losses arising from changes in financial assumptions | (144,111 | ) | 204,847 | |||||||||||||
Actuarial gains and losses arising from experience adjustments | (9,521 | ) | 73,819 | |||||||||||||
Changes in scope of Consolidation | (2,098 | ) | 41,864 | 303 | 71,400 | |||||||||||
|
|
|
| |||||||||||||
Ending | (Won) | 1,129,912 | (Won) | 1,462,720 | ₩ | 1,636,593 | ₩ | 1,460,957 | ||||||||
|
|
|
|
1 | The payment of the benefits for voluntary retirement amounts to₩1,215,407 million in 2014. |
Changes in the fair value of plan assets for the years ended December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won) | 2010 | 2011 | 2013 | 2014 | ||||||||||||
Beginning | (Won) | 1,149,657 | (Won) | 865,934 | ₩ | 1,175,003 | ₩ | 1,050,510 | ||||||||
Expected return on plan assets | 64,047 | 41,146 | ||||||||||||||
Interest income | 42,964 | 30,966 | ||||||||||||||
Remeasurements: | ||||||||||||||||
Return on plan assets (excluding amounts included in interest income) | 2,612 | (5,775 | ) | |||||||||||||
Benefits paid | (57,866 | ) | (61,085 | ) | ||||||||||||
Changes due to settlements of plan 1 | (138,220 | ) | (381,501 | ) | ||||||||||||
Employer contributions | 9,772 | 131,421 | 26,161 | 182,904 | ||||||||||||
Plan participants’ contributions | 689 | 18,571 | ||||||||||||||
Benefits paid | (31,927 | ) | (44,396 | ) | ||||||||||||
Changes due to settlements of plan | (313,872 | ) | — | |||||||||||||
Changes in scope of Consolidation | (2,217 | ) | 22,190 | |||||||||||||
Actuarial gains (losses) | (10,215 | ) | 2,142 | |||||||||||||
Changes in scope of consolidation | (144 | ) | 51,100 | |||||||||||||
|
|
|
| |||||||||||||
Ending | (Won) | 865,934 | (Won) | 1,037,008 | ₩ | 1,050,510 | ₩ | 867,119 | ||||||||
|
|
|
|
1 | The payment from the plan assets for voluntary retirement amounts to₩307,268 million in 2014. |
Amounts recognized in the statement of income for the years ended December 31, 20102012, 2013 and 2011,2014, are as follows:
(in millions of Korean won) | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||
Current service cost | (Won) | 145,119 | (Won) | 174,089 | ₩ | 206,389 | ₩ | 210,466 | ₩ | 184,870 | ||||||||||
Interest cost | 68,140 | 53,257 | ||||||||||||||||||
Expected return on plan assets | (64,047 | ) | (41,146 | ) | ||||||||||||||||
Past service cost | (38,416 | ) | 26 | |||||||||||||||||
Costs on settlements | 29,966 | — | ||||||||||||||||||
Net Interest cost | 16,369 | 14,927 | 17,897 | |||||||||||||||||
Losses on settlements | (3,630 | ) | 2,171 | 666,299 | ||||||||||||||||
Transfer out | (8,609 | ) | (4,054 | ) | (8,763 | ) | (10,502 | ) | (6,173 | ) | ||||||||||
|
|
|
|
| ||||||||||||||||
Total expenses | (Won) | 132,153 | (Won) | 182,172 | ₩ | 210,365 | ₩ | 217,062 | ₩ | 862,893 | ||||||||||
|
|
|
|
|
Principal actuarial assumptions used are as follows:
1.1.2010 | 12.31.2010 | 12.31.2011 | 2012.12.31 | 2013.12.31 | 2014.12.31 | |||||||||||||
Discount rate | 5.07% ~ 5.90% | 4.00% ~ 5.70% | 4.00% ~ 4.80% | 3.13% ~ 4.10% | 3.10% ~ 4.05% | 2.37% ~ 3.80% | ||||||||||||
Expected rate of return | 3.00% ~ 6.60% | 3.30% ~ 5.80% | 4.10% ~ 5.80% | |||||||||||||||
Future salary increase | 1.50% ~ 6.00% | 2.00% ~ 6.90% | 2.00% ~ 9.30% | 3.00% ~ 8.10% | 2.10% ~ 8.44% | 2.00% ~ 8.10% |
Details
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
As of December 31, 2014, total amounts of the plan assets are invested in principal and interest guaranteed financial instruments.
The sensitivity of the defined benefit obligations as of December 31, 2014, to changes in the weighted principal assumptions is:
Effect on defined benefit obligation | ||||||||||||
(in percentage, in millions of Korean won) | Changes in principal assumption | Increase in principal assumption | Decrease in principal assumption | |||||||||
Discount rate | 0.5% point | ₩ | (67,774 | ) | ₩ | 71,340 | ||||||
Salary growth rate | 0.5% point | 68,691 | (65,861 | ) |
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The sensitivity of the defined benefit obligation to changes in principal actuarial assumptions is calculated using the projected unit credit method, the same method applied when calculating the defined benefit obligations recognized on the statement of financial position.
The Company annually reviews funding levels of plan assets and has plan asset policies that require maintaining the funding level of the Company equal to or more than the level required under the Employee Retirement Benefit Security Act. Expected contributions to post-employment benefit plans for the year ending December 31, 2015, are₩274,410 million.
Expected maturity analysis of undiscounted pension benefits as of January 1, 2010 and December 31, 2010 and 2011, are2014, is as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | |||||||||
Pension deposit | (Won) | — | (Won) | — | (Won) | 1,009,754 | ||||||
Severance insurance deposits | 1,149,657 | 865,934 | 27,254 | |||||||||
|
|
|
|
|
| |||||||
Total | (Won) | 1,149,657 | (Won) | 865,934 | (Won) | 1,037,008 | ||||||
|
|
|
|
|
|
(in millions of Korean won) | Less than 1 year | Between 1 and 2 years | Between 2 and 5 years | Over 5 years | Total | |||||||||||||||
Pension benefits | ₩ | 125,308 | ₩ | 96,948 | ₩ | 366,005 | ₩ | 4,122,574 | ₩ | 4,710,835 |
The weighted average duration of the defined benefit obligations is 8.9 years.
19. Defined Contribution Plan
Actual return onRecognized expense related to the defined contribution plan assets for the yearsyear ended December 31, 20102014, is₩25,423 million (2012:₩1,703 million, 2013:₩23,857 million).
KT Corporation and 2011, are as follows:Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(in millions of Korean won) | 12.31.2010 | 12.31.2011 | ||||||
Actual return on plan assets | (Won) | 53,832 | (Won) | 43,288 |
Details of adjustments for the differences between initial assumptions and actual figures as of January 1, 2010 and December 31, 2010 and 2011, are as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | |||||||||
Present value of the defined benefit obligations | (Won) | 1,235,683 | (Won) | 1,129,912 | (Won) | 1,462,720 | ||||||
Fair value of plan assets | (1,149,657 | ) | (865,934 | ) | (1,037,008 | ) | ||||||
Deficit in the plan | 86,026 | 263,978 | 425,712 | |||||||||
Experience adjustments on defined benefit liabilities | — | (60,691 | ) | (2,900 | ) | |||||||
Experience adjustments on plan assets | — | (10,215 | ) | 2,142 |
20. Commitments and Contingencies
As of December 31, 2011,2014, major commitments with local financial institutions are as follows:
(in millions of Korean won and thousands of foreign currencies) | Financial institution | Currency | Limit | Used amount | ||||||||||
Bank overdraft | Kookmin Bank and others | KRW | 1,659,000 | — | ||||||||||
Commercial papers factoring | Korea Exchange Bank | KRW | 277,000 | — | ||||||||||
Loan on information and communications fund | Shinhan Bank and others | KRW | 39,138 | 21,924 | ||||||||||
Collateralized loan on accounts receivable-trade | Kookmin Bank and others | KRW | 618,000 | 91,384 | ||||||||||
Collection for foreign currency denominated checks | Korea Exchange Bank | USD | 1,000 | — | ||||||||||
Plus electronic bill | Industrial Bank of Korea | KRW | 50,000 | — | ||||||||||
Comprehensive credit line | Korea Exchange Bank | KRW | 5,000 | — | ||||||||||
Others | Kookmin Bank and others | KRW | 130,000 | 2,000 | ||||||||||
USD | 83,500 | 14,439 | ||||||||||||
|
|
|
|
|
| |||||||||
Total | KRW | 2,778,138 | 115,308 | |||||||||||
USD | 84,500 | 14,439 | ||||||||||||
|
|
|
|
|
|
(in millions of Korean won and Financial institution Bank overdraft Commercial papers Factoring Collateralized loan on accounts receivable-trade FX forward trading commitment Plus electronic notes Payable Loan on information and communications fund Loans for working capital Comprehensive credit line Green energy factoring Facility loans Comprehensive credit line Credit line for call loan Total
thousands of foreign currencies) Currency Limit Used
amount Kookmin Bank and others KRW 1,492,903 5,903 Korea Exchange Bank and others KRW 1,015,000 835,000 Kookmin Bank and others KRW 746,000 112,221 Shinhan Bank USD 11,500 — Industrial Bank of Korea KRW 50,000 1,995 Shinhan Bank KRW 1,539 1,539 Industrial Bank of Korea and others KRW 674,000 219,000 Korea Exchange Bank KRW 15,000 11,687 Shinhan Bank KRW 279 279 Korea Development Bank and others KRW 390,000 348,167 Shinhan Bank KRW 50,000 20,000 Yuanta Securities Korea Co., Ltd. KRW 120,000 — KRW 4,554,721 1,555,791 USD 11,500 —
As of December 31, 2011,2014, guarantees received from financial institutions are as follows:
(in millions of Korean won and thousands of foreign currencies) | Financial institution | Currency | Limit | Used amount | ||||||||||
Performance guarantee for construction | Seoul Guarantee Insurance | KRW | 36,498 | — | ||||||||||
Performance guarantee | Export-Import Bank of Korea | USD | 3,835 | 3,835 | ||||||||||
SAR | 1 | 735 | 735 | |||||||||||
DZD | 2 | 25,863 | 25,863 | |||||||||||
Seoul Guarantee Insurance | KRW | 12,861 | — | |||||||||||
Korea Software Financial Cooperative | KRW | 184,094 | 184,094 | |||||||||||
Bid guarantee | Korea Software Financial Cooperative | KRW | 10,202 | 10,202 | ||||||||||
Advances received guarantee | Export-Import Bank of Korea | USD | 2,925 | 2,925 | ||||||||||
DZD | 77,589 | 77,589 | ||||||||||||
Prepayment guarantee | Korea Software Financial Cooperative | KRW | 116,895 | 116,895 | ||||||||||
Warranties guarantee | Export-Import Bank of Korea | USD | 971 | 971 | ||||||||||
Korea Software Financial Cooperative | KRW | 22,260 | 22,260 | |||||||||||
Currency guarantee | Korea exchange Bank | KRW | 23,600 | 1,930 | ||||||||||
Woori Bank | KRW | 50,000 | 3,887 | |||||||||||
Shinhan Bank | KRW | 44,550 | 26,100 | |||||||||||
Korea Software Financial Cooperative | KRW | 5,770 | 5,770 | |||||||||||
Export-Import Bank of Korea | KRW | 8,369 | — | |||||||||||
Foreign currency guarantee | Kookmin Bank | USD | 6,866 | 4,039 | ||||||||||
Shinhan Bank | USD | 9,877 | 867 | |||||||||||
Korea exchange Bank | USD | 45,000 | 41,255 | |||||||||||
HSBC | USD | 40,000 | 40,000 | |||||||||||
Guarantee deposit | Seoul Guarantee Insurance | KRW | 31,013 | — | ||||||||||
Guarantee for import letters of credit | Korea Exchange Bank | USD | 5,000 | — | ||||||||||
|
|
|
| |||||||||||
Total | KRW | 546,112 | 371,138 | |||||||||||
USD | 114,474 | 93,892 | ||||||||||||
SAR | 735 | 735 | ||||||||||||
DZD | 103,452 | 103,452 | ||||||||||||
|
|
|
|
|
|
Details of collaterals that KT Capital Co.,Ltd., a subsidiary of KT Corporation, is provided with by third parties as of December 31, 2011, are as follows:
( |
|
| Limit | |||||||
| KRW | 85,291 | ||||||||
USD | 5,393 | |||||||||
1 | 25,863 | |||||||||
Guarantee for import letters of credit | Kookmin Bank and others | USD | 73,980 | |||||||
Guarantee for payment in foreign currency | Korea Exchange Bank and others | PLN | 2 | 23,000 | ||||||
USD | 43,573 | |||||||||
Guarantee for payment in local currency | Woori Bank and others | KRW | 12,338 | |||||||
Comprehensive guarantee for payment in foreign currency | Kookmin Bank | KRW | 16,488 | |||||||
Warranty guarantee | Seoul Guarantee Insurance | KRW | 948 | |||||||
Guarantee for advances received | Export-Import Bank of Korea | DZD | 1 | 77,589 | ||||||
USD | 2,925 | |||||||||
Guarantees for accounts receivable from the handset sales | Seoul Guarantee Insurance | KRW | 674,768 | |||||||
Bid guarantee | Korea Software Financial Cooperative | KRW | 23,214 | |||||||
Performance guarantee /Warranty guarantee | Korea Software Financial Cooperative | KRW | 207,681 | |||||||
Prepayment and other guarantee | Korea Software Financial Cooperative and others | KRW | 55,486 | |||||||
Guarantees for licensing | Seoul Guarantee Insurance | KRW | 11,666 | |||||||
Guarantees for deposits | Seoul Guarantee Insurance | KRW | 4,302 | |||||||
KRW | 1,092,182 | |||||||||
Total | USD | 125,871 | ||||||||
DZD | (1) | 103,452 | ||||||||
PLN | (2) | 23,000 |
As
1 | Algerian Dinar. |
2 | Polish Zloty. |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Details of collaterals that KT Capital Co., Ltd., a subsidiary, is provided with by third parties as of December 31, 2011, guarantees provided by the Company for a third party,2014, are as follows:
(In millions of Korean won) |
| |||||||
| Movables, real-estate, and other | |||||||
|
As of December 31, 2014, guarantees provided by the Company for a third party, are as follows:
Samsung Engineering Co.and others
Other Project Financing 1
|
(in millions of Korean won) | Creditor | Limit | Used amount | Period | ||||||||||||
Individuals with the right of ownership of Gyeryeong Rishivill II Apartment | Shinhan Bank | ₩ | 50,000 | ₩ | 23,375 | | Jun 10, 2014 ~ May 31, 2016 | |
As of December 31, 2011,2014, based on the investors’ agreement, the Company has an obligation to provide funding to Smart Channel Co., Ltd. if Smart Channel Co, Ltd. is unable to fulfill its obligation. The Company pledged investment securities in Smart Channel Co., Ltd. as collateral (Note 14). Furthermore, the Company provided allowance for doubtful receivables of₩49,362 million against other receivables from Smart Channel Co., Ltd.
The Controlling Company is jointly and severally obligated with KT Sat Co., Ltd. to pay KT Sat Co., Ltd.’s liabilities prior to spin-off. As of December 31, 2014, the Company and KT Sat Co., Ltd. are jointly and severally liable for reimbursement of₩7,801 million.
For the year ended December 31, 2014, the Company made agreements with the Securitization Specialty Companies Olleh KT Thirteenth to Eighteenth Securitization Specialty Co., Ltd. (2013: Olleh KT Seventh to Twelfth Securitization Specialty Co., Ltd.), and disposed of part of its trade receivables related to handset sales(in 2014 :₩2,133,546 million, in 2013 :₩2,684,017 million). Loss on the disposal of trade receivables₩16,373 million (2013 :₩7,673 million) was recognized. The Company also made asset management agreements with each securitization specialty company and will receive the related management fees.
As of December 31, 2014, the Company is a defendant in 142225 lawsuits, with an aggregate claim amount of(Won)₩ 37,065million.230,006 million (2013:₩159,434 million). As of December 31, 2011,2014, litigation provisions of(Won)₩ 28,91520,239 million for various pending lawsuits and unasserted claims are recorded as liabilities for potential loss in the ordinary course of business. The Company cannot yet predict the final outcomeoutcomes of the cases because these casesmatters involve significant uncertainties related to the legal theory or the nature of the claims as well as the complexity of the facts.
On March 6, 2014, the website of the Controlling Company was accessed by hackers and personal information of the customers was stolen. There are lawsuits against the Controlling Company over this breach seeking damages of approximately₩6,661 million. The resolution of the lawsuit cannot yet be predicted.reasonably predicted because it involves significant uncertainties at early stages. Also, there may be more lawsuits filed against the Company in the future. However, the size and result of any potential lawsuits cannot yet be reasonably predicted because it is not sure yet whether the customers whose personal information was stolen would litigate or not.
According to the financial and other covenants included in certain bonds and borrowings, the Company is required to maintain certain financial ratios such as debt/debt to equity ratio, use the funds for the designated purpose and report to the creditors periodically. The covenant also contains restriction on provision of additional collaterals and disposal of certain assets. As of December 31, 2011,2014, the Company is in compliance with the related covenants.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Asia Broadcast Satellite Holdings Ltd(ABS), sued the Controlling Company and its subsidiary KT Sat at The International Court of Arbitration of the International Chamber of Commerce on December 31, 2014, on the ownership and compensation of damages due to the sales contract of the satellite KOREASAT. In addition, ABS sued the Controlling Company and its subsidiary KT Sat at the International Centre for Dispute Resolution of the American Arbitration Association on December 24, 2013, on the compensation of damages of the breach of entrustment contract. Currently, the mediator selection process for the Controlling Company, KT Sat and ABS is complete, and the process of arbitration is in progress. The final outcome of this arbitration cannot yet be predicted.
21. Lease
The Company’s non-cancellable lease arrangements are as follows:
The Company as the Lessee
Finance Lease
Details of finance lease assets as of January 1, 2010 and December 31, 20102013 and 2011,2014 are as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Acquisition costs | (Won) | 35,233 | (Won) | 137,182 | (Won) | 166,181 | ₩ | 99,702 | ₩ | 94,247 | ||||||||||
Accumulated depreciation | (30,382 | ) | (83,348 | ) | (67,250 | ) | (27,980 | ) | (39,032 | ) | ||||||||||
|
|
|
|
| ||||||||||||||||
Net balance | (Won) | 4,851 | (Won) | 53,834 | 98,931 | ₩ | 71,722 | ₩ | 55,215 | |||||||||||
|
|
|
|
|
As of December 31, 2014, the Company recognizes financial lease assets as other property and equipment. The related depreciation amounted to(Won)₩ 26,02419,560 million (2010:(2013:(Won)₩ 28,31911,483 million) for the year ended December 31, 2011.2014.
Details of future minimum lease payments as of January 1, 2010 and December 31, 20102013 and 2011,2014 under finance lease contracts are summarized below:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||||||||||||||
Type | Minimum lease payments | Present Values | Minimum lease payments | Present Values | Minimum lease payments | Present Values | ||||||||||||||||||||||||||
Total amount of minimum lease payments | ||||||||||||||||||||||||||||||||
Within one year | (Won) | 6,519 | (Won) | 6,224 | (Won) | 46,144 | (Won) | 33,089 | (Won) | 66,635 | (Won) | 46,155 | ₩ | 22,498 | ₩ | 22,516 | ||||||||||||||||
From one year to five years | 1,348 | 1,329 | 74,118 | 60,767 | 116,627 | 90,042 | 52,877 | 37,382 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | (Won) | 7,867 | (Won) | 7,553 | (Won) | 120,262 | (Won) | 93,856 | (Won) | 183,262 | (Won) | 136,197 | ₩ | 75,375 | ₩ | 59,898 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Unrealized interest expense | 7,166 | 4,891 | ||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Net amount of minimum lease payments | ||||||||||||||||||||||||||||||||
Within one year | 19,486 | 20,155 | ||||||||||||||||||||||||||||||
From one year to five years | 48,723 | 34,852 | ||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total | ₩ | 68,209 | ₩ | 55,007 | ||||||||||||||||||||||||||||
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Operating Lease
Details of future minimum lease payments as of January 1, 2010 and December 31, 20102013 and 2011,2014, under operating lease contracts are summarized below:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Within one year | (Won) | 19,923 | (Won) | 23,971 | (Won) | 52,053 | ₩ | 78,245 | ₩ | 77,727 | ||||||||||
From one year to five years | 7,734 | 17,915 | 158,560 | 308,292 | 312,305 | |||||||||||||||
Thereafter | — | — | 217,115 | 246,632 | 165,799 | |||||||||||||||
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|
|
|
| ||||||||||||||||
Total | (Won) | 27,657 | (Won) | 41,886 | (Won) | 427,728 | ₩ | 633,169 | ₩ | 555,831 | ||||||||||
|
|
|
|
|
Operating lease expenses incurred for the years ended December 31, 20102012, 2013 and 2011,2014 amounted to(Won)₩ 23,68061,201 million,₩77,657 million, and(Won)₩ 41,49979,359 million, respectively.
The Company as the Lessor
Finance Lease
Details of finance lease assets as of January 1, 2010, isDecember 31, 2013, are as follows:
(in millions of Korean won) | Minimum lease payments | Unguaranteed residual value | Gross investment in the lease | Unaccrued interest | Net investment in the lease | Minimum lease payments | Gross investment in the lease | Unaccrued interest | Net investment in the lease | |||||||||||||||||||||||||||
Within one year | (Won) | 228,346 | (Won) | 114 | (Won) | 228,460 | (Won) | (25,466 | ) | (Won) | 202,994 | ₩ | 337,804 | ₩ | 337,804 | ₩ | (38,779 | ) | ₩ | 299,025 | ||||||||||||||||
From one year to five years | 358,948 | 5,802 | 364,750 | (39,774 | ) | 324,976 | 454,542 | 454,542 | (32,922 | ) | 421,620 | |||||||||||||||||||||||||
Thereafter | 8,667 | — | 8,667 | (413 | ) | 8,254 | 10,395 | 10,395 | (913 | ) | 9,482 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Total | (Won) | 595,961 | (Won) | 5,916 | (Won) | 601,877 | (Won) | (65,653 | ) | (Won) | 536,224 | ₩ | 802,741 | ₩ | 802,741 | ₩ | (72,614 | ) | ₩ | 730,127 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
Details of finance lease assets as of December 31, 2010,2014, are as follows:
(in millions of Korean won) | Minimum lease payments | Unguaranteed residual value | Gross investment in the lease | Unaccrued interest | Net investment in the lease | |||||||||||||||
Within one year | (Won) | 240,988 | (Won) | — | (Won) | 240,988 | (Won) | (41,293 | ) | (Won) | 199,695 | |||||||||
From one year to five years | 480,037 | — | 480,037 | (74,407 | ) | 405,630 | ||||||||||||||
Thereafter | 10,248 | — | 10,248 | (1,577 | ) | 8,671 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | (Won) | 731,273 | (Won) | — | (Won) | 731,273 | (Won) | (117,277 | ) | (Won) | 613,996 | |||||||||
|
|
|
|
|
|
|
|
|
|
Details of finance lease assets as of December 31, 2011, are as follows:
(in millions of Korean won) | Minimum lease payments | Unguaranteed residual value | Gross investment in the lease | Unaccrued interest | Net investment in the lease | Minimum lease payments | Gross investment in the lease | Unaccrued interest | Net investment in the lease | |||||||||||||||||||||||||||
Within one year | (Won) | 290,511 | (Won) | — | (Won) | 290,511 | (Won) | (39,066 | ) | (Won) | 251,445 | ₩ | 286,570 | ₩ | 286,570 | ₩ | (20,794 | ) | ₩ | 265,776 | ||||||||||||||||
From one year to five years | 514,243 | — | 514,243 | (42,951 | ) | 471,292 | 363,277 | 363,277 | (24,116 | ) | 339,161 | |||||||||||||||||||||||||
Thereafter | 25,960 | — | 25,960 | (3,171 | ) | 22,789 | 874 | 874 | (65 | ) | 809 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Total | (Won) | 830,714 | (Won) | — | (Won) | 830,714 | (Won) | (85,188 | ) | (Won) | 745,526 | ₩ | 650,721 | ₩ | 650,721 | ₩ | (44,975 | ) | ₩ | 605,746 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
Details of bad debts allowance for finance lease receivables as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Within one year | (Won) | (4,007 | ) | (Won) | (4,924 | ) | (Won) | (2,742 | ) | ₩ | 4,817 | ₩ | 6,794 | |||||||
Over five years | (1,306 | ) | — | — | ||||||||||||||||
From one year to five years | 15,245 | 14,412 | ||||||||||||||||||
Thereafter | (8,146 | ) | (11,733 | ) | (6,124 | ) | 128 | 127 | ||||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | (13,459 | ) | (Won) | (16,657 | ) | (Won) | (8,866 | ) | ₩ | 20,190 | ₩ | 21,333 | |||||||
|
|
|
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Operating Lease
Details of operating lease assets as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | |||||||||
Acquisition costs | (Won) | 228,286 | (Won) | 22,761 | (Won) | 24,866 | ||||||
Accumulated depreciation | (116,068 | ) | (11,075 | ) | (6,614 | ) | ||||||
|
|
|
|
|
| |||||||
Net balance | (Won) | 112,218 | (Won) | 11,686 | (Won) | 18,252 | ||||||
|
|
|
|
|
|
(in millions of Korean won) Acquisition costs Accumulated depreciation Net balance 2013 2014 ₩ 2,073,592 ₩ 2,698,249 (606,148 ) (754,531 ) ₩ 1,467,444 ₩ 1,943,718
Details of future minimum lease payments as of January 1, 2010 and December 31, 20102013 and 2011,2014, under operating lease contracts are summarized below:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Within one year | (Won) | 7,339 | (Won) | 5,226 | (Won) | 7,381 | ₩ | 203,014 | ₩ | 547,194 | ||||||||||
From one year to five years | 3,615 | 2,203 | 7,153 | 687,162 | �� | 673,117 | ||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | 10,954 | (Won) | 7,429 | (Won) | 14,534 | ₩ | 890,176 | ₩ | 1,220,311 | ||||||||||
|
|
|
|
|
22. Capital Stock
As of January 1, 2010 and December 31, 20102013 and 2011,2014, the Company’s number of authorized shares is one billion.
1.1.2010 | 12.31.2010 | 12.31.2011 | ||||||||||||||||||||||||||||||||||
Number of issued shares | Par value per share (Korean won) | Common stock (in millions of Korean won) | Number of outstanding shares | Par value per share (Korean won) | Common stock (in millions of Korean won) | Number of outstanding shares | Par value per share (Korean won) | Common stock (in millions of Korean won) | ||||||||||||||||||||||||||||
Common stock 1 | 261,111,808 | (Won) | 5,000 | (Won) | 1,564,499 | 261,111,808 | (Won) | 5,000 | (Won) | 1,564,499 | 261,111,808 | (Won) | 5,000 | (Won) | 1,564,499 |
2013 | 2014 | |||||||||||||||||||||||
Number of outstanding shares | Par value per share (Korean won) | Common stock (in millions of Korean won) | Number of outstanding shares | Par value per share (Korean won) | Common stock (in millions of Korean won) | |||||||||||||||||||
Common stock1 | 261,111,808 | ₩ | 5,000 | ₩ | 1,564,499 | 261,111,808 | ₩ | 5,000 | ₩ | 1,564,499 |
1 | The Company retired 51,787,959 treasury shares against retained earnings. Therefore, the common stock amount differs from the amount resulting from multiplying the number of shares issued by |
23. Retained Earnings
Details of retained earnings as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Legal reserve1 | (Won) | 780,499 | (Won) | 780,499 | (Won) | 782,249 | ₩ | 782,249 | ₩ | 782,249 | ||||||||||
Voluntary reserves | 4,758,012 | 4,651,362 | 4,911,362 | |||||||||||||||||
Voluntary reserves 2 | 4,911,362 | 4,911,362 | ||||||||||||||||||
Unappropriated retained earnings | 4,154,526 | 4,034,307 | 4,526,022 | 4,325,778 | 2,874,788 | |||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | 9,693,037 | (Won) | 9,466,168 | (Won) | 10,219,633 | ₩ | 10,019,389 | ₩ | 8,568,399 | ||||||||||
|
|
|
|
|
1 | The Commercial Code of the Republic of Korea requires the Company to appropriate, as a legal reserve, an amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued capital stock. The reserve is not available for the payment of cash dividends, but may be transferred to capital stock with the approval of the Company’s Board of Directors or used to reduce accumulated deficit, if any, with the ratification of the Company’s majority shareholders. |
2 | The provision of research and development of human is separately accumulated with tax reserve fund during earned surplus disposal by Tax Reduction and Exemption Control Act of Korea. Reversal of this provision can be paid out as dividends according to related tax law. |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
24. Accumulated Other Comprehensive Income and Other Components of Equity
As of January 1, 2010 and December 31, 20102013 and 2011,2014, the details of the Controlling Company’s accumulated other comprehensive income are as follows:
(in millions of Korean won) | 2013 | 2014 | ||||||
Investments in associates and joint ventures | ₩ | (12,681 | ) | ₩ | (8,955 | ) | ||
Loss on derivatives | (9,337 | ) | (37,158 | ) | ||||
Available-for-sale | 55,836 | 76,725 | ||||||
Foreign currency translation adjustment | (9,280 | ) | (4,822 | ) | ||||
|
|
|
| |||||
Total | ₩ | 24,538 | ₩ | 25,790 | ||||
|
|
|
|
Changes in accumulated other comprehensive income for the years ended December 31, 2013 and 2014, are as follows:
2013 | ||||||||||||||||
(in millions of Korean won) | Beginning | Increase / decrease | Reclassification as gain or loss | Ending | ||||||||||||
Investments in associates and joint ventures | ₩ | (15,251 | ) | ₩ | 2,570 | ₩ | — | ₩ | (12,681 | ) | ||||||
Gain or loss on derivatives | (4,626 | ) | (71,778 | ) | 67,067 | (9,337 | ) | |||||||||
Available-for-sale | 23,738 | 25,814 | 6,284 | 55,836 | ||||||||||||
Foreign currency translation adjustment | (2,536 | ) | (6,744 | ) | — | (9,280 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 1,325 | ₩ | (50,138 | ) | ₩ | 73,351 | ₩ | 24,538 | |||||||
|
|
|
|
|
|
|
|
2014 | ||||||||||||||||
(in millions of Korean won) | Beginning | Increase / decrease | Reclassification as gain or loss | Ending | ||||||||||||
Investments in associates and joint ventures | ₩ | (12,681 | ) | ₩ | 3,726 | ₩ | — | ₩ | (8,955 | ) | ||||||
Gain or loss on derivatives | (9,337 | ) | 16,974 | (44,795 | ) | (37,158 | ) | |||||||||
Available-for-sale | 55,836 | 20,889 | — | 76,725 | ||||||||||||
Foreign currency translation adjustment | (9,280 | ) | 4,458 | — | (4,822 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | ₩ | 24,538 | ₩ | 46,047 | ₩ | (44,795 | ) | ₩ | 25,790 | |||||||
|
|
|
|
|
|
|
|
As of December 31, 2013 and 2014, the Company’s other components of equity are as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Treasury stock | (Won) | (956,159 | ) | (Won) | (955,083 | ) | (Won) | (953,608 | ) | |||||||||||
Loss on disposal of treasury stock | (890,650 | ) | (295 | ) | — | |||||||||||||||
Treasury stock 1 | ₩ | (922,175 | ) | ₩ | (866,316 | ) | ||||||||||||||
Loss on disposal of treasury stock 2 | (2,170 | ) | (21,847 | ) | ||||||||||||||||
Share-based payments | 3,619 | 7,669 | 7,455 | (9,609 | ) | 3,627 | ||||||||||||||
Others 1 | (310,957 | ) | (310,584 | ) | (551,136 | ) | ||||||||||||||
Others 3 | (386,989 | ) | (376,173 | ) | ||||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | (2,154,147 | ) | (Won) | (1,258,293 | ) | (Won) | (1,497,289 | ) | ₩ | (1,320,943 | ) | ₩ | (1,260,709 | ) | |||||
|
|
|
|
|
1 | During the current period, the Company disposed of 1,059,060 shares (2013: 167,842 shares) of treasury stock |
2 |
| Profit and loss incurred from transactions with non-controlling |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
As of January 1, 2010 and December 31, 20102013 and 2011,2014, the details of treasury stock are as follows:
1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | ||||||||||||||||
Number of shares | 17,915,340 | 17,895,964 | 17,897,147 | 17,308,160 | 16,249,100 | |||||||||||||||
Amounts(In millions of Korean won) | (Won) | 965,159 | (Won) | 955,083 | (Won) | 953,608 | ₩ | 922,175 | ₩ | 866,316 |
Treasury stock is expected to be used for the stock compensation for the Company’s directors and employees and other purposes.
25. Share-Based Payments
The controlling Company’sdetails of share-based compensation programs include the employee stock options and stock grants. The Company measures and recognizes compensation cost for all share-based payment awards made to employees and directors, including grants of employee stock options and employee stock grants.
The fair value of awards granted that are expected to ultimately vest is recognized as expense over the requisite service periods. The number of options expected to vest equals the total options granted less an estimation of the number of forfeitures expected to occur prior to vesting. The forfeiture rate is calculated based on historical data and is adjusted if actual forfeitures differ significantly from the original estimates. The effect of any change in estimated forfeitures would be recognized through a cumulative adjustment that would be included in compensation cost in the period of the change in estimate.
Stock Options
The Company has granted stock options to its executive officers and directorspayments as of December 31, 2011, in accordance with the stock option plan approved by its board of directors, details of which are as follows:
4th grant | KTF-4th1 | |||
Grant date | 2005.2.4 | 2005.3.4 | ||
Grantee | Former executives | Executives and former outside directors | ||
Number of basic allocated shares upon grant | 50,800 shares | 92,637 shares | ||
Number of additional shares related to business performance upon grant | 20,000 shares | — | ||
Number of shares expected to be exercised upon grant | 60,792 shares | 92,637 shares | ||
Number of settled or forfeited shares | 10,800 shares | 46,888 shares | ||
Number of expired shares as of December 31, 2011 | — | — | ||
Number of basic allocated shares as of December 31, 2011 | 40,000 shares | 45,749 shares | ||
Number of additional shares related to business performance as of December 31, 2011 | 3,153 shares | — | ||
Number of shares expected to be exercised | 43,153 shares | 45,749 shares | ||
Fair value per share (in Korean won) | (Won)12,322 | (Won)4,328 | ||
Total compensation cost (in millions of Korean won) | (Won) 531million | (Won) 343 million | ||
Exercise price per share (in Korean won) | (Won)54,600 | (Won)42,684 | ||
Exercise period | 2007.2.5~2012.2.4 | 2007.3.5~2012.3.4 | ||
Valuation method | Fair value method | Fair value method |
Upon exercise, the controlling Company can elect one of the following settlement methods: issuance of new shares, issuance of treasury stock or cash settlement, subject to certain circumstances. The changes of the number of stock options and a weighted-average exercise prices, as of December 31, 2010 and 2011 are as follows:
2010 | ||||||||||||||||||||
(in Korean won) | Beginning | Expired | Exercised 1 | Ending | Number of shares exercisable | |||||||||||||||
2nd grant | 3,000 | 3,000 | — | — | — | |||||||||||||||
4th grant | 43,153 | — | — | 43,153 | 43,153 | |||||||||||||||
KTF-2nd | 20,570 | 20,570 | — | — | — | |||||||||||||||
KTF-3rd | 219,909 | 35,811 | 184,098 | — | — | |||||||||||||||
KTF-4th | 79,200 | — | 33,451 | 45,749 | 45,749 | |||||||||||||||
Total | 365,832 | 59,381 | 217,549 | 88,902 | 88,902 | |||||||||||||||
Weighted-average exercise prices | 44,754 | 49,794 | 41,861 | 48,468 | ||||||||||||||||
2011 | ||||||||||||||||||||
(in Korean won) | Beginning | Expired | Exercised 1 | Ending | Number of shares exercisable | |||||||||||||||
4th grant | 43,153 | — | — | 43,153 | 43,153 | |||||||||||||||
KTF-4th | 45,749 | — | — | 45,749 | 45,749 | |||||||||||||||
Total | 88,902 | — | — | 88,902 | 88,902 | |||||||||||||||
Weighted-average exercise prices | 48,468 | — | — | 48,468 |
The controlling Company adopted the fair value method to measure compensation costs based on the various valuation assumptions and methods, which are as follows:
4th grant | KTF-4th 1 | |||||||
Risk-free interest rate | 4.43 | % | 2.78 | % | ||||
Expected duration(year) | 4.5 ~ 5.5 | 1.5 | ||||||
Expected volatility | 33.41%~42.13 | % | 35.03 | % | ||||
Expected dividend yield ratio | 5.86 | % | 3.54 | % |
Other share-based compensation
The Company provided stock grants subject to both the service period and business performance goals.
The fair value of each stock grant awarded was estimated on the date of grant for performance based grants assuming that performance goals will be achieved. The expected term for grants is generally one year. The stock grants are settled with the new shares issued or treasury stock owned by the Company upon vesting. The fair value is based on the market price of the Company’s stock on the grant date. Compensation cost is recognized over the requisite vesting period and adjusted for actual forfeitures before vesting.
The details of stocks grants as of December 31, 20112014, are as follows:
| ||
Grant date | ||
Grantee | ||
| ||
| ||
Vesting conditions | Service condition: 1 year Non-market performance condition: achievement of performance | |
Fair value per option (in Korean won) | ||
Total compensation costs (in Korean won) | ||
Estimated exercise date (exercise date) | During | |
Valuation method | Fair value method |
Changes ofThe changes in the number of other share-based payments,stock options and the weighted-average exercise price, as of December 31, 20102013 and 20112014, are as follows:
2010 | ||||||||||||||||||||||||
Beginning | Grant | Expired | Exercised 1 | Ending | Number of shares exercisable | |||||||||||||||||||
2nd grant | 13,345 | — | 13,345 | — | — | — | ||||||||||||||||||
3rd grant | 29,055 | — | — | 29,055 | — | — | ||||||||||||||||||
4th grant | — | 142,436 | — | — | 142,436 | — | ||||||||||||||||||
KTF-2nd | 11,790 | — | 11,790 | — | — | — | ||||||||||||||||||
Total | 54,190 | 142,436 | 25,135 | 29,055 | 142,436 | — |
2013 | ||||||||||||||||||||||||||||
Beginning | Granted | Expired | Forfeited | Exercised 1 | Ending | Number of shares exercisable | ||||||||||||||||||||||
6th grant | 255,110 | — | 154,137 | — | 100,973 | — | — | |||||||||||||||||||||
7th grant | — | 288,459 | — | 6,231 | — | 282,228 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 255,110 | 288,459 | 154,137 | 6,231 | 100,973 | 282,228 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 | ||||||||||||||||||||||||||
Beginning | Grant | Expired | Exercised 1 | Ending | Number of shares exercisable | |||||||||||||||||||||
4th grant | 142,436 | — | 11,924 | 130,512 | — | — | ||||||||||||||||||||
5th grant | — | 185,338 | — | — | 185,338 | — | ||||||||||||||||||||
Total | 142,436 | 185,338 | 11,924 | 130,512 | 185,338 | — |
2014 | ||||||||||||||||||||||||||||
Beginning | Granted | Expired | Forfeited | Exercised 1 | Ending | Number of shares exercisable | ||||||||||||||||||||||
7th grant | 282,228 | — | 278,175 | — | 4,053 | — | — | |||||||||||||||||||||
8th grant | — | 251,833 | — | — | — | 251,833 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | 282,228 | 251,833 | 278,175 | — | 4,053 | 251,833 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | The weighted average price of common stock at the time of exercise during |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
26. Operating Revenues
Operating revenues for the years ended December 31, 20102012, 2013 and 2011,2014, are as follows:
(in millions of Korean won) | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||
Sales of services | ₩ | 19,266,545 | ₩ | 19,663,014 | ₩ | 19,991,656 | ||||||||||||||
Sale of goods | (Won) | 3,899,128 | (Won) | 4,378,852 | 4,589,830 | 4,065,659 | 3,477,631 | |||||||||||||
Sales of services | 16,110,222 | 16,831,158 | ||||||||||||||||||
Others 1 | 316,925 | 780,041 | ||||||||||||||||||
Others 1,2,3 | 787,397 | 329,208 | 258,091 | |||||||||||||||||
|
|
|
|
| ||||||||||||||||
Operating revenues | (Won) | 20,326,275 | (Won) | 21,990,051 | ₩ | 24,643,772 | ₩ | 24,057,881 | ₩ | 23,727,378 | ||||||||||
|
|
|
|
|
1 |
|
2 | Disposed land and building (carrying amount:₩32,232 million) for₩144,100 million toK-REALTY CR-REIT 2 and leased them in November 2012. The Company recognized gain on disposal of property and equipment of₩111,868 million and accounted for as an operating lease. |
3 | Off-plan sales amounting to₩45,010 million, which should have been recorded as a deduction of operating revenue in 2012, was recorded as a deduction of operating revenue in 2013. |
27. Operating Expenses
Operating expenses for the years ended December 31, 20102012, 2013 and 2011,2014, are as follows:
(in millions of Korean won) | 2010 | 2011 | 2012 | 2013 2 | 2014 | |||||||||||||||
Salaries and wages | (Won) | 2,623,098 | (Won) | 2,856,020 | ₩ | 3,096,766 | ₩ | 3,288,942 | ₩ | 3,999,952 | ||||||||||
Depreciation | 2,864,356 | 2,646,503 | 2,894,400 | 3,107,792 | 3,186,775 | |||||||||||||||
Amortization of intangible assets | 244,087 | 312,979 | 379,678 | 458,382 | 588,579 | |||||||||||||||
Commissions | 1,291,873 | 1,449,446 | ||||||||||||||||||
Commissions 1 | 3,655,057 | 3,575,488 | 4,022,427 | |||||||||||||||||
Interconnection charges | 1,225,581 | 1,115,792 | 901,314 | 885,479 | 797,329 | |||||||||||||||
Purchase of handsets | 3,984,934 | 4,249,972 | ||||||||||||||||||
International interconnection fee | 309,955 | 265,467 | 238,404 | |||||||||||||||||
Purchase of inventories | 4,851,295 | 3,565,948 | 3,402,529 | |||||||||||||||||
Changes of inventories | (54,761 | ) | (35,890 | ) | (259,078 | ) | 320,971 | 220,791 | ||||||||||||
Sales commission | 1,910,415 | 1,866,331 | ||||||||||||||||||
Service Cost | 1,264,218 | 1,834,425 | 1,544,806 | |||||||||||||||||
Utilities | 250,347 | 262,930 | 271,277 | 309,497 | 313,760 | |||||||||||||||
Taxes and Dues | 230,424 | 219,352 | 299,567 | 257,931 | 241,696 | |||||||||||||||
Rent | 284,257 | 324,324 | 371,030 | 432,543 | 429,644 | |||||||||||||||
Insurance premium | 243,666 | 313,056 | 274,517 | |||||||||||||||||
Installation fee | 291,057 | 260,498 | 317,684 | |||||||||||||||||
Advertising expenses | 181,644 | 184,544 | 150,399 | 161,013 | 159,645 | |||||||||||||||
Research and development expenses | 305,658 | 175,917 | 153,171 | 171,461 | 192,022 | |||||||||||||||
Card service cost | 2,771,383 | 2,702,653 | 2,883,060 | |||||||||||||||||
Others | 2,976,491 | 4,388,110 | 1,318,518 | 1,822,951 | 1,576,161 | |||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | 18,318,404 | (Won) | 20,016,330 | ₩ | 22,963,673 | ₩ | 23,734,497 | ₩ | 24,389,781 | ||||||||||
|
|
|
|
|
1 | The sales commission is included in commissions |
2 | ₩32,835 million of Operating expenses related to off-plan sales, which should have been recorded as a deduction of operating expenses in 2012, was recorded as a deduction of operating expenses in 2013. |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Details of salaries and wages for the years ended December 31, 20102012, 2013 and 20112014, are as follows:
(in millions of Korean won) | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||
Short-term employee benefits | (Won) | 2,458,527 | (Won) | 2,601,675 | ₩ | 2,885,024 | ₩ | 3,031,435 | ₩ | 2,703,266 | ||||||||||
Post-employment benefits | 132,153 | 202,862 | ||||||||||||||||||
Share-based payment (Note 25) | 6,794 | 6,726 | ||||||||||||||||||
Termination benefits | 25,624 | 44,757 | ||||||||||||||||||
Post-employment benefits (Defined benefit plan) | 210,365 | 217,062 | 862,893 | |||||||||||||||||
Post-employment benefits (Defined contribution plan) | 1,703 | 23,857 | 25,423 | |||||||||||||||||
Post-employment benefits (Others) | 25,762 | 12,506 | 404,743 | |||||||||||||||||
Share-based payment | 3,912 | 4,082 | 3,627 | |||||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | 2,623,098 | (Won) | 2,856,020 | ₩ | 3,096,766 | ₩ | 3,288,942 | ₩ | 3,999,952 | ||||||||||
|
|
|
|
|
28. Classification of Operating Income
The Company’s operating income is calculated by deducting operating expenses such as salaries and amortization cost and others, from operating revenue which includes sales of services and others. Major items and related amounts included in operating revenue and expenses are described in Notes 26 and 27.
29. Financial Income and Expenses
Details of financial income for the years ended December 31, 20102012, 2013 and 2011,2014 are as follows:
(in millions of Korean won) | 2010 | 2011 | ||||||
Interest income | (Won) | 97,440 | (Won) | 151,288 | ||||
Foreign currency transaction gain | 21,963 | 44,217 | ||||||
Foreign currency translation gain | 64,983 | 6,097 | ||||||
Gain on settlement of derivatives | 197 | 389 | ||||||
Gain on valuation of derivatives | 54,299 | 63,959 | ||||||
Others | 497 | 1,469 | ||||||
|
|
|
| |||||
Total | (Won) | 239,379 | (Won) | 267,419 | ||||
|
|
|
|
(in millions of Korean won) Interest income Gain on foreign currency transactions Gain on foreign currency translation Gain on settlement of derivatives Gain on valuation of derivatives Others Total 2012 2013 2014 ₩ 203,214 ₩ 108,794 ₩ 80,840 20,159 37,371 37,246 266,623 106,135 34,871 2,824 13,878 2,134 118 627 93,235 5,719 12,544 6,574 ₩ 498,657 ₩ 279,349 ₩ 254,900
Details of financial expenses for the years ended December 31, 20102012, 2013 and 2011,2014 are as follows:
(in millions of Korean won) | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||
Interest expenses | (Won) | 489,925 | (Won) | 481,415 | ₩ | 472,917 | ₩ | 450,302 | ₩ | 501,052 | ||||||||||
Foreign currency transaction loss | 25,153 | 34,862 | ||||||||||||||||||
Foreign currency translation loss | 31,644 | 85,274 | ||||||||||||||||||
Loss on foreign currency transactions | 17,974 | 31,611 | 26,076 | |||||||||||||||||
Loss on foreign currency translation | 7,249 | 6,518 | 126,233 | |||||||||||||||||
Loss on settlement of derivatives | 1,595 | 27,055 | 7,804 | 16,384 | 35,240 | |||||||||||||||
Loss on valuation of derivatives | 47,496 | 9,192 | 241,358 | 105,691 | 25,357 | |||||||||||||||
Loss on disposal of trade receivables | 15,809 | 8,009 | 16,464 | |||||||||||||||||
Impairment loss on available-for-sale financial assets | 3,401 | 5,052 | 70,022 | |||||||||||||||||
Others | 2,850 | 2,418 | 15,481 | 23,933 | 17,999 | |||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | 598,663 | (Won) | 640,216 | ₩ | 781,993 | ₩ | 647,500 | ₩ | 818,443 | ||||||||||
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|
|
|
|
30.KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
29. Deferred Income Tax and Income Tax Expense
The analysisanalyses of deferred tax assets and deferred tax liabilities as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Deferred tax assets | ||||||||||||||||||||
Deferred tax assets to be recovered within 12 months | ₩ | 396,831 | ₩ | 273,120 | ||||||||||||||||
Deferred tax assets to be recovered after more than 12 months | (Won) | 253,806 | (Won) | 273,371 | (Won) | 237,586 | 979,277 | 1,416,347 | ||||||||||||
Deferred tax assets to be recovered within 12 months | 696,865 | 592,330 | 787,314 | |||||||||||||||||
|
|
|
|
| ||||||||||||||||
(Won) | 950,671 | (Won) | 865,701 | (Won) | 1,024,900 | 1,376,108 | 1,689,467 | |||||||||||||
|
|
|
|
| ||||||||||||||||
Deferred tax liabilities | ||||||||||||||||||||
Deferred tax liability to be recovered within 12 months | (1,015 | ) | (1,058 | ) | ||||||||||||||||
Deferred tax liability to be recovered after more than 12 months | (6,040 | ) | (961 | ) | (846 | ) | (837,614 | ) | (753,581 | ) | ||||||||||
Deferred tax liability to be recovered within 12 months | (376,095 | ) | (303,860 | ) | (618,635 | ) | ||||||||||||||
|
|
|
|
| ||||||||||||||||
(Won) | (382,135 | ) | (Won) | (304,821 | ) | (Won) | (619,481 | ) | (838,629 | ) | (754,639 | ) | ||||||||
|
|
|
|
| ||||||||||||||||
Deferred tax assets (liabilities), net | (Won) | 568,536 | (Won) | 560,880 | (Won) | 405,419 | ||||||||||||||
Deferred tax assets after offset | ₩ | 706,977 | ₩ | 1,078,792 | ||||||||||||||||
Deferred tax liabilities after offset | ₩ | 169,498 | ₩ | 143,964 | ||||||||||||||||
|
|
|
|
|
The gross movements on the deferred income tax account for the years ended December 31, 20102013 and 2011,2014, are calculated as follows:
(in millions of Korean won) | 2010 | 2011 | 2013 | 2014 | ||||||||||||
Beginning | (Won) | 568,536 | (Won) | 560,880 | ₩ | 473,475 | ₩ | 537,479 | ||||||||
Charged/(credited) to the income statement | (53,014 | ) | (142,012 | ) | ||||||||||||
Charged/(credited) to other comprehensive income | 48,358 | 36,233 | ||||||||||||||
Charged (credited) to the income statement | 98,680 | 317,115 | ||||||||||||||
Charged (credited) to other comprehensive income | (34,676 | ) | 75,104 | |||||||||||||
Changes in scope of consolidation | (3,000 | ) | (49,682 | ) | — | 5,130 | ||||||||||
|
|
|
| |||||||||||||
Ending | (Won) | 560,880 | (Won) | 405,419 | ₩ | 537,479 | ₩ | 934,828 | ||||||||
|
|
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
2010 | ||||||||||||||||||||||||||||||||||||
(in millions of Korean won) | 2013 | |||||||||||||||||||||||||||||||||||
Beginning | Income statement | Other comprehensive income | Changes in scope of consolidation | Ending | Beginning | Income statement | Other comprehensive income | Ending | ||||||||||||||||||||||||||||
Deferred tax liabilities | ||||||||||||||||||||||||||||||||||||
Derivative financial assets | (Won) | (39,273 | ) | (Won) | (1,759 | ) | (Won) | 10,178 | (Won) | — | (Won) | (30,854 | ) | ₩ | (297 | ) | ₩ | (116 | ) | ₩ | — | ₩ | (413 | ) | ||||||||||||
Available-for-sale financial assets | (10,669 | ) | (5,198 | ) | (17,985 | ) | (33,852 | ) | ||||||||||||||||||||||||||||
Investment in joint venture and associates | (48,596 | ) | 1,406 | 195 | — | (46,995 | ) | (1,652 | ) | (30,140 | ) | (780 | ) | (32,572 | ) | |||||||||||||||||||||
Depreciation | (39,642 | ) | 33,413 | — | — | (6,229 | ) | (31,898 | ) | (38,229 | ) | — | (70,127 | ) | ||||||||||||||||||||||
Advanced depreciation provision | (241,265 | ) | 3,035 | — | (238,230 | ) | ||||||||||||||||||||||||||||||
Deposits for severance benefits | (244,854 | ) | 54,861 | — | — | (189,993 | ) | (297,116 | ) | 29,963 | (10 | ) | (267,163 | ) | ||||||||||||||||||||||
Accrued income | (1,551 | ) | 849 | — | — | (702 | ) | (1,673 | ) | 65 | — | (1,608 | ) | |||||||||||||||||||||||
Prepaid expenses | 220 | 70 | — | 290 | ||||||||||||||||||||||||||||||||
Reserve for technology and human resource development | (64,570 | ) | 20,681 | — | (43,889 | ) | ||||||||||||||||||||||||||||||
Others | (5,625 | ) | (24,423 | ) | — | — | (30,048 | ) | (144,650 | ) | (6,415 | ) | — | (151,065 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Subtotal | (Won) | (379,541 | ) | (Won) | 64,347 | (Won) | 10,373 | (Won) | — | (Won) | (304,821 | ) | ||||||||||||||||||||||||
₩ | (793,570 | ) | ₩ | (26,284 | ) | ₩ | (18,775 | ) | ₩ | (838,629 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Deferred tax assets | ||||||||||||||||||||||||||||||||||||
Derivatives | ₩ | 21,719 | ₩ | 9,377 | ₩ | 1,499 | ₩ | 32,595 | ||||||||||||||||||||||||||||
Allowance for doubtful accounts | (Won) | 115,151 | (Won) | 12,889 | (Won) | — | (Won) | — | (Won) | 128,040 | 139,276 | 13,538 | — | 152,814 | ||||||||||||||||||||||
Inventory valuation | 10,494 | (9,814 | ) | — | — | 680 | 302 | 1 | — | 303 | ||||||||||||||||||||||||||
Available-for-sale financial assets | 12,147 | 892 | (52 | ) | — | 12,987 | ||||||||||||||||||||||||||||||
Contribution to construction | 39,296 | (8,108 | ) | — | — | 31,188 | ||||||||||||||||||||||||||||||
Contribution for construction | 27,132 | (6 | ) | — | 27,126 | |||||||||||||||||||||||||||||||
Accrued expenses | 30,176 | (1,687 | ) | — | — | 28,489 | 27,713 | 27,576 | — | 55,289 | ||||||||||||||||||||||||||
Provisions | 12,051 | 6,198 | — | — | 18,249 | 62,696 | (28,976 | ) | — | 33,720 | ||||||||||||||||||||||||||
Defined benefit liabilities | 194,921 | (72,790 | ) | 38,433 | — | 160,564 | ||||||||||||||||||||||||||||||
Withholdings for facilities expenses | 9,609 | (326 | ) | — | — | 9,283 | ||||||||||||||||||||||||||||||
Property and equipment | 229,253 | 8,710 | — | 237,963 | ||||||||||||||||||||||||||||||||
Retirement benefit obligations | 320,909 | 16,263 | (18,055 | ) | 319,117 | |||||||||||||||||||||||||||||||
Withholding of facilities expenses | 8,861 | (521 | ) | — | 8,340 | |||||||||||||||||||||||||||||||
Accrued payroll expenses | 37,410 | 12,345 | — | — | 49,755 | 32,185 | 14,536 | — | 46,721 | |||||||||||||||||||||||||||
Deduction of installment receivables | 34,603 | 37,568 | — | — | 72,171 | 11,524 | (4,479 | ) | — | 7,045 | ||||||||||||||||||||||||||
Present value discount | 8,922 | 15,045 | — | — | 23,967 | 14,900 | (9,931 | ) | — | 4,969 | ||||||||||||||||||||||||||
Assets retirement obligation | 13,657 | 1,628 | — | — | 15,285 | 18,761 | 485 | — | 19,246 | |||||||||||||||||||||||||||
Gain or loss foreign currency translation | 86,843 | (5,732 | ) | — | — | 81,111 | 20,727 | (10,491 | ) | — | 10,236 | |||||||||||||||||||||||||
Deferred revenue | 59,560 | (5,748 | ) | — | — | 53,812 | 66,828 | (2,389 | ) | — | 64,439 | |||||||||||||||||||||||||
Real-estate sales | 48,327 | (45,387 | ) | — | — | 2,940 | 694 | 4,720 | — | 5,414 | ||||||||||||||||||||||||||
Tax credit carryforwards | 169,615 | (80,229 | ) | — | — | 89,386 | 150,334 | 14,067 | — | 164,401 | ||||||||||||||||||||||||||
Foreign operation translation difference | 2,507 | — | 655 | 3,162 | ||||||||||||||||||||||||||||||||
Others | 65,295 | 25,895 | (396 | ) | (3,000 | ) | 87,794 | 110,724 | 72,484 | — | 183,208 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Subtotal | (Won) | 948,077 | (Won) | (117,361 | ) | (Won) | 37,985 | (Won) | (3,000 | ) | (Won) | 865,701 | ||||||||||||||||||||||||
|
|
|
|
| ₩ | 1,267,045 | ₩ | 124,964 | ₩ | (15,901 | ) | ₩ | 1,376,108 | |||||||||||||||||||||||
Net balance | (Won) | 568,536 | (Won) | (53,014 | ) | (Won) | 48,358 | (Won) | (3,000 | ) | (Won) | 560,880 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||
Net balance 1 | ₩ | 473,475 | ₩ | 98,680 | ₩ | (34,676 | ) | ₩ | 537,479 | |||||||||||||||||||||||||||
|
|
|
|
KT Corporation and Subsidiaries
(in millions of Korean won) Deferred tax liabilities Derivative financial assets Available-for-sale financial assets Investment in joint venture and associates Depreciation Deposits for severance benefits Accrued income Reserve for technology and human resource development Others Subtotal Deferred tax assets Allowance for Doubtful Accounts Inventory valuation Contribution for construction Accrued expenses Provisions Defined benefit liabilities Withholding of facilities expenses Accrued payroll expenses Deduction of installment receivables Present value discount Assets retirement obligation Gain or loss foreign currency translation Deferred revenue Real-estate sales Tax credit carryforwards Others Subtotal Net balance Notes to Consolidated Financial Statements 2011 Beginning Income
statement Other
comprehensive
income Changes in
scope of
consolidation Ending (Won) (30,854 ) (Won) (6,178 ) (Won) (829 ) (Won) — (Won) (37,861 ) 12,987 (27,472 ) (648 ) 2,188 (12,945 ) (46,995 ) 46,083 1,076 (364 ) (200 ) (6,229 ) (73,284 ) — (2,995 ) (82,508 ) (189,993 ) (83,396 ) 502 1,654 (271,233 ) (702 ) (1,105 ) — (29 ) (1,836 ) — (63,491 ) — — (63,491 ) (30,048 ) (60,717 ) — (58,642 ) (149,407 ) (Won) (291,834 ) (Won) (269,560 ) (Won) 101 (Won) (58,188 ) (Won) (619,481 ) (Won) 128,040 (Won) (20,556 ) (Won) 106 (Won) 4,613 (Won) 112,203 680 (508 ) — 422 594 31,188 (1,887 ) — — 29,301 28,489 (4,405 ) — (1 ) 24,083 18,249 36,248 — 741 55,238 160,564 58,518 37,418 748 257,248 9,283 106 — — 9,389 49,755 (21,085 ) — — 28,670 72,171 6,709 — — 78,880 23,967 10,208 — 1 34,176 15,285 998 — — 16,283 81,111 16,524 — (3 ) 97,632 53,812 (2,629 ) — — 51,183 2,940 3,516 — — 6,456 89,386 (8,532 ) — — 80,854 87,794 54,323 (1,392 ) 1,985 142,710 (Won) 852,714 (Won) 127,548 (Won) 36,132 (Won) 8,506 (Won) 1,024,900 (Won) 560,880 (Won) (142,012 ) (Won) 36,233 (Won) (49,682 ) (Won) 405,419
December 31, 2012, 2013 and 2014
(in millions of Korean won) | 2014 | |||||||||||||||||||
Beginning | Income statement | Other comprehensive income | Changes in scope of consolidation | Ending | ||||||||||||||||
Deferred tax liabilities | ||||||||||||||||||||
Derivative financial assets | ₩ | (413 | ) | ₩ | (118 | ) | ₩ | — | ₩ | 109 | ₩ | (422 | ) | |||||||
Available-for-sale financial assets | (33,852 | ) | (71 | ) | (7,076 | ) | 183 | (40,816 | ) | |||||||||||
Investment in joint venture and associates | (32,572 | ) | (10,986 | ) | (1,120 | ) | — | (44,678 | ) | |||||||||||
Advanced depreciation provision | (238,230 | ) | 100 | — | — | (238,130 | ) | |||||||||||||
Depreciation | (70,127 | ) | 17,889 | — | (145 | ) | (52,383 | ) | ||||||||||||
Deposits for severance benefits | (267,163 | ) | 66,449 | — | (4,272 | ) | (204,986 | ) | ||||||||||||
Accrued income | (1,608 | ) | (67 | ) | — | — | (1,675 | ) | ||||||||||||
Prepaid expenses | 290 | 128 | — | 9 | 427 | |||||||||||||||
Reserve for technology and human resource development | (43,889 | ) | 21,252 | — | — | (22,637 | ) | |||||||||||||
Others | (151,065 | ) | 9,790 | — | (8,064 | ) | (149,339 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | (838,629 | ) | ₩ | 104,366 | ₩ | (8,196 | ) | ₩ | (12,180 | ) | ₩ | (754,639 | ) | |||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Deferred tax assets | ||||||||||||||||||||
Derivatives | ₩ | 32,595 | ₩ | (23,298 | ) | ₩ | 8,877 | ₩ | — | ₩ | 18,174 | |||||||||
Allowance for doubtful accounts | 152,814 | (10,434 | ) | — | 426 | 142,806 | ||||||||||||||
Inventory valuation | 303 | (106 | ) | — | (216 | ) | (19 | ) | ||||||||||||
Contribution for construction | 27,126 | (5,086 | ) | — | — | 22,040 | ||||||||||||||
Accrued expenses | 55,289 | (7,719 | ) | — | 3,057 | 50,627 | ||||||||||||||
Provisions | 33,720 | (5,232 | ) | — | (158 | ) | 28,330 | |||||||||||||
Property and equipment | 237,963 | 1,720 | — | — | 239,683 | |||||||||||||||
Retirement benefit obligations | 319,117 | (101,742 | ) | 75,549 | 4,573 | 297,497 | ||||||||||||||
Withholding of facilities expenses | 8,340 | (531 | ) | — | — | 7,809 | ||||||||||||||
Accrued payroll expenses | 46,721 | (26,121 | ) | — | (824 | ) | 19,776 | |||||||||||||
Deduction of installment receivables | 7,045 | (2,735 | ) | — | — | 4,310 | ||||||||||||||
Present value discount | 4,969 | (3,196 | ) | — | (5 | ) | 1,768 | |||||||||||||
Assets retirement obligation | 19,246 | (961 | ) | — | 77 | 18,362 | ||||||||||||||
Gain or loss foreign currency translation | 10,236 | 6,850 | — | (106 | ) | 16,980 | ||||||||||||||
Deferred revenue | 64,439 | 167 | — | 43 | 64,649 | |||||||||||||||
Real-estate sales | 5,414 | (4,542 | ) | — | — | 872 | ||||||||||||||
Tax credit carryforwards | 164,401 | 38,877 | — | — | 203,278 | |||||||||||||||
Foreign operation translation difference | 3,162 | — | (1,126 | ) | — | 2,036 | ||||||||||||||
Tax loss carryforward | — | 411,755 | — | — | 411,755 | |||||||||||||||
Others | 183,208 | (54,917 | ) | — | 10,443 | 138,734 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
₩ | 1,376,108 | ₩ | 212,749 | ₩ | 83,300 | ₩ | 17,310 | ₩ | 1,689,467 | |||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Net balance 1 | ₩ | 537,479 | ₩ | 317,115 | ₩ | 75,104 | ₩ | 5,130 | ₩ | 934,828 | ||||||||||
|
|
|
|
|
|
|
|
|
|
1 | Deferred tax liabilities, amounting to₩2,232 million (2013: Deferred tax liabilities of₩1,680 million) that are related to the tax receivable of certain subsidiaries’ undistributed profit, are not recognized as of December 31, 2014. This undistributed profit is permanently reinvested. As of December 31, 2014, temporary difference of unrecognized deferred tax liabilities is₩22,241 million (2013:₩143,483 million). |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
The tax impacts recognized directly to equity as of January 1, 2010 and December 31, 20102012, 2013 and 2011,2014 are as follows:
1.1.2010 | 12.31.2010 | 12.31.2011 | ||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Before recognition | Tax effect | After recognition | Before recognition | Tax effect | After recognition | Before recognition | Tax effect | After recognition | |||||||||||||||||||||||||||
Available-for-sale valuation gain (loss) | (Won) | 8,651 | (Won) | (1,907 | ) | (Won) | 6,744 | (Won) | 10,874 | (Won) | (2,392 | ) | (Won) | 8,482 | (Won) | 85,974 | (Won) | (18,034 | ) | (Won) | 67,940 | |||||||||||||||
Hedge instruments valuation gain (loss) | (23,559 | ) | 280 | (23,279 | ) | (59,142 | ) | 710 | (58,432 | ) | (30,629 | ) | 368 | (30,261 | ) | |||||||||||||||||||||
Actuarial gain (loss) | — | — | — | (188,113 | ) | 41,385 | (146,728 | ) | (326,658 | ) | 71,865 | (254,793 | ) | |||||||||||||||||||||||
Shares of other comprehensive gain (loss) of joint ventures and associates | 503 | (111 | ) | 392 | 3,553 | (782 | ) | 2,771 | (2,458 | ) | 541 | (1,917 | ) | |||||||||||||||||||||||
Shares of actuarial gain (loss) of Joint ventures and associates | — | — | — | (305 | ) | 67 | (238 | ) | (2,764 | ) | 608 | (2,156 | ) | |||||||||||||||||||||||
Others | (318,483 | ) | 47 | (318,436 | ) | (318,898 | ) | 81 | (318,817 | ) | (317,577 | ) | 157 | (317,420 | ) | |||||||||||||||||||||
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Total | (Won) | (332,888 | ) | (Won) | (1,691 | ) | (Won) | (334,579 | ) | (Won) | (552,031 | ) | (Won) | 39,069 | (Won) | (512,962 | ) | (Won) | (594,112 | ) | (Won) | 55,505 | (Won) | (538,607 | ) | |||||||||||
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(in millions of Available-for-sale valuation gain (loss) Hedge instruments valuation gain (loss) Remeasurements from net defined benefit liabilities Shares of gain (loss) of joint ventures and associates Foreign operation translation difference Total 2012 2013 2014
Korean won) Before
recognition Tax
effect After
recognition Before
recognition Tax
effect After
recognition Before
recognition Tax
effect After
recognition ₩ 25,181 ₩ (6,094 ) ₩ 19,087 ₩ 74,317 ₩ (17,985 ) ₩ 56,332 ₩ 29,239 ₩ (7,076 ) ₩ 22,163 33,743 (8,166 ) 25,577 (6,195 ) 1,499 (4,696 ) (36,682 ) 8,877 (27,805 ) (172,153 ) 41,661 (130,492 ) 74,648 (18,065 ) 56,583 (312,186 ) 75,549 (236,637 ) (13,009 ) 3,148 (9,861 ) 3,221 (780 ) 2,441 4,628 (1,120 ) 3,508 (8,766 ) 2,121 (6,645 ) (2,708 ) 655 (2,053 ) 4,652 (1,126 ) 3,526 ₩ (135,004 ) ₩ 32,670 ₩ (102,334 ) ₩ 143,283 ₩ (34,676 ) ₩ 108,607 ₩ (310,349 ) ₩ 75,104 ₩ (235,245 )
Details of income tax expensesexpense (benefit) for the years ended December 31, 20102012, 2013 and 20112014 are calculated as follows:
(in millions of Korean won) | 2010 | 2011 | ||||||
Current income tax expenses | 352,471 | 229,861 | ||||||
Impact of change in temporary difference | 53,014 | 160,126 | ||||||
Impact of change in tax rate 1 | — | (18,114 | ) | |||||
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|
|
| |||||
Total income tax expense | (Won) | 405,485 | (Won) | 371,873 | ||||
|
|
|
| |||||
Income tax expense from continued operations | 396,369 | 316,735 | ||||||
Income tax expense for discontinued operations | 9,116 | 55,138 |
(in millions of Korean won) | 2012 | 2013 | 2014 | |||||||||
Current income tax expenses | ₩ | 302,278 | ₩ | 148,259 | ₩ | 50,780 | ||||||
Impact of change in deferred taxes | (24,409 | ) | (98,680 | ) | (317,115 | ) | ||||||
|
|
|
|
|
| |||||||
Income tax expense (benefit) | ₩ | 277,869 | ₩ | 49,579 | ₩ | (266,335 | ) | |||||
|
|
|
|
|
|
|
The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:
(in millions of Korean won) | 2010 | 2011 | ||||||
Profit before continuing operations before income tax expenses | (Won) | 1,681,273 | (Won) | 1,597,886 | ||||
Expected tax expense at statutory tax rate | 406,868 | 386,688 | ||||||
Tax effects of | ||||||||
Income not subject to tax | (6,199 | ) | (394,462 | ) | ||||
Expenses not deductible for tax purposes | 36,466 | 396,673 | ||||||
Tax credit carry forwards and deductions | (87,666 | ) | (169,057 | ) | ||||
Changes in unrealizable deferred tax assets | 957 | 10,188 | ||||||
Deferred tax effects due to changes in tax rates and others | 25,362 | 85,146 | ||||||
Others | 20,581 | 1,559 | ||||||
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| |||||
Income tax expenses for continuing operations | (Won) | 396,369 | (Won) | 316,735 | ||||
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|
| |||||
Average effective tax rate | 23.6 | % | 19.8 | % |
2012 | 2013 | 2014 | ||||||||||
Loss before income tax (benefit) | ₩ | 1,414,842 | ₩ | (38,166 | ) | ₩ | (1,207,748 | ) | ||||
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|
|
|
| |||||||
Statutory income tax (benefit) | ₩ | 342,392 | ₩ | (9,236 | ) | ₩ | (292,275 | ) | ||||
Tax effect | ||||||||||||
Income not taxable for taxation purposes | (1,407 | ) | (25,130 | ) | (44,145 | ) | ||||||
Non deductible expenses | 39,136 | 87,220 | 62,127 | |||||||||
Tax credit | (83,311 | ) | (15,673 | ) | (39,505 | ) | ||||||
Additional payment of income taxes | 59,755 | (5,910 | ) | 1,079 | ||||||||
Tax effect and adjustment on consolidation | — | (4,251 | ) | 3,949 | ||||||||
Derecognition in deferred tax income | (55,006 | ) | 10,815 | (3,878 | ) | |||||||
Others | (23,690 | ) | 11,744 | 46,313 | ||||||||
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| |||||||
Income tax expense (benefit) | ₩ | 277,869 | ₩ | 49,579 | ₩ | (266,335 | ) | |||||
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31.30. Earnings Per Share
Calculation of earnings per share for the years ended December 31, 2010 and 2011, are as follows:
1) Basic earnings per share from continuing operations
Basic earnings per share from continuing operations is calculated by dividing the profit from continuing operations attributable to equity holders of the Company by the weighted average number of common stocks outstanding during the period, excluding common stocks purchased by the Company and held as treasury stock (Note 24).stock.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Basic earnings per share from continuing operations for the years ended December 31, 20102012, 2013 and 2011, are2014 is calculated as follows:
2010 | 2011 | |||||||
Profit from continuing operations attributable to common stock | (Won) | 1,273,191 | (Won) | 1,276,512 | ||||
Weighted average number of common stock outstanding | 243,207,149 | 243,268,052 | ||||||
Basic earnings per share from continuing operations | (Won) | 5,235 | (Won) | 5,247 |
2) Basic earnings per share from discontinued operations
Basic earnings per share from discontinued operations is calculated by dividing the profit from discontinued operations attributable to equity holders of the Company by the weighted average number of common stocks outstanding during the period, excluding common stocks purchased by the Company and held as treasury stock (Note 24).
Basic earnings per share from discontinued operations for the years ended December 31, 2010 and 2011, are calculated as follows:
2010 | 2011 | |||||||
Profit from discontinued operations attributable to common stock | (Won) | 22,650 | (Won) | 170,039 | ||||
Weighted average number of common stock outstanding | 243,207,149 | 243,268,052 | ||||||
Basic earnings per share from discontinued operations | (Won) | 93 | (Won) | 699 |
3) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of common stocks outstanding during the year, excluding common stocks purchased by the Company and held as treasury stock (Note 24).
Basic earnings per share for the years ended December 31, 2010 and 2011, are calculated as follows:
2010 | 2011 | |||||||
Net income attributable to common stock | (Won) | 1,295,841 | (Won) | 1,446,551 | ||||
Weighted average number of common stock outstanding | 243,207,149 | 243,268,052 | ||||||
Basic earnings per share | (Won) | 5,328 | (Won) | 5,946 |
4) Diluted earnings per share from continuing operations
2012 | 2013 | 2014 | ||||||||||
Profit (loss) from continuing operations attributable to common stock | ₩ | 1,075,694 | ₩ | (189,931 | ) | ₩ | (1,030,240 | ) | ||||
Profit (loss) from discontinued operations attributable to common stock | (29,567 | ) | — | — | ||||||||
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| |||||||
1,046,127 | (189,931 | ) | (1,030,240 | ) | ||||||||
|
|
|
|
|
| |||||||
Weighted average number of common stock outstanding | 243,517,103 | 243,737,431 | 244,433,771 | |||||||||
Basic earnings (loss) per share | ₩ | 4,296 | ₩ | (779 | ) | ₩ | (4,215 | ) | ||||
Basic earnings (loss) per share from continuing operations | 4,417 | (779 | ) | (4,215 | ) | |||||||
Basic earnings (loss) per share from discontinued operations | (121 | ) | — | — |
Diluted earnings per share from continuing operations is calculated by adjusting the weighted average number of common stocks outstanding to assume conversion of all dilutive potential common stocks. The Company has dilutive potential common stocks from stock options.
Diluted earnings per share from continuing operations for the years ended December 31, 20102012 and 2011, are2013, 2014 is calculated as follows:
2010 | 2011 | |||||||
Profit from continuing operations attributable to common stock | (Won) | 1,273,191 | (Won) | 1,276,512 | ||||
Adjusted Profit from continuing operations attributable to common stock | 1,273,191 | 1,276,512 | ||||||
Number of dilutive potential common shares outstanding | 18,081 | 32,960 | ||||||
Weighted-average number of common shares outstanding and dilutive common shares | 243,225,230 | 243,301,012 | ||||||
Diluted earnings per share from continuing operations | (Won) | 5,235 | (Won) | 5,247 |
Diluted earnings per share from continuing operations is calculated by dividing adjusted profit from continuing operations attributable to equity holders of the Company by the sum of the number of common stocks and dilutive potential common stocks. Certain stock options and other share-based payments have no dilutive effect and are excluded from the calculation of diluted earnings per share from continuing operations.
Adjusted Profit (loss) from continuing operations attributable to common stock(in millions of Korean won) Adjusted Profit (loss) from discontinued operations attributable to common stock(in millions of Korean won) Number of dilutive potential common shares outstanding Weighted-average number of common shares outstanding and dilutive common shares Diluted earnings (loss) per share(in Korean won) Diluted earnings (loss) per share from continuing operations Diluted earnings (loss) per share from discontinued operations 2012 2013 2014 ₩ 1,075,694 ₩ (190,485 ) ₩ (1,030,253 ) (29,567 ) — — ₩ 1,046,127 ₩ (190,485 ) ₩ (1,030,253 ) 23,851 — — 243,540,954 243,737,431 244,443,771 4,296 (782 ) (4,215 )
(in Korean won) 4,417 (782 ) (4,215 )
(in Korean won) (121 ) — —
5) Diluted earnings per share from discontinued operations
Diluted earnings per share from discontinued operations is calculated by adjusting the weighted average number of common stocks outstanding to assume conversion of all dilutive potential common stocks. The Company has dilutive potential common stocks from stock options.
Diluted earnings per share from discontinued operations for the years ended December 31, 2010 and 2011, are calculated as follows:
2010 | 2011 | |||||||
Profit from discontinued operations attributable to common stock (in millions of Korean won) | (Won) | 22,650 | (Won) | 170,039 | ||||
Adjusted profit from discontinued operations attributable to common stock (in millions of Korean won) | 22,650 | 170,039 | ||||||
Number of dilutive potential common shares outstanding | 18,081 | 32,960 | ||||||
Weighted-average number of common shares outstanding and dilutive common shares | 243,225,230 | 243,301,012 | ||||||
Diluted earnings per share from discontinued operations (in Korean won) | (Won) | 93 | (Won) | 699 |
Diluted earnings per share from discontinued operations is calculated by dividing adjusted profit from discontinued operations attributable to equity holders of the Company by the sum of the number of common stocks and dilutive potential common stocks. Certain stock options and other share-based payments have no dilutive effect and are excluded from the calculation of diluted earnings per share from discontinued operations.
6) Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average number of common stocks outstanding to assume conversion of all dilutive potential common stocks. The Company has dilutive potential common stocks from stock options.
Diluted earnings per share for the years ended December 31, 2010 and 2011, are calculated as follows:
2010 | 2011 | |||||||
Net income attributable to common stock (in millions of Korean won) | (Won) | 1,295,841 | (Won) | 1,446,551 | ||||
Adjusted net income attributable to common stock(in millions of Korean won) | 1,295,841 | 1,446,551 | ||||||
Number of dilutive potential common shares outstanding | 18,081 | 32,960 | ||||||
Weighted-average number of common shares outstanding and dilutive common shares | 243,225,230 | 243,301,012 | ||||||
Diluted earnings per share(in Korean won) | (Won) | 5,328 | (Won) | 5,946 |
Diluted earnings per share is calculated by dividing adjusted net income attributable to equity holders of the Company by the sum of the number of common stocks and dilutive potential common stocks. Certain stock options and other share-based payments have no dilutive effect and are excluded from the calculation of diluted earnings per share.
32. Dividends31. Dividend
The dividends paid by the Controlling Company in 20112012, 2013 and 20102014 were(Won)₩586,150486,602 million ((Won)₩2,4102,000 per share) and(Won)₩486,393487,445 million ((Won)₩2,000 per share),₩195,112 million (₩800 per share), respectively. A dividend in respect ofThe Company has no plan to propose dividends for the year ended December 31, 2011, of(Won)2,000 per share, amounting to a total dividend of(Won)486,602 million, was approved2014, and no dividends were proposed at the shareholders’ meeting on March 16, 2012. These consolidated financial statements do not reflect this dividend payable.27, 2015.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
33.32. Cash Generated from Operations
Cash flows from operating activities for the years ended December 31, 20102012, 2013 and 20112014, are as follows:
(in millions of Korean won) | 2010 | 2011 | ||||||
1. Profit for the period | (Won) | 1,314,884 | (Won) | 1,452,019 | ||||
2. Adjustments to reconcile net income | ||||||||
Income tax expenses | 396,369 | 316,735 | ||||||
Interest income 1 | (257,483 | ) | (325,028 | ) | ||||
Interest expense 1 | 585,462 | 588,366 | ||||||
Depreciation | 2,972,503 | 2,671,858 | ||||||
Amortization of intangible assets | 266,299 | 319,875 | ||||||
Provision for severance benefits | 160,095 | 250,576 | ||||||
Bad debt expenses | 204,009 | 168,096 | ||||||
Income or losses from jointly controlled entities and associates 2 | (33,182 | ) | 473 | |||||
Gain or loss on disposal of jointly controlled entities and associates | (16,727 | ) | (190,631 | ) | ||||
Impairment on jointly controlled entities and associates | — | 5,107 | ||||||
Impairment on property and equipment | 10,464 | 18,594 | ||||||
Gain or loss on disposal of property and equipment | 62,425 | (226,571 | ) | |||||
Contribution of provisions | 58,253 | 59,116 | ||||||
Reversal of provisions | (12,909 | ) | (4,963 | ) | ||||
Foreign currency translation gain (loss) | (33,339 | ) | 79,189 | |||||
Gain or loss on valuation of derivatives | (5,405 | ) | (28,101 | ) | ||||
Others | (83,628 | ) | (282,083 | ) | ||||
3. Changes in operating assets and liabilities | ||||||||
Increase in trade receivables | (1,033,307 | ) | (1,412,493 | ) | ||||
Decrease in other receivables | 208 | 879,746 | ||||||
Increase in loans receivable | (285,207 | ) | (152,497 | ) | ||||
Increase in finance lease receivables | (156,863 | ) | (183,669 | ) | ||||
Increase in other assets | (167,179 | ) | (79,175 | ) | ||||
Decrease in inventories | 55,954 | 32,113 | ||||||
Increase in trade payables | 142,014 | 98,761 | ||||||
Decrease in other payables | (393,388 | ) | (1,077,806 | ) | ||||
Increase in other liabilities | (3,034 | ) | 62,579 | |||||
Decrease in provisions | 264,900 | 29,365 | ||||||
Increase in deferred revenue | 219,629 | 196,507 | ||||||
Increase in contribution on plan assets | (3,848 | ) | (125,984 | ) | ||||
Payment of severance benefits | (955,910 | ) | (235,037 | ) | ||||
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| |||||
4. Net cash provided by operating activities (1+2+3) | (Won) | 3,272,059 | (Won) | 2,905,037 | ||||
|
|
|
|
(in millions of Korean won) | 2012 | 2013 | 2014 | |||||||||
1. Profit (loss) for the year | ₩ | 1,105,439 | ₩ | (87,745 | ) | ₩ | (941,413 | ) | ||||
2. Adjustments to reconcile net income | ||||||||||||
Income tax expenses (income) | 277,869 | 49,579 | (266,335 | ) | ||||||||
Interest income | (387,396 | ) | (279,392 | ) | (237,975 | ) | ||||||
Interest expense | 589,727 | 548,129 | 578,210 | |||||||||
Dividends income | (6,370 | ) | (20,841 | ) | (15,007 | ) | ||||||
Depreciation | 2,925,170 | 3,141,846 | 3,242,346 | |||||||||
Amortization of intangible assets | 388,663 | 478,902 | 612,418 | |||||||||
Provision for severance benefits | 219,128 | 227,564 | 869,066 | |||||||||
Bad debt expenses | 150,389 | 189,665 | 231,934 | |||||||||
Gain from jointly controlled entities and associates | (24,308 | ) | (10,222 | ) | (24,361 | ) | ||||||
Loss (gain) on disposal of jointly controlled entities and associates | (125,754 | ) | 1,254 | 8,036 | ||||||||
Impairment loss on jointly controlled entities and associates | 3,202 | 6,006 | — | |||||||||
Loss on disposal of subsidiaries | — | — | 11,028 | |||||||||
Loss (gain) on disposal of property and equipment | (407,485 | ) | 393,567 | 133,374 | ||||||||
Loss (gain) on disposal of intangible assets | (1,402 | ) | 52,008 | 17,528 | ||||||||
Loss on impairment of intangible assets | 6,115 | 36,207 | 87,275 | |||||||||
Loss (gain) on foreign currency translation | (259,374 | ) | (99,617 | ) | 91,362 | |||||||
Loss (gain) on valuation of derivatives | 242,979 | 105,248 | (34,011 | ) | ||||||||
Impairment losses on available for sale financial assets | 3,401 | 5,052 | 70,022 | |||||||||
Loss (gain) on disposal of available for sale financial assets | (4,830 | ) | (2,339 | ) | 13,495 | |||||||
Others | (94,987 | ) | (56,620 | ) | (26,101 | ) | ||||||
3. Changes in operating assets and liabilities | ||||||||||||
Decrease in trade receivables | 1,848,011 | 938,495 | 13,008 | |||||||||
Decrease (increase) in other receivables | (533,319 | ) | (7,194 | ) | 170,497 | |||||||
Decrease (increase) in loans receivable | 47,990 | (156,418 | ) | 47,044 | ||||||||
Decrease in finance lease receivables | 130,987 | 147,735 | 138,208 | |||||||||
Decrease (increase) in other current assets | (60,274 | ) | 40,905 | 271,475 | ||||||||
Increase in other non-current assets | (26,719 | ) | (762,032 | ) | (1,200,843 | ) | ||||||
Decrease (increase) in inventories | (286,513 | ) | 169,567 | 301,210 | ||||||||
Increase (decrease) in trade payables | 177,577 | (145,363 | ) | (417,944 | ) | |||||||
Increase (decrease) in other payables | 948,480 | (69,265 | ) | (260,421 | ) | |||||||
Increase (decrease) in other current liabilities | (48,256 | ) | 222,609 | 19,010 | ||||||||
Increase (decrease) in other non-current liabilities | (147,820 | ) | (40,999 | ) | 38,030 | |||||||
Increase (decrease) in provisions | (86,715 | ) | (150,457 | ) | 26,029 | |||||||
Increase (decrease) in deferred revenue | 153,034 | (66,519 | ) | 1,359 | ||||||||
Decrease (increase) in plan assets | (165,755 | ) | 249,102 | 238,987 | ||||||||
Payment of severance benefits | (111,192 | ) | (371,157 | ) | (1,427,229 | ) | ||||||
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|
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| |||||||
4. Net cash provided by operating activities (1+2+3) | ₩ | 6,439,692 | ₩ | 4,677,260 | ₩ | 2,379,311 | ||||||
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|
|
Significant transactions not affecting cash flows for the years ended December 31, 20102012, 2013 and 2011,2014 are as follows:
(in millions of Korean won) | 2010 | 2011 | ||||||
Reclassification of the current portion of bonds payable | (Won) | 1,920,773 | (Won) | 1,080,549 | ||||
Reclassification of construction-in-progress to property and equipment | 2,383,898 | 3,165,808 |
(in millions of Korean won) | 2012 | 2013 | 2014 | |||||||||
Reclassification of the current portion of bonds payable | ₩ | 2,157,522 | ₩ | 1,791,454 | ₩ | 1,805,553 | ||||||
Reclassification of construction-in-progress to property and equipment | 3,142,858 | 2,314,925 | 2,478,164 | |||||||||
Reclassification of accounts payable from property and equipment | 68,766 | 181,816 | 310,270 | |||||||||
Reclassification of accounts payable from intangible assets | — | 567,550 | 179,395 | |||||||||
Reclassification of payable from defined benefit liability | — | (84,689 | ) | 26,250 | ||||||||
Reclassification of payable from plan assets | — | (79,177 | ) | 20,695 | ||||||||
Exercise of convertible bonds | — | — | 19,052 |
34.KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
33. Segment Information
The Company’s operating segments are as follows:
Details | Business service | |
| ||
| ||
Finance / Rental Business Group | Credit card, loan, lease and others | |
Others Group |
1 | The names of some operating segments have changed, from Telecommunication & Convergence/Customer Group and Global & Enterprise Group in prior period to Customer/Marketing Group and Enterprise Sales Group in current period, respectively. |
Details of each segment for the years ended December 31, 20102012, 2013 and 2011,2014 are as follows:
2010 | ||||||||||||
(in millions of Korean won) | Operating revenues | Operating income (loss) | Depreciation and Amortization | |||||||||
Personal | (Won) | 9,715,134 | (Won) | 902,014 | (Won) | 1,383,402 | ||||||
Home/Enterprise | 10,193,591 | 1,091,903 | 1,655,961 | |||||||||
Others | 2,716,780 | 67,238 | 83,673 | |||||||||
|
|
|
|
|
| |||||||
Sub-total | 22,625,505 | 2,061,155 | 3,123,036 | |||||||||
Elimination | (2,299,230 | ) | (53,284 | ) | (14,593 | ) | ||||||
|
|
|
|
|
| |||||||
Consolidated amount | (Won) | 20,326,275 | (Won) | 2,007,871 | (Won) | 3,108,443 | ||||||
|
|
|
|
|
| |||||||
2011 | ||||||||||||
(in millions of Korean won) | Operating revenues | Operating income (loss) | Depreciation and Amortization | |||||||||
Personal | (Won) | 10,026,309 | (Won) | 1,087,406 | (Won) | 1,177,272 | ||||||
Home/Enterprise | 10,140,508 | 938,520 | 1,660,489 | |||||||||
Others | 4,696,234 | 106,485 | 129,139 | |||||||||
|
|
|
|
|
| |||||||
Sub-total | 24,863,051 | 2,132,411 | 2,966,900 | |||||||||
Elimination | (2,873,000 | ) | (158,690 | ) | (7,418 | ) | ||||||
|
|
|
|
|
| |||||||
Consolidated amount | (Won) | 21,990,051 | (Won) | 1,973,721 | (Won) | 2,959,482 | ||||||
|
|
|
|
|
|
2012 | ||||||||||||
(in millions of Korean won) | Operating revenues | Operating income (loss) | Depreciation and Amortization | |||||||||
Customer/Marketing Group | ₩ | 15,932,278 | ₩ | 733,461 | ₩ | 2,440,338 | ||||||
Enterprise Sales Group | 2,930,958 | 327,300 | 485,267 | |||||||||
Finance/Rental Group | 3,717,181 | 185,220 | 181,904 | |||||||||
Others Group | 4,252,074 | 83,039 | 147,238 | |||||||||
|
|
|
|
|
| |||||||
26,832,491 | 1,329,020 | 3,254,747 | ||||||||||
Elimination | (2,188,719 | ) | 351,079 | 19,331 | ||||||||
|
|
|
|
|
| |||||||
Consolidated amount | ₩ | 24,643,772 | ₩ | 1,680,099 | ₩ | 3,274,078 | ||||||
|
|
|
|
|
| |||||||
2013 | ||||||||||||
(in millions of Korean won) | Operating revenues | Operating income(loss) | Depreciation and Amortization | |||||||||
Customer/Marketing Group | ₩ | 14,938,037 | ₩ | 51,853 | ₩ | 2,445,321 | ||||||
Enterprise Sales Group | 2,917,116 | 235,728 | 486,258 | |||||||||
Finance/Rental Group | 4,053,481 | 279,856 | 400,223 | |||||||||
Others Group | 5,093,995 | 287,482 | 233,322 | |||||||||
|
|
|
|
|
| |||||||
27,002,629 | 854,919 | 3,565,124 | ||||||||||
Elimination | (2,944,748 | ) | (531,535 | ) | 1,050 | |||||||
|
|
|
|
|
| |||||||
Consolidated amount | ₩ | 24,057,881 | ₩ | 323,384 | ₩ | 3,566,174 | ||||||
|
|
|
|
|
|
2014 | ||||||||||||
(in millions of Korean won) | Operating revenues | Operating income (loss) | Depreciation and Amortization | |||||||||
Customer/Marketing Group | ₩ | 14,566,755 | ₩ | (797,804 | ) | ₩ | 2,534,392 | |||||
Enterprise Sales Group | 2,916,662 | 97,081 | 489,016 | |||||||||
Finance/Rental Group | 4,550,754 | 322,012 | 465,304 | |||||||||
Others Group | 4,819,391 | (213,828 | ) | 273,208 | ||||||||
|
|
|
|
|
| |||||||
26,853,562 | (592,539 | ) | 3,761,920 | |||||||||
Elimination | (3,126,184 | ) | (69,864 | ) | 13,434 | |||||||
|
|
|
|
|
| |||||||
Consolidated amount | ₩ | 23,727,378 | ₩ | (662,403 | ) | ₩ | 3,775,354 | |||||
|
|
|
|
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
The geographic dataregional segment information provided to the management for the geographic datareportable segments as of December 31, 2012, 2013 and 2014 and for the years ended December 31, 20102012, 2013 and 2011,2014 are as follows:
(In millions of Korean won) | Operating revenues | Non-current assets1 | ||||||||||||||||||||||||||||||||||||||
(in millions of Korean won) | Operating revenues | Non-current assets 1 | ||||||||||||||||||||||||||||||||||||||
2010 | 2011 | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2012 | 2013 | 2014 | 2013 | 2014 | |||||||||||||||||||||||||||||||
Location | ||||||||||||||||||||||||||||||||||||||||
Domestic | (Won) | 20,287,117 | (Won) | 21,934,481 | (Won) | 16,172,144 | (Won) | 15,677,411 | (Won) | 17,325,954 | ₩ | 24,609,126 | ₩ | 23,999,635 | ₩ | 23,645,855 | ₩ | 21,143,152 | ₩ | 20,867,205 | ||||||||||||||||||||
Overseas | 39,158 | 55,570 | 194,303 | 202,267 | 49,936 | 34,646 | 58,246 | 81,523 | 176,700 | 204,654 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | (Won) | 20,326,275 | (Won) | 21,990,051 | (Won) | 16,366,447 | (Won) | 15,879,678 | (Won) | 17,375,890 | ₩ | 24,643,772 | ₩ | 24,057,881 | ₩ | 23,727,378 | ₩ | 21,319,852 | ₩ | 21,071,859 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
1 | Non-current assets include fixed assets, intangible assets |
Assets and liabilities of each segments as of December 31, 2013 and 2014, are as follows:
2013 | ||||||||||||||||||||
(in millions of Korean won) | Non-finance | Finance /Rental | Total | Adjustment | Consolidated amount | |||||||||||||||
Assets | ||||||||||||||||||||
Current | ₩ | 7,023,358 | ₩ | 3,920,164 | ₩ | 10,943,522 | ₩ | (971,603 | ) | ₩ | 9,971,919 | |||||||||
Trade and other receivables | 4,142,237 | 1,864,709 | 6,006,946 | (767,377 | ) | 5,239,569 | ||||||||||||||
Short-term loans | — | 889,418 | 889,418 | (50,694 | ) | 838,724 | ||||||||||||||
Inventories | 649,754 | 25,596 | 675,350 | (1,732 | ) | 673,618 | ||||||||||||||
Other assets | 2,231,367 | 1,140,441 | 3,371,808 | (151,800 | ) | 3,220,008 | ||||||||||||||
Non-current | 24,060,958 | 3,730,135 | 27,791,093 | (2,912,895 | ) | 24,878,198 | ||||||||||||||
Trade and other receivables | 796,622 | 68,877 | 865,499 | (52,028 | ) | 813,471 | ||||||||||||||
Long-term loans | — | 542,267 | 542,267 | (32,394 | ) | 509,873 | ||||||||||||||
Property, equipment and intangible assets (including investment property) | 18,817,659 | 1,931,006 | 20,748,665 | 571,187 | 21,319,852 | |||||||||||||||
Other assets | 4,446,677 | 1,187,985 | 5,634,662 | (3,399,660 | ) | 2,235,002 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total assets | ₩ | 31,084,316 | ₩ | 7,650,299 | ₩ | 38,734,615 | ₩ | (3,884,498 | ) | ₩ | 34,850,117 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Liabilities | ||||||||||||||||||||
Current | ₩ | 8,452,101 | ₩ | 3,716,585 | ₩ | 12,168,686 | ₩ | (944,570 | ) | ₩ | 11,224,116 | |||||||||
Trade and other payables | 5,866,180 | 2,344,098 | 8,210,278 | �� | (796,455 | ) | 7,413,823 | |||||||||||||
Borrowings | 1,785,879 | 1,224,852 | 3,010,731 | 9,975 | 3,020,706 | |||||||||||||||
Other liabilities | 800,042 | 147,635 | 947,677 | (158,090 | ) | 789,587 | ||||||||||||||
Non-current | 8,238,497 | 2,938,773 | 11,177,270 | (388,685 | ) | 10,788,585 | ||||||||||||||
Trade and other payables | 919,486 | 168,630 | 1,088,116 | (29,232 | ) | 1,058,884 | ||||||||||||||
Borrowings | 6,024,803 | 2,561,893 | 8,586,696 | (123,509 | ) | 8,463,187 | ||||||||||||||
Other liabilities | 1,294,208 | 208,250 | 1,502,458 | (235,944 | ) | 1,266,514 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities | ₩ | 16,690,598 | ₩ | 6,655,358 | ₩ | 23,345,956 | ₩ | (1,333,255 | ) | ₩ | 22,012,701 | |||||||||
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|
|
|
|
|
|
|
|
35.KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2014 | ||||||||||||||||||||
(in millions of Korean won) | Non-finance | Finance /Rental | Total | Adjustment | Consolidated amount | |||||||||||||||
Assets | ||||||||||||||||||||
Current | ₩ | 6,047,980 | ₩ | 3,431,308 | ₩ | 9,479,288 | ₩ | (705,453 | ) | ₩ | 8,773,835 | |||||||||
Trade and other receivables | 3,898,572 | 1,479,240 | 5,377,812 | (566,762 | ) | 4,811,050 | ||||||||||||||
Short-term loans | — | 759,684 | 759,684 | (49,316 | ) | 710,368 | ||||||||||||||
Inventories | 385,984 | 31,972 | 417,956 | 927 | 418,883 | |||||||||||||||
Other assets | 1,763,424 | 1,160,412 | 2,923,836 | (90,302 | ) | 2,833,534 | ||||||||||||||
Non-current | 24,347,003 | 3,990,853 | 28,337,856 | (3,312,416 | ) | 25,025,440 | ||||||||||||||
Trade and other receivables | 856,756 | 59,701 | 916,457 | (67,594 | ) | 848,863 | ||||||||||||||
Long-term loans | — | 587,218 | 587,218 | (2,304 | ) | 584,914 | ||||||||||||||
Property, equipment and intangible assets (including investment property) | 18,111,139 | 2,230,419 | 20,341,558 | 730,301 | 21,071,859 | |||||||||||||||
Other assets | 5,379,108 | 1,113,515 | 6,492,623 | (3,972,819 | ) | 2,519,804 | ||||||||||||||
�� |
|
|
|
|
|
|
|
|
|
| ||||||||||
Total assets | ₩ | 30,394,983 | ₩ | 7,422,161 | ₩ | 37,817,144 | ₩ | (4,017,869 | ) | ₩ | 33,799,275 | |||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Liabilities | ||||||||||||||||||||
Current | ₩ | 7,683,942 | ₩ | 3,079,278 | ₩ | 10,763,220 | ₩ | (776,073 | ) | ₩ | 9,987,147 | |||||||||
Trade and other payables | 5,108,735 | 1,967,354 | 7,076,089 | (667,978 | ) | 6,408,111 | ||||||||||||||
Borrowings | 1,954,166 | 1,001,478 | 2,955,644 | — | 2,955,644 | |||||||||||||||
Other liabilities | 621,041 | 110,446 | 731,487 | (108,095 | ) | 623,392 | ||||||||||||||
Non-current | 9,341,308 | 2,814,518 | 12,155,826 | (131,255 | ) | 12,024,571 | ||||||||||||||
Trade and other payables | 703,587 | 229,276 | 932,863 | (23,671 | ) | 909,192 | ||||||||||||||
Borrowings | 7,418,747 | 2,447,310 | 9,866,057 | (6,316 | ) | 9,859,741 | ||||||||||||||
Other liabilities | 1,218,974 | 137,932 | 1,356,906 | (101,268 | ) | 1,255,638 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total liabilities | ₩ | 17,025,250 | ₩ | 5,893,796 | ₩ | 22,919,046 | ₩ | (907,328 | ) | ₩ | 22,011,718 | |||||||||
|
|
|
|
|
|
|
|
|
|
34. Related Party Transactions
The list of subsidiariesrelated party of the Company as of December 31, 2011,2014, is described in Note 1.2.as follows:
Relationship | Related parties | |
Associates and jointly controlled entities | Korea Information & Technology Investment Fund, KT WiBro Infra Co., Ltd., K-REALTY CR REIT 1, Mongolian Telecommunications, KT-SB Venture Investment Fund, Boston Global Film & Contents Fund L.P., QTT Global (Group) Company Limited, CU Industrial Development Co., Ltd., Exdell Corporation, Information Technology Solution Bukbu Corporation, Information Technology Solution Nambu Corporation, Information Technology Solution Seobu Corporation, Information Technology Solution Busan Corporation, Information Technology Solution Jungbu Corporation, Information Technology Solution Honam Corporation, Information Technology Solution Daegu Corporation, VANGUARD Private Equity Fund, KT-LIG ACE Private Equity Fund, Smart Channel Co., Ltd., HooH Healthcare Inc., KD Living, Inc., ChungHo EZ-Cash Co., Ltd., JNK Retech Co., Ltd., Harex Info Tech Inc., MOS GS Co., Ltd., MOS Daegu Co., Ltd., MOS Chungcheong Co., Ltd., MOS Gangnam Co., Ltd., MOS GB Co., Ltd., MOS BS Co., Ltd., MOS Honam Co., Ltd., ANIMAX BROADCASTING KOREA Co., Ltd., SPERA Private Equity Fund, QCP New Technology Investment Fund No. 20, KT-IMM Investment Fund, Mirae Asset Good Company Investment Fund No.3, 2010 KIF-IMM IT Investment Fund, Saehacoms Co., Ltd., Oscar Ent. Co., Ltd., KoFC KTC-ORIX Korea-Japan Partnership Private Equity Fund II, Texno Pro Sistem, How Smartmall Private Special Asset Investment Trust, KT-CKP New Media Investment Fund, SP1 Private Equity Fund, LoginD Co., Ltd., KTC-NP-Growth Champ 2011-2 PEF, K-REALTY CR-REIT 6, ISU-kth Contents Investment Fund, U-City Technologies Philippines, Inc., Daiwon Broadcasting Co., Ltd. |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
The related receivables and payables as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
1.1.2010 | 12.31.2010 | 12.31.2011 | ||||||||||||||||||||||
(in millions of Korean won) | Receivables | Payables | Receivables | Payables | Receivables | Payables | ||||||||||||||||||
Associates | (Won) | 11,317 | (Won) | 194,461 | (Won) | 16,933 | (Won) | 335,610 | (Won) | 8,308 | (Won) | 372,457 | ||||||||||||
Joint Ventures | — | — | 1,099 | 111,120 | 2,321 | 125,439 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | (Won) | 11,317 | (Won) | 194,461 | (Won) | 18,032 | (Won) | 446,730 | (Won) | 10,629 | (Won) | 497,896 | ||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
2013 | ||||||||||||||||||||||
Receivables | Payables | |||||||||||||||||||||
(in millions of Korean won) | Trade receivables | Loans | Other receivables | Trade payables | Other payables | |||||||||||||||||
Associates and jointly controlled entities | ktcs Corporation | ₩ | 2,079 | ₩ | — | ₩ | 606 | ₩ | 765 | ₩ | 14,372 | |||||||||||
ktis Corporation | 1,388 | — | 95 | 137 | 35,416 | |||||||||||||||||
Information Technology Solution Bukbu Corporation | 3 | — | 610 | 2 | 4,555 | |||||||||||||||||
Information Technology Solution Nambu Corporation | 2 | — | 9 | — | 3,989 | |||||||||||||||||
Information Technology Solution Seobu Corporation | 8 | — | 577 | — | 4,095 | |||||||||||||||||
Information Technology Solution Busan Corporation | 1 | — | 191 | 20 | 1,810 | |||||||||||||||||
Information Technology Solution Jungbu Corporation | 2 | — | 375 | — | 3,697 | |||||||||||||||||
Information Technology Solution Honam Corporation | 2 | — | 239 | — | 3,110 | |||||||||||||||||
Information Technology Solution Daegu Corporation | 3 | — | 198 | — | 2,257 | |||||||||||||||||
KT Wibro Infra Co., Ltd. | — | — | — | — | 172,081 | |||||||||||||||||
Smart Channel Co., Ltd. | 9,717 | 9,638 | 39,724 | 2,261 | 75 | |||||||||||||||||
K- Realty CR-REITs No. | 949 | — | 36,000 | — | — | |||||||||||||||||
MOS GS Co., Ltd. | 74 | — | 1 | 1,763 | 50 | |||||||||||||||||
MOS Daegu Co., Ltd. | 4 | — | — | 1,154 | 17 | |||||||||||||||||
MOS Chungcheong Co., Ltd. | 39 | — | 1 | 1,186 | 230 | |||||||||||||||||
MOS Gangnam Co., Ltd. | 2 | — | 1 | — | 180 | |||||||||||||||||
MOS GB Co., Ltd. | 94 | — | 5 | 2,442 | 131 | |||||||||||||||||
MOS BS Co., Ltd. | 3 | — | 1 | 1,006 | 53 | |||||||||||||||||
MOS Honam Co., Ltd., | 1 | — | 2 | 1,517 | 183 | |||||||||||||||||
Others | 226 | 400 | 1,889 | 52 | 1,989 | |||||||||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 14,597 | ₩ | 10,038 | ₩ | 80,524 | ₩ | 12,305 | ₩ | 248,290 | |||||||||||||
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|
|
|
|
|
|
|
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2014 | ||||||||||||||||||||||
Receivables | Payables | |||||||||||||||||||||
(in millions of Korean won) | Trade receivables | Loans | Other receivables | Trade payables | Other payables | |||||||||||||||||
Associates and jointly controlled entities | Information Technology Solution Bukbu Corporation | ₩ | 137 | ₩ | — | ₩ | 11 | ₩ | — | ₩ | 7,427 | |||||||||||
Information Technology Solution Nambu Corporation | 132 | — | 9 | — | 5,062 | |||||||||||||||||
Information Technology Solution Seobu Corporation | 18 | — | 12 | — | 4,977 | |||||||||||||||||
Information Technology Solution Busan Corporation | 7 | — | 15 | 39 | 2,293 | |||||||||||||||||
Information Technology Solution Jungbu Corporation | 5 | — | 2 | 1 | 2,305 | |||||||||||||||||
Information Technology Solution Honam Corporation | 203 | — | 4 | 1 | 5,159 | |||||||||||||||||
Information Technology Solution Daegu Corporation | 3 | — | — | — | 2,278 | |||||||||||||||||
KT Wibro Infra Co., Ltd. | — | — | — | — | 129,294 | |||||||||||||||||
Smart Channel Co., Ltd. | 10,234 | 9,638 | 39,724 | 3,095 | 26 | |||||||||||||||||
K-Realty CR-REITs No. | 948 | — | 35,850 | — | — | |||||||||||||||||
MOS GS Co., Ltd. | 36 | — | 1 | 852 | — | |||||||||||||||||
MOS Daegu Co., Ltd. | 3 | — | 26 | 1,507 | — | |||||||||||||||||
MOS Chungcheong Co., Ltd. | 1 | — | 1 | 1,468 | 143 | |||||||||||||||||
MOS Gangnam Co., Ltd. | 1 | — | 1 | 802 | — | |||||||||||||||||
MOS GB Co., Ltd. | 115 | — | 5 | 1,142 | — | |||||||||||||||||
MOS BS Co., Ltd. | 1 | — | 1 | 956 | 20 | |||||||||||||||||
MOS Honam Co., Ltd., | 1 | — | 2 | 2,032 | — | |||||||||||||||||
Others | 491 | — | 1,789 | 190 | 1,124 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 12,336 | ₩ | 9,638 | ₩ | 77,453 | ₩ | 12,085 | ₩ | 160,108 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
Significant transactions with related parties for the years ended December 31, 20102012, 2013 and 2011,2014, are as follows:
2010 | 2011 | |||||||||||||||
(in millions of Korean won) | Operating revenue | Operating Expenses | Operating revenue | Operating Expenses | ||||||||||||
Associates | (Won) | 169,526 | (Won) | 923,592 | (Won) | 76,419 | (Won) | 870,681 | ||||||||
Joint Ventures | 23,684 | 55,139 | 13,531 | 55,787 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | (Won) | 193,210 | (Won) | 978,731 | (Won) | 89,950 | (Won) | 926,468 | ||||||||
|
|
|
|
|
|
|
|
2012 | ||||||||||
(in millions of Korean won) | Sales | Purchases | ||||||||
Associates and jointly controlled entities | KTCS Corporation | ₩ | 44,649 | ₩ | 262,227 | |||||
KTIS Corporation | 38,144 | 273,938 | ||||||||
Information Technology Solution Bukbu Corporation | 4,081 | 26,004 | ||||||||
Information Technology Solution Nambu Corporation | 3,344 | 31,156 | ||||||||
Information Technology Solution Seobu Corporation | 4,589 | 33,548 | ||||||||
Information Technology Solution Busan Corporation | 2,750 | 18,327 | ||||||||
Information Technology Solution Jungbu Corporation | 4,228 | 26,394 | ||||||||
Information Technology Solution Honam Corporation | 2,845 | 35,666 | ||||||||
Information Technology Solution Daegu Corporation | 1,872 | 12,696 | ||||||||
KT Wibro Infra Co., Ltd. | 6 | 2,083 | ||||||||
Smart Channel Co., Ltd. | 5,039 | 1,670 | ||||||||
K-REALTY CR REIT1 | 2,038 | 35,290 | ||||||||
MOS GS Co., Ltd. | 1,033 | 17,620 | ||||||||
MOS Daegu Co., Ltd. | 429 | 12,318 | ||||||||
MOS Chungcheong Co., Ltd | 462 | 12,760 | ||||||||
MOS Gangnam Co., Ltd. | 372 | 14,474 | ||||||||
MOS GB Co., Ltd. | 1,401 | 22,113 | ||||||||
MOS BS Co., Ltd. | 575 | 15,716 | ||||||||
MOS Honam Co., Ltd. | 542 | 13,799 | ||||||||
Others | 3,002 | 19,895 | ||||||||
|
|
|
| |||||||
₩ | 121,401 | ₩ | 887,694 | |||||||
|
|
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2013 | ||||||||||
(in millions of Korean won) | Sales | Purchases | ||||||||
Associates and jointly controlled entities | KTCS Corporation | ₩ | 45,172 | ₩ | 258,203 | |||||
KTIS Corporation | 59,537 | 281,219 | ||||||||
Information Technology Solution Bukbu Corporation | 4,784 | 29,626 | ||||||||
Information Technology Solution Nambu Corporation | 4,871 | 33,232 | ||||||||
Information Technology Solution Seobu Corporation | 5,397 | 34,526 | ||||||||
Information Technology Solution Busan Corporation | 2,920 | 18,967 | ||||||||
Information Technology Solution Jungbu Corporation | 5,318 | 27,483 | ||||||||
Information Technology Solution Honam Corporation | 3,122 | 36,096 | ||||||||
Information Technology Solution Daegu Corporation | 2,048 | 13,462 | ||||||||
KT Wibro Infra Co., Ltd. | 9 | 1,660 | ||||||||
Smart Channel Co., Ltd. | 8,188 | — | ||||||||
K-REALTY CR REIT1 | 2,039 | 36,349 | ||||||||
MOS GS Co., Ltd. | 1,465 | 17,337 | ||||||||
MOS Daegu Co., Ltd. | 806 | 12,061 | ||||||||
MOS Chungcheong Co., Ltd | 819 | 12,111 | ||||||||
MOS Gangnam Co., Ltd. | 749 | 15,078 | ||||||||
MOS GB Co., Ltd. | 1,981 | 22,858 | ||||||||
MOS BS Co., Ltd. | 914 | 15,117 | ||||||||
MOS Honam Co., Ltd. | 948 | 13,803 | ||||||||
Others | 2,739 | 15,766 | ||||||||
|
|
|
| |||||||
₩ | 153,826 | ₩ | 894,954 | |||||||
|
|
|
|
(in millions of Korean won) | 2014 | |||||||||
Sales | Purchases | |||||||||
Associates and jointly controlled entities | KTCS Corporation 1 | ₩ | 59,739 | ₩ | 245,648 | |||||
KTIS Corporation 1 | 78,546 | 243,336 | ||||||||
Information Technology Solution Bukbu Corporation | 6,787 | 54,450 | ||||||||
Information Technology Solution Nambu Corporation | 7,574 | 45,940 | ||||||||
Information Technology Solution Seobu Corporation | 6,388 | 40,251 | ||||||||
Information Technology Solution Busan Corporation | 4,093 | 26,174 | ||||||||
Information Technology Solution Jungbu Corporation | 7,187 | 37,436 | ||||||||
Information Technology Solution Honam Corporation | 4,976 | 36,081 | ||||||||
Information Technology Solution Daegu Corporation | 3,460 | 21,006 | ||||||||
KT Wibro Infra Co., Ltd. | 11 | 1,237 | ||||||||
Smart Channel Co., Ltd. | 14,002 | 2 | ||||||||
K-REALTY CR REIT1 | 2,067 | 37,413 | ||||||||
MOS GS Co., Ltd. | 1,593 | 17,063 | ||||||||
MOS Daegu Co., Ltd. | 894 | 12,092 | ||||||||
MOS Chungcheong Co., Ltd | 867 | 12,105 | ||||||||
MOS Gangnam Co., Ltd. | 775 | 16,209 | ||||||||
MOS GB Co., Ltd. | 2,017 | 21,114 | ||||||||
MOS BS Co., Ltd. | 858 | 15,762 | ||||||||
MOS Honam Co., Ltd. | 780 | 14,417 | ||||||||
Others | 4,401 | 11,903 | ||||||||
|
|
|
| |||||||
₩ | 207,015 | ₩ | 909,639 | |||||||
|
|
|
|
1 | The transactions for the year ended December 31, 2014, before ktcs and kits were included in consolidation scope. |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Key management compensation for the years ended December 31, 20102012, 2013 and 2011,2014 consists of:
(in millions of Korean won) | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||
Salaries and other short-term benefits | (Won) | 3,011 | (Won) | 3,153 | ₩ | 3,166 | ₩ | 3,203 | ₩ | 1,817 | ||||||||||
Provision for severance benefits | 150 | 270 | 274 | 335 | 400 | |||||||||||||||
Stock-based compensation | 2,147 | 1,990 | 1,078 | 842 | 965 | |||||||||||||||
|
|
|
|
| ||||||||||||||||
Total | (Won) | 5,308 | (Won) | 5,413 | ₩ | 4,518 | ₩ | 4,380 | ₩ | 3,182 | ||||||||||
|
|
|
|
|
Fund transactions with related parties for the years ended December 31, 2013 and 2014, are as follows
2013 | ||||||||||||||||||||||
Loan transactions | Borrowing transactions | Equity contributions in cash | ||||||||||||||||||||
(in millions of Korean won) | Loans | Collections | Borrowings | Repayments | ||||||||||||||||||
Associates and jointly controlled entities | ktis Corporation | ₩ | — | ₩ | 654 | ₩ | — | ₩ | — | ₩ | — | |||||||||||
KT-SB Venture Investment Fund | — | — | — | — | 6,000 | |||||||||||||||||
JNK Retech Co., Ltd | — | — | — | — | 1,176 | |||||||||||||||||
KT-CKP New Media Investment Fund | — | — | — | — | 2,250 | |||||||||||||||||
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₩ | — | ₩ | 654 | ₩ | — | ₩ | — | ₩ | 9,426 | |||||||||||||
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2014 | ||||||||||||||||||||||
Loan transactions | Borrowing transactions | Equity contributions in cash | ||||||||||||||||||||
(in millions of Korean won) | Loans | Collections | Borrowings | Repayments | ||||||||||||||||||
Associate | KT-IMM Investment Fund | ₩ | — | ₩ | — | ₩ | — | ₩ | — | ₩ | 1,540 | |||||||||||
HooH Healthcare Inc. | — | — | — | 401 | 3,370 | |||||||||||||||||
KT-CKP New Media Investment Fund | — | — | — | — | 2,250 | |||||||||||||||||
K-REALTY CR-REIT 6 | — | — | — | — | 7,000 | |||||||||||||||||
ISU-kth Contents Investment Fund | — | — | — | — | 1,100 | |||||||||||||||||
KoFC KTC-ORIX Korea-Japan Partnership Private Equity Fund II | — | — | — | — | 136 | |||||||||||||||||
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₩ | — | ₩ | — | ₩ | — | ₩ | 401 | ₩ | 15,396 | |||||||||||||
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Payment guarantees and collaterals provided by the Company
As of December 31, 2014, based on the investors’ agreement, the Company has an obligation to provide funding to Smart Channel Co., Ltd., a related company, if Smart Channel Co, Ltd. is unable to fulfill its obligation to pay its payables. The Company pledged investment securities in Smart Channel Co., Ltd. as collateral (Note 20).
There are no collaterals and payment guarantees provided by the related parties.
36.KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
35. Financial risk management
(1) Financial risk factors
The Company’s activities expose itselfit to a variety of financial risks such as changes in foreign exchange rates,risks: market risk (including currency risk, fair value interest ratesrate risk, cash flow interest rate risk and market prices arising from future commercial transactionsprice risk), credit risk and recognized assets and liabilities.liquidity risk. The Company’s financialoverall risk management is focusedprogram focuses on controlling these risks in its operatingthe unpredictability of financial markets and financing activities.seeks to minimize potential adverse effects on the Company’s financial performance. The Company uses derivativesderivative financial instruments to hedge certain financial risk exposures such as fair value risk and cash flow risk.exposures.
The Company’s financial policy is set up in the long-term perspective and annually reported to the Board of Directors. The financial risk management is carried out by the Value Management Office, which identifies, evaluates and hedges financial risks. The treasury department in the Value Management Office considers various finance market conditions to estimate the effect from the market changes.
1) Market risk
The Company’s market risk management focuses on controlling the extent of exposure to the risk in order to minimize revenue volatility. Market risk is a risk that decreases value or profit of the Company’s portfolio due to changes in market interest rate, foreign exchange rate and other factors.
(i) Sensitivity analysis
Sensitivity analysis is performed for each type of market risk to which the Company is exposed. Reasonably possible changes in the relevant risk variable such as prevailing market interest rates, currency rates, equity prices or commodity prices are estimated and if the rate of change in the underlying risk variable is stable, the Company does not alter the chosen reasonably possible change in the risk variable. The reasonably possible change does not include remote or ‘worst case’ scenarios or ‘stress tests’.
(ii) Foreign exchange risk
The Company is exposed to foreign exchange risk arising from operating, investing and financing activities. Foreign exchange risk is managed within the range of the possible effect on the Company’s cash flows. Foreign exchange risk unaffecting the Company’s cash flows is not hedged but can be hedged at a particular situation.
As of December 31, 20102012, 2013 and 2011,2014 if the foreign exchange rate had strengthened/weakened by 10% with all other variables held constant, the effects on profit before income tax and shareholders’ equity would have been as follows:
(in millions of Korean won) | Fluctuation of foreign exchange rate | Income before tax | Shareholders’ equity | |||||||||
12.31.2010 | +10 | % | (Won) | (60,833 | ) | (Won) | (45,933 | ) | ||||
- 10 | % | 60,833 | 45,933 | |||||||||
12.31.2011 | +10 | % | (57,174 | ) | (50,471 | ) | ||||||
- 10 | % | 57,174 | 50,471 |
(in millions of Korean won) | Fluctuation of foreign exchange rate | Income before tax | Shareholders’ equity | |||||||||
2012.12.31 | +10 | % | ₩ | (64,746 | ) | ₩ | (52,203 | ) | ||||
-10 | % | 64,746 | 52,203 | |||||||||
2013.12.31 | +10 | % | ₩ | (46,173 | ) | ₩ | (47,888 | ) | ||||
-10 | % | 46,173 | 47,888 | |||||||||
2014.12.31 | +10 | % | ₩ | (45,430 | ) | ₩ | (38,437 | ) | ||||
-10 | % | 45,430 | 38,437 |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
The above analysis is a simple sensitivity analysis which assumes that all the variables other than foreign exchange rates are held constant. Therefore, the analysis does not reflect any correlation between foreign exchange rates and other variables, nor the management’s decision to decrease the risk.
Details of foreign assets and liabilities of the Company as of January 1, 2010 and December 31, 20102012, 2013 and 2011,2014 are as follows:
(in thousands of foreign currencies) | 1.1.2010 | 12.31.2010 | 12.31.2011 | |||||||||||||||||||||||||||||||||||||||||||||
Financial assets | Financial liabilities | Financial assets | Financial liabilities | Financial assets | Financial liabilities | |||||||||||||||||||||||||||||||||||||||||||
(in thousands of | 2012 | 2013 | 2014 | |||||||||||||||||||||||||||||||||||||||||||||
Financial assets | Financial liabilities | Financial assets | Financial liabilities | Financial assets | Financial liabilities | |||||||||||||||||||||||||||||||||||||||||||
USD | 226,385 | 2,365,536 | 201,620 | 2,421,054 | 209,742 | 2,299,644 | 217,488 | 2,377,137 | 254,917 | 2,225,700 | 197,221 | 2,532,614 | ||||||||||||||||||||||||||||||||||||
SDR | 15,225 | 8,566 | 5,721 | 4,256 | 1,160 | 744 | 494 | 1,130 | 1,105 | 1,211 | 573 | 1,027 | ||||||||||||||||||||||||||||||||||||
JPY | 79,202 | 19,550,183 | 970,586 | 19,913,770 | 1,080,392 | 35,446,361 | 657,947 | 35,102,877 | 190,520 | 30,054,316 | 34,168 | 30,051,367 | ||||||||||||||||||||||||||||||||||||
GBP | 10 | 51 | 6 | 131 | 7 | 108 | 1 | 9 | — | 134 | — | 257 | ||||||||||||||||||||||||||||||||||||
EUR | 276 | 118 | 632 | 1,317 | 1,239 | 3,357 | 5,395 | 2,614 | 1,342 | 4,943 | 134 | 177 | ||||||||||||||||||||||||||||||||||||
DZD | — | — | 20,339 | — | 18,714 | — | 3,770 | — | 2,798 | — | 929 | — | ||||||||||||||||||||||||||||||||||||
AUD | 13 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
CNY | — | — | 14,772 | 991 | 14,495 | 700 | 10,236 | 197 | — | — | 3,957 | — | ||||||||||||||||||||||||||||||||||||
RUR | — | — | 1,412,479 | 238,975 | — | — | ||||||||||||||||||||||||||||||||||||||||||
UZS | — | — | 16,679,037 | 59,788,523 | — | — | 7,920,825 | 38,727,985 | 1,805,565 | — | 7,978,633 | — | ||||||||||||||||||||||||||||||||||||
RWF | — | — | 11,962 | — | 13,593 | — | ||||||||||||||||||||||||||||||||||||||||||
IDR | — | — | — | — | 411,687 | 10,000 | 347,447 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
KWD | — | 288 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
HKD | — | — | — | — | 158 | — | ||||||||||||||||||||||||||||||||||||||||||
BDT | — | — | — | — | 299 | — | ||||||||||||||||||||||||||||||||||||||||||
COP | — | — | — | — | 23,583 | — | ||||||||||||||||||||||||||||||||||||||||||
PLN | — | — | — | — | 28,195 | — | ||||||||||||||||||||||||||||||||||||||||||
VND | — | — | — | — | 273,313 | 93,756 | ||||||||||||||||||||||||||||||||||||||||||
CHF | — | — | — | — | — | 78 |
(iii) Price risk
As of December 31, 20102012, 2013 and 2011,2014 the Company is exposed to equity securities price risk because the securities held by the Company are traded in active markets. If the market prices had increased/decreased by 10% with all other variables held constant, the effects on profit before income tax and shareholders’ equity would have been as follows:
(in millions of Korean won) | Fluctuation of price | Income before tax | Shareholders’ equity | |||||||||
12.31.2010 | +10 | % | (Won) | — | (Won) | 1,914 | ||||||
- 10 | % | — | (1,914 | ) | ||||||||
12.31.2011 | +10 | % | (Won) | — | 4,375 | |||||||
- 10 | % | — | (4,375 | ) |
(in millions of Korean won) | Fluctuation of price | Income before tax | Equity | |||||||||
2012.12.31 | +10 | % | ₩ | — | ₩ | 4,916 | ||||||
-10 | % | — | (4,916 | ) | ||||||||
2013.12.31 | +10 | % | ₩ | — | ₩ | 5,535 | ||||||
-10 | % | — | (5,535 | ) | ||||||||
2014.12.31 | +10 | % | ₩ | — | ₩ | 6,593 | ||||||
-10 | % | — | (6,593 | ) |
The above analysis is based on the assumption that the equity index had increased/decreased by 10% with all other variables held constant and all the Company’s marketable equity instruments had moved according to the historical correlation with the index.
(iv) Cash flowCashflow and fair value interest rate risk
The Company’s interest rate risk arises from liabilities in foreign currency such as foreign currency bonds payable. Bonds payable in foreign currency issued at variable rates expose the
Company to cash flow interest rate risk which is partially offset by swap transactions. Bonds payable and
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
borrowings issued at fixed rates expose the Company to fair value interest rate risk. The Company sets the policy and operates to minimize the uncertainty of the changes in interest rates and financial costs.
As of December 31, 20102012, 2013 and 2011,2014 if the market interest rate had increased/decreased by 100bp with other variables held constant, the effects on profit before income tax and shareholders’ equity would be as follows:
(In millions of Korean won) | Fluctuation of | Income before tax | Shareholders’ equity | |||||||
12.31.2010 | + 100 bp | (Won) | (660 | ) | (Won) | (3,618 | ) | |||
- 100 bp | (17,293 | ) | (14,603 | ) | ||||||
12.31.2011 | + 100 bp | (1,488 | ) | (345 | ) | |||||
- 100 bp | (13,108 | ) | (14,445 | ) |
(In millions of Korean won) | Fluctuation of interest rate | Income before tax | Shareholders’ equity | |||||||||
2012.12.31 | + 100 bp | ₩ | (562 | ) | ₩ | (368 | ) | |||||
- 100 bp | (5,100 | ) | (5,361 | ) | ||||||||
2013.12.31 | + 100 bp | ₩ | 10,345 | ₩ | 12,846 | |||||||
- 100 bp | (17,201 | ) | (19,017 | ) | ||||||||
2014.12.31 | + 100 bp | ₩ | (4,717 | ) | ₩ | 4,892 | ||||||
- 100 bp | (4,632 | ) | (11,064 | ) |
The above analysis is a simple sensitivity analysis which assumes that all the variables other than market interest rates are held constant. Therefore, the analysis does not reflect any correlation between market interest rates and other variables, nor the management’s decision to decrease the risk.
2) Credit risk
Credit risk is managed on the Company basis with the purpose of minimizing financial loss. Credit risk arises from the normal transactions and investing activities, where clients or other party fails to discharge an obligation on contract conditions. To manage credit risk, the Company considers the counterparty’s credit based on the counterparty’s financial conditions, default history and other important factors.
Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as outstanding receivables. To minimize such risk, only the financial institutions with strong credit ratings are accepted.
As of January 1, 2010 and December 31, 20102013 and 2011,2014, maximum exposure to credit risk that are not considered of value of collateral held regarding financial instrument areis as follows.
(In millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Cash equivalents (except cash on hand) | (Won) | 1,539,660 | (Won) | 1,152,995 | (Won) | 1,433,839 | ||||||||||||||
Trade and other receivables | 4,515,007 | 5,318,713 | 7,882,329 | |||||||||||||||||
Cash equivalents(except cash on hand) | ₩ | 2,065,157 | ₩ | 1,884,745 | ||||||||||||||||
Trade and other receivables1 | 6,053,040 | 5,659,913 | ||||||||||||||||||
Loans receivable | 911,229 | 1,133,221 | 1,189,331 | 1,348,597 | 1,295,282 | |||||||||||||||
Finance lease receivables | 522,765 | 597,339 | 736,660 | 709,937 | 584,413 | |||||||||||||||
Other financial assets | ||||||||||||||||||||
Derivate financial assets | 308,324 | 250,630 | 164,434 | |||||||||||||||||
Financial instrument | 370,262 | 116,269 | 289,628 | |||||||||||||||||
Financial assets at fair value through the profit or loss | 15,643 | 6,983 | ||||||||||||||||||
Derivative used for hedging | 3,496 | 41,540 | ||||||||||||||||||
Time deposits and others | 582,693 | 455,622 | ||||||||||||||||||
Available-for-sale financial assets | 3,151 | 1,565 | 25,829 | 25,978 | 27,870 | |||||||||||||||
Held-to-maturity financial assets | 82 | 7 | 7 | 3,248 | 7,767 | |||||||||||||||
Financial guarantee contracts 1 | 9,469 | 37,923 | 57,369 | |||||||||||||||||
Performance guarantee contracts 1 | — | 312 | 910 | |||||||||||||||||
Financial guarantee contracts 2 | 389,814 | 55,393 | ||||||||||||||||||
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Total | (Won) | 8,179,949 | (Won) | 8,608,974 | (Won) | 11,780,336 | ₩ | 11,197,603 | ₩ | 10,019,528 | ||||||||||
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1 | As of December 31, 2014, the Company is provided with a payment guarantee of₩674,768 million from Seoul Guarantee Insurance related to the sale of certain accounts receivable arising from the handset sales. |
2 | Total amounts guaranteed by the Company according to the guarantee |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
3) Liquidity risk
The Company manages its liquidity risk by liquidity strategy and plans. The Company considers the maturity of financial assets and financial liabilities and the estimated cash flows from operations.
The table below analysesanalyzes the Company’s liabilities into relevant maturity groups based on the remaining period at the date of the end of each reporting period to the contractual maturity date. These amounts are contractual undiscounted cash flows.
12.31.2010 | 2013.12.31 | |||||||||||||||||||||||||||||||
(in millions of Korean won) | Less than 1 year | 1-5 years | More than 5 years | Total | Less than 1 year | 1-5 years | More than 5 years | Total | ||||||||||||||||||||||||
Trade and other payables | (Won) | 5,436,441 | (Won) | 483,379 | (Won) | 27,179 | (Won) | 5,946,999 | ₩ | 7,429,289 | ₩ | 789,999 | ₩ | 352,928 | ₩ | 8,572,216 | ||||||||||||||||
Finance lease payables | 46,144 | 74,188 | — | 120,332 | 22,498 | 52,877 | — | 75,375 | ||||||||||||||||||||||||
Borrowings | 3,200,317 | 6,746,895 | 1,152,118 | 11,099,330 | ||||||||||||||||||||||||||||
Other non-derivative financial liabilities1 | 4,183 | 12,071 | 4,719 | 20,973 | ||||||||||||||||||||||||||||
Borrowings (including bonds payable) | 3,147,761 | 5,408,176 | 3,468,282 | 12,024,219 | ||||||||||||||||||||||||||||
Other non-derivative financial liabilities | — | 3,166 | 53,704 | 56,870 | ||||||||||||||||||||||||||||
Financial guarantee contracts1 | 37,923 | — | — | 37,923 | 389,814 | — | — | 389,814 | ||||||||||||||||||||||||
Obligation guarantee contracts1 | 312 | — | — | 312 | ||||||||||||||||||||||||||||
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Total | (Won) | 8,725,320 | (Won) | 7,316,533 | (Won) | 1,184,016 | (Won) | 17,225,869 | ₩ | 10,989,362 | ₩ | 6,254,218 | ₩ | 3,874,914 | ₩ | 21,118,494 | ||||||||||||||||
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12.31.2011 | 2014.12.31 | |||||||||||||||||||||||||||||||
(in millions of Korean won) | Less than 1 year | 1-5 years | More than 5 years | Total | Less than 1 year | 1-5 years | More than 5 years | Total | ||||||||||||||||||||||||
Trade and other payables | (Won) | 5,708,878 | (Won) | 618,231 | (Won) | 21,771 | (Won) | 6,348,880 | ₩ | 6,973,931 | ₩ | 1,028,043 | ₩ | 254,852 | ₩ | 8,256,826 | ||||||||||||||||
Finance lease payables | 66,635 | 116,627 | — | 183,262 | 22,516 | 37,382 | — | 59,898 | ||||||||||||||||||||||||
Borrowings | 2,546,855 | 8,144,611 | 2,139,458 | 12,830,924 | ||||||||||||||||||||||||||||
Other non-derivative financial liabilities 1 | — | 331,170 | — | 331,170 | ||||||||||||||||||||||||||||
Borrowings (including bonds payable) | 2,986,372 | 6,508,681 | 4,162,910 | 13,657,963 | ||||||||||||||||||||||||||||
Other non-derivative financial liabilities | 405 | 3,441 | — | 3,846 | ||||||||||||||||||||||||||||
Financial guarantee contracts 1 | 57,369 | — | — | 57,369 | 55,393 | — | — | 55,393 | ||||||||||||||||||||||||
Performance guarantee contracts 1 | 910 | — | — | 910 | ||||||||||||||||||||||||||||
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Total | (Won) | 8,380,647 | (Won) | 9,210,639 | (Won) | 2,161,229 | (Won) | 19,752,515 | ₩ | 10,038,617 | ₩ | 7,577,547 | ₩ | 4,417,762 | ₩ | 22,033,926 | ||||||||||||||||
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1 | Total amount guaranteed by the Company according to guarantee contracts. Cash flow from financial guarantee contracts is classified as the maturity group in the earliest period when the financial guarantee contracts can be |
Cash outflow and inflow of derivatives settled gross or net are undiscounted contractual cash flow and can differ from the amount in the financial statements.
12.31.2010 | 2012.12.31 | |||||||||||||||||||||||||||||||
(in millions of Korean won) | Less than 1 year | 1-5 years | More than 5 years | Total | Less than 1 year | 1-5 years | More than 5 years | Total | ||||||||||||||||||||||||
Outflow | (Won) | 613,404 | (Won) | 1,590,493 | (Won) | 43,805 | (Won) | 2,247,702 | ₩ | 1,020,494 | ₩ | 1,507,287 | ₩ | 41,292 | ₩ | 2,569,073 | ||||||||||||||||
Inflow | 753,842 | 1,660,349 | 50,909 | 2,465,100 | 949,921 | 1,550,822 | 45,093 | 2,545,836 |
12.31.2011 | 2013.12.31 | |||||||||||||||||||||||||||||||
(in millions of Korean won) | Less than 1 year | 1-5 years | More than 5 years | Total | Less than 1 year | 1-5 years | More than 5 years | Total | ||||||||||||||||||||||||
Outflow | (Won) | 414,646 | (Won) | 1,949,253 | (Won) | 42,541 | (Won) | 2,406,440 | ₩ | 971,454 | ₩ | 1,377,071 | ₩ | 38,795 | ₩ | 2,387,320 | ||||||||||||||||
Inflow | 436,469 | 2,038,288 | 50,053 | 2,524,810 | 910,488 | 1,256,407 | 41,648 | 2,208,543 |
2014.12.31 | ||||||||||||||||
(in millions of Korean won) | Less than 1 year | 1-5 years | More than 5 years | Total | ||||||||||||
Outflow | ₩ | 242,051 | ₩ | 2,282,242 | ₩ | 38,795 | ₩ | 2,563,088 | ||||||||
Inflow | 210,045 | 2,217,211 | 43,418 | 2,470,674 |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(2) Disclosure of capital management
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other shareholders and to maintain an optimal capital structure to reduce the cost of capital.
The Company’s capital structure consists of liabilities including borrowings, cash and cash equivalents, and shareholders’ equity. The treasury department monitors the Company’s capital structure and considers cost of capital and risks related each capital component.
The debtdebt-to-equity ratios as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | |||||||||
Total liabilities | (Won) | 15,948,878 | (Won) | 15,587,548 | (Won) | 19,547,600 | ||||||
Total equity | 10,714,816 | 11,354,055 | 12,537,809 | |||||||||
Gearing ratio | 149 | % | 137 | % | 156 | % |
(in millions of Korean won) Total liabilities Total equity Debt-to-equity ratio 2013 2014 ₩ 22,012,701 ₩ 22,011,718 12,837,416 11,787,557 171 % 187 %
The Company manages capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as ‘equity’ in the statement of financial position plus net debt.
The gearing ratioratios as of January 1, 2010 and December 31, 20102013 and 2011,2014, are as follows:
(in millions of Korean won, %) | 1.1.2010 | 12.31.2010 | 12.31.2011 | 2013 | 2014 | |||||||||||||||
Total borrowings | (Won) | 9,566,700 | (Won) | 9,382,364 | (Won) | 10,998,552 | ₩ | 11,552,103 | ₩ | 12,870,392 | ||||||||||
Less: cash and cash equivalents | (1,542,872 | ) | (1,161,641 | ) | (1,445,169 | ) | (2,070,869 | ) | (1,888,663 | ) | ||||||||||
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Net debt | 8,023,828 | 8,220,723 | 9,553,383 | 9,481,234 | 10,981,729 | |||||||||||||||
Total equity | 10,714,816 | 11,354,055 | 12,537,809 | 12,837,416 | 11,787,557 | |||||||||||||||
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Total capital | (Won) | 18,738,644 | (Won) | 19,574,778 | (Won) | 22,091,192 | 22,318,650 | 22,769,286 | ||||||||||||
Gearing ratio | 43 | % | 42 | % | 43 | % | 42 | % | 48 | % |
(3) Fair value estimationOffsetting Financial Assets and Financial Liabilities
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2)
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3)
The following table presentsDetails of the Company’s assets and liabilities that are measured at fair value as of January 1, 2010 and December 31, 2010 and 2011:
1.1.2010 | ||||||||||||||||
(in millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Available-for-sale | (Won) | 15,587 | (Won) | 3,151 | (Won) | — | (Won) | 18,738 | ||||||||
Derivative financial assets | — | 308,324 | — | 308,324 | ||||||||||||
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Total | (Won) | 15,587 | (Won) | 311,475 | (Won) | — | (Won) | 327,062 | ||||||||
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| |||||||||
Liabilities | ||||||||||||||||
Derivative financial liabilities | (Won) | — | (Won) | 11,279 | (Won) | — | (Won) | 11,279 | ||||||||
Hedged bonds | — | 180,023 | — | 180,023 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | (Won) | — | (Won) | 191,302 | (Won) | — | (Won) | 191,302 | ||||||||
|
|
|
|
|
|
|
|
12.31.2010 | ||||||||||||||||
(in millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Assets at fair value through the profit and loss | (Won) | — | (Won) | 1,173 | (Won) | — | (Won) | 1,173 | ||||||||
Available-for-sale | 25,469 | 1,565 | — | 27,034 | ||||||||||||
Derivative financial assets | — | 250,630 | — | 250,630 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | (Won) | 25,469 | (Won) | 253,368 | (Won) | — | (Won) | 278,837 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Derivative financial liabilities | (Won) | — | (Won) | 20,471 | (Won) | — | (Won) | 20,471 | ||||||||
Hedged bonds | — | 181,244 | — | 181,244 | ||||||||||||
Financial guarantee liabilities | — | 3,157 | — | 3,157 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | (Won) | — | (Won) | 204,872 | (Won) | — | (Won) | 204,872 | ||||||||
|
|
|
|
|
|
|
|
(in millions of Korean won) Assets Assets at fair value through the profit and loss Available-for-sale Derivative financial assets Total Liabilities Derivative financial liabilities Financial guarantee liabilities Total 12.31.2011 Level 1 Level 2 Level 3 Total (Won) — (Won) 1,386 (Won) — (Won) 1,386 101,183 25,829 134,346 261,358 — 164,434 — 164,434 (Won) 101,183 (Won) 191,649 (Won) 134,346 (Won) 427,178 (Won) — (Won) 6,548 (Won) 2,258 (Won) 8,806 — 8,042 — 8,042 (Won) — (Won) 14,590 (Won) 2,258 (Won) 16,848
The fair value of financial instruments traded in active markets is based on quoted market prices at the date of the end of reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used forrecognized financial assets held by the Company is the bid price. These instruments are included in level 1. Instruments included in level 1 comprise listed equity investments classified as available-for-sale.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs requiredsubject to fair value of an instrument are observable, the instrument is included in level 2.
If oneenforceable master netting arrangements or more of the significant inputs are not based on observable market data, the instrument is included in level 3.
The changes of the financial instrument included in Level 3 for the year ended December 31, 2011similar agreements are as follows:
(in millions of Korean won) | Available-for-sale financial assets | Derivative financial liabilities | ||||||
Beginning | (Won) | — | (Won) | — | ||||
Total profit | — | — | ||||||
Income for the year | — | (36 | ) | |||||
Other comprehensive income | 14,850 | — | ||||||
Transfer into Level 3 from the cost method | 17,544 | — | ||||||
Changes in scope of consolidation | 101,952 | (2,222 | ) | |||||
|
|
|
| |||||
Ending | (Won) | 134,346 | (Won) | (2,258 | ) | |||
|
|
|
|
2013 | ||||||||||||||||||||||||
(in millions of Korean won) | Gross assets | Gross liabilities offset | Net amounts presented in the statement of financial position | Amounts not offset | Net amount | |||||||||||||||||||
Financial instruments | Cash collateral | |||||||||||||||||||||||
Derivative assets for hedging purpose 1 | ₩ | 5,393 | ₩ | — | ₩ | 5,393 | ₩ | (5,393 | ) | ₩ | — | ₩ | — | |||||||||||
Trade receivables 2 | 100,989 | (60 | ) | 100,929 | (92,979 | ) | — | 7,950 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 106,382 | ₩ | (60 | ) | ₩ | 106,322 | ₩ | (98,372 | ) | ₩ | — | ₩ | 7,950 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
The details of equity securities measured at historical cost as of January 1, 2010 and December 31, 20102012, 2013 and 2011, are as follows.2014
(in millions of Korean won) | 1.1.2010 | 12.31.2010 | 12.31.2011 | |||||||||
SBSKTSPC 1 | (Won) | 15,000 | (Won) | 25,000 | (Won) | 25,000 | ||||||
MBCKTSPC 1 | 11,000 | 11,000 | 11,000 | |||||||||
KBSKTSPC 1 | — | — | 11,000 | |||||||||
IBK-AUCTUS Green Growth Private Equity Fund 1 | 100 | 7,000 | 10,340 | |||||||||
ELAND RETAIL.Ltd. 1 | — | — | 9,998 | |||||||||
Vogo II-2 Investment Holdings Co., Ltd. 1 | — | — | 4,813 | |||||||||
Revolution Private Equity Fund 1 | — | — | 4,500 | |||||||||
KoFC-IMM Pioneer Champ 2010-17 venture investment 1 | — | 2,010 | 3,000 | |||||||||
Enterprise DB Corp. 1 | — | 3,013 | 3,013 | |||||||||
Others | 66,878 | 97,087 | 77,233 | |||||||||
|
|
|
|
|
| |||||||
Total | (Won) | 92,978 | (Won) | 145,110 | (Won) | 159,897 | ||||||
|
|
|
|
|
|
2014 | ||||||||||||||||||||||||
(in millions of Korean won) | Gross assets | Gross liabilities offset | Net amounts presented in the statement of financial position | Amounts not offset | Net amount | |||||||||||||||||||
Financial instruments | Cash collateral | |||||||||||||||||||||||
Derivative assets for hedging purpose 1 | ₩ | 3,225 | ₩ | — | ₩ | 3,225 | ₩ | (3,225 | ) | ₩ | — | ₩ | — | |||||||||||
Trade receivables 2 | 107,179 | (1 | ) | 107,178 | (103,704 | ) | — | 3,474 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 110,404 | ₩ | (1 | ) | ₩ | 110,403 | ₩ | (106,929 | ) | ₩ | — | ₩ | 3,474 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | The |
2 | The amount applied with netting arrangements under the |
The Company’s recognized financial liabilities subject to enforceable master netting arrangements or similar agreements are as follows:
2013 | ||||||||||||||||||||||||
Korean won) | Gross liabilities | Gross assets offset | Net amounts presented in the statement of financial position | Amounts not offset | Net amount | |||||||||||||||||||
Financial instruments | Cash collateral | |||||||||||||||||||||||
Derivative liabilities for hedging purpose1 | ₩ | 9,889 | ₩ | — | ₩ | 9,889 | ₩ | (5,393 | ) | ₩ | — | ₩ | 4,496 | |||||||||||
Trade payables 2 | 95,754 | — | 95,754 | (92,979 | ) | — | 2,775 | |||||||||||||||||
Other payables 2 | 11 | (2 | ) | 9 | — | — | 9 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 105,654 | ₩ | (2 | ) | ₩ | 105,652 | ₩ | (98,372 | ) | ₩ | — | ₩ | 7,280 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
2014 | ||||||||||||||||||||||||
(in millions of Korean won) | Gross liabilities | Gross assets offset | Net amounts presented in the statement of financial position | Amounts not offset | Net amount | |||||||||||||||||||
Financial instruments | Cash collateral | |||||||||||||||||||||||
Derivative liabilities for hedging purpose 1 | ₩ | 49,016 | ₩ | — | ₩ | 49,016 | ₩ | (3,225 | ) | ₩ | — | ₩ | 45,791 | |||||||||||
Trade payables 2 | 108,669 | — | 108,669 | (103,704 | ) | — | 4,965 | |||||||||||||||||
Other payables 2 | 2 | (1 | ) | 1 | — | — | 1 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
₩ | 157,687 | ₩ | (1 | ) | ₩ | 157,686 | ₩ | (106,929 | ) | ₩ | — | ₩ | 50,757 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
1 | The amount applied with master netting arrangements under the standard contract of International Swap Sand Derivatives Association(ISDA). |
2 | The amount applied with netting arrangements under the reference offer of the telecommunication facility interconnection and sharing data among telecommunications companies. |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
36. Fair Value
(1) Fair Value of Financial Instruments by Category
Carrying amount and fair value of financial instruments by category as of December 31, 2013 and 2014, are as follows:
2013 | 2014 | |||||||||||||||
(in millions of Korean won) | Carrying amount | Fair value | Carrying amount | Fair value | ||||||||||||
Financial assets | ||||||||||||||||
Cash and cash equivalents 1 | ₩ | 2,070,869 | ₩ | 2,070,869 | ₩ | 1,888,663 | ₩ | 1,888,663 | ||||||||
Trade and other receivables 1 | 6,053,040 | 6,053,040 | 5,659,913 | 5,659,913 | ||||||||||||
Other financial assets | ||||||||||||||||
Financial instruments at fair value through profit or loss | 15,643 | 15,643 | 6,983 | 6,983 | ||||||||||||
Derivative financial instruments for hedging purpose | 3,496 | 3,496 | 41,540 | 41,540 | ||||||||||||
Time deposits and others 1 | 582,693 | 582,693 | 455,622 | 455,622 | ||||||||||||
Held-to-maturity financial assets 1 | 3,248 | 3,248 | 7,767 | 7,767 | ||||||||||||
Available-for-sale financial assets 2 | 405,194 | 405,194 | 437,285 | 437,285 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 9,134,183 | ₩ | 9,134,183 | ₩ | 8,497,773 | ₩ | 8,497,773 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Financial liabilities | ||||||||||||||||
Trade and other liabilities 1 | ₩ | 8,472,707 | ₩ | 8,472,707 | ₩ | 7,317,303 | ₩ | 7,317,303 | ||||||||
Financial lease liabilities | 68,210 | 68,210 | 55,007 | 55,007 | ||||||||||||
Borrowings | 11,483,893 | 11,499,645 | 12,815,385 | 12,821,442 | ||||||||||||
Other financial liabilities | ||||||||||||||||
Financial instruments at fair value through profit or loss | 2,956 | 2,956 | 3,980 | 3,980 | ||||||||||||
Derivative financial instruments for hedging purpose | 150,612 | 150,612 | 122,012 | 122,012 | ||||||||||||
Financial guarantee liability 1 | 15,984 | 15,984 | 5,434 | 5,434 | ||||||||||||
Other financial liabilities 1 | 73,080 | 73,080 | 82,816 | 82,816 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 20,267,442 | ₩ | 20,283,194 | ₩ | 20,401,937 | ₩ | 20,407,994 | |||||||||
|
|
|
|
|
|
|
|
1 | The Company did not conduct fair value estimation since the book value is a reasonable approximation of the fair value. |
2 | Equity instruments that do not have a quoted price in an active market are measured at |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(2) Financial Instruments Measured at Cost
Available-for-sale financial assets measured at cost as of December 31, 2013 and 2014, are as follows:
(in millions of Korean won) | 2013 | 2014 | ||||||
SBS KT SPC | ₩ | 25,000 | ₩ | — | ||||
IBK-AUCTUS Green Growth Private Equity Fund | 14,318 | 14,068 | ||||||
MBC KT SPC | 11,000 | — | ||||||
Ustream Inc | 11,295 | — | ||||||
CBC II Fund | 6,633 | 9,548 | ||||||
TRANSLINK No.2 Fund | 8,080 | 9,104 | ||||||
KBS KT SPC | 11,000 | 7,000 | ||||||
WALDEN No.6 Fund | 5,956 | 5,749 | ||||||
Storm IV Fund | 3,501 | 5,162 | ||||||
Enterprise DB (Convertible Preferred Stock) | 3,013 | 3,013 | ||||||
The 1st Praxis PE | 3,000 | — | ||||||
AMOGREENTECH | 3,000 | 3,000 | ||||||
Ars Magna Private Equity Fund | — | 3,000 | ||||||
Kokam Co., Ltd. | 2,794 | 2,794 | ||||||
KDBC-IMM No.1 Private Equity Fund | — | 2,499 | ||||||
Nexenta Systems (Convertible Preferred Stock) | 2,260 | 2,260 | ||||||
Nexenta Systems | 1,029 | 2,159 | ||||||
BK Constant Recovery Private Equity Fund | — | 2,000 | ||||||
HNNSC Private Equity Fund | — | 2,000 | ||||||
KDBC-EN Agro Private Equity Fund | — | 2,000 | ||||||
Eco 2014 Private Equity Fund | — | 2,000 | ||||||
IMM Infra No.2 | — | 2,000 | ||||||
K- Realty CR-REITs No.6 | — | 2,000 | ||||||
Newkyunggi Resort Corp | 1,240 | 1,214 | ||||||
Goods Flow Co., Ltd. | 1,000 | 1,000 | ||||||
KaKao Co., Ltd | 1,000 | — | ||||||
Kamur No.1 Private Equity Fund | 2,000 | — | ||||||
Others | 25,314 | 4,701 | ||||||
|
|
|
| |||||
₩ | 142,433 | ₩ | 88,271 | |||||
|
|
|
|
The range of cashflow estimates is significant and the probabilities of the various estimates cannot be reasonably assessed and therefore, these instruments are measured at cost.
The Company does not have any plans to dispose of the above-mentioned equities instruments in the near future. These instruments will be measured at fair value when the Company can develop a reliable estimate of the fair value.
(3) Fair Value Hierarchy
Assets measured at fair value or for which the fair value is disclosed are categorized within the fair value hierarchy, and the defined levels are as follows:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, prices) or indirectly (that is, derived from prices) (Level 2).
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
Fair value hierarchy classifications of the financial assets and financial liabilities that are measured at fair value or its fair value is disclosed as of December 31, 2013 and 2014, are as follows:
2013 | ||||||||||||||||
(in millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Recurring fair value measurements | ||||||||||||||||
Other financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ₩ | — | ₩ | 499 | ₩ | 15,144 | ₩ | 15,643 | ||||||||
Derivative financial assets for hedging purpose | — | — | 3,496 | 3,496 | ||||||||||||
Available-for-sale financial assets | 55,347 | 57,533 | 292,314 | 405,194 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
55,347 | 58,032 | 310,954 | 424,333 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Disclosed fair value | ||||||||||||||||
Jointly controlled entities and associates | 69,840 | — | — | 69,840 | ||||||||||||
Investment property 1 | — | — | 2,051,183 | 2,051,183 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
69,840 | — | 2,051,183 | 2,121,023 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 125,187 | ₩ | 58,032 | ₩ | 2,362,137 | ₩ | 2,545,356 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Recurring fair value measurements | ||||||||||||||||
Other financial liabilities | ||||||||||||||||
Financial liabilities at fair value through profit or loss | ₩ | — | ₩ | 6 | ₩ | 2,950 | ₩ | 2,956 | ||||||||
Derivative financial liabilities for hedging purpose | — | 113,980 | 36,632 | 150,612 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 113,986 | 39,582 | 153,568 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Disclosed fair value | ||||||||||||||||
Borrowings | — | — | 11,499,645 | 11,499,645 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | — | 11,499,645 | 11,499,645 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | — | ₩ | 113,986 | ₩ | 11,539,227 | ₩ | 11,653,213 | |||||||||
|
|
|
|
|
|
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2014 | ||||||||||||||||
(in millions of Korean won) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Recurring fair value measurements | ||||||||||||||||
Other financial assets | ||||||||||||||||
Financial assets at fair value through profit or loss | ₩ | — | ₩ | — | ₩ | 6,983 | ₩ | 6,983 | ||||||||
Derivative financial assets for hedging purpose | — | 34,198 | 7,342 | 41,540 | ||||||||||||
Available-for-sale financial assets | 65,932 | 42,093 | 329,260 | 437,285 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
65,932 | 76,291 | 343,585 | 485,808 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Disclosed fair value | ||||||||||||||||
Jointly controlled entities and associates | 8,247 | — | — | 8,247 | ||||||||||||
Investment property 1 | — | — | 2,277,234 | 2,277,234 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
8,247 | — | 2,277,234 | 2,285,481 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | 74,179 | ₩ | 76,291 | ₩ | 2,620,819 | ₩ | 2,771,289 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Recurring fair value measurements | ||||||||||||||||
Other financial liabilities | ||||||||||||||||
Financial liabilities at fair value through profit or loss | ₩ | — | ₩ | — | ₩ | 3,980 | ₩ | 3,980 | ||||||||
Derivative financial liabilities for hedging purpose | — | 122,012 | — | 122,012 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | 122,012 | 3,980 | 125,992 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Disclosed fair value | ||||||||||||||||
Borrowings | — | — | 12,821,442 | 12,821,442 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
— | — | 12,821,442 | 12,821,442 | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
₩ | — | ₩ | 122,012 | ₩ | 12,825,442 | ₩ | 12,947,434 | |||||||||
|
|
|
|
|
|
|
|
1 | The highest and best use of a non-financial asset does not differ from its current use. |
(4) Transfers Between Fair Value Hierarchy Levels of Recurring Fair Value Measurements
(a) Details of transfers between Level 1 and Level 2 of the fair value hierarchy for the recurring fair value measurements are as follows:
There are no transfers between Level 1 and Level 2 of the fair value hierarchy for the recurring fair value measurements.
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(b) Details of changes in Level 3 of the fair value hierarchy for the recurring fair value measurements are as follows:
2013 | ||||||||||||||||||||||||||||
(in millions of Korean won) | Interest rate swap | Other derivative assets | Derivative financial assets for hedging purpose | Available- for-sale | Other derivative liabilities | Financial liabilities designated as at fair value through profit or loss | Derivative financial liabilities for hedging purpose | |||||||||||||||||||||
Beginning balance | ₩ | 1 | ₩ | 6,287 | ₩ | 20,511 | ₩ | 217,201 | ₩ | — | ₩ | 3,153 | ₩ | 23,540 | ||||||||||||||
Reclassification | 15,633 | — | (15,633 | ) | — | — | — | — | ||||||||||||||||||||
Amount recognized in profit or loss | (8,395 | ) | 2,469 | 127 | (3,844 | ) | 148 | (351 | ) | 9,268 | ||||||||||||||||||
Amount recognized in other comprehensive income | — | — | (1,509 | ) | 95,434 | — | — | 3,824 | ||||||||||||||||||||
Purchases | — | — | — | 3,009 | — | — | — | |||||||||||||||||||||
Sales | — | (851 | ) | — | (29,851 | ) | — | — | — | |||||||||||||||||||
Transfer into Level 3 (From Cost method) | — | — | — | 10,365 | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Ending balance | ₩ | 7,239 | ₩ | 7,905 | ₩ | 3,496 | ₩ | 292,314 | ₩ | 148 | ₩ | 2,802 | ₩ | 36,632 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 | ||||||||||||||||||||||||||||
(in millions of Korean won) | Interest rate swap | Other derivative assets | Derivative financial assets for hedging purpose | Available- for-sale | Other derivative liabilities | Financial liabilities designated as at fair value through profit or loss | Derivative financial liabilities for hedging purpose | |||||||||||||||||||||
Beginning balance | ₩ | 7,239 | ₩ | 7,905 | ₩ | 3,496 | ₩ | 292,314 | ₩ | 148 | ₩ | 2,802 | ₩ | 36,632 | ||||||||||||||
Reclassification | — | — | — | (5,836 | ) | — | — | — | ||||||||||||||||||||
Amount recognized in profit or loss | (1 | ) | (395 | ) | 5,315 | (3,483 | ) | 32 | 532 | — | ||||||||||||||||||
Amount recognized in other comprehensive income | — | — | (1,469 | ) | 21,006 | — | — | — | ||||||||||||||||||||
Purchases | — | — | — | 34,322 | 466 | — | — | |||||||||||||||||||||
Sales | — | (527 | ) | — | (26,512 | ) | — | — | — | |||||||||||||||||||
Settlement | (7,238 | ) | — | — | — | — | — | (36,632 | ) | |||||||||||||||||||
Transfer into Level 3 (From Cost method) | — | — | — | 17,449 | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Ending balance | ₩ | — | ₩ | 6,983 | ₩ | 7,342 | ₩ | 329,260 | ₩ | 646 | ₩ | 3,334 | ₩ | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
(5) Valuation Technique and the Inputs
Valuation techniques and inputs used in the recurring, non-recurring fair value measurements and disclosed fair values categorized within Level 2 and Level 3 of the fair value hierarchy as of December 31, 2013 and 2014, are as follows:
2013 | ||||||||||
(in millions of Korean won) | Fair value | Level | Valuation techniques | |||||||
Recurring fair value measurements | ||||||||||
Other financial assets | ||||||||||
Financial assets at fair value through profit or loss | ||||||||||
Held for trading financial assets | ||||||||||
Interest rate and currency swap | ₩ | 7,239 | 3 | Hull-White model | ||||||
Currency forward | 499 | 2 | Discounted cash flow model | |||||||
Other derivative assets | 7,905 | 3 | Monte-Carlo Simulation Option model (binomial trees) | |||||||
Derivative financial assets for hedging purpose | 3,496 | 3 | Discounted cash flow model | |||||||
Available-for-sale financial assets | 349,847 | 2,3 | Discounted cash flow model | |||||||
Disclosed fair value | ||||||||||
Investment property | 2,051,183 | 3 | Discounted cash flow model | |||||||
Recurring fair value measurements | ||||||||||
Other financial liabilities | ||||||||||
Financial liabilities at fair value through profit or loss | ||||||||||
Held for trading financial assets | ||||||||||
Currency forward | 6 | 2 | Discounted cash flow model | |||||||
Other derivatives | 148 | 3 | Option model (binomial trees) | |||||||
Financial liabilities designated as at fair value through profit or loss | 2,802 | 3 | Option model (binomial trees) | |||||||
Derivative financial liabilities for hedging purpose | 113,980 | 2 | Discounted cash flow model | |||||||
36,632 | 3 | Hull-White model | ||||||||
Disclosed fair value | ||||||||||
Borrowings | 11,499,645 | 3 | Discounted cash flow model |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2014 | ||||||||||
(in millions of Korean won) | Fair value | Level | Valuation techniques | |||||||
Recurring fair value measurements | ||||||||||
Other financial assets | ||||||||||
Financial assets at fair value through profit or loss | ||||||||||
Held for trading financial assets | ||||||||||
Other derivative assets | ₩ | 6,983 | 3 | Monte-Carlo Simulation Option model (binomial trees) | ||||||
Derivative financial assets for hedging purpose | 34,198 | 2 | Discounted cash flow model | |||||||
7,342 | 3 | Hull-White model | ||||||||
Available-for-sale financial assets | 371,353 | 2,3 | Discounted cash flow model | |||||||
Disclosed fair value | ||||||||||
Investment property | 2,277,234 | 3 | Discounted cash flow model | |||||||
Recurring fair value measurements | ||||||||||
Other financial liabilities | ||||||||||
Financial liabilities at fair value through profit or loss | ||||||||||
Held for trading financial assets | ||||||||||
Other derivatives | 646 | 3 | Option model (binomial trees) | |||||||
Financial liabilities designated as at fair value through profit or loss | 3,334 | 3 | Option model (binomial trees) | |||||||
Derivative financial liabilities for hedging purpose | 122,012 | 2 | Discounted cash flow model | |||||||
Disclosed fair value | 12,821,442 | 3 | Discounted cash flow model |
(6) Valuation Processes for Fair Value Measurements Categorized Within Level 3
The Company uses external experts that perform the fair value measurements required for financial reporting purposes. External experts report directly to the company’s financial officer of the financial & accounting department, and discusses valuation processes and results with the financial officer in line with the Company’s reporting dates.
(7) Gains and losses on valuation at the transaction date
In the case that the Company values derivative financial instruments using inputs not based on observable market data, and the fair value calculated by the said valuation technique differs from the transaction price, then the fair value of the financial instruments is recognized as the transaction price. The difference between the fair value at initial recognition and the transaction price is deferred and amortized using a straight-line method by maturity of the financial instrument. However, in the case that inputs of the valuation techniques become observable in markets, the remaining deferred difference is immediately recognized in full in profit for the year.
In relation to this, details and changes of the total deferred difference for the years ended December 31, 2013 and 2014, are as follows:
(in millions of Korean won) | 2013 | 2014 | ||||||
Beginning balance | ₩ | 54,152 | ₩ | 43,322 | ||||
New transactions | — | — | ||||||
Amortization | (10,830 | ) | (10,830 | ) | ||||
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|
|
| |||||
Ending balance | ₩ | 43,322 | ₩ | 32,492 | ||||
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|
|
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
37. Business Combination
(1) ktcs Corporation
KT SkylifeHitel Co., Ltd.
Due to the trend of convergence in the telecommunications and broadcasting market, the Controlling Company needed to obtain control over, a broadcasting company to enhance the synergy effectssubsidiary of the resources within the consolidated subsidiaries. On January 27, 2011, the Controlling Company, acquired 4,800,000 treasury shares (11.3%) of ktcs Corporation, an associate, from Dutch Savings Holdings B.V 5,600,000ktcs Corporation on October 31, 2014.
ktcs Corporation was reclassified as a subsidiary from an associate as a result of redeemable convertible preferred stockthis transaction accounted for in accordance with voting rights and the bonds convertible into 5,600,000 of common stock of KT Skylife Co., Ltd. (formerly “Korea Digital Satellite Broadcasting Co., Ltd.”) for(Won)246,400 million, which is engaged in the satellite broadcasting business. Including the potential voting rights, the Controlling Company’s ownership in KT Skylife Co., Ltd. has increased to 53.05% and accordingly, the Controlling Company has control over KT Skylife Co., Ltd. On March 10, 2011, the Controlling Company exercised the conversion right of both redeemable convertible preferred stocks and convertible bonds.IFRS 3,Business Combinations.
As a result of applying the acquisition method, the Company recognized goodwillgain on bargain purchase of(Won)₩306,303 million, which is5,719 million. The gain on bargain purchase resulting from the excess of total consideration transferred over the fairdecrease in value of the net assets at the acquisition date. The fair value of the net assets at the acquisition date includes the identifiable intangible assets such as customer relationship,goodwill and membership, which was not previously recognized in the subsidiary’s financial statements.statements, is wholly recognized as profit for the year.
Details of the consideration transferred, fair value of the acquired identifiable assets and liabilities and goodwill at the acquisition date are as follows:
(in millions of Korean won) | ||||
Consideration transferred | ||||
| ||||
|
| |||
| ||||
Cash and cash equivalents | ||||
Trade and other receivables | 66,051 | |||
Other financial assets | ||||
| ||||
Inventories | ||||
| ||||
Intangible assets | ||||
| ||||
Other assets | ||||
Trade and other | ( | ) | ||
Borrowings | ( | ) | ||
| ||||
| ||||
| ( | ) | ||
Provisions | (559 | ) | ||
Net defined benefit liabilities | (6,554 | ) | ||
Other liabilities | ( | ) | ||
|
| |||
The net of total amounts of identifiable assets and liabilities measured at fair value (b) | ||||
Non-controlling interests2 (c) | ||||
|
| |||
| ) | |||
|
|
1 | The assets acquired and liabilities assumed are measured at fair value in accordance with IFRS 3,Business Combination. |
2 | At the date of acquisition, the Company measures any non-controlling interest in |
As described in Note 15,14, the previously held interest in KT Skylife Co., Ltd.ktcs Corporation was measured at fair value, and the Company recognized other operating incomeexpense of(Won)₩187,4582,469 million arising from the fair value measurement on acquisition.
After the acquisition date, the operating revenue and net income for consolidation of KT Skylife Co., Ltd.ktcs Corporation. before the elimination of intercompany transactions, with its subsidiarieswhich are included in consolidated statement of income, are(Won)₩116,74878,828 million and(Won)₩7,3212,788 million, respectively. The difference between itsrespectively, for the year ended December 31, 2014. If ktcs
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Corporation was consolidated on January 1, 2014, the operating revenue and net income from the acquisition date and the revenue and net income if KT Skylife Co., Ltd. had been consolidated from January 1, 2011, included in consolidation is insignificant.consolidated statement of income would have been₩439,077 million and₩11,203 million, respectively, for the year ended December 31, 2014.,
The fair value of trade accounts receivable and other receivablesothers acquired from KT Skylife Co., Ltd.ktcs Corporation is(Won)₩140,18066,051 million, while the full contract value is(Won)168,693 million. The uncollectible amounts from these receivablesand all are expected to be(Won)28,513 million.deemed collectible.
(2) BC Card Co.,Ltd.ktis Corporation
KT Capital Co.,Ltd., which is a subsidiary of theThe Controlling Company disposed of 4,954,704 shares (11.6%) of ktcs Corporation, an associate, to ktis Corporation, another associate, and acquired common4,000,000 treasury shares with voting right at(Won)252,302 million(11.5%) of ktis Corporation from Woori Bankktis Corporation on October 6, 201130, 2014.
ktis Corporation was reclassified as a consolidated subsidiary from an associate as a result of this transaction accounted for in order to secure stable management control of BC card co., Ltd. and strengthen synergies between two firms based on determination of board meetings at February 11 and February 23, 2011. By this acquisition, the company’s ownership interests of BC Card Co.,Ltd. increased to 38.86% including ownership which were previously acquired from Citi Bank. Also, the Company entered into shareholders’ agreement toaccordance with IFRS 3,Business Combinations.
exercise voting right of 1,349,920 registered common shares of BC Card Co.,Ltd. (30.68% of total BC Card Co.,Ltd. shares) owned by Vogo-BCC Investment Holdings Co.,Ltd. and KGF-BCC LIMITED on March 25, 2011. Based on the shareholders’ agreement and the acquisition of common shares described above, the Company has control of BC card co., Ltd. from October 6, 2011(acquisition date).
As a result of applying the acquisition method, the Company recognized goodwillgain on bargain purchase of(Won)₩41,234 million, which is6,952 million. The gain on bargain purchase resulting from the excess of total consideration transferred over the fairdecrease in value of the net assets at the acquisition date. The fair value of the net assets at the acquisition date includes the identifiable intangible assets such as customer relationship,goodwill and membership, which was not previously recognized in the subsidiary’s financial statements.statements, is wholly recognized as profit for the year.
Details of the consideration transferred, fair value of the acquired identifiable assets and liabilities and goodwill at the acquisition date are as follows.follows:
(in millions of Korean won) | ||||
Consideration transferred | ||||
| ||||
| ||||
| ||||
|
| |||
| ||||
Cash and cash equivalents | ||||
Trade and other receivables | 39,851 | |||
Other financial assets | ||||
| ||||
| ||||
| ||||
Intangible assets | ||||
| ||||
Other assets | ||||
Trade and other | ( | ) | ||
| ( | ) | ||
Current income tax liabilities | ( | ) | ||
Provisions | ( | |||
| ||||
| ) | |||
Other liabilities | ( | ) | ||
The net of total amounts of identifiable assets and liabilities measured at fair value (b) | ||||
147,448 | ||||
Non-controlling interests | ||||
|
| |||
| ) | |||
|
|
1 |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
As described in Note 14, the previously held interest in ktis Corporation was measured at fair value, and the Company recognized operating expense of₩4,667 million arising from the value measurement on acquisition.
After the acquisition date, the operating revenue and net income for consolidation of BC Card Co,. Ltd.ktis Corporation before the elimination of inter-companyintercompany transactions, with its subsidiarieswhich are included in consolidated statement of income, are(Won)₩782,853million83,850 million and(Won)₩9454,704 million, respectively.respectively, for the year ended December 31, 2014. If BC Card Co.,Ltd had beenktis Corporation was consolidated fromon January 1, 2011,2014, the operating revenue and net income included in consolidation shouldconsolidated statement of income would have been(Won)₩3,376,113million454,080 million and(Won)₩102,459million, respectively.13,323 million, respectively, for the year ended December 31, 2014.
The fair value of trade accounts receivable and others acquired from ktis Corporation is₩39,851 million, but the full contract value is₩40,029 million. The uncollectible amounts from these receivables are expected to be₩178 million.
38. Interests in Unconsolidated Structured Entities
Details of information about its interests in unconsolidated structured entities, which the Company does not have control over, including the nature, purpose and activities of the structured entity and how the structured entity is financed, are as follows:
Remarks | Nature, purpose, activities and others | |
Real estate finance | A structured entity incorporated for the purpose of real estate development is provided with funds by investors’ investments in equity and borrowings from financial institutions (including long-term and short-term loans and issuance of ABCP due in three months), and based on these, the structured entity implements activities such as real estate acquisition, development and mortgage loans. The structured entity repays loan principals with funds incurred from installment house sales after the completion of real estate development or with collection of the principal of mortgage loan. The remaining shares are distributed to investors. As of December 31, 2014, this entity is engaged in real estate finance structured entity, and generates revenues by receiving dividends from direct investments in or receiving interests on loans to the structured entity. Financial institutions, including the Entity, are provided with guarantees including joint guarantees or real estate collateral from investors and others. Consequently, the entity is a priority over other parties in the preservation of claim. However, when the credit rating of investors and others decreases or when the value of real estate decreases, the entity may be obliged to cover losses. | |
PEF and investment funds | Minority investors including managing members contribute to PEF and investment funds incorporated for the purpose of providing funds to the small, medium, or venture entities, and the managing member implements activities such as investments in equity or loans based on the contributions. As of December 31, 2014, the entity is engaged in PEF and investment funds structured entity, and after contributing to PEF and investment funds, the entity receives dividends for operating revenues from these contributions. The entity is provided with underlying assets of PEF and investment funds as collateral. However, when the value of the underlying assets decreases, the entity may be obliged to cover losses. |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Remarks | Nature, purpose, activities and others | |
M&A finance | A structured entity incorporated for the purpose of supporting a certain company’s financial structure improvement or acquiring equity or convertible bonds is provided with funds by investors’ investments in equity and long-term or short-term borrowings from financial institutions, and based on these, the structured entity acquires shares held by the entity, which has plans to improve its financial structure, or to dispose convertible bonds and others. The structured entity repays loan principals with funds incurred from disposals of holding shares after a certain period. The remaining shares are distributed to investors. As of December 31, 2014, the entity is engaged in M&A finance structured entity, and receives interests. Financial institutions are provided with guarantees including joint guarantees or shares subject to M&A from investors and others. Consequently, the entity is a priority over other parties in the preservation of claim. However, when the credit rating of investors and others decreases or when the value of shares provided as collateral decreases, the Company may be obliged to cover losses. | |
Asset securitization | A transferor other than this entity transfers the assets, which are subject to securitization, to a structured entity incorporated by the transferor or other financial institutions other than the entity, and based on this as underlying assets, the structured entity is provided with funds by asset-backed borrowings and pays acquisition costs of the acquired underlying assets. As of December 31, 2014, the entity is engaged in the structured entity, and generates revenues by receiving interest income as the entity provides asset-backed loans directly to the structured entity. When the structured entity has difficulty repaying loan principal, the transferor has obligation to cover the lack of funds. Consequently, the financial institutions including the entity are a priority over other parties in the preservation of claim. However, when the credit rating of transferor decreases, the said entity may be obliged to cover losses. | |
Other | There are other structured entity types, which the entity is engaged in, such as shipping finance, SPAC and others. Interest income is realized from the entity’s loans to the relevant structured entity. When the credit rating of the shipping company decreases, or the value of vessels decreases, the entity may be obliged to cover losses. When SPAC is listed or merged after the entity invests in shares or convertible bonds issued by the relevant structured entity, revenues are realized from disposal of the shares of the convertible bonds. However, the entity may be obliged to cover losses when SPAC is liquidated if the SPAC is not listed or merged. |
Details of scale of unconsolidated structured entities and nature of the risks associated with an entity’s interests in unconsolidated structured entities as of December 31, 2013 and 2014, are as follows:
2013 | ||||||||||||||||||||||||
(in millions of Korean won) | Real Estate Finance | PEF & Investment Fund | Acquisition Finance | Asset-backed Securitization | Others | Total | ||||||||||||||||||
Total amount of Unconsolidated Structured Entities Assets | ₩ | 4,970,665 | ₩ | 2,787,075 | ₩ | 2,175,476 | ₩ | 5,981,382 | ₩ | 163,702 | ₩ | 16,078,300 | ||||||||||||
Assets recognized in statement of financial position | ||||||||||||||||||||||||
Loans | ₩ | 277,663 | ₩ | 360 | ₩ | 101,969 | ₩ | 228,413 | ₩ | 12,043 | ₩ | 620,448 | ||||||||||||
Other financial assets | 32,244 | 131,399 | 981 | — | 8,690 | 173,314 | ||||||||||||||||||
Jointly investment entities and associates | — | 183,200 | — | — | 28,406 | 211,606 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | ₩ | 309,907 | ₩ | 314,959 | ₩ | 102,950 | ₩ | 228,413 | ₩ | 49,139 | ₩ | 1,005,368 | ||||||||||||
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| |||||||||||||
Maximum loss exposure 1 | ||||||||||||||||||||||||
Investment Assets | ₩ | 309,907 | ₩ | 314,959 | ₩ | 102,950 | ₩ | 228,413 | ₩ | 49,139 | ₩ | 1,005,368 | ||||||||||||
Credit grants | 103,500 | — | — | — | — | 103,500 | ||||||||||||||||||
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|
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|
| |||||||||||||
Total | ₩ | 413,407 | ₩ | 314,959 | ₩ | 102,950 | ₩ | 228,413 | ₩ | 49,139 | ₩ | 1,108,868 | ||||||||||||
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1 | Maximum exposure to loss includes the investments recognized in the Company’s financial statements and the amounts which are probable to be determined when certain conditions are met by agreements including purchase agreements, credit granting and others. |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2014 | ||||||||||||||||||||||||
(in millions of Korean won) | Real Estate Finance | PEF & Investment Fund | Acquisition Finance | Asset-backed Securitization | Others | Total | ||||||||||||||||||
Total amount of Unconsolidated Structured Entities Assets | ₩ | 4,584,026 | ₩ | 3,894,693 | ₩ | 2,086,841 | ₩ | 4,828,936 | ₩ | 127,228 | ₩ | 15,521,724 | ||||||||||||
Assets recognized in statement of financial position | ||||||||||||||||||||||||
Loans | ₩ | 254,305 | ₩ | 360 | ₩ | 66,073 | ₩ | 170,826 | ₩ | 1,979 | ₩ | 493,543 | ||||||||||||
Other financial assets | 24,340 | 112,116 | — | — | 8,369 | 144,825 | ||||||||||||||||||
Jointly investment entities and associates | 7,081 | 155,000 | — | — | 27,630 | 189,711 | ||||||||||||||||||
|
|
|
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|
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|
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| |||||||||||||
Total | ₩ | 285,726 | ₩ | 267,476 | ₩ | 66,073 | ₩ | 170,826 | ₩ | 37,978 | ₩ | 828,079 | ||||||||||||
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| |||||||||||||
Maximum loss exposure 1 | ||||||||||||||||||||||||
Investment Assets | ₩ | 285,726 | ₩ | 267,476 | ₩ | 66,073 | ₩ | 170,826 | ₩ | 37,978 | ₩ | 828,079 | ||||||||||||
Credit grants | 88,000 | — | — | — | — | 88,000 | ||||||||||||||||||
|
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|
|
|
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|
| |||||||||||||
Total | ₩ | 373,726 | ₩ | 267,476 | ₩ | 66,073 | ₩ | 170,826 | ₩ | 37,978 | ₩ | 916,079 | ||||||||||||
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1 | Maximum exposure to loss includes the investments recognized in the Company’s financial statements and the amounts which are probable to be determined when certain conditions are met by agreements including purchase agreements, credit granting and others. |
39. Information About Non-controlling Interests
(3) Enswers Inc.Changes in Accumulated Non-controlling Interests
The profit or loss allocated to non-controlling interests and accumulated non-controlling interests of subsidiaries that are material to the Company for the years ended December 31, 2012, 2013 and 2014, is as follows:
2012 | ||||||||||||||||||||||||
(in millions of | Non-controlling Interests rate(%) | Accumulated non-controlling interests at the beginning of the year | Profit or loss allocated to non-controlling interests | Dividends paid to non-controlling interests | Others | Accumulated non-controlling interests at the end of the year | ||||||||||||||||||
KT Skylife Co., Ltd. | 49.85 | % | ₩ | 288,051 | ₩ | 1,792,439 | ₩ | 277,729 | ₩ | 93,876 | ₩ | 71,258 | ||||||||||||
BC Card Co., Ltd | 34.35 | % | 338,954 | 702,707 | 1,395,463 | 81,986 | 119,261 | |||||||||||||||||
KT Rental | 42.00 | % | 193,367 | 1,696,058 | 531,221 | 39,029 | 28,718 | |||||||||||||||||
KT Powertel Co., Ltd. | 55.15 | % | 86,129 | 190,875 | 887,872 | 16,584 | 2,924 | |||||||||||||||||
KT Hitel Co., Ltd | 34.06 | % | 347,509 | 608,213 | 254,099 | 120,249 | 158,877 |
2013 | ||||||||||||||||||||||||
(in millions of | Non-controlling Interests rate(%) | Accumulated non-controlling interests at the beginning of the year | Profit or loss allocated to non-controlling interests | Dividends paid to non-controlling interests | Others | Accumulated non-controlling interests at the end of the year | ||||||||||||||||||
KT Skylife Co., Ltd. | 49.89 | % | ₩ | 264,765 | ₩ | 29,081 | ₩ | (8,662 | ) | ₩ | (1,203 | ) | ₩ | 283,981 | ||||||||||
BC Card Co., Ltd | 34.49 | % | 208,923 | 35,949 | (10,890 | ) | 27,734 | 261,716 | ||||||||||||||||
KT Rental | 42.00 | % | 119,029 | 8,682 | (2,986 | ) | (1,057 | ) | 123,668 | |||||||||||||||
KT Powertel Co., Ltd. | 55.15 | % | 66,323 | 3,007 | (669 | ) | (755 | ) | 67,906 | |||||||||||||||
KT Hitel Co., Ltd | 36.30 | % | 45,507 | (670 | ) | — | 11,183 | 56,020 |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2014 | ||||||||||||||||||||||||
(in millions of | Non-controlling Interests rate(%) | Accumulated non-controlling interests at the beginning of the year | Profit or loss allocated to non-controlling interests | Dividends paid to non-controlling interests | Others | Accumulated non-controlling interests at the end of the year | ||||||||||||||||||
KT Skylife Co., Ltd. | 50.01 | % | ₩ | 283,981 | ₩ | 26,828 | ₩ | (10,538 | ) | ₩ | (2,971 | ) | ₩ | 297,300 | ||||||||||
BC Card Co., Ltd | 30.46 | % | 261,716 | 31,414 | (7,299 | ) | 7,100 | 292,931 | ||||||||||||||||
KT Rental | 42.00 | % | 123,668 | 15,538 | (1,903 | ) | (121 | ) | 137,182 | |||||||||||||||
KT Powertel Co., Ltd. | 55.15 | % | 67,906 | 2,961 | (631 | ) | (5 | ) | 70,231 | |||||||||||||||
KT Hitel Co., Ltd | 36.30 | % | 56,020 | 2,195 | — | (7,079 | ) | 51,136 |
Summarized Financial Information on Subsidiaries
The summarized financial information for each subsidiary with non-controlling interests that are material to the Company before inter-company eliminations as of December 31, 2012, 2013 and 2014, are as follows:
2012 | ||||||||||||||||||||
(in millions of Korean won) | KT Skylife Co., Ltd. | BC Card Co., Ltd. | KT Rental | KT Powertel Co., Ltd. | KT Hitel Co., Ltd. | |||||||||||||||
Non-controlling Interests | 49.85 | % | 34.35 | % | 42.00 | % | 55.15 | % | 34.06 | % | ||||||||||
Current assets | ₩ | 303,069 | ₩ | 1,792,439 | ₩ | 305,651 | ₩ | 93,877 | ₩ | 132,892 | ||||||||||
Non-current assets | 338,495 | 735,663 | 1,388,370 | 81,985 | 116,339 | |||||||||||||||
Current liabilities | 197,972 | 1,696,058 | 537,424 | 39,029 | 75,727 | |||||||||||||||
Non-current liabilities | 94,677 | 211,820 | 889,060 | 16,584 | 3,784 | |||||||||||||||
Equity | 348,915 | 620,224 | 267,537 | 120,249 | 169,719 | |||||||||||||||
Accumulated non-controlling interests | 173,932 | 213,049 | 112,369 | 66,323 | 57,803 | |||||||||||||||
Operating revenue | 574,829 | 3,128,882 | 368,228 | 124,936 | 443,431 | |||||||||||||||
Profit or loss for the year | 55,546 | 103,797 | 11,072 | 12,527 | (8,902 | ) | ||||||||||||||
Total comprehensive income | 52,152 | 127,976 | 10,107 | 12,229 | (10,659 | ) | ||||||||||||||
The profit or loss allocated to non-controlling interests | 27,689 | 35,655 | 4,650 | 6,909 | (3,032 | ) | ||||||||||||||
Cash flows from operating activities | 170,815 | 18,310 | 105,771 | 8,734 | (14,954 | ) | ||||||||||||||
Cash flows from investing activities | (76,320 | ) | (35,116 | ) | (265,429 | ) | (6,997 | ) | 5,263 | |||||||||||
Cash flows from financing activities before dividends paid to non-controlling interests | (18,642 | ) | 8,070 | 169,963 | — | — | ||||||||||||||
Dividends paid to non-controlling interests | — | (5,290 | ) | — | — | — | ||||||||||||||
Effect of exchange rate change on cash and cash equivalents | — | — | — | — | (10 | ) | ||||||||||||||
Net (decrease)/increase in cash and cash equivalents | 75,853 | (14,026 | ) | 10,305 | 1,737 | (9,701 | ) |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
2013 | ||||||||||||||||||||
(in millions of Korean won) | KT Skylife Co., Ltd. | BC Card Co., Ltd. | KT Rental | KT Powertel Co., Ltd. | KT Hitel Co., Ltd. | |||||||||||||||
Non-controlling Interests | 49.89 | % | 34.49 | % | 42.00 | % | 55.15 | % | 36.30 | % | ||||||||||
Current assets | ₩ | 287,142 | ₩ | 2,292,323 | ₩ | 362,040 | ₩ | 87,932 | ₩ | 178,659 | ||||||||||
Non-current assets | 397,509 | 672,427 | 1,826,231 | 79,199 | 115,006 | |||||||||||||||
Current liabilities | 191,181 | 1,958,506 | 532,634 | 30,433 | 99,348 | |||||||||||||||
Non-current liabilities | 91,887 | 216,505 | 1,363,625 | 13,579 | 3,296 | |||||||||||||||
Equity | 401,583 | 789,738 | 292,013 | 123,119 | 191,021 | |||||||||||||||
Accumulated non-controlling interests | 200,360 | 273,328 | 122,650 | 67,906 | 69,343 | |||||||||||||||
Operating revenue | 630,469 | 3,102,968 | 886,959 | 112,905 | 582,925 | |||||||||||||||
Profit or loss for the year | 72,724 | 128,475 | 32,400 | 5,453 | 3,551 | |||||||||||||||
Total comprehensive income | 73,943 | 198,778 | 31,041 | 5,661 | 8,109 | |||||||||||||||
The profit or loss allocated to non-controlling interests | 36,284 | 44,465 | 13,608 | 3,008 | 1,289 | |||||||||||||||
Cash flows from operating activities | 141,282 | 273,904 | (346,309 | ) | 16,010 | 11,108 | ||||||||||||||
Cash flows from investing activities | (218,797 | ) | (17,335 | ) | (39,246 | ) | (15,794 | ) | (18,199 | ) | ||||||||||
Cash flows from financing activities before dividends paid to non-controlling interests | (14,346 | ) | 10,216 | 392,098 | (6,252 | ) | 13,192 | |||||||||||||
Dividends paid to non-controlling interests | (8,344 | ) | (10,051 | ) | (2,075 | ) | (1,538 | ) | — | |||||||||||
Effect of exchange rate change on cash and cash equivalents | — | — | (287 | ) | — | (49 | ) | |||||||||||||
Net (decrease)/increase in cash and cash equivalents | (100,205 | ) | 256,734 | 4,181 | (7,574 | ) | 6,052 |
2014 | ||||||||||||||||||||
(in millions of Korean won) | KT Skylife Co., Ltd. | BC Card Co., Ltd. | KT Rental | KT Powertel Co., Ltd. | KT Hitel Co., Ltd. | |||||||||||||||
Non-controlling Interests | 50.01 | % | 30.46 | % | 42.00 | % | 55.15 | % | 36.30 | % | ||||||||||
Current assets | ₩ | 260,391 | ₩ | 2,023,465 | ₩ | 377,916 | ₩ | 83,846 | ₩ | 119,957 | ||||||||||
Non-current assets | 422,618 | 676,923 | 2,278,469 | 73,484 | 107,037 | |||||||||||||||
Current liabilities | 226,878 | 1,723,966 | 718,852 | 21,787 | 29,748 | |||||||||||||||
Non-current liabilities | 19,448 | 70,957 | 1,598,798 | 8,209 | 1,681 | |||||||||||||||
Equity | 436,683 | 905,465 | 338,735 | 127,334 | 195,565 | |||||||||||||||
Accumulated non-controlling interests | 297,300 | 292,931 | 143,457 | 70,231 | 51,136 | |||||||||||||||
Operating revenue | 656,430 | 3,298,144 | 1,074,569 | 105,250 | 494,455 | |||||||||||||||
Profit or loss for the year | 55,162 | 134,450 | 51,388 | 5,368 | 12,205 | |||||||||||||||
Total comprehensive income | 53,990 | 331,599 | 52,437 | 5,368 | 9,873 | |||||||||||||||
The profit or loss allocated to non-controlling interests | 26,828 | 31,414 | 19,543 | 2,961 | 2,195 | |||||||||||||||
Cash flows from operating activities | 140,057 | 176,019 | (346,743 | ) | 10,190 | 65,096 | ||||||||||||||
Cash flows from investing activities | (20,889 | ) | (21,699 | ) | (35,632 | ) | (647 | ) | (44,712 | ) | ||||||||||
Cash flows from financing activities before dividends paid to non-controlling interests | (26,411 | ) | (31,497 | ) | 359,510 | (1,137 | ) | — | ||||||||||||
Dividends paid to non-controlling interests | (10,538 | ) | (7,299 | ) | (1,903 | ) | (631 | ) | — | |||||||||||
Effect of exchange rate change on cash and cash equivalents | — | — | — | — | (12 | ) | ||||||||||||||
Net (decrease)/increase in cash and cash equivalents | 82,219 | 115,524 | (24,768 | ) | 7,775 | 20,372 |
Transactions with Non-controlling Interests
The effect of changes in the ownership interest on the equity attributable to owners of the Company during the year is summarized as follows:
(in millions of Korean won) | 2012 | 2013 | 2014 | |||||||||
Carrying amount of non-controlling interests acquired 1 | ₩ | 178,763 | ₩ | 14,353 | ₩ | 16,136 | ||||||
Consideration paid to non-controlling interests 2 | (15,359 | ) | (16,202 | ) | (9,764 | ) | ||||||
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Excess of consideration paid recognized in parent’s equity | ₩ | 163,404 | ₩ | (1,849 | ) | 6,372 | ||||||
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KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
1 | In 2012, the Company acquired 30.68% of the issued shares of BC Card Co., Ltd, a subsidiary ofVogo-BCC Investment Holdings Co., Ltd. and KGF-BCC LIMITED, for a purchase consideration of₩288,828 million. The Company now holds 69.54% equity interest in BC Card Co., Ltd. The carrying amount of the non-controlling interests in BC Card Co., Ltd. at the date of acquisition was₩272,273 million. As a result, the Company derecognized non-controlling interests of₩172,376 million and recorded an increase in equity attributable to owners of the parent of₩116,452 million. |
In 2013, the Company acquired the remaining 40% of the issued shares of KT Dutch B.V., a subsidiary, for a purchase consideration of₩3,980 million. The Company now holds 100% equity interest in KT Dutch B.V. The carrying amount of the non-controlling interests in KT Dutch B.V. at the date of acquisition was₩14,353 million. As a result, the Company derecognized non-controlling interests of₩14,353 million and recorded an increase in equity attributable to owners of the parent of₩10,373 million. |
In 2014, the Company acquired the shares of BC Card Co., Ltd., which had been held by KT Capital Co., Ltd. as a result of spin-off and merger of certain division of KT Capital Co., Ltd. The company’s effective percentage of ownership of BC Card Co., Ltd. increased from 65.51% to 69.54%. As a result, the carrying amount of controlling interest increased by₩16,136 million. |
2 | In 2012, the Company’s non-controlling interest increased by 13.85% through inequality capital increase of KT Cloudware Corporation on March 26, June 13 and November 30, 2012. This resulted in an increase in the carrying amount of non-controlling interest of₩4,060 million. Also, on November 21, 2012, the Company’s non-controlling interest increased by 9.09% through inequality capital increase of KT music Corporation. As a result, the carrying amount of non-controlling interest increased by₩5,360 million. |
In 2013, the Company’s non-controlling interest increased by 2.24% through inequality capital increase of KT Hitel Co., Ltd. This resulted in an increase in the carrying amount of non-controlling interest of₩8,439 million. Also, on July 11, 2013, the Company’s non-controlling interest increased by 6.04% through inequality capital increase of Nasmedia, Inc. As a result, the carrying amount of non-controlling interest increased by₩7,239 million. |
In 2014, the convertible bonds issued by KT Music Corporation has been converted into common stocks, and as a result, common shares and share premium of the Company increased by₩20,349 million. The Company’s ownership decreased from 57.78% to 49.99%, and accordingly, the carrying amount ofnon-controlling interest increased by₩9,764 million. |
40. Discontinued Operations
As approved by the Company’s Board of Directors on November 11, 2011,August 9, 2012, the Company acquireddecided to sell KT Tech, Inc., its subsidiary, and discontinued the operations related to handset development. KT-Tech’s liquidation procedure has been completed and KT Tech’s electrical operating performance was reflected in profit or loss from discontinued operations.
Income and loss from discontinued operations for the year ended December 31, 2012, are as follows:
(in millions of Korean won) | 2012 | |||
Revenue | ₩ | 431 | ||
Expense | (35,756 | ) | ||
Income from discontinued operations before income taxes | ₩ | (35,325 | ) | |
Income tax expense for discontinued operations | 3,791 | |||
Income (loss) from discontinued operations | ₩ | (31,534 | ) | |
KT Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2012, 2013 and 2014
Cash flows from discontinued operations for the year ended December 31, 2012, are as follows:
(in millions of Korean won) | 2012 | |||
Cash flows from operating activities | ₩ | 40,017 | ||
Cash flows from investing activities | (3,609 | ) | ||
Cash flows from financing activities | (28,243 | ) | ||
Changes in foreign exchange rates | (6 | ) | ||
Total cash flows | ₩ | 8,159 | ||
41. Subsequent Events
The Company merged KT Media Hub Co., Ltd., a subsidiary, on December 7, 2011, from existing shareholders 14,185 common shares and 3,676March 31, 2015.
As approved by the Company’s Board of redeemable convertible preferred stockDirectors, the Company entered into the contract with voting rightsLotte Group to dispose all of Enwers Inc,its interests in KT Rental, a subsidiary which is specializedwas included in the video-related technology,financial/rental segment, on March 11, 2015 and the deal closing is expected to be completed in order to develop a new business and strengthen the existing business.end of May, 2015. The Company’s ownership in Enwers Inc. has increased to 56.3% including the potential voting rights and accordingly, the Company acquired control over Enswers Inc.
Details of the consideration transferred, fair value of the acquired identifiable assets and liabilities and goodwill at the acquisition dateof disposal group as of December 31, 2014 are as follows.
(in millions of Korean won) | ||||
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Loans, net | 84,878 | |||
Finance lease receivables, net | 110,225 | |||
Other financial assets | 4,192 | |||
Inventories, net | 6,564 | |||
Property and equipment, net | 2,008,855 | |||
Intangible assets, net | 180,275 | |||
Other assets | 61,296 | |||
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Borrowings | 1,910,888 | |||
Other financial liabilities | ||||
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The previously held interest in Enswers Inc. was measured at fair value, and the Company recognized other operating income of(Won)1,942 million arising from the fair value measurement on acquisition.
After the acquisition date, the revenue and net loss for consolidation of Enswers Inc. before the elimination of inter-company transactions with its subsidiaries are(Won)797 and(Won)331 million, respectively. If Enswers Inc. had been consolidated from January 1, 2011, the revenue and net loss included in consolidation should have been(Won)3,467million and(Won)1,512million, respectively.
The fair value of trade accounts receivable and other receivables acquired from Enswers Inc. is(Won)387 million, while the full contract value is(Won)414 million. The uncollectible amounts from these receivables are expected to be(Won)27 million.
38. Assets Held for Sale and Discontinued Operations
As approved by the Controlling Company’s Board of Directors on May 4, 2011, the Controlling Company decided to sell 5,309,189 shares (79.96%) of New Telephone Company, Inc. to Vimpel-Communication and the Controlling Company lost its control of New Telephone Company. The prior
period financial statements presented for comparative purposes have been restated in accordance with IFRS 5,Non-current Assets Held for Sale and Discontinued Operations. Profit or loss arising from net fair value measurement and related income tax effect is reflected in profit or loss from discontinued operations.
The liquidation of KT Internal venture Fund NO.2, a former subsidiary, was completed on December 28, 2011. Therefore, the Company accounted for the operating result until the liquidation as discontinued operation and restated the prior year statement of income presented for the comparative purpose in accordance with IFRS 5“Non-current Assets Held for Sale and Discontinued Operations”.The Company also included the related gains or losses and income tax effects in the profit from the discontinued operation.
On June 1, 2010, the rent-a-car business segment of Kumho Rent-A-Car Global Co., Ltd., a joint venture investment, was split off and was merged with Kumho Rental Co., Ltd., resulting in the decrease of the Company’s ownership in Kumho Rental Co., Ltd. from 100% to 58%. And as the Company has joint control of KT Rental Co., Ltd. under the shareholders’ agreement, this subsidiary is accounted for under the equity method in accordance with IAS 31,Interest in Joint Ventures. The operating results of KT Rental Co., Ltd. until the date the Company lost control are accounted for under discontinued operations.
The Company sold all shares of DOREMI MEDIA CO.,LTD and D&G Star to the third parties. The operating results of DOREMI MEDIA CO.,LTD and D&G Star prior to the loss of the control were accounted for as discontinued operation in 2010 and the related gains or losses and income tax effects are included in the profit from the discontinued operation.
Income and loss from discontinued operations for the year ended December 31, 2010 and 2011, are as follows:
(in millions of Korean won) | 2010 | 2011 | ||||||
Revenue | (Won) | 159,866 | (Won) | 28,460 | ||||
Expense | (133,605 | ) | (22,630 | ) | ||||
Income (loss) from discontinued operations before income taxes | 26,261 | 5,830 | ||||||
Income tax expense for discontinued operations | (8,054 | ) | (1,836 | ) | ||||
Income (loss) from discontinued operations | 18,207 | 3,994 | ||||||
Gain on disposal and fair valuation before income taxes | 12,835 | 220,176 | ||||||
Income tax expense | (1,062 | ) | (53,302 | ) | ||||
Gain on disposal and fair valuation after tax | 11,773 | 166,874 | ||||||
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Income (loss) from discontinued operations | (Won) | 29,980 | (Won) | 170,868 | ||||
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Cash flows from discontinued operations for the year ended December 31, 2010 and 2011, are as follows:
(in millions of Korean won) | 2010 | 2011 | ||||||
Cash flows from operating activities | (Won) | 8,416 | (Won) | 6,527 | ||||
Cash flows from investing activities | (8,241 | ) | (4,095 | ) | ||||
Cash flows from financing activities | 4,632 | (47,023 | ) | |||||
Changes in foreign exchange rates | (7,384 | ) | 8,365 | |||||
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Total cash flows | (Won) | (2,577 | ) | (Won) | (36,226 | ) | ||
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39. Subsequent Events
Subsequent to December 31, 2011,2014, the Company has issued the unsecured public bonds, as follows:
(in millions of Korean won and thousands of foreign currencies) | Issue date | Face value of bond | Interest rate | Maturity date | Repayment method | |||||||||||||
The 57-1stnon-registered unsecured bond | 01.05.2012 | (Won)50,000 | 4.43 | % | 10.05.2014 | Lump sum repayment at maturity | ||||||||||||
The 57-2nd non-registered unsecured bond | 01.05.2012 | (Won)20,000 | 4.44 | % | 10.05.2014 | Lump sum repayment at maturity | ||||||||||||
The 57-3rd non-registered unsecured bond | 01.05.2012 | (Won)30,000 | 4.61 | % | 10.05.2014 | Lump sum repayment at maturity | ||||||||||||
Regulation S.Bond | 01.20.2012 | USD 350,000 | 3.875 | % | 01.20.2017 | Lump sum repayment at maturity |
(in millions of Korean won) | Issue date | Total par value | Coupon rate | Maturity date | ||||||||||||
The 188-1st Public bond | Jan. 29, 2015 | ₩ | 160,000 | 2.35 | % | Jan. 29, 2020 | ||||||||||
The 188-2nd Public bond | Jan. 29, 2015 | 240,000 | 2.60 | % | Jan. 29, 2025 | |||||||||||
The 188-3rd Public bond | Jan. 29, 2015 | 50,000 | 2.86 | % | Jan. 29, 2035 |
Subsequent to December 31, 2011, the additional contributions was made by the Controlling Company as follows.
(in millions of Korean won) | Date | Number of shares | Amount | Purpose | ||||||||||
KT Capital Co.,Ltd | 01.25.2012 |
| 4,712,103 common shares |
| 41,000 | To strengthen the financial stability |
The Company entered into the shareholders’ agreement with Vogo-BCC Investment Holdings Co.,Ltd. and KGF-BCC LIMITED on March 25, 2011 for the sustainable control over BC card co., Ltd, which is a subsidiary of the Company. Based on this agreement,2014, the Company has exercisedissued the call option for 1,349,920 common shares of BC Card Co., Ltd, owned by Vogo-BCC Investment Holdings Co.,Ltd. and KGF-BCC LIMITED(30.68% of total shares) for(Won)28,713,408 million on January 27, 2012.bonds in Japanese yen as follows:
On April 18, 2012, the Company entered into a contract with Olleh KT First Securitization Specialty Co., Ltd. which is a special purpose entity formed for the securitization of KT’s accounts receivable. Based on this contract, the Company sold its accounts receivables with book value of(Won)529,776 million for a total sales price of(Won)525,400 million.
Issue date | Total par value | Coupon rate | Maturity date | |||||||||||||
2015 Samurai Bond | Feb. 24, 2015 | JPY 15,000,000 | 0.48 | % | Feb. 23, 2018 |
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
KT CORPORATION |
(Registrant) |
/s/ |
Name: |
Title: Chief Executive Officer |
Date: April 27, 201229, 2015