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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF MARCH 2023
Commission File Number: 333-04906
SK Telecom Co., Ltd.
(Translation of registrant’s name into English)
65, Euljiro, Jung-gu
Seoul 04539, Korea
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submission to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SK Telecom Co., Ltd. | ||
(Registrant) | ||
By: | /s/ Hee Jun Chung | |
(Signature) | ||
Name: | Hee Jun Chung | |
Title: | Vice President |
Date: March 10, 2023
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SK TELECOM CO., LTD. AND SUBSIDIARIES
Consolidated Financial Statements
For the Year ended December 31, 2022
(With Independent Auditors’ Report Thereon)
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(English Translation of a Report Originally Issued in Korean)
The Shareholders and Board of Directors
SK Telecom Co., Ltd.
Opinion
We have audited the accompanying consolidated financial statements of SK Telecom Co., Ltd. and its subsidiaries (collectively referred to as the “Group”) which comprise the consolidated statement of financial position as of December 31, 2022, and the consolidated statement of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2022, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”).
Basis for Opinion
We conducted our audits in accordance with Korean Standards on Auditing (“KSA”). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
1. | Cut-off of revenue from cellular services. |
As described in notes 3 (23) and 4 (2) to the consolidated financial statements, the Group’s revenue from the cellular services is recognized based on data from a complex array of information technology systems which process a significant volume of transactions with its customers. Furthermore, the transactions involve a variety of contractual terms from new subscriptions to deactivations or churn, and changes of rate plans during the period. Therefore, we have identified timing of revenue recognition related to the Group’s cellular services as a key audit matter. Related revenue from the cellular services amounted toW10,253,217 million in 2022.
The primary procedures we performed to address this key audit matter included:
• | Inspecting major contracts with subscribers to assess whether the Group’s revenue recognition policies based on the terms and conditions as set out in the contracts, are consistent with reference to the requirements of KIFRS No. 1115; |
• | Testing internal controls relating to the timing of revenue recognition for the cellular services; and |
• | Evaluating the appropriateness of the timing of revenue recognition by recalculating the prorated revenue based on the subscribed rate plan and comparing it with the billing information. |
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2. | Impairment assessment of goodwill for the fixed-line telecommunication services cash generating unit |
As described in notes 3 (12) and 16 to the consolidated financial statements, the Group assesses impairment of goodwill allocated to a cash generating unit (“CGU”), at least, annually or when there is an indication of possible impairment by comparing the carrying amount of the CGU to its recoverable amount based on value-in-use (“VIU”). The amount of goodwill allocated to the fixed-line telecommunication services CGU isW764,082 million as of December 31, 2022.
In carrying out the goodwill impairment assessment, the Group compared the carrying amount of the fixed-line telecommunication services CGU and its value in use (“VIU”) based on discounted cash flow forecasts. We have identified the goodwill impairment assessment for the fixed-line telecommunication services CGU as a key audit matter due to the inherent uncertainties and significant judgement involved in management’s estimates around the major assumptions such as estimates of future operating revenue, perpetual growth rate and discount rate, all of which have a significant impact on the determination of the VIU.
The primary audit procedures we have performed for this key audit matter include:
• | Assessing the competence and objectivity of the external specialist utilized by management; |
• | Evaluating the appropriateness of the valuation method and assumptions applied by management by involving our internal specialist; |
• | Performing a sensitivity analysis for both the discount rate and the perpetual growth rate applied to the discounted cash flow forecasts to assess the impact of changes in these key assumptions on the conclusion reached by management in its impairment assessment; |
• | Evaluating the reasonableness of management’s future cash flow forecasts by comparison with financial budgets approved by management; and |
• | Performing a retroactive assessment of the prior periods’ cash flow forecasts by comparison with the actual results. |
Other Matter
The consolidated statement of financial position as of December 31, 2021, and the related consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended which have been audited by KPMG Samjong Accounting Corp., in accordance with KSA, whose report dated March 10, 2022 expressed an unqualified opinion. The accompanying consolidated statement of financial position as of December 31, 2021 presented for comparative purposes, is not different, in all material respects, from the above audited consolidated statement of financial position.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with KIFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
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Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with KSA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
• | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
• | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
• | Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
• | Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
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From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditors’ report is Yoo, Jung Ho.
March 10, 2023
This report is effective as of March 10, 2023, the independent auditor’s report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the date of independent auditor’s report date to the time this report is used. Such events and circumstances could significantly affect the accompanying consolidated financial statements and may result in modifications to this report.
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SK TELECOM CO., LTD. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021
The accompanying consolidated financial statements, including all footnote disclosures, have been prepared by, and are the responsibility of, the Group.
Ryu, Young-Sang
Chief Executive Officer
SK TELECOM CO., LTD.
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SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Financial Position
As of December 31, 2022 and 2021
(In millions of won) | Note | December 31, 2022 | December 31, 2021 | |||||||
Assets | ||||||||||
Current Assets: | ||||||||||
Cash and cash equivalents | 5,35,36 | 872,731 | ||||||||
Short-term financial instruments | 5,35,36 | 237,230 | 508,677 | |||||||
Short-term investment securities | 10,35,36 | — | 5,010 | |||||||
Accounts receivable – trade, net | 6,35,36,37 | 1,970,611 | 1,913,511 | |||||||
Short-term loans, net | 6,35,36,37 | 78,590 | 70,817 | |||||||
Accounts receivable – other, net | 6,35,36,37,38 | 479,781 | 548,362 | |||||||
Contract assets | 8,36 | 83,058 | 76,698 | |||||||
Prepaid expenses | 7 | 1,974,315 | 1,987,503 | |||||||
Prepaid income taxes | 32 | 415 | 77 | |||||||
Derivative financial assets | 22,35,36,39 | 168,527 | 30,110 | |||||||
Inventories, net | 9 | 166,355 | 204,637 | |||||||
Non-current assets held for sale | 41 | 6,377 | 8,734 | |||||||
Advanced payments and others | 6,35,36 | 171,646 | 125,798 | |||||||
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7,219,196 | 6,352,665 | |||||||||
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Non-Current Assets: | ||||||||||
Long-term financial instruments | 5,35,36 | 375 | 375 | |||||||
Long-term investment securities | 10,35,36 | 1,410,736 | 1,715,078 | |||||||
Investments in associates and joint ventures | 12 | 1,889,289 | 2,197,351 | |||||||
Investment property, net | 14 | 25,137 | 23,034 | |||||||
Property and equipment, net | 13,15,37,38 | 13,322,492 | 12,871,259 | |||||||
Goodwill | 11,16 | 2,075,009 | 2,072,493 | |||||||
Intangible assets, net | 17 | 3,324,910 | 3,869,769 | |||||||
Long-term contract assets | 8,36 | 49,163 | 41,580 | |||||||
Long-term loans, net | 6,35,36,37 | 26,973 | 21,979 | |||||||
Long-term accounts receivable – other | 6,35,36,37,38 | 373,951 | 275,238 | |||||||
Long-term prepaid expenses | 7 | 1,073,422 | 1,069,148 | |||||||
Guarantee deposits | 6,35,36,37 | 167,441 | 186,713 | |||||||
Long-term derivative financial assets | 22,35,36,39 | 152,633 | 187,484 | |||||||
Deferred tax assets | 32 | 6,860 | 128 | |||||||
Defined benefit assets | 21 | 175,748 | 18,427 | |||||||
Other non-current assets | 6,35,36 | 14,927 | 8,556 | |||||||
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24,089,066 | 24,558,612 | |||||||||
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Total Assets | 30,911,277 | |||||||||
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(Continued)
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SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Financial Position, Continued
As of December 31, 2022 and 2021
(In millions of won) | Note | December 31, 2022 | December 31, 2021 | |||||||
Liabilities and Shareholders’ Equity | ||||||||||
Current Liabilities: | ||||||||||
Accounts payable – trade | 35,36,37 | 190,559 | ||||||||
Accounts payable – other | 35,36,37 | 2,427,906 | 2,071,870 | |||||||
Withholdings | 35,36,37 | 803,555 | 790,489 | |||||||
Contract liabilities | 8 | 172,348 | 166,436 | |||||||
Accrued expenses | 26,35,36 | 1,505,549 | 1,295,404 | |||||||
Income tax payable | 32 | 112,358 | 192,221 | |||||||
Derivative financial liabilities | 22,35,36,39 | — | 52 | |||||||
Provisions | 20,40 | 39,683 | 61,656 | |||||||
Short-term borrowings | 18,35,36,39 | 142,998 | 12,998 | |||||||
Current portion of long-term debt, net | 18,35,36,39 | 1,967,586 | 1,430,324 | |||||||
Current portion of long-term payables – other | 19,35,36,39 | 398,874 | 398,823 | |||||||
Lease liabilities | 35,36,37,39 | 386,429 | 349,568 | |||||||
Other current liabilities | — | 35 | ||||||||
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8,046,541 | 6,960,435 | |||||||||
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Non-Current Liabilities: | ||||||||||
Debentures, excluding current installments, net | 18,35,36,39 | 6,524,095 | 7,037,424 | |||||||
Long-term borrowings, excluding current installments, net | 18,35,36,39 | 668,125 | 353,122 | |||||||
Long-term payables – other | 19,35,36,39 | 1,239,467 | 1,611,010 | |||||||
Long-term lease liabilities | 35,36,37,39 | 1,395,628 | 1,184,714 | |||||||
Long-term contract liabilities | 8 | 61,574 | 36,531 | |||||||
Defined benefit liabilities | 21 | 61 | 13,157 | |||||||
Long-term derivative financial liabilities | 22,35,36,39 | 302,593 | 321,084 | |||||||
Long-term provisions | 20 | 79,415 | 65,339 | |||||||
Deferred tax liabilities | 32 | 763,766 | 941,301 | |||||||
Other non-current liabilities | 35,36,37 | 71,801 | 52,022 | |||||||
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11,106,525 | 11,615,704 | |||||||||
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Total Liabilities | 19,153,066 | 18,576,139 | ||||||||
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Shareholders’ Equity: | ||||||||||
Share capital | 1,23 | 30,493 | 30,493 | |||||||
Capital surplus and others | 11,23,24,25,26 | (11,567,117 | ) | (11,623,726 | ) | |||||
Retained earnings | 27 | 22,463,711 | 22,437,341 | |||||||
Reserves | 28 | 391,233 | 735,238 | |||||||
Equity attributable to owners of the Parent Company | 11,318,320 | 11,579,346 | ||||||||
Non-controlling interests | 836,876 | 755,792 | ||||||||
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Total Shareholder’s Equity | 12,155,196 | 12,335,138 | ||||||||
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Total Liabilities and Shareholder’s Equity | 30,911,277 | |||||||||
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The accompanying notes are an integral part of the consolidated financial statement.
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SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Income
For the years ended December 31, 2022 and 2021
(In millions of won) | Note | 2022 | 2021 | |||||||||
Continuing operations | ||||||||||||
Operating revenue: | 4,37 | |||||||||||
Revenue | 16,748,585 | |||||||||||
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Operating expenses: | 37 | |||||||||||
Labor | 2,449,813 | 2,300,754 | ||||||||||
Commissions | 7 | 5,518,786 | 5,426,114 | |||||||||
Depreciation and amortization | 4 | 3,621,325 | 3,672,555 | |||||||||
Network interconnection | 715,285 | 749,599 | ||||||||||
Leased lines | 268,426 | 310,141 | ||||||||||
Advertising | 252,402 | 233,401 | ||||||||||
Rent | 143,747 | 140,418 | ||||||||||
Cost of goods sold | 9 | 1,268,124 | 1,167,417 | |||||||||
Others | 29 | 1,454,995 | 1,361,024 | |||||||||
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15,692,903 | 15,361,423 | |||||||||||
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Operating profit | 4 | 1,612,070 | 1,387,162 | |||||||||
Finance income | 4,31 | 179,838 | 155,133 | |||||||||
Finance costs | 4,31 | (456,327 | ) | (315,604 | ) | |||||||
Gain (loss) relating to investments in subsidiaries, associates and joint ventures, net | 4,12 | (81,707 | ) | 446,300 | ||||||||
Other non-operating income | 4,30 | 55,898 | 114,553 | |||||||||
Other non-operating expenses | 4,30 | (73,620 | ) | (69,353 | ) | |||||||
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Profit before income tax | 4 | 1,236,152 | 1,718,191 | |||||||||
Income tax expense | 32 | 288,321 | 446,796 | |||||||||
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Profit from continuing operations | 947,831 | 1,271,395 | ||||||||||
Profit from discontinued operations, net of taxes | 42 | — | 1,147,594 | |||||||||
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Profit for the year | 2,418,989 | |||||||||||
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Attributable to: | ||||||||||||
Owners of the Parent Company | 2,407,523 | |||||||||||
Non-controlling interests | 35,431 | 11,466 | ||||||||||
Earnings per share | 33 | |||||||||||
Basic earnings per share (in won) | 7,191 | |||||||||||
Basic earnings per share - continuing operations (in won) | 4,118 | 3,614 | ||||||||||
Diluted earnings per share (in won) | 4,116 | 7,187 | ||||||||||
Diluted earnings per share - continuing operations (in won) | 4,116 | 3,613 |
The accompanying notes are an integral part of the consolidated financial statement.
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SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Comprehensive Income
For the years ended December 31, 2022 and 2021
(In millions of won) | Note | 2022 | 2021 | |||||||||
Profit for the year | 2,418,989 | |||||||||||
Other comprehensive income (loss): | ||||||||||||
Items that will never be reclassified to profit or loss, net of taxes: | ||||||||||||
Remeasurement of defined benefit liabilities(asset) | 21 | 70,885 | 16,374 | |||||||||
Net change in other comprehensive income of investments in associates and joint ventures | 12,28 | — | 4,796 | |||||||||
Valuation gain (loss) on financial assets at fair value through other comprehensive income | 28,31 | (491,853 | ) | 920,871 | ||||||||
Items that are or may be reclassified subsequently to profit or loss, net of taxes: | ||||||||||||
Net change in other comprehensive income (loss) of investments in associates and joint ventures | 12,28 | 119,707 | 356,503 | |||||||||
Net change in unrealized fair value of derivatives | 22,28,31 | (21,366 | ) | 16,133 | ||||||||
Foreign currency translation differences for foreign operations | 28 | 16,401 | 47,515 | |||||||||
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Other comprehensive income (loss) for the year, net of taxes | (306,226 | ) | 1,362,192 | |||||||||
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Total comprehensive income | 3,781,181 | |||||||||||
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Total comprehensive income attributable to: | ||||||||||||
Owners of the Parent Company | 3,473,445 | |||||||||||
Non-controlling interests | 40,412 | 307,736 |
The accompanying notes are an integral part of the consolidated financial statement.
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SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Changes in Equity
For the years ended December 31, 2022 and 2021
(In millions of won) | ||||||||||||||||||||||||||||||||
Controlling interests | Non- controlling interests | Total equity | ||||||||||||||||||||||||||||||
Note | Share capital | Capital surplus (deficit) and others | Retained earnings | Reserves | Sub-total | |||||||||||||||||||||||||||
Balance, January 1, 2021 | 677,203 | 22,981,913 | 40,139 | 23,743,894 | 652,349 | 24,396,243 | ||||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | 2,407,523 | — | 2,407,523 | 11,466 | 2,418,989 | |||||||||||||||||||||||||
Other comprehensive income | 12,21,22,28,31 | — | — | 26,371 | 1,039,551 | 1,065,922 | 296,270 | 1,362,192 | ||||||||||||||||||||||||
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— | — | 2,433,894 | 1,039,551 | 3,473,445 | 307,736 | 3,781,181 | ||||||||||||||||||||||||||
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Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends | 34 | — | — | (641,944 | ) | — | (641,944 | ) | (25,771 | ) | (667,715 | ) | ||||||||||||||||||||
Interim dividends | 34 | — | — | (355,804 | ) | — | (355,804 | ) | — | (355,804 | ) | |||||||||||||||||||||
Share option | 26 | — | 75,498 | — | — | 75,498 | 12,124 | 87,622 | ||||||||||||||||||||||||
Interest on hybrid bonds | 25 | — | — | (14,766 | ) | — | (14,766 | ) | — | (14,766 | ) | |||||||||||||||||||||
Acquisition of treasury shares | 24 | — | (76,111 | ) | — | — | (76,111 | ) | — | (76,111 | ) | |||||||||||||||||||||
Disposal of treasury shares | 24 | — | 57,017 | — | — | 57,017 | — | 57,017 | ||||||||||||||||||||||||
Retirement of treasury shares | 24 | — | 1,965,952 | (1,965,952 | ) | — | — | — | — | |||||||||||||||||||||||
Changes from spin-off | 42 | (14,146 | ) | (14,460,588 | ) | — | (344,452 | ) | (14,819,186 | ) | (186,211 | ) | (15,005,397 | ) | ||||||||||||||||||
Changes in ownership in subsidiaries | 11 | — | 137,303 | — | — | 137,303 | (4,435 | ) | 132,868 | |||||||||||||||||||||||
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(14,146 | ) | (12,300,929 | ) | (2,978,466 | ) | (344,452 | ) | (15,637,993 | ) | (204,293 | ) | (15,842,286 | ) | |||||||||||||||||||
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Balance, December 31, 2021 | (11,623,726 | ) | 22,437,341 | 735,238 | 11,579,346 | 755,792 | 12,335,138 | |||||||||||||||||||||||||
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Balance, January 1, 2022 | (11,623,726 | ) | 22,437,341 | 735,238 | 11,579,346 | 755,792 | 12,335,138 | |||||||||||||||||||||||||
Total comprehensive income: | ||||||||||||||||||||||||||||||||
Profit for the year | — | — | 912,400 | — | 912,400 | 35,431 | 947,831 | |||||||||||||||||||||||||
Other comprehensive income (loss) | 12,21,22,28,31 | — | — | 32,798 | (344,005 | ) | (311,207 | ) | 4,981 | (306,226 | ) | |||||||||||||||||||||
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|
|
|
| |||||||||||||||||||
— | — | 945,198 | (344,005 | ) | 601,193 | 40,412 | 641,605 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Transactions with owners: | ||||||||||||||||||||||||||||||||
Annual dividends | 34 | — | — | (361,186 | ) | — | (361,186 | ) | — | (361,186 | ) | |||||||||||||||||||||
Interim dividends | 34 | — | — | (542,876 | ) | — | (542,876 | ) | — | (542,876 | ) | |||||||||||||||||||||
Share option | 26 | — | 72,261 | — | — | 72,261 | — | 72,261 | ||||||||||||||||||||||||
Interest on hybrid bonds | 25 | — | — | (14,766 | ) | — | (14,766 | ) | — | (14,766 | ) | |||||||||||||||||||||
Transactions of treasury shares | 24 | — | (2,683 | ) | — | — | (2,683 | ) | — | (2,683 | ) | |||||||||||||||||||||
Changes in ownership in subsidiaries | 11 | — | (12,969 | ) | — | — | (12,969 | ) | 40,672 | 27,703 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
— | 56,609 | (918,828 | ) | — | (862,219 | ) | 40,672 | (821,547 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance, December 31, 2022 | (11,567,117 | ) | 22,463,711 | 391,233 | 11,318,320 | 836,876 | 12,155,196 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statement.
10
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Cash Flows
For the years ended December 31, 2022 and 2021
(In millions of won) | Note | 2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||||
Cash generated from operating activities: | ||||||||||
Profit for the year | 2,418,989 | |||||||||
Adjustments for income and expenses | 39 | 4,719,438 | 3,473,779 | |||||||
Changes in assets and liabilities related to operating activities | 39 | 118,106 | (568,695 | ) | ||||||
|
|
|
| |||||||
5,785,375 | 5,324,073 | |||||||||
Interest received | 52,163 | 37,403 | ||||||||
Dividends received | 16,388 | 327,906 | ||||||||
Interest paid | (259,719 | ) | (306,634 | ) | ||||||
Income tax paid | (434,890 | ) | (351,469 | ) | ||||||
|
|
|
| |||||||
Net cash provided by operating activities | 5,159,317 | 5,031,279 | ||||||||
|
|
|
| |||||||
Cash flows from investing activities: | ||||||||||
Cash inflows from investing activities: | ||||||||||
Decrease in short-term financial instruments, net | 264,693 | 162,565 | ||||||||
Decrease in short-term investment securities, net | 5,010 | 32,544 | ||||||||
Collection of short-term loans | 123,700 | 137,196 | ||||||||
Decrease in long-term financial instruments | 330,032 | 343 | ||||||||
Proceeds from disposals of long-term investment securities | 104,190 | 78,261 | ||||||||
Proceeds from disposals of investments in associates and joint ventures | 342,645 | 100,634 | ||||||||
Proceeds from disposals of non-current assets held for sale | 20,136 | — | ||||||||
Proceeds from disposals of property and equipment | 15,792 | 61,425 | ||||||||
Proceeds from disposals of intangible assets | 10,993 | 14,618 | ||||||||
Collection of long-term loans | 1,134 | 4,166 | ||||||||
Decrease in deposits | 10,056 | 6,941 | ||||||||
Proceeds from settlement of derivatives | 1,542 | 1,495 | ||||||||
|
|
|
| |||||||
1,229,923 | 600,188 | |||||||||
Cash outflows for investing activities: | ||||||||||
Increase in short-term loans | (127,263 | ) | (100,209 | ) | ||||||
Increase in long-term loans | (11,724 | ) | (9,877 | ) | ||||||
Increase in long-term financial instruments | (330,032 | ) | (21 | ) | ||||||
Acquisitions of long-term investment securities | (436,753 | ) | (286,566 | ) | ||||||
Acquisitions of investments in associates and joint ventures | (11,065 | ) | (222,765 | ) | ||||||
Acquisitions of property and equipment | (2,908,287 | ) | (2,915,851 | ) | ||||||
Acquisitions of intangible assets | (138,136 | ) | (392,588 | ) | ||||||
Increase in deposits | (12,146 | ) | (51,274 | ) | ||||||
Cash outflow for business combinations, net | (62,312 | ) | (107,226 | ) | ||||||
|
|
|
| |||||||
(4,037,718 | ) | (4,086,377 | ) | |||||||
|
|
|
| |||||||
Net cash used in investing activities | (3,486,189 | ) | ||||||||
|
|
|
|
(Continued)
11
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Consolidated Statements of Cash Flows, Continued
For the years ended December 31, 2022 and 2021
(In millions of won) | Note | 2022 | 2021 | |||||||
Cash flows from financing activities: | ||||||||||
Cash inflows from financing activities: | ||||||||||
Proceeds from short-term borrowings, net | — | |||||||||
Proceeds from issuance of debentures | 1,200,122 | 873,245 | ||||||||
Proceeds from long-term borrowings | 440,000 | 350,000 | ||||||||
Increase in financial liabilities at FVTPL | — | 129,123 | ||||||||
Cash inflows from settlement of derivatives | 768 | 332 | ||||||||
Transactions with non-controlling shareholders | 31,151 | 444,124 | ||||||||
|
|
|
| |||||||
1,802,041 | 1,796,824 | |||||||||
Cash outflows for financing activities: | ||||||||||
Repayments of short-term borrowings, net | — | (50,823 | ) | |||||||
Repayments of long-term payables – other | (400,245 | ) | (426,267 | ) | ||||||
Repayments of debentures | (1,390,000 | ) | (890,000 | ) | ||||||
Repayments of long-term borrowings | (41,471 | ) | (286,868 | ) | ||||||
Payments of dividends | (904,020 | ) | (1,028,520 | ) | ||||||
Payments of interest on hybrid bonds | (14,766 | ) | (14,766 | ) | ||||||
Repayments of lease liabilities | (401,054 | ) | (431,674 | ) | ||||||
Acquisition of treasury shares | — | (76,111 | ) | |||||||
Cash outflows resulting from spin-off | — | (626,000 | ) | |||||||
Transactions with non-controlling shareholders | (367 | ) | (19,406 | ) | ||||||
|
|
|
| |||||||
(3,151,923 | ) | (3,850,435 | ) | |||||||
|
|
|
| |||||||
Net cash used in financing activities | 39 | (1,349,882 | ) | (2,053,611 | ) | |||||
|
|
|
| |||||||
Net increase (decrease) in cash and cash equivalents | 1,001,640 | (508,521 | ) | |||||||
Cash and cash equivalents at beginning of the year | 872,731 | 1,369,653 | ||||||||
Effects of exchange rate changes on cash and cash equivalents | 7,920 | 11,599 | ||||||||
|
|
|
| |||||||
Cash and cash equivalents at end of the year | 872,731 | |||||||||
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statement.
12
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity |
(1) | General |
SK Telecom Co., Ltd. (the “Parent Company”) was incorporated in March 29, 1984, under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The head office of the Parent Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.
The Parent Company’s common shares are listed on the Stock Market of Korea Exchange, and it’s depositary receipts (DRs) are listed on the New York Stock Exchange and the London Stock Exchange. As of December 31, 2022, the Parent Company’s total issued shares are held by the following shareholders:
Number of shares | Percentage of total shares issued (%) | |||||||
SK Inc. | 65,668,397 | 30.01 | ||||||
National Pension Service | 16,846,066 | 7.69 | ||||||
Institutional investors and other shareholders | 131,671,103 | 60.17 | ||||||
Kakao Investment Co., Ltd. | 3,846,487 | 1.76 | ||||||
Treasury shares | 801,091 | 0.37 | ||||||
|
|
|
| |||||
218,833,144 | 100.00 | |||||||
|
|
|
|
These consolidated financial statements comprise the Parent Company and its subsidiaries (collectively referred to as the “Group”). SK Inc. is the ultimate controlling entity of the Parent Company.
On November 1, 2021, the date of spin-off, the Parent Company completed the spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments (See note 42).
13
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(2) | List of subsidiaries |
The list of subsidiaries as of December 31, 2022 and 2021 is as follows:
Ownership (%)(*1) | ||||||||||||||
Subsidiary | Location | Primary business | Dec. 31, 2022 | Dec. 31, 2021 | ||||||||||
Subsidiaries owned by the Parent Company | SK Telink Co., Ltd. | Korea | International telecommunication and Mobile Virtual Network Operator service | 100.0 | 100.0 | |||||||||
SK Communications Co., Ltd. | Korea | Internet website services | 100.0 | 100.0 | ||||||||||
SK Broadband Co., Ltd. | Korea | Fixed-line telecommunication services | 74.4 | 74.3 | ||||||||||
PS&Marketing Corporation | Korea | Communications device retail business | 100.0 | 100.0 | ||||||||||
SERVICE ACE Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SERVICE TOP Co., Ltd. | Korea | Call center management service | 100.0 | 100.0 | ||||||||||
SK O&S Co., Ltd. | Korea | Base station maintenance service | 100.0 | 100.0 | ||||||||||
SK Telecom China Holdings Co., Ltd. | China | Investment (Holdings company) | 100.0 | 100.0 | ||||||||||
SK Global Healthcare Business Group Ltd. | Hong Kong | Investment | 100.0 | 100.0 | ||||||||||
YTK Investment Ltd. | Cayman Islands | Investment | 100.0 | 100.0 | ||||||||||
Atlas Investment | Cayman Islands | Investment | 100.0 | 100.0 | ||||||||||
SK Telecom Americas, Inc. | USA | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
Quantum Innovation Fund I | Korea | Investment | 59.9 | 59.9 | ||||||||||
SK Telecom Japan Inc. | Japan | Information gathering and consulting | 100.0 | 100.0 | ||||||||||
Happy Hanool Co., Ltd. | Korea | Service | 100.0 | 100.0 | ||||||||||
SK stoa Co., Ltd. | Korea | Other telecommunication retail business | 100.0 | 100.0 | ||||||||||
Broadband Nowon Co., Ltd.(*2) | Korea | Cable broadcasting services | — | 100.0 | ||||||||||
SAPEON Inc.(*2,3) | USA | Manufacturing non-memory and other electronic integrated circuits | 62.5 | — | ||||||||||
Subsidiaries owned by SK Broadband Co., Ltd. | Home & Service Co., Ltd. | Korea | Operation of information and communication facility | 100.0 | 100.0 | |||||||||
Media S Co., Ltd. | Korea | Production and supply services of broadcasting programs | 100.0 | 100.0 | ||||||||||
Subsidiary owned by PS&Marketing Corporation | SK m&service Co., Ltd.(*2,4) | Korea | Database and Internet website service | 100.0 | — | |||||||||
Subsidiary owned by Quantum Innovation Fund I | PanAsia Semiconductor Materials LLC. | Korea | Investment | 66.4 | 66.4 | |||||||||
Subsidiary owned by SK Telecom Japan Inc. | SK Planet Japan, K. K. | Japan | Digital contents sourcing service | 79.8 | 79.8 | |||||||||
Subsidiary owned by SAPEON Inc. | SAPEON Korea Inc.(*2,5) | Korea | Manufacturing non-memory and other electronic integrated circuits | 100.0 | — | |||||||||
Others(*6) | SK Telecom Innovation Fund, L.P. | USA | Investment | 100.0 | 100.0 | |||||||||
SK Telecom China Fund I L.P. | Cayman Islands | Investment | 100.0 | 100.0 |
14
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(2) | List of subsidiaries, Continued |
The list of subsidiaries as of December 31, 2022 and 2021 is as follows, Continued:
(*1) | The ownership interest represents direct ownership interest in subsidiaries either by the Parent Company or subsidiaries of the Parent Company. |
(*2) | Details of changes in the consolidation scope for year ended December 31, 2022 are presented in note 1-(4). |
(*3) | The Parent Company newly established SAPEON inc. and the ownership interest of the Parent Company in SAPEON inc. has changed from 100% to 62.5% due to unequal paid-in capital increase of SAPEON Inc. incurred after the establishment for the year ended December 31, 2022. |
(*4) | PS&Marketing Corporation acquired 3,099,112 shares (100%) of SK m&service Co., Ltd. at |
(*5) | The Parent Company newly established SAPEON Korea Inc. and disposed the entire shares of SAPEON Korea Inc. to SAPEON Inc. at |
(*6) | Others are owned by Atlas Investment and another subsidiary of the Parent Company. |
15
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(3) | Condensed financial information of subsidiaries |
1) Condensed financial information of significant subsidiaries as of and for the year ended December 31, 2022 is as follows:
(In millions of won) | ||||||||||||||||||||
As of December 31, 2022 | 2022 | |||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit (loss) | |||||||||||||||
SK Telink Co., Ltd. | 60,927 | 135,354 | 302,595 | 15,008 | ||||||||||||||||
SK Broadband Co., Ltd. | 6,245,484 | 3,134,949 | 3,110,535 | 4,162,093 | 212,816 | |||||||||||||||
PS&Marketing Corporation | 403,030 | 177,739 | 225,291 | 1,376,400 | 3,856 | |||||||||||||||
SERVICE ACE Co., Ltd. | 97,597 | 59,189 | 38,408 | 194,798 | 2,429 | |||||||||||||||
SERVICE TOP Co., Ltd. | 81,590 | 53,589 | 28,001 | 179,365 | 1,613 | |||||||||||||||
SK O&S Co., Ltd. | 121,755 | 70,280 | 51,475 | 331,715 | 2,059 | |||||||||||||||
Home & Service Co., Ltd. | 158,248 | 102,184 | 56,064 | 413,259 | (1,217 | ) | ||||||||||||||
SK stoa Co., Ltd. | 103,910 | 44,696 | 59,214 | 329,304 | 9,977 | |||||||||||||||
SK m&service Co., Ltd.(*) | 160,704 | 95,263 | 65,441 | 211,081 | 4,157 |
(*) | The financial information is the condensed financial information after the entity was included in the scope of consolidation. |
2) | Condensed financial information of significant subsidiaries as of and for the year ended December 31, 2021 is as follows: |
(In millions of won) | ||||||||||||||||||||
As of December 31, 2021 | 2021 | |||||||||||||||||||
Subsidiary | Total assets | Total liabilities | Total equity | Revenue | Profit | |||||||||||||||
SK Telink Co., Ltd. | 52,821 | 122,016 | 313,404 | 8,846 | ||||||||||||||||
SK Broadband Co., Ltd. | 5,971,505 | 3,091,837 | 2,879,668 | 4,058,997 | 213,468 | |||||||||||||||
PS&Marketing Corporation | 478,745 | 263,457 | 215,288 | 1,445,540 | 3,179 | |||||||||||||||
SERVICE ACE Co., Ltd. | 99,059 | 66,496 | 32,563 | 197,146 | 2,519 | |||||||||||||||
SERVICE TOP Co., Ltd. | 72,026 | 46,067 | 25,959 | 185,452 | 2,066 | |||||||||||||||
SK O&S Co., Ltd. | 95,748 | 58,870 | 36,878 | 285,591 | 69 | |||||||||||||||
Home & Service Co., Ltd. | 131,947 | 90,775 | 41,172 | 405,255 | 550 | |||||||||||||||
SK stoa Co., Ltd. | 107,943 | 59,931 | 48,012 | 316,249 | 19,163 |
16
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(4) | Changes in subsidiaries |
1) The list of subsidiaries that were newly included in consolidation for the year ended December 31, 2022 is as follows:
Subsidiary | Reason | |
SAPEON Korea Inc. | Established by the Parent Company | |
SAPEON Inc. | Established by the Parent Company | |
SK m&service Co., Ltd. | Acquired by PS&Marketing Corporation |
2) The list of subsidiaries that were excluded from consolidation for the year ended December 31, 2022 is as follows:
Subsidiary | Reason | |
Broadband Nowon Co., Ltd. | Merged into SK Broadband Co., Ltd |
17
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||
SK Broadband Co., Ltd. (*) | ||||
Ownership of non-controlling interests (%) | 25.3 | |||
As of December 31, 2022 | ||||
Current assets | ||||
Non-current assets | 5,076,410 | |||
Current liabilities | (1,707,805 | ) | ||
Non-current liabilities | (1,488,834 | ) | ||
Net assets | 3,228,076 | |||
Carrying amount of non-controlling interests | 816,676 | |||
2022 | ||||
Revenue | ||||
Profit for the year | 217,303 | |||
Total comprehensive income | 237,860 | |||
Profit attributable to non-controlling interests | 51,528 | |||
Net cash provided by operating activities | ||||
Net cash used in investing activities | (807,965 | ) | ||
Net cash used in financing activities | (415,908 | ) | ||
Effects of exchange rate changes on cash and cash equivalents | (584 | ) | ||
Net decrease in cash and cash equivalents | (39,663 | ) | ||
Dividends paid to non-controlling interests for the year ended December 31, 2022 |
(*) | The condensed financial information above is the consolidated financial information of the subsidiary and is reflected fair value adjustments that occurred a business combination. |
18
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
1. | Reporting Entity, Continued |
(5) | The financial information of significant non-controlling interests of the Group as of and for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | ||||
SK Broadband Co., Ltd. (*) | ||||
Ownership of non-controlling interests (%) | 25.1 | |||
As of December 31, 2021 | ||||
Current assets | ||||
Non-current assets | 4,886,448 | |||
Current liabilities | (1,433,800 | ) | ||
Non-current liabilities | (1,717,074 | ) | ||
Net assets | 2,988,509 | |||
Carrying amount of non-controlling interests | 740,771 | |||
2021 | ||||
Revenue | ||||
Profit for the year | 198,268 | |||
Total comprehensive income | 214,003 | |||
Profit attributable to non-controlling interests | 52,935 | |||
Net cash provided by operating activities | ||||
Net cash used in investing activities | (615,510 | ) | ||
Net cash used in financing activities | (248,139 | ) | ||
Effects of exchange rate changes on cash and cash equivalents | (59 | ) | ||
Net increase in cash and cash equivalents | 208,599 | |||
Dividends paid to non-controlling interests for the year ended December 31, 2021 |
(*) | The condensed financial information above is the consolidated financial information of the subsidiary and is reflected fair value adjustments that occurred a business combination. |
19
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
2. | Basis of Preparation |
These consolidated financial statements were prepared in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”), as prescribed in the Act on External Audits of Stock Companies of Korea. The accompanying consolidated financial statements have been translated into English from Korean financial statements. In the event of any differences in interpreting the financial statements or the independent auditor’s report thereon, Korean version, which is used for regulatory reporting purposes, shall prevail.
The accompanying consolidated financial statements comprise the Group and the Group’s investments in associates and joint ventures.
The consolidated financial statements were authorized for issuance by the Board of Directors on February 7, 2023, which will be submitted for final approval at the shareholder’s meeting to be held on March 28, 2023.
(1) | Basis of measurement |
The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the consolidated statement of financial position:
• | derivative financial instruments measured at fair value; |
• | financial instruments measured at fair value through profit or loss (“FVTPL”); |
• | financial instruments measured at fair value through other comprehensive income (“FVOCI”); |
• | liabilities measured at fair value for cash-settled share-based payment arrangement; and |
• | liabilities (assets) for defined benefit plans recognized at the total present value of defined benefit obligations less the fair value of plan assets. |
(2) | Functional and presentation currency |
Financial statements of Group entities within the Group are prepared in functional currency of each group entity, which is the currency of the primary economic environment in which each entity operates. Consolidated financial statements of the Group are presented in Korean won, which is the Parent Company’s functional and presentation currency.
(3) | Use of estimates and judgments |
The preparation of the consolidated financial statements in conformity with KIFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period prospectively.
1) Critical judgments
Information about critical judgments in applying accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements is included in notes for the following areas: consolidation (whether the Group has de facto control over an investee), and determination of stand-alone selling prices.
20
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
2. | Basis of Preparation, Continued |
(3) | Use of estimates and judgments, Continued |
2) Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes: loss allowance (notes 6 and 36), estimated useful lives of costs to obtain a contract (notes 7), property and equipment and intangible assets (notes 3 (7), (9), 13 and 17), impairment of goodwill (notes 3 (12) and 16), recognition of provision (notes 3 (17) and 20), measurement of defined benefit liabilities (notes 3 (16) and 21), transaction of derivative instruments (notes 3 (6) and 22) and recognition of deferred tax assets (liabilities) (notes 3 (25) and 32).
3) Fair value measurement
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group has an established policies and processes with respect to the measurement of fair values including Level 3 fair values, and the measurement of fair values is reviewed and is directly reported to the finance executives.
The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Group assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of KIFRS, including the level in the fair value hierarchy in which such valuations should be classified.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.
• | Level 1: quoted (unadjusted) market prices in active markets for identical assets or liabilities; |
• | Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and |
• | Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Information about assumptions used for fair value measurements are included in note 22 and note 36.
21
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies |
The significant accounting policies applied by the Group in the preparation of its consolidated financial statements in accordance with KIFRS are included below. Except for certain standards and amendments which are effective for annual periods beginning on or after January 1, 2022, the significant accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as of and for the year ended December 31, 2021. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective.
The new and amended standards and interpretations that are effective for annual periods beginning on or after January 1, 2022 are as follows. These amended standards had no significant impact on the Group’s consolidated financial statements.
• | Onerous Contracts – Cost of Fulfilling a Contract (Amendments to KIFRS 1037). |
• | Reference to Conceptual Framework (Amendments to KIFRS 1103). |
• | Property, Plant and Equipment: Proceeds before Intended Use (Amendments to KIFRS 1016). |
• | Annual Improvements to KIFRS 2018-2020. |
As described in note 42, the Parent Company carried out a spin-off of its businesses of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments pursuant to the resolution of the Board of Directors on June 10, 2021 and approval of shareholders’ meeting on October 12, 2021. The Group has applied KIFRS 1105 Non-current Assets Held for Sale and Discontinued Operations, and accordingly, presented profit or loss of the spin-off business as discontinued operations.
(1) | Operating segments |
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. The Group’s operating segments have been determined to be each business unit, for which the Group generates separately identifiable financial information that is regularly reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. The Group has three reportable segments as described in note 4. Segment results that are reported to the chief operating decision maker include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
22
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(2) | Basis of consolidation |
1) Business combination
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control.
In determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs.
The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.
Consideration transferred is generally measured at fair value, identical to the measurement of identifiable net assets acquired at fair value. The difference between the acquired company’s fair value and the consideration transferred is accounted for goodwill. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognized in profit or loss immediately. Acquisition-related costs are expensed in the periods in which the costs are incurred and the services are received, except if related to the costs to issue debt or equity securities recognized based on KIFRS 1032 and KIFRS 1109.
Consideration transferred does not include the amount settled in relation to the pre-existing relationship. Such amounts are generally recognized through profit or loss.
Contingent consideration is measured at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. If contingent consideration is not classified as equity, the Group subsequently recognizes changes in fair value of contingent consideration through profit or loss.
2) Non-controlling interests
Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
Changes in a Controlling Company’s ownership interest in a subsidiary that do not result in the Controlling Company losing control of the subsidiary are accounted for as equity transactions.
3) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of an investee begins from the date the Group obtains control of the investee and cease when the Group loses control of the investee.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(2) | Basis of consolidation, Continued |
4) Loss of control
If the Group loses control of a subsidiary, the Group derecognizes the assets and liabilities of the former subsidiary from the consolidated statement of financial position and recognizes gain or loss associated with the loss of control attributable to the former controlling interest. Any investment retained in the former subsidiary is recognized at its fair value when control is lost.
5) Interest in investees accounted for using the equity method
Interest in investees accounted for using the equity method composed of interest in associates and joint ventures.
An associate is an entity in which the Group has significant influence, but not control, over the entity’s financial and operating policies. A joint venture is a joint arrangement whereby the Group that has joint control of the arrangement has rights to the net assets of the arrangement.
The investment in an associate and a joint venture is initially recognized at cost including transaction costs and the carrying amount is increased or decreased to recognize the Group’s share of the profit or loss and changes in equity of the associate or the joint venture after the date of acquisition.
6) Intra-group transactions
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. The Group’s share of unrealized gain incurred from transactions with investees accounted for using the equity method are eliminated and unrealized loss are eliminated using the same basis if there are no evidence of asset impairments.
7) Business combinations under common control
SK Inc. is the ultimate controlling entity of the Group. The assets and liabilities acquired under business combination under common control are recognized at the carrying amounts in the ultimate controlling shareholder’s consolidated financial statements. The difference between consideration and carrying amount of net assets acquired is added to or subtracted from capital surplus and others.
(3) | Cash and cash equivalents |
Cash and cash equivalents comprise cash balances, call deposits and investment securities with maturities of three months or less from the acquisition date that are easily convertible to cash and subject to an insignificant risk of changes in their fair value.
(4) | Inventories |
Inventories are initially recognized at the acquisition cost and subsequently measured using the weighted average method. During the period, a perpetual inventory system is used to track inventory quantities, which is adjusted based on the physical inventory counts performed at the period end. When the net realizable value of inventories is less than cost, the carrying amount is reduced to the net realizable value, and any difference is charged to current period as operating expenses.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets |
1) Recognition and initial measurement
Accounts receivable – trade and debt investments issued are initially recognized when they are originated. All other financial assets and financial liabilities are initially recognized when the Group becomes a party to the contractual provisions of the instrument.
A financial asset (unless an accounts receivable – trade without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. An accounts receivable – trade without a significant financing component is initially measured at the transaction price.
2) Classification and subsequent measurement
On initial recognition, a financial asset is classified as measured at:
• | FVTPL |
• | FVOCI – equity investment |
• | FVOCI – debt investment |
• | Financial assets at amortized cost |
A financial asset is classified based on the business model in which a financial asset is managed and its contractual cash flow characteristics.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL:
• | it is held within a business model whose objective is to hold assets to collect contractual cash flows; and |
• | its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets, Continued |
2) Classification and subsequent measurement, Continued
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
• | it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and |
• | its contractual terms give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. |
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income (“OCI”). This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
The following accounting policies are applied to the subsequent measurement of financial assets.
| Financial assets at FVTPL | These assets are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognized in profit or loss. | ||
Financial assets at amortized cost | These assets are subsequently measured at amortized cost using the effective interest method. The amortized cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss. | |||
Debt investments at FVOCI | These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. | |||
Equity investments at FVOCI | These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the dividend clearly represents a recovery of the cost of the investment. Other net gains and losses are recognized in OCI and are never reclassified to profit or loss. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets, Continued |
3) Impairment
The Group estimates the expected credit losses (“ECL”) for the debt instruments measured at amortized cost and FVOCI based on the Group’s historical experience and informed credit assessment that includes forward-looking information. The impairment approach is decided based on the assessment of whether the credit risk of a financial asset has increased significantly since initial recognition. However, the Group applies a practical expedient and recognizes impairment losses equal to lifetime ECLs for accounts receivable – trade and lease receivables from the initial recognition.
ECL is a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e., the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive).
At each reporting date, the Group assesses whether financial assets measured at amortized cost and debt investments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Loss allowance on financial assets measured at amortized cost is deducted from the carrying amount of the respective assets, while loss allowance on debt instruments at FVOCI is recognized in OCI, instead of reducing the carrying amount of the transferred assets.
4) Derecognition
Financial assets
The Group derecognizes a financial asset when:
• | the contractual rights to the cash flows from the financial asset expire; or |
• | it transfers the rights to receive the contractual cash flows in a transaction in which either: |
• | substantially all of the risks and rewards of ownership of the financial asset are transferred; or |
• | the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. |
The Group enters into transactions whereby it transfers assets recognized in its consolidated statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(5) | Non-derivative financial assets, Continued |
4) Derecognition, Continued
Interest rate benchmark reform
When the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortized cost changed as a result of interest rate benchmark reform, the Group updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by the reform. A change in the basis for determining the contractual cash flows is required by interest rate benchmark reform if the following conditions are met:
• | the change is necessary as a direct consequence of the reform; and |
• | the new basis for determining the contractual cash flows is economically equivalent to the previous basis – i.e., the basis immediately before the change. |
When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Group first updated the effective rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Group applied the policies on accounting for modifications to the additional changes.
5) Offsetting
Financial assets and financial liabilities are offset and the net amount is presented in the statement of financial position when the Group currently has a legally enforceable right to offset the recognized amounts and intends either to settle on a net basis or to settle the liability and realize the asset simultaneously.
A financial asset and a financial liability are offset only when the right to set off the amount is not contingent on future event and legally enforceable even on the event of default, insolvency or bankruptcy.
(6) | Derivative financial instruments, including hedge accounting |
Derivatives are initially recognized at fair value. Subsequent to initial recognition, derivatives are measured at fair value at the end of each reporting period, and changes therein are accounted for as described below.
1) Hedge accounting
The Group holds forward exchange contracts, interest rate swaps, currency swaps and other derivative contracts to manage interest rate risk and foreign exchange risk. The Group designates derivatives as hedging instruments to hedge the variability in cash flow associated with highly probable forecasted transactions or firm commitments (a cash flow hedge).
On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(6) | Derivative financial instruments, including hedge accounting, Continued |
1) Hedge accounting, Continued
Hedges directly affected by interest rate benchmark reform
When uncertainty arises about the interest rate benchmark designated as a hedged risk and the timing or the amount of the interest rate benchmark-based cash flows of the hedged item or of the hedging instrument as a result of IBOR reform, for the purpose of evaluating whether there is an economic relationship between the hedged items and the hedging instruments, the Group assumes that the interest rate benchmark on which the hedged items and the hedging instruments are based is not altered as a result of interest rate benchmark reform.
For a cash flow hedge of a forecast transaction, the Group assumes that the benchmark interest rate will not be altered as a result of interest rate benchmark reform for the purpose of assessing whether the forecast transaction is highly probable and determining whether a previously designated forecast transaction in a discontinued cash flow hedge is still expected to occur.
The Group will cease applying the specific policy for assessing the economic relationship between the hedged item and the hedging instrument
• | to a hedged item or hedging instrument when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the respective item or instrument; or |
• | when the hedging relationship is discontinued. |
When the basis for determining the contractual cash flows of the hedged item or hedging instrument changes as a result of IBOR reform and therefore there is no longer uncertainty arising about the cash flows of the hedged item or the hedging instrument, the Group amends the hedge documentation of that hedging relationship to reflect the change(s) required by IBOR reform.
The Group amends the formal hedge documentation by the end of the reporting period during which a change required by IBOR reform is made to the hedged risk, hedged item or hedging instrument. These amendments in the formal hedge documentation do not constitute the discontinuation of the hedging relationship or the designation of a new hedging relationship.
If changes are made in addition to those changes required by interest rate benchmark reform to the financial asset or financial liability designated in a hedging relationship or to the designation of the hedging relationship, the Group determines whether those additional changes result in the discontinuation of hedging accounting. If the additional changes do not result in the discontinuation of hedging accounting, the Group amend the formal designation of the hedging relationship.
When the interest rate benchmark on which the hedged future cash flows had been based is changed as required by IBOR reform, for the purpose of determining whether the hedged future cash flows are expected to occur, the Group deems that the hedging reserve recognized in OCI for that hedging relationship is based on the alternative benchmark rate on which the hedged future cash flows will be based.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(6) | Derivative financial instruments, including hedge accounting, Continued |
1) Hedge accounting, Continued
Cash flow hedge
When a derivative is designated to hedge the variability in cash flows attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income, net of tax, and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated, exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. The cumulative gain or loss on the hedging instrument that has been recognized in other comprehensive income is reclassified to profit or loss in the periods during which the forecasted transaction occurs. If the forecasted transaction is no longer expected to occur, then the balance in other comprehensive income is recognized immediately in profit or loss.
2) Other derivative financial instruments
Other derivative financial instrument not designated as a hedging instrument are measured at fair value, and the changes in fair value of the derivative financial instrument is recognized immediately in profit or loss.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(7) | Property and equipment |
Property and equipment are initially measured at cost. The cost of property and equipment includes expenditures arising directly from the construction or acquisition of the asset, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.
Property and equipment, subsequently, are carried at cost less accumulated depreciation and accumulated impairment losses.
Subsequent costs are recognized in the carrying amount of property and equipment at cost or, if appropriate, as a separate item if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be reliably measured. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing are recognized in profit or loss as incurred.
Property and equipment, except for land, are depreciated on a straight-line basis over estimated useful lives that appropriately reflect the pattern in which the asset’s future economic benefits are expected to be consumed. A component that is significant compared to the total cost of property and equipment is depreciated over its separate useful life.
Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment and are recognized as other non-operating income (loss).
The estimated useful lives of the Group’s property and equipment are as follows:
Useful lives (years) | ||
Buildings and structures | 15 ~ 40 | |
Machinery | 3 ~ 15, 30 | |
Other property and equipment | 3 ~10 |
The Group reviews estimated residual values, expected useful lives, and depreciation methods annually at the end of each reporting date and adjusts, if appropriate. The change is accounted for as a change in an accounting estimate.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(8) | Borrowing costs |
The Group capitalizes borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. Other borrowing costs are recognized in expense as incurred. A qualifying asset is an asset that requires a substantial period of time to get ready for its intended use or sale. Financial assets are not qualifying assets, and assets that are ready for their intended use or sale when acquired are not qualifying assets either.
To the extent that the Group borrows funds specifically for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization as the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of those borrowings. To the extent that the Group borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the Group determines the amount of borrowing costs eligible for capitalization by applying a capitalization rate to the expenditures on that asset. The capitalization rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs that the Group capitalizes during a period do not exceed the amount of borrowing costs incurred during the period.
(9) | Intangible assets |
Intangible assets are measured initially at cost and, subsequently, are carried at cost less accumulated amortization and accumulated impairment losses.
Intangible assets, except for goodwill, are amortized on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use. The residual value of intangible assets is zero. However, club memberships and brand are expected to be available for use as there are no foreseeable limits to the periods. These intangible assets are determined as having indefinite useful lives and, therefore, not amortized.
The estimated useful lives of the Group’s intangible assets are as follows:
Useful lives (years) | ||
Frequency usage rights | 2.4 ~ 10 | |
Land usage rights | 5 | |
Industrial rights | 5, 10 | |
Development costs | 5 | |
Facility usage rights | 10, 20 | |
Customer relations | 3 ~ 15 | |
Other | 3 ~ 20 |
Amortization periods and the amortization methods for intangible assets with finite useful lives are reviewed at the end of each reporting period. The useful lives of intangible assets that are not being amortized are reviewed at the end of each reporting period to determine whether events and circumstances continue to support indefinite useful life assessments for those assets. Changes, if appropriate, are accounted for as changes in accounting estimates.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(9) | Intangible assets, Continued |
Expenditures on research activities are recognized in profit or loss as incurred. Development expenditures are capitalized only if development costs can be reliably measured, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are recognized in profit or loss as incurred.
Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the specific asset to which it relates. All other expenditures, including expenditures on internally generated goodwill and brands, are recognized in profit or loss as incurred.
(10) | Government grants |
Government grants are not recognized unless there is reasonable assurance that the Group will comply with the grant’s conditions and that the grant will be received.
1) Grants related to assets
Government grants whose primary condition is that the Group purchases, constructs, or otherwise acquires a long-term asset are deducted in calculating the carrying amount of the asset. The grant is recognized in profit or loss over the life of a depreciable asset as a reduction to depreciation expense.
2) Grants related to income
Government grants which are intended to compensate the Group for expenses incurred are deducted from the related expenses.
(11) | Investment property |
Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are reported at cost less accumulated depreciation and accumulated impairment losses.
Subsequent expenditures are recognized in carrying amount of an asset or as a separate asset if it is probable that future economic benefits associated with the assets will flow into the Group and the cost of an asset can be measured reliably. The carrying amount of those parts that are replaced is derecognized. The costs associated with routine maintenance and repairs are recognized in profit or loss as incurred.
Investment property, except for land, is depreciated on a straight-line basis over estimated useful lives of 30 years. In addition, right-of-use asset classified as investment property is depreciated using the straight-line basis from the commencement date to the end of the lease term.
The depreciation method, estimated useful lives and residual values are reviewed at the end of each reporting date and adjusted, if appropriate. The change is accounted for as a change in an accounting estimate.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(12) | Impairment of non-financial assets |
The carrying amounts of the Group’s non-financial assets other than contract assets recognized for revenue arising from contracts with a customer, assets recognized for the costs to obtain or fulfill a contract with a customer, employee benefits, inventories, deferred tax assets, and non-current assets held for sale are reviewed at the end of the reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, irrespective of whether there is any indication of impairment, are tested for impairment annually by comparing their recoverable amounts to their carrying amounts.
The Group estimates the recoverable amount of an individual asset, and if it is impossible to measure the individual recoverable amount of an asset, the Group estimates the recoverable amount of cash-generating unit (“CGU”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. The value in use is estimated by applying a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU for which estimated future cash flows have not been adjusted, to the estimated future cash flows expected to be generated by the asset or CGU.
An impairment loss is recognized in profit or loss to the extent the carrying amount of the asset exceeds its recoverable amount.
Goodwill acquired in a business combination is allocated to each CGU that is expected to benefit from the synergy arising from the business acquired. Any impairment identified at the CGU level will first reduce the carrying amount of goodwill and then be used to reduce the carrying amount of the other assets in the CGU on a pro rata basis. Except for impairment losses in respect of goodwill which are never reversed, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
(13) | Leases |
A contract is or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
1) | Group as a lessee |
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component.
The Group recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(13) | Leases, Continued |
1) Group as a lessee, Continued
The right-of-use asset is subsequently depreciated using the straight-line basis from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
• | fixed payments, including in-substance fixed payments; |
• | variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; |
• | amounts expected to be payable under a residual value guarantee; and |
• | the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. |
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension of termination option of if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in ‘property and equipment’ in the statement of financial position.
The Group has elected not to recognize right-of-use assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognizes the lease payments on short-term leases and leases of low value assets as an expense on a straight-line basis over the lease term.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(13) | Leases, Continued |
2) Group as a lessor
At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Group is an intermediate lessor, is accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, then the Group applies KIFRS 1115 to allocate the consideration in the contract.
The Group applies derecognition and impairment requirements in KIFRS 1109 to the net investment in the lease. The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.
The Group recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as part of ‘other revenue’.
(14) | Non-current assets held for sale |
Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sales rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the assets (or disposal groups) must be available for immediate sale in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amounts and fair value less cost to sell. The Group recognizes an impairment loss for any initial or subsequent write-down of assets (or disposal groups) to fair value less costs to sell and a gain for any subsequent increase in fair value less costs to sell up to the cumulative impairment loss previously recognized.
A non-current asset that is classified as held for sale or part of a disposal group classified as held for sale is not depreciated (or amortized).
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(15) | Non-derivative financial liabilities |
The Group classifies non-derivative financial liabilities into financial liabilities at fair value through profit or loss or other financial liabilities in accordance with the substance of the contractual arrangement. The Group recognizes financial liabilities in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the financial liabilities.
1) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading or designated as such upon initial recognition. Subsequent to initial recognition, these liabilities are measured at fair value. The amount of change in fair value of financial liability that is attributable to changes in the credit risk of that liability shall be presented in other comprehensive income, and the remaining amount of change in the fair value of the liability shall be presented in profit or loss. Upon initial recognition, transaction costs that are directly attributable to the issue of the financial liability are recognized in profit or loss as incurred.
2) Other financial liabilities
Non-derivative financial liabilities other than financial liabilities at fair value through profit or loss are classified as other financial liabilities. At the date of initial recognition, other financial liabilities are measured at fair value minus transaction costs that are directly attributable to the issue of the financial liabilities. Subsequent to initial recognition, other financial liabilities are measured at amortized cost and the interest expenses are recognized using the effective interest method.
3) Derecognition of financial liability
The Group extinguishes a financial liability only when the contractual obligation is fulfilled, canceled or expires. The Group recognizes new financial liabilities at fair value based on new contracts and eliminates existing liabilities when the contractual terms of the financial liabilities change and the cash flows change substantially.
When a financial liability is derecognized, the difference between the carrying amount and the consideration paid (including any transferred non-cash assets or liabilities assumed) is recognized in profit or loss.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(16) | Employee benefits |
1) Short-term employee benefits
Short-term employee benefits are employee benefits that are due to be settled within 12 months after the end of the period in which the employees render related services. When an employee has rendered a service to the Group during an accounting period, the Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.
2) Other long-term employee benefits
Other long-term employee benefits include employee benefits that are settled beyond 12 months after the end of the period in which the employees render related services. The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss in the period in which they arise.
3) Retirement benefits: defined contribution plans
When an employee has rendered a service to the Group during a period, the Group recognizes the contribution payable to a defined contribution plan in exchange for that service as a liability (accrued expense), after deducting any contribution already paid. If the contribution already paid exceeds the contribution due for service before the end of the reporting period, the Group recognizes that excess as an asset (prepaid expense) to the extent that the prepayment will lead to a reduction in future payments or a cash refund.
4) Retirement benefits: defined benefit plans
At the end of reporting period, defined benefit liabilities relating to defined benefit plans are recognized at present value of defined benefit obligations net of fair value of plan assets.
The calculation is performed annually by an independent actuary using the projected unit credit method. When the fair value of plan assets exceeds the present value of the defined benefit obligation, the Group recognizes an asset, to the extent of the present value of any economic benefits available in the form of refunds from the plan or reduction in the future contributions to the plan.
Remeasurements of the net defined benefit liability (asset), which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income. The Group determines net interests on net defined benefit liability (asset) by multiplying discount rate determined at the beginning of the annual reporting period and considers changes in net defined benefit liability (asset) from contributions and benefit payments. Net interest costs and other costs relating to the defined benefit plan are recognized through profit or loss.
When the plan amendment or curtailment occurs, gains or losses on amendment or curtailment in benefits for the past service provided are recognized through profit or loss. The Group recognizes a gain or loss on a settlement when the settlement of defined benefit plan occurs.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(16) | Employee benefits, Continued |
5) Termination benefits
The Group recognizes a liability and expense for termination benefits at the earlier of the period when the Group can no longer withdraw the offer of those benefits and the period when the Group recognizes costs for a restructuring that involves the payment of termination benefits. If benefits are payable more than 12 months after the reporting period, they are discounted to their present value.
(17) | Provisions |
Provisions are recognized when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The risks and uncertainties that inevitably surround many events and circumstances are taken into account in reaching the best estimate of a provision. If the effect of the time value of money is material, provisions are determined at the present value of the expected future cash flows.
If some or all of the expenditures required to settle a provision are expected to be reimbursed by another party, the reimbursement is recognized when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement is treated as a separate asset.
Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
A provision is used only for expenditures for which the provision was originally recognized.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(18) | Emissions Rights |
The Group accounts for greenhouse gases emission right and the relevant liability as below pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission in Korea.
1) Greenhouse Gases Emission Right
Greenhouse Gases Emission Right consists of emission allowances, which are allocated from the government free of charge or purchased from the market. The cost includes any directly attributable costs incurred during the normal course of business.
The Group derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government in which the future economic benefits are no longer expected to be probable.
2) Emissions liability
Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession and the unit price for such emission rights in the market at the end of the reporting period. The emissions liabilities are derecognized when they are surrendered to the government.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(19) | Transactions in foreign currencies |
1) Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated to the functional currency using the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Exchange differences arising from monetary items except for financial liabilities designated cashflow hedging instruments are recognized in profit or loss. If a gain or loss on a non-monetary item is recognized in other comprehensive income, any foreign exchange differences are also recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any foreign exchange differences are also recognized in profit or loss.
2) Foreign operations
If the presentation currency of the Group is different from a foreign operation’s functional currency, the financial statements of the foreign operation are translated into the presentation currency using the following methods:
The assets and liabilities of foreign operations, whose functional currency is not the currency of a hyperinflationary economy, are translated to presentation currency at exchange rates at the reporting date. The income and expenses of foreign operations are translated to functional currency at exchange rates at the dates of the transactions. Foreign currency differences are recognized in other comprehensive income.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition of that foreign operation is treated as assets and liabilities of the foreign operation. Thus, they are expressed in the functional currency of the foreign operation and translated at the closing rate at the reporting date.
When a foreign operation is disposed, the relevant amount in the translation is transferred to profit or loss as part of the profit or loss on disposal. On the partial disposal of a subsidiary that includes a foreign operation, the relevant proportion of such cumulative amount is reattributed to non-controlling interest. In any other partial disposal of a foreign operation, the relevant proportion is reclassified to profit or loss.
(20) | Share capital |
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
When the Parent Company repurchases its own shares, the amount of the consideration paid is recognized as a deduction from equity and classified as treasury shares. The gains or losses from the purchase, disposal, reissue, or retirement of treasury shares are directly recognized in equity being as transaction with owners.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(21) | Hybrid bond |
The Group recognizes a financial instrument issued by the Group as an equity instrument if it does not include contractual obligation to deliver financial assets including cash to the counter party.
(22) | Share-based payment |
For equity-settled share-based payment transaction, if the fair value of the goods or services received cannot be reliably estimated, the Group measures the value indirectly by reference to the fair value of the equity instruments granted. The related expense with a corresponding increase in capital surplus and others is recognized over the vesting period of the awards.
The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period in which the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date based on the fair value of the share appreciation rights. Any changes in the fair value of the liability are recognized in profit or loss.
(23) | Revenue |
1) Identification of performance obligations in contracts with customers
The Group identifies the distinct services or goods as performance obligations in contracts with customers such as (1) providing wireless and fixed-line telecommunications services, (2) sale of handsets and (3) providing other goods and services. In the case of providing both wireless telecommunications service and selling a handset together to one customer, the Group allocates considerations from the customer between the separate performance obligations for handset sale and wireless telecommunications service. The handset sale revenue is recognized when handset is delivered, and the wireless telecommunications service revenue is recognized over the period of the contract term as stated in the subscription contract.
2) Allocation of the transaction price to each performance obligation
The Group allocates the transaction price of a contract to each performance obligation identified on a relative stand-alone selling price basis. The Group uses “adjusted market assessment approach” for estimating the stand-alone selling price of a good or service.
3) Incremental costs of obtaining a contract
The Group pays commissions to its retail stores and authorized dealers in connection with acquiring service contracts. The commissions paid to these parties constituted a significant portion of the Group’s operating expenses. These commissions would not have been paid if there have been no binding contracts with subscribers and, therefore, the Group capitalizes certain costs associated with commissions paid to obtain new customer contracts and amortize them over the expected contract periods.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(23) | Revenue, Continued |
4) Customer loyalty programs
The Group provides customer loyalty points to customers based on the usage of the service to which the Group allocates a portion of consideration received as a performance obligation distinct from wireless telecommunications services. The amount to be allocated to the loyalty program is measured according to the relative stand-alone selling price of the customer loyalty points. The amount allocated to the loyalty program is deferred as a contract liability and is recognized as revenue when loyalty points are redeemed.
5) Consideration payable to a customer
Based on the subscription contract, a customer who uses the Group’s wireless telecommunications services may receive a discount for purchasing goods or services from a designated third party. The Group pays a portion of the price discounts that the customer receives to the third party which is viewed as consideration payable to a customer. The Group accounts for the amounts payable to the third party as a reduction of the wireless telecommunications service revenue.
(24) | Finance income and finance costs |
Finance income comprises interest income on funds invested (including financial assets measured at fair value), dividend income, gains on disposal of financial assets at FVTPL, changes in fair value of financial instruments at FVTPL, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method. Dividend income is recognized in profit or loss when the right to receive the dividend is established.
Finance costs comprise interest expense on borrowings, changes in fair value of financial instruments at FVTPL, and losses on hedging instruments that are recognized in profit or loss. Interest expense on borrowings and debentures is recognized as it accrues in profit or loss using the effective interest rate method.
(25) | Income taxes |
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.
The Group pays income tax in accordance with the tax-consolidation system when the Parent Company and its subsidiaries are economically unified.
1) Current tax
Current tax is the expected tax payable or receivable on the taxable profit or loss for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and includes interests and fines related to income taxes paid or payable. The taxable profit is different from the accounting profit for the period since the taxable profit is calculated excluding the temporary differences, which will be taxable or deductible in determining taxable profit (tax loss) of future periods, and non-taxable or non-deductible items from the accounting profit.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(25) | Income taxes, Continued |
2) Deferred tax
Deferred tax is recognized by using the asset-liability method in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The Group recognizes a deferred tax liability for all taxable temporary differences, except for the difference associated with investments in subsidiaries and associates that the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The Group recognizes a deferred tax asset for all deductible temporary differences to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized.
A deferred tax asset is recognized for the carryforward of unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilized. Future taxable profit is dependent on the reversal of taxable temporary differences. If there are insufficient taxable temporary differences to recognize the deferred tax asset, the business plan of the Group and the reversal of existing temporary differences are considered in determining the future taxable profit.
The Group reviews the carrying amount of a deferred tax asset at the end of each reporting period and reduces the carrying amount to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized, or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if the Group has a legally enforceable right to offset the amount recognized and intends to settle the current tax liabilities and assets on a net basis. Income tax expense in relation to dividend payments is recognized when liabilities relating to the dividend payments are recognized.
3) Uncertainty over income tax treatments
The Group assesses the uncertainty over income tax treatments pursuant to KIFRS 1012. If the Group concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Group reflects the effect of uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the entity expects to better predict the resolution of the uncertainty:
• | The most likely amount: the single most likely amount in a range of possible outcomes. |
• | The expected value: the sum of the probability-weighted amounts in a range of possible outcomes. |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
3. | Significant Accounting Policies, Continued |
(26) | Earnings per share |
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Parent Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees, if any.
(27) | Discontinued operation |
A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:
• | represents a separate major line of business or geographic area of operations; |
• | is part of a single co-ordinated plan to dispose of a separate major line of business or geographic area of operations; or |
• | is a subsidiary acquired only for a purpose of resale. |
When an operation is classified as a discontinued operation, the comparative statements of income and comprehensive income are re-presented as if the operation had been discontinued from the start of the comparative year.
(28) | Standards issued but not yet effective |
The new and amended standards and interpretations that are issued, but not yet effective for annual period beginning after January 1, 2022 are disclosed below. The following amendments are not expected to have a significant impact on the Group’s consolidated financial statements.
• | Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to KIFRS 1012) |
• | Classification of Liabilities as Current or Non-current (Amendments to KIFRS 1001). |
• | KIFRS 1117 Insurance Contracts and amendments to KIFRS 1117 Insurance Contracts. |
• | Disclosure of Accounting Polices (Amendments to KIFRS 1001). |
• | Definition of Accounting Estimates (Amendments to KIFRS 1008). |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
4. | Operating Segments |
The Group’s operating segments have been identified to be each business unit, by which the Group provides different services and merchandise. The Group’s reportable segments include: cellular services, which include cellular voice service, wireless data service and wireless internet services; fixed-line telecommunication services, which include telephone services, internet services, and leased line services; and all other businesses, which include providing shopping channel and digital platform for selling products and other immaterial operations, each of which does not meet the quantitative threshold to be considered as a reportable segment and are presented collectively as others.
(1) | Segment information for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) |
| |||||||||||||||||||||||
2022 | ||||||||||||||||||||||||
Continuing operations | ||||||||||||||||||||||||
Cellular services | Fixed-line telecommunication services | Others (*) | Sub-total | Adjustments | Total | |||||||||||||||||||
Total revenue | 4,895,791 | 592,188 | 19,984,845 | (2,679,872 | ) | 17,304,973 | ||||||||||||||||||
Inter-segment revenue | 1,554,550 | 1,082,802 | 42,520 | 2,679,872 | (2,679,872 | ) | — | |||||||||||||||||
External revenue | 12,942,316 | 3,812,989 | 549,668 | 17,304,973 | — | 17,304,973 | ||||||||||||||||||
Depreciation and amortization | 2,738,547 | 981,838 | 22,730 | 3,743,115 | (121,790 | ) | 3,621,325 | |||||||||||||||||
Operating profit (loss) | 1,334,306 | 311,210 | (2,126 | ) | 1,643,390 | (31,320 | ) | 1,612,070 | ||||||||||||||||
Finance income and costs, net |
| (276,489 | ) | |||||||||||||||||||||
Loss relating to investments in subsidiaries, associates and joint ventures, net |
| (81,707 | ) | |||||||||||||||||||||
Other non-operating income and expense, net |
| (17,722 | ) | |||||||||||||||||||||
Profit before income tax |
| 1,236,152 |
(In millions of won) |
| |||||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||||||
Continuing operations | Discontinued operations | |||||||||||||||||||||||||||
Cellular services | Fixed-line telecommunication services | Others (*) | Sub-total | Adjustments | Total | |||||||||||||||||||||||
Total revenue | 4,790,641 | 362,978 | 19,368,026 | (2,619,441 | ) | 16,748,585 | 2,845,424 | |||||||||||||||||||||
Inter-segment revenue | 1,495,934 | 1,112,935 | 10,572 | 2,619,441 | (2,619,441 | ) | — | 462,341 | ||||||||||||||||||||
External revenue | 12,718,473 | 3,677,706 | 352,406 | 16,748,585 | — | 16,748,585 | 2,383,083 | |||||||||||||||||||||
Depreciation and amortization | 2,812,827 | 958,462 | 11,318 | 3,782,607 | (110,052 | ) | 3,672,555 | 287,412 | ||||||||||||||||||||
Operating profit (loss) | 1,123,147 | 294,070 | 14,550 | 1,431,767 | (44,605 | ) | 1,387,162 | 12,325 | ||||||||||||||||||||
Finance income and costs, net |
| (160,471 | ) | (222,406 | ) | |||||||||||||||||||||||
Gain relating to investments in subsidiaries, associates and joint ventures, net |
| 446,300 | 1,502,147 | |||||||||||||||||||||||||
Other non-operating income and expense, net |
| 45,200 | 60,680 | |||||||||||||||||||||||||
Profit before income tax |
| 1,718,191 | 1,352,746 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
4. | Operating Segments, Continued |
(1) | Segment information for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*) | The Parent Company carried out a spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments for the year ended December 31, 2021. Accordingly, the Group reclassified SK stoa Co., Ltd. from Commerce Services segment to Others segment. |
The Group principally operates its businesses in Korea and the revenue amounts earned outside of Korea are immaterial. Therefore, no entity-wide geographical information is presented.
No single customer contributed 10% or more to the Group’s total revenue for the years ended December 31, 2022 and 2021.
(2) | Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows: |
(In millions of won) | ||||||||||
2022 | 2021 | |||||||||
Goods and Services transferred at a point in time: | ||||||||||
Cellular revenue | Goods(*1) | 959,932 | ||||||||
Fixed-line telecommunication revenue | Goods | 66,477 | 105,340 | |||||||
Other revenue | Others(*2) | 464,805 | 328,328 | |||||||
|
|
|
| |||||||
1,500,307 | 1,393,600 | |||||||||
|
|
|
| |||||||
Goods and Services transferred over time: | ||||||||||
Cellular revenue | Wireless service(*3) | 10,253,217 | 10,100,368 | |||||||
Cellular interconnection | 471,163 | 493,820 | ||||||||
Other(*4) | 1,248,911 | 1,164,353 | ||||||||
Fixed-line telecommunication revenue | Fixed-line service | 156,662 | 217,000 | |||||||
Cellular interconnection | 21,209 | 69,769 | ||||||||
Internet Protocol Television(*5) | 1,816,130 | 1,786,765 | ||||||||
International calls | 180,689 | 162,379 | ||||||||
Internet service and miscellaneous(*6) | 1,571,822 | 1,336,453 | ||||||||
Other revenue | Miscellaneous | 84,863 | 24,078 | |||||||
|
|
|
| |||||||
15,804,666 | 15,354,985 | |||||||||
|
|
|
| |||||||
Discontinued operations | — | 2,383,083 | ||||||||
|
|
|
| |||||||
19,131,668 | ||||||||||
|
|
|
|
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
4. | Operating Segments, Continued |
(2) | Disaggregation of operating revenues considering the economic factors that affect the amounts, timing and uncertainty of the Group’s revenue and future cash flows is as follows, Continued: |
(*1) | Cellular revenue includes revenue from sales of handsets and other electronic accessories. |
(*2) | Miscellaneous other revenue includes revenue from considerations received for the product sales-type data broadcasting channel use, and sales of goods through data broadcasting. |
(*3) | Wireless service includes revenue from wireless voice and data transmission services principally derived from usage charges to wireless subscribers. |
(*4) | Other revenue includes revenue from billing and collection services as well as other miscellaneous services. |
(*5) | IPTV service revenue includes revenue from IPTV services principally derived from usage charges to IPTV subscribers. |
(*6) | Internet service includes revenue from the high speed broadband internet service principally derived from usage charges to subscribers as well as other miscellaneous services. |
5. | Deposits with Restrictions on Use |
Deposits which are restricted in use as of December 31, 2022 and 2021 are summarized as follows:
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Cash and cash equivalents(*) | — | |||||||
Short-term financial instruments(*) | 79,514 | 79,500 | ||||||
Long-term financial instruments(*) | 375 | 372 | ||||||
|
|
|
| |||||
79,872 | ||||||||
|
|
|
|
(*) | Includes the followings: i) deposits restricted in use due to the court’s order for seizure and collection of bonds; and ii) charitable trust fund established by the Group, profits from which shall be donated to charitable institutions. As of December 31, 2022, such deposits and funds cannot be withdrawn before maturity. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
6. | Trade and Other Receivables |
(1) | Details of trade and other receivables as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | December 31, 2022 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (234,919 | ) | 1,970,611 | |||||||||
Short-term loans | 79,298 | (708 | ) | 78,590 | ||||||||
Accounts receivable – other(*) | 522,091 | (42,310 | ) | 479,781 | ||||||||
Accrued income | 1,732 | — | 1,732 | |||||||||
Guarantee deposits (Other current assets) | 113,204 | — | 113,204 | |||||||||
|
|
|
|
|
| |||||||
2,921,855 | (277,937 | ) | 2,643,918 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 71,857 | (44,884 | ) | 26,973 | ||||||||
Long-term accounts receivable – other(*) | 375,829 | (1,878 | ) | 373,951 | ||||||||
Guarantee deposits | 167,741 | (300 | ) | 167,441 | ||||||||
Long-term accounts receivable – trade (Other non-current assets) | 14,165 | (4 | ) | 14,161 | ||||||||
|
|
|
|
|
| |||||||
629,592 | (47,066 | ) | 582,526 | |||||||||
|
|
|
|
|
| |||||||
(325,003 | ) | 3,226,444 | ||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2022 include |
(In millions of won) | December 31, 2021 | |||||||||||
Gross amount | Loss allowance | Carrying amount | ||||||||||
Current assets: | ||||||||||||
Accounts receivable – trade | (238,847 | ) | 1,913,511 | |||||||||
Short-term loans | 71,750 | (933 | ) | 70,817 | ||||||||
Accounts receivable – other(*) | 593,109 | (44,747 | ) | 548,362 | ||||||||
Accrued income | 762 | — | 762 | |||||||||
Guarantee deposits (Other current assets) | 92,046 | — | 92,046 | |||||||||
|
|
|
|
|
| |||||||
2,910,025 | (284,527 | ) | 2,625,498 | |||||||||
Non-current assets: | ||||||||||||
Long-term loans | 66,431 | (44,452 | ) | 21,979 | ||||||||
Long-term accounts receivable – other(*) | 277,116 | (1,878 | ) | 275,238 | ||||||||
Guarantee deposits | 186,713 | — | 186,713 | |||||||||
Long-term accounts receivable – trade (Other non-current assets) | 8,140 | (34 | ) | 8,106 | ||||||||
|
|
|
|
|
| |||||||
538,400 | (46,364 | ) | 492,036 | |||||||||
|
|
|
|
|
| |||||||
(330,891 | ) | 3,117,534 | ||||||||||
|
|
|
|
|
|
(*) | Gross and carrying amounts of accounts receivable – other as of December 31, 2021 include |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
6. | Trade and Other Receivables, Continued |
(2) | Changes in the loss allowance on accounts receivable – trade measured at amortized costs for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
Beginning balance | Impairment | Write-offs(*2) | Collection of receivables previously written-off | Business combination | Spin-off | Ending balance | ||||||||||||||||||||||
2022 | 27,053 | (42,296 | ) | 11,282 | 3 | — | 234,923 | |||||||||||||||||||||
2021(*1) | 31,546 | (65,852 | ) | 14,565 | 878 | (6,754 | ) | 238,881 |
(*1) | Includes amounts related to discontinued operations. |
(*2) | The Group writes off the trade and other receivables that are determined to be uncollectable due to reasons such as termination of operations or bankruptcy. |
(3) | The Group applies the practical expedient that allows the Group to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Group uses its historical credit loss experience over the past three years and classifies the accounts receivable - trade by their credit risk characteristics and days overdue. Details of loss allowance on accounts receivable – trade as of December 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||||
Less than 6 months | 6 months ~ 1 year | 1 ~ 3 years | More than 3 years | |||||||||||||||
Telecommunications service revenue | Expected credit loss rate | 2.24 | % | 76.22 | % | 85.59 | % | 93.00 | % | |||||||||
Gross amount | 47,412 | 126,479 | 20,100 | |||||||||||||||
Loss allowance | 31,500 | 36,139 | 108,249 | 18,693 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||
Other revenue | Expected credit loss rate | 2.92 | % | 50.75 | % | 69.89 | % | 97.02 | % | |||||||||
Gross amount | 3,464 | 8,606 | 15,679 | |||||||||||||||
Loss allowance | 17,357 | 1,758 | 6,015 | 15,212 | ||||||||||||||
|
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|
|
|
|
|
|
As the Group is a wireless and fixed-line telecommunications service provider, the Group’s financial assets measured at amortized cost primarily consist of receivables from numerous individual customers, and, therefore, no significant credit concentration risk arises.
Receivables related to other revenue mainly consist of receivables from corporate customers. The Group transacts only with corporate customers with credit ratings that are considered to be low at credit risk. In addition, the Group is not exposed to significant credit concentration risk as the Group regularly assesses their credit risk by monitoring their credit rating. While the contract assets are under the impairment requirements, no significant credit risk has been identified.
50
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
7. | Prepaid expenses |
The Group pays commissions to its retail stores and authorized dealers, primarily for wireless and fixed-line telecommunication services. The Group capitalized certain costs associated with commissions paid to retail stores and authorized dealers to obtain new and retained customer contracts as prepaid expenses. These prepaid expenses are amortized on a straight-line basis over the periods that the Group expects to maintain its customers.
(1) | Details of prepaid expenses as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Current assets: |
| |||||||
Incremental costs of obtaining contracts | 1,886,680 | |||||||
Others | 86,133 | 100,823 | ||||||
|
|
|
| |||||
1,987,503 | ||||||||
|
|
|
| |||||
Non-current assets: |
| |||||||
Incremental costs of obtaining contracts | 977,236 | |||||||
Others | 77,242 | 91,912 | ||||||
|
|
|
| |||||
1,069,148 | ||||||||
|
|
|
|
(2) | Incremental costs of obtaining contracts |
The amortization in connection with incremental costs of obtaining contracts recognized for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Amortization recognized | 2,634,134 |
(*) | Includes amounts related to discontinued operations. |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
8. | Contract Assets and Liabilities |
In case of providing both wireless telecommunication services and sales of handsets, the Group allocated the consideration based on relative stand-alone selling prices and recognized unbilled receivables from handset sales as contract assets. The Group recognized receipts in advance for prepaid telecommunications services and unearned revenue for customer loyalty programs as contract liabilities.
(1) | Details of contract assets and liabilities as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Contract assets: | ||||||||
Allocation of consideration between performance obligations | 118,278 | |||||||
Contract liabilities: | ||||||||
Wireless service contracts | 18,544 | 18,397 | ||||||
Customer loyalty programs | 7,706 | 12,699 | ||||||
Fixed-line service contracts | 136,880 | 118,600 | ||||||
Others | 70,792 | 53,271 | ||||||
|
|
|
| |||||
202,967 | ||||||||
|
|
|
|
(2) | The amount of revenue recognized for the years ended December 31, 2022 and 2021 related to the contract liabilities carried forward from the prior periods are |
(In millions of won) | ||||||||||||||||
Less than 1 year | 1 ~ 2 years | More than 2 years | Total | |||||||||||||
Wireless service contracts | — | — | 18,544 | |||||||||||||
Customer loyalty programs | 6,141 | 1,048 | 517 | 7,706 | ||||||||||||
Fixed-line service contracts | 88,051 | 14,198 | 34,631 | 136,880 | ||||||||||||
Others | 59,612 | 10,935 | 245 | 70,792 | ||||||||||||
|
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|
|
|
|
|
| |||||||||
26,181 | 35,393 | 233,922 | ||||||||||||||
|
|
|
|
|
|
|
|
52
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
9. | Inventories |
(1) | Details of inventories as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Acquisition cost | Write-down | Carrying amount | Acquisition cost | Write-down | Carrying amount | |||||||||||||||||||
Merchandise | (5,616 | ) | 151,303 | 204,545 | (3,419 | ) | 201,126 | |||||||||||||||||
Supplies | 15,052 | — | 15,052 | 3,511 | — | 3,511 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(5,616 | ) | 166,355 | 208,056 | (3,419 | ) | 204,637 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(2) | Inventories recognized as operating expenses for the years ended December 31, 2022 and 2021 are |
10. | Investment Securities |
(1) | Details of short-term investment securities as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||
Category | December 31, 2022 | December 31, 2021 | ||||||||
Beneficiary certificates | FVTPL | 5,010 |
(2) | Details of long-term investment securities as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||
Category | December 31, 2022 | December 31, 2021 | ||||||||||
Equity instruments | FVOCI | (*) | 1,510,428 | |||||||||
FVTPL | 44,440 | 57,830 | ||||||||||
|
|
|
| |||||||||
1,234,037 | 1,568,258 | |||||||||||
Debt instruments | FVOCI | — | 1,177 | |||||||||
FVTPL | 176,699 | 145,643 | ||||||||||
|
|
|
| |||||||||
176,699 | 146,820 | |||||||||||
|
|
|
| |||||||||
1,715,078 | ||||||||||||
|
|
|
|
(*) | The Group designated investments in equity instruments that are not held for trading as financial assets at FVOCI, the amounts to those FVOCI as of December 31, 2022 and 2021 are |
53
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations |
(1) | 2022 |
1) | Acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation: |
PS&Marketing Corporation obtained control over SK m&service Co., Ltd. by acquiring its 3,099,112 shares (100%) for the year ended December 31, 2022. As this transaction is a business combination under common control, the assets acquired and liabilities assumed were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements, and the difference between the consideration transferred and the carrying amounts of net assets was recognized as capital surplus and others. Subsequent to the acquisition of control, SK m&service Co., Ltd. recognized211,081 million of revenue andW4,157 million of net profit. Meanwhile, assuming that business combination occurred as of January 1, 2022, the Group would have recognizedW250,108 million of revenue andW4,695 million of net profit.W
(i) | Summary of the acquiree |
Information of acquiree | ||
Corporate name | SK m&service Co., Ltd. | |
Location | 16th floor, 34, Supyo-ro, Jung-gu, Seoul, Korea | |
CEO | Park, Jeong-Min | |
Industry | Database and internet website service |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed as of the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
Cash and cash equivalents | 10,547 | |||
Accounts receivable – trade and other, net | 76,035 | |||
Inventories, net | 3,349 | |||
Property and equipment, net | 27,138 | |||
Intangible assets, net | 12,462 | |||
Goodwill | 2,516 | |||
Other assets | 10,394 | |||
Accounts payable – trade and other | (53,894 | ) | ||
Income tax payable | (399 | ) | ||
Lease liabilities | (6,503 | ) | ||
Provisions | (991 | ) | ||
Defined benefit liabilities | (2,739 | ) | ||
Other liabilities | (18,337 | ) | ||
|
| |||
59,578 | ||||
|
| |||
III. Capital surplus and others(I-II) | ||||
|
|
54
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021 |
1) | Merger of ADT CAPS Co., Ltd. by SK Shieldus Co., Ltd.(Formerly, ADT CAPS Co, Ltd., at the time of merger, SK Infosec Co., Ltd.): |
On March 4, 2021, SK Infosec Co., Ltd. merged with ADT CAPS Co., Ltd., a subsidiary of SK Infosec Co., Ltd., to improve management efficiency. As this transaction is a business combination under common control, the acquired assets and liabilities were recognized at the carrying amounts in the ultimate controlling entity’s consolidated financial statements and there is no effect on the assets and liabilities of the consolidated financial statements. After the date of the merger, SK Infosec Co., Ltd. changed its name to ADT CAPS Co., Ltd. and then again, in October 2021, ADT CAPS Co., Ltd. changed its name to SK Shieldus Co., Ltd.
Identifiable assets acquired and liabilities assumed were transferred to spin-off company.
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
2) | Acquisition of Studio Dolphin Co., Ltd. by Dreamus Company: |
DREAMUS Company obtained control by acquiring 10,000 shares(100%) of Studio Dolphin Co., Ltd. for the year ended December 31, 2021. The consideration transferred was1,500 million in cash and the difference between the fair value of net assets acquired and the consideration transferred amounting toW1,465 million was recognized as goodwill. Subsequent to the acquisition of control, Studio Dolphin Co., Ltd. recognized revenue ofW245 million and net loss ofW304 million and the amounts are included in profit or loss from discontinued operations.W
Identifiable assets acquired, liabilities assumed and goodwill were transferred to spin-off company.
(i) | Summary of the acquiree |
Information of acquiree | ||
Corporate name | Studio Dolphin Co., Ltd. | |
Location | 3rd floor, 10, Jandari-ro 7an-gil, Mapo-gu, Seoul, Korea | |
CEO | Kim, Dong-Hee | |
Industry | Music and sound recording business |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed as of the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
II. Fair value of identifiable assets acquired and liabilities assumed: | ||||
Cash and cash equivalents | 20 | |||
Accounts receivable – trade and other | 31 | |||
Other assets | 7 | |||
Accounts payable – trade and other | (4 | ) | ||
Short-term borrowings | (2 | ) | ||
Other liabilities | (17 | ) | ||
|
| |||
35 | ||||
|
| |||
III. Goodwill(I-II) | ||||
|
|
56
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
3) | Acquisition of YLP Inc. by Tmap Mobility Co., Ltd.: |
Tmap Mobility Co., Ltd. obtained control by acquiring 168,012 shares (100%) of YLP Inc. during the year ended December 31, 2021. The consideration transferred was79,000 million, among whichW55,598 million was paid in cash to acquire 118,242 shares (70.4%) and on June 29, 2021, T map Mobility Co., Ltd. issued 267,700 of its new common shares (with a fair value ofW23,402 million) to the shareholders of YLP Inc. in exchange for the remaining 49,770 shares (29.6%) owned by those shareholders. The difference between the fair value of net assets acquired and the consideration transferred amounting toW69,516 million was recognized as goodwill. Subsequent to the acquisition of control, YLP Inc. recognized revenue ofW20,488 million and net loss ofW1,632 million and the amounts are included in profit or loss from discontinued operations.W
Identifiable assets acquired, liabilities assumed and goodwill were transferred to spin-off company.
(i) | Summary of the acquiree |
Information of acquiree | ||
Corporate name | YLP Inc. | |
Location | 1740, Cheongwon-ro, Pyeongtaek-si, Gyeonggi-do, Korea | |
CEO | Lee, Hyeok-Ju | |
Industry | Freight forwarders and cargo agents |
57
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
3) Acquisition of YLP Inc. by Tmap Mobility Co., Ltd., Continued:
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed as of the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
Fair value of shares of T map Mobility Co., Ltd. | 23,402 | |||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
Cash and cash equivalents | 1,897 | |||
Financial instruments | 4,000 | |||
Accounts receivable – trade and other, net | 4,480 | |||
Property and equipment, net | 431 | |||
Intangible assets, net | 3,595 | |||
Other assets | 325 | |||
Borrowings | (1,000 | ) | ||
Accounts payable – trade and other | (3,542 | ) | ||
Lease liabilities | (327 | ) | ||
Other liabilities | (48 | ) | ||
Deferred tax liabilities | (327 | ) | ||
|
| |||
9,484 | ||||
|
| |||
III. Goodwill(I-II) | ||||
|
|
58
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
4) | Acquisition of Rokmedia Co., Ltd. by One Store Co., Ltd.: |
One Store Co., Ltd. obtained control by acquiring 60,000 shares (100%) of Rokmedia Co., Ltd. for the year ended December 31, 2021. The consideration transferred was40,000 million in cash and the difference between the fair value of net assets acquired and the consideration transferred amounting toW33,641 million was recognized as goodwill. Subsequent to the acquisition of control, Rokmedia Co., Ltd. recognized revenue ofW10,915 million and net profit ofW1,066 million and the amounts are included in profit or loss from discontinued operation.W
Identifiable assets acquired, liabilities assumed and goodwill were transferred to spin-off company.
(i) | Summary of the acquiree |
Information of acquiree | ||
Corporate name | Rokmedia Co., Ltd. | |
Location | 3rd floor, 330, Seongam-ro, Mapo-gu, Seoul, Korea | |
CEO | Kang, Jun-Gyu / Kim, Jeong-Su | |
Industry | Publishing and telecommunications retail business |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
4) Acquisition of Rokmedia Co., Ltd. by One Store Co., Ltd., Continued:
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed as of the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
Cash and cash equivalents | 719 | |||
Financial instruments | 2,170 | |||
Accounts receivable – trade and other, net | 1,374 | |||
Inventories | 933 | |||
Other assets | 3,212 | |||
Short-term loans, net | 30 | |||
Property and equipment, net | 792 | |||
Intangible assets, net | 2,677 | |||
Accounts payable – trade and other | (1,885 | ) | ||
Contract liabilities | (1,401 | ) | ||
Borrowings | (1,485 | ) | ||
Provisions | (385 | ) | ||
Lease liabilities | (56 | ) | ||
Other liabilities | (111 | ) | ||
Deferred tax liabilities | (135 | ) | ||
Income tax payable | (90 | ) | ||
|
| |||
6,359 | ||||
|
| |||
III. Goodwill(I-II) | ||||
|
|
60
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
11. | Business Combinations, Continued |
(2) | 2021, Continued |
5) | Acquisition of GOOD SERVICE Co., Ltd. by Tmap Mobility Co., Ltd.: |
T map Mobility Co., Ltd. obtained control by acquiring 2,000 shares (100%) of GOOD SERVICE Co., Ltd. for the year ended December 31, 2021. The consideration transferred was10,000 million in cash and the difference between the fair value of net assets acquired and the consideration transferred amounting toW4,844 million was recognized as goodwill. Subsequent to the acquisition of control, GOOD SERVICE Co., Ltd. recognized revenue ofW1,063 million and net profit ofW621 million and the amounts are included in profit or loss from discontinued operations.W
Identifiable assets acquired, liabilities assumed and goodwill were transferred to spin-off company.
(i) | Summary of the acquiree |
Information of acquiree | ||
Corporate name | GOOD SERVICE Co., Ltd. | |
Location | 4th floor, 54, Daeheung-ro, Mapo-gu, Seoul, Korea | |
CEO | Kim, Seung-Wook | |
Industry | Surrogate driving service business and related business |
(ii) | Considerations transferred, identifiable assets acquired and liabilities assumed as of the acquisition date are as follows: |
(In millions of won) | ||||
Amounts | ||||
I. Consideration transferred: | ||||
Cash and cash equivalents | ||||
II. Fair value of identifiable assets acquired and liabilities assumed: |
| |||
Cash and cash equivalents | 1,328 | |||
Financial instruments | 116 | |||
Accounts receivable – trade and other, net | 1,881 | |||
Property and equipment, net | 116 | |||
Intangible assets, net | 3,492 | |||
Accounts payable – trade and other | (883 | ) | ||
Other liabilities | (85 | ) | ||
Deferred tax liabilities | (696 | ) | ||
Lease liabilities | (113 | ) | ||
|
| |||
5,156 | ||||
|
| |||
III. Goodwill(I-II) | ||||
|
|
61
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures |
(1) | Investments in associates and joint ventures accounted for using the equity method as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | December 31, 2022 | December 31, 2021 | ||||||||||||||||
Country | Ownership (%) | Carrying amount | Ownership (%) | Carrying amount | ||||||||||||||
Investments in associates: | ||||||||||||||||||
SK China Company Ltd. | China | 27.3 | 27.3 | |||||||||||||||
Korea IT Fund(*1) | Korea | 63.3 | 324,860 | 63.3 | 339,976 | |||||||||||||
HanaCard Co., Ltd.(*2) | Korea | — | — | 15.0 | 349,866 | |||||||||||||
UniSK | China | 49.0 | 20,839 | 49.0 | 19,156 | |||||||||||||
SK Technology Innovation Company | Cayman Islands | 49.0 | 69,375 | 49.0 | 86,301 | |||||||||||||
SK MENA Investment B.V. | Netherlands | 32.1 | 14,296 | 32.1 | 15,343 | |||||||||||||
SK Latin America Investment S.A. | Spain | 32.1 | 11,961 | 32.1 | 14,004 | |||||||||||||
SK South East Asia Investment Pte. Ltd. | Singapore | 20.0 | 357,537 | 20.0 | 348,782 | |||||||||||||
Pacific Telecom Inc.(*3) | USA | 15.0 | 48,542 | 15.0 | 43,789 | |||||||||||||
SM. Culture & Contents Co., Ltd. | Korea | 23.1 | 59,611 | 23.1 | 60,261 | |||||||||||||
Digital Games International Pte. Ltd.(*4) | Singapore | — | — | 33.3 | 2,208 | |||||||||||||
Invites Healthcare Co., Ltd.(*5) | Korea | 31.1 | — | 27.1 | 26,474 | |||||||||||||
Nam Incheon Broadcasting Co., Ltd. | Korea | 27.3 | 13,575 | 27.3 | 12,525 | |||||||||||||
Home Choice Corp.(*3) | Korea | 17.8 | 4,456 | 17.8 | 3,052 | |||||||||||||
Konan Technology Inc. | Korea | 20.8 | 8,366 | 26.5 | 3,639 | |||||||||||||
CMES Inc.(*3,6) | Korea | 7.7 | 900 | — | — | |||||||||||||
12CM JAPAN and others(*3,7) | — | — | 69,734 | — | 68,966 | |||||||||||||
|
|
|
| |||||||||||||||
|
|
|
| |||||||||||||||
Investments in joint ventures: | ||||||||||||||||||
Finnq Co., Ltd. (*8) | Korea | — | — | 49.0 | 7,255 | |||||||||||||
UTC Kakao-SK Telecom ESG Fund(*9) | Korea | 48.2 | 5,710 | 48.2 | 2,000 | |||||||||||||
|
|
|
| |||||||||||||||
5,710 | 9,255 | |||||||||||||||||
|
|
|
| |||||||||||||||
|
|
|
|
62
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(1) | Investments in associates and joint ventures accounted for using the equity method as of December 31, 2022 and 2021 are as follows, Continued: |
(*1) | Investment in Korea IT Fund was classified as investment in associates as the Group does not have control over the investee under the contractual agreement with other shareholders. |
(*2) | The Group disposed the entire shares of HanaCard Co., Ltd. to Hana Financial Group Inc. for |
(*3) | Although the Group holds less than 20% of equity interests in these investees, investments in such investees were classified as investments in associates as the Group can exercise significant influence through its right to appoint the members of the Board of Directors. |
(*4) | The Group disposed the entire shares of Digital Games International Pte. Ltd. and recognized |
(*5) | The Group recognized the carrying amount of investments in Invites Healthcare Co., Ltd. in entirety as an impairment loss for the year ended December 31, 2022. |
(*6) | As the Group obtained significant influence over the investee, |
(*7) | The Group additionally contributed |
(*8) | The Group disposed the entire shares of Finnq Co., Ltd. to Hana Financial Group Inc. for |
(*9) | The Group additionally contributed |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(2) | The market value of investments in listed associates as of December 31, 2022 and 2021 are as follows: |
(In millions of won, except for share data) | ||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Market price per share (in won) | Number of shares | Market value | Market price per share (in won) | Number of shares | Market value | |||||||||||||||||||
SM.Culture & Contents Co.,Ltd. | 22,033,898 | 65,220 | 4,485 | 22,033,898 | 98,822 | |||||||||||||||||||
Konan Technology Inc. | 28,250 | 1,179,580 | 33,323 | — | — | — |
(3) | The condensed financial information of significant associates as of and for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||
Korea IT Fund | SK China Company Ltd. | SK South East Asia Investment Pte. Ltd. | ||||||||||
As of December 31, 2022 | ||||||||||||
Current assets | 1,223,426 | 146,589 | ||||||||||
Non-current assets | 414,804 | 2,050,001 | 3,034,335 | |||||||||
Current liabilities | — | 76,654 | 488,132 | |||||||||
Non-current liabilities | — | 276,525 | — | |||||||||
2022 | ||||||||||||
Revenue | 62,334 | 72,658 | ||||||||||
Profit (loss) for the year | 7,505 | (11,681 | ) | (17,504 | ) | |||||||
Other comprehensive income (loss) | (11,779 | ) | 58,034 | (34,220 | ) | |||||||
Total comprehensive income (loss) | (4,274 | ) | 46,353 | (51,724 | ) |
(In millions of won) | ||||||||||||||||
HanaCard Co., Ltd. | Korea IT Fund | SK China Company Ltd. | SK South East Asia Investment Pte. Ltd. | |||||||||||||
As of December 31, 2021 | ||||||||||||||||
Current assets | 117,172 | 1,124,219 | 133,110 | |||||||||||||
Non-current assets | 465,333 | 419,632 | 1,849,102 | 2,853,184 | ||||||||||||
Current liabilities | 1,281,783 | — | 53,199 | 412,962 | ||||||||||||
Non-current liabilities | 6,284,587 | — | 316,470 | — | ||||||||||||
2021 | ||||||||||||||||
Revenue | 58,741 | 80,241 | 9,945 | |||||||||||||
Profit (loss) for the year | 250,484 | 50,107 | 933,475 | (188,678 | ) | |||||||||||
Other comprehensive income (loss) | 909 | (6,847 | ) | 326,661 | 304,700 | |||||||||||
Total comprehensive income | 251,393 | 43,260 | 1,260,136 | 116,022 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(4) | Reconciliations of financial information of significant associates to carrying amounts of investments in associates in the consolidated financial statements as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
Korea IT Fund | 63.3 | 324,860 | — | 324,860 | ||||||||||||||||
SK China Company Ltd.(*) | 2,920,248 | 27.3 | 796,387 | 83,140 | 879,527 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*) | 1,787,685 | 20.0 | 357,537 | — | 357,537 |
(In millions of won) | ||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||
Net assets | Ownership interests (%) | Net assets attributable to the ownership interests | Cost-book value differentials | Carrying amount | ||||||||||||||||
HanaCard Co., Ltd. | 15.0 | 304,351 | 45,515 | 349,866 | ||||||||||||||||
Korea IT Fund | 536,804 | 63.3 | 339,976 | — | 339,976 | |||||||||||||||
SK China Company Ltd.(*) | 2,603,336 | 27.3 | 709,961 | 83,793 | 793,754 | |||||||||||||||
SK South East Asia Investment Pte. Ltd.(*) | 1,743,908 | 20.0 | 348,782 | — | 348,782 |
(*) | Net assets of these entities represent net assets excluding those attributable to their non-controlling interests. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(5) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | 2022 | |||||||||||||||||||||||
Beginning balance | Acquisition and Disposal | Share of profit (loss) | Other comprehensive income (loss) | Other increase (decrease) | Ending balance | |||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||
SK China Company Ltd. | — | (19,395 | ) | 105,168 | — | 879,527 | ||||||||||||||||||
Korea IT Fund (*1) | 339,976 | — | 4,753 | (7,459 | ) | (12,410 | ) | 324,860 | ||||||||||||||||
HanaCard Co., Ltd. | 349,866 | (368,389 | ) | 17,749 | 774 | — | — | |||||||||||||||||
UniSK | 19,156 | — | 2,424 | (741 | ) | — | 20,839 | |||||||||||||||||
SK Technology Innovation Company | 86,301 | — | (22,923 | ) | 5,997 | — | 69,375 | |||||||||||||||||
SK MENA Investment B.V. | 15,343 | — | (2,059 | ) | 1,012 | — | 14,296 | |||||||||||||||||
SK Latin America Investment S.A. | 14,004 | — | (2,083 | ) | 40 | — | 11,961 | |||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 348,782 | — | (6,975 | ) | 15,730 | — | 357,537 | |||||||||||||||||
Pacific Telecom Inc. | 43,789 | — | 2,890 | 1,863 | — | 48,542 | ||||||||||||||||||
SM. Culture & Contents Co., Ltd. | 60,261 | 37 | (756 | ) | 69 | — | 59,611 | |||||||||||||||||
Digital Games International Pte. Ltd. | 2,208 | (1,757 | ) | (562 | ) | 111 | — | — | ||||||||||||||||
Invites Healthcare Co., Ltd.(*2) | 26,474 | — | (11,759 | ) | (74 | ) | (14,641 | ) | — | |||||||||||||||
Nam Incheon Broadcasting Co., Ltd.(*1) | 12,525 | — | 1,186 | — | (136 | ) | 13,575 | |||||||||||||||||
Home Choice Corp. | 3,052 | — | 1,403 | 1 | — | 4,456 | ||||||||||||||||||
Konan Technology Inc. | 3,639 | 5,451 | (710 | ) | (14 | ) | — | 8,366 | ||||||||||||||||
CMES Inc.(*3) | — | — | — | — | 900 | 900 | ||||||||||||||||||
12CM JAPAN and others(*4) | 68,966 | 1,873 | 1,245 | — | (2,350 | ) | 69,734 | |||||||||||||||||
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2,188,096 | (362,785 | ) | (35,572 | ) | 122,477 | (28,637 | ) | 1,883,579 | ||||||||||||||||
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Investments in joint ventures: | ||||||||||||||||||||||||
Finnq Co., Ltd. | 7,255 | (3,840 | ) | (3,617 | ) | 202 | — | — | ||||||||||||||||
UTC Kakao-SK Telecom ESG Fund | 2,000 | 4,000 | (290 | ) | — | — | 5,710 | |||||||||||||||||
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9,255 | 160 | (3,907 | ) | 202 | — | 5,710 | ||||||||||||||||||
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(362,625 | ) | (39,479 | ) | 122,679 | (28,637 | ) | 1,889,289 | |||||||||||||||||
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(5) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*1) | Dividends distributed by the associates are deducted from the carrying amount for the year ended December 31, 2022. |
(*2) | The Group recognized |
(*3) | As the Group obtained significant influence over the investee, |
(*4) | The acquisition for the year ended December 31, 2022 includes |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(5) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | 2021 | |||||||||||||||||||||||||||
Beginning balance | Acquisition and Disposal | Share of profit (loss) | Other compre- hensive income (loss) | Other increase (decrease) | Spin-off | Ending balance | ||||||||||||||||||||||
Investments in associates: | ||||||||||||||||||||||||||||
SK China Company Ltd.(*1) | — | 274,066 | 95,696 | (131,141 | ) | — | 793,754 | |||||||||||||||||||||
Korea IT Fund(*1) | 323,294 | — | 31,734 | (4,336 | ) | (10,716 | ) | — | 339,976 | |||||||||||||||||||
HanaCard Co., Ltd. | 314,930 | — | 35,057 | (121 | ) | — | — | 349,866 | ||||||||||||||||||||
SK Telecom CS T1 Co., Ltd.(*2) | 53,010 | 4,888 | (8,769 | ) | (575 | ) | — | (48,554 | ) | — | ||||||||||||||||||
NanoEnTek, Inc.(*2) | 43,190 | — | 1,836 | (86 | ) | — | (44,940 | ) | — | |||||||||||||||||||
UniSK | 15,700 | — | 1,475 | 1,981 | — | — | 19,156 | |||||||||||||||||||||
SK Technology Innovation Company | 41,579 | — | 39,256 | 5,466 | — | — | 86,301 | |||||||||||||||||||||
SK MENA Investment B.V. | 14,043 | — | 2 | 1,298 | — | — | 15,343 | |||||||||||||||||||||
SK hynix Inc.(*1,2) | 12,251,861 | 19,482 | 1,542,757 | 197,473 | (170,937 | ) | (13,840,636 | ) | — | |||||||||||||||||||
SK Latin America Investment S.A. | 13,930 | — | (49 | ) | 123 | — | — | 14,004 | ||||||||||||||||||||
Grab Geo Holdings PTE. LTD.(*2) | 30,063 | — | — | — | — | (30,063 | ) | — | ||||||||||||||||||||
SK South East Asia Investment Pte. Ltd. | 311,990 | — | (18,218 | ) | 55,010 | — | — | 348,782 | ||||||||||||||||||||
Pacific Telecom Inc. | 39,723 | — | 1,598 | 2,468 | — | — | 43,789 | |||||||||||||||||||||
SM. Culture & Contents Co., Ltd. | 62,248 | 144 | (2,484 | ) | 353 | — | — | 60,261 | ||||||||||||||||||||
Contents Wavve Co., Ltd.(*2) | 75,803 | 100,000 | (20,716 | ) | — | — | (155,087 | ) | — | |||||||||||||||||||
Hello Nature Co., Ltd.(*2,3) | 11,969 | 9,980 | (10,899 | ) | (1 | ) | (1,730 | ) | (9,319 | ) | — | |||||||||||||||||
Digital Games International Pte. Ltd. | 6,449 | — | (4,529 | ) | 288 | — | — | 2,208 | ||||||||||||||||||||
Invites Healthcare Co., Ltd. | 25,536 | 7,000 | (5,968 | ) | (94 | ) | — | — | 26,474 | |||||||||||||||||||
Nam Incheon Broadcasting Co., Ltd.(*1) | 10,902 | — | 1,759 | — | (136 | ) | — | 12,525 | ||||||||||||||||||||
NANO-X IMAGING LTD.(*2) | 28,484 | (47 | ) | (2,049 | ) | — | 2,437 | (28,825 | ) | — | ||||||||||||||||||
Home Choice Corp. | 3,585 | — | (533 | ) | — | — | — | 3,052 | ||||||||||||||||||||
Carrot General Insurance Co., Ltd.(*4) | 13,469 | 12,289 | (6,666 | ) | (358 | ) | (8,734 | ) | (10,000 | ) | — | |||||||||||||||||
Bertis Inc.(*2) | — | 15,739 | (423 | ) | — | — | (15,316 | ) | — | |||||||||||||||||||
UT LLC(*2) | — | 86,319 | (7,773 | ) | — | — | (78,546 | ) | — | |||||||||||||||||||
SPARKPLUS Co., Ltd.(*2) | — | 34,166 | — | — | — | (34,166 | ) | — | ||||||||||||||||||||
12CM JAPAN and others(*2,5) | 65,750 | 9,038 | (2,869 | ) | 7,693 | (1,624 | ) | (5,383 | ) | 72,605 | ||||||||||||||||||
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14,312,641 | 298,998 | 1,837,595 | 362,278 | (322,581 | ) | (14,300,835 | ) | 2,188,096 | ||||||||||||||||||||
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Investments in joint ventures: | ||||||||||||||||||||||||||||
Dogus Planet, Inc.(*2) | 15,071 | — | (6,990 | ) | (1,447 | ) | — | (6,634 | ) | — | ||||||||||||||||||
Finnq Co., Ltd. | 13,342 | — | (5,969 | ) | (118 | ) | — | — | 7,255 | |||||||||||||||||||
NEXTGEN BROADCAST SERVICES CO, LLC(*2) | 5,850 | 9,048 | (1,276 | ) | — | 892 | (14,514 | ) | — | |||||||||||||||||||
NEXTGEN ORCHESTRATION, LLC(*2) | 1,600 | — | — | — | 142 | (1,742 | ) | — | ||||||||||||||||||||
Techmaker GmbH(*2) | 5,609 | — | (94 | ) | 145 | — | (5,660 | ) | — | |||||||||||||||||||
WAVVE Americas Inc. (Formerly, Korea Content Platform, Inc.)(*2) | — | 30,191 | (14 | ) | — | 598 | (30,775 | ) | — | |||||||||||||||||||
UTC Kakao-SK Telecom ESG Fund | — | 2,000 | — | — | — | — | 2,000 | |||||||||||||||||||||
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41,472 | 41,239 | (14,343 | ) | (1,420 | ) | 1,632 | (59,325 | ) | 9,255 | |||||||||||||||||||
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340,237 | 1,823,252 | 360,858 | (320,949 | ) | (14,360,160 | ) | 2,197,351 | |||||||||||||||||||||
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68
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(5) | Details of the changes in investments in associates and joint ventures accounted for using the equity method for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*1) | Dividends received from the associates are deducted from the carrying amount for the year ended December 31, 2021. |
(*2) | Investment in SK Telecom CS T1 Co., Ltd. and twenty-three other associates and joint ventures were transferred to the spin-off company for the year ended December 31, 2021. In addition, profit or loss related to investments in associates and joint ventures, which are transferred to the spin-off company, are included in profit or loss from discontinued operations. |
(*3) | The Group recognized |
(*4) | The Parent Company has entered into an agreement whereby the entire shares of Carrot General Insurance Co., Ltd. will transfer to T map Mobility Co., Ltd. In accordance with the agreement, the Parent Company reclassified the investments in Carrot General Insurance Co., Ltd. amounting to |
(*5) | The acquisition for the year ended December 31, 2021 includes |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
12. | Investments in Associates and Joint Ventures, Continued |
(6) | The Group discontinued the application of equity method to the following investees due to their carrying amounts being reduced to zero. The details of cumulative unrecognized equity method losses as of December 31, 2022 are as follows: |
((In millions of won) | Unrecognized loss | Unrecognized change in equity | ||||||||||||||
2022 | Cumulative loss | 2022 | Cumulative loss | |||||||||||||
Wave City Development Co., Ltd. | 8,695 | — | — | |||||||||||||
Daehan Kanggun BcN Co., Ltd. and others | — | 5,780 | — | (124 | ) | |||||||||||
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14,475 | — | (124 | ) | |||||||||||||
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13. | Property and Equipment |
(1) | Property and equipment as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | December 31, 2022 | |||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment loss | Carrying amount | |||||||||||||
Land | — | — | 1,005,857 | |||||||||||||
Buildings | 1,736,257 | (950,582 | ) | (450 | ) | 785,225 | ||||||||||
Structures | 935,276 | (668,019 | ) | (1,601 | ) | 265,656 | ||||||||||
Machinery | 37,100,715 | (29,185,881 | ) | (1,934 | ) | 7,912,900 | ||||||||||
Other | 1,771,890 | (1,273,655 | ) | (841 | ) | 497,394 | ||||||||||
Right-of-use assets | 2,555,685 | (766,350 | ) | (3,206 | ) | 1,786,129 | ||||||||||
Construction in progress | 1,069,331 | — | — | 1,069,331 | ||||||||||||
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(32,844,487 | ) | (8,032 | ) | 13,322,492 | ||||||||||||
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(In millions of won) | December 31, 2021 | |||||||||||||||
Acquisition cost | Accumulated depreciation | Accumulated impairment loss | Carrying amount | |||||||||||||
Land | — | — | 972,800 | |||||||||||||
Buildings | 1,692,239 | (897,336 | ) | (450 | ) | 794,453 | ||||||||||
Structures | 922,637 | (629,757 | ) | (1,601 | ) | 291,279 | ||||||||||
Machinery | 35,770,485 | (27,771,040 | ) | (1,518 | ) | 7,997,927 | ||||||||||
Other | 1,718,337 | (1,230,128 | ) | (493 | ) | 487,716 | ||||||||||
Right-of-use assets | 2,229,945 | (669,389 | ) | (1,223 | ) | 1,559,333 | ||||||||||
Construction in progress | 767,751 | — | — | 767,751 | ||||||||||||
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(31,197,650 | ) | (5,285 | ) | 12,871,259 | ||||||||||||
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70
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
13. | Property and Equipment, Continued |
(2) | Changes in property and equipment for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation | Impairment | Business combination(*) | Ending balance | |||||||||||||||||||||||||
Land | 79 | (175 | ) | 30,364 | — | — | 2,789 | 1,005,857 | ||||||||||||||||||||||||
Buildings | 794,453 | 1,071 | (638 | ) | 36,219 | (54,463 | ) | — | 8,583 | 785,225 | ||||||||||||||||||||||
Structures | 291,279 | 2,288 | (32 | ) | 10,422 | (38,301 | ) | — | — | 265,656 | ||||||||||||||||||||||
Machinery | 7,997,927 | 560,889 | (49,586 | ) | 1,696,447 | (2,292,358 | ) | (419 | ) | — | 7,912,900 | |||||||||||||||||||||
Other | 487,716 | 780,382 | (938 | ) | (672,199 | ) | (105,730 | ) | (391 | ) | 8,554 | 497,394 | ||||||||||||||||||||
Right-of-use assets | 1,559,333 | 720,932 | (65,961 | ) | (27,579 | ) | (403,794 | ) | (3,133 | ) | 6,331 | 1,786,129 | ||||||||||||||||||||
Construction in progress | 767,751 | 1,564,345 | (1,709 | ) | (1,261,937 | ) | — | — | 881 | 1,069,331 | ||||||||||||||||||||||
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3,629,986 | (119,039 | ) | (188,263 | ) | (2,894,646 | ) | (3,943 | ) | 27,138 | 13,322,492 | ||||||||||||||||||||||
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(*) | Includes assets acquired from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company. |
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Depreciation(*1) | Impairment (*2) | Business combination(*3) | Spin-off | Ending balance | ||||||||||||||||||||||||||||
Land | 634 | (21,557 | ) | 24,789 | — | — | — | (70,389 | ) | 972,800 | ||||||||||||||||||||||||||
Buildings | 858,606 | 3,919 | (9,706 | ) | 47,612 | (55,818 | ) | — | 639 | (50,799 | ) | 794,453 | ||||||||||||||||||||||||
Structures | 317,403 | 2,482 | (6,124 | ) | 16,546 | (37,968 | ) | — | — | (1,060 | ) | 291,279 | ||||||||||||||||||||||||
Machinery | 8,376,212 | 593,225 | (44,477 | ) | 1,816,003 | (2,394,351 | ) | (1,054 | ) | — | (347,631 | ) | 7,997,927 | |||||||||||||||||||||||
Other | 653,616 | 830,277 | (2,286 | ) | (607,271 | ) | (180,980 | ) | (495 | ) | 193 | (205,338 | ) | 487,716 | ||||||||||||||||||||||
Right-of-use assets | 1,472,035 | 672,723 | (60,159 | ) | (9,610 | ) | (433,970 | ) | (1,223 | ) | 507 | (80,970 | ) | 1,559,333 | ||||||||||||||||||||||
Construction in progress | 659,882 | 1,695,316 | (1,071 | ) | (1,554,047 | ) | — | — | — | (32,329 | ) | 767,751 | ||||||||||||||||||||||||
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3,798,576 | (145,380 | ) | (265,978 | ) | (3,103,087 | ) | (2,772 | ) | 1,339 | (788,516 | ) | 12,871,259 | ||||||||||||||||||||||||
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(*1) | Includes amounts related to discontinued operations. |
(*2) | The Group recognized impairment losses for obsolete assets for the year ended December 31, 2021. |
(*3) | Includes assets acquired from the acquisition of YLP Inc. and another company by T map Mobility Co., Ltd. and from the acquisition of Rokmedia Co., Ltd. by One Store Co., Ltd. |
71
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
14. | Investment Property |
(1) | Investment property as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2022 | December 31, 2021 | |||||||||||||||||||||||
Acquisition cost | Accumulated depreciation | Carrying amount | Acquisition cost | Accumulated depreciation | Carrying amount | |||||||||||||||||||
Land | — | 6,115 | 6,071 | — | 6,071 | |||||||||||||||||||
Buildings | 21,490 | (14,606 | ) | 6,884 | 21,021 | (13,668 | ) | 7,353 | ||||||||||||||||
Right-of-use assets | 17,057 | (4,919 | ) | 12,138 | 12,577 | (2,967 | ) | 9,610 | ||||||||||||||||
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| |||||||||||||
(19,525 | ) | 25,137 | 39,669 | (16,635 | ) | 23,034 | ||||||||||||||||||
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|
(2) | Changes in investment property for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) |
| |||||||||||||||
2022 | ||||||||||||||||
Beginning balance | Transfer | Depreciation | Ending balance | |||||||||||||
Land | 44 | — | 6,115 | |||||||||||||
Buildings | 7,353 | 564 | (1,033 | ) | 6,884 | |||||||||||
Right-of-use assets | 9,610 | 4,124 | (1,596 | ) | 12,138 | |||||||||||
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| |||||||||
4,732 | (2,629 | ) | 25,137 | |||||||||||||
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|
(In millions of won) |
| |||||||||||
2021 | ||||||||||||
Beginning balance | Transfer | Ending balance | ||||||||||
Land | 6,071 | 6,071 | ||||||||||
Buildings | — | 7,353 | 7,353 | |||||||||
Right-of-use assets | — | 9,610 | 9,610 | |||||||||
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| |||||||
23,034 | 23,034 | |||||||||||
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|
(3) | The Group recognized lease income of |
(4) | The fair value of investment property is |
15. | Leases |
(1) | Group as a lessee |
1) | Details of the right-of-use assets as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Land, buildings and structures | 1,392,925 | |||||||
Others | 239,211 | 166,408 | ||||||
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|
| |||||
1,559,333 | ||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
15. | Leases, Continued |
(1) | Group as a lessee, Continued |
2) Details of amounts recognized in the consolidated statements of income for the years ended December 31, 2022 and 2021 as a lessee are as follows:
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Depreciation of right-of-use assets(*): | ||||||||
Land, buildings and structures | 338,304 | |||||||
Others | 57,295 | 95,666 | ||||||
|
|
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| |||||
433,970 | ||||||||
|
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|
| |||||
Interest expense on lease liabilities | 23,998 |
(*) | Includes amounts related to discontinued operations. |
Expenses related to short-term leases and leases of low-value assets the Group recognized are immaterial.
3) | The total cash outflows due to lease payments for the years ended December 31, 2022 and 2021 amounted to |
(2) Group as a lessor
1) Finance lease
The Group recognized interest income of910 million andW2,053 million on lease receivables for the years ended December 31, 2022 and 2021, respectively. The amounts for the year ended December 31, 2021 include profit or loss from discontinued operations.W
The following table sets out a maturity analysis for lease receivables, presenting the undiscounted lease payments to be received subsequent to December 31, 2022.
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 2 years | 3,707 | |||
2 ~ 3 years | 2,062 | |||
3 ~ 4 years | 509 | |||
4 ~ 5 years | 231 | |||
|
| |||
Undiscounted lease payments | ||||
|
| |||
Unrealized finance income | ||||
Net investment in the lease | 17,139 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
15. | Leases, Continued |
(2) | Group as a lessor, Continued |
2) Operating lease
The Group recognized lease income of246,279 million andW230,140 million for the years ended December 31, 2022 and 2021, respectively, of which variable lease payments received areW8,622 million andW17,686 million, respectively.W
The following table sets out a maturity analysis of lease payments, presenting the undiscounted fixed payments to be received subsequent to December 31, 2022.
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 2 years | 132,802 | |||
2 ~ 3 years | 60,808 | |||
3 ~ 4 years | 9,424 | |||
4 ~ 5 years | 3,520 | |||
More than 5 years | 1,706 | |||
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| |||
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16. | Goodwill |
(1) | Goodwill as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Goodwill related to merger of Shinsegi Telecom, Inc. | 1,306,236 | |||||||
Goodwill related to acquisition of SK Broadband Co., Ltd. | 764,082 | 764,082 | ||||||
Other goodwill | 4,691 | 2,175 | ||||||
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|
|
| |||||
2,072,493 | ||||||||
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|
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
16. | Goodwill, Continued |
(2) | Details of the impairment testing of Goodwill as of December 31, 2022 is as follows: |
Goodwill is allocated to the following CGUs for the purpose of impairment testing.
• | goodwill related to Shinsegi Telecom, Inc.(*1): Cellular services; |
• | goodwill related to SK Broadband Co., Ltd.(*2): Fixed-line telecommunication services; and |
• | other goodwill: Others. |
(*1) | Goodwill related to merger of Shinsegi Telecom, Inc. |
The recoverable amount of the CGU is based on its value in use calculated by applying the post-tax annual discount rate of 6.7% (2021: 6.6%) (pre-tax annual discount rate for 2022 and 2021: 9.0% and 9.0%) to the estimated future post-tax cash flows based on financial budgets for the next five years. An annual growth rate of 0.0% (2021: 0.5%) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the long-term wireless telecommunication industry growth rate.
(*2) | Goodwill related to acquisition of SK Broadband Co., Ltd. |
The recoverable amount of the CGU is based on its value in use calculated by applying the post-tax annual discount rate of 6.7% (2021: 7.1%) (pre-tax annual discount rate for 2022 and 2021: 8.5% and 9.2%) to the estimated future post-tax cash flows based on financial budgets for the next five years. An annual growth rate of 1.0% (2021: 1.0%) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the long-term fixed-line telecommunication industry growth rate
(3) | Details of the changes in goodwill for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Beginning balance | 3,357,524 | |||||||
Acquisition(*) | 2,516 | 111,928 | ||||||
Other | — | (43 | ) | |||||
Spin-off | — | (1,396,916 | ) | |||||
|
|
|
| |||||
Ending balance | 2,072,493 | |||||||
|
|
|
|
(*) | It consists of goodwill recognized as PS&Marketing Corporation’s acquisition of SK m&service Co., Ltd for the years ended December 31, 2022. It consists of goodwill recognized as T map Mobility Co., Ltd.’s acquisition of YLP Inc. and another company, goodwill recognized as DREAMUS Company’s acquisition of Studio Dolphin Co., Ltd. and goodwill recognized from One Store Co., Ltd.’s acquisition of Rokmedia Co., Ltd. for the year ended December 31, 2021 (See Note 11). |
As of December 31, 2022 and 2021, accumulated impairment losses are33,441 million, respectively.W
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
17. | Intangible Assets |
(1) | Intangible assets as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | December 31, 2022 | |||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment loss | Carrying amount | |||||||||||||
Frequency usage rights(*1) | (1,499,158 | ) | (186,000 | ) | 2,082,432 | |||||||||||
Land usage rights | 59,389 | (58,165 | ) | — | 1,224 | |||||||||||
Industrial rights | 94,238 | (30,068 | ) | (12,378 | ) | 51,792 | ||||||||||
Development costs | 14,497 | (14,213 | ) | — | 284 | |||||||||||
Facility usage rights | 157,651 | (142,654 | ) | — | 14,997 | |||||||||||
Customer relations | 505,063 | (204,882 | ) | — | 300,181 | |||||||||||
Club memberships(*2) | 116,401 | — | (24,430 | ) | 91,971 | |||||||||||
Other(*3) | 4,627,565 | (3,839,030 | ) | (6,506 | ) | 782,029 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
(5,788,170 | ) | (229,314 | ) | 3,324,910 | ||||||||||||
|
|
|
|
|
|
|
|
(In millions of won) | December 31, 2021 | |||||||||||||||
Acquisition cost | Accumulated amortization | Accumulated impairment loss | Carrying amount | |||||||||||||
Frequency usage rights(*1) | (4,476,046 | ) | (186,000 | ) | 2,559,689 | |||||||||||
Land usage rights | 48,318 | (45,586 | ) | — | 2,732 | |||||||||||
Industrial rights | 92,332 | (36,342 | ) | (36 | ) | 55,954 | ||||||||||
Development costs | 34,393 | (34,193 | ) | — | 200 | |||||||||||
Facility usage rights | 156,062 | (138,188 | ) | — | 17,874 | |||||||||||
Customer relations | 507,581 | (180,324 | ) | — | 327,257 | |||||||||||
Club memberships(*2) | 113,300 | — | (24,806 | ) | 88,494 | |||||||||||
Other(*3) | 4,347,971 | (3,524,002 | ) | (6,400 | ) | 817,569 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
(8,434,681 | ) | (217,242 | ) | 3,869,769 | ||||||||||||
|
|
|
|
|
|
|
|
(*1) | The Parent Company was reassigned 800 MHz, 1.8 GHz and 2.1 GHz band of frequency licenses from the Ministry of Science and Information and Communication Technology (“ICT”) in exchange for |
(*2) | Club memberships are classified as intangible assets with indefinite useful lives and are not amortized. |
(*3) | Other intangible assets primarily consist of computer software and others. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
17. | Intangible Assets, Continued |
(2) | Changes in intangible assets for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) |
| |||||||||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization | Impairment (*1) | Business Combination(*2) | Ending balance | |||||||||||||||||||||||||
Frequency usage rights | — | — | — | (477,257 | ) | — | — | 2,082,432 | ||||||||||||||||||||||||
Land usage rights | 2,732 | — | — | — | (1,508 | ) | — | — | 1,224 | |||||||||||||||||||||||
Industrial rights | 55,954 | 13,428 | (823 | ) | (103 | ) | (4,324 | ) | (12,343 | ) | 3 | 51,792 | ||||||||||||||||||||
Development costs | 200 | — | — | — | (573 | ) | — | 657 | 284 | |||||||||||||||||||||||
Facility usage rights | 17,874 | 1,396 | (2 | ) | 252 | (4,523 | ) | — | — | 14,997 | ||||||||||||||||||||||
Customer relations | 327,257 | — | — | — | (27,076 | ) | — | — | 300,181 | |||||||||||||||||||||||
Club memberships | 88,494 | 9,926 | (7,113 | ) | — | — | (725 | ) | 1,389 | 91,971 | ||||||||||||||||||||||
Other | 817,569 | 108,144 | (380 | ) | 189,075 | (342,776 | ) | (16 | ) | 10,413 | 782,029 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
132,894 | (8,318 | ) | 189,224 | (858,037 | ) | (13,084 | ) | 12,462 | 3,324,910 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*1) | The Group recognized the difference between recoverable amount and the carrying amount of intangible assets amounting to |
(*2) | Includes assets acquired from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company. |
(In millions of won) |
| |||||||||||||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||||||||||||||
Beginning balance | Acquisition | Disposal | Transfer | Amortization (*1) | Reversal (Impairment) (*2) | Business Combination(*3) | Spin-off | Ending balance | ||||||||||||||||||||||||||||
Frequency usage rights | 1,145,999 | — | — | (519,075 | ) | — | — | — | 2,559,689 | |||||||||||||||||||||||||||
Land usage rights | 4,720 | 175 | (76 | ) | — | (2,087 | ) | — | — | — | 2,732 | |||||||||||||||||||||||||
Industrial rights | 71,442 | 5,158 | (8 | ) | 390 | (6,377 | ) | (36 | ) | — | (14,615 | ) | 55,954 | |||||||||||||||||||||||
Development costs | 9,364 | 1,279 | (150 | ) | — | (3,210 | ) | — | — | (7,083 | ) | 200 | ||||||||||||||||||||||||
Facility usage rights | 21,880 | 1,690 | (21 | ) | 328 | (6,003 | ) | — | — | — | 17,874 | |||||||||||||||||||||||||
Customer relations | 919,863 | 4,854 | (461 | ) | — | (53,342 | ) | — | 4,705 | (548,362 | ) | 327,257 | ||||||||||||||||||||||||
Club memberships | 106,865 | 6,518 | (9,925 | ) | — | — | 653 | — | (15,617 | ) | 88,494 | |||||||||||||||||||||||||
Brands | 374,096 | — | — | — | — | — | — | (374,096 | ) | — | ||||||||||||||||||||||||||
Other | 995,199 | 80,713 | (4,580 | ) | 276,890 | (421,213 | ) | (111 | ) | 5,059 | (114,388 | ) | 817,569 | |||||||||||||||||||||||
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
1,246,386 | (15,221 | ) | 277,608 | (1,011,307 | ) | 506 | 9,764 | (1,074,161 | ) | 3,869,769 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*1) | Includes amounts related to discontinued operations. |
(*2) | The Group recognized the difference between recoverable amount and the carrying amount of intangible assets amounting to |
(*3) | Includes assets acquired from the acquisition of YLP Co., Ltd. and another company by T map Mobility Co., Ltd., and Rokmedia Co., Ltd. by One Store Co., Ltd. |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
17. | Intangible Assets, Continued |
(3) | Research and development expenditures recognized as expense for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Research and development costs expensed as incurred | 406,672 |
(*) | Includes amounts related to discontinued operations. |
(4) | Details of frequency usage rights as of December 31, 2022 are as follows: |
(In millions of won) | ||||||||||
Amount | Description | Commencement of amortization | Completion of amortization | |||||||
800MHz license | LTE service | Jul. 2021 | Jun. 2026 | |||||||
1.8GHz license | 414,317 | LTE service | Dec. 2021 | Dec. 2026 | ||||||
2.6GHz license | 485,670 | LTE service | Sep. 2016 | Dec. 2026 | ||||||
2.1GHz license | 311,381 | W-CDMA and LTE service | Dec. 2021 | Dec. 2026 | ||||||
3.5GHz license | 712,594 | 5G service | Apr. 2019 | Nov. 2028 | ||||||
28GHz license | 4,766 | 5G service | Jan. 2021 | May. 2023 | ||||||
|
| |||||||||
|
|
18. | Borrowings and Debentures |
(1) | Short-term borrowings as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||
Lender | Annual interest rate (%) | Maturity | December 31, 2022 | December 31, 2021 | ||||||||||
BNK Securities. Co.,Ltd. | 4.60 | Jan. 20, 2023 | — | |||||||||||
KEB Hana Bank | 6.62 | Oct. 31, 2023 | 30,000 | — | ||||||||||
Hana Financial Investment Co., Ltd.(*) | 6.30 | May. 29, 2023 | 4,642 | 4,642 | ||||||||||
DB Financial Investment Co., Ltd.(*) | 6.30 | May. 29, 2023 | 2,785 | 2,785 | ||||||||||
Shinhan Financial Investment Co., Ltd.(*) | 6.20 | Feb. 20, 2023 | 5,571 | 5,571 | ||||||||||
|
|
|
| |||||||||||
12,998 | ||||||||||||||
|
|
|
|
(*) | PanAsia Semiconductor Materials LLC., a subsidiary of the Parent Company, has pledged its |
78
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
18. | Borrowings and Debentures, Continued |
(2) | Long-term borrowings as of December 31, 2022 and 2021 are as follows: |
(In millions of won and thousands of other currencies) | ||||||||||||||
Lender | Annual interest rate (%) | Maturity | December 31, 2022 | December 31, 2021 | ||||||||||
Korea Development Bank(*1) | 1.87 | Feb. 10, 2026 | 50,000 | |||||||||||
Korea Development Bank(*2) | 3M CD + 0.71 | Dec. 21, 2022 | — | 12,500 | ||||||||||
Credit Agricole CIB(*2,3) | 3M CD + 0.82 | Dec. 14, 2023 | 12,500 | 25,000 | ||||||||||
Export Kreditnamnden | 1.70 | Apr. 29, 2022 | — | | 6,746 (USD 5,690) |
| ||||||||
Mizuho bank, Ltd. | 1.35 | May. 20, 2024 | 100,000 | 100,000 | ||||||||||
DBS bank Ltd. | 1.32 | May. 28, 2024 | 200,000 | 200,000 | ||||||||||
DBS bank Ltd. | 2.68 | Mar. 10, 2025 | 200,000 | — | ||||||||||
Credit Agricole CIB | 3.30 | Apr. 29, 2024 | 50,000 | — | ||||||||||
Mizuho Bank, Ltd. | 3.29 | Nov. 27, 2023 | 100,000 | — | ||||||||||
Nonghyup Bank(*4) | MOR + 1.96 | Nov. 17, 2024 | 40,000 | — | ||||||||||
Credit Agricole CIB | 4.89 | Nov. 28, 2025 | 50,000 | — | ||||||||||
|
|
|
| |||||||||||
793,125 | 394,246 | |||||||||||||
Less: present value discount | (13 | ) | (59 | ) | ||||||||||
|
|
|
| |||||||||||
793,112 | 394,187 | |||||||||||||
Less: current portions | (124,987 | ) | (41,065 | ) | ||||||||||
|
|
|
| |||||||||||
353,122 | ||||||||||||||
|
|
|
|
(*1) | The long-term borrowings are to be repaid by installments on an annual basis from 2022 to 2026. |
(*2) | 3M CD rates are 3.98% and 1.29% as of December 31, 2022 and 2021, respectively. |
(*3) | The long-term borrowings are to be repaid by installments on an annual basis from 2020 to 2023. |
(*4) | 6M MOR rates are 4.35% as of December 31, 2022. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
18. | Borrowings and Debentures, Continued |
(3) | Debentures as of December 31, 2022 and 2021 are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||
Purpose | Maturity | Annual interest rate | December 31, 2022 | December 31, 2021 | ||||||||||
Unsecured corporate bonds | Operating and | 2022 | 3.30 | — | 140,000 | |||||||||
Unsecured corporate bonds | refinancing fund | 2032 | 3.45 | 90,000 | 90,000 | |||||||||
Unsecured corporate bonds | Operating fund | 2023 | 3.03 | 230,000 | 230,000 | |||||||||
Unsecured corporate bonds | 2033 | 3.22 | 130,000 | 130,000 | ||||||||||
Unsecured corporate bonds | 2024 | 3.64 | 150,000 | 150,000 | ||||||||||
Unsecured corporate bonds | Refinancing fund | 2024 | 2.82 | 190,000 | 190,000 | |||||||||
Unsecured corporate bonds | Operating and | 2022 | 2.40 | — | 100,000 | |||||||||
Unsecured corporate bonds | refinancing fund | 2025 | 2.49 | 150,000 | 150,000 | |||||||||
Unsecured corporate bonds | 2030 | 2.61 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | Operating fund | 2025 | 2.66 | 70,000 | 70,000 | |||||||||
Unsecured corporate bonds | 2030 | 2.82 | 90,000 | 90,000 | ||||||||||
Unsecured corporate bonds | Operating and | 2025 | 2.55 | 100,000 | 100,000 | |||||||||
Unsecured corporate bonds | refinancing fund | 2035 | 2.75 | 70,000 | 70,000 | |||||||||
Unsecured corporate bonds | Operating fund | 2026 | 2.08 | 90,000 | 90,000 | |||||||||
Unsecured corporate bonds | 2036 | 2.24 | 80,000 | 80,000 | ||||||||||
Unsecured corporate bonds | 2026 | 1.97 | 120,000 | 120,000 | ||||||||||
Unsecured corporate bonds | 2031 | 2.17 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | Refinancing fund | 2022 | 2.17 | — | 120,000 | |||||||||
Unsecured corporate bonds | 2027 | 2.55 | 100,000 | 100,000 | ||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2032 | 2.65 | 90,000 | 90,000 | |||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2022 | 2.63 | — | 80,000 | |||||||||
Unsecured corporate bonds | Refinancing fund | 2027 | 2.84 | 100,000 | 100,000 | |||||||||
Unsecured corporate bonds | 2023 | 2.81 | 100,000 | 100,000 | ||||||||||
Unsecured corporate bonds | 2028 | 3.00 | 200,000 | 200,000 | ||||||||||
Unsecured corporate bonds | 2038 | 3.02 | 90,000 | 90,000 | ||||||||||
Unsecured corporate bonds | Operating and | 2023 | 2.33 | 150,000 | 150,000 | |||||||||
Unsecured corporate bonds | refinancing fund | 2038 | 2.44 | 50,000 | 50,000 | |||||||||
Unsecured corporate bonds | Operating fund | 2022 | 2.03 | — | 180,000 | |||||||||
Unsecured corporate bonds | 2024 | 2.09 | 120,000 | 120,000 | ||||||||||
Unsecured corporate bonds | 2029 | 2.19 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | 2039 | 2.23 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | Operating and | 2022 | 1.40 | — | 120,000 | |||||||||
Unsecured corporate bonds | refinancing fund | 2024 | 1.49 | 60,000 | 60,000 | |||||||||
Unsecured corporate bonds | 2029 | 1.50 | 120,000 | 120,000 | ||||||||||
Unsecured corporate bonds | 2039 | 1.52 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | 2049 | 1.56 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | Operating fund | 2022 | 1.69 | — | 230,000 | |||||||||
Unsecured corporate bonds | 2024 | 1.76 | 70,000 | 70,000 | ||||||||||
Unsecured corporate bonds | 2029 | 1.79 | 40,000 | 40,000 | ||||||||||
Unsecured corporate bonds | 2039 | 1.81 | 60,000 | 60,000 | ||||||||||
Unsecured corporate bonds | Operating and refinancing fund | 2023 | 1.64 | 170,000 | �� | 170,000 |
80
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
18. | Borrowings and Debentures, Continued |
(3) | Debentures as of December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||
Purpose | Maturity | Annual interest rate | December 31, 2022 | December 31, 2021 | ||||||||||
Unsecured corporate bonds | Operating fund | 2025 | 1.75 | 130,000 | 130,000 | |||||||||
Unsecured corporate bonds | 2030 | 1.83 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | 2040 | 1.87 | 70,000 | 70,000 | ||||||||||
Unsecured corporate bonds | Refinancing fund | 2025 | 1.40 | 140,000 | 140,000 | |||||||||
Unsecured corporate bonds | 2030 | 1.59 | 40,000 | 40,000 | ||||||||||
Unsecured corporate bonds | 2040 | 1.76 | 110,000 | 110,000 | ||||||||||
Unsecured corporate bonds | Refinancing fund | 2024 | 1.17 | 80,000 | 80,000 | |||||||||
Unsecured corporate bonds | 2026 | 1.39 | 80,000 | 80,000 | ||||||||||
Unsecured corporate bonds | 2031 | 1.80 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds | 2041 | 1.89 | 100,000 | 100,000 | ||||||||||
Unsecured corporate bonds | Refinancing fund | 2024 | 2.47 | 90,000 | 90,000 | |||||||||
Unsecured corporate bonds | 2026 | 2.69 | 70,000 | 70,000 | ||||||||||
Unsecured corporate bonds | 2041 | 2.68 | 40,000 | 40,000 | ||||||||||
Unsecured corporate bonds | 2025 | 3.80 | 240,000 | — | ||||||||||
Unsecured corporate bonds | 2027 | 3.84 | 70,000 | — | ||||||||||
Unsecured corporate bonds | 2042 | 3.78 | 40,000 | — | ||||||||||
Unsecured corporate bonds | 2025 | 4.00 | 300,000 | — | ||||||||||
Unsecured corporate bonds | 2027 | 4.00 | 95,000 | — | ||||||||||
Unsecured corporate bonds | 2024 | 4.79 | 100,000 | — | ||||||||||
Unsecured corporate bonds | 2025 | 4.73 | 110,000 | — | ||||||||||
Unsecured corporate bonds | 2027 | 4.74 | 60,000 | — | ||||||||||
Unsecured corporate bonds | 2032 | 4.69 | 40,000 | — | ||||||||||
Unsecured corporate bonds(*1) | Operating fund | 2022 | 2.26 | — | 150,000 | |||||||||
Unsecured corporate bonds(*1) | Operating and refinancing fund | 2022 | 2.70 | — | 140,000 | |||||||||
Unsecured corporate bonds(*1) | 2023 | 2.93 | 80,000 | 80,000 | ||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2022 | 2.00 | — | 50,000 | |||||||||
Unsecured corporate bonds(*1) | 2024 | 2.09 | 160,000 | 160,000 | ||||||||||
Unsecured corporate bonds(*1) | 2022 | 1.71 | — | 80,000 | ||||||||||
Unsecured corporate bonds(*1) | Operating and refinancing fund | 2024 | 1.71 | 100,000 | 100,000 | |||||||||
Unsecured corporate bonds(*1) | 2026 | 1.86 | 50,000 | 50,000 | ||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2023 | 1.48 | 100,000 | 100,000 | |||||||||
Unsecured corporate bonds(*1) | Operating and refinancing fund | 2025 | 1.64 | 100,000 | 100,000 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
18. | Borrowings and Debentures, Continued |
(3) | Debentures as of December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won and thousands of U.S. dollars) | ||||||||||||||
Purpose | Maturity | Annual interest | December 31, 2022 | December 31, 2021 | ||||||||||
Unsecured corporate bonds(*1) | Refinancing fund | 2025 | 1.41 | 160,000 | 160,000 | |||||||||
Unsecured corporate bonds(*1) | 2024 | 1.69 | 100,000 | 100,000 | ||||||||||
Unsecured corporate bonds(*1) | 2025 | 2.58 | 100,000 | — | ||||||||||
Unsecured corporate bonds(*1) | 2032 | 2.92 | 50,000 | — | ||||||||||
Unsecured global bonds | Operating fund | 2027 | 6.63 | | 506,920 (USD 400,000 | ) | | 474,200 (USD 400,000 | ) | |||||
Unsecured global bonds | 2023 | 3.75 | | 633,650 (USD 500,000 | ) | | 592,750 (USD 500,000 | ) | ||||||
Unsecured global bonds(*1) | Refinancing fund | 2023 | 3.88 | | 380,190 (USD 300,000 | ) | | 355,650 (USD 300,000 | ) | |||||
Floating rate notes(*2) | Operating fund | 2025 | 3M LIBOR + 0.91 | | 380,190 (USD 300,000 | ) | | 355,650 (USD 300,000 | ) | |||||
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8,385,950 | 8,448,250 | |||||||||||||
Less: discounts on bond | (19,256 | ) | (21,567 | ) | ||||||||||
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8,366,694 | 8,426,683 | |||||||||||||
Less: current portions of bonds | (1,842,599 | ) | (1,389,259 | ) | ||||||||||
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6,524,095 | 7,037,424 | |||||||||||||
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(*1) Unsecured corporate bonds were issued by SK Broadband Co., Ltd., a subsidiary of the Parent Company.
(*2) 3M LIBOR rates are 4.75% and 0.21% as of December 31, 2022 and 2021, respectively.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
19. | Long-term Payables – other |
(1) | As of December 31, 2022 and 2021, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 17): |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Long-term payables – other | 2,090,715 | |||||||
Present value discount on long-term payables – other | (52,129 | ) | (80,882 | ) | ||||
Current installments of long-term payables – other | (398,874 | ) | (398,823 | ) | ||||
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Carrying amount as of December 31 | 1,611,010 | |||||||
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(2) | The sum of portions repaid among the principal of long-term payables – other for the years ended December 31, 2022 and 2021 amounts at |
(In millions of won) | ||||
Amount | ||||
Less than 1 year | ||||
1 ~ 3 years | 738,300 | |||
3 ~ 5 years | 460,538 | |||
More than 5 years | 91,387 | |||
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20. | Provisions |
Changes in provisions for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||||||||||||||||||||||||||||||
2022 | As of December 31, 2022 | |||||||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Business combination | Ending balance | Current | Non-current | ||||||||||||||||||||||||||||
Provision for restoration | 6,823 | (5,679 | ) | (1,767 | ) | (10 | ) | 991 | 115,089 | 36,998 | 78,091 | |||||||||||||||||||||||||
Emission allowance | 1,885 | 2,719 | — | (2,418 | ) | — | — | 2,186 | 2,186 | — | ||||||||||||||||||||||||||
Other provisions | 10,379 | 4,071 | (9,509 | ) | (3,080 | ) | (38 | ) | — | 1,823 | 499 | 1,324 | ||||||||||||||||||||||||
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13,613 | (15,188 | ) | (7,265 | ) | (48 | ) | 991 | 119,098 | 39,683 | 79,415 | ||||||||||||||||||||||||||
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(In millions of won) | ||||||||||||||||||||||||||||||||||||||||
2021 | As of December 31, 2021 | |||||||||||||||||||||||||||||||||||||||
Beginning balance | Increase | Utilization | Reversal | Other | Business combination | Spin-off | Ending balance | Current | Non-current | |||||||||||||||||||||||||||||||
Provision for restoration | 12,648 | (6,283 | ) | (440 | ) | 172 | — | (5,019 | ) | 114,731 | 59,204 | 55,527 | ||||||||||||||||||||||||||||
Emission allowance | 7,424 | 1,368 | (1,091 | ) | (5,816 | ) | — | — | — | 1,885 | 1,885 | — | ||||||||||||||||||||||||||||
Other provisions | 29,800 | 1,655 | (18,909 | ) | (1,820 | ) | — | 385 | (732 | ) | 10,379 | 567 | 9,812 | |||||||||||||||||||||||||||
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15,671 | (26,283 | ) | (8,076 | ) | 172 | 385 | (5,751 | ) | 126,995 | 61,656 | 65,339 | |||||||||||||||||||||||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
21. | Defined Benefit Liabilities (Assets) |
(1) | Details of defined benefit liabilities (assets) as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Present value of defined benefit obligations | 1,035,016 | |||||||
Fair value of plan assets | (1,214,007 | ) | (1,040,286 | ) | ||||
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Defined benefit assets(*) | (175,748 | ) | (18,427 | ) | ||||
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| |||||
Defined benefit liabilities | 61 | 13,157 | ||||||
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(*) | Since the Group entities neither have legally enforceable right nor intention to settle the defined benefit obligations of Group entities with defined benefit assets of other Group entities, defined benefit assets of Group entities have been separately presented from defined benefit liabilities. |
(2) | Principal actuarial assumptions as of December 31, 2022 and 2021 are as follows: |
December 31, 2022 | December 31, 2021 | |||
Discount rate for defined benefit obligations | 5.09% ~ 5.71% | 2.35 ~ 3.29% | ||
Expected rate of salary increase | 2.00% ~ 8.37% | 2.00 ~ 5.29% |
Discount rate for defined benefit obligation is determined based on market yields of high-quality corporate bonds with similar maturities for estimated payment term of defined benefit obligation. Expected rate of salary increase is determined based on the Group’s historical promotion index, inflation rate and salary increase ratio.
(3) | Changes in defined benefit obligations for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) |
| |||||||
2022 | 2021(*1) | |||||||
Beginning balance | 1,278,550 | |||||||
Current service cost | 134,847 | 186,395 | ||||||
Interest cost | 32,572 | 28,617 | ||||||
Remeasurement | ||||||||
- Demographic assumption | (28,222 | ) | (794 | ) | ||||
- Financial assumption | (84,532 | ) | (29,399 | ) | ||||
- Adjustment based on experience | 2,369 | 5,773 | ||||||
Business combinations(*2) | 29,357 | — | ||||||
Benefit paid | (79,117 | ) | (114,897 | ) | ||||
Spin-off | — | (318,476 | ) | |||||
Others(*3) | (3,970 | ) | (753 | ) | ||||
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Ending balance | 1,035,016 | |||||||
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(*1) | Includes amounts related to discontinued operations. |
(*2) | Includes liabilities acquired from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company. |
(*3) | Others include changes of liabilities due to employee’s transfers among affiliates for the years ended December 31, 2022 and 2021. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
21. | Defined Benefit Liabilities (Assets), Continued |
(4) | Changes in plan assets for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*1) | |||||||
Beginning balance | 1,127,163 | |||||||
Interest income | 32,910 | 24,550 | ||||||
Remeasurement | (18,622 | ) | (3,798 | ) | ||||
Contributions | 215,254 | 152,208 | ||||||
Benefit paid | (83,123 | ) | (100,511 | ) | ||||
Business combinations(*2) | 26,618 | — | ||||||
Spin-off | — | (157,522 | ) | |||||
Others | 684 | (1,804 | ) | |||||
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Ending balance | 1,040,286 | |||||||
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(*1) | Includes amounts related to discontinued operations. |
(*2) | Includes assets acquired from the acquisition of SK m&service Co., Ltd. by PS&Marketing Corporation, a subsidiary of the Parent Company. |
The Group expects to contribute191,597 million to the defined benefit plans in 2023.W
(5) | Total cost of benefit plan, which is recognized in profit and loss (included in labor in the statement of income) for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Current service cost | 186,395 | |||||||
Net interest cost | (338 | ) | 4,067 | |||||
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190,462 | ||||||||
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(*) | Includes amounts related to discontinued operations. |
Costs related to the defined benefit except for the amounts transferred to construction in progress are included labor expenses and research and development expenses.
(6) | Details of plan assets as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Equity instruments | 25,083 | |||||||
Debt instruments | 174,385 | 228,534 | ||||||
Short-term financial instruments, etc. | 1,021,906 | 786,669 | ||||||
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1,040,286 | ||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
21. | Defined Benefit Liabilities (Assets), Continued |
(7) | As of December 31, 2022, effects on defined benefit obligations if each of significant actuarial assumptions changes within expectable and reasonable range are as follows: |
(In millions of won) | ||||||||
0.5% Increase | 0.5% Decrease | |||||||
Discount rate | 38,337 | |||||||
Expected salary increase rate | 38,500 | (36,315 | ) |
The sensitivity analysis does not consider dispersion of all cash flows that are expected from the plan and provides approximate values of sensitivity for the assumptions used.
A weighted average duration of defined benefit obligations as of December 31, 2022 and 2021 are 7.53 years and 9.19 years, respectively.
22. | Derivative Instruments |
(1) | Currency and interest rate swap contracts under cash flow hedge accounting as of December 31, 2022 are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||
Borrowing | Hedging Instrument (Hedged item) | Hedged risk | Financial institution | Duration of | ||||
Jul. 20, 2007 | Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000) | Foreign currency risk | Morgan Stanley and four other banks | Jul. 20, 2007 ~ Jul. 20, 2027 | ||||
Apr. 16, 2018 | Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 500,000) | Foreign currency risk | The Export-Import Bank of Korea and three other banks | Apr. 16, 2018 ~ Apr. 16, 2023 | ||||
Mar. 4, 2020 | Floating-to-fixed cross-currency interest rate swap (U.S. dollar-denominated bonds face value of USD 300,000) | Foreign currency risk and Interest rate risk | Citibank | Mar. 4, 2020 ~ Jun. 4, 2025 | ||||
Aug. 13, 2018 | Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 300,000) | Foreign currency risk | Citibank | Aug. 13, 2018 ~ Aug. 13, 2023 | ||||
Dec. 19, 2018 | Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 12,500) | Interest rate risk | Credit Agricole CIB | Mar. 19, 2019 ~ Dec. 14, 2023 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
22. | Derivative Instruments, Continued |
(2) | SK Broadband Co., Ltd., a subsidiary of the Parent Company, entered into Total Return Swap(TRS) contract amounting to |
(3) | In relation to the business acquisition by SK Broadband Co., Ltd. for the year ended December 31, 2020 the Parent Company has entered into a shareholders’ agreement with the shareholders of the acquirees. Pursuant to the agreement, when certain conditions are met within a period of time subsequent to the merger, the shareholders of the acquirees can exercise their drag-along rights and require the Parent Company to sell its shares in SK Broadband Co., Ltd. Should the shareholders exercise their drag-along rights, the Parent Company also can exercise its call options over the shares held by those shareholders. The Group recognized a long-term derivative financial liability of |
The fair value of SK Broadband Co., Ltd.’s common stock was estimated using 5-year projected cash flows discounted at 6.7% per annum. The fair value of the derivative financial liability was determined by using the Binomial Model based on various assumptions including the price of common stock and its price fluctuations. The significant unobservable inputs used in the fair value measurement and inter-relationship between significant unobservable inputs and fair value measurement are as follows:
Significant unobservable inputs | Correlations between inputs and fair value measurements | |
Fair value of SK Broadband Co., Ltd.’s common stock | The estimated fair value of derivative financial liabilities would decrease (increase) if the fair value of common stock would increase (decrease) | |
Volatility of stock price | The estimated fair value of derivative financial liabilities would decrease (increase) if the volatility of stock price increase (decrease) |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
22. | Derivative Instruments, Continued |
(4) | The Group has entered into the agreement with Newberry Global Limited, whereby the Group has been granted subscription right and contingent subscription right to acquire Newberry series-C redeemable convertible preferred stock for the year ended December 31, 2020. The Group recognized derivative financial assets of |
The fair value of Newberry series-C redeemable convertible preferred stock (“RCPS”) was estimated using the fair value of Newberry Global Limited’s common stock which was estimated by using market approach and its price fluctuations. The fair value of derivative financial asset was determined by using the Binomial Model based on various assumptions including the price of RCPS and its price fluctuations. Meanwhile, if the fair value of RCPS, significant unobservable input used in the fair value measurement, increases (decreases), the estimated fair value of derivative financial asset would increase (decrease). If the volatility of stock price, significant unobservable input used in the fair value measurement, increases (decrease), the estimated fair value of derivative financial asset would increase (decrease).
(5) | The Parent Company has entered into the agreement with HAEGIN Co., Ltd., whereby the Parent Company has been granted contingent subscription right to acquire HAEGIN Co., Ltd.’s common stock for the year ended December 31, 2022. The Parent Company is able to exercise the right in accordance with the agreement when certain conditions are met and recognized long-term derivative financial assets of |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
22. | Derivative Instruments, Continued |
(6) | The fair value of derivative financial instruments to which the Group applies cash flow hedge is recorded in the consolidated financial statements as derivative financial assets, long-term derivative financial assets. As of December 31, 2022, details of fair values of the derivatives assets and liabilities are as follows: |
(In millions of won and thousands of U.S. dollars) | ||||||||
Hedging instrument (Hedged item) | Cash flow hedge | Fair value | ||||||
Current assets: | ||||||||
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 300,000) | 44,365 | |||||||
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 500,000) | 102,780 | 102,780 | ||||||
Floating-to-fixed interest rate swap (Korean won borrowing amounting to KRW 12,500) | 164 | 164 | ||||||
Non-current assets: | ||||||||
Fixed-to-fixed cross currency swap (U.S dollar denominated bonds face value of USD 400,000) | 82,735 | |||||||
Floating-to-fixed cross currency interest rate swap (U.S dollar denominated bonds face value of USD 300,000) | 37,107 | 37,107 | ||||||
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267,151 | ||||||||
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(7) | The fair value of derivatives held for trading is recorded in the consolidated financial statements as derivative financial assets, long-term derivative financial assets and long-term derivative financial liabilities. As of December 31, 2022, details of fair values of the derivative assets and liabilities are as follows: |
(In millions of won) | ||||||||
Held for trading | Fair value | |||||||
Current assets: | ||||||||
Contingent subscription right | 8,083 | |||||||
Subscription right | 13,135 | 13,135 | ||||||
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21,218 | 21,218 | |||||||
Non-current assets: | ||||||||
Contingent subscription right | 6,895 | 6,895 | ||||||
Total return swap | 25,896 | 25,896 | ||||||
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32,791 | 32,791 | |||||||
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54,009 | ||||||||
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Non-current liabilities: | ||||||||
Drag-along and call option rights | (302,593 | ) |
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Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
23. | Share Capital and Capital Surplus and Others |
(1) | Details of share capital as of December 31, 2022 and 2021 are as follows: |
(In millions of won, except for share data) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Number of authorized shares(*1) | 670,000,000 | 670,000,000 | ||||||
Par value (in won)(*1) | 100 | 100 | ||||||
Number of issued shares | 218,833,144 | 218,833,144 | ||||||
Share capital: | ||||||||
Common share(*2) | 30,493 |
(*1) | As a result of stock split and the spin-off for the year ended December 31, 2021, the number of shares that the Parent Company is allowed to issue under its article of incorporation has changed from 220,000,000 shares with a par value of |
(*2) | The Parent Company’s share capital decreased by |
(2) | Changes in issued shares for the years ended December 31, 2022 and 2021 are as follows: |
(In shares) | ||||||||
2022 | 2021 | |||||||
Issued shares as of January 1 | 218,833,144 | 80,745,711 | ||||||
Retirement of treasury shares(*1) | — | (8,685,568 | ) | |||||
Stock split(*2) | — | 288,240,572 | ||||||
Spin-off(*3) | — | (141,467,571 | ) | |||||
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Issued shares as of December 31 | 218,833,144 | 218,833,144 | ||||||
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(*1) | The Parent Company retired 8,685,568 treasury shares with reduction of its retained earnings before appropriation for the year ended December 31, 2021. |
(*2) | The stock split of the Parent Company’s common share was approved at the shareholders’ meeting held on October 12, 2021, to increase the number of its outstanding shares, effective from October 28, 2021. The par value of issued shares has changed from |
(*3) | The allocation of new shares to shareholders of the spin-off company is based on the number of shares at par value of |
Surviving Company | Spin-off Company | |||
Company name | SK Telecom Co., Ltd. | SK Square Co., Ltd. | ||
Common shares (in the number of shares) | 0.6073625 | 0.3926375 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
23. | Share Capital and Capital Surplus and Others, Continued |
(3) | Details of shares outstanding as of December 31, 2022 and 2021 are as follows: |
(In shares) | December 31, 2022 | December 31, 2021 | ||||||||||||||||||||||
Issued shares | Treasury shares | Outstanding shares | Issued shares | Treasury shares | Outstanding shares | |||||||||||||||||||
Shares outstanding | 218,833,144 | 801,091 | 218,032,053 | 218,833,144 | 1,250,992 | 217,582,152 |
(4) | Details of capital surplus and others as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Paid-in surplus | 1,771,000 | |||||||
Treasury shares (Note 24) | (36,702 | ) | (57,314 | ) | ||||
Hybrid bonds (Note 25) | 398,759 | 398,759 | ||||||
Share option (Note 26) | 2,061 | 47,166 | ||||||
Others (*) | (13,702,235 | ) | (13,783,337 | ) | ||||
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(11,623,726 | ) | |||||||
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(*) | Others primarily consist of the excess of the consideration paid by the Group over the carrying amount of net assets acquired from entities under common control. |
24. | Treasury Shares |
(1) | Treasury shares as of December 31, 2022 and 2021 are as follows: |
(In millions of won, except for the number of shares) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Number of shares | 801,091 | 1,250,992 | ||||||
Acquisition cost | 57,314 |
(2) | Changes in treasury shares for the years ended December 31, 2022 and 2021 are as follows: |
(In shares) | ||||||||
2022 | 2021 | |||||||
Treasury shares as of January 1 | 1,250,992 | 9,418,558 | ||||||
Acquisition (*1) | — | 288,000 | ||||||
Disposal (*2) | — | (626,740 | ) | |||||
Retirement of treasury shares (*3) | — | (8,685,568 | ) | |||||
Stock split (*4) | — | 1,577,000 | ||||||
Spin-off (*5) | — | (719,955 | ) | |||||
Disposal (*6) | (449,901 | ) | (303 | ) | ||||
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Treasury shares as of December 31 | 801,091 | 1,250,992 | ||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
24. | Treasury Shares, Continued |
(2) | Changes in treasury shares for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*1) | The Parent Company acquired 288,000 of its treasury shares for |
(*2) | The Parent Company distributed 626,240 treasury shares (acquisition cost: |
(*3) | The Parent Company retired 8,685,568 treasury shares with reduction of its retained earnings before appropriation, as a result, the Parent Company’s issued shares have decreased without change in share capital for the year ended December 31, 2021. |
(*4) | The stock split of the Parent Company’s common stock was approved at the shareholders’ meeting held on October 12, 2021, to increase the number of its outstanding shares, effective from October 28, 2021. |
(*5) | 773,987 treasury shares, some of treasury shares held by the Parent Company, have been replaced common shares of SK Square Co., Ltd., spin-off company, due to spin-off for the year ended December 31, 2021. Meanwhile, the Parent Company acquired 54,032 of its treasury shares (acquisition cost: |
(*6) | The Parent Company distributed 303 treasury shares (acquisition cost: |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
25. | Hybrid Bonds |
Hybrid bonds classified as equity as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||||||||||||||||
Type | Issuance date | Maturity (*1) | Annual interest rate(%)(*2) | December 31, 2022 | December 31, 2021 | |||||||||||||||||
Series 2-1 hybrid bonds | Unsecured subordinated bearer bond | June 7, 2018 | June 7, 2078 | 3.70 | 300,000 | |||||||||||||||||
Series 2-2 hybrid bonds | Unsecured subordinated bearer bond | June 7, 2018 | June 7, 2078 | 3.65 | 100,000 | 100,000 | ||||||||||||||||
Issuance costs | (1,241 | ) | (1,241 | ) | ||||||||||||||||||
|
|
|
| |||||||||||||||||||
398,759 | ||||||||||||||||||||||
|
|
|
|
As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Parent Company classified the hybrid bonds as equity.
These are subordinated bonds which rank before common shares in the event of a liquidation or reorganization of the Parent Company.
(*1) | The Parent Company has a right to extend the maturity without any notice or announcement. |
(*2) | Annual interest rate is determined as yield rate of 5-year national bond plus premium. According to the step-up clause, additional premium of 0.25% and 0.75%, respectively, after 10 years and 25 years from the issuance date are applied. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
26. Share based payment arrangement
(1) | The terms and conditions related to the grants of the share-based payment arrangement are as follows: |
1) | Share-based payment arrangement with cash alternatives |
Series | ||||||||||||||||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5(*2) | 6(*2) | ||||||||||||||||||||||
Grant date | March 24, 2017 | | February 20, 2018 | | | February 22, 2019 | | | March 26, 2019 |
| | March 26, 2020 |
| | March 25, 2021 |
| ||||||||||||
Types of shares to be issued | Registered common shares | |||||||||||||||||||||||||||
Grant method | Reissue of treasury shares, Cash settlement | |||||||||||||||||||||||||||
Number of shares (*1) (in share) | 67,320 | 67,320 | 4,124 | 8,907 | 5,266 | 376,313 | 87,794 | |||||||||||||||||||||
Exercise price (*1) (in won) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||||||||||||||||
Exercise period | | Mar. 25, 2020 ~ Mar. 24, 2023 | | | Mar. 25, 2021 ~ Mar. 24, 2024 | | | Feb. 21, 2020 ~ Feb. 20, 2023 | | | Feb. 23, 2021 ~ Feb. 22, 2024 | | | Mar. 27, 2021 ~ Mar. 26, 2024 | | | Mar. 27, 2023 ~ Mar. 26, 2027 | | | Mar. 26, 2023 ~ Mar. 25, 2026 | | |||||||
Vesting conditions | | 3 years’ service from the grant date | | | 4 years’ service from the grant date | | | 2 years’ service from the grant date | | | 2 years’ service from the grant date | | | 2 years’ service from the grant date | | | 3 years’ service from the grant date |
| | 2 years’ service from the grant date |
|
Series | ||||||
7-1 | 7-2(*2) | |||||
Grant date | March 25, 2022 | |||||
Types of shares to be issued | Registered common shares | |||||
Grant method | Reissue of treasury shares, Cash settlement |
| ||||
Number of shares (in share) | 295,275 | 109,704 | ||||
Exercise price (in won) | 56,860 | 56,860 | ||||
Exercise period | Mar. 26, 2025 ~ Mar. 25, 2029 | Mar. 26, 2024 ~ Mar. 25, 2027 | ||||
Vesting conditions | 2 years’ service from the grant date | 2 years’ service from the grant date |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
26. | Share based payment arrangement, Continued |
(1) | The terms and conditions related to the grants of the share-based payment arrangement are as follows, Continued: |
2) | Cash-settled share-based payment arrangement |
2021 | 2022 | |||||
Share appreciation rights of SK Telecom Co., Ltd. (*3) | Share appreciation rights of SK Square Co., Ltd. (*3) | Share appreciation rights of SK Telecom Co., Ltd. (*3) | ||||
Grant date | January 1, 2021 | January 1, 2022 | ||||
Grant method | Cash settlement | |||||
Number of shares (*1) (in share) | 183,246 | 118,456 | 338,525 | |||
Exercise price (*1) (in won) | 50,276 | 56,860 | ||||
Exercise period | Jan. 1, 2023 ~ Mar. 28, 2024 | Jan. 1, 2024 ~ Mar. 25, 2025 | ||||
Vesting conditions | 2 years’ service from the grant date | 2 years’ service from the grant date |
(*1) | Number of shares granted and exercise price are adjusted as a result of stock split and the spin-off for the year ended December 31, 2021, and the remaining part of 1-1st share option and 3rd share option were fully and partially exercised for the year ended December 31, 2022, respectively. |
(*2) | Parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2022 and 2021. |
(*3) | The Parent Company newly established the long-term incentive policy as part of the compensation related to the growth of corporate value and granted cash settled share appreciation rights to executives. Meanwhile, parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2022. |
(2) | The Parent Company has changed the accounting treatment for share-based payment arrangements with cash alternatives from equity-settled share-based payment arrangements to cash-settled share-based payment arrangements for the year ended December 31, 2022. The fair value of the goods or services that the Parent Company acquired from its employees and the liability incurred at the date of reclassification is |
(In millions of won) | ||||
Share compensation expense | ||||
As of December 31, 2021 | ||||
For the year ended December 31, 2022 | 78,600 | |||
In subsequent periods | 40 | |||
|
| |||
|
|
The carrying amount of liabilities recognized by the Parent Company in relation to the cash-settled share-based payment arrangement is906 million andW1,774 million as of December 31, 2022 and 2021, respectively.W
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
26. | Share based payment arrangement, Continued |
(3) | The Parent Company used binomial option pricing model in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows: |
1) | Share-based payment arrangement with cash alternatives |
(i) SK Telecom Co., Ltd.
(In won) | Series | |||||||||||||||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | ||||||||||||||||||||||
Risk-free interest rate | 3.67 | % | 3.70 | % | 3.65 | % | 3.70 | % | 3.70 | % | 3.76 | % | 3.74 | % | ||||||||||||||
Estimated option’s life | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | 5 years | |||||||||||||||||||||
Share price on the remeasurement date | 47,400 | 47,400 | 47,400 | 47,400 | 47,400 | 47,400 | 47,400 | |||||||||||||||||||||
Expected volatility | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | 20.80 | % | ||||||||||||||
Expected dividends | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | 6.90 | % | ||||||||||||||
Exercise price(*) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||||||||||||||||
Per-share fair value of the option(*) | 250 | 947 | 357 | 1,639 | 2,289 | 9,628 | 3,837 |
Series | ||||||||
(In won) | 7-1 | 7-2 | ||||||
Risk-free interest rate | 3.75 | % | 3.76 | % | ||||
Estimated option’s life | 7 years | 5 years | ||||||
Share price on the remeasurement date | 47,400 | 47,400 | ||||||
Expected volatility | 20.80 | % | 20.80 | % | ||||
Expected dividends | 6.90 | % | 6.90 | % | ||||
Exercise price | 56,860 | 56,860 | ||||||
Per-share fair value of the option | 3,153 | 2,693 |
(ii) SK Square Co., Ltd.
(In won) | Series | |||||||||||||||||||||||||||
1-2 | 1-3 | 2 | 3 | 4 | 5 | 6 | ||||||||||||||||||||||
Risk-free interest rate | 1.95 | % | 2.07 | % | 2.63 | % | 1.91 | % | 1.78 | % | 1.52 | % | 1.55 | % | ||||||||||||||
Estimated option’s life | 6 years | 7 years | 5 years | 5 years | 5 years | 7 years | 5 years | |||||||||||||||||||||
Share price (Closing price on the preceding day)(*) | 52,500 | 52,500 | 48,700 | 51,800 | 50,600 | 34,900 | 49,800 | |||||||||||||||||||||
Expected volatility | 13.38 | % | 13.38 | % | 16.45 | % | 8.30 | % | 7.70 | % | 8.10 | % | 25.70 | % | ||||||||||||||
Expected dividends | 3.80 | % | 3.80 | % | 3.70 | % | 3.80 | % | 3.90 | % | 5.70 | % | 4.00 | % | ||||||||||||||
Exercise price(*) | 53,298 | 57,562 | 50,824 | 53,052 | 50,862 | 38,452 | 50,276 | |||||||||||||||||||||
Per-share fair value of the option(*) | 4,048 | 3,096 | 4,798 | 1,720 | 1,622 | 192 | 8,142 |
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
26. | Share based payment arrangement, Continued |
(3) | The Parent Company used binomial option pricing model in the measurement of the fair value of the share options at grant date and the inputs used in the model are as follows, Continued: |
2) | Cash-settled share-based payment arrangement |
2021 | 2022 | |||||||||||
(In won) | Share appreciation rights of SK Telecom Co., Ltd. | Share appreciation rights of SK Square Co., Ltd. | Share appreciation rights of SK Telecom Co., Ltd. | |||||||||
Risk-free interest rate | 3.70 | % | 3.70 | % | 3.72 | % | ||||||
Estimated option’s life | 3.25 years | 3.25 years | 3.25 years | |||||||||
Share price on the remeasurement date | 47,400 | 33,550 | 47,400 | |||||||||
Expected volatility | 20.80 | % | 37.40 | % | 20.80 | % | ||||||
Expected dividends | 6.90 | % | 0.00 | % | 6.90 | % | ||||||
Exercise price(*) | 50,276 | 50,276 | 56,860 | |||||||||
Per-share fair value of the option | 2,308 | 1,760 | 1,625 |
(*) | Share price (closing price on the preceding day), exercise price and per-share fair value of the option are adjusted as a result of stock split and spin-off for the year ended December 31, 2021. |
Meanwhile, the Board of Directors of the Parent Company resolved to dispose its treasury shares for the purpose of allotment of shares as bonus payment on October 12, 2021. The transaction is equity-settled share-based payment transactions in accordance with KIFRS 1102 and 505,350 shares (before stock split) were granted on October 12, 2021 (i.e., grant date). 7,700 shares (before stock split) out of 505,350 shares (before stock split) were transferred to spin-off company on November 1, 2021. Vesting conditions are 6 months from the grant date and per-share fair value on the grant date are measured at300,500 that is closing price of common shares on the grant date before stock split and spin-off. The fair value of these share-based payment on the grant date isW151,858 million, among which the awards with a fair value ofW9,935 million were transferred to spin-off company.W
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
27. | Retained Earnings |
(1) | Retained earnings as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Appropriated: | ||||||||
Legal reserve | 22,320 | |||||||
Reserve for business expansion | 9,631,138 | 11,631,138 | ||||||
Reserve for technology development | 4,365,300 | 4,365,300 | ||||||
|
|
|
| |||||
13,996,438 | 15,996,438 | |||||||
Unappropriated | 8,444,953 | 6,418,583 | ||||||
|
|
|
| |||||
22,437,341 | ||||||||
|
|
|
|
(2) | Legal reserve |
The Korean Commercial Act requires the Parent Company to appropriate as a legal reserve at least 10% of cash dividends paid for each accounting period until the reserve equals 50% of outstanding share capital. The legal reserve may not be utilized for cash dividends, but may only be used to offset a future deficit, if any, or may be transferred to share capital.
28. | Reserves |
(1) | Details of reserves, net of taxes, as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Valuation gain on FVOCI | 633,240 | |||||||
Other comprehensive gain of investments in associates and joint ventures | 173,477 | 53,770 | ||||||
Valuation gain on derivatives | 14,463 | 33,918 | ||||||
Foreign currency translation differences for foreign operations | 30,012 | 14,310 | ||||||
|
|
|
| |||||
735,238 | ||||||||
|
|
|
|
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
28. | Reserves, Continued |
(2) | Changes in reserves for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
Valuation gain (loss) on financial assets at FVOCI | Other comprehensive income (loss) of investments in associates and joint ventures | Valuation gain (loss) on derivatives | Foreign currency translation differences for foreign operations | Total | ||||||||||||||||
Balance as of January 1, 2021 | (392,333 | ) | 17,615 | (24,122 | ) | 40,139 | ||||||||||||||
Changes, net of taxes | 194,261 | 446,103 | 16,303 | 38,432 | 695,099 | |||||||||||||||
Balance as of December 31, 2021 | 53,770 | 33,918 | 14,310 | 735,238 | ||||||||||||||||
Changes, net of taxes | (459,959 | ) | 119,707 | (19,455 | ) | 15,702 | (344,005 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balance as of December 31, 2022 | 173,477 | 14,463 | 30,012 | 391,233 | ||||||||||||||||
|
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|
|
|
|
|
|
|
|
(3) | Changes in valuation gain (loss) on financial assets at FVOCI for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Balance as of January 1 | 438,979 | |||||||
Amount recognized as other comprehensive income for the year, net of taxes | (490,959 | ) | 627,833 | |||||
Amount reclassified to retained earnings, net of taxes | 31,000 | (12,429 | ) | |||||
Changes from spin-off, net of taxes | — | (421,143 | ) | |||||
|
|
|
| |||||
Balance as of December 31 | 633,240 | |||||||
|
|
|
|
(4) | Changes in valuation gain (loss) on derivatives for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Balance as of January 1 | 17,615 | |||||||
Amount recognized as other comprehensive income for the year, net of taxes | (25,630 | ) | 9,731 | |||||
Amount reclassified to profit, net of taxes | 6,175 | 6,572 | ||||||
|
|
|
| |||||
Balance as of December 31 | 33,918 | |||||||
|
|
|
|
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
29. | Other Operating Expenses |
Details of other operating expenses for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Communication | 32,462 | |||||||
Utilities | 401,025 | 350,678 | ||||||
Taxes and dues | 49,445 | 33,935 | ||||||
Repair | 435,572 | 425,606 | ||||||
Research and development | 340,864 | 347,711 | ||||||
Training | 39,632 | 31,761 | ||||||
Bad debt for accounts receivable - trade | 27,053 | 29,402 | ||||||
Travel | 15,684 | 7,813 | ||||||
Supplies and other | 113,839 | 101,656 | ||||||
|
|
|
| |||||
1,361,024 | ||||||||
|
|
|
|
30. | Other Non-Operating Income and Expenses |
Details of other non-operating income and expenses for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Other Non-operating Income: | ||||||||
Gain on disposal of property and equipment and intangible assets | 39,136 | |||||||
Others | 39,913 | 75,417 | ||||||
|
|
|
| |||||
114,553 | ||||||||
|
|
|
| |||||
Other Non-operating Expenses: | ||||||||
Impairment loss on property and equipment and intangible assets | 3,135 | |||||||
Loss on disposal of property and equipment and intangible assets | 20,465 | 28,158 | ||||||
Donations | 13,125 | 12,800 | ||||||
Bad debt for accounts receivable – other | 3,011 | 3,995 | ||||||
Others | 19,992 | 21,265 | ||||||
|
|
|
| |||||
69,353 | ||||||||
|
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|
|
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
31. | Finance Income and Costs |
(1) | Details of finance income and costs for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Finance Income: | ||||||||
Interest income | 36,708 | |||||||
Gain on sale of accounts receivable – other | 1,043 | 27,725 | ||||||
Dividends | 2,552 | 12,039 | ||||||
Gain on foreign currency transactions | 21,283 | 10,987 | ||||||
Gain on foreign currency translations | 2,095 | 7,505 | ||||||
Gain relating to financial instruments at FVTPL | 94,393 | 60,169 | ||||||
|
|
|
| |||||
155,133 | ||||||||
|
|
|
|
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Finance Costs: | ||||||||
Interest expense | 279,737 | |||||||
Loss on sale of accounts receivable – other | 61,841 | — | ||||||
Loss on foreign currency transactions | 19,485 | 12,270 | ||||||
Loss on foreign currency translations | 3,814 | 6,764 | ||||||
Loss relating to financial instruments at FVTPL | 41,597 | 16,833 | ||||||
Loss on disposal of investment assets | 1,283 | — | ||||||
|
|
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| |||||
315,604 | ||||||||
|
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|
|
(2) | Details of interest income included in finance income for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Interest income on cash equivalents and financial instruments | 16,141 | |||||||
Interest income on loans and others | 30,481 | 27,709 | ||||||
|
|
|
| |||||
43,850 | ||||||||
|
|
|
|
(*) | Includes amounts related to discontinued operations. |
(3) | Details of interest expenses included in finance costs for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Interest expense on borrowings | 66,188 | |||||||
Interest expense on debentures | 217,475 | 224,144 | ||||||
Others | 85,096 | 52,010 | ||||||
|
|
|
| |||||
342,342 | ||||||||
|
|
|
|
(*) | Includes amounts related to discontinued operations. |
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
31. | Finance Income and Costs, Continued |
(4) | Finance income and costs by category of financial instruments for the years ended December 31, 2022 and 2021 are as follows. Bad debt expense (reversal of loss allowance) for accounts receivable – trade, loans and receivables are presented and explained separately in notes 6 and 36. |
1) | Finance income and costs |
(In millions of won) | ||||||||
2022 | ||||||||
Finance income | Finance costs | |||||||
Financial Assets: | ||||||||
Financial assets at FVTPL | 103,292 | |||||||
Financial assets at FVOCI | 1,495 | 1,283 | ||||||
Financial assets at amortized cost | 45,008 | 23,094 | ||||||
Derivatives designated as hedging instrument | — | 146 | ||||||
|
|
|
| |||||
150,571 | 127,815 | |||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Financial liabilities at FVTPL | 18,432 | — | ||||||
Financial liabilities at amortized cost | 10,835 | 328,512 | ||||||
|
|
|
| |||||
29,267 | 328,512 | |||||||
|
|
|
| |||||
456,327 | ||||||||
|
|
|
|
(In millions of won) | ||||||||
2021 | ||||||||
Finance income(*) | Finance costs(*) | |||||||
Financial Assets: | ||||||||
Financial assets at FVTPL | 67,503 | |||||||
Financial assets at FVOCI | 3,413 | 142,015 | ||||||
Financial assets at amortized cost | 48,940 | 12,262 | ||||||
Derivatives designated as hedging instrument | — | 600 | ||||||
|
|
|
| |||||
201,943 | 222,380 | |||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Financial liabilities at FVTPL | — | 8,036 | ||||||
Financial liabilities at amortized cost | 607 | 355,011 | ||||||
|
|
|
| |||||
607 | 363,047 | |||||||
|
|
|
| |||||
585,427 | ||||||||
|
|
|
|
(*) | Includes amounts related to discontinued operations. |
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
31. | Finance Income and Costs, Continued |
(4) | Finance income and costs by category of financial instruments for the years ended December 31, 2022 and 2021 are as follows. Bad debt expense (reversal of loss allowance) for accounts receivable – trade, loans and receivables are presented and explained separately in notes 6 and 36, Continued. |
2) | Other comprehensive income (loss) |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Financial Assets: | ||||||||
Financial assets at FVOCI | 920,871 | |||||||
Derivatives designated as hedging instrument | (21,548 | ) | 15,427 | |||||
|
|
|
| |||||
(513,401 | ) | 936,298 | ||||||
|
|
|
| |||||
Financial Liabilities: | ||||||||
Derivatives designated as hedging instrument | 182 | 706 | ||||||
|
|
|
| |||||
937,004 | ||||||||
|
|
|
|
(5) | Details of impairment losses for financial assets for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Accounts receivable – trade | 31,546 | |||||||
Other receivables | 3,011 | 6,001 | ||||||
|
|
|
| |||||
37,547 | ||||||||
|
|
|
|
(*) | Includes amounts related to discontinued operations. |
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
32. | Income Tax Expense |
(1) | Income tax expenses for the years ended December 31, 2022 and 2021 consist of the following: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Current tax expense: | ||||||||
Current year | 319,539 | |||||||
Current tax of prior years | 73,477 | 705 | ||||||
|
|
|
| |||||
348,379 | 320,244 | |||||||
|
|
|
| |||||
Deferred tax expense: | ||||||||
Changes in net deferred tax assets | (60,058 | ) | 331,704 | |||||
|
|
|
| |||||
Income tax expense: | ||||||||
Tax expense of continuing operation | 288,321 | 446,796 | ||||||
Tax expense of discontinued operation | — | 205,152 | ||||||
|
|
|
| |||||
651,948 | ||||||||
|
|
|
|
(2) | The difference between income taxes computed using the statutory corporate income tax rates and the recorded income taxes for the years ended December 31, 2022 and 2021 is attributable to the following: |
(In millions of won) | ||||||||
2022 | 2021(*) | |||||||
Income taxes at statutory income tax rate | 834,146 | |||||||
Non-taxable income | (14,969 | ) | (13,924 | ) | ||||
Non-deductible expenses | 24,679 | 15,329 | ||||||
Tax credit and tax reduction | (10,300 | ) | (62,075 | ) | ||||
Changes in unrecognized deferred taxes | 21,057 | (68,589 | ) | |||||
Changes in tax rate | (42,307 | ) | (36,193 | ) | ||||
Income tax refund and others | (19,419 | ) | (16,746 | ) | ||||
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| |||||
Income tax expense | 651,948 | |||||||
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(*) | The aggregated amount of profit before income tax from continuing and discontinued operations. |
104
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
32. | Income Tax Expense, Continued |
(3) | Deferred taxes directly charged to (credited from) equity for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Valuation gain (loss) on financial assets measured at fair value | (208,490 | ) | ||||||
Share of other comprehensive loss of investment in associates and joint ventures | (2,972 | ) | (34 | ) | ||||
Valuation gain (loss) on derivatives | 7,649 | (5,709 | ) | |||||
Remeasurement of defined benefit liabilities | (20,867 | ) | (3,780 | ) | ||||
Gain (loss) on disposal of treasury shares and others | (28,108 | ) | 26,970 | |||||
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(191,043 | ) | |||||||
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(4) | Details of the changes in deferred tax assets (liabilities) for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
2022 | ||||||||||||||||||||
Beginning | Deferred tax expense (income) | Directly charged to (credited from) equity | Business combinations | Ending | ||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences: | ||||||||||||||||||||
Loss allowance | (2,315 | ) | — | — | 75,042 | |||||||||||||||
Accrued interest income | (166 | ) | (5,057 | ) | — | (2,680 | ) | (7,903 | ) | |||||||||||
Financial assets measured at fair value | (157,828 | ) | (19,592 | ) | 167,249 | — | (10,171 | ) | ||||||||||||
Investments in subsidiaries, associates and joint ventures | (31,817 | ) | 51,635 | (2,972 | ) | — | 16,846 | |||||||||||||
Property and equipment and intangible assets | (305,967 | ) | (46,895 | ) | — | 257 | (352,605 | ) | ||||||||||||
Provisions | 4,198 | (2,569 | ) | — | — | 1,629 | ||||||||||||||
Retirement benefit obligation | 52,332 | (875 | ) | (20,867 | ) | 29 | 30,619 | |||||||||||||
Valuation gain on derivatives | 6,336 | (1,217 | ) | 7,649 | — | 12,768 | ||||||||||||||
Gain (loss) on foreign currency translation | 21,378 | (745 | ) | — | — | 20,633 | ||||||||||||||
Incremental costs to acquire a contract | (749,871 | ) | 26,971 | — | — | (722,900 | ) | |||||||||||||
Contract assets and liabilities | (2,201 | ) | 6,480 | — | — | 4,279 | ||||||||||||||
Right-of-use assets | (389,502 | ) | (41,895 | ) | — | — | (431,397 | ) | ||||||||||||
Lease liabilities | 381,537 | 47,111 | — | — | 428,648 | |||||||||||||||
Others | 68,481 | 41,691 | (28,108 | ) | 3,652 | 85,716 | ||||||||||||||
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(1,025,733) | 52,728 | 122,951 | 1,258 | (848,796) | ||||||||||||||||
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Deferred tax assets related to unused tax loss carryforwards and tax credit carryforwards: | ||||||||||||||||||||
Tax loss carryforwards | — | 2,007 | — | — | 2,007 | |||||||||||||||
Tax credit | 84,560 | 5,323 | — | — | 89,883 | |||||||||||||||
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84,560 | 7,330 | — | — | 91,890 | ||||||||||||||||
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60,058 | 122,951 | 1,258 | (756,906 | ) | ||||||||||||||||
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105
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
32. | Income Tax Expense, Continued |
(4) | Details of the changes in deferred tax assets (liabilities) for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||
Beginning | Deferred tax expense (income) | Directly charged to (credited from) equity | Business combinations | Spin-off | Ending | |||||||||||||||||||
Deferred tax assets (liabilities) related to temporary differences: | ||||||||||||||||||||||||
Loss allowance | (8,397 | ) | — | — | (5,531 | ) | 77,357 | |||||||||||||||||
Accrued interest income | (1,631 | ) | (2,022 | ) | — | — | 3,487 | (166 | ) | |||||||||||||||
Financial assets measured at fair value | (81,055 | ) | (6,765 | ) | (208,490 | ) | — | 138,482 | (157,828 | ) | ||||||||||||||
Investments in subsidiaries, associates and joint ventures | (1,673,906 | ) | (281,035 | ) | (34 | ) | — | 1,923,158 | (31,817 | ) | ||||||||||||||
Property and equipment and intangible assets | (511,862 | ) | (42,456 | ) | — | (1,023 | ) | 249,374 | (305,967 | ) | ||||||||||||||
Provisions | 6,294 | (1,436 | ) | — | — | (660 | ) | 4,198 | ||||||||||||||||
Retirement benefit obligation | 102,285 | (3,563 | ) | (3,780 | ) | — | (42,610 | ) | 52,332 | |||||||||||||||
Valuation gain (loss) on derivatives | 14,767 | 210 | (5,709 | ) | — | (2,932 | ) | 6,336 | ||||||||||||||||
Gain (loss) on foreign currency translation | 21,774 | (396 | ) | — | — | — | 21,378 | |||||||||||||||||
Incremental costs to acquire a contract | (807,831 | ) | 53,492 | — | — | 4,468 | (749,871 | ) | ||||||||||||||||
Contract assets and liabilities | (2,606 | ) | 405 | — | — | — | (2,201 | ) | ||||||||||||||||
Right-of-use assets | (372,297 | ) | (35,851 | ) | — | — | 18,646 | (389,502 | ) | |||||||||||||||
Lease liabilities | 362,476 | 38,600 | — | — | (19,539 | ) | 381,537 | |||||||||||||||||
Others | 120,514 | (95,537 | ) | 26,970 | (135 | ) | 16,669 | 68,481 | ||||||||||||||||
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(2,731,793 | ) | (384,751 | ) | (191,043 | ) | (1,158 | ) | 2,283,012 | (1,025,733 | ) | ||||||||||||||
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Deferred tax assets related to unused tax loss carryforwards and tax credit carryforwards: | ||||||||||||||||||||||||
Tax loss carryforwards | 88,223 | 7,915 | — | — | (96,138 | ) | — | |||||||||||||||||
Tax credit | 39,583 | 45,132 | — | — | (155 | ) | 84,560 | |||||||||||||||||
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127,806 | 53,047 | — | — | (96,293 | ) | 84,560 | ||||||||||||||||||
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(331,704 | ) | (191,043 | ) | (1,158 | ) | 2,186,719 | (941,173 | ) | ||||||||||||||||
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(5) | Details of temporary differences, unused tax loss carryforwards and unused tax credits carryforwards which are not recognized as deferred tax assets (liabilities), in the consolidated statements of financial position as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Loss allowance | 85,998 | |||||||
Investments in subsidiaries, associates and joint ventures | (434,253 | ) | (176,520 | ) | ||||
Other temporary differences | 61,817 | 61,368 | ||||||
Unused tax loss carryforwards | 229,410 | 347,889 | ||||||
Unused tax credit carryforwards | — | 34 |
106
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
32. | Income Tax Expense, Continued |
The amount of unused tax loss carryforwards which are not recognized as deferred tax assets as of December 31, 2022 are expiring within the following periods:
(In millions of won) | ||||
Unused tax loss carryforwards | ||||
Less than 1 year | ||||
1 ~ 2 years | 11,544 | |||
2 ~ 3 years | 14,345 | |||
More than 3 years | 203,521 | |||
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33. | Earnings per Share |
Earnings per share is calculated as the profit attributable to the owners of the parent company for common stock and dilutive potential common stock, and details are as follows.
(1) | Basic earnings per share |
1) Basic earnings per share for the years ended December 31, 2022 and 2021 are calculated as follows:
(In millions of won, except for share data) | ||||||||
2022 | 2021 | |||||||
Basic earnings per share attributable to owners of the Parent Company: |
| |||||||
Profit attributable to owners of the Parent Company | 1,217,520 | |||||||
Interest on hybrid bonds | (14,766 | ) | (14,766 | ) | ||||
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| |||||
Profit from continuing operation attributable to owners of the Parent Company on common shares | 897,634 | 1,202,754 | ||||||
Profit from discontinued operation attributable to owners of the Parent Company on common shares | — | 1,190,003 | ||||||
Weighted average number of common shares outstanding | 217,994,490 | 332,761,592 | ||||||
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| |||||
Basic earnings per share (in won) | ||||||||
Continuing operation | 3,614 | |||||||
Discontinued operation | — | 3,576 | ||||||
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107
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
33. | Earnings per Share, Continued |
(1) | Basic earnings per share, Continued |
2) | The weighted average number of common shares outstanding for the years ended December 31, 2022 and 2021 are calculated as follows: |
(In shares) | 2022 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares as of January 1, 2022 | 218,833,144 | 218,833,144 | ||||||
Treasury shares as of January 1, 2022 | (1,250,992 | ) | (1,250,992 | ) | ||||
Disposal of treasury shares | 449,901 | 412,338 | ||||||
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| |||||
218,032,053 | 217,994,490 | |||||||
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(In shares) | 2021 | |||||||
Number of common shares | Weighted average number of common shares | |||||||
Issued shares as of January 1, 2021 | 403,728,555 | 403,728,555 | ||||||
Treasury shares as of January 1, 2021 | (47,092,790 | ) | (47,092,790 | ) | ||||
Acquisition of treasury shares | (1,494,032 | ) | (1,383,241 | ) | ||||
Disposal of treasury shares | 3,134,003 | 1,022,242 | ||||||
Spin-off | (140,693,584 | ) | (23,513,174 | ) | ||||
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217,582,152 | 332,761,592 | |||||||
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(2) | Diluted earnings per share |
1) | Diluted earnings per share for the years ended December 31, 2022 and 2021 are calculated as follows: |
(In millions of won, except for share data) | 2022 | 2021 | ||||||
Profit from continuing operation attributable to owners of the Parent Company on common shares | 1,202,754 | |||||||
Profit from discontinued operation attributable to owners of the Parent Company on common shares | — | 1,190,003 | ||||||
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| |||||
Adjusted weighted average number of common shares outstanding | 218,108,742 | 332,917,848 | ||||||
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Diluted earnings per share (in won) | ||||||||
Continuing operation | 3,613 | |||||||
Discontinued operation | — | 3,574 | ||||||
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2) | The adjusted weighted average number of common shares outstanding for the years ended December 31, 2022 and 2021 are calculated as follows: |
(In shares) | 2022 | 2021 | ||||||
Outstanding shares as of January 1 | 217,582,152 | 356,635,765 | ||||||
Effect of treasury shares | 412,338 | (360,999 | ) | |||||
Effect of Spin-off | — | (23,513,174 | ) | |||||
Effect of share option | 114,252 | 156,256 | ||||||
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| |||||
Adjusted weighted average number of common shares outstanding | 218,108,742 | 332,917,848 | ||||||
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108
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
34. | Dividends |
(1) | Details of dividends declared |
Details of dividend declared in Parent company for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won, except for face value and share data) | ||||||||||||||||||
Year | Dividend type | Number of shares outstanding | Face value (in won) | Dividend ratio | Dividends | |||||||||||||
2022 | Cash dividends (Interim) | 218,002,830 | 100 | 830 | % | |||||||||||||
Cash dividends (Interim) | 218,032,053 | 100 | 830 | % | 180,967 | |||||||||||||
Cash dividends (Interim) | 218,032,053 | 100 | 830 | % | 180,967 | |||||||||||||
Cash dividends (Year-end) | 218,032,053 | 100 | 830 | % | 180,967 | |||||||||||||
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2021 | Cash dividends (Interim) | 217,616,645 | 100 | 1,635 | % | |||||||||||||
Cash dividends (Year-end) | 217,582,152 | 100 | 1,660 | % | 361,186 | |||||||||||||
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(2) | Dividends yield ratio |
Dividends yield ratios for the years ended December 31, 2022 and 2021 are as follows:
(In won)
Year | Dividend type | Dividend per share | Closing price at year-end | Dividend yield ratio | ||||||||||
2022 | Cash dividends | 3,320 | 47,400 | 7.00 | % | |||||||||
2021 | Cash dividends | 3,295 | 57,900 | 5.69 | % |
109
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
35. | Categories of Financial Instruments |
(1) | Financial assets by category as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | ||||||||||||||||
Cash and cash equivalents | — | 1,636,309 | — | 1,882,291 | ||||||||||||||||
Financial instruments | 148,365 | — | 89,240 | — | 237,605 | |||||||||||||||
Long – term investment securities(*) | 221,139 | 1,189,597 | — | — | 1,410,736 | |||||||||||||||
Accounts receivable – trade | — | — | 1,984,772 | — | 1,984,772 | |||||||||||||||
Loans and other receivables | 332,669 | — | 909,003 | — | 1,241,672 | |||||||||||||||
Derivative financial assets | 54,009 | — | — | 267,151 | 321,160 | |||||||||||||||
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1,189,597 | 4,619,324 | 267,151 | 7,078,236 | |||||||||||||||||
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(*) | The Group designated |
(In millions of won) | ||||||||||||||||||||||||
December 31, 2021 | ||||||||||||||||||||||||
Financial assets at FVTPL | Equity instruments at FVOCI | Debt instruments at FVOCI | Financial assets at amortized cost | Derivatives hedging instrument | Total | |||||||||||||||||||
Cash and cash equivalents | — | — | 367,153 | — | 872,731 | |||||||||||||||||||
Financial instruments | 389,368 | — | — | 119,684 | — | 509,052 | ||||||||||||||||||
Short – term investment securities | 5,010 | — | — | — | — | 5,010 | ||||||||||||||||||
Long – term investment securities(*) | 203,473 | 1,510,428 | 1,177 | — | — | 1,715,078 | ||||||||||||||||||
Accounts receivable – trade | — | — | — | 1,921,617 | — | 1,921,617 | ||||||||||||||||||
Loans and other receivables | 459,959 | — | — | 735,958 | — | 1,195,917 | ||||||||||||||||||
Derivative financial assets | 34,933 | — | — | — | 182,661 | 217,594 | ||||||||||||||||||
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1,510,428 | 1,177 | 3,144,412 | 182,661 | 6,436,999 | ||||||||||||||||||||
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(*) | The Group designated |
110
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
35. | Categories of Financial Instruments, Continued |
(2) | Financial liabilities by category as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | December 31, 2022 | |||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Total | ||||||||||
Accounts payable – trade | 89,255 | 89,255 | ||||||||||
Derivative financial liabilities | 302,593 | — | 302,593 | |||||||||
Borrowings | — | 936,110 | 936,110 | |||||||||
Debentures | — | 8,366,694 | 8,366,694 | |||||||||
Lease liabilities(*) | — | 1,782,057 | 1,782,057 | |||||||||
Accounts payable – other and others | — | 5,505,465 | 5,505,465 | |||||||||
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| |||||||
16,679,581 | 16,982,174 | |||||||||||
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|
(In millions of won) | December 31, 2021 | |||||||||||||||
Financial liabilities at FVTPL | Financial liabilities at amortized cost | Derivatives hedging instrument | Total | |||||||||||||
Accounts payable – trade | 190,559 | — | 190,559 | |||||||||||||
Derivative financial liabilities | 321,025 | — | 111 | 321,136 | ||||||||||||
Borrowings | — | 407,185 | — | 407,185 | ||||||||||||
Debentures | — | 8,426,683 | — | 8,426,683 | ||||||||||||
Lease liabilities(*) | — | 1,534,282 | — | 1,534,282 | ||||||||||||
Accounts payable – other and others | — | 5,524,692 | — | 5,524,692 | ||||||||||||
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16,083,401 | 111 | 16,404,537 | ||||||||||||||
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(*) | Lease liabilities are not applicable on category of financial liabilities, but are classified as financial liabilities measured at amortized cost on consideration of nature for measurement of liabilities. |
111
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management |
(1) | Financial risk management |
The Group is exposed to market risk, credit risk and liquidity risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates and interest rates. The Group implements a risk management system to monitor and manage these specific risks.
The Group’s financial assets consist of cash and cash equivalents, financial instruments, investment securities, accounts receivable – trade and other, etc. Financial liabilities consist of accounts payable – trade and other, borrowings, debentures, lease liabilities and others.
1) Market risk
(i) Currency risk
The Group incurs exchange position due to revenue and expenses from its global operations. Major foreign currencies where the currency risk occur are USD, EUR and others. The Group determines the currency risk management policy after considering the nature of business and the presence of methods that mitigate the currency risk for each Group entities. The Group manages currency risk arising from business transactions by using currency forwards, etc. Currency risk occurs on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of each group entity.
Monetary assets and liabilities denominated in foreign currencies as of December 31, 2022 are as follows:
(In millions of won, thousands of foreign currencies) | ||||||||||||||||
Assets | Liabilities | |||||||||||||||
Foreign currencies | Won equivalent | Foreign currencies | Won equivalent | |||||||||||||
USD | 53,243 | 1,517,930 | ||||||||||||||
EUR | 5,626 | 7,602 | 20 | 27 | ||||||||||||
Others | — | 452 | — | 175 | ||||||||||||
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In addition, the Group has entered into cross currency swaps to hedge against currency risk related to foreign debentures. (See note 22)
As of December 31, 2022, a hypothetical change in exchange rates by 10% would have increased (decreased) the Group’s profit before income tax as follows:
(In millions of won) | ||||||||
If increased by 10% | If decreased by 10% | |||||||
USD | (3,933 | ) | ||||||
EUR | 758 | (758 | ) | |||||
Others | 28 | (28 | ) | |||||
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| |||||
(4,719 | ) | |||||||
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112
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk |
The interest rate risk of the Group arises from borrowings, debentures and long-term payables – other. Since the Group’s interest bearing assets are mostly fixed-interest bearing assets, the Group’s revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.
The Group performs various analysis to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Group takes various measures such as refinancing, renewal, alternative financing and hedging.
As of December 31, 2022, floating-rate borrowings and debentures amount to52,500 million andW380,190 million, respectively, and the Group has entered into interest rate swaps to hedge interest rate risk related to the floating-rate borrowings amounting toW12,500 million and debentures as described in note 22.W
If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income taxes for the year ended December 31, 2022, would change by400 million in relation to the floating-rate borrowings which has not entered into interest rate swaps.W
As of December 31, 2022, the floating-rate long-term payables – other are1,690,470 million. If the interest rate increases (decreases) 1%p with all other variables held constant, profit before income taxes for the year ended December 31, 2022, would change byW16,905 million in relation to the floating-rate long-term payables – other that are exposed to interest rate risk.W
Interest rate benchmark reform and associated risks
A fundamental reform of major interest rate benchmarks is being undertaken globally, including the replacement of some interbank offered rates (IBORs) with alternative nearly risk-free rates (referred to as ‘IBOR reform’). Especially, in the case of LIBOR, all of the calculations were suspended as of December 31, 2021, except for the overnight, one month, three months, six months, and 12 months of USD LIBOR, and the aforementioned five USD LIBORs will also be suspended as of June 30, 2023. The alternative interest rate benchmark of USD LIBOR is the Secured Overnight Financing Rate(“SOFR”). Meanwhile, in case of Korean CD rate, the alternative interest rate benchmark has selected as Korea Overnight Financing Repo Rate(“KOFR”) and as part of interest rate benchmark reform, the interest rate has been disclosed through Korea Securities Depository since November 26, 2021. KOFR is calculated using the overnight RP rate as collateral for government bonds and monetary stabilization bonds. However, unlike LIBOR, calculation of CD rate will not be suspended, it is unclear when and how the transition to KOFR will take place.
The Group plans to include fallback clauses into financial instruments relating to LIBOR to which calculation has not been suspended yet, or change their LIBOR directly to alternative interest rates before the calculation is suspended. Meanwhile, The Group is closely monitoring market trends for CD rate-related financial instruments.
113
Table of Contents
SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
1) | Market risk, Continued |
(ii) | Interest rate risk, Continued |
The Group’s financial instruments exposed to the risk arising from interest rate benchmark reform as of December 31, 2022 are indexed to the USD LIBOR. The Group is exposed to legal risk to amend the terms of contracts on the financial instruments subject to interest rate benchmark reform as well as process and operation risks to manage such amendments. In addition, the Group is exposed to the risk of monitoring the market trend regarding the alternative interest rate and establishing the corresponding risk management strategy. If the IBOR is designated as the hedged item, the Group is required to replace it to an alternative benchmark interest and review the effects on the hedging relationship. In addition, the Group is exposed to the risk of minimizing hedge ineffectiveness by aligning the method and timing of the transition to the alternative benchmark interest applied to the hedged item and the hedging instrument.
The Group evaluates the extent to which contracts reference IBOR cash flows, whether such contracts will need to be amended as a result of IBOR reform and how to manage communication about IBOR reform with counterparties.
Non-derivative financial liabilities
The Parent Company’s non-derivative financial liabilities subject to Interest rate benchmark reform as of December 31, 2021 were floating-rate bonds indexed to USD LIBOR. As explained above, the Group is discussing with the counterparty about including the fallback clauses as of December 31, 2022.
Derivatives
The Group’s most derivative instruments designated as cash flow hedge are governed by contracts based on the International Swaps and Derivatives Association (ISDA)’s master agreements. As part of interest rate benchmark reform, ISDA has included a new fallback clause regarding which alterative benchmark interest rate to be applied when the calculation of major IBOR is suspended in the master agreement. The master agreement is applied to derivative contracts after January 25, 2021 and the transaction parties is required to adhere to ISDA protocol to include the same fallback clause to derivative contracts before January 25, 2021. The Group has adhered to ISDA protocol for transition to the alternative benchmark interest rate and the fallback clause will be included when counterparties adhere to the protocol to include. The Group’s counterparties have adhered to ISDA protocol and agreed to include the fallback clause.
Hedge accounting
The Group’s hedged items and hedging instruments as of December 31, 2022 are indexed to USD LIBOR. These benchmark rates are quoted each day and the IBOR cash flows are exchanged with counterparties as usual.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) | Credit risk |
The maximum credit exposure as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Cash and cash equivalents | 872,550 | |||||||
Financial instruments | 237,605 | 509,052 | ||||||
Investment securities | 900 | 2,077 | ||||||
Accounts receivable – trade | 1,984,772 | 1,921,617 | ||||||
Contract assets | 132,221 | 118,278 | ||||||
Loans and other receivables | 1,241,672 | 1,195,917 | ||||||
Derivative financial assets | 321,160 | 217,594 | ||||||
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4,837,085 | ||||||||
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Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To manage credit risk, the Group evaluates the credit worthiness of each customer or counterparty considering the party’s financial information, its own trading records and other factors. Based on such information, the Group establishes credit limits for each customer or counterparty.
(i) | Accounts receivable – trade and contract assets |
The Group establishes a loss allowance in respect of accounts receivable – trade and contract assets. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Details of changes in loss allowance for the year ended December 31, 2022 are included in note 6.
(ii) | Debt investments |
The credit risk arises from debt investments included in237,605 million of financial instruments,W900 million of investment securities andW1,241,672 million of loans and other receivables. To limit the exposure to this risk, the Group transacts only with financial institutions with credit ratings that are considered to be low credit risk.W
Most of the Group’s debt investments are considered to have a low risk of default and the borrower has a strong capacity to meet its contractual cash flow obligations in the near term. Thus, the Group measured the loss allowance for the debt investments at an amount equal to 12-month expected credit losses.
Meanwhile, the Group monitors changes in credit risk at each reporting date. The Group recognized the loss allowance at an amount equal to lifetime expected credit losses when the credit risk on the debt investments is assumed to have increased significantly if it is more than 30 days past due.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(1) | Financial risk management, Continued |
2) Credit risk, Continued
(ii) Debt investments, Continued
The Group’s maximum exposure to credit risk is equal to each financial asset’s carrying amount. The gross carrying amounts of each financial asset except for the accounts receivable – trade and derivative financial assets as of December 31, 2022 are as follows.
(In millions of won) | ||||||||||||||||
Financial assets at FVTPL | Financial assets at amortized cost | |||||||||||||||
| 12-month ECL | Lifetime ECL – not credit impaired | Lifetime ECL – credit impaired | |||||||||||||
Gross amount | 994,868 | 5,592 | 87,862 | |||||||||||||
Loss allowance | — | (3,081 | ) | (3,314 | ) | (83,685 | ) | |||||||||
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Carrying amount | 991,787 | 2,278 | 4,177 | |||||||||||||
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Changes in the loss allowance for the debt investments for the year ended December 31, 2022 are as follows:
(In millions of won) | ||||||||||||||||
12-month ECL | Lifetime ECL – not credit impaired | Lifetime ECL – credit impaired | Total | |||||||||||||
December 31, 2021 | 6,190 | 83,033 | 92,010 | |||||||||||||
Remeasurement of loss allowance, net | 1,571 | (1,517 | ) | 2,957 | 3,011 | |||||||||||
Transfer to lifetime ECL – not credit impaired | (1,277 | ) | 1,277 | — | — | |||||||||||
Transfer to lifetime ECL – credit impaired | — | (2,636 | ) | 2,636 | — | |||||||||||
Amounts written off | — | — | (6,594 | ) | (6,594 | ) | ||||||||||
Recovery of amounts written off | — | — | 1,653 | 1,653 | ||||||||||||
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December 31, 2022 | 3,314 | 83,685 | 90,080 | |||||||||||||
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(iii) Cash and cash equivalents
The Group deposits1,882,093 million of cash and cash equivalents as of December 31, 2022 (W872,550 million as of December 31, 2021) at banks and financial institutions with credit ratings above the certain level. Impairment on cash and cash equivalents has been measured on a 12-month expected loss basis and reflects the short maturities of the exposures. The Group considered that its cash and cash equivalents have low credit risk based on the credit ratings of the counterparties assigned by external credit rating agencies.W
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. Financial Risk Management, Continued
(1) | Financial risk management, Continued |
3) Liquidity risk
The Group’s approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalents balances and have enough liquidity through various committed credit lines. The Group maintains enough liquidity within credit lines through active operating activities.
Contractual maturities of financial liabilities as of December 31, 2022 are as follows:
(In millions of won) | ||||||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 - 5 years | More than 5 years | ||||||||||||||||
Accounts payable - trade | 89,255 | 89,255 | — | — | ||||||||||||||||
Borrowings(*) | 936,110 | 975,960 | 290,024 | 685,936 | — | |||||||||||||||
Debentures(*) | 8,366,694 | 9,469,549 | 2,074,631 | 5,077,080 | 2,317,838 | |||||||||||||||
Lease liabilities | 1,782,057 | 2,063,294 | 391,686 | 1,104,040 | 567,568 | |||||||||||||||
Accounts payable – other and others(*) | 5,505,465 | 5,641,277 | 4,291,518 | 1,256,702 | 93,057 | |||||||||||||||
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18,239,335 | 7,137,114 | 8,123,758 | 2,978,463 | |||||||||||||||||
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(*) | Includes interest payables. |
The Group does not expect that the cash flows included in the maturity analysis could occur significantly earlier or at different amounts.
As of December 31, 2022, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:
(In millions of won) | ||||||||||||||||
Carrying amount | Contractual cash flows | Less than 1 year | 1 - 5 years | |||||||||||||
Assets | 281,636 | 169,761 | 111,875 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(2) | Capital management |
The Group manages its capital to ensure that it will be able to continue as a business while maximizing the return to shareholders through the optimization of its debt and equity structure. The overall strategy of the Group is the same as that of the Group as of and for the year ended December 31, 2021.
The Group monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity from the consolidated financial statements.
Debt-equity ratio as of December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
December 31, 2022 | December 31, 2021 | |||||||
Total liabilities | 18,576,139 | |||||||
Total equity | 12,155,196 | 12,335,138 | ||||||
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Debt-equity ratios | 157.57 | % | 150.60 | % | ||||
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(3) | Fair value |
1) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2022 are as follows: |
(In millions of won) | December 31, 2022 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | 44,431 | 727,014 | 230,719 | 1,002,164 | ||||||||||||||||
Derivative hedging instruments | 267,151 | — | 267,151 | — | 267,151 | |||||||||||||||
FVOCI | 1,189,597 | 993,765 | — | 195,832 | 1,189,597 | |||||||||||||||
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1,038,196 | 994,165 | 426,551 | 2,458,912 | |||||||||||||||||
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Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | — | 302,593 | 302,593 | ||||||||||||||||
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Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 911,597 | — | 911,597 | ||||||||||||||||
Debentures | 8,366,694 | — | 7,813,420 | — | 7,813,420 | |||||||||||||||
Long-term payables – other | 1,638,341 | — | 1,614,934 | — | 1,614,934 | |||||||||||||||
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— | 10,339,951 | — | 10,339,951 | |||||||||||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
2) | Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2021 are as follows: |
(In millions of won) | December 31, 2021 | |||||||||||||||||||
Carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||
Financial assets that are measured at fair value: | ||||||||||||||||||||
FVTPL | 55,455 | 1,359,915 | 182,951 | 1,598,321 | ||||||||||||||||
Derivative hedging instruments | 182,661 | — | 182,661 | — | 182,661 | |||||||||||||||
FVOCI | 1,511,605 | 1,344,434 | — | 167,171 | 1,511,605 | |||||||||||||||
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1,399,889 | 1,542,576 | 350,122 | 3,292,587 | |||||||||||||||||
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Financial liabilities that are measured at fair value: | ||||||||||||||||||||
FVTPL | — | — | 321,025 | 321,025 | ||||||||||||||||
Derivative hedging instruments | 111 | — | 111 | — | 111 | |||||||||||||||
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— | 111 | 321,025 | 321,136 | |||||||||||||||||
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Financial liabilities that are not measured at fair value: | ||||||||||||||||||||
Borrowings | — | 392,237 | — | 392,237 | ||||||||||||||||
Debentures | 8,426,683 | — | 8,679,472 | — | 8,679,472 | |||||||||||||||
Long-term payables – other | 2,009,833 | — | 2,010,852 | — | 2,010,852 | |||||||||||||||
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— | 11,082,561 | — | 11,082,561 | |||||||||||||||||
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The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.
Fair value of the financial instruments that are traded in an active market (financial assets at FVOCI and financial assets at FVTPL) is measured based on the bid price at the end of the reporting date.
The Group uses various valuation methods for determination of fair value of financial instruments that are not traded in an active market. Derivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods such as discounted cash flow and market approach. Inputs used to such valuation methods include swap rate, interest rate, and risk premium, and the Group performs valuation using the inputs which are consistent with natures of assets and liabilities measured.
Interest rates used by the Group for the fair value measurement as of December 31, 2022 are as follows:
Interest rate | ||||
Derivative instruments | 4.18% ~ 5.20% | |||
Borrowings and debentures | 4.89% ~ 5.10% | |||
Long-term payables – other | 4.59% ~ 5.06% |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
36. | Financial Risk Management, Continued |
(3) | Fair value, Continued |
3) | There have been no transfers between Level 2 and Level 1 for the year ended December 31, 2022. The changes of financial instruments classified as Level 3 for the year ended December 31, 2022 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
Balance as of January 1, 2022 | Gain for the year | OCI | Acquisition | Disposal | Transfer | Balance as of December 31, 2022 | ||||||||||||||||||||||
FVTPL | 42,145 | 1,375 | 48,458 | (38,894 | ) | (5,316 | ) | 230,719 | ||||||||||||||||||||
FVOCI | 167,171 | — | 1,088 | 55,333 | (26,860 | ) | (900 | ) | 195,832 | |||||||||||||||||||
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42,145 | 2,463 | 103,791 | (65,754 | ) | (6,216 | ) | 426,551 | |||||||||||||||||||||
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FVTPL | 18,432 | — | — | — | — | (302,593 | ) |
(4) | Enforceable master netting agreement or similar agreement |
Carrying amounts of financial instruments recognized of which offset agreements are applicable as of December 31, 2022 and 2021 are as follows:
(In millions of won) | December 31, 2022 | |||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the consolidated statements of financial position | ||||||||||
Financial assets: | ||||||||||||
Accounts receivable – trade and others | (236,921 | ) | 8,914 | |||||||||
Financial liabilities: | ||||||||||||
Accounts payable – other and others | (236,921 | ) | 7,588 |
(In millions of won) | December 31, 2021 | |||||||||||
Gross financial instruments recognized | Amount offset | Net financial instruments presented on the consolidated statements of financial position | ||||||||||
Financial assets: | ||||||||||||
Accounts receivable – trade and others | (189,424 | ) | 8,404 | |||||||||
Financial liabilities: | ||||||||||||
Accounts payable – other and others | (189,424 | ) | 11,425 |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties |
(1) | List of related parties |
Relationship | Company | |
Ultimate controlling entity | SK Inc. | |
Joint venture | UTC Kakao-SK Telecom ESG Fund | |
Associate | SK China Company Ltd. and 42 others | |
Others | The Ultimate controlling entity’s subsidiaries and associates and others |
As of December 31, 2022, the Group belongs to SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act of the Republic of Korea. All of the other entities included in SK Group are considered related parties of the Group.
(2) | Compensation for the key management |
The Parent Company considers registered directors (three executive and five non-executive directors) who have substantial role and responsibility in planning, operations, and relevant controls of the business as key management. The compensation given to such key management for the years ended December 31, 2022 and 2021 are as follows:
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Salaries | 5,956 | |||||||
Defined benefits plan expenses | 761 | 2,845 | ||||||
Share option | 1,598 | 146 | ||||||
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8,947 | ||||||||
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Compensation for the key management includes salaries, non-monetary salaries, and retirement benefits made in relation to the pension plan and compensation expenses related to share options granted.
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | 2022 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others(*1) | Acquisition of property and equipment and others | ||||||||||
Ultimate Controlling Entity | SK Inc.(*2) | 662,247 | 114,895 | |||||||||||
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Associates | F&U Credit information Co., Ltd. | 3,490 | 49,227 | 265 | ||||||||||
HanaCard Co., Ltd. (*3) | 8,932 | 1,820 | 22 | |||||||||||
Daehan Kanggun BcN Co., Ltd. | 20,290 | — | — | |||||||||||
Others(*4) | 13,795 | 5,608 | 80 | |||||||||||
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46,507 | 56,655 | 367 | ||||||||||||
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Others | SK Innovation Co., Ltd. | 27,524 | 19,598 | — | ||||||||||
SK Energy Co., Ltd. | 4,585 | 710 | — | |||||||||||
SK Geo Centric Co., Ltd. | 925 | 1 | — | |||||||||||
SK Networks Co., Ltd.(*5) | 4,312 | 904,320 | 288 | |||||||||||
SK Networks Service Co., Ltd. | 6,110 | 71,432 | 7,891 | |||||||||||
SK Ecoplant Co., Ltd. | 3,330 | 112 | — | |||||||||||
SK hynix Inc. | 60,933 | 75 | — | |||||||||||
SK Shieldus Co., Ltd. | 39,455 | 147,731 | 35,854 | |||||||||||
Content Wavve Corp. | 6,797 | 108,760 | 229 | |||||||||||
Eleven Street Co., Ltd. | 71,972 | 31,589 | — | |||||||||||
SK Planet Co., Ltd. | 19,753 | 95,261 | 17,481 | |||||||||||
SK RENT A CAR Co., Ltd. | 14,992 | 15,891 | — | |||||||||||
SK Magic Co., Ltd. | 2,204 | 1,071 | — | |||||||||||
Tmap Mobility Co., Ltd. | 22,011 | 4,973 | 892 | |||||||||||
Onestore Co., Ltd. | 17,181 | 24 | — | |||||||||||
Dreamus Company | 7,235 | 85,193 | 649 | |||||||||||
UbiNS Co., Ltd. | 283 | 46,222 | 53,897 | |||||||||||
Happy Narae Co., Ltd. | 1,637 | 24,727 | 143,188 | |||||||||||
Others | 40,058 | 29,610 | 20,555 | |||||||||||
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351,297 | 1,587,300 | 280,924 | ||||||||||||
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2,306,202 | 396,186 | |||||||||||||
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(*1) | Operating expenses and others include lease payments paid by the Group. |
(*2) | Operating expenses and others include |
(*3) | HanaCard Co., Ltd. was excluded from the related parties due to the disposal of the Group’s shares in the entity for the year ended December 31, 2022, and the transactions above occurred before the disposal. |
(*4) | Operating revenue and others include |
(*5) | Operating expenses and others include costs for handset purchases amounting to |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | 2021 | |||||||||||||
Scope | Company | Operating revenue and others | Operating expense and others(*1) | Acquisition of property and equipment and others | ||||||||||
Ultimate Controlling Entity | SK Inc.(*2) | 633,868 | 82,191 | |||||||||||
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Associates | F&U Credit information Co., Ltd. | 3,828 | 50,029 | — | ||||||||||
HanaCard Co., Ltd. | 17,962 | 4,374 | — | |||||||||||
SK Wyverns Co., Ltd.(*3) | 202 | 8,203 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd. | 10,943 | — | — | |||||||||||
SK China Company Ltd.(*4) | 131,141 | — | — | |||||||||||
Others(*5) | 11,778 | 8,356 | — | |||||||||||
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175,854 | 70,962 | — | ||||||||||||
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Others | SK Innovation Co., Ltd. | 53,445 | 19,093 | — | ||||||||||
SK Energy Co., Ltd. | 18,970 | 1,250 | — | |||||||||||
SK Geo Centric Co., Ltd. | 33,435 | 9 | — | |||||||||||
SK TNS Co., Ltd.(*3) | 75 | 6,868 | 57,903 | |||||||||||
SKC Infra Service Co., Ltd.(*3) | 26 | 30,798 | 8,028 | |||||||||||
SK Networks Co., Ltd.(*6) | 14,439 | 1,055,512 | 24 | |||||||||||
SK Networks Service Co., Ltd. | 7,292 | 73,596 | 3,520 | |||||||||||
SK hynix Inc.(*7) | 285,104 | 199 | — | |||||||||||
Happy Narae Co., Ltd. | 6,899 | 20,229 | 133,625 | |||||||||||
SK Shieldus Co., Ltd.(*8) | 5,793 | 18,861 | 20,382 | |||||||||||
Content Wavve Co., Ltd. | 174 | 78,964 | — | |||||||||||
Eleven Street Co., Ltd. | 2,785 | 5,699 | — | |||||||||||
SK Planet Co., Ltd. | 2,048 | 16,747 | 6,081 | |||||||||||
SK hynix Semiconductor (China) Ltd. | 48,546 | — | — | |||||||||||
SK hynix system ic (Wuxi) Co., Ltd. | 20,807 | — | — | |||||||||||
SK ON Hungary Kft. | 38,413 | — | — | |||||||||||
SK RENT A CAR Co., Ltd. | 5,843 | 18,564 | — | |||||||||||
Dreamus Company | 795 | 20,074 | 396 | |||||||||||
SK m&service Co., Ltd. | 764 | 3,670 | 888 | |||||||||||
UbiNS Co., Ltd. | 415 | 42,335 | 50,847 | |||||||||||
Others | 156,055 | 30,762 | 23,428 | |||||||||||
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702,123 | 1,443,230 | 305,122 | ||||||||||||
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2,148,060 | 387,313 | |||||||||||||
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(3) | Transactions with related parties for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(*1) | Operating expense and others include lease payments paid by the Group. |
(*2) | Operating expense and others include |
(*3) | Transactions occurred before the related party relationship terminated. |
(*4) | Operating revenue and others include |
(*5) | Operating revenue and others include |
(*6) | Operating expenses and others include costs for handset purchases amounting to |
(*7) | Operating revenue and others include |
(*8) | Operating revenue and others include |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of December 31, 2022 and 2021 are as follows: |
(In millions of won) | December 31, 2022 | |||||||||||||
Scope | Company | Receivables | Payables | |||||||||||
Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||||
Ultimate Controlling Entity | SK Inc. | 2,383 | 103,141 | |||||||||||
Associates | F&U Credit information Co., Ltd. | — | 64 | 5,682 | ||||||||||
SK USA, Inc. | — | — | 1,519 | |||||||||||
Wave City Development Co., Ltd.(*1) | — | 901 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 3,199 | — | |||||||||||
HanaCard Co., Ltd. | — | — | — | |||||||||||
Others | — | — | 65 | |||||||||||
|
|
|
|
|
| |||||||||
22,147 | 4,164 | 7,266 | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Innovation Co., Ltd. | — | 9,726 | 33,091 | ||||||||||
SK Networks Co., Ltd. | — | 488 | 113,943 | |||||||||||
Mintit Co., Ltd. | — | 35,058 | 3 | |||||||||||
SK hynix Inc. | — | 15,494 | 311 | |||||||||||
Happy Narae Co., Ltd. | — | 31 | 31,979 | |||||||||||
SK Shieldus Co., Ltd. | — | 14,035 | 17,447 | |||||||||||
Content Wavve Corp. | — | 349 | 19,244 | |||||||||||
Incross Co., Ltd. | — | 3,774 | 16,152 | |||||||||||
Eleven Street Co., Ltd. | — | 6,797 | 13,026 | |||||||||||
SK Planet Co., Ltd. | — | 8,190 | 43,238 | |||||||||||
SK RENT A CAR Co., Ltd. | — | 1,291 | 22,895 | |||||||||||
UbiNS Co., Ltd. | — | — | 21,179 | |||||||||||
Others(*3) | 16,475 | 13,996 | 41,890 | |||||||||||
|
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|
|
|
| |||||||||
16,475 | 109,229 | 374,398 | ||||||||||||
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|
|
|
| |||||||||
115,776 | 484,805 | |||||||||||||
|
|
|
|
|
|
(*1) | As of December 31, 2022, the Parent Company recognized loss allowance amounting to |
(*2) | As of December 31, 2022, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
(*3) | During the year ended December 31, 2022, SK Telecom Innovation Fund, L.P., a subsidiary of the Parent Company, entered into a convertible loan agreement for USD 13,000,000 with id Quantique SA, classified as an other related party. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(4) | Account balances with related parties as of December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | December 31, 2021 | |||||||||||||
Receivables | Payables | |||||||||||||
Scope | Company | Loans | Accounts receivable – trade, etc. | Accounts payable – other, etc. | ||||||||||
Ultimate Controlling Entity | SK Inc. | 2,092 | 69,652 | |||||||||||
Associates | F&U Credit information Co., Ltd. | — | 4 | 5,265 | ||||||||||
Wave City Development Co., Ltd.(*1) | — | 2,623 | — | |||||||||||
Daehan Kanggun BcN Co., Ltd.(*2) | 22,147 | 3,857 | — | |||||||||||
HanaCard Co., Ltd. | — | 529 | 48,020 | |||||||||||
Others | — | 84 | 1,197 | |||||||||||
|
|
|
|
|
| |||||||||
22,147 | 7,097 | 54,482 | ||||||||||||
|
|
|
|
|
| |||||||||
Others | SK Innovation Co., Ltd. | — | 3,022 | 38,022 | ||||||||||
SK Networks Co., Ltd. | — | 241 | 198,631 | |||||||||||
Mintit Co., Ltd. | — | 17,929 | 131 | |||||||||||
SK hynix Inc. | — | 11,526 | 166 | |||||||||||
Happy Narae Co., Ltd. | — | 6 | 49,349 | |||||||||||
SK m&service Co., Ltd. | — | 1,453 | 18,921 | |||||||||||
SK Shieldus Co., Ltd. | — | 2,649 | 24,593 | |||||||||||
Content Wavve Co., Ltd. | — | 183 | 9,873 | |||||||||||
Incross Co., Ltd. | — | 3,610 | 11,829 | |||||||||||
Eleven Street Co., Ltd. | — | 2,851 | 7,782 | |||||||||||
SK Planet Co., Ltd. | — | 668 | 31,652 | |||||||||||
SK RENT A CAR Co., Ltd. | — | 116 | 16,715 | |||||||||||
UbiNS Co., Ltd. | — | 24 | 14,932 | |||||||||||
Others | — | 8,307 | 29,106 | |||||||||||
|
|
|
|
|
| |||||||||
— | 52,585 | 451,702 | ||||||||||||
|
|
|
|
|
| |||||||||
61,774 | 575,836 | |||||||||||||
|
|
|
|
|
|
(*1) | As of December 31, 2021, the Parent Company recognized loss allowance amounting to |
(*2) | As of December 31, 2021, the Parent Company recognized full loss allowance for the balance of loans to Daehan Kanggun BcN Co., Ltd. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
37. | Transactions with Related Parties, Continued |
(5) | The Group has granted SK REIT Co., Ltd. The right of first offer regarding the disposal of real estate owned by the Group. Whereby, the negotiation period is within 3 to 5 years from June 30, 2021, date of agreement, and the Group has been granted the right by SK REIT Co., Ltd. to lease the real estate in preference to a third party if SK REIT Co., Ltd. purchases the real estate from the Group. |
(6) | The details of additional investments and disposal of associates and joint ventures for the year ended December 31, 2022 are as presented in note 12. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
38. | Commitments and Contingencies |
(1) Collateral assets and commitments
SK Broadband Co., Ltd., a subsidiary of the Parent Company, has pledged its properties as collateral for leases on buildings in the amount of1,513 million as of December 31, 2022.W
Meanwhile, PanAsia Semiconductor Materials LLC., a subsidiary of the Parent Company, has pledged its21,981 million of equity instruments at FVTPL onW12,998 million of short-term borrowings as of December 31, 2022.W
(2) Legal claims and litigations
As of December 31, 2022, the Group is involved in various legal claims and litigation. Provision recognized in relation to these claims and litigation is immaterial. In connection with those legal claims and litigation for which no provision was recognized, management does not believe the Group has a present obligation, nor is it expected any of these claims or litigation will have a significant impact on the Group’s financial position or operating results in the event an outflow of resources is ultimately necessary.
(3) Accounts receivable from sale of handsets
The sales agents of the Parent Company sell handsets to the Parent Company’s subscribers on an installment basis. The Parent Company entered into comprehensive agreements to purchase accounts receivable from handset sales with retail stores and authorized dealers and to transfer the accounts receivable from handset sales to special purpose companies which were established with the purpose of liquidating receivables, respectively.
The accounts receivable from sale of handsets amounting to357,467 million andW493,277 million as of December 31, 2022 and 2021, respectively, which the Parent Company purchased according to the relevant comprehensive agreement are recognized as accounts receivable – other and long-term accounts receivable – other.W
(4) Commitment of the acquisition and disposal of shares
The Board of Directors of the Parent Company resolved the acquisition and disposal of certain shares in order to strengthen the strategic alliance with Hana Financial Group Inc. (“HFG”) at the Board of Directors’ meeting held on July 22, 2022. In accordance with the resolution, as of July 27, 2022, the Parent Company disposed of its entire common shares of HanaCard Co., Ltd. (39,902,323 shares) and entire common shares of Finnq Co., Ltd. (6,370,000 shares) to HFG for330,032 million andW5,733 million, respectively. Through the agreement with HFG, the Parent Company is obligated to acquire HFG’s common shares from July 27, 2022 to January 31, 2024, after depositingW330,032 million in a specific money trust, and the Parent Company completed the acquisition of the shares for the year ended December 31, 2022. As a part of the aforementioned transaction, as of July 27, 2022, the Parent Company disposed of its entire common shares of SK Square Co., Ltd. (767,011 shares) to HanaCard Co., Ltd. forW31,563 million, and HanaCard Co., Ltd. is obligated to acquire the Parent Company’s common shares from July 27, 2022 to January 31, 2024, after depositingW68,437 million in a specific money trust. Before March 31, 2025, the Parent Company, HFG, and HanaCard Co., Ltd. may not dispose of shares they have acquired or will acquire under the aforementioned transaction.W
(5) The acquisition cost of property and equipment and intangible assets to be incurred in subsequent periods under arrangements is26,374 million as of December 31, 2022.W
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
39. | Statements of Cash Flows |
(1) | Adjustments for income and expenses from operating activities for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Interest income | (43,850 | ) | ||||||
Dividends | (2,552 | ) | (14,132 | ) | ||||
Gain on foreign currency translations | (2,095 | ) | (10,753 | ) | ||||
Gain on sale of accounts receivable — other | (1,043 | ) | (27,725 | ) | ||||
Gain (loss) relating to investments in associates and joint ventures, net | 81,707 | (1,948,447 | ) | |||||
Gain on disposal of property and equipment and intangible assets | (15,985 | ) | (40,109 | ) | ||||
Gain on business transfer | — | (82,248 | ) | |||||
Gain relating to financial instruments at FVTPL | (94,393 | ) | (91,244 | ) | ||||
Other income | (6,515 | ) | (10,369 | ) | ||||
Interest expense | 328,307 | 342,342 | ||||||
Loss on foreign currency translations | 3,814 | 8,005 | ||||||
Loss on sale of receivables-other | 61,841 | — | ||||||
Income tax expense | 288,321 | 651,948 | ||||||
Expense related to defined benefit plan | 134,509 | 190,462 | ||||||
Share option | 84,463 | 91,646 | ||||||
Bonus paid by treasury shares | 25,425 | 29,643 | ||||||
Depreciation and amortization | 3,755,312 | 4,114,394 | ||||||
Bad debt for accounts receivables — trade | 27,053 | 31,546 | ||||||
Loss on disposal of property and equipment and intangible assets | 20,465 | 47,369 | ||||||
Impairment loss on property and equipment and intangible assets | 17,027 | 3,135 | ||||||
Bad debt for accounts receivable — other | 3,011 | 6,001 | ||||||
Loss relating to financial instruments at FVTPL | 41,597 | 76,142 | ||||||
Loss on disposal of investment assets | 1,283 | — | ||||||
Other financial fees | — | 142,015 | ||||||
Other expenses | 26,358 | 8,008 | ||||||
|
|
|
| |||||
3,473,779 | ||||||||
|
|
|
|
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
39. | Statements of Cash Flows, Continued |
(2) | Changes in assets and liabilities from operating activities for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Accounts receivable - trade | (95,374 | ) | ||||||
Accounts receivable - other | 54,988 | (152,038 | ) | |||||
Advanced payments | (25,377 | ) | (43,212 | ) | ||||
Prepaid expenses | 11,989 | 77,404 | ||||||
Inventories | 39,633 | (70,601 | ) | |||||
Long - term accounts receivable - other | (74,729 | ) | 83,658 | |||||
Contract assets | (13,400 | ) | (11,582 | ) | ||||
Guarantee deposits | 6,245 | 8,125 | ||||||
Accounts payable - trade | (101,465 | ) | 12,312 | |||||
Accounts payable - other | 369,693 | (109,476 | ) | |||||
Withholdings | 4,964 | (55,925 | ) | |||||
Contract liabilities | 18,910 | (2,158 | ) | |||||
Deposits received | 99 | (3,737 | ) | |||||
Accrued expenses | 116,039 | 7,505 | ||||||
Provisions | (20 | ) | (19,324 | ) | ||||
Long - term provisions | (13,792 | ) | (260 | ) | ||||
Plan assets | (132,131 | ) | (51,697) | |||||
Retirement benefit payment | (79,117 | ) | (114,897 | ) | ||||
Others | (3,877 | ) | (27,418 | ) | ||||
|
|
|
| |||||
(568,695 | ) | |||||||
|
|
|
|
(3) | Significant non-cash transactions for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||
2022 | 2021 | |||||||
Increase (decrease) in accounts payable – other relating to the acquisition of property and equipment and intangible assets | 1,063,800 | |||||||
Increase of right-of-use assets | 720,932 | 672,723 | ||||||
Change in assets and liabilities by spin-off (Note 42) | — | 14,379,397 | ||||||
Retirement of treasury shares | — | 1,965,952 | ||||||
Disposal of treasury shares (Congratulatory bonus for spin-off) | — | 114,373 | ||||||
Transfer from property and equipment to investment property | 4,732 | 23,034 |
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
39. | Statements of Cash Flows, Continued |
(4) | Reconciliation of liabilities arising from financing activities for the years ended December 31, 2022 and 2021 are as follows: |
(In millions of won) | ||||||||||||||||||||||||||||
2022 | ||||||||||||||||||||||||||||
January 1, 2022 | Cash flows | Non-cash transactions | ||||||||||||||||||||||||||
Exchange rate changes(*) | Fair value changes | Business combinations | Other changes | December 31, 2022 | ||||||||||||||||||||||||
Total liabilities from financing activities: |
| |||||||||||||||||||||||||||
Short-term borrowings | 130,000 | — | — | — | — | 142,998 | ||||||||||||||||||||||
Long-term borrowings | 394,187 | 398,529 | — | — | — | 397 | 793,113 | |||||||||||||||||||||
Debentures | 8,426,683 | (189,878 | ) | 122,350 | — | — | 7,538 | 8,366,693 | ||||||||||||||||||||
Lease liabilities | 1,534,281 | (401,054 | ) | — | — | 6,503 | 642,327 | 1,782,057 | ||||||||||||||||||||
Long-term payables – other | 2,009,833 | (400,245 | ) | — | — | — | 28,753 | 1,638,341 | ||||||||||||||||||||
Derivative financial liabilities | 111 | — | — | (111 | ) | — | — | — | ||||||||||||||||||||
Derivative financial assets | (182,661 | ) | 768 | — | (85,258 | ) | — | — | (267,151 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
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|
|
| |||||||||||||||
(461,880 | ) | 122,350 | (85,369 | ) | 6,503 | 679,015 | 12,456,051 | |||||||||||||||||||||
Other cash flows from financing activities: |
| |||||||||||||||||||||||||||
Payments of cash dividends | ||||||||||||||||||||||||||||
Payments of interest on hybrid bonds | (14,766 | ) | ||||||||||||||||||||||||||
Cash inflow from transactions with the non-controlling shareholders | 31,151 | |||||||||||||||||||||||||||
Cash outflow from transactions with the non-controlling shareholders | (367 | ) | ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
(888,002 | ) | |||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||
|
|
(*) | The effect of changes in foreign exchange rates for financial liabilities at amortized cost. |
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
39. | Statements of Cash Flows, Continued |
(4) | Reconciliation of liabilities arising from financing activities for the years ended December 31, 2022 and 2021 are as follows, Continued: |
(In millions of won) | ||||||||||||||||||||||||||||||||
2021 | ||||||||||||||||||||||||||||||||
January 1, 2021 | Cash flows | Non-cash transactions | ||||||||||||||||||||||||||||||
Exchange rate changes(*) | Fair value changes | Business combinations | Spin-off | Other changes | December 31, 2021 | |||||||||||||||||||||||||||
Total liabilities from financing activities: |
| |||||||||||||||||||||||||||||||
Short-term borrowings | (50,823 | ) | — | — | 1,825 | (48,510 | ) | 508 | 12,998 | |||||||||||||||||||||||
Long-term borrowings | 2,028,924 | 63,132 | 600 | — | 662 | (1,703,300 | ) | 4,169 | 394,187 | |||||||||||||||||||||||
Debentures | 8,579,743 | (16,755 | ) | 145,584 | — | — | (295,544 | ) | 13,655 | 8,426,683 | ||||||||||||||||||||||
Lease liabilities | 1,436,777 | (431,674 | ) | — | — | 497 | (85,322 | ) | 614,003 | 1,534,281 | ||||||||||||||||||||||
Long-term payables – other | 1,566,954 | (426,267 | ) | — | — | — | — | 869,146 | 2,009,833 | |||||||||||||||||||||||
Derivative financial liabilities | 54,176 | 332 | — | (42,282 | ) | — | (12,115 | ) | — | 111 | ||||||||||||||||||||||
Derivative financial assets | (65,136 | ) | — | — | (117,525 | ) | — | �� | — | — | (182,661 | ) | ||||||||||||||||||||
Financial liabilities at FVTPL | — | 129,123 | — | 7,996 | — | (137,119 | ) | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
(732,932 | ) | 146,184 | (151,811 | ) | 2,984 | (2,281,910 | ) | 1,501,481 | 12,195,432 | |||||||||||||||||||||||
Other cash flows from financing activities: |
| |||||||||||||||||||||||||||||||
Payments of cash dividends | ||||||||||||||||||||||||||||||||
Payments of interest on hybrid bonds | (14,766 | ) | ||||||||||||||||||||||||||||||
Acquisition of treasury shares | (76,111 | ) | ||||||||||||||||||||||||||||||
Cash inflow from transactions with the non-controlling shareholders | 444,124 | |||||||||||||||||||||||||||||||
Cash outflow from transactions with the non-controlling shareholders | (19,406 | ) | ||||||||||||||||||||||||||||||
Cash outflow from spin-off | (626,000 | ) | ||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
(1,320,679 | ) | |||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
|
|
(*) | The effect of changes in foreign exchange rates for financial liabilities at amortized cost. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
40. | Emissions Liabilities |
(1) | The quantity of emissions rights allocated free of charge for each implementation year as of December 31, 2022 are as follows: |
(In tCO2-eQ) | ||||||||||||||||
Quantities allocated in 2020 | Quantities allocated in 2021 | Quantities allocated in 2022 | Total | |||||||||||||
Emissions rights allocated free of charge | 814,842 | 1,387,671 | 1,410,823 | 3,613,336 |
(2) | Changes in emissions rights quantities the Parent Company held are as follows: |
(In tCO2-eQ) | ||||||||||||||||
Quantities allocated in 2020 | Quantities allocated in 2021 | Quantities allocated in 2022 | Total | |||||||||||||
January 1 | (60,977 | ) | 306,234 | 281,234 | 526,491 | |||||||||||
Allocation at no cost | 814,842 | 1,387,671 | 1,410,823 | 3,613,336 | ||||||||||||
Additional allocation | 217,643 | — | — | 217,643 | ||||||||||||
Other changes | — | (8,049 | ) | 3,573 | (4,476 | ) | ||||||||||
Purchase | 68,471 | — | — | 68,471 | ||||||||||||
Surrender or shall be surrendered | (1,039,979 | ) | (1,424,476 | ) | (1,421,550 | ) | (3,886,005 | ) | ||||||||
Borrowing | — | 19,854 | 108,790 | 128,644 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
December 31 | — | 281,234 | 382,870 | 664,104 | ||||||||||||
|
|
|
|
|
|
|
|
(3) | As of December 31, 2022, the estimated annual greenhouse gas emissions quantities of the Group are 1,533,206 tCO2-eQ. |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
41. | Non-current Assets Held for Sale |
(1) | On February 25, 2021, the Parent Company has decided to dispose of the investments in an associate engaged in mobility business to T map Mobility Co., Ltd. pursuant to the approval of the Board of Directors and reclassified entire shares of the investments in associates as non-current assets held for sale. The disposal of the investment in the associate was completed in 2022 after the Financial Services Commission approved the transaction. |
(In millions of won) | ||||||
December 31, 2021 | ||||||
Investments in associates | Carrot General Insurance Co., Ltd. |
(2) | The Group classified investment securities scheduled to be liquidated as non-current assets held for sale as of December 31, 2022, and the details are as follows: |
(In millions of won) | ||||||
December 31, 2022 | ||||||
Investments in associates | Daekyo Wipoongdangdang Contents Korea Fund | |||||
|
| |||||
FVTPL | Digital Content Korea Fund | 3,645 | ||||
InterVest Fund | 107 | |||||
Central Fusion Content Fund | 1,563 | |||||
|
| |||||
5,315 | ||||||
|
| |||||
|
|
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
42. | Spin-off |
(1) | In accordance with the resolution of the Board of Directors held on June 10, 2021 and shareholders’ meeting held on October 12, 2021, the Parent Company completed the spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other business and making new investments on November 1, 2021, and the registration of the spin-off was completed as of November 2, 2021. The details of the spin-off are as follows: |
Method of spin-off | Horizontal spin-off | |||
| Company | SK Telecom Co., Ltd. (Surviving Company) | ||
SK Square Co., Ltd. (Spin-off Company) | ||||
Effective date of spin-off | November 1, 2021 |
(2) | The details of financial information due to the spin-off of its business of managing investments in semiconductor, New ICT and other business and making new investments are as follows: |
1) | Statements of Income |
The details of profit or loss of discontinued operations for the year ended December 31, 2021 are as follows:
(In millions of won) | ||||
2021 | ||||
Operating revenue | ||||
Operating expenses: | 2,370,758 | |||
Labor | 824,505 | |||
Commission | 349,344 | |||
Depreciation and amortization | 287,412 | |||
Network interconnection | 863 | |||
Advertising | 158,512 | |||
Rent | 2,754 | |||
Cost of goods sold | 426,161 | |||
Others | 321,207 | |||
|
| |||
Operating profit | 12,325 | |||
Finance income | 47,417 | |||
Finance costs | 269,823 | |||
Gain relating to investments in associates and joint ventures | 1,502,147 | |||
Other non-operating income | 86,246 | |||
Other non-operating expenses | 25,566 | |||
|
| |||
Profit before income tax | 1,352,746 | |||
Income tax expense | 205,152 | |||
Profit from discontinued operations, net of taxes | ||||
|
|
42. | Spin-off, Continued |
(2) | The details of financial information due to the spin-off of its business of managing investments in semiconductor, New ICT and other business and making new investments are as follows, Continued: |
2) | Statements of Cash Flows |
The details of cash flows from discontinued operations for the year ended December 31, 2021 is as follows:
(In millions of won) | ||||
2021 | ||||
Cash flows from operating activities | ||||
Cash flows from investing activities | (967,053 | ) | ||
Cash flows from financing activities | (88,872 | ) |
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SK TELECOM CO., LTD. and its Subsidiaries
Notes to the Consolidated Financial Statements
For the years ended December 31, 2022 and 2021
(3) | The details of assets and liabilities derecognized from the financial statements due to the spin-off of its business of managing investments in semiconductor, New ICT and other business and making new investments are as follows. Subsequent to the spin-off, the Parent Company lost control over the related businesses. The spin-off was accounted for by derecognizing all related assets and liabilities. The net assets of the spin-off business as of the spin-off date was recognized in capital surplus and others. |
(In millions of won) | ||||
Amount | ||||
Current assets | ||||
Non-current assets | 19,269,615 | |||
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Total assets | ||||
Current liabilities | ||||
Non-current liabilities | 4,676,324 | |||
|
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Total liabilities | ||||
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Net assets | ||||
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(4) | As of November 1, 2021, the Parent Company has split the business division for the purpose of new investments and management of shares in related investee companies belong to semiconductors and New ICT sector. The Parent Company has the obligation to jointly and severally reimburse the liabilities incurred by the Parent Company prior to the spin-off with SK Square Co., Ltd., the spin-off company, in accordance with Article 530-9 (1) of Korean Commercial Act. |
43. | Subsequent Events |
On February 7, 2023, the Board of Directors of the Parent Company approved the disposal of treasury shares and details of the transaction are as follows:
Information of disposal | ||||
| Number of treasury shares | 324,580 Common shares | ||
Price of the treasury shares per share (in won) |
| |||
Aggregate disposal value |
| |||
Disposal date | February 9, 2023 | |||
Purpose of disposal | Allotment of shares as bonus payment | |||
Method of disposal | Over-the-counter |
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