Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2021

Commission File Number 1-14926

 

 

KT Corporation

(Translation of registrant’s name into English)

 

 

90, Buljeong-ro,

Bundang-gu, Seongnam-si,

Gyeonggi-do,

Korea

(Address of principal executive offices)

 

 

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

Form 20-F  ☒            Form 40-F  ☐

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

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

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

Yes  ☐            No  ☒

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

 

 

 


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SIGNATURES

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

 

Dated: November 26, 2021
KT Corporation
By:  

/s/ Seunghoon Chi

Name: Seunghoon Chi
Title: Vice President
By:  

/s/ Ginah Yun

Name: Ginah Yun
Title: Director


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Financial Statements

September 30, 2021 and 2020


Table of Contents

KT Corporation and Subsidiaries

Index

September 30, 2021 and 2020

 

 

 

     Page(s)

Report on Review of Interim Financial Statements

   1 – 2

Consolidated Interim Financial Statements

  

Consolidated Interim Statements of Financial Position

   3 – 4

Consolidated Interim Statements of Profit or Loss

   5

Consolidated Interim Statements of Comprehensive Income

   6

Consolidated Interim Statements of Changes in Equity

   7 – 8

Consolidated Interim Statements of Cash Flows

   9 – 10

Notes to the Consolidated Interim Financial Statements

   11 – 66


Table of Contents
LOGO   LOGO

Report on Review of Interim Financial Statements

(English Translation of a Report Originally Issued in Korean)

To the Shareholders and Board of Directors of

KT Corporation

Reviewed Financial Statements

We have reviewed the accompanying consolidated interim financial statements of KT Corporation and its subsidiaries (collectively referred to as the “Group”). These financial statements consist of the consolidated interim statement of financial position of the Group as at September 30, 2021, and the related consolidated interim statements of profit or loss and comprehensive income for the three-month and nine-month periods ended September 30, 2021 and 2020, and consolidated interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2021 and 2020, and a summary of significant accounting policies and other explanatory notes, expressed in Korean won.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated interim financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”) 1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of consolidated interim financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to issue a report on these consolidated interim financial statements based on our review.

We conducted our review in accordance with quarterly or semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe the accompanying consolidated interim financial statements are not presented fairly, in all material respects, in accordance with Korean IFRS 1034 Interim Financial Reporting.

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


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Other Matters

We have audited the consolidated statement of financial position of the Group as at December 31, 2020, and the related consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the year then ended, in accordance with Korean Standards on Auditing. We expressed an unqualified opinion on those financial statements, not presented herein, in our audit report dated March 9, 2021. The consolidated statement of financial position as at December 31, 2020, presented herein for comparative purposes, is consistent, in all material respects, with the above audited statement of financial position as at December 31, 2020.

Review standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries.

 

LOGO

November 15, 2021

Seoul, Korea

 

This report is effective as of November 15, 2021, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying consolidated interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

 

2


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Financial Position

September 30, 2021 and December 31, 2020

 

 

(in millions of Korean won)    Notes      September 30, 2021
(Unaudited)
     December 31, 2020  

Assets

 

  

Current assets

 

  

Cash and cash equivalents

     4      W 3,088,946      W 2,634,624  

Trade and other receivables, net

     4,5        5,438,634        4,902,471  

Other financial assets

     4,6        848,418        1,202,840  

Current tax assets

        7,216        2,059  

Inventories, net

     7        406,638        534,636  

Current assets held for sale

     9        1,198        1,198  

Other current assets

     8        2,106,300        1,876,352  
     

 

 

    

 

 

 

Total current assets

        11,897,350        11,154,180  
     

 

 

    

 

 

 

Non-current assets

        

Trade and other receivables, net

     4,5        1,028,995        1,250,769  

Other financial assets

     4,6        518,592        544,347  

Property and equipment, net

     10        13,919,519        14,206,119  

Right-of-use assets, net

     17        1,255,400        1,217,179  

Investment properties, net

     10        1,691,281        1,368,453  

Intangible assets, net

     10        3,082,531        2,161,258  

Investments in associates and joint ventures

     11        1,252,714        557,881  

Deferred tax assets

        438,543        433,698  

Other non-current assets

     8        746,250        768,661  
     

 

 

    

 

 

 

Total non-current assets

        23,933,825        22,508,365  
     

 

 

    

 

 

 

Total assets

      W 35,831,175      W 33,662,545  
     

 

 

    

 

 

 

 

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

3


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Financial Position

September 30, 2021 and December 31, 2020

 

 

(in millions of Korean won)    Notes      September 30, 2021
(Unaudited)
    December 31, 2020  

Liabilities

       

Current liabilities

       

Trade and other payables

     4,12      W 6,155,844   W 6,210,099  

Borrowings

     4,13        1,588,224       1,418,114  

Other financial liabilities

     4, 6        10,471       2,493  

Current tax liabilities

        368,402       232,225  

Provisions

     14        167,980       165,990  

Deferred income

        66,775       60,252  

Other current liabilities

     8        1,023,624       1,103,299  
     

 

 

   

 

 

 

Total current liabilities

        9,381,320       9,192,472  
     

 

 

   

 

 

 

Non-current liabilities

       

Trade and other payables

     4,12        1,082,714       807,540  

Borrowings

     4,13        6,807,884       5,898,184  

Other financial liabilities

     4,6        375,793       260,676  

Net defined benefit liabilities

     15        503,832       378,087  

Provisions

     14        86,335       86,202  

Deferred income

     20        172,307       149,050  

Deferred tax liabilities

        410,324       429,331  

Other non-current liabilities

     8        913,180       909,570  
     

 

 

   

 

 

 

Total non-current liabilities

        10,352,369       8,918,640  
     

 

 

   

 

 

 

Total liabilities

        19,733,689       18,111,112  
     

 

 

   

 

 

 

Equity attribute to owners of the Controlling Company

       

Share capital

        1,564,499       1,564,499  

Share premium

        1,440,258       1,440,258  

Retained earnings

     18        12,821,729       12,155,420  

Accumulated other comprehensive income

        25,996       86,051  

Other components of equity

     19        (1,351,143     (1,234,784
     

 

 

   

 

 

 
        14,501,339       14,011,444  

Non-controlling interests

        1,596,147       1,539,989  
     

 

 

   

 

 

 

Total equity

        16,097,486       15,551,433  
     

 

 

   

 

 

 

Total liabilities and equity

      W 35,831,175     W 33,662,545  
     

 

 

   

 

 

 

 

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

4


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Profit or Loss

Three-Month and Nine-Month Periods Ended September 30, 2021 and 2020

 

 

            Periods Ended September 30  
            2021
(Unaudited)
     2020
(Unaudited)
 
(in millions of Korean won, except per share amounts)    Notes      Three months      Nine months      Three months      Nine months  

Operating revenue

     20      W 6,217,382      W 18,274,420      W 6,001,198      W 17,709,417  

Operating expenses

     21        5,834,986        16,971,989        5,707,153        16,687,029  
     

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit

        382,396        1,302,431        294,045        1,022,388  

Other income

     22        78,240        212,023        122,458        236,122  

Other expenses

     22        82,535        198,851        99,780        236,797  

Finance income

     23        229,331        486,114        35,326        301,040  

Finance costs

     23        191,269        428,440        42,775        327,983  

Share of net profits (losses) of associates and joint ventures

     11        64,137        97,888        4,907        (3,432
     

 

 

    

 

 

    

 

 

    

 

 

 

Profit before income tax expense

        480,300        1,471,165        314,181        991,338  

Income tax expense

     24        142,554        436,156        84,248        325,138  
     

 

 

    

 

 

    

 

 

    

 

 

 

Profit for the period

      W 337,746      W 1,035,009      W 229,933      W 666,200  
     

 

 

    

 

 

    

 

 

    

 

 

 

Profit for the period attributable to:

              

Owners of the Controlling Company

      W 310,852      W 952,293      W 203,288      W 590,314  

Non-controlling interest

        26,894        82,716        26,645        75,886  

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

     25              

Basic earnings per share

      W 1,324      W 4,039      W 828      W 2,407  

Diluted earnings per share

        1,322        4,036        828        2,405  

 

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

5


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Comprehensive Income

Three-Month and Nine-Month Periods Ended September 30, 2021 and 2020

 

 

            Periods Ended September 30  
            2021
(Unaudited)
    2020
(Unaudited)
 
(in millions of Korean won)    Notes      Three months     Nine months     Three months     Nine months  

Profit for the period

      W 337,746     W 1,035,009     W 229,933     W 666,200  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

           

Items that will not be reclassified to profit or loss:

           

Remeasurements of the net defined benefit liabilities

     15        6,562       15,706       2,573       (625

Share of remeasurement gain of associates and joint ventures

        1,084       (1,502     (86     (14

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

     6        (860     15,013       15,704       56,673  

Items that may be subsequently reclassified to profit or loss:

           

Valuation gain (loss) on cash flow hedges

     6        91,363       141,218       (34,003     40,176  

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

        (93,735     (137,861     42,431       (34,778

Share of other comprehensive income from associates and joint ventures

        (3,155     (24,926     (4,237     (3,659

Exchange differences on translation of foreign operations

        (6,506     (1,795     10,601       694  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income for the period, net of tax

        (5,247     5,853       32,983       58,467  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

      W 332,499     W 1,040,862     W 262,916     W 724,667  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period attributable to:

           

Owners of the Controlling Company

      W 305,661     W 953,239     W 225,627     W 640,785  

Non-controlling interests

        26,838       87,623       37,289       83,882  

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

 

6


Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Changes in Equity

Nine-Month Periods Ended September 30, 2021 and 2020

 

 

            Attributable to owners of the Controlling Company              
(in millions of Korean won)    Notes      Share
capital
     Share
premium
     Retained
earnings
    Accumulated
other comprehensive
income
    Other
components
of equity
    Total    

Non-controlling

interest

   

Total

equity

 

Balance at January 1, 2020

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

Comprehensive income

                     

Profit for the period

        —          —          590,314       —         —         590,314       75,886       666,200  

Remeasurements of net defined benefit liabilities

     15        —          —          1,410       —         —         1,410       (2,035     (625

Valuation gain (loss) on cash flow hedge

     6        —          —          —         5,471       —         5,471       (73     5,398  

Share of other comprehensive income (loss) of associates and joint ventures

        —          —          —         (3,212     —         (3,212     (447     (3,659

Share of remeasurement of the net defined benefit liabilities of associates and joint ventures

        —          —          (13     —         —         (13     (1     (14

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

        —          —          184,330       (138,461     —         45,869       10,804       56,673  

Exchange differences on translation of foreign operations

        —          —          —         946       —         946       (252     694  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        —          —          776,041       (135,256     —         640,785       83,882       724,667  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                —            

Transactions with owners

                     

Dividends paid by the Controlling Company

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

Dividends paid to non-controlling interest of subsidiaries

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

Appropriations of loss on disposal of treasury stock

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

Change in ownership interest in subsidiaries

        —          —          —         —         10,081       10,081       23,266       33,347  

Disposal of treasury stock

        —          —          —         —         3,640       3,640       —         3,640  

Others

        —          —          —         —         20,491       20,491       —         20,491  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

        —          —          (271,456     —         35,902       (235,554     (17,536     (253,090
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2020 (Unaudited)

      W 1,564,499      W 1,440,258      W 12,138,365     W 59,678     W (1,134,181   W 14,068,619     W 1,586,506     W 15,655,125  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

7


Table of Contents

KT Corporation and Subsidiaries

Consolidated Statements of Changes in Equity

Nine-Month Periods Ended September 30, 2021 and 2020

 

 

            Attributable to owners of the Controlling Company              
(in millions of Korean won)    Notes      Share
capital
     Share
premium
     Retained
earnings
    Accumulated
other comprehensive
income
    Other
components
of equity
    Total    

Non-controlling

interest

   

Total

equity

 

Balance as at January 1, 2021

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

Comprehensive income

                     

Profit for the period

        —          —          952,293       —         —         952,293       82,716       1,035,009  

Remeasurements of net defined benefit liabilities

     15        —          —          9,410       —         —         9,410       6,296       15,706  

Valuation gain on cash flow hedge

     6        —          —          —         3,314       —         3,314       43       3,357  

Share of other comprehensive income (loss) of associates and joint ventures

        —          —          —         (19,758     —         (19,758     (5,168     (24,926

Share of remeasurement of the net defined benefit liabilities of associates and joint ventures

        —          —          (1,462     —         —         (1,462     (40     (1,502

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

        —          —          53,053       (41,109     —         11,944       3,069       15,013  

Exchange differences on translation of foreign operations

        —          —          —         (2,502     —         (2,502     707       (1,795
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        —          —          1,013,294       (60,055     —         953,239       87,623       1,040,862  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners

                     

Dividends paid by the Controlling Company

        —          —          (326,487     —         —         (326,487     —         (326,487

Dividends paid to non-controlling interest of subsidiaries

        —          —          —         —         —         —         (23,762     (23,762

Appropriations of loss on disposal of treasury stock

        —          —          (20,498     —         20,498       —         —         —    

Change in consolidation scope

        —          —          —         —         —         —         781       781  

Change in ownership interest in subsidiaries

        —          —          —         —         7,581       7,581       (9,634     (2,053

Acquisition of treasury stock

        —          —          —         —         (190,105     (190,105     —         (190,105

Disposal of treasury stock

        —          —          —         —         3,056       3,056       —         3,056  

Others

        —          —          —         —         42,611       42,611       1,150       43,761  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

        —          —          (346,985     —         (116,359     (463,344     (31,465     (494,809
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at September 30, 2021 (Unaudited)

      W 1,564,499      W 1,440,258      W 12,821,729     W 25,996     W (1,351,143   W 14,501,339     W 1,596,147     W 16,097,486  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

8


Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Cash Flows

Nine-Month Periods Ended September 30, 2021 and 2020

 

 

            Nine-Month Period Ended September 30  
(in millions of Korean won)    Notes      2021
(Unaudited)
    2020
(Unaudited)
 

Cash flows from operating activities

       

Cash generated from operations

     26      W 4,443,043     W 3,680,864  

Interest paid

        (196,435     (195,545

Interest received

        196,709       189,882  

Dividends received

        70,042       19,098  

Income tax paid

        (351,164     (19,168
     

 

 

   

 

 

 

Net cash inflow from operating activities

        4,162,195       3,675,131  
     

 

 

   

 

 

 

Cash flows from investing activities

       

Collection of loans

        40,116       49,505  

Disposal of financial assets at fair value through profit or loss

        378,167       282,114  

Disposal of financial assets at amortized cost

        569,150       333,387  

Disposal of financial assets at fair value through comprehensive income

        207,244       351,066  

Disposal of assets held-for-sale

        —         119,524  

Disposal of investments in associates and joint ventures

        13,103       122  

Disposal of property and equipment and investment properties

        46,312       18,241  

Disposal of intangible assets

        10,159       10,969  

Disposal of right-of-use assets

        240       211  

Acquisition of new subsidiary

        39,340       11,045  

Discontinued operations

        —         205  

Loans granted

        (43,773     (38,245

Acquisition of financial assets at fair value through profit or loss

        (314,483     (439,135

Acquisition of financial assets at amortized cost

        (406,018     (428,209

Acquisition of financial assets at fair value through other comprehensive income

        (37,019     (38

Acquisition of investments in associates and joint ventures

        (464,712     (290,911

Acquisition of property and equipment and investment properties

        (2,643,952     (2,370,338

Acquisition of intangible assets

        (571,017     (465,207

Acquisition of right-of-use assets

        (3,329     (7,118

Acquisition of derivatives

        (58     —    

Decrease in cash due to business combination, etc.

        (634,921     —    
     

 

 

   

 

 

 

Net cash outflow from investing activities

        (3,815,451     (2,862,812
     

 

 

   

 

 

 

 

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

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Table of Contents

KT Corporation and Subsidiaries

Consolidated Interim Statements of Cash Flows

Nine-Month Periods Ended September 30, 2021 and 2020

 

 

            Nine-Month Period Ended September 30  
(in millions of Korean won)    Notes      2021
(Unaudited)
    2020
(Unaudited)
 

Cash flows from financing activities

       

Proceeds from borrowings

        2,503,603       1,678,326  

Settlement of derivative assets and liabilities, net

        (1,205     16,452  

Transaction with non-controlling interest

        56,847       25,052  

Cash inflow from other financing activities

        6,215       149  

Repayments of borrowings

        (1,648,654     (1,184,121

Dividends paid

        (350,249     (310,465

Decrease in finance lease liabilities

        (269,651     (338,203

Decrease in other financal liabilities

        —         (13,674

Acquisition of treasury stock

        (192,684     (935
     

 

 

   

 

 

 

Net cash inflow (outflow) from financing activities

        104,222       (127,419
     

 

 

   

 

 

 

Effect of exchange rate change on cash and cash equivalents

        3,356       152  
     

 

 

   

 

 

 

Net increase in cash and cash equivalents

        454,322       685,052  

Cash and cash equivalents

       

Beginning of the period

        2,634,624       2,305,894  
     

 

 

   

 

 

 

End of the period

      W 3,088,946     W 2,990,946  
     

 

 

   

 

 

 

 

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

10


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements    

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

1.

General Information

The consolidated financial statements include the accounts of KT Corporation, which is the controlling company as defined under Korean IFRS 1110 Consolidated Financial Statements, and its 74 controlled subsidiaries as described in Note 1.2 (collectively referred to as the “Group”).

 

  1.1

The Controlling Company

KT Corporation (the “Controlling Company”) commenced operations on January 1, 1982, when it spun off from the Korea Communications Commission (formerly the Korean Ministry of Information and Communications) to provide telephone services and to engage in the development of advanced communications services under the Act of Telecommunications of Korea. The headquarters are located in Seongnam City, Gyeonggi Province, Republic of Korea, and the address of its registered head office is 90, Buljeong-ro, Bundang-gu, Seongnam City, Gyeonggi Province.

On October 1, 1997, upon the announcement of the Government-Investment Enterprises Management Basic Act and the Privatization Law, the Controlling Company became a government-funded institution under the Commercial Code of Korea.

On December 23, 1998, the Controlling Company’s shares were listed on the Korea Stock Exchange.

On May 29, 1999, the Controlling Company issued 24,282,195 additional shares and issued American Depository Shares (ADS), which represents new shares and 20,813,311 government-owned shares, on the New York Stock Exchange. On July 2, 2001, the additional ADS representing 55,502,161 government-owned shares were issued at the New York Stock Exchange.

In 2002, the Controlling Company acquired the entire government-owned shares in accordance with the Korean government’s privatization plan. As at September 30, 2021, the Korean government does not own any shares in the Controlling Company.

 

  1.2

Consolidated Subsidiaries

The consolidated subsidiaries as at September 30, 2021 and December 31, 2020, are as follows:

 

               Controlling percentage
ownership1 (%)
     
Subsidiary    Type of business    Location   

September 30,

2021

   

December 31,

2020

    Closing
month

KT Linkus Co., Ltd.

  

Public telephone maintenance

   Korea      92.4     92.4   December

KT Submarine Co., Ltd. 2,4

  

Submarine cable construction and maintenance

   Korea      39.3     39.3   December

KT Telecop Co., Ltd.

  

Security service

   Korea      86.8     86.8   December

KT Alpha Co., Ltd. (KT Hitel Co., Ltd.)

  

Data communication

   Korea      73.0     67.1   December

KT Service Bukbu Co., Ltd.

  

Opening services of fixed line

   Korea      67.3     67.3   December

KT Service Nambu Co., Ltd.

  

Opening services of fixed line

   Korea      77.3     77.3   December

KT Commerce Inc.

  

B2C, B2B service

   Korea      100.0     100.0   December

KT Strategic Investment Fund No.2

  

Investment fund

   Korea      100.0     100.0   December

 

11


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

               Controlling percentage
ownership1 (%)
     
Subsidiary    Type of business    Location   

September 30,

2021

   

December 31,

2020

    Closing
month

KT Strategic Investment Fund No.3

  

Investment fund

   Korea      100.0     100.0   December

KT Strategic Investment Fund No.4

  

Investment fund

   Korea      100.0     100.0   December

KT Strategic Investment Fund No.5

  

Investment fund

   Korea      100.0     100.0   December

BC-VP Strategic Investment Fund No.1

  

Investment fund

   Korea      100.0     100.0   December

BC Card Co., Ltd.

  

Credit card business

   Korea      69.5     69.5   December

VP Inc.

  

Payment security service for credit card, others

   Korea      50.9     50.9   December

H&C Network

  

Call center for financial sectors

   Korea      100.0     100.0   December

BC Card China Co., Ltd.

  

Software development and data processing

   China      100.0     100.0   December

INITECH Co., Ltd. 4

  

Internet banking ASP and security solutions

   Korea      58.2     58.2   December

Smartro Co., Ltd.

  

VAN (Value Added Network) business

   Korea      64.5     64.5   December

KTDS Co., Ltd. 4

  

System integration and maintenance

   Korea      95.5     95.5   December

KT M&S Co., Ltd.

  

PCS distribution

   Korea      100.0     100.0   December

GENIE Music Corporation 2,4

  

Online music production and distribution

   Korea      36.2     36.2   December

KT MOS Bukbu Co., Ltd. 4

  

Telecommunication facility maintenance

   Korea      100.0     100.0   December

KT MOS Nambu Co., Ltd. 4

  

Telecommunication facility maintenance

   Korea      98.4     98.4   December

KT Skylife

  

Satellite TV

   Korea      50.3     50.3   December

Skylife TV Co., Ltd.

  

TV contents provider

   Korea      100.0     92.6   December

KT Estate Inc.

  

Residential building development and supply

   Korea      100.0     100.0   December

KT AMC Co., Ltd.

  

Asset management and consulting services

   Korea      100.0     100.0   December

NEXR Co., Ltd.

  

Cloud system implementation

   Korea      100.0     100.0   December

KTGDH Co., Ltd.

  

Data center development and related service

   Korea      100.0     100.0   December

KT Sat Co., Ltd.

  

Satellite communication business

   Korea      100.0     100.0   December

Nasmedia, Co., Ltd.3,4

  

Solution provider and IPTV advertisement sales business

   Korea      44.0     44.0   December

KT Sports Co., Ltd.

  

Management of sports group

   Korea      100.0     100.0   December

KT Music Contents Fund No.2

  

Music contents investment business

   Korea      100.0     100.0   December

KT-Michigan Global Content Fund

  

Content investment business

   Korea      88.6     88.6   December

Autopion Co., Ltd.

  

Information and communication service

   Korea      100.0     100.0   December

KTCS Corporation 2,4

  

Database and online information provider

   Korea      32.2     31.9   December

KTIS Corporation 2,4

  

Database and online information provider

   Korea      31.4     30.8   December

KT M Mobile Co., Ltd.

  

Special category telecommunications operator and sales of communication device

   Korea      100.0     100.0   December

KT Investment Co., Ltd.

  

Technology business finance

   Korea      100.0     100.0   December

Whowho&Company Co., Ltd.

  

Software development and supply

   Korea      100.0     100.0   December

PlayD Co., Ltd.

  

Advertising agency

   Korea      70.4     70.4   December

Next Connect PFV

  

Residential building development and supply

   Korea      100.0     100.0   December

KT Rwanda Networks Ltd.

  

Network installation and management

   Rwanda      51.0     51.0   December

AOS Ltd.

  

System integration and maintenance

   Rwanda      51.0     51.0   December

 

12


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

               Controlling percentage
ownership1 (%)
      
Subsidiary    Type of business    Location    September 30,
2021
     December 31,
2020
     Closing
month

KT Japan Co., Ltd.

  

Foreign telecommunication business

   Japan      100.0      100.0    December

East Telecom LLC

  

Fixed line internet business

   Uzbekistan      91.6      91.6    December

KT America, Inc.

  

Foreign investment business

   USA      100.0      100.0    December

PT. BC Card Asia Pacific

  

Software development and supply

   Indonesia      99.9      99.9    December

KT Hong Kong Telecommunications Co., Ltd.

  

Fixed line telecommunication business

   Hong Kong      100.0      100.0    December

Korea Telecom Singapore Pte. Ltd.

  

Foreign investment business

   Singapore      100.0      100.0    December

Texnoprosistem LLP

  

Fixed line internet business

   Uzbekistan      100.0      100.0    December

Nasmedia Thailand Co., Ltd

  

Internet advertising solution

   Thailand      99.9      99.9    December

KT Huimangjieum

  

Manufacturing

   Korea      100.0      100.0    December

K-REALTY RENTAL HOUSING REIT 3

  

Residential building

   Korea      88.6      88.6    December

Storywiz

  

Contents and software development and supply

   Korea      100.0      100.0    December

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

  

Telecommunication facility construction and maintenance

   Korea      100.0      100.0    December

KT Studio Genie Co., Ltd.

  

Data communication service and data communication construction business

   Korea      100.0      —        December

KHS Corporation

  

Operation and maintenance of facilities

   Korea      100.0      —        December

Lolab Co., Ltd.

  

Truck transportation and trucking arrangement business

   Korea      80.0      —        December

HCN Co., Ltd.

  

Cable television service

   Korea      100.0      —        December

MEDIA GENIE Co., Ltd.

  

TV contents provider

   Korea      100.0      —        December

KT Seezn Co., Ltd.

  

Movies, videos and TV contents production and distribution

   Korea      100.0      —        December

MILLIE Co., Ltd.

  

Book contents service

   Korea      38.6      —        December

KT ES Pte. Ltd.

  

Foreign investment business

   Singapore      57.6      —        December

Epsilon Global Communications PTE. Ltd.

  

Foreign investment business

   Singapore      100.0      —        December

Epsilon Telecommunications (SP) PTE. Ltd.

  

Fixed line telecommunication business

   Singapore      100.0      —        December

Epsilon Telecommunications (US) PTE. Ltd.

  

Fixed line telecommunication business

   Singapore      100.0      —        December

Epsilon Telecommunications Limited

  

Fixed line telecommunication business

   UK      100.0      —        December

7D Digital Limited

  

Software development

   UK      100.0      —        December

Epsilon Telecommunications (HK) Limited

  

Fixed line telecommunication business

   Hong kong      100.0      —        December

Epsilon US Inc.

  

Fixed line telecommunication business

   USA      100.0      —        December

Epsilon Telecommunications (BG) EOOD

  

Employee support service

   Bulgaria      100.0      —        December

Epsilon M E A General Trading LLC

  

Local counter work

   Dubai      49.0      —        December

K-REALTY RENTAL HOUSING REIT V

  

Residential building

   Korea      100.0      —        December

 

1 

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

2 

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

3 

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

4 

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

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

  1.3

Changes in Scope of Consolidation

Subsidiaries newly included/excluded in/from the consolidation during the nine-month period ended September 30, 2021:

 

Changes   

  

Location

  

Name of subsidiary

  

Reason

Included    Korea    KT Studio Genie Co., Ltd.    Newly established
Included    Korea    Lolab    Newly established
Included    Korea    KHS Corporation    Transferred
Included    Korea    HCN Co., Ltd.    Transferred
Included    Korea    MEDIA GENIE Co., Ltd.    Transferred
Included    Korea    KT Seezn Co., Ltd.    Transferred
Included    Korea    MILLIE Co., Ltd.    Transferred
Included    Singapore    KT ES Pte. Ltd.    Newly established
Included    Singapore   

Epsilon Global Communications

PTE. Ltd.

   Transferred
Included    Singapore   

Epsilon Telecommunications

(SP) PTE. Ltd.

   Transferred
Included    Singapore   

Epsilon Telecommunications

(US) PTE. Ltd.

   Transferred
Included    UK    Epsilon Telecommunications Limited    Transferred
Included    UK    7D Digital Limited    Transferred
Included    Hong kong   

Epsilon Telecommunications

(HK) Limited

   Transferred
Included    USA    Epsilon US Inc.    Transferred
Included    Bulgaria    Epsilon Telecommunications (BG) EOOD    Transferred
Included    Dubai    Epsilon M E A General Trading L.L.C    Transferred
Included    Korea   

K-REALTY RENTAL HOUSING

REIT V

   Newly established
Excluded    Belgium    KT Belgium    Liquidated
Excluded    Korea    KT Powertel Co., Ltd.    Shares disposed
Excluded    China    Korea Telecom China Co., Ltd.    Liquidated
Excluded    Poland    KBTO Sp.z o. o.    Liquidated
Excluded    Korea    GE Premier 1st Corporate Restructuring Real Estate Investment Trust Co.    Liquidated
Excluded    Korea    KT M Hows Co., Ltd.    Merged
Excluded    Netherlands    KT Dutch B.V.    Liquidated
Excluded    Korea    KT Music Contents Fund No.1    Liquidated

 

14


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Summarized information for consolidated subsidiaries as at September 30, 2021 and December 31, 2020 and for the nine-month periods ended September 30, 2021 and 2020, is as follows:

 

(in millions of Korean won)    September 30, 2021  
     Total assets      Total liabilities      Operating
revenues
     Profit (loss)
for the period
 

KT Linkus Co., Ltd.

   W 54,019      W 51,333      W 59,428      W  (1,608

KT Submarine Co., Ltd.

     113,957        12,289        24,280        (472

KT Telecop Co., Ltd.

     357,571        228,492        376,244        3,990  

KT Alpha Co., Ltd. (KT Hitel Co., Ltd.)

     371,984        152,797        321,571        (10,181

KT Service Bukbu Co., Ltd.

     55,242        51,179        169,171        (208

KT Service Nambu Co., Ltd.

     65,141        58,260        200,794        158  

BC Card Co., Ltd. 1

     3,798,630        2,425,541        2,634,461        77,335  

H&C Network 1

     264,569        54,757        234,045        1,553  

Nasmedia Co., Ltd. 1

     420,981        209,000        87,827        18,618  

KTDS Co., Ltd. 1

     237,358        169,043        412,442        21,311  

KT M&S Co., Ltd.

     245,592        208,026        503,577        3,612  

GENIE Music Corporation

     279,040        119,987        181,998        8,708  

KT MOS Bukbu Co., Ltd.

     32,318        23,766        50,397        2,557  

KT MOS Nambu Co., Ltd.

     33,409        22,522        50,204        2,067  

KT Skylife Co., Ltd. 1

     1,225,415        444,279        520,374        48,122  

KT Estate Inc. 1

     2,065,999        662,395        240,729        39,351  

KTGDH Co., Ltd.

     11,352        1,602        3,297        416  

KT Sat Co., Ltd.

     597,981        43,289        128,620        16,110  

KT Sports Co., Ltd.

     33,364        21,095        39,284        646  

KT Music Contents Fund No.2

     14,942        204        211        2  

KT-Michigan Global Content Fund

     6,990        103        13,591        13,479  

Autopion Co., Ltd.

     4,312        3,991        2,970        (615

KT M Mobile Co., Ltd.

     130,557        38,646        150,479        (5,444

KT Investment Co., Ltd. 1

     75,959        54,726        18,180        (699

KTCS Corporation 1

     368,523        186,467        669,910        17,102  

KTIS Corporation

     349,636        172,535        346,531        12,285  

Next Connect PFV

     493,087        140,868        —          (4,778

KT Japan Co., Ltd. 1

     1,474        2,633        1,135        (142

KT America, Inc.

     4,781        49        4,798        151  

KT Rwanda Networks Ltd. 2

     128,263        232,005        17,472        (21,074

AOS Ltd. 2

     11,861        2,830        5,478        1,017  

KT Hong Kong Telecommunications Co., Ltd.

     8,681        3,799        13,824        924  

KT Huimangjieum 1

     6,418        2,931        8,297        622  

Storywiz

     19,852        10,822        13,688        (2,488

 

15


Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won)    September 30, 2021  
     Total assets      Total liabilities      Operating
revenues
     Profit (loss)
for the period
 

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

     101,170        64,596        136,593        (4,572

KT Studio Genie Co., Ltd.

     236,766        13,439        98        (3,689

Lolab Co., Ltd.

     26,687        756        949        (46

East Telecom LLC

     34,400        21,780        5,705        1,291  

MEDIA GENIE Co., Ltd.

     22,186        5,157        —          —    

KT Seezn Co., Ltd.

     91,352        22,157        20,481        6,261  

KT ES Pte. Ltd.

     245,237        80,536        —          —    
           
(in millions of Korean won)    December 31, 2020      September 30, 2020  
     Total assets      Total liabilities      Operating
revenues
     Profit (loss)
for the period
 

KT Powertel Co., Ltd.

   W 119,694      W 18,833      W 46,216      W 2,574  

KT Linkus Co., Ltd.

     58,372        54,022        61,458        (3,911

KT Submarine Co., Ltd.

     116,813        14,032        47,522        8,782  

KT Telecop Co., Ltd.

     318,456        193,737        259,638        (1,128

KT Alpha Co., Ltd. (KT Hitel Co., Ltd.)

     288,949        92,599        247,207        (2,444

KT Service Bukbu Co., Ltd.

     60,825        56,554        159,167        (2,495

KT Service Nambu Co., Ltd.

     58,182        51,460        194,802        (2,906

BC Card Co., Ltd. 1

     3,084,398        1,778,751        2,529,961        73,746  

H&C Network 1

     269,651        61,365        240,521        2,352  

Nasmedia Co., Ltd. 1

     422,039        221,371        79,668        14,566  

KTDS Co., Ltd. 1

     183,297        133,129        333,369        9,984  

KT M Hows Co., Ltd.

     104,704        76,315        31,544        6,058  

KT M&S Co., Ltd.

     231,260        197,306        482,068        434  

GENIE Music Corporation

     250,538        88,488        184,330        7,458  

KT MOS Bukbu Co., Ltd.

     32,167        26,070        47,436        1,334  

KT MOS Nambu Co., Ltd.

     33,765        24,947        52,953        2,968  

KT Skylife Co., Ltd. 1

     919,476        175,039        522,194        51,061  

KT Estate Inc. 1

     1,689,601        325,429        287,264        10,752  

KTGDH Co., Ltd.

     11,003        1,669        3,151        433  

KT Sat Co., Ltd.

     630,740        92,791        127,525        10,140  

KT Sports Co., Ltd.

     26,572        14,940        35,335        1,642  

KT Music Contents Fund No.1

     4,844        1,525        280        230  

KT Music Contents Fund No.2

     15,021        285        135        (77

KT-Michigan Global Content Fund

     10,382        175        106        (38

Autopion Co., Ltd.

     4,903        4,961        4,743        (386

KT M Mobile Co., Ltd.

     129,011        27,281        123,153        (3,436

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won)    December 31, 2020      September 30, 2020  
     Total assets      Total liabilities      Operating
revenues
     Profit (loss)
for the period
 

KT Investment Co., Ltd. 1

     115,627        93,695        2,237        767  

KTCS Corporation 1

     384,919        215,175        645,859        10,628  

KTIS Corporation

     294,289        126,894        337,536        11,466  

Next Connect PFV

     394,268        37,271        8        (1,424

KT Japan Co., Ltd.1

     2,694        2,622        1,175        (179

Korea Telecom China Co., Ltd.

     381        21        427        (111

KT Dutch B.V.1

     29,585        10,109        19,190        4,893  

KT America, Inc.

     4,498        125        4,795        265  

KT Rwanda Networks Ltd.2

     114,768        191,781        13,139        (26,726

KT Belgium

     87,608        —          —          26  

KBTO sp.zo.o.

     438        117        468        (2,698

AOS Ltd.2

     11,812        3,875        4,402        395  

KT Hong Kong Telecommunications Co., Ltd.

     6,159        2,800        12,655        1,073  

KT Huimangjieum

     3,720        2,787        2,674        201  

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

     5,703        1,165        91        28  

Storywiz Co., Ltd.

     21,594        10,065        11,217        (1,612

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

     138,220        102,963        145,552        (1,084

 

1 

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

2 

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

 

2.

Significant Accounting Policies

 

  2.1

Basis of Preparation

The Group maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying consolidated interim financial statements have been condensed, restructured and translated into English from the Korean language financial statements.

The consolidated interim financial statements of the Group as at and for the nine-month periods ended September 30, 2021, have been prepared in accordance with Korean IFRS 1034 Interim Financial Reporting. These consolidated interim financial statements have been prepared in accordance with Korean IFRS which is effective or has been early adopted as at September 30, 2021.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

  2.2

Changes in Accounting Policies and Disclosures

(1) New and amended standards and interpretations adopted by the Group

The Group has applied the following standards and interpretations for the first time for their annual reporting period commencing January 1, 2021.

 

   

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

As a practical expedient, a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification, and the amounts recognized in profit or loss as a result of applying this exemption should be disclosed. The amendments do not have a significant impact on the financial statements.

 

   

Amendments to Korean IFRS 1109 Financial Instruments, Korean IFRS 1039 Financial Instruments: Recognition and Measurement, Korean IFRS 1107 Financial Instruments: Disclosure, Korean IFRS 1104 Insurance Contracts and Korean IFRS 1116 Lease – Interest Rate Benchmark Reform (Phase 2 amendments)

In relation to interest rate benchmark reform, the amendments provide exceptions including adjust effective interest rate instead of book amounts when interest rate benchmark of financial instruments at amortized costs is replaced and apply hedge accounting without discontinuance although the interest rate benchmark is replaced in hedging relationship. The Group does not expect that these amendments have a significant impact on financial statements.

(2) New standards and interpretations not yet adopted by the Group

Certain new accounting standard and interpretation that have been published but have not been early adopted by the Group, are set out below.

 

   

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

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

 

   

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

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

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

 

   

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

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

 

   

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

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

 

   

Amendments to Korean IFRS 1116 Lease – Concession on COVID-19—Related Rent Concessions Beyond June 30, 2021

The application of the practical expedient where a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification is extended to lease payments originally due on or before June 30, 2022. A lessee shall apply the practical expedient consistently to eligible contracts with similar characteristics and in similar circumstances. The amendment should be applied for annual periods beginning on or after April 1, 2021, and earlier application is permitted. The Group does not expect that these amendments have a significant impact on the financial statements.

 

   

Annual improvements to Korean IFRS 2018-2020

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

 

   

Korean IFRS 1101 First Time Adoption of Korean International Financial Reporting Standards – Subsidiaries That Are First-Time Adopters

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

   

Korean IFRS 1109 Financial Instruments – Fees Related to the 10% Test for Derecognition of Financial Liabilities

 

   

Korean IFRS 1116 Leases – Lease Incentives

 

   

Korean IFRS 1041 Agriculture – Measuring Fair Value

 

  2.3

Significant Accounting Policies

Significant accounting policies and method of computation used in the preparation of the consolidated interim financial statements are consistent with those of the consolidated financial statements for the year ended December 31, 2020, except for the changes due to the application of amendment and enactments of standards described in Note 2.1 (1) and the one described below.

(1) Income Tax Expense

Income tax expense for the interim period is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate is applied to the pre-tax income.

 

3.

Critical Accounting Estimates and Assumptions

The preparation of financial statements requires the Group to make estimates and assumptions concerning the future. The estimates and assumptions are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. Actual results may differ from these estimates.

The spread of COVID-19 has been a material impact on domestic and global economy. It may have a negative impact; such as, decrease in productivity, decrease or delay in sales, collection of existing receivables and others. Accordingly, it may have a negative impact on the financial position and financial performance of the Group, and the impact is expected to be continued to the consolidated annual financial statements in 2021.

Significant accounting estimates and assumptions applied in the preparation of the consolidated interim financial statements can be adjusted depending on changes in the uncertainty from COVID-19. Also, the ultimate effect of COVID-19 to the Group’s business, financial position and financial performance cannot presently determined.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

4.

Financial Instruments by Category

Financial instruments by category as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
Financial assets    Financial assets
at amortized
cost
     Financial
assets at fair
value through
profit or loss
     Financial assets at
fair value through
other comprehensive
income
    

Derivatives

used for
hedging

     Total  

Cash and cash equivalents

   W 3,088,946      W —        W —        W —        W 3,088,946  

Trade and other receivables1

     5,853,396        —          539,652        —          6,393,048  

Other financial assets

     455,490        696,917        120,238        94,365        1,367,010  

 

1 

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

 

(in millions of Korean won)    September 30, 2021  
Financial liabilities    Financial liabilities
at amortized cost
    

Financial liabilities
at fair value through

profit and loss

    

Derivatives

used for hedging

     Total  

Trade and other payables

   W  7,238,558      W —        W —        W 7,238,558  

Borrowings

     8,396,108        —          —          8,396,108  

Other financial liabilities

     154,727        220,892        10,645        386,264  

 

(in millions of Korean won)    December 31, 2020  
Financial assets    Financial assets
at amortized
cost
     Financial
assets at fair
value through
profit or loss
     Financial assets at
fair value through
other comprehensive
income
    

Derivatives

used for
hedging

     Total  

Cash and cash equivalents

   W  2,634,624      W —        W —        W —        W  2,634,624  

Trade and other receivables1

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

Other financial assets

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

 

1 

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

 

(in millions of Korean won)    December 31, 2020  
Financial liabilities    Financial liabilities
at amortized cost
    

Financial liabilities
at fair value through

profit and loss

    

Derivatives

used for hedging

     Total  

Trade and other payables

   W 7,017,639      W —        W —        W 7,017,639  

Borrowings

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

Other financial liabilities

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

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

5.

Trade and Other Receivables

Trade and other receivables as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
     Total amounts      Provision for
impairment
     Present value
discount
    

Carrying

amount

 

Current assets

           

Trade receivables

   W 3,678,544      W (335,924    W (7,665    W 3,334,955  

Other receivables

     2,202,134        (95,799      (2,656      2,103,679  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 5,880,678      W (431,723    W (10,321    W 5,438,634  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-current assets

           

Trade receivables

     583,163        (3,018      (18,288      561,857  

Other receivables

     586,962        (104,987      (14,837      467,138  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 1,170,125      W (108,005    W (33,125    W 1,028,995  
  

 

 

    

 

 

    

 

 

    

 

 

 

 


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

Carrying

amount

 

Current assets

           

Trade receivables

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

Other receivables

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

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

Non-current assets

           

Trade receivables

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

Other receivables

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

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Details of other receivables as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Loans

   W 104,063      W 116,082  

Receivables 1

     1,911,599        1,699,608  

Accrued income

     17,430        6,901  

Refundable deposits

     348,998        350,180  

Loans receivable

     245,760        150,527  

Finance lease receivables

     81,743        64,047  

Others

     62,010        60,416  

Less: Provision for impairment

     (200,786      (204,604
  

 

 

    

 

 

 
     W      2,570,817      W      2,243,157  
  

 

 

    

 

 

 

 

1

As of September 30, 2021, the settlement receivables of BC Card Co., Ltd. of W1,187,568 million (December 31, 2020: W986,384 million) are included.

The maximum exposure of trade and other receivables to credit risk is the carrying amount of each class of receivables mentioned above as at September 30, 2021.

The Group classifies a certain portion of trade receivables as financial assets at fair value through other comprehensive income considering the trade receivables business model for managing the asset and the cash flow characteristics of the contract.

 

6.

Other Financial Assets and Liabilities

Details of other financial assets and liabilities as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Other financial assets

     

Financial assets at amortized cost 1

   W 455,490      W 671,068  

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

     696,917        809,919  

Financial assets at fair value through other comprehensive income 1

     120,238        258,516  

Derivatives used for hedging

     94,365        7,684  

Less: Non-current

     (518,592      (544,347
  

 

 

    

 

 

 

Current

   W 848,418      W 1,202,840  
  

 

 

    

 

 

 

Other financial liabilities

     

Financial liabilities at amortized cost

   W 154,727      W 132,558  

Financial liabilities at fair value through profit or loss

     220,892        2,682  

Derivatives used for hedging

     10,645        127,929  

Less: Non-current

     (375,793      (260,676
  

 

 

    

 

 

 

Current

   W 10,471      W 2,493  
  

 

 

    

 

 

 

 

1

As at September 30, 2021, the Group’s other financial assets amounting to W111,874 million (December 31, 2020: W104,442 million), which consist of checking account deposits, time deposits and others, are subject to withdrawal restrictions.

2 

As at September 30, 2021, MMW(Money Market Wrap) and MMT(Money Market Trust) amounting to W306,073 million (December 31, 2020: W509,068 million) are included in other financial assets.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Details of financial assets at fair value through profit or loss as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Equity instruments (Listed)

   W 27,521      W 46,449  

Equity instruments (Unlisted)

     50,490        83,017  

Debt securities

     618,233        680,453  

Derivative held for trading

     673        —    
  

 

 

    

 

 

 
     696,917      809,919  

Less: Non-current

     (329,576      (276,109
  

 

 

    

 

 

 

Current

   W 367,341      W 533,810  
  

 

 

    

 

 

 

The maximum exposure of debt instruments of financial assets recognized at fair value through profit or loss to credit risk is the carrying amount as at September 30, 2021.

Investment in Korea Software Financial Cooperative amounting to W5,417 million is provided as collateral.

Details of financial assets at fair value through other comprehensive income as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Equity instruments (Listed)

   W 21,824      W 6,216  

Equity instruments (Unlisted)

     92,092        245,730  

Debt securities

     6,322        6,570  
  

 

 

    

 

 

 
     120,238      258,516  

Less: Non-current

     (120,238      (258,516
  

 

 

    

 

 

 

Current

   W —        W —    
  

 

 

    

 

 

 

Upon disposal of these equity instruments, any balance within the accumulated other comprehensive income for these equity instruments is not reclassified to profit or loss, but to retained earnings. Upon disposal of debt securities, remaining balance of the accumulated other comprehensive income of debt investments is reclassified to profit or loss.

During the period ended September 30, 2021, the Group sold all of Mastercard Inc. shares. The fair value of the shares sold is W206,840 million, and the cumulative amount recognized in comprehensive income after tax is W76,296 million. Of these, W53,052 million is reclassified as retained earnings attributable to owners of the Controlling Company.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Details of valuation of derivatives used for hedging as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  
     Assets      Liabilities      Assets      Liabilities  

Interest rate swap 1

   W —        W 237      W —        W 1,078  

Currency swap 2

     93,541        10,408        7,684        126,189  

Currency forwards 3

     824        —          —          662  
  

 

 

    

 

 

    

 

 

    

 

 

 
     94,365        10,645        7,684        127,929  

Less: Non-current

     (60,426      (180      (2,111      (126,408
  

 

 

       

 

 

    

 

 

 

Current

   W 33,939      W 10,465      W 5,573      W 1,521  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1

The interest rate swap contract is to hedge the risk of variability in future fair value of the borrowings.

2

The currency swap contract is to hedge the risk of variability in cash flow from the borrowings. In applying the cash flow hedge accounting, the Group hedges its exposures to cash flow fluctuation until September 7, 2034.

3

The currency forward contract is to hedge the risk of variability in cash flow from transactions in foreign currencies due to changes in foreign exchange rate.

The full value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.

The valuation gains and losses on the derivative contracts for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

     2021      2020  
Type of transaction    Valuation
gain
     Valuation
loss
    

Other

comprehensive
income1

     Valuation
gain
     Valuation
loss
    

Other

comprehensive
income1

 

Interest rate swap

   W —        W —        W 1      W —        W —        W (1,204

Currency swap

     200,935        10        190,001        59,398        17,153        55,796  

Currency forwards

     961        —          —          1,522        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 201,896      W 10      W 190,002      W 60,920      W 17,153      W 54,592  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1 

The amounts are before adjustments of deferred income tax directly reflected in equity and allocation to the non-controlling interest.

The ineffective portion recognized in profit or loss on the cash flow hedge is valuation gain of W11,558 million for the period ended September 30, 2021 (nine-month period ended September 30, 2020: valuation gain of W3,192 million).

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Details of financial liabilities at fair value through profit or loss at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Financial liabilities at fair value through profit or loss

     

Redeemable Convertible Preferred Stock

   W 18,965      W —    

Drag-Along Right 1

     198,467        —    

Others

     3,460        2,682  
  

 

 

    

 

 

 
     W            220,892      W             2,682  
  

 

 

    

 

 

 

 

1 

The Group granted the Drag Along Right to the financial investors, who are participating in capital increase with consideration of K Bank Inc. for the nine-month period ended September 30, 2021. According to the Drag-Along Right, if K Bank inc. fails to list their stock on the public market upon the agreed terms since the date of completion of the acquisition, financial investors may exercise the Drag-Along right to the Group, and the Group may comply or exercise the right to sell. If financial investors exercise the Drag-Along Right, the Group must exercise the right to sell or guarantee the return to the financial investors upon the agreed terms.

The valuation gain and loss on financial liabilities at fair value through profit or loss for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
    

Valuation

gain

    

Valuation

loss

    

Valuation

gain

    

Valuation

loss

 

Drag-Along Right

   W 6,856      W —        W —        W —    

Others

     3,455        —          39        4  
  

 

 

    

 

 

    

 

 

    

 

 

 
   W 10,311      W     —        W         39      W         4  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

7.

Inventories

Inventories as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  
     Acquisition
cost
     Valuation
allowance
   

Carrying

amount

     Acquisition
cost
     Valuation
allowance
   

Carrying

amount

 

Merchandise

   W 458,580      W (93,167   W 365,413      W 650,856      W (133,224   W 517,632  

Others

     41,225        —         41,225        17,004        —         17,004  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
   W 499,805      W (93,167   W 406,638      W 667,860      W (133,224   W 534,636  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Cost of inventories recognized as expenses for the nine-month period ended September 30, 2021, amounts to W2,673,172 million (nine-month period ended September 30, 2020: W2,672,684 million) and recovery of valuation loss on inventory amounts to W40,057 million for the nine-month period ended September 30, 2021 (nine-month period ended September 30, 2020: recovery of valuation loss of W 34,873 million).

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

8.

Other Assets and Liabilities

Other assets and liabilities as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Other assets

     

Advance payments

   W 164,440      W 168,302  

Prepaid expenses

     141,900        66,578  

Contract cost 1

     1,764,248        1,804,948  

Contract assets 1

     713,618        586,438  

Others

     68,344        18,747  

Less: Non-current

     (746,250      (768,661
  

 

 

    

 

 

 

Current

   W  2,106,300      W  1,876,352  
  

 

 

    

 

 

 

Other liabilities

     

Advances received 1

   W 270,522      W 328,491  

Withholdings

     122,304        105,415  

Unearned revenue 1

     37,514        29,593  

Lease liabilities

     1,168,541        1,143,640  

Contract liabilities 1

     314,070        384,133  

Others

     23,853        21,597  

Less: Non-current

     (913,180      (909,570
  

 

 

    

 

 

 

Current

   W 1,023,624      W 1,103,299  
  

 

 

    

 

 

 

 

1 

The amounts include adjustments arising from adoption of Korean IFRS 1115 Revenue from Contracts with Customers (Note 20).

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

9.

Assets Held for Sale

During the third quarter, the consolidated company decided to sell some real estate and other assets and classified them as assets held for sale. The specific details of assets held for sale are as follows.

 

(in millions of Korean won)    2021  

Land

   W 172  

Building

     938  

Others

     88  
  

 

 

 

Total

   W 1,198  
  

 

 

 

The price of sale was expected to exceed the carrying amount of net assts, and as a result, no impairment was recognized for the segment classified as held for sale.

 

10.

Property and Equipment, Investment Properties, and Intangible Assets

Changes in property and equipment for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Beginning, net

   W 14,206,119      W 13,785,299  

Acquisition and capital expenditure

     1,745,816        1,967,668  

Disposal and termination

     (65,211      (53,317

Depreciation

     (1,942,202      (1,924,755

Transfer to investment property

     (48,735      (1,881

Scope change

     111,370        913  

Others

     (87,638      (386
  

 

 

    

 

 

 

Ending, net

   W 13,919,519      W 13,773,541  
  

 

 

    

 

 

 

Details of property and equipment provided as collateral as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021
     Carrying
amount
     Secured
amount
     Related line
item
   Related
amount
     Secured party
Land and Buildings    W  11,482      W  15,587      Borrowings    W  3,073      Industrial
Bank of
Korea/Korea
Development
Bank

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

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

Land and Buildings

   W  11,644      W  15,502      Borrowings    W  3,072      Industrial
Bank of
Korea/Korea
Development
Bank
     4,142        249      Deposits      249      K Bank Inc.

Changes in investment properties for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Beginning, net

   W 1,368,453      W  1,387,430  

Acquisition

     329,237        22,860  

Disposal

     (1,907      (654

Depreciation

     (38,350      (48,795

Transfer from (to) property and equipment

     48,735        1,881  

Scope change

     7,087        —    

Others

     (21,973      (11,244
  

 

 

    

 

 

 

Ending, net

   W 1,691,282      W 1,351,478  
  

 

 

    

 

 

 

As at September 30, 2021, the Group (Lessor) has entered into a non-cancellable operating lease contract relating to real estate lease. The future minimum lease fee under this contract is W 70,433 million for one year or less, W 135,527 million more than one year and less than five years, W 89,826 million over five years, and W 295,786 million in total.

Details of investment properties provided as collateral as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
     Carrying
amount
     Secured
amount
     Related
account
   Related
amount
 

Land and Buildings

   W  799,167      W  66,288      Deposits    W  57,696  

Land and Buildings

     2,796        3,513      Borrowings      2,927  

 

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

Land and Buildings

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

Land and Buildings

     2,861        3,434      Borrowings      2,928  

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Changes in intangible assets for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Beginning, net

   W  2,161,258      W  2,834,037  

Acquisition and capital expenditure

     767,449        161,859  

Disposal and termination

     (12,676      (13,259

Amortization

     (445,341      (473,693

Scope change

     599,556        3,621  

Others

     12,285        4,855  
  

 

 

    

 

 

 

Ending, net

   W 3,082,531      W 2,517,420  
  

 

 

    

 

 

 

The carrying amount of membership rights and others, excluding goodwill, with indefinite useful life not subject to amortization is W 219,565 million as at September 30, 2021 (December 31, 2020: W 221,099 million).

In April 2021, the Group was reassigned with a portion of the 1.8GHz and 900MHz bands in accordance with Article 11 of the Radio Waves Act (frequency allocation based on consideration). The payment for the frequency use right is W 547,800 million and W 141,300 million for the 1.8GHz and 900MHz bands, respectively. The Group paid a portion of the consideration paid in a lump sum in September 2021, and plans to pay the remainder in installments every year for the next five years.

Goodwill is allocated to the Group’s cash-generating unit which is identified by operating segments. As at September 30, 2021, goodwill allocated to each cash-generating unit is as follows:

 

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

ICT

   Mobile services1    W 65,057  

Finance

   BC Card Co., Ltd.1      41,234  

Satellite TV

   HCN Co., Ltd      275,265  

Others

   GENIE Music Corporation1      50,214  
   MILLIE Co., Ltd.      45,434  
   PlayD Co., Ltd.1      42,745  
   KT Telecop Co., Ltd. 1      15,418  
   Epsilon Global Communications PTE. Ltd.      158,654  
   MEDIA GENIE Co., Ltd.      13,782  
   KT MOS Bukbu Co., Ltd. and others      15,550  
     

 

 

 
   W  723,353  
     

 

 

 

 

1

The recoverable amounts of telecom wireless business, BC Card Co., Ltd. and KT Telecop Co., Ltd. are calculated based on value-in use calculations. The recoverable amounts of GENIE Music Corporation and PlayD Co., Ltd. are calculated based on fair value less costs to sell. These calculations use pre-tax cash flow projections for the next five years based on financial budgets. Cash flow that exceeds the period of financial budgets is projected by expected growth rate. This growth rate does not exceed the long-term average growth rate of the industry which the cash-generate unit belongs in. The Group estimated its revenue growth rate based on past performance and its expectation of future market changes. The Group determined cash flow projections based on past performance and its estimation of market growth. Specific risks of related operating segments are reflected in the discount rate.

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

11.

Investments in Associates and Joint Ventures

Details of associates as at September 30, 2021 and December 31, 2020, are as follows:

 

     Percentage of ownership (%)     Location    Closing month
  

September 30,

2021

    December 31,
2020
          

KIF Investment Fund

     33.3     33.3   Korea    December 31

KT-IBKC Future Investment Fund 1 1

     50.0     50.0   Korea    December 31

K Bank Inc.

     33.7     34.0   Korea    December 31

Hyundai Robotics Co., Ltd. 2

     10.0     10.0   Korea    December 31

IGIS Professional investors Private Investment Real Estate Investment LLC No 395

     35.3     35.3   Korea    December 31

 

1

At the end of the reporting period, although the Group has 50% ownership, the equity method of accounting has been applied as the Group, which is a limited partner of the investment fund, cannot participate in determining the operating and financial policies.

2

At the end of the reporting period, although the Group has less than 20% ownership in ordinary share, this entity is included in investments in associates as the Group has a significant influence in determining the operating and financial policies.

Changes in investments in associates and joint ventures for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

     2021  
(in millions of Korean won)    Beginning     

Acquisition

(Disposal)

    Share of net profit
(loss) from associates
and joint ventures 1
    Others     Ending  

KIF Investment Fund

   W  170,155      W —       W 6,660     W (7,194   W  169,621  

KT-IBKC Future Investment Fund 1

     16,190        (5,700     1,631       —          12,121  

K Bank Inc.

     208,272        424,957       1,703       193,917       828,849  

Hyundai Robotics Co., Ltd.

     50,936        —         (392     169       50,713  

IGIS Professional investors Private Investment Real Estate Investment LLC No 395

     17,786        —         (338     —         17,448  

Others

     94,542        32,352       88,777       (41,709     173,962  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 557,881      W  451,609     W  98,041     W  145,183     W  1,252,714  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

     2020  
(in millions of Korean won)    Beginning     

Acquisition

(Disposal)

    Share of net profit
(loss) from associates
and joint ventures 1
    Others     Ending  

KIF Investment Fund

   W  163,975      W —       W 6,283     W  (11,745)     W  158,513  

KT-IBKC Future Investment Fund 1

     14,100        —         1,400       —         15,500  

KT-CKP New Media Investment Fund

     134        (134     —         —         —    

K Bank Inc.

     45,158        195,011       (17,828     (1,629     220,712  

Hyundai Robotics Co., Ltd.

     —          50,000       101       176       50,277  

Others 1

     44,293        10,400       6,799       (8,518     52,974  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   W 267,660      W  255,277     W  (3,245   W (21,716   W 497,976  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

1

KT Investment Co., Ltd., a subsidiary of the Group, recognized its share in net profit (loss) from associates and joint ventures as operating revenue and expense. These include its share in net loss from associates and joint ventures of W 153 million (nine-month period ended September 30, 2020: net profit of W 187 million) recognized as operating revenue and expense during the period.

Summarized financial information of associates and joint ventures as at September 30, 2021 and December 31, 2020 and for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
     Assets      Liabilities      Operating
revenue
    

Profit (loss)

for the period

 

KIF Investment Fund

   W 508,862      W —        W —        W  19,979  

KT-IBKC Future Investment Fund 1

     24,243        —          4,614        3,263  

K Bank Inc.

     14,343,610        12,561,007        190,153        8,446  

Hyundai Robotics Co., Ltd.

     417,829        118,487        146,362        (3,921

IGIS Professional investors Private Investment Real Estate Investment LLC No 395

     115,628        66,192        —          (235

 

(in millions of Korean won)    December 31, 2020      September 30, 2020  
     Assets      Liabilities      Operating
revenue
    

Profit (loss)

for the period

 

KIF Investment Fund

   W 510,464      W —        W —        W 18,852  

KT-IBKC Future Investment Fund 1

     32,379        —          4,499        2,801  

K Bank Inc

     4,329,813        3,840,993        52,686        (70,324

Hyundai Robotics Co., Ltd.

     441,505        139,939        56,683        1,008  

IGIS Professional investors Private Investment Real Estate Investment LLC No 395

     116,853        66,459        —          —    

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Due to the discontinuance of equity method accounting, the Group has not recognized loss from associates and joint ventures of W 708 million for the nine-month period ended September 30, 2021 (nine-month period ended September 30, 2020: loss of W 595 million). The accumulated comprehensive loss of associates and joint ventures as at September 30, 2021, which was not recognized by the Group, is W 8,935 million (December 31, 2020: W 8,228 million).

 

12.

Trade and Other Payables

Details of trade and other payables as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Current liabilities

     

Trade payables

   W  1,309,655      W  1,239,717  

Other payables

     4,846,189        4,970,382  
  

 

 

    

 

 

 
   W  6,155,844      W 6,210,099  
  

 

 

    

 

 

 

Non-current liabilities

     

Trade payables

   W  1,473      W  1,528  

Other payables1

     1,081,241        806,012  
  

 

 

    

 

 

 
   W  1,082,714      W  807,540  
  

 

 

    

 

 

 

 

1

As at September 30, 2021, other payables include residual considerations related to new frequency acquisitions (Note 10).

Details of other payables as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Non-trade payables 1

   W  3,710,366      W  3,841,227  

Accrued expenses

     1,225,239        933,978  

Operating deposits

     780,146        803,904  

Others

     211,679        197,285  

Less: Non-current

     (1,081,241      (806,012
  

 

 

    

 

 

 

Current

   W  4,846,189      W  4,970,382  
  

 

 

    

 

 

 

 

1

Settlement payables of BC Card Co., Ltd., a subsidiary of the Group, of W 1,270,843 million related to credit card transactions are included as at September 30, 2021 (December 31, 2020: W 1,007,171 million)

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

13.

Borrowings

Details of borrowings as at September 30, 2021 and December 31, 2020, are as follows:

Debentures

 

(in millions of Korean won and foreign currencies in thousands)   September 30, 2021      December 31, 2020  
Type    Maturity    Annual interest
rates
 

Foreign

currency

    

Korean

won

    

Foreign

currency

    

Korean

won

 

MTNP notes 1

   Sep. 7, 2034    6.500%     USD 100,000        118,490        USD 100,000      W  108,800  

MTNP notes

   Jul. 18, 2026    2.500%     USD 400,000        473,960        USD 400,000        435,200  

MTNP notes

   Aug. 7, 2022    2.625%     USD 400,000        473,960        USD 400,000        435,200  

FR notes 2

   Aug. 23, 2023    LIBOR(3M)+0.900%     USD 100,000        118,490        USD 100,000        108,800  

MTNP notes

   Jul. 6, 2021    —       —          —          JPY 16,000,000        168,682  

MTNP notes

   Jul. 19, 2022    0.220%     JPY 29,600,000        313,221        JPY 29,600,000        312,061  

MTNP notes

   Jul. 19, 2024    0.330%     JPY 400,000        4,233        JPY 400,000        4,217  

MTNP notes

   Sep. 1, 2025    1.000%     USD 400,000        473,960        USD 400,000        435,200  

FR notes 2

   Nov. 1, 2024    LIBOR(3M)+0.980%     USD 350,000        414,715        USD 350,000        380,800  

FR notes 2

   Jun. 19, 2023    SOR(6M)+0.500%     SGD 284,000        247,117        SGD 284,000        233,510  

MTNP notes

   Jan. 21, 2027    1.375%     USD 300,000        355,470        —          —    

The 180-2nd Public bond

   Apr. 26, 2021    —       —          —          —          380,000  

The 181-3rd Public bond

   Aug. 26, 2021    —       —          —          —          250,000  

The 182-2nd Public bond

   Oct. 28, 2021    4.310%     —          100,000        —          100,000  

The 183-2nd Public bond

   Dec. 22, 2021    4.090%     —          90,000        —          90,000  

The 183-3rd Public bond

   Dec. 22, 2031    4.270%     —          160,000        —          160,000  

The 184-2nd Public bond

   Apr. 10, 2023    2.950%     —          190,000        —          190,000  

The 184-3rd Public bond

   Apr. 11, 2033    3.170%     —          100,000        —          100,000  

The 186-3rd Public bond

   Jun. 26, 2024    3.418%     —          110,000        —          110,000  

The 186-4th Public bond

   Jun. 26, 2034    3.695%     —          100,000        —          100,000  

The 187-3rd Public bond

   Sep. 2, 2024    3.314%     —          170,000        —          170,000  

The 187-4th Public bond

   Sep. 2, 2034    3.546%     —          100,000        —          100,000  

The 188-2nd Public bond

   Jan. 29, 2025    2.454%     —          240,000        —          240,000  

The 188-3rd Public bond

   Jan. 29, 2035    2.706%     —          50,000        —          50,000  

The 189-2nd Public bond

   Jan. 28, 2021    —       —          —          —          130,000  

The 189-3rd Public bond

   Jan. 28, 2026    2.203%     —          100,000        —          100,000  

The 189-4rd Public bond

   Jan. 28, 2036    2.351%     —          70,000        —          70,000  

The 190-1st Public bond

   Jan. 29, 2021    —       —          —          —          110,000  

The 190-2nd Public bond

   Jan. 30, 2023    2.749%     —          150,000        —          150,000  

The 190-3rd Public bond

   Jan. 30, 2028    2.947%     —          170,000        —          170,000  

The 190-4th Public bond

   Jan. 30, 2038    2.931%     —          70,000        —          70,000  

The 191-1st Public bond

   Jan. 14, 2022    2.048%     —          220,000        —          220,000  

The 191-2nd Public bond

   Jan. 15, 2024    2.088%     —          80,000        —          80,000  

The 191-3rd Public bond

   Jan. 15, 2029    2.160%     —          110,000        —          110,000  

The 191-4th Public bond

   Jan. 14, 2039    2.213%     —          90,000        —          90,000  

The 192-1st Public bond

   Oct. 11, 2022    1.550%     —          340,000        —          340,000  

The 192-2nd Public bond

   Oct. 11, 2024    1.578%     —          100,000        —          100,000  

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won and foreign currencies in thousands)    September 30, 2021      December 31, 2020  
Type    Maturity    Annual interest
rates
  

Foreign

currency

    

Korean

won

    

Foreign

currency

    

Korean

won

 

The 192-3rd Public bond

   Oct. 11, 2029    1.622%      —          50,000        —          50,000  

The 192-4th Public bond

   Oct. 11, 2039    1.674%      —          110,000        —          110,000  

The 193-1st Public bond

   Jun. 16, 2023    1.174%      —          150,000        —          150,000  

The 193-2nd Public bond

   Jun. 17, 2025    1.434%      —          70,000        —          70,000  

The 193-3rd Public bond

   Jun. 17, 2030    1.608%      —          20,000        —          20,000  

The 193-4th Public bond

   Jun. 15, 2040    1.713%      —          60,000        —          60,000  

The 194-1st Public bond

   Jan. 26, 2024    1.127%      —          130,000        —          —    

The 194-2nd Public bond

   Jan. 27, 2026    1.452%      —          140,000        —          —    

The 194-3rd Public bond

   Jan. 27, 2031    1.849%      —          50,000        —          —    

The 194-4th Public bond

   Jan. 25, 2041    1.976%      —          80,000        —          —    

The 195-1st Public bond

   Jun. 10, 2024    1.387%      —          180,000        —          —    

The 195-2nd Public bond

   Jun. 10, 2026    1.806%      —          80,000        —          —    

The 195-3rd Public bond

   Jun. 10, 2031    2.168%      —          40,000        —          —    

The 148th MTN

   Jun. 23, 2023    1.513%      —          100,000        —          100,000  

The 149-1st MTN

   Mar. 08, 2024    1.440%      —          70,000        —          —    

The 149-2nd MTN

   Mar. 10, 2026    1.756%      —          30,000        —          —    

The 150-1st MTN

   Apr. 7, 2023    1.154%      —          20,000        —          —    

The 150-2nd MTN

   Apr. 8, 2024    1.462%      —          30,000        —          —    

The 151-1st MTN

   May. 12, 2023    1.191%      —          10,000        —          —    

The 151-2nd MTN

   May. 14, 2024    1.432%      —          40,000        —          —    

The 152-1st MTN

   Aug. 30, 2024    1.813%      —          80,000        —          —    

The 152-2nd MTN

   Aug. 28, 2026    1.982%      —          20,000        —          —    

The 18-1st MTN

   Jul. 2, 2024    1.844%      —          100,000        —          —    

The 18-2nd MTN

   Jul. 2, 2026    2.224%      —          50,000        —          —    
           

 

 

       

 

 

 

Subtotal

        7,613,616           6,962,470  

Less: Current portion

        (1,195,475         (1,228,283

Discount on bonds

        (23,735         (19,847
     

 

 

       

 

 

 

Total

      W 6,394,406         W 5,714,340  
     

 

 

       

 

 

 

 

1 

As at September 30, 2021, the Group has outstanding notes in the amount of USD 100 million with fixed interest rates under Medium Term Note Program (“MTNP”) registered in the Singapore Stock Exchange, which allowed issuance of notes of up to USD 2,000 million. However, the MTNP has been terminated since 2007.

2 

The Libor (3M) and SOR (6M) is approximately 0.130% and 0.229% as at September 30, 2021.

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Convertible bonds

 

(in millions of Korean won)  
Type    Issuance Date      Maturity     

Annual

Interest Rate

    September 30, 2021     December 31, 2020  

The 1st CB(Private) 1,2

     Jun. 5, 2020        Jun. 5, 2025        0.000   W 8,000     W 8,000  

Redemption premium

             2,267       2,267  

Bond discount issuance

             (4,042     (4,644
          

 

 

   

 

 

 

Subtotal

             6,225       5,623  

Current portion

             —         —    
          

 

 

   

 

 

 

Total

           W 6,225     W 5,623  
          

 

 

   

 

 

 

 

1 

Common shares of Storywiz are subject to conversion (appraisal period: June 5, 2021~ May 4, 2025).

2 

Nominal interest rate and maturity yield is approximately 0% and 5%, respectively, and will be settled on maturity.

Short-term borrowings

 

(in millions of Korean won)         September 30, 2021      December 31, 2020  
Type    Financial institution    Annual interest rates

Operational

   NongHyup Bank    2.060%    W 11,032      W 40,189  
   Shinhan Bank    2.740%      4,000        —    
   Shinhan Bank    —        —          22,500  
   Shinhan Bank    —        —          10,000  
   Woori Bank    —        —          1,900  
   Woori Bank    CD(3M) + 1.900%~1.970%      20,000        —    
   Korea Development Bank    1.890%~3.680%      26,000        10,000  
   Industrial Bank of Korea    2.550%      6,000        200  
   Hana Bank    —        —          11,000  
   Hana Bank    1.020%~2.530%      6,455        —    
   KB Securities Co., Ltd    0.890%~1.380%      111,000        —    
   Kiwoom Securities Co., Ltd    1.380%      23,000        —    
   NH Investment & Securities Co., Ltd    0.890%~1.380%      83,000        —    
   Korea Investment & Securiies Co., Ltd    1.240%      10,000        —    
   Shinhan Investment Corp.    1.240%~1.380%      43,000        —    
   HSBC    2.075%      16,589        —    
        

 

 

    

 

 

 
   W 360,076      W 95,789  
  

 

 

    

 

 

 

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Long-term borrowings

 

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

September 30, 2021

    December 31, 2020  
Financial institution    Type   

Annual interest

rates

  

Foreign

currency

  

Korean

won

   

Foreign

currency

    

Korean

won

 

Export-Import Bank of Korea

  

Inter-Korean

Cooperation Fund 1

   1.000%    —      W 2,467       —        W 2,961  

Industrial Bank of Korea

   General loans    —      —        —         —          6,000  

CA-CIB

   Long-term CP    1.260%    —        100,000       —          100,000  

Shinhan Bank

   General loans    3.230%    USD 7,002      8,297       —          —    
   General loans    —      —        —         —          5,000  
   General loans    1.900%    USD 4,470      5,297       —          —    
   General loans    2.630%    USD 20,000      23,698       —          —    
   General loans 2    LIBOR(3M)+1.650%    USD 8,910      10,557       USD 8,910        9,694  
   General loans 2    LIBOR(3M)+2.130%    USD 25,000      29,623       USD 25,000        27,200  
   General loans 2    LIBOR(3M)+1.847%    USD 13,000      15,404       —          —    
   Facility loans 2    LIBOR(3M)+1.340%    USD 25,918      30,710       USD 25,918        28,199  

NongHyup Bank

   PF loans    1.852%    —        117,500       —          —    
   Facility loans    2.000%    —        36       —          54  

Korea Development Bank

   General loans    —      —        —         —          30,000  
   General loans    —      —        —         —          10,000  
   General loans    3.000%    —        30,000       —          —    
   General loans    1.920%    —        9,000       —          —    

Woori Bank

   General loans    3.320%    —        15,000       —          —    
   PF loans    2.480%    —        14,069       —          —    
   PF loans    2.000%    —        5,113       —          —    

Kookmin Bank and others2

   Facility loans2    LIBOR(3M)+1.850%    USD 19,542      23,155       USD 48,855        53,155  
        

 

  

 

 

   

 

 

    

 

 

 

Subtotal

              439,926          272,263  

Less: Current portion

              (32,673        (94,042
           

 

 

      

 

 

 
            W 407,253        W 178,221  
           

 

 

      

 

 

 

 

1 

The above Inter-Korean Cooperation Fund is repayable in installments over 13 years after a seven-year grace period.

2 

LIBOR(3M) is approximately 0.130% as at September 30, 2021.

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Repayment schedule of the Group’s debentures and borrowings including the portion of current liabilities as at September 30, 2021, is as follows:

 

(in millions of Korean won)    Debentures      Borrowings      Total  
     In local
currency
     In foreign
currency
     Sub-total      In local
currency
     In foreign
currency
     Sub-total         

Oct. 1, 2021~ Sep. 30, 2022

   W 410,000      W 787,181      W 1,197,181      W 353,005      W 39,744      W 392,749      W 1,589,929  

Oct. 1, 2022~ Sep. 30, 2023

     960,000        365,607        1,325,607        233,006        86,294        319,300        1,644,907  

Oct. 1, 2023~ Sep. 30, 2024

     990,000        4,233        994,233        35,494        13,593        49,087        1,043,319  

Oct. 1, 2024~ Sep. 30, 2025

     410,000        888,675        1,298,675        5,494        —          5,493        1,304,168  

After Oct. 1, 2025

     1,858,000        947,920        2,805,920        9,675        23,698        33,373        2,839,293  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,628,000      W 2,993,616      W 7,621,616      W 636,673      W 163,329      W 800,002      W 8,421,618  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

14.

Provisions

Changes in provisions for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021  
     Litigation      Restoration cost      Others      Total  

Beginning balance

   W 76,500      W 105,767      W 69,925      W 252,192  

Increase (transfer)

     1,509        8,556        14,457        24,522  

Usage

     (2,590      (2,487      (1,802      (6,879

Reversal

     —          (1,299      (14,073      (15,372

Change in consolidation scope

     —          (586      438        (148
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   W 75,419      W 109,951      W 68,945      W 254,315  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 75,419      W 28,148      W 64,413      W 167,980  

Non-current

     —          81,803        4,532        86,335  

 

(in millions of Korean won)    2020  
     Litigation      Restoration cost      Others      Total  

Beginning balance

   W 64,241      W 113,289      W 76,631      W 254,161  

Increase (transfer)

     1,683        (1,294      26,710        27,099  

Usage

     (1,769      (1,849      (5,939      (9,557

Reversal

     (60      (652      (20,645      (21,357

Change in consolidation scope

     7        227        54,161        54,395  
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   W 64,102      W 109,721      W 130,918      W 304,741  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 64,102      W 19,628      W 97,047      W 180,777  

Non-current

     —          90,093        33,871        123,964  

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

15.

Net Defined Benefit Liabilities

The amounts recognized in the statements of financial position as at September 30, 2021 and December 31, 2020, are determined as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Present value of defined benefit obligations

   W 2,647,581      W 2,556,712  

Fair value of plan assets

     (2,143,749      (2,189,375
  

 

 

    

 

 

 

Liabilities

   W 503,832      W 378,087  
  

 

 

    

 

 

 

Assets

   W —        W 10,750  
  

 

 

    

 

 

 

Changes in the defined benefit obligations for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Beginning

   W 2,556,712      W 2,427,351  

Current service cost

     186,130        185,391  

Interest expense

     32,516        32,720  

Past service cost

     —          1,353  

Benefits paid

     (136,273      (155,070

Remeasurements

     (16,312      2,652  

Change in consolidation scope

     24,130        9,415  

Others

     678        1,692  
  

 

 

    

 

 

 

Ending

   W 2,647,581      W 2,505,504  
  

 

 

    

 

 

 

Changes in the fair value of plan assets for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Beginning

   W 2,189,375      W 2,069,710  

Interest income

     28,673        28,112  

Remeasurements on plan assets

     547        3,233  

Employer contributions

     16,362        13,774  

Benefits paid

     (112,281      (139,108

Change in consolidation scope

     19,638        8,264  

Others

     1,435        (1,517
  

 

 

    

 

 

 

Ending

   W 2,143,749      W 1,982,468  
  

 

 

    

 

 

 

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Amounts recognized in the consolidated statement of profit or loss for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Current service cost

   W 186,130      W 185,391  

Net interest cost

     3,843        4,608  

Past service cost

     —          1,353  

Account transfers

     (11,424      (12,308
  

 

 

    

 

 

 

Total expenses

   W 178,549      W 179,044  
  

 

 

    

 

 

 

 

16.

Commitments and Contingencies

As at September 30, 2021, major commitments with local financial institutions are as follows:

 

(in millions of Korean won and foreign currencies
in thousands)
   Financial institution    Currency    Limit      Used amount  

Bank overdraft

   Kookmin Bank and others    KRW      1,442,600        4,000  

Inter-Korean Cooperation Fund

   Export-Import Bank of Korea    KRW      37,700        2,467  

Insurance for Economic Cooperation project

   Export-Import Bank of Korea    KRW      3,240        1,732  

Collateralized loan on electronic accounts receivable-trade

   Kookmin Bank and others    KRW      411,135        24,017  

Plus electronic notes payable

   Industrial Bank of Korea    KRW      50,000        275  

Loans for working capital

  

Korea Development Bank and others

   KRW
    
200,426
 
    
132,426
 
   Shinhan Bank    USD      258,300        65,842  

Facility loans

   Shinhan Bank and others    KRW      209,123        19,219  

Derivatives transaction limit

   Korea Development Bank    KRW      100,000        8,043  
   Woori Bank and others    USD      69,054        21,210  
        

 

 

    

 

 

 
      KRW      2,454,224        192,179  

Total

      USD      327,354        87,052  
        

 

 

    

 

 

 

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

As at September 30, 2021, guarantees received from financial institutions are as follows:

 

(in millions of Korean won and foreign currencies in
thousands)
   Financial institution    Currency      Limit  

Performance guarantee

   Seoul Guarantee Insurance and others      KRW        153,914  
   Hana Bank      USD        1,200  

Guarantee for payment in foreign currency

   Kookmin Bank and others      USD        31,484  

Guarantee for payment in Korean currency

   Shinhan Bank      KRW        48,159  

Refund guarantee for advances received

   Korea Development Bank and others      USD        8,536  

Comprehensive credit line

   Hana Bank      KRW        44,100  
        USD        8,700  

Bid guarantee

   Hana Bank and others      USD        688,380  

Bid guarantee

   Korea Software Financial Cooperative and others      KRW        50,028  

Performance guarantee / warranty guarantee

        KRW        465,627  

Guarantee for advance payments / others

        KRW        187,698  

Warranty guarantee

   Seoul Guarantee Insurance      KRW        753  

Performance guarantee

        KRW        8,655  

Guarantees for licensing

        KRW        5,914  

Guarantees for depositions

        KRW        2,709  

Merchant business guarantee insurance

        KRW        237  

Construction fund guarantee insurance

        KRW        14,464  
        

 

 

 

Total

        KRW        982,258  
        USD        738,300  
        

 

 

 

As at September 30, 2021, guarantees provided by the Group to a third party, are as follows:

 

(in millions of Korean won)    Subject to payment guarantees    Creditor    Limit      Used
amount
     Period

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.)1

   Gasan Solar Power Plant Inc.    Shinhan Bank      4,700        1,091     

Jan. 7, 2021

~Jan. 8, 2025

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.)1

   SPP Inc.    Suhyup Bank      3,250        691     

Feb. 17, 2014

~Feb. 16, 2024

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.)1

   Korea Cell Inc.    Suhyup Bank      3,250        681     

Feb. 17, 2014

~Feb. 16, 2024

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.)1

  

San-Ya Agricultural

Association Corporation

   Suhyup Bank      3,250        691     

Feb. 17, 2014

~Feb. 16, 2024

KT Alpha Co., Ltd.

(KT Hitel Co., Ltd.)

   Cash payers    Cash payers      860        —       

Jul. 21, 2021

~ Apr. 15, 2022

KT Alpha Co., Ltd.

(KT Hitel Co., Ltd.)

   Mobile Voucher amount    NongHyup Agribusiness Group Inc.      30,000        10,700     

Jan. 16, 2021

~ Jan. 14, 2022

KT Alpha Co., Ltd.

(KT Hitel Co., Ltd.)

   Mobile Voucher amount    Emart Co., Ltd and others      20,000        18,000     

Jun. 19, 2021

~ Jun. 17, 2022

Nasmedia Co., Ltd.

   Stockholders Association Members    Korea Securities Finance Corp      5,654        1,310      —  

 

1 

Depending on the reimbursement of principal debtor, KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.), a subsidiary of the Group, is subject to payment.

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

The Controlling Company is jointly and severally obligated with KT Sat Co., Ltd., to pay KT Sat Co., Ltd.’s liabilities incurred prior to spin-off. As at September 30, 2021, the Controlling Company and KT Sat Co., Ltd. are jointly and severally liable for reimbursement of W 733 million.

For the nine-month period ended September 30, 2021, the Controlling Company entered into agreements with Securitization Specialty Companies (2021: Giga LTE Fifty fifth to Fifty ninth Securitization Specialty Co., Ltd., 2020: Giga LTE Forty ninth to Fifty fourth Securitization Specialty Co., Ltd.), and disposed of its trade receivables related to handset sales. The Group also entered into asset management agreements with each securitization specialty company and in accordance with the agreements the Group shall receive asset management fees upon liquidation of the securitization specialty company.

As at September 30, 2021, the Group is a defendant in 244 lawsuits with the total claimed amount of W 203,734 million (2020: W 110,409 million). As at September 30, 2021, litigation provisions of W 75,419 million for pending lawsuits and unasserted claims are recorded as liabilities for potential loss in the ordinary course of business. The final outcome of the cases cannot be estimated as at the end of the reporting period.

According to financial and other covenants included in certain debentures and borrowings, the Group is required to maintain certain financial ratios such as debt-to-equity ratio, use the funds for the designated purpose and report to the creditors periodically. Such covenants also contain restrictions on the provision of additional collateral and disposal of certain assets.

As at September 30,2021, the Group participates in Algerie Sidi Abdela new town development consortium (percentage of ownership: 2.5%) and has joint liability with other consortium participants.

As at September 30, 2021, the contracted amount of property and equipment acquisition agreements made but not yet recognized amounts to W 752,954 million (December 31, 2020: W 596,983 million).

As at September 30, 2021, there are derivatives generated by the Group granting Drag-Along Right to financial investors participating in K Bank Inc. capital increase with consideration (Note 6).

During the nine-month period ended September 30, 2021, the Group entered into an agreement with the seller, who participated in the acquisition of shares in MILLE Co., Ltd.. If certain conditions are not met in the future as disclosed in the terms and conditions of the agreement, the seller may exercise Tag-Along Right, Drag-Along Right and Put Option for the ordinary and redeemable convertible preferred stock.

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

During the nine-month period ended September 30, 2021, the Group entered into an agreement with financial investors, who participated in the acquisition of shares in Epsilon Global Communications PTE. Ltd.. If certain conditions are not met in the future as disclosed in the terms and conditions of the agreement, financial investors may exercise Tag-Along Right and Drag-Along for the convertible preferred stock.

 

17.

Leases

Set out below is information for leases when the Group is a lessee. Information when the Group is a lessor is described in Note 10.

The consolidated statement of financial position shows the following amounts relating to leases:

 

(In millions of Korean won)    September 30, 2021      December 31, 2020  

Right-of-use assets

     

Property and buildings

   W 1,103,639      W 1,073,207  

Machinery and track facilities

     66,360        42,127  

Others

     85,401        101,845  
  

 

 

    

 

 

 
   W 1,255,400      W 1,217,179  
  

 

 

    

 

 

 

Investment property (buildings)

   W 489      W 19,456  

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Lease liabilities1

     

Current

   W 345,791      W 345,224  

Non-current

     822,750        798,416  
  

 

 

    

 

 

 
   W 1,168,541      W 1,143,640  
  

 

 

    

 

 

 

 

1 

Included in the line items other current liabilities and other non-current liabilities in the consolidated statement of financial position (Note 8).

For the nine-month periods ended September 30, 2021 and 2020, increase of right-of-use assets was W 319,937 million and W 341,658 million, respectively.

The consolidated statement of profit or loss relating to leases for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      September 30, 2020  

Depreciation of right-of-use assets

     

Property and buildings

   W 226,385      W 219,210  

Machinery and track facilities

     32,538        46,320  

Others

     39,611        41,681  
  

 

 

    

 

 

 
   W 298,534      W 307,211  
  

 

 

    

 

 

 

Depreciation of investment properties

   W 1,842      W 14,753  

Interest expense relating to lease liabilities

     25,745        33,110  

Expenses relating to short-term leases

     7,106        7,516  

Expenses relating to leases of low-value assets that are not short-term leases

     18,514        19,393  

Expenses relating to variable lease payments not included in lease liabilities

     9,076        6,280  

Total cash outflow from leases was W 304,347 million and W 371,392 million during the nine-month period ended September 30, 2021 and 2020, respectively.

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

18.

Retained Earnings

Details of retained earnings as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Legal reserve 1

   W 782,249      W 782,249  

Voluntary reserves 2

     4,651,362        4,651,362  

Unappropriated retained earnings

     7,388,118        6,721,809  
  

 

 

    

 

 

 

Total

   W 12,821,729      W 12,155,420  
  

 

 

    

 

 

 

 

1 

The Commercial Code of the Republic of Korea requires the Controlling Company to appropriate, as a legal reserve, an amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued share capital. The reserve is not available for the payment of cash dividends, but may be transferred to share capital with the approval of the Controlling Company’s Board of Directors or used to reduce accumulated deficits, if any, with the ratification of the Controlling Company’s majority shareholders.

2 

In accordance with the Restrictions on Special Taxation Act, R&D and HR related reserves under the voluntary reserves are separately accumulated when retained earnings from tax reserve funds are disposed, when income tax is recalculated from tax return adjustments.

 

19.

Other Components of Equity

The Group’s other components of equity as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Treasury stock

   W (1,066,958    W (882,224

Gain or Loss on disposal of treasury stock

     605        (17,579

Share-based payments

     46,635        5,901  

Equity transactions within consolidated entities1

     (331,425      (340,882
  

 

 

    

 

 

 

Total

   W (1,351,143    W (1,234,784
  

 

 

    

 

 

 

 

1

Includes profit or loss from transactions with non-controlling interests and investment differences from changes in equity ratios of subsidiaries.

As at September 30, 2021 and December 31, 2020, the details of treasury stock are as follows:

 

     September 30, 2021      December 31, 2020  

Number of shares

     26,735,994        19,269,678  

Amount (in millions of Korean won)

   W 1,066,958      W 882,224  

Treasury stock is expected to be used as stock compensation for the Group’s directors, employees and other purposes.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

20.

Revenue from Contracts with Customers and Relevant Contract Assets and Liabilities

The Group has recognized the following amounts relating to revenue in the statement of profit or loss for the three and nine-month periods ended September 30, 2021 and 2020:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Revenue from contracts with customers

   W 6,168,941      W 18,136,938      W 5,949,165      W 17,558,570  

Revenue from other sources

     48,441        137,482        52,033        150,847  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 6,217,382      W 18,274,420      W 6,001,198      W 17,709,417  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating revenues for the three and nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Services provided

   W 5,306,339      W 15,726,339      W 5,165,418      W 15,297,365  

Sales of goods

     911,043        2,548,081        835,780        2,412,052  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 6,217,382      W 18,274,420      W 6,001,198      W 17,709,417  
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenues from services provided are recognized over time, and sales of goods are recognized at a point in time. Revenues from construction commitments included in sales of goods are recognized using the percentage of completion method.

The contract assets and liabilities recognized in relation to revenue from contracts with customers are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Contract assets 1

   W 818,774      W 672,672  
  

 

 

    

 

 

 

Contract liabilities 1

     327,881        413,707  
  

 

 

    

 

 

 

Deferred revenue 2

     88,157        89,694  
  

 

 

    

 

 

 

 

1 

The Group recognized contract assets of W 105,156 million and contract liabilities of W 13,811 million for long-term construction contracts as at September 30, 2021 (2020: contract assets of W 86,234 million and contract liabilities of W 29,574 million). The Group recognizes contract assets as trade and other receivables, and contract liabilities as other current liabilities.

2 

Deferred revenue recognized relating to government grants is excluded.

The contract costs recognized as assets are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Incremental costs of contract establishment

   W 1,676,794      W 1,726,191  
  

 

 

    

 

 

 

Costs of Contract performance

     87,454        78,757  
  

 

 

    

 

 

 

The Group recognized W1,386,617 million of operating expenses for the nine-month period ended September 30, 2021(nine-month period ended September 30, 2020: W1,352,217 million) which relate to contract cost assets.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

For the three and nine-month periods ended September 30, 2021 and 2020, the recognized revenue arising from carried-forward contract liabilities from prior year is as follows:

 

(in millions of Korean won)    2021        2020  
     Three months        Nine months        Three months        Nine months  

Revenue recognized that was included in the contract liability balance at the beginning of the year

                 

Allocation of the transaction price

   W 60,148        W 231,148        W 58,130        W 205,114  

Deferred revenue of joining/instalment fees

     9,771          33,276          10,681          33,409  
  

 

 

      

 

 

      

 

 

      

 

 

 

Total

   W 69,919        W 264,424        W 68,811        W 238,523  
  

 

 

      

 

 

      

 

 

      

 

 

 

 

21.

Operating Expenses

Operating expenses for the three and nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Salaries and wages

   W 1,089,964      W 3,139,734      W 1,082,289      W 3,069,887  

Depreciation

     652,429        1,952,106        651,660        1,950,561  

Depreciation of right-of-use assets

     99,374        298,534        100,525        307,211  

Amortization of intangible assets

     143,347        442,936        153,116        471,113  

Commissions

     292,435        806,227        250,546        730,582  

Interconnection charges

     122,620        369,460        133,364        399,012  

International interconnection fees

     47,392        147,863        45,617        135,707  

Purchase of inventories

     874,536        2,505,117        1,106,659        2,824,199  

Changes of inventories

     67,463        127,998        (211,312      (186,388

Sales commissions

     562,874        1,746,584        589,887        1,686,168  

Service costs

     556,895        1,584,899        543,452        1,517,318  

Utilities

     96,734        268,534        97,559        266,005  

Taxes and dues

     69,226        209,169        82,212        216,381  

Rent

     31,666        94,942        35,151        100,737  

Insurance premiums

     18,199        45,688        18,465        53,082  

Installation fees

     38,927        109,576        34,482        92,653  

Advertising expenses

     41,986        117,150        35,471        91,045  

Research and development expenses

     46,012        125,915        42,533        118,650  

Card service costs

     767,927        2,275,749        750,073        2,181,874  

Others

     214,980        603,808        165,404        661,232  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 5,834,986      W 16,971,989      W 5,707,153      W 16,687,029  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Details of employee benefits for the three and nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Short-term employee benefits

   W 965,854      W 2,856,389      W 977,586      W 2,807,252  

Post-employment benefits (defined benefits)

     58,981        178,549        59,940        179,044  

Post-employment benefits (defined contributions)

     16,810        48,032        16,853        44,977  

Share-based payments

     41,360        43,944        22,685        25,278  

Others

     6,959        12,820        5,225        13,336  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 1,089,964      W 3,139,734      W 1,082,289      W 3,069,887  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

22.

Other Income and Other Expenses

Other income for the three and nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Gain on disposal of property and equipment

   W 8,417      W 23,237      W 3,971      W 14,844  

Gain on disposal of intangible assets

     231        1,297        34        1,966  

Gain on disposal of right-of-use assets

     708        3,929        1,353        5,487  

Compensation on property and equipment

     31,185        105,024        38,968        112,749  

Gain on government subsidies

     18,663        28,047        3,155        9,883  

Gain on disposal of investments in subsidiaries

     17        244        —          —    

Reversal of other allowance for bad debts

     1        461        157        875  

Others

     19,018        49,784        74,820        90,318  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 78,240      W 212,023      W 122,458      W 236,122  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Other expenses for the three and nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Loss on disposal of property, equipment and investment properties

   W 10,563      W 44,043      W 15,192      W 51,627  

Loss on disposal of intangible assets

     3,427        3,813        1,640        2,540  

Loss on disposal of right-of-use assets

     946        10,955        483        6,421  

Loss on disposal of investments in associates

     6        6        91        124  

Loss on disposal of investments in subsidiaries

     3,217        11,046        —          —    

Donations

     2,028        5,548        2,978        16,289  

Other allowance for bad debts

     6,798        19,574        7,821        26,361  

Others

     55,550        103,866        71,575        133,435  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 82,535      W 198,851      W 99,780      W 236,797  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

23.

Financial Income and Costs

Details of financial income for the three and nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Interest income

   W 65,931      W 199,009      W 68,183      W 201,989  

Gain on foreign currency transactions

     10,994        16,368        2,675        11,402  

Gain on foreign currency translation

     (8,490      10,357        6,771        14,500  

Gain on disposal of derivatives

     699        1,304        7,226        9,398  

Gain on valuation of derivatives

     127,483        212,207        (50,360      60,959  

Gain on settlement of financial instruments

     10,443        21,780        136        287  

Gain on valuation of financial instruments

     (51      643        506        1,408  

Others

     22,322        24,446        189        1,097  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 229,331      W 486,114      W 35,326      W 301,040  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Details of financial costs for the three and nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months     Nine months      Three months      Nine months  

Interest expenses

   W 63,853     W 188,371      W 69,446      W 211,026  

Loss on foreign currency transactions

     4,791       9,259        10,792        18,696  

Loss on foreign currency translation

     124,384       209,578        (48,949      72,618  

Loss on disposal of derivatives

     6,229       6,264        20        57  

Loss on valuation of derivatives

     (14,804     10        10,076        17,157  

Loss on disposal of trade receivables

     3,049       10,426        1,312        6,040  

Others

     3,767       4,532        78        2,389  
  

 

 

   

 

 

    

 

 

    

 

 

 

Total

   W 191,269     W 428,440      W 42,775      W 327,983  
  

 

 

   

 

 

    

 

 

    

 

 

 

 

24.

Income Tax Expense

Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. As at September 30, 2021, the estimated average annual income tax rate used for the year ending December 31, 2021 is 29.65%.

 

25.

Earnings per Share

Basic earnings per share is calculated by dividing the profit from operations attributable to equity holders of the Group by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares purchased by the Group and held as treasury stock.

Basic earnings per share from operations for the three and nine-month periods ended September 30, 2021 and 2020, are calculated as follows:

 

     2021      2020  
     Three months      Nine months      Three months      Nine months  

Profit attributable to ordinary shares
(in millions of Korean won)

   W 310,278      W 950,675      W 203,288      W 590,314  

Weighted average number of ordinary shares outstanding
(in number of shares)

     234,375,814        235,364,704        245,372,025        245,286,249  

Basic earnings per share
(in Korean won)

   W 1,324      W 4,039      W 828      W 2,407  

Diluted earnings per share from operations is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group has dilutive potential ordinary shares from convertible preferred stock, convertible bonds and other share-based payments.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Diluted earnings per share from operations for the three and nine-month periods ended September 30, 2021 and 2020, are calculated as follows:

 

     2021      2020  
     Three months      Nine months      Three months      Nine months  

Profit attributable to ordinary shares
(in millions of Korean won)

   W 310,278      W 950,675      W 203,288      W 590,314  

Adjusted net income attributable to ordinary shares
(in millions of Korean won)

     (19      (19      —          —    

Diluted profit attributable to ordinary shares
(in millions of Korean won)

     310,259        950,656        203,288        590,314  

Number of dilutive potential ordinary shares outstanding
(in number of shares)

     365,247        205,406        99,815        119,290  

Weighted average number of ordinary shares outstanding
(in number of shares)

     234,741,061        235,570,110        245,471,840        245,405,539  

Diluted earnings per share (in Korean won)

     1,322        4,036        828        2,405  

Diluted earnings per share is earnings per outstanding of ordinary shares and dilutive potential ordinary shares. Diluted earnings per share is calculated by dividing adjusted profit for the year by the sum of the number of ordinary shares and dilutive potential ordinary shares.

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

26.

Cash Generated from Operations

Cash flows from operating activities for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

1. Profit for the period

   W 1,035,009      W 666,200  

2. Adjustments for:

     

Income tax expense

     436,155        325,138  

Interest income 1

     (217,978      (217,072

Interest expense 1

     191,532        211,926  

Dividend income 2

     (25,447      (2,697

Depreciation

     1,980,552        1,973,550  

Amortization of intangible assets

     445,341        473,693  

Depreciation of right-of-use assets

     298,534        307,211  

Provisions for severance benefits (defined benefits)

     189,973        191,352  

Allowance for bad debts

     77,216        92,598  

Share of net profit or loss of associates and joint ventures

     (97,888      3,432  

Loss on disposal of associates and joint ventures

     6        124  

Loss on disposal of subsidiaries

     10,802        —    

Loss on disposal of property, equipment and investment properties

     20,806        36,783  

Impairment loss on property and equipment

     1,371        47,291  

Loss on disposal of right-of-use assets

     7,026        934  

Loss on disposal of intangible assets

     2,516        574  

Impairment loss on intangible assets

     1,775        1,023  

Loss on foreign currency translation 3

     199,221        58,118  

Gain on valuation of derivatives

     (207,237      (53,143

Loss on disposal of financial assets at amortized cost

     3        1  

Loss (gain) on disposal of financial assets at fair value through profit or loss

     (21,742      428  

Loss on valuation of financial assets at fair value 4 through profit or loss

     18,996        419  

Others

     424        29,565  

3. Changes in operating assets and liabilities

     

Increase in trade receivables

     (2,013      (123,877

Increase in other receivables

     (335,122      (1,200,120

Decrease (increase) in other current assets

     (73,894      58,039  

Increase in other non-current assets

     (95,676      (76,538

Decrease (increase) in inventories

     185,890        (140,708

Increase in trade payables

     52,564        241,342  

Increase in other payables

     476,499        773,746  

Increase (decrease) in other current liabilities

     (50,850      33,633  

Increase (decrease) in other non-current liabilities

     (23,334      699  

Increase in provisions

     2,744        2,233  

Increase in deferred revenue

     3,216        66  

Decrease in plan assets

     161,016        117,281  

Payment of severance benefits

     (204,963      (152,380
  

 

 

    

 

 

 

4. Cash generated from operations (1+2+3)

   W 4,443,043      W 3,680,864  
  

 

 

    

 

 

 

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

1 

BC Card Co., Ltd. and other subsidiaries of the Group recognize interest income and expense as operating revenue and expense, respectively, including interest income of W 18,969 million (nine-month period ended September 30, 2020: W 15,083 million) and interest expense of W 3,161 million (nine-month period ended September 30, 2020: W 899 million) that are recognized as operating revenue and expense, respectively, for the nine-month period ended September 30, 2021.

 

2 

BC Card Co., Ltd. recognized dividend income as operating revenue, including dividend income of W 1,139 million (nine-month period ended September 30, 2020: W 1,594 million) that is recognized as operating revenue for the nine-month period ended September 30, 2021.

 

3 

BC Card Co., Ltd. and other subsidiaries of the Group recognize gains or losses on foreign currency translation as operating revenue and expenses, respectively, including losses on foreign currency translation of W 10 million that is recognized as operating expense for the nine-month period ended September 30, 2021 (there were no foreign currency translation gains or losses the nine-month period ended September 30, 2020).

 

4

KT Investment Co., Ltd. and other subsidiaries of the Group recognize gains or losses on valuation of financial assets measured at fair value through profit or loss as operating revenue and expenses, respectively, including a loss on valuation of financial assets measured at fair value through profit or loss of W 15,001 million that is recognized as operating expense for the nine-month period ended September 30, 2021 (nine-month period ended September 30, 2020: loss of W 1 million recognized in operating expense).

Significant transactions not affecting cash flows for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Reclassification of the current portion of borrowings

   W 965,160      W 1,039,503  

Reclassification of construction-in-progress to property and equipment

     1,728,860        1,364,518  

Reclassification of other payables from property and equipment

     (568,899      (374,316

Reclassification of other payables from intangible assets

     196,431        (339,208

Reclassification of other payables from defined net benefit liabilities

     (3,593      (126

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

27.

Changes in Liabilities Arising from Financing Activities

 

(in millions of Korean won)    Nine months ended September 30, 2021  
                 Non-cash        
     Beginning     Cash flows     Newly
acquired
     Exchange
differences
    Fair value
changes
    Others     Ending  

Borrowings

   W 7,316,298     W 854,949     W 46,340      W 202,776     W —       W (24,255   W 8,396,108  

Lease liabilities

     1,143,640       (269,651     296,710        3       47       (2,208     1,168,541  

Derivative liabilities

     130,573       (1,421     205,323        (1,581     (12,350     (107,978     212,566  

Derivative assets

     (7,606     216       —          (186,461     (8,742     108,228       (94,365
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total

   W 8,582,905     W 584,093     W 549,142      W 14,737     W (21,045   W (26,982   W 9,682,850  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(in millions of Korean won)    Nine months ended September 30, 2020  
                 Non-cash        
     Beginning     Cash flows     Newly
acquired
     Exchange
differences
    Fair value
changes
    Others     Ending  

Borrowings

   W 7,298,867     W 494,205     W 15,639      W 35,031     W —       W 7,175     W 7,850,917  

Lease liabilities

     1,211,351       (338,203     334,540        4       31       (4,593     1,203,130  

Other financial liabilities

     —         (13,674     13,674        —         —         —         —    

Derivative liabilities

     20,096       (714     2,588        3,210       13,670       (6,801     32,049  

Derivative assets

     (58,576     15,184       —          (50,391     (21,243     6,798       (108,228
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total

   W 8,471,738     W 156,798     W 366,441      W (12,146   W (7,542   W 2,579     W 8,977,868  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

28.

Segment Information

The Group’s operating segments are as follows:

 

Details    Business service
ICT    Mobile/fixed line telecommunication service and convergence business, B2B business and others
Finance    Credit card business and others
Satellite TV    Satellite TV business
Others    IT, facility security and global business, and others

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Details of operating revenues and profit by each segment for the three and nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021  
     Operating
revenues
    Operating
profit
    Depreciation
and amortization 1
 
    

Three

months

   

Nine

months

   

Three

months

   

Nine

months

   

Three

months

   

Nine

months

 

ICT

   W 4,664,705     W 13,717,959     W 259,127     W 976,291     W 801,954     W 2,417,823  

Finance

     966,790       2,847,521       48,451       123,974       13,890       41,864  

Satellite TV

     178,378       520,374       12,015       56,845       20,519       61,484  

Others

     1,579,627       4,363,609       81,287       170,877       84,535       252,263  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     7,389,500       21,449,463       400,880       1,327,987       920,898       2,773,434  

Elimination

     (1,172,118     (3,175,043     (18,484     (25,556     (25,748     (79,858
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated amount

   W 6,217,382     W 18,274,420     W 382,396     W 1,302,431     W 895,150     W 2,693,576  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(in millions of Korean won)    2020  
     Operating
revenues
    Operating
profit
    Depreciation
and amortization 1
 
    

Three

months

   

Nine

months

   

Three

months

   

Nine

months

   

Three

months

   

Nine

months

 

ICT

   W 4,520,467     W 13,289,209     W 208,512     W 764,221     W 803,747     W 2,428,333  

Finance

     864,332       2,532,719       28,604       96,431       12,760       31,434  

Satellite TV

     176,610       522,194       13,579       63,912       20,624       63,629  

Others

     1,487,678       4,248,259       44,395       111,750       89,076       269,005  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     7,049,087       20,592,381       295,090       1,036,314       926,207       2,792,401  

Elimination

     (1,047,889     (2,882,964     (1,045     (13,926     (20,906     (63,516
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated amount

   W 6,001,198     W 17,709,417     W 294,045     W 1,022,388     W 905,301     W 2,728,885  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1 

Sum of depreciation of property and equipment, investment properties, right-of-use assets and amortization of intangible assets.

Operating revenues for the three and nine-month periods ended September 30, 2021 and 2020, and non-current assets as at September 30, 2021 and December 31, 2020, by geographical region, are as follows:

 

(in millions of Korean won)    2021  
     Operating revenues      Non-current assets1  
     Three months      Nine months      September 30, 2021  

Domestic

   W 6,197,750      W 18,216,824      W 19,697,420  

Overseas

     19,632        57,596        251,311  
  

 

 

    

 

 

    

 

 

 

Total

   W 6,217,382      W 18,274,420      W 19,948,731  
  

 

 

    

 

 

    

 

 

 

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won)    2020  
     Operating revenues      Non-current assets1  
     Three months      Nine months      December 31, 2020  

Domestic

   W 5,986,229      W 17,656,734      W 18,934,766  

Overseas

     14,969        52,683        18,243  
  

 

 

    

 

 

    

 

 

 

Total

   W 6,001,198      W 17,709,417      W 18,953,009  
  

 

 

    

 

 

    

 

 

 

 

1 

Non-current assets include property and equipment, intangible assets, investment properties, and right-of-use-assets

 

29.

Related Party Transactions

The list of related parties of the Group as at September 30, 2021, is as follows:

 

Relationship    Name of Entity
Associates and joint ventures   

KIF Investment Fund, K-REALTY CR REITs No.1, Boston Global Film & Contents Fund

L.P., QTT Global (Group) Company Ltd., CU Industrial Development Co., Ltd.,

KD Living, Inc., LoginD Co., Ltd., K-REALTY CR-REIT 6, K Bank Inc.,

ISU-kth Contents Investment Fund, Daiwon Broadcasting Co., Ltd.,

KT-DSC Creative Economy Youth Start-up Investment Fund,

Korea Electronic Vehicle Charging Service, K-REALTY RENTAL HOUSING REIT 2,

AI RESEARCH INSTITUTE, KT-IBKC Future Investment Fund 1,

Gyeonggi-KT Yoojin Superman Fund, FUNDA Co., Ltd, CHAMP IT Co., Ltd.,

Alliance Internet Corp., Little big pictures, Virtua Realm Sendirian Berhad,

KT Philippines, KT-Smart Factory Investment Fund, Studio Discovery Co., Ltd.,

KT Young Entrepreneurs DNA Investment Fund, Hyundai Robotics Co., Ltd.,

IGIS Professional Investors Private Investment Real Estate Investment LLC No.395,

Mogyo Limited Company Specializing in the Cultural Industry,

Maruee Limited Company Specializing in the Cultural Industry, Trustay Co., Ltd.,

The Skyk Co., Ltd., StorySoop Inc., Mastern No.127 Logispoint Daegu Co., Ltd.,

SMART KOREA KT NEXT VENTURE FUND, KT Early Stage Investment Fund,

Pacific Professional Investors Private Investment Real Estate Investment LLC No.55

Mastern KT Multi-Family Real Estate Private Equity Investment Fund 1, Home Choice Corp

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Outstanding balances of receivables and payables in relation to transactions with related parties as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
     Receivables      Payables  
   Trade
receivables
     Other
receivables
     Trade
payables
    

Other

payables

    

Lease

lia3bilities

 

Associates and joint ventures

   K- Realty CR-REITs No.1    W 1,372      W 12,100      W —        W —        W 4,098  
   K Bank, Inc.      754        35,436        —          473        —    
   IGIS Professional Investors Private Investment Real Estate Investment LLC No.395      4,064        —          —          —          —    
   Others      928        2        588        2,920        —    
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 7,118      W 47,538      W 588      W 3,393      W 4,098  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
(in millions of Korean won)    December 31, 2020  
          Receivables      Payables  
          Trade
receivables
     Other
receivables
     Trade
payables
     Other
payables
    

Lease

liabilities

 

Associates and joint ventures

   K- Realty CR-REITs No.1    W 457      W 16,200      W —        W —        W 20,857  
   K Bank, Inc.      775        32,964        —          891        —    
   Others      72        1,147        —          858        —    

Others

   KHS Corp.      7        —           —          —          —     
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 1,311      W 50,311      W —        W 1,749      W 20,857  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Significant transactions with related parties for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021  
          Sales      Purchases  
          Operating
revenue
    

Other

income

     Operating
expenses
     Others 1  

Associates and joint ventures

   K- Realty CR-REITs No.1    W 1,986      W —        W —        W —    
   K Bank, Inc      17,172        33        10,705        —    
  

IGIS Professional Investors Private Investment Real Estate Investment LLC No.395

     4,500        —          —          —    
   Others 2      5,486        103        14,229        2,113  

Others

   KHS Corporation 3      14        —          1,744        —    
     

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 29,158      W 136      W 26,678      W 2,113  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1 

Amounts include acquisition of property and equipment, and others.

2

Includes transactions of Oscar Ent. Co., Ltd., Mission Limited Company Specializing in the Cultural Industry and Sweet&Sour Limited Company Specializing in the Cultural Industry before the entities were excluded from associates and joint ventures.

3 

Includes transactions of the entity before it was included as a subsidiary of the Group.

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won)         2020  
          Sales      Purchases  
          Operating
revenue
    

Other

income

     Operating
expenses
     Others 1  

Associates and joint ventures

  

K- Realty CR-REITs No.1

   W 1,289      W      W —        W —    
  

KIF Investment Fund

     —          —          —          —    
  

K Bank, Inc.

     12,889        —          6,300        —    
  

Others

     489        70        7,369        —    

Others

  

KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.) 2

     2,385        —          25,862        61,491  
  

KHS Corporation

     62        —          8,084        —    
     

 

 

    

 

 

    

 

 

    

 

 

 

Total

      W 17,114      W 70      W 47,615      W 61,491  
     

 

 

    

 

 

    

 

 

    

 

 

 

 

1 

Amounts include acquisition of property and equipment, and others.

2 

Includes transactions of the entity before it was included as a subsidiary of the Group.

 

(in millions of Korean won)    2021      2020  
          Finance
income
     Finance
costs
    

Dividend

income

     Finance
income
     Finance
costs
    

Dividend

income

 

Associates and joint ventures

   K- Realty CR-REITs No.1    W —        W 149      W 40,142      W —        W 1,008      W 8,061  
   KIF Investment Fund      —          —          —          —          —          9,241  
   K Bank, Inc      146        —          —          3        —          —    
   Others      —          —          6,474        —          —          43  

Others

   KT Engineering Co., Ltd. (KT ENGCORE Co., Ltd.)1      —          —          —          —          1        —    
   KHS Corp.      —          —          —          —          —          —    
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 146      W 149      W 46,616      W 3      W 1,009      W 17,345  
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1 

Includes transactions of the entity before it was included as a subsidiary of the Group.

Key management compensation for the nine-month periods ended September 30, 2021 and 2020, consists of:

 

(in millions of Korean won)    2021      2020  

Salaries and other short-term benefits

   W 1,622      W 1,560  

Post-employment benefits

     311        285  

Stock-based compensation

     503        468  
  

 

 

    

 

 

 

Total

   W 2,436      W 2,313  
  

 

 

    

 

 

 

 

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Table of Contents

KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Fund transactions with related parties for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021  
     Repayments1
    

Equity contributions

in cash and others

 

Associates and Joint ventures

     

K- Realty CR-REITs No.1

   W 11,767      W —    

KT-IBKC Future Investment fund 1

     —          (5,700

Trustay Co., Ltd.

     —          3,000  

KT-Smart Factory Investment Fund

     —          1,400  

KT Young Entrepreneurs DNA Investment Fund

     —          8,400  

KT-DSC Creative Economy Youth Start-up Investment Fund

     —          (2,200

StorySoop Inc.

     —          2,000  

Mastern No.127 Logispoint Daegu Co., Ltd.

     —          1,900  

The skyk Co., Ltd.

     —          581  

Mogyo Limited Company Specializing in the Cultural Industry

     —          700  

Mastern KT Multi-Family Real Estate Private Equity Investment Fund I

     —          6,055  

Pacific Professional Investors Private Investment Real Estate Investment LLC No. 55

     —          11,000  

KT Early Stage Investment Fund

     —          4,000  

K Bank, Inc

     —          424,957  

SMART KOREA KT NEXT VENTURE FUND

     —          2,400  

Mission Limited Company Specializing in the Cultural Industry 2

     —          (2,026

Sweet&Sour Limited Company Specializing in the Cultural Industry 2

     —          (3,177
  

 

 

    

 

 

 

Total

   W 11,767      W 453,290  
  

 

 

    

 

 

 

 

1 

Amounts include lease transactions.

2

Includes transactions before being excluded as associates and joint ventures.

 

(in millions of Korean won)    2020  
     Repayments1
    

Equity contributions

in cash and others

 

Associates and Joint ventures

     

K- Realty CR-REITs No.1

   W 18,934      W —    

Studio Discovery Co., Ltd.

     —          3,000  

KT Young Entrepreneurs DNA Investment Fund

     —          3,600  

KT-Smart Factory Investment Fund

     —          2,800  

KT-CKP New Media Investment Fund

     —          (148

K Bank, Inc

     —          195,011  

Gyeonggi-KT Yoojin Superman Fund

     —          1,000  

Hyundai Robotics Co., Ltd.

     —          50,000  

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won)    2020  
     Repayments1
    

Equity contributions

in cash and others

 

Others

     

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.) 2

     34        —    
  

 

 

    

 

 

 

Total

   W 18,968      W 255,263  
  

 

 

    

 

 

 

 

1 

Amounts include lease transactions.

2

Includes transactions of the entity before it was included as a subsidiary of the Group.

At the end of the reporting period, there are no collateral and payment guarantee provided by the related parties.

 

30.

Fair Value

(1)    Fair Value of Financial Instruments by Category

Carrying amount and fair value of financial instruments by category as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  
     Carrying
amount
     Fair value      Carrying
amount
     Fair value  

Financial assets

           

Cash and cash equivalents

   W 3,088,946        1       W 2,634,624        1   

Trade and other receivables

           

Financial assets measured at amortized cost 2

     5,853,396        1         4,976,423        1   

Financial assets at fair value through other comprehensive income

     539,652        539,652        1,118,619        1,118,619  

Other financial assets

           

Financial assets measured at amortized cost

     455,490        1         671,068        1   

Financial assets at fair value through profit or loss

     696,917        696,917        809,919        809,919  

Financial assets at fair value through other comprehensive income

     120,238        120,238        258,516        258,516  

Derivative financial assets for hedging

     94,365        94,365        7,684        7,684  
  

 

 

       

 

 

    

Total

   W 10,849,004         W 10,476,853     
  

 

 

       

 

 

    

Financial liabilities

           

Trade and other payables

     7,238,558        1         7,017,639        1   

Borrowings

     8,396,108        1         7,316,298        1   

Other financial liabilities

           

Financial liabilities at amortized cost

     154,727        1         132,558        1   

Financial liabilities at fair value through profit or loss

     220,892        220,892        2,682        2,682  

Derivative financial liabilities for hedging

     10,645        10,645        127,929        127,929  
  

 

 

       

 

 

    

Total

   W 16,020,930         W 14,597,106     
  

 

 

       

 

 

    

 

1 

The Group did not conduct a fair value estimation since the book amount is a reasonable approximation of fair value.

2 

With the application of Korean IFRS 1107, lease receivables are excluded from fair value disclosure.

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(2)    Fair Value Hierarchy

To provide an indication about the reliability of the inputs used in determining fair value, the Group classifies its financial instruments into the three levels prescribed under the accounting standards. Financial instruments that are measured at fair value are categorized by the fair value hierarchy, and the defined levels are as follows:

 

 

Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1.

 

 

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

 

 

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

Fair value hierarchy classifications of the financial assets and financial liabilities that are measured at fair value or its fair value is disclosed as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
     Level 1      Level 2      Level 3      Total  
Assets            

Trade and other receivables

           

Financial assets at fair value through other comprehensive income

   W —        W 539,652      W —        W 539,652  

Other financial assets

           

Financial assets at fair value through profit or loss

     27,521        329,824        339,572        696,917  

Financial assets at fair value through other comprehensive income

     19,826        7,497        92,915        120,238  

Derivative financial assets for hedging

     —          61,250        33,115        94,365  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 47,347      W 938,223      W 465,602      W 1,451,172  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Other financial liabilities

           

Financial liabilities at fair value through profit or loss

   W —        W 823      W 220,069      W 220,892  

Derivative financial liabilities for hedging

     —          10,645        —          10,645  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W —        W 11,468      W 220,069      W 231,537  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won)    December 31, 2020  
     Level 1      Level 2      Level 3      Total  

Assets

           

Trade and other receivables

           

Financial assets at fair value through other comprehensive income

   W —        W 1,118,619      W —        W 1,118,619  

Other financial assets

           

Financial assets at fair value through profit or loss

     46,449        330,961        432,509        809,919  

Financial assets at fair value through other comprehensive income

     5,606        202,121        50,789        258,516  

Derivative financial assets for hedging

     —          7,684        —          7,684  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 52,055      W 1,659,385      W 483,298      W 2,194,738  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Other financial liabilities

           

Financial liabilities at fair value through profit or loss

   W —        W 45      W 2,637      W 2,682  

Derivative financial liabilities for hedging

     —          123,735        4,194        127,929  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W —        W 123,780      W 6,831      W 130,611  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(3)

Transfers Between Fair Value Hierarchy Levels of Recurring Fair Value Measurements

There are no transfers between Level 1 and Level 2 of the fair value hierarchy for recurring fair value measurements.

Details of changes in Level 3 of the fair value hierarchy for recurring fair value measurements are as follows:

 

(In millions of Korean won)    September 30, 2021  
     Financial assets      Financial
liabilities
 
     Financial assets
at fair value
through profit or
loss
     Financial assets
at fair value
through other
comprehensive
income
    

Derivative
financial assets

for hedging

    

Financial

liabilities at fair
value through
profit or loss

 

Beginning balance

   W 432,509      W 50,789      W (4,194    W 2,637  

Purchases

     202,388        25,945        —          224,288  

Reclassifications

     (23,584      14,299        —          —    

Changes in consolidation scope

     423        1,581        —          —    

Disposals

     (274,325      —          —          —    

Amount recognized in profit or loss

     2,161        52        42,898        (6,856

Amount recognized in other comprehensive income

     —          249        (5,589      —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   W 339,572      W 92,915      W 33,115      W 220,069  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(In millions of Korean won)    September 30, 2020  
     Financial assets  
     Financial assets at
fair value through
profit or loss
     Financial assets at fair
value through other
comprehensive income
     Derivative financial
assets (liabilities) for
hedging
 

Beginning balance

   W 495,141      W 42,054      W  17,788  

Purchases

     247,854        13,143        —    

Reclassifications

     (2,539      —          —    

Disposals

     (247,897      (547      —    

Amount recognized in profit or loss

     1,426        (447      5,211  

Amount recognized in other comprehensive income

     —          (1,386      7,065  
  

 

 

    

 

 

    

 

 

 

Ending balance

   W 493,985      W 52,817      W 30,064  
  

 

 

    

 

 

    

 

 

 

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(4)

Valuation Techniques and Inputs

Valuation techniques and inputs used in recurring and non-recurring fair value measurements and disclosed fair values categorized within Level 2 and Level 3 of the fair value hierarchy as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
     Fair value      Level      Valuation techniques  

Assets

        

Trade and other receivables

        

Financial assets at fair value through other comprehensive income

     W     539,652        2        DCF Model  

Other financial assets

        

Financial assets at fair value through profit or loss

     669,396        2,3       

DCF Model,

Adjusted Net Asset model

 

 

Financial assets at fair value through other comprehensive income

     100,412        2,3       


DCF Model

Comparable Company
Analysis

 

 
 

Derivative financial assets for hedging

     94,365        2,3       

DCF Model,

Hull-White model

 

 

Liabilities

        

Other financial liabilities

        

Financial liabilities at fair value through profit or loss

   W 220,892        2,3       

DCF Model,

Binomial Option Pricing

 

 

Derivative financial liabilities for hedging

     10,645        2        DCF Model  
(in millions of Korean won)    December 31, 2020  
     Fair value      Level      Valuation techniques  

Assets

        

Trade and other receivables

        

Financial assets at fair value through other comprehensive income

   W 1,118,619        2        DCF Model  

Other financial assets

        

Financial assets at fair value through profit or loss

     763,470        2,3       

DCF Model,

Adjusted Net Asset model

 

 

Financial assets at fair value through other comprehensive income

     252,910        2,3       


DCF Model,

Comparable Company
Analysis

 

 
 

Derivative financial assets for hedging

     7,684        2        DCF Model  

Liabilities

        

Other financial liabilities

        

Financial liabilities at fair value through profit or loss

   W 2,682        2,3       


DCF Model,

Binomial Option Pricing
Model


 
 

Derivative financial liabilities for hedging

     127,929        2,3       

DCF Model,

Hull-White model

 

 

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(5)

Valuation Processes for Fair Value Measurements Categorized Within Level 3

The Group uses external experts that perform the fair value measurements required for financial reporting purposes. External experts report directly to the Chief Financial Officer (CFO) and discuss valuation processes and results with the CFO in line with the Group’s closing dates.

 

(6)

Gains and Losses on Valuation at the Transaction Date

In the case that the Group values derivative financial instruments using inputs not based on observable market data, and the fair value calculated by valuation methods using such data differs from the transaction price, then the fair value of the financial instrument is recognized at the transaction price. The difference between the fair value at initial recognition and the transaction price is deferred and amortized using a straight-line method by maturity of the financial instrument. However, in the case that the inputs of the valuation methods become observable in markets, the remaining deferred difference is immediately recognized in full in profit or loss.

In relation to this, details and changes of total deferred differences for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Derivatives used for
hedging
     Derivatives used for
hedging
 

Beginning balance

   W 2,257      W 3,682  

New transactions

     —          —    

Recognized at fair value through profit or loss

     (1,069      (1,069
  

 

 

    

 

 

 

Ending balance

   W 1,188      W 2,613  
  

 

 

    

 

 

 

 

64


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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

31.

Business Combination

On September 30, 2021, the Group’s subsidiary, KT Skylife Co., Ltd. acquired 7,000,000 ordinary shares(100%) of Hyundai HCN Co., Ltd. for W515,091 million to strengthen the competitiveness of the paid broadcasting business and create the synergy, and changed its name to HCN Co., Ltd.

On September 30, 2021, the Group’s subsidiary, KT Studio Genie Co., Ltd. acquired 3,017,428 ordinary shares(100%) of Hyundai Media Co., Ltd for W30,812 million to strengthen the synergy of content business within the KT Group and changed its name to Media Genie Co., Ltd.

On September 30, 2021, the Group’s subsidiary, KT ES Pte. Ltd acquired 81,320,642 ordinary shares(100%) of Epsilon Global Communications PTE. Ltd for USD 135 million to expand the global communication business and create the synergy.

On September 30, 2021, the Group’s subsidiary, GENIE Music Corporation acquired 129,925 ordinary shares and 123,772 redeemable convertible preferred stock (38.63%) for W46,427 million to create the synergy with its existing business and strengthen business competitiveness.

Details of the business combinations are as follows:

 

(in millions of Korean won)    Business line    Date      Purchase Consideration  

HCN Co., Ltd.

   Cable television
Service
     Sept. 30,2021      W 515,091  

MEDIA GENIE Co., Ltd.

   TV contents provider      Sept. 30,2021        30,812  

Epsilon Global Communications PTE. Ltd..

   Foreign investment
business
     Sept. 30,2021        159,653  

MILLIE Co., Ltd

   Book contents service      Sept. 30,2021        46,427  

Fair value of the assets and liabilities recognized as a result of the acquisition at the acquisition date are as follows:

 

(in millions of Korean won)    HCN Co., Ltd.      MEDIA GENIE
Co., Ltd.
     Epsilon Global
Communications
PTE. Ltd.
     MILLIE Co., Ltd.  

Purchase consideration

   W 515,091      W 30,812      W 159,653      W 46,427  

Recognized amounts of identifiable assets and liabilities

           

Non-current assets

     209,070        12,883        73,737        1,602  

Current assets

     104,574        9,304        18,993        17,774  

Non-current liabilities

     37,667        540        34,942        28,289  

Current liabilities

     36,151        4,617        45,594        11,922  

Total identifiable net assets

     239,826        17,030        12,194        (20,835

Non-controlling interest

     —          —          —          (21,828

Fair value of recognized

net assets

     239,826        17,030        12,194        993  
  

 

 

    

 

 

    

 

 

    

 

 

 

Goodwill 1

   W 275,265      W 13,782      W 147,459      W 45,434  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1 

Goodwill may change as the results of the fair value assessment for identifiable asset and liabilities for purchase price allocation have not been determined.

 

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KT Corporation and Subsidiaries

Notes to the Consolidated Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

32.

Changes in Accounting Policies—Determination of Lease Term Considering Economic Penalty

The Group has changed its accounting policy by adopting accounting treatments in accordance with the agenda decisions for ‘Lease Term and Useful Life of Leasehold Improvements’ issued by the IFRS Interpretations Committee on December 16, 2019. The change in accounting policy has been firstly retrospectively applied to the 2020 annual consolidated financial statements in accordance with Korean IFRS 1008 Accounting Policies, Changes in Accounting Estimates and Errors. The Group adjusted the comparative consolidated financial statements for the nine-month period ended September 30, 2020.

In relation to the changes in accounting policy, the adjusted amounts recognized in each line item in the consolidated financial statements are as follows:

Consolidated statements of profit or loss

 

(in millions of Korean won)    Periods ended September 30, 2020  
     Amount based on previous policy      Adjustment     Amount based on changed policy  
    

Three

Months

    

Nine

Months

    

Three

Months

   

Nine

Months

   

Three

Months

    

Nine

Months

 

Operating expenses

   W 5,708,862      W 16,692,140      W (1,709   W (5,111   W 5,707,153      W 16,687,029  

Other income

     122,176        232,306        282       3,816       122,458        236,122  

Other expenses

     99,780        236,797        —         —         99,780        236,797  

Finance income

     35,326        301,040        —         —         35,326        301,040  

Finance cost

     40,648        321,026        2,127       6,957       42,775        327,983  

Income tax expense

     84,248        325,138        —         —         84,248        325,138  

Profit for the period

     230,069        664,230        (136     1,970       229,933        666,200  

Basic earnings per share

     829        2,399        (1     8       828        2,407  

Diluted earnings per share

     829        2,397        (1     8       828        2,405  

 

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KT Corporation

Separate Interim Financial Statements

September 30, 2021 and 2020


Table of Contents

KT Corporation

Index

September 30, 2021 and 2020

 

     Page(s)

Report on Review of Interim Financial Statements

   1 - 2

Separate Interim Financial Statements

  

Separate Interim Statements of Financial Position

   3 - 4

Separate Interim Statements of Profit or Loss

   5

Separate Interim Statements of Comprehensive Income

   6

Separate Interim Statements of Changes in Equity

   7

Separate Interim Statements of Cash Flows

   8

Notes to the Separate Interim Financial Statements

   9 - 51


Table of Contents
LOGO       LOGO

Report on Review of Interim Financial Statements

(English Translation of a Report Originally Issued in Korean)

To the Shareholders and Board of Directors of

KT Corporation

Reviewed Financial Statements

We have reviewed the accompanying separate interim financial statements of KT Corporation (the “Company”). These financial statements consist of the separate interim statement of financial position as at September 30, 2021, and the related separate interim statements of profit or loss and comprehensive income for the three-month and nine-month periods ended September 30, 2021 and 2020, and separate interim statements of changes in equity and cash flows for the nine-month periods ended September 30, 2021 and 2020, and a summary of significant accounting policies and other explanatory notes, expressed in Korean won.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these separate interim financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”) 1034 Interim Financial Reporting, and for such internal control as management determines is necessary to enable the preparation of separate interim financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to issue a report on these separate interim financial statements based on our review.

We conducted our review in accordance with quarterly or semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Korean Standard on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe the accompanying separate interim financial statements do not present fairly, in all material respects, in accordance with Korean IFRS 1034 Interim Financial Reporting.

 

LOGO


Table of Contents

Other Matters

We have audited the separate statement of financial position of the Company as at December 31, 2020, and the related separate statements of profit or loss, comprehensive income, changes in equity and cash flows for the year then ended, in accordance with Korean Standards on Auditing. We expressed an unqualified opinion on those financial statements, not presented herein, in our audit report dated March 9, 2021. The separate statement of financial position as at December 31, 2020, presented herein for comparative purposes, is consistent, in all material respects, with the above audited statement of financial position as at December 31, 2020.

Review standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to review such financial statements may differ from those generally accepted and applied in other countries.

 

LOGO

Seoul, Korea

November 15, 2021

 

This report is effective as of November 15, 2021, the review report date. Certain subsequent events or circumstances, which may occur between the review report date and the time of reading this report, could have a material impact on the accompanying separate interim financial statements and notes thereto. Accordingly, the readers of the review report should understand that there is a possibility that the above review report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.

 

2


Table of Contents

KT Corporation

Separate Interim Statements of Financial Position

September 30, 2021 and December 31, 2020

 

 

(in millions of Korean won)    Notes      September 30, 2021
(Unaudited)
     December 31, 2020  

Assets

        

Current assets

        

Cash and cash equivalents

     4      W 1,829,451      W 1,541,210  

Trade and other receivables, net

     4,5        3,430,900        3,127,040  

Other financial assets

     4,6        105,621        268,046  

Inventories, net

     7        186,576        353,310  

Other current assets

     8        1,980,466        1,866,128  
     

 

 

    

 

 

 

Total current assets

        7,533,014        7,155,734  
     

 

 

    

 

 

 

Non-current assets

        

Trade and other receivables, net

     4,5        760,217        1,080,282  

Other financial assets

     4,6        360,242        180,780  

Property and equipment, net

     9        11,463,588        11,999,717  

Right-of-use assets

     16        1,112,971        1,152,153  

Investment properties, net

     9        980,661        735,563  

Intangible assets, net

     9        1,920,016        1,583,456  

Investments in subsidiaries, associates and joint ventures

     10        3,798,976        3,505,017  

Other non-current assets

     8        677,801        635,224  
     

 

 

    

 

 

 

Total non-current assets

        21,074,472        20,872,192  
     

 

 

    

 

 

 

Total assets

      W 28,607,486      W 28,027,926  
     

 

 

    

 

 

 

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

 

3


Table of Contents

KT Corporation

Separate Interim Statements of Financial Position

September 30, 2021 and December 31, 2020

 

 

(in millions of Korean won)    Notes      September 30, 2021
(Unaudited)
    December 31, 2020  

Liabilities

       

Current liabilities

       

Trade and other payables

     4,11      W 3,957,855     W 4,276,962  

Borrowings

     4,12        1,195,968       1,228,777  

Other financial liabilities

     4,6        10,227       —    

Current tax liabilities

        290,930       76,036  

Provisions

     13        157,692       152,971  

Deferred income

        50,954       53,836  

Other current liabilities

     8        755,757       819,385  
     

 

 

   

 

 

 

Total current liabilities

        6,419,383       6,607,967  
     

 

 

   

 

 

 

Non-current liabilities

       

Trade and other payables

     4,11        1,006,026       738,275  

Borrowings

     4,12        5,947,155       5,716,991  

Other financial liabilities

     4,6        171       120,349  

Net defined benefit liabilities

     14        360,051       270,290  

Provisions

     13        78,220       79,774  

Deferred income

     19        165,742       141,554  

Deferred tax liabilities

        229,547       271,454  

Other non-current liabilities

     8        809,921       877,715  
     

 

 

   

 

 

 

Total non-current liabilities

        8,596,833       8,216,402  
     

 

 

   

 

 

 

Total liabilities

        15,016,216       14,824,369  
     

 

 

   

 

 

 

Equity

       

Share capital

        1,564,499       1,564,499  

Share premium

        1,440,258       1,440,258  

Retained earnings

     17        11,746,554       11,233,714  

Accumulated other comprehensive income

        42,882       42,906  

Other components of equity

     18        (1,202,923     (1,077,820
     

 

 

   

 

 

 

Total equity

        13,591,270       13,203,557  
     

 

 

   

 

 

 

Total liabilities and equity

      W 28,607,486     W 28,027,926  
     

 

 

   

 

 

 

 

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

4


Table of Contents

KT Corporation

Separate Interim Statements of Profit or Loss

Three-Month and Nine-Month Periods Ended September 30, 2021 and 2020

 

 

            Periods Ended September 30  
(in millions of Korean won, except per share amounts)    Notes      2021
(Unaudited)
     2020
(Unaudited)
 
            Three months      Nine months      Three months      Nine months  

Operating revenue

     19      W 4,664,705      W 13,717,959      W 4,520,466      W 13,289,208  

Operating expenses

     20        4,405,577        12,741,667        4,311,955        12,524,987  
     

 

 

    

 

 

    

 

 

    

 

 

 

Operating profit

        259,128        976,292        208,511        764,221  

Other income

     21        74,474        273,127        65,742        296,325  

Other expenses

     21        58,281        144,109        50,876        162,309  

Finance income

     22        205,398        444,644        29,818        273,943  

Finance costs

     22        171,423        386,981        32,050        290,406  
     

 

 

    

 

 

    

 

 

    

 

 

 

Profit before income tax expense

        309,296        1,162,973        221,145        881,774  

Income tax expense

        80,603        303,072        58,043        230,773  
     

 

 

    

 

 

    

 

 

    

 

 

 

Profit for the period

      W 228,693      W 859,901      W 163,102      W 651,001  
     

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share

              

Basic earnings per share

     24      W 976      W 3,653      W 665      W 2,654  

Diluted earnings per share

     24        974        3,650        664        2,653  

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

 

5


Table of Contents

KT Corporation

Separate Interim Statements of Comprehensive Income

Three-Month and Nine-Month Periods Ended September 30, 2021 and 2020

 

 

            Periods Ended September 30  
(in millions of Korean won)    Notes      2021
(Unaudited)
    2020
(Unaudited)
 
            Three months     Nine months     Three months     Nine months  

Profit for the period

      W 228,693     W 859,901     W 163,102     W 651,001  
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income

           

Items that will not be subsequently reclassified to profit or loss:

           

Remeasurements of the net defined benefit liability

     14        397       (76     865       1,408  

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

        (2,920     (2,400     635       154  

Items that may be subsequently reclassified to profit or loss:

           

Valuation gain (loss) on cash flow hedge

     6        90,334       139,955       (34,570     40,834  

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

        (92,972     (137,579     42,431       (34,778
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income for the period, net of tax

        (5,161     (100     9,361       7,618  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

      W 223,532     W 859,801     W 172,463     W 658,619  
     

 

 

   

 

 

   

 

 

   

 

 

 

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

 

6


Table of Contents

KT Corporation

Separate Interim Statements of Changes in Equity

Nine-Month Periods Ended September 30, 2021 and 2020

 

 

(in millions of Korean won)                               Accumulated     Other        
          Share      Share      Retained     other comprehensive     components     Total  
   Notes      capital      premium      earnings     income     of equity     equity  

Balance as at January 1, 2020

      W 1,564,499      W 1,440,258      W 10,866,582     W 23,449     W (1,001,492   W 12,893,296  

Comprehensive income

                 

Profit for the period

        —          —          651,001       —         —         651,001  

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

     6        —          —          —         154       —         154  

Remeasurements of net defined benefit liabilities

     14        —          —          1,408       —         —         1,408  

Valuation gain on cash flow hedge

     6        —          —          —         6,056       —         6,056  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        —          —          652,409       6,210       —         658,619  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners

                 

Dividends paid

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

Appropriation of retained earnings related to loss on disposal of treasury stock

        —          —          (1,690     —         1,690       —    

Disposal of treasury stock

        —          —          —         —         3,640       3,640  

Others

        —          —          —         —         20,491       20,491  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

        —          —          (271,456     —         25,821       (245,635
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at September 30, 2020 (Unaudited)

 

   W 1,564,499      W 1,440,258      W 11,247,535     W 29,659     W (975,671   W 13,306,280  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at January 1, 2021

      W 1,564,499      W 1,440,258      W 11,233,714     W 42,906     W (1,077,820   W 13,203,557  

Profit for the period

        —          —          859,901       —         —         859,901  

Loss on valuation of financial assets at fair value through other comprehensive income

     6        —          —          —         (2,400     —         (2,400

Remeasurements of net defined benefit liabilities

     14        —          —          (76     —         —         (76

Valuation gain on cash flow hedge

     6        —          —          —         2,376       —         2,376  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        —          —          859,825       (24     —         859,801  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Transactions with owners

                 

Dividends paid

        —          —          (326,487     —         —         (326,487

Appropriation of retained earnings related to loss on disposal of treasury stock

        —          —          (20,498     —         20,498       —    

Acquisition of treasury stock

        —          —          —         —         (190,105     (190,105

Disposal of treasury stock

                  3,056       3,056  

Others

        —          —          —         —         41,448       41,448  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal

        —          —          (346,985     —         (125,103     (472,088
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance as at September 30, 2021 (Unaudited)

 

   W 1,564,499      W 1,440,258      W 11,746,554     W 42,882     W (1,202,923   W 13,591,270  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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KT Corporation

Separate Interim Statements of Cash Flows

Nine-Month Periods Ended September 30, 2021 and 2020

 

 

            Nine-Month Periods Ended September 30  
(in millions of Korean won)    Notes      2021
(Unaudited)
    2020
(Unaudited)
 

Cash flows from operating activities

 

    

Cash generated from operations

     25      W 3,932,694     W 3,116,438  

Interest paid

        (175,859     (181,953

Interest received

        167,003       164,568  

Dividends received

        76,629       132,033  

Income tax refund (paid)

        (116,955     66,979  
     

 

 

   

 

 

 

Net cash inflow from operating activities

 

     3,883,512       3,298,065  
     

 

 

   

 

 

 

Cash flows from investing activities

       

Collection of loans

        36,300       46,064  

Disposal of current financial assets at amortized cost

        189,967       —    

Disposal of non-current financial assets at amortized cost

        —         1  

Disposal of financial assets at fair value through profit or loss

        25,751       361  

Disposal of financial assets at fair value through other comprehensive income

        —         288  

Disposal of investments in subsidiaries, associates and joint ventures

        69,784       1,378  

Disposal of assets held for sale

        —         119,182  

Disposal of property and equipment

        31,616       13,989  

Disposal of intangible assets

        5,311       3,996  

Disposal of right-of-use assets

        110       50  

Loans granted

        (36,660     (33,391

Acquisition of current financial assets at amortized cost

        —         (173

Acquisition of financial assets at fair value through profit or loss

        (66,520     (5,828

Acquisition of financial assets at fair value through other comprehensive income

        (40,182     —    

Acquisition of investments in subsidiaries, associates and joint ventures

        (348,908     (108,521

Acquisition of property and equipment

        (2,150,481     (2,164,413

Acquisition of intangible assets

        (506,245     (373,540

Acquisition of right-of-use assets

        (2,777     (3,781
     

 

 

   

 

 

 

Net cash outflow from investing activities

 

     (2,792,934     (2,504,338
     

 

 

   

 

 

 

Cash flows from financing activities

       

Proceeds from borrowings

        1,038,456       1,113,964  

Settlement of derivative assets and liabilities, net

        216       16,452  

Dividends paid

        (326,487     (269,766

Repayments of borrowings

        (1,033,841     (742,427

Acquisition of treasury stock

        (190,105     —    

Decrease in lease liabilities

        (291,059     (328,785
     

 

 

   

 

 

 

Net cash inflow (outflow) from financing activities

     26        (802,820     (210,562
     

 

 

   

 

 

 

Effect of exchange rate change on cash and cash equivalents

 

     483       3  
     

 

 

   

 

 

 

Net increase in cash and cash equivalents

 

     288,241       583,168  

Cash and cash equivalents

       

Beginning of the period

        1,541,210       1,328,397  
     

 

 

   

 

 

 

End of the period

      W 1,829,451     W 1,911,565  
     

 

 

   

 

 

 

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

 

8


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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

1.

General Information

KT Corporation (the “Company”) commenced operations on January 1, 1982, when it spun off from the Korea Communications Commission (formerly the Korean Ministry of Information and Communications) to provide telephone services and to engage in the development of advanced communications services under the Act of Telecommunications of Korea. The address of the Company’s registered office is 90, Buljeong-ro, Bundang-gu, Seongnam City, Gyeonggi Province, Korea.

On October 1, 1997, upon the announcement of the Act on the Management of Government-Invested Institutions and the Privatization Law, the Company became a government-funded institution under the Commercial Code of Korea.

On December 23, 1998, the Company’s shares were listed on the Korea Stock Exchange.

On May 29, 1999, the Company issued 24,282,195 additional shares and issued American Depository Shares (ADS), which represents new shares and 20,813,311 government-owned shares, on the New York Stock Exchange. On July 2, 2001, the additional ADS representing 55,502,161 government-shares were issued at the New York Stock Exchange.

In 2002, the Company acquired the entire government-owned shares in accordance with the Korean government’s privatization plan. As at September 30, 2021, the Korean government does not own any shares in the Company.

 

2.

Significant Accounting Policies

 

  2.1

Basis of Preparation

The Company maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying separate interim financial statements have been translated into English from the Korean language financial statements.

The Company’s separate interim financial statements for the nine-month period ended September 30, 2021, have been prepared in accordance with Korean IFRS 1034 Interim Financial Reporting. These separate interim financial statements have been prepared in accordance with Korean IFRS which is effective or has been early adopted as at September 30, 2021.

 

  2.2

Changes in Accounting Policies and Disclosures

(1) New and amended standards and interpretations adopted by the Company

The Company has applied the following standards and interpretations for the first time for their annual reporting period commencing January 1, 2021.

 

 

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Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

   

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

As a practical expedient, a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification, and the amounts recognized in profit or loss as a result of applying this exemption should be disclosed. The Company does not expect that these amendments have a significant impact on the financial statements.

 

   

Amendments to Korean IFRS 1109 Financial Instruments, Korean IFRS 1039 Financial Instruments: Recognition and Measurement, Korean IFRS 1107 Financial Instruments: Disclosure, Korean IFRS 1104 Insurance Contracts and Korean IFRS 1116 Lease – Interest Rate Benchmark Reform (Phase 2 amendments)

In relation to interest rate benchmark reform, the amendments provide exceptions including adjust effective interest rate instead of book amounts when interest rate benchmark of financial instruments at amortized costs is replaced and apply hedge accounting without discontinuance although the interest rate benchmark is replaced in hedging relationship. The Company does not expect that these amendments have a significant impact on financial statements.

(2) New standards and interpretations not yet adopted by the Company

Certain new accounting standard and interpretation that have been published but have not been early adopted by the Company, are set out below.

 

   

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

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

 

   

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

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

 

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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

   

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

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

 

   

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

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

 

   

Amendments to Korean IFRS 1116 Lease – Concession on COVID-19—Related Rent Concessions Beyond June 30 2021

The application of the practical expedient where a lessee may elect not to assess whether a rent concession occurring as a direct consequence of the COVID-19 pandemic is a lease modification, is extended to lease payments originally due on or before June 30, 2022. A lessee shall apply the practical expedient consistently to eligible contracts with similar characteristics and in similar circumstances. The amendment should be applied for annual periods beginning on or after April 1, 2021, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the financial statements.

 

   

Annual improvements to Korean IFRS 2018-2020

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

 

   

Korean IFRS 1101 First Time Adoption of Korean International Financial Reporting Standards – Subsidiaries That Are First-Time Adopters

 

   

Korean IFRS 1109 Financial Instruments – Fees Related to the 10% Test for Derecognition of Financial Liabilities

 

   

Korean IFRS 1116 Leases – Lease Incentives

 

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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

   

Korean IFRS 1041 Agriculture – Measuring Fair Value

 

  2.3

Significant Accounting Policies

Significant accounting policies and method of computation used in the presentation of the separate interim financial statements are consistent with those of the separate financial statements for the year ended December 31, 2020, except for the changes due to the application of amendment and enactments of standards described in Note 2.1 (1) and the one described below.

(1) Income Tax Expense

Income tax expense for the interim period is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate is applied to the pre-tax income.

(2) Subsidiaries, Associates and Joint Ventures

The financial statements of the Company are the separate financial statements prepared in accordance with Korean IFRS 1027 Separate Financial Statements. Investments in subsidiaries, joint ventures and associates are recognized at cost under the direct equity method. Management applied the carrying amounts under the previous K-GAAP at the time of transition to Korean IFRS as deemed cost of investments. The Company recognizes dividend income from subsidiaries, joint ventures and associates in profit or loss when its right to receive the dividend is established.

 

3.

Critical Accounting Estimates and Assumptions

The preparation of financial statements requires the Company to make estimates and assumptions concerning the future. The estimates and assumptions are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. Actual results may differ from these estimates.

The spread of COVID-19 has been a material impact on domestic and global economy. It may have a negative impact; such as, decrease in productivity, decrease or delay in sales, collection of existing receivables and others. Accordingly, it may have a negative impact on the financial position and financial performance of the Company, and the impact is expected to be continued to the separate annual financial statements in 2021.

Significant accounting estimates and assumptions applied in the preparation of the separate interim financial statements can be adjusted depending on changes in the uncertainty from COVID-19. Also, the ultimate effect of COVID-19 to the Company’s business, financial position and financial performance cannot presently determined.

 

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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

4.

Financial Instruments by Category

Financial instruments by category as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
Financial assets    Financial
assets at
amortized
cost
     Financial
assets at fair
value
through
profit or loss
     Financial
assets at fair
value through
other
comprehensive
income
    

Derivatives

used for
hedging

     Total  

Cash and cash equivalents

   W 1,829,451      W —        W —        W —        W 1,829,451  

Trade and other receivables 1

     3,648,432        —          539,652        —          4,188,084  

Other financial assets

     72,510        200,321        101,718        91,314        465,863  

 

1

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

 

(in millions of Korean won)    September 30, 2021  
Financial liabilities    Financial
liabilities at
amortized cost
    

Derivatives

used for
hedging

     Total  

Trade and other payables

   W 4,963,881      W —        W 4,963,881  

Borrowings

     7,143,123        —          7,143,123  

Other financial liabilities

     —          10,398        10,398  

 

(in millions of Korean won)    December 31, 2020  
Financial assets    Financial
assets at
amortized
cost
     Financial
assets at fair
value
through
profit or loss
     Financial
assets at fair
value through
other
comprehensive
income
    

Derivatives

used for
hedging

     Total  

Cash and cash equivalents

   W 1,541,210      W —        W —        W —        W 1,541,210  

Trade and other receivables1

     3,085,047        —          1,118,619        —          4,203,666  

Other financial assets

     262,477        155,805        22,860        7,684        448,826  

 

1

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

 

(in millions of Korean won)    December 31, 2020  
Financial liabilities    Financial
liabilities at
amortized cost
    

Derivatives

used for
hedging

     Total  

Trade and other payables

   W 5,015,237      W —        W 5,015,237  

Borrowings

     6,945,768        —          6,945,768  

Other financial liabilities

     —          120,349        120,349  

 

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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

5.

Trade and Other Receivables

Trade and other receivables as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
     Total amounts      Provision for
impairment
     Present
value discount
    

Carrying

amount

 

Current assets

           

Trade receivables

   W 3,261,484      W (264,484    W (7,452    W 2,989,548  

Other receivables

     489,022        (45,084      (2,586      441,352  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 3,750,506      W (309,568    W (10,038    W 3,430,900  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-current assets

           

Trade receivables

   W 551,530      W (2,602    W (17,770    W 531,158  

Other receivables

     241,801        —          (12,742      229,059  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 793,331      W (2,602    W (30,512    W 760,217  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

Carrying

amount

 

Current assets

           

Trade receivables

   W 2,990,693      W (259,917    W (8,631    W 2,722,145  

Other receivables

     464,889        (53,824      (6,170      404,895  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 3,455,582      W (313,741    W (14,801    W 3,127,040  
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-current assets

           

Trade receivables

   W 874,032      W (3,833    W (33,836    W 836,363  

Other receivables

     257,443        (5      (13,519      243,919  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 1,131,475      W (3,838    W (47,355    W 1,080,282  
  

 

 

    

 

 

    

 

 

    

 

 

 

Details of other receivables as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Loans

   W 59,732      W 58,799  

Receivables

     325,274        313,073  

Accrued income

     2,883        1,355  

Refundable deposits

     324,554        325,545  

Others

     3,052        3,871  

Less: Provision for impairment

     (45,084      (53,829
  

 

 

    

 

 

 

Total

   W 670,411      W 648,814  
  

 

 

    

 

 

 

 

14


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

The maximum exposure of trade and other receivables to credit risk is the carrying amount of each class of receivables mentioned above as at September 30, 2021.

The Company classifies a portion of the trade receivables as financial assets at fair value through other comprehensive income considering the trade receivables business model for managing the asset and the cash flow characteristics of the contract.

 

6.

Other Financial Assets and Liabilities

Details of other financial assets and liabilities as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Other financial assets

     

Financial assets at amortized cost 1

   W 72,510      W 262,477  

Financial assets at fair value through profit or loss 2

     200,321        155,805  

Financial assets at fair value through other comprehensive income

     101,718        22,860  

Derivatives used for hedging

     91,314        7,684  

Less: Non-current

     (360,242      (180,780
  

 

 

    

 

 

 

Current

   W 105,621      W 268,046  
  

 

 

    

 

 

 

Other financial liabilities

     

Derivatives used for hedging

   W 10,398      W 120,349  

Less: Non-current

     (171      (120,349
  

 

 

    

 

 

 

Current

   W 10,227      W —    
  

 

 

    

 

 

 

 

1

As at September 30, 2021, the Company’s financial instruments amounting to W 22,501 million (December 31, 2020: W 22,501 million), which consist of checking account deposits, time deposits and others, are subject to withdrawal restrictions.

2 

Investment in Korea Software Financial Cooperative amounting to W 1,136 million is provided as collateral.

 

Details

of financial assets at fair value through profit or loss as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Equity instruments (Listed)

   W 179      W 110  

Equity instruments (Unlisted)

     —          —    

Debt securities

     200,142        155,695  

Less: Non-current

     (200,321      (155,805
  

 

 

    

 

 

 

Current

   W —        W —    
  

 

 

    

 

 

 

The maximum exposure of debt instruments of financial assets recognized at fair value through profit or loss to credit risk is the carrying amount as at September 30, 2021.

 

15


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Details of financial assets at fair value through other comprehensive income as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Equity instruments (Listed)

   W 40,576      W 1,825  

Equity instruments (Unlisted)

     61,142        21,035  

Less: Non-current

     (101,718      (22,860
  

 

 

    

 

 

 

Current

   W —        W —    
  

 

 

    

 

 

 

Upon disposal of these equity instruments, any balance within the accumulated other comprehensive income for these equity instruments is not reclassified to profit or loss, but to retained earnings. Upon disposal of debt securities, remaining balance of the accumulated other comprehensive income of debt investments is reclassified to profit or loss.

Details of valuation of derivatives used for hedging as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  
     Assets      Liabilities      Assets      Liabilities  

Currency swap 1

   W 91,314      W 10,398      W 7,684      W 120,349  

Less: Non-current

     (58,199      (171      (2,111      (120,349
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 33,115      W 10,227      W 5,573      W —    
  

 

 

    

 

 

    

 

 

    

 

 

 

 

1

The currency swap contract is to hedge the risk of variability in cash flow from the bond. In applying the cash flow hedge accounting, the Company hedges its exposures to cash flow fluctuation until September 7, 2034.

The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and, as a current asset or liability, if the maturity of the hedged item is less than 12 months.

The valuation gains and losses on the derivative contracts for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  
Type of transaction    Valuation
gain
     Valuation
loss
    

Other

comprehensive
income 1

     Valuation
gain
     Valuation
loss
    

Other

comprehensive
income 1

 
Currency swap    W 196,857      W —        W 189,281      W 58,991      W 15,493      W 55,352  

 

1 

The amounts are before adjustments of deferred income tax directly reflected in equity and allocation to the non-controlling interest.

The ineffective portion recognized in profit or loss on the cash flow hedge is valuation gain of W 11,449 million for the current period (nine-month period ended September 30, 2020: valuation gain of W 3,192 million).

 

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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

7.

Inventories

Inventories as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  
     Acquisition
cost
     Valuation
allowance
   

Carrying

amount

     Acquisition
cost
     Valuation
allowance
   

Carrying

amount

 
Merchandise    W 276,393      W (89,817   W 186,576      W 481,829      W (128,519   W 353,310  

Cost of inventories recognized as expenses for the nine-month period ended September 30, 2021, amounts to W 2,142,019 million (nine-month period ended September 30, 2020: W 2,180,194 million) and valuation gain on inventory amounts to W 38,702 million for the nine-month period ended September 30, 2021 (nine-month period ended September 30, 2020: valuation gain of W 34,549 million).

 

8.

Other Assets and Liabilities

Other assets and liabilities as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Other assets

     

Advance payments

   W 61,734      W 44,405  

Prepaid expenses 1

     1,938,525        1,920,574  

Contract assets 1

     658,008        536,373  

Less: Non-current

     (677,801      (635,224
  

 

 

    

 

 

 

Current

   W 1,980,466      W 1,866,128  
  

 

 

    

 

 

 

Other liabilities

     

Advances received 1

   W 162,091      W 224,079  

Withholdings

     52,100        20,871  

Unearned revenue

     18,015        14,610  

Lease liabilities

     1,007,786        1,066,144  

Contract liabilities 1

     325,686        371,396  

Less: Non-current

     (809,921      (877,715
  

 

 

    

 

 

 

Current

   W 755,757      W 819,385  
  

 

 

    

 

 

 

 

1 

The amounts include adjustments arising from adoption of Korean IFRS 1115 Revenue from Contracts with Customers (Note 19).

 

17


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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

9.

Property and Equipment, Investment Properties, and Intangible Assets

Changes in property and equipment for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Beginning, net

   W 11,999,717      W 11,447,952  

Acquisition and capital expenditure

     1,614,964        1,821,333  

Disposal and termination

     (53,769      (47,367

Depreciation

     (1,758,007      (1,728,928

Transfer

     (291,595      (23,627

Others

     (47,722      32,831  
  

 

 

    

 

 

 

Ending, net

   W 11,463,588      W 11,502,194  
  

 

 

    

 

 

 

Changes in investment properties for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Beginning, net

   W 735,563      W 769,019  

Depreciation

     (29,372      (39,405

Transfer

     274,470        12,628  
  

 

 

    

 

 

 

Ending, net

   W 980,661      W 742,242  
  

 

 

    

 

 

 

As at September 30, 2021, the Company (Lessor) has entered into a non-cancellable operating lease contract relating to real estate lease. The future minimum lease fee under this contract is W 105,150 million for one year or less, W 183,074 million more than one year and less than five years, W 353,784 million over five years, and W 642,008 million in total.

Details of investment properties provided as collateral as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
    
Carrying
amount
 
 
    
Secured
amount
 
 
   Related account      Related amount  
Land and Buildings    W 130,777      W 39,420      Deposits
received
   W 33,380  

 

(in millions of Korean won)    December 31, 2020  
    
Carrying
amount
 
 
    
Secured
amount
 
 
   Related account      Related amount  
Land and Buildings    W 135,070      W 39,250      Deposits
received
   W 35,258  

 

18


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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Changes in intangible assets for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Beginning, net

   W 1,583,456      W 2,239,882  

Acquisition and capital expenditure

     716,894        34,346  

Disposal and termination

     (8,383      (5,530

Amortization

     (371,951      (395,129
  

 

 

    

 

 

 

Ending, net

   W 1,920,016      W 1,873,569  
  

 

 

    

 

 

 

The carrying amount of goodwill with indefinite useful life not subject to amortization is W 65,057 million as at September 30, 2021 (December 31, 2020: W 65,057 million). The carrying amount of membership rights with indefinite useful life not subject to amortization is W 72,361 million as at September 30, 2021 (December 31, 2020: W 72,361 million).

In April 2021, the Company reassigned a portion of the 1.8Ghz and 900MHz bands in accordance with Article 11 of the Radio Waves Act (frequency allocation based on consideration). The payment for the frequency use right is W 547,800 million and W 141,300 million for the 1.8GHz and 900MHz bands, respectively. The Company paid a portion of the consideration in lump sum in June 2021 and plans to pay the reminder in installments every year for the next five years.

 

10.

Investments in Subsidiaries, Associates and Joint Ventures

Carrying amount in investments in subsidiaries, associates and joint ventures as at September 30, 2021 and December 31, 2020, is as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Subsidiaries

   W 3,555,092      W 3,269,173  

Associates and joint ventures

     243,884        235,844  
  

 

 

    

 

 

 

Total

   W 3,798,976      W 3,505,017  
  

 

 

    

 

 

 

Investments in subsidiaries as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    Location    Percentage of
ownership (%)
    Carrying amount  
 

September 30,

2021

    

December 31,

2020

 

KT Estate Inc.

   Korea      100.0   W 1,084,522      W 1,084,522  

KT Sat Co., Ltd.

   Korea      100.0     390,530        390,530  

KTCS Corporation 1

   Korea      7.9     6,427        6,427  

KTIS Corporation 1

   Korea      31.4     30,633        30,633  

KT Skylife Co., Ltd.

   Korea      50.3     311,696        311,696  

BC Card Co., Ltd.

   Korea      69.5     633,004        633,004  

 

19


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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won)    Location      Percentage of
ownership (%)
    Carrying amount  
 

September 30,

2021

    

December 31,

2020

 

KT M&S Co., Ltd.

     Korea        100.0     26,764        26,764  

KT Alpha Co., Ltd.(KT Hitel Co., Ltd.)

     Korea        70.5     130,924        120,078  

KT Belgium

     Belgium        0.0     —          5,489  

KT Powertel Co., Ltd.

     Korea        0.0     —          37,419  

Genie Music Corporation 5

     Korea        0.0     —          37,417  

KT Dutch B.V.

     Netherlands        0.0     —          32,359  

KT Telecop Co., Ltd.

     Korea        86.8     134,308        134,308  

KT Submarine Co., Ltd. 1

     Korea        39.3     24,370        24,370  

Nasmedia Co., Ltd.2

     Korea        44.0     23,051        23,051  

KTDS Co., Ltd.

     Korea        95.5     19,616        19,616  

KTGDH Co., Ltd.

     Korea        100.0     7,544        7,544  

KT Strategic Investment Fund No.2

     Korea        90.9     2,381        10,245  

KT Sports

     Korea        66.0     14,520        14,520  

KT M Mobile Co., Ltd.

     Korea        100.0     102,237        102,237  

KT Service Bukbu Co., Ltd.

     Korea        67.3     7,092        7,092  

KT Service Nambu Co., Ltd.

     Korea        76.4     10,160        10,160  

KT Strategic Investment Fund No.3

     Korea        86.7     2,947        4,507  

KT Strategic Investment Fund No.4

     Korea        95.0     19,000        19,000  

PlayD Co., Ltd. 3

     Korea        23.5     20,000        20,000  

KT MOS Bukbu Co., Ltd.

     Korea        100.0     6,334        6,334  

KT MOS Nambu Co., Ltd.

     Korea        98.4     4,267        4,267  

Next Connect PFV

     Korea        100.0     24,250        24,250  

KT Strategic Investment Fund No.5

     Korea        95.0     19,000        12,540  

Storywiz Co., Ltd. 4

     Korea        0.0     —          14,000  

KT Engineering (KT ENGCORE Co., Ltd.)

     Korea        59.8     28,000        28,000  

KT Studio Genie Co., Ltd.4

     Korea        100.0     220,687        —    

KT Seezn Co., Ltd. 5

     Korea        100.0     62,933        —    

Lolab Co., Ltd.

     Korea        80.0     22,009        —    

KT ES Pte. Ltd.

     Singapore        57.6     93,440        —    

Others4

     —          —         72,446        66,794  
       

 

 

    

 

 

 
        W 3,555,092      W 3,269,173  
       

 

 

    

 

 

 

 

1 

At the end of the reporting period, although sum of percentage of ownership of the Company and its subsidiaries is less than 50% ownership in this entity, this entity is included in investments in subsidiaries due to the dispersion of the non-controlling interests and voting patterns at the shareholders’ meetings in the past.

 

2 

At the end of the reporting period, although the Company owns less than 50% ownership in this entity, this entity is included in investments in subsidiaries as the Company holds the majority of voting right based on an agreement with other investors.

 

3

At the end of the reporting period, this entity is included in investments in subsidiaries as the Nasmedia Co., Ltd., holds ownership of 46.9% the Company and subsidiary holds ownership of 70.4%.

 

4

During the current period, the Company invested its shares of Storywiz Co., Ltd. and Skylife TV Co., Ltd., subsidiaries, in KT Studio Genie Co., Ltd.

 

5 

During the current period, the Company invested its shares of Genie Music Corporation subsidiaries and others, in KT Seezn Co., Ltd.

 

20


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Investments in associates and joint ventures as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    Location      Percentage of
ownership (%)
    Carrying amount  
 

September 30,

2021

    

December 31,

2020

 

KIF Investment Fund

     Korea        33.3   W 115,636      W 115,636  

KT-IBKC Future Investment Fund 1

     Korea        43.3     7,150        12,090  

Hyundai Robotics Co., Ltd. 1

     Korea        10.0     50,000        50,000  

Others

          71,098        58,118  
       

 

 

    

 

 

 
        W 243,884      W 235,844  
       

 

 

    

 

 

 

 

1

At the end of the reporting period, although the Company has less than 20% ownership in ordinary share, this entity is included in investments in associates as the Company has a significant influence in determining the operating and financial policies.

Changes in investments in associates and joint ventures for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Beginning

   W 3,505,017      W 3,501,391  

Acquisition

     348,908        109,350  

Disposal

     (70,140      (1,495

Impairment loss

    
—  
 
    
(1,681

Reversal of impairment loss

    
7,028
 
     —    

Others 1

     8,163        (50,950
  

 

 

    

 

 

 

Ending

   W 3,798,976      W 3,556,615  
  

 

 

    

 

 

 

 

1 

It includes transactions in which the Company invested convertible bonds for Skylife TV Co., Ltd. in KT Studio Genie Co., Ltd. for the nine-month period ended September 30, 2021.

 

11.

Trade and Other Payables

Details of trade and other payables as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Current liabilities

     

Trade payables

   W  800,578      W  672,179  

Other payables

     3,157,277        3,604,783  
  

 

 

    

 

 

 

Total

   W  3,957,855      W  4,276,962  
  

 

 

    

 

 

 

Non-current liabilities

     

Other payables1

   W  1,006,026      W  738,275  
  

 

 

    

 

 

 

 

1

As at September 30, 2021, other payables include residual considerations related to new frequency acquisitions (Note 9).

 

21


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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Details of other payables as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Non-trade payables

   W 2,644,830      W 3,086,595  

Accrued expenses

     948,368        642,388  

Operating deposits

     430,952        460,379  

Others

     139,153        153,696  

Less: Non-current

     (1,006,026      (738,275
  

 

 

    

 

 

 

Current

   W 3,157,277      W 3,604,783  
  

 

 

    

 

 

 

 

12.

Borrowings

Details of borrowings as at September 30, 2021 and December 31, 2020, are as follows:

Debentures

 

(in millions of Korean won and foreign currencies in thousands)    September 30, 2021      December 31, 2020  
Type    Maturity    Annual interest rates   

Foreign

currency

    

Korean

won

    

Foreign

currency

    

Korean

won

 

MTNP notes 1

   Sep. 7, 2034    6.500%      USD 100,000      W 118,490        USD 100,000      W 108,800  

MTNP notes

   Jul. 18, 2026    2.500%      USD 400,000        473,960        USD 400,000        435,200  

MTNP notes

   Aug. 7, 2022    2.625%      USD 400,000        473,960        USD 400,000        435,200  

FR notes 2

   Aug. 23, 2023    LIBOR(3M)+0.900%      USD 100,000        118,490        USD 100,000        108,800  

MTNP notes

   Jul. 6, 2021    —        —          —          JPY 16,000,000        168,682  

MTNP notes

   Jul. 19, 2022    0.220%      JPY 29,600,000        313,221        JPY 29,600,000        312,061  

MTNP notes

   Jul. 19, 2024    0.330%      JPY 400,000        4,233        JPY 400,000        4,217  

MTNP notes

   Sep. 1, 2025    1.000%      USD 400,000        473,960        USD 400,000        435,200  

FR notes 2

   Nov. 1, 2024    LIBOR(3M)+0.980%      USD 350,000        414,715        USD 350,000        380,800  

FR notes 2

   Jun. 19, 2023    SOR(6M)+0.500%      SGD 284,000        247,117        SGD 284,000        233,510  

MTNP notes

   Jan. 21, 2027    1.375%      USD 300,000        355,470        —          —    

The 180-2nd Public bond

   Apr. 26, 2021    —        —          —          —          380,000  

The 181-3rd Public bond

   Aug. 26, 2021    —        —          —          —          250,000  

The 182-2nd Public bond

   Oct. 28, 2021    4.310%      —          100,000        —          100,000  

The 183-2nd Public bond

   Dec. 22, 2021    4.090%      —          90,000        —          90,000  

The 183-3rd Public bond

   Dec. 22, 2031    4.270%      —          160,000        —          160,000  

The 184-2nd Public bond

   Apr. 10, 2023    2.950%      —          190,000        —          190,000  

The 184-3rd Public bond

   Apr. 11, 2033    3.170%      —          100,000        —          100,000  

The 186-3rd Public bond

   Jun. 26, 2024    3.418%      —          110,000        —          110,000  

The 186-4th Public bond

   Jun. 26, 2034    3.695%      —          100,000        —          100,000  

The 187-3rd Public bond

   Sep. 2, 2024    3.314%      —          170,000        —          170,000  

 

22


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won and foreign currencies in thousands)    September 30, 2021     December 31, 2020  
Type    Maturity    Annual interest
rates
  

Foreign

currency

    

Korean

won

   

Foreign

currency

    

Korean

won

 

The 187-4th Public bond

   Sep. 2, 2034    3.546%      —          100,000       —          100,000  

The 188-2nd Public bond

   Jan. 29, 2025    2.454%      —          240,000       —          240,000  

The 188-3rd Public bond

   Jan. 29, 2035    2.706%      —          50,000       —          50,000  

The 189-2nd Public bond

   Jan. 28, 2021    —        —          —         —          130,000  

The 189-3rd Public bond

   Jan. 28, 2026    2.203%      —          100,000       —          100,000  

The 189-4th Public bond

   Jan. 28, 2036    2.351%      —          70,000       —          70,000  

The 190-1st Public bond

   Jan. 29, 2021    —        —          —         —          110,000  

The 190-2nd Public bond

   Jan. 30, 2023    2.749%      —          150,000       —          150,000  

The 190-3rd Public bond

   Jan. 30, 2028    2.947%      —          170,000       —          170,000  

The 190-4th Public bond

   Jan. 30, 2038    2.931%      —          70,000       —          70,000  

The 191-1st Public bond

   Jan. 14, 2022    2.048%      —          220,000       —          220,000  

The 191-2nd Public bond

   Jan. 15, 2024    2.088%      —          80,000       —          80,000  

The 191-3rd Public bond

   Jan. 15, 2029    2.160%      —          110,000       —          110,000  

The 191-4th Public bond

   Jan. 14, 2039    2.213%      —          90,000       —          90,000  

The 192-1st Public bond

   Oct. 11, 2022    1.550%      —          340,000       —          340,000  

The 192-2nd Public bond

   Oct. 11, 2024    1.578%      —          100,000       —          100,000  

The 192-3rd Public bond

   Oct. 11, 2029    1.622%      —          50,000       —          50,000  

The 192-4th Public bond

   Oct. 11, 2039    1.674%      —          110,000       —          110,000  

The 193-1st Public bond

   Jun. 16, 2023    1.174%      —          150,000       —          150,000  

The 193-2nd Public bond

   Jun. 17, 2025    1.434%      —          70,000       —          70,000  

The 193-3rd Public bond

   Jun. 17, 2030    1.608%      —          20,000       —          20,000  

The 193-4th Public bond

   Jun. 15, 2040    1.713%      —          60,000       —          60,000  

The 194-1st Public bond

   Jan. 26, 2024    1.127%      —          130,000       —          —    

The 194-2nd Public bond

   Jan. 27, 2026    1.452%      —          140,000       —          —    

The 194-3rd Public bond

   Jan. 27, 2031    1.849%      —          50,000       —          —    

The 194-4th Public bond

   Jan. 25, 2041    1.976%      —          80,000       —          —    

The 195-1st Public bond

   Jun. 10, 2024    1.387%      —          180,000       —          —    

The 195-2nd Public bond

   Jun. 10, 2026    1.806%      —          80,000       —          —    

The 195-3rd Public bond

   Jun. 10, 2031    2.168%      —          40,000       —          —    
        

 

 

    

 

 

   

 

 

    

 

 

 

Subtotal

     —          7,063,616       —          6,862,470  

Less: Current portion

     —          (1,195,475     —          (1,228,284

Discount on bonds

     —          (22,960     —          (19,663
        

 

 

    

 

 

   

 

 

    

 

 

 

Total

     —        W 5,845,181       —        W 5,614,523  
        

 

 

    

 

 

   

 

 

    

 

 

 

 

1 

As at September 30, 2021, the Company has outstanding notes in the amount of USD 100 million with fixed interest rates under Medium Term Note Program (“MTNP”) registered in the Singapore Stock Exchange, which allowed issuance of notes of up to USD 2,000 million. However, the MTN program has been terminated since 2007.

2 

The Libor (3M) and the SOR (6M) is approximately 0.130% and 0.229% as at September 30, 2021, respectively.

 

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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Long-term borrowings

 

(in millions of Korean won)              
Financial institution    Type    Maturity   

Annual

interest
rates

    September 30,
2021
    December 31,
2020
 

Export-Import Bank of Korea

   Inter-Korean Cooperation Fund 1    July 10, 2026      1.000   W 2,467     W 2,961  

CA-CIB

   Long-term commercial papers    May 15, 2023      1.260     100,000       100,000  
          

 

 

   

 

 

 

Subtotal

 

    102,467       102,961  

                                      Less: Current portion

 

    (493     (493
          

 

 

   

 

 

 

Total

 

  W 101,974     W 102,468  
          

 

 

   

 

 

 

 

1 

Inter-Korean Cooperation Fund is repayable in installments over 13 years after a seven-year grace period.

Repayment schedule of the Company’s debentures and borrowings including the portion of current liabilities as at September 30, 2021, is as follows:

 

(in millions of Korean won)    Bonds                
     In local
currency
     In foreign
currency
    

Sub-

total

     Borrowings      Total  

Oct. 1, 2021 ~ Sep. 30, 2022

   W 410,000      W 787,181      W 1,197,181      W 493      W 1,197,674  

Oct. 1, 2022 ~ Sep. 30, 2023

     830,000        365,607        1,195,607        100,493        1,296,100  

Oct. 1, 2023 ~ Sep. 30, 2024

     670,000        4,233        674,233        493        674,726  

Oct. 1, 2024 ~ Sep. 30, 2025

     410,000        888,675        1,298,675        493        1,299,168  

After Oct. 1, 2025

     1,750,000        947,920        2,697,920        495        2,698,415  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   W 4,070,000      W 2,993,616      W 7,063,616      W 102,467      W 7,166,083  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

13.

Provisions

Changes in provisions for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

     2021  
(in millions of Korean won)    Litigation      Restoration cost      Others      Total  

Beginning balance

   W 74,179      W 97,039      W 61,527      W 232,745  

Increase (transfer)

     1,332        6,135        13,393        20,860  

Usage

     (268      (2,185      (810      (3,263

Reversal

     —          (736      (13,694      (14,430
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   W 75,243      W 100,253      W 60,416      W 235,912  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 75,243      W 25,983      W 56,466      W 157,692  

Non-current

     —          74,270        3,950        78,220  

 

24


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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

     2020  
(in millions of Korean won)    Litigation      Restoration cost      Others      Total  

Beginning balance

   W 64,041      W 103,895      W 69,783      W 237,719  

Increase (transfer)

     1,578        (639      26,129        27,068  

Usage

     (1,506      (1,015      (5,477      (7,998

Reversal

     (11      (1,786      (19,520      (21,317
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   W 64,102      W 100,455      W 70,915      W 235,472  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

   W 64,102      W 18,403      W 68,327      W 150,832  

Non-current

     —          82,052        2,588        84,640  

 

14.

Net Defined Benefit Liabilities

The amounts recognized in the statements of financial position as at September 30, 2021 and December 31, 2020, are determined as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Present value of defined benefit obligations

   W 1,869,021      W 1,809,843  

Fair value of plan assets

     (1,508,970      (1,539,553
  

 

 

    

 

 

 

Liabilities, net

   W 360,051      W 270,290  
  

 

 

    

 

 

 

Changes in the defined benefit obligations for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Beginning

   W 1,809,843      W 1,774,582  

Current service cost

     103,747        107,199  

Interest expense

     25,004        25,236  

Benefit paid

     (69,573      (103,386
  

 

 

    

 

 

 

Ending

   W 1,869,021      W 1,803,631  
  

 

 

    

 

 

 

Changes in the fair value of plan assets for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Beginning

   W 1,539,553      W 1,499,984  

Interest income

     21,269        21,331  

Remeasurements on plan assets

     (103      1,908  

Benefit paid

     (51,749      (93,668
  

 

 

    

 

 

 

Ending

   W 1,508,970      W 1,429,555  
  

 

 

    

 

 

 

 

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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Amounts recognized in the separate statement of profit or loss for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Current service cost

   W 103,747      W 107,199  

Net interest cost

     3,735        3,905  

Account transfers

     (11,365      (12,434
  

 

 

    

 

 

 

Total expenses in salaries and wages

   W 96,117      W 98,670  
  

 

 

    

 

 

 

 

15.

Commitments and Contingencies

As at September 30, 2021, major commitments with local financial institutions are as follows:

 

(in millions of Korean won and foreign currencies in
thousands)
   Financial institution    Currency    Limit      Used
amount
 

Bank overdraft

   Kookmin Bank and others    KRW      1,430,000        —    

Inter-Korean Cooperation Fund

   Export-Import Bank of Korea    KRW      37,700        2,467  

Economic Cooperation Business Insurance

   Export-Import Bank of Korea    KRW      3,240        1,732  

Collateralized loan on electronic accounts receivable-trade

   Kookmin Bank and others    KRW      298,004        6,583  

Plus electronic notes payable

   Industrial Bank of Korea    KRW      50,000        275  

Derivatives transaction limit

   Korea Development Bank    KRW      100,000        8,043  
   Woori Bank and others    USD      69,054        21,210  
      KRW      1,918,944        19,100  
     

 

  

 

 

    

 

 

 

Total

      USD      69,054        21,210  
     

 

  

 

 

    

 

 

 

As at September 30, 2021, guarantees received from financial institutions are as follows:

 

(in millions of Korean won and foreign currencies in thousands)    Financial institution    Currency      Limit  

Comprehensive credit line

   Hana Bank      KRW        4,100  
     USD        8,700  

Bid guarantee

  

Korea Software

Financial Cooperative

     KRW        37,448  

Performance guarantee / warranty guarantee

     KRW        367,124  

Guarantee for advances received / others

     KRW        173,816  

Guarantee for payment in foreign currency

   Kookmin Bank      USD        11,484  
   Shinhan Bank      USD        5,000  
   Woori Bank      USD        15,000  

Guarantee for payment in local currency

   Shinhan Bank      KRW        48,010  

Refund guarantee for advances received

   Korea Development Bank      USD        8,536  

Performance guarantee

   Seoul Guarantee Insurance      KRW        8,507  

Guarantees for licensing

     KRW        3,707  

Guarantee for deposits

     KRW        1,331  

Total

        KRW        644,043  
        USD        48,720  

 

26


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

The Company is jointly and severally obligated with KT Sat Co., Ltd. to pay KT Sat Co., Ltd.’s liabilities incurred prior to spin-off. As at September 30, 2021, the Company and KT Sat Co., Ltd. are jointly and severally liable for reimbursement of W 733 million.

For the nine-month period ended September 30, 2021, the Company made agreements with Securitization Specialty Companies (2021: First 5G Fifty fifth to Fifty ninth Securitization Specialty Co., Ltd., 2020: First 5G Forty ninth to Fifty fourth Securitization Specialty Co., Ltd.), and disposed of its trade receivables related to handset sales. The Company also made asset management agreements with each securitization specialty company and in accordance with the agreements, the Company will receive asset management fees upon liquidation of the securitization specialty company.

As at September 30, 2021, the Company is a defendant in 194 lawsuits with the total claimed amount of W 79,165 million. As at September 30, 2021, litigation provisions of W 75,243 million for pending lawsuits and unasserted claims are recorded as liabilities for potential loss in the ordinary course of business. The final outcomes of the cases cannot be estimated at the end of the reporting period.

According to financial and other covenants included in certain debentures and borrowings, the Company is required to maintain certain financial ratios such as debt-to-equity ratio, use the funds for the designated purpose and report to the creditors periodically. Such covenants also contain restriction on provision of additional collateral and disposal of certain assets.

As at September 30, 2021, the Company participates in Algerie Sidi Abdela new town development consortium (percentage of ownership: 2.5%) and has joint liability with other consortium participants.

As at September 30, 2021, the contracted amount of property and equipment and intangible assets acquisition agreement made but not yet recognized amounts to W 748,193 million (December 31, 2020: W 595,145 million).

 

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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

16.

Leases

Set out below is information for leases when the Company is a lessee. Information for when the Company is a lessor is provided in Note 9.

The separate statement of financial position shows the following amounts relating to leases:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Right-of-use assets

     

Property and buildings

   W  1,027,313      W  1,069,993  

Machinery and track facilities

     52,979        38,073  

Others

     32,679        44,087  
  

 

 

    

 

 

 
   W 1,112,971      W 1,152,153  
  

 

 

    

 

 

 

Investment properties (buildings)

   W 866      W 19,730  

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Lease liabilities 1

     

Current

   W  282,186      W  291,470  

Non-current

     725,600        774,674  
  

 

 

    

 

 

 
   W  1,007,786      W  1,066,144  
  

 

 

    

 

 

 

 

1 

Included in the line item ‘other current liabilities and non-current liabilities’ in the separate statement of financial position (Note 8).

Increases in right-of-use assets for the nine-month periods ended September 30, 2021 and 2020 was W 266,084 million and W 322,517 million, respectively.

The separate statement of profit or loss for the nine-month periods ended September 30, 2021 and 2020 shows the following amounts relating to leases:

 

(in millions of Korean won)    2021      2020  

Depreciation of right-of-use assets

     

Property and buildings

   W 239,048      W  227,212  

Machinery and track facilities

     32,150        45,887  

Others

     16,733        16,268  
  

 

 

    

 

 

 
   W  287,931      W 289,367  
  

 

 

    

 

 

 

Depreciation of investment properties

   W 1,739      W 14,650  

Interest expense relating to lease liabilities

     23,478        30,892  

Expense relating to short-term leases

     2,731        3,061  

Expense relating to leases of low-value assets that are not short-term leases

     10,861        11,560  

The total cash outflow for leases for the nine-month periods ended September 30, 2021 and 2020 was W 304,651 million and W 343,406 million, respectively.

 

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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

17.

Retained Earnings

Details of retained earnings as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Legal reserve 1

   W 782,249      W 782,249  

Voluntary reserves 2

     4,651,362        4,651,362  

Unappropriated retained earnings

     6,312,943        5,800,103  
  

 

 

    

 

 

 

Total

   W  11,746,554      W  11,233,714  
  

 

 

    

 

 

 

 

1 

The Commercial Code of the Republic of Korea requires the Company to appropriate, as a legal reserve, an amount equal to a minimum of 10% of cash dividends paid until such reserve equals 50% of its issued share capital. The reserve is not available for the payment of cash dividends but may be transferred to share capital with the approval of the Company’s Board of Directors or used to reduce accumulated deficits, if any, with the ratification of the Company’s majority shareholders.

2 

In accordance with the Restrictions on Special Taxation Act, R&D and HR related reserves under the voluntary reserves are separately accumulated when retained earnings from tax reserve funds are disposed, when income tax is recalculated from tax return adjustments.

 

18.

Other Components of Equity

The Company’s other components of equity as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Treasury stock

   W  (1,066,958    W (882,224

Loss on disposal of treasury stock

     (2,314      (20,498

Share-based payments

     46,635        5,901  

Others

     (180,286      (180,999
  

 

 

    

 

 

 

Total

   W (1,202,923    W (1,077,820
  

 

 

    

 

 

 

As at September 30, 2021 and December 31, 2020, the details of treasury stock are as follows:

 

     September 30, 2021      December 31, 2020  

Number of shares (in shares)

     26,735,994        19,269,678  

Amount (in millions of Korean won)

   W 1,066,958      W 882,224  

Treasury stock is expected to be used as stock compensation for the Company’s directors, employees and other purposes.

 

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Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

19.

Revenue from Contracts with Customers and Relevant Contract Assets and Liabilities

The Company has recognized the following amounts relating to revenue in the statement of profit or loss for the three-month and nine-month periods ended September 30, 2021 and 2020:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Revenue from contracts with customers

   W 4,619,377      W 13,585,787      W 4,474,065      W 13,153,043  

Revenue from other sources

     45,328        132,172        46,401        136,165  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   W 4,664,705      W 13,717,959      W 4,520,466      W 13,289,208  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating revenues for the three-month and nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Services provided

   W 3,918,806      W 11,609,129      W 3,805,714      W 11,299,206  

Sales of goods

     745,899        2,108,830        714,752        1,990,002  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 4,664,705      W 13,717,959      W 4,520,466      W 13,289,208  
  

 

 

    

 

 

    

 

 

    

 

 

 

Revenues from services provided are recognized over time, and sales of goods are recognized at a point of time.

The contract assets, liabilities and deferred revenue recognized in relation to revenue from contracts with customers as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Contract assets 1

   W  763,164      W  622,608  

Contract liabilities 1

     339,497        400,971  

Deferred revenue 2

     75,462        76,198  

 

1

The Company recognized contract assets of W 105,156 million and contract liabilities of W 13,811 million for long-term construction contracts as at September 30, 2021 (2020: contract assets of W 86,234 million and contract liabilities of W 29,574 million). The Company recognizes contract assets as trade and other receivables, and contract liabilities as other current liabilities.

2

Deferred revenue recognized relating to government grants is excluded.

The contract costs recognized as assets as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  

Incremental costs of contract establishment

   W  1,682,478      W  1,722,451  

Costs of contract performance

     140,171        139,252  

The Company recognized W 1,449,477 million of operating expenses for the nine-month period ended September 30,2021 (2020: W 1,383,625 million) which relate to contract cost assets.

 

30


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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

The Company did not recognize an impairment loss in anticipation of full recovery of costs recognized as assets.

For the three-month and nine-month periods ended September 30, 2021 and 2020, the recognized revenue arising from carried-forward contract liabilities and deferred revenue from prior year are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Revenue recognized that was included in the contract liability balance at the beginning of the year

           

Allocation of the transaction price

   W 55,998      W 210,931      W 56,365      W 198,252  

Deferred revenue of joining/installment fees

     8,759        29,831        9,734        30,460  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 64,757      W 240,762      W 66,099      W 228,712  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20.

Operating Expenses

Operating expenses for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
    

Three

months

    

Nine

months

    

Three

months

    

Nine

months

 

Salaries and wages

   W  629,292      W  1,765,375      W 629,186      W  1,719,662  

Depreciation

     588,115        1,759,165        584,403        1,745,381  

Depreciation of right-of-use assets

     94,711        287,931        94,372        289,368  

Amortization of intangible assets

     119,127        370,727        124,973        393,585  

Commissions

     428,937        1,232,140        394,000        1,141,574  

Interconnection charges

     122,699        369,428        133,484        399,231  

International interconnection fees

     47,400        147,891        45,633        135,775  

Purchase of inventories

     667,169        1,936,584        932,359        2,317,926  

Changes of inventories

     75,585        166,733        (189,927      (172,281

Sales commissions

     622,062        1,894,899        641,899        1,836,635  

Service costs

     196,991        567,934        177,849        514,957  

Purchase of contents

     158,469        442,821        137,622        437,288  

Utilities

     92,551        253,917        90,982        245,644  

Taxes and dues

     57,670        178,593        74,493        178,896  

Rent

     26,340        79,198        27,277        81,424  

Insurance premiums

     16,221        42,126        15,431        45,873  

Installation fees

     116,230        341,942        109,731        316,082  

Advertising expenses

     32,279        91,590        30,509        82,771  

Research and development expenses

     47,363        126,074        42,098        120,239  

Others

     266,366        686,599        215,581        694,957  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W  4,405,577      W  12,741,667      W  4,311,955      W  12,524,987  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

31


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Details of employee benefits for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Short-term employee benefits

   W  541,713      W  1,583,468      W  558,936      W  1,552,437  

Post-employment benefits (defined benefits)

     31,698        96,117        32,916        98,670  

Post-employment benefits (defined contributions)

     11,652        33,677        12,699        33,790  

Share-based payments

     41,334        43,892        22,685        25,279  

Others

     2,895        8,221        1,950        9,486  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 629,292      W 1,765,375      W 629,186      W 1,719,662  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

21.

Other Income and Other Expenses

Other income for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Gain on disposal of property and equipment

   W 5,423      W 19,135      W 3,517      W 13,130  

Gain on disposal of right-of-use assets

     513        1,622        1,228        5,308  

Gain on disposal of intangible assets

     —          808        340        424  

Compensation on property and equipment

     31,185        105,024        38,968        112,749  

Gain on disposal of investments in Subsidiaries, Associates and Joint Ventures

     25        2,268        —          —    

Reversal of impairment loss on investments in Subsidiaries

     —          7,027        —          —    

Dividends received

     11,934        76,622        5,800        132,025  

Gain on government subsidies

     18,663        28,047        3,155        9,883  

Others

     6,731        32,574        12,734        22,806  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 74,474      W 273,127      W  65,742      W  296,325  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

32


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Other expenses for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Loss on disposal of property and equipment

   W 9,430      W 41,294      W 13,700      W 45,678  

Loss on disposal of right-of-use assets

     927        10,119        462        6,270  

Loss on disposal of intangible assets

     3,451        3,698        1,568        1,958  

Loss on disposal of investments in Subsidiaries, Associates and Joint Ventures

     (3      2,624        —          117  

Impairment loss on investments in Subsidiaries

     —          —          1,681        1,681  

Impairment loss on assets held for sale

     —          —          —          14,629  

Donations

     1,210        4,337        2,276        13,721  

Others

     43,266        82,037        31,189        78,255  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W  58,281      W  144,109      W 50,876      W 162,309  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

22.

Finance Income and Costs

Details of finance income for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Interest income

   W 62,245      W  187,272      W 63,098      W 186,653  

Gain on foreign currency transactions

     9,724        13,537        2,296        8,968  

Gain on foreign currency translation

     (9,571      8,387        5,515        12,474  

Gain on settlement of derivatives

     —          —          6,850        6,850  

Gain on valuation of derivatives

     115,817        196,857        (47,942      58,991  

Gain on disposal of financial instruments

     10,396        21,722        —          —    

Gain on valuation of financial instruments

     16,787        16,862        —          —    

Others

     —          7        1        7  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W  205,398      W 444,644      W 29,818      W 273,943  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

33


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Details of finance costs for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Three months      Nine months      Three months      Nine months  

Interest expenses

   W 56,726      W  169,096      W 62,349      W  191,351  

Loss on foreign currency transactions

     3,668        6,441        9,833        15,295  

Loss on foreign currency translation

     116,583        194,917        (50,956      61,538  

Loss on settlement of derivatives

     6,209        6,209        —          —    

Loss on valuation of derivatives

     (14,703      —          9,581        15,493  

Loss on disposal of trade receivables

     3,049        10,427        1,312        6,040  

Loss on disposal of financial instruments

     —          —          (115      576  

Loss on valuation of financial instruments

     —          —          46        113  

Others

     (109      (109      —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W  171,423      W 386,981      W 32,050      W 290,406  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

23.

Income Tax Expense

Income tax expense is recognized based on the best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual income tax rate used for the year ending December 31, 2021 is 26.06%.

 

24.

Earnings per Share

Basic earnings per share is calculated by dividing the profit from operations attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the period, excluding ordinary shares purchased by the Company and held as treasury stock.

Basic earnings per share from operations for the nine-month periods ended September 30, 2021 and 2020, are calculated as follows:

 

     2021      2020  
     Three months      Nine months      Three months      Nine months  

Profit attributable to ordinary shares (in millions of Korean won)

   W 228,693      W 859,901      W 163,102      W 651,001  

Weighted average number of ordinary shares outstanding (in number of shares)

     234,375,814        235,364,704        245,372,025        245,286,249  

Basic earnings per share (in Korean won)

   W 976      W 3,653      W 665      W 2,654  

 

34


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Diluted earnings per share from operations is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has dilutive potential ordinary shares from other share-based payments.

Diluted earnings per share from operations for the nine-month periods ended September 30, 2021 and 2020, are calculated as follows:

 

     2021      2020  
     Three months      Nine months      Three months      Nine months  

Profit attributable to ordinary shares

(in millions of Korean won)

   W 228,693      W 859,901      W 163,102      W 651,001  

Diluted profit attributable to ordinary shares

(in millions of Korean won)

   W 228,693      W 859,901      W 163,102      W 651,001  

Number of dilutive potential ordinary shares outstanding

(in number of shares)

     365,247        205,406        99,815        119,290  

Weighted average number of ordinary shares outstanding

(in number of shares)

     234,741,061        235,570,110        245,471,840        245,405,539  

Diluted earnings per share

(in Korean won)

   W 974      W 3,650      W 664      W 2,653  

Diluted earnings per share is earnings per outstanding of ordinary shares and dilutive potential ordinary shares. Diluted earnings per share is calculated by dividing adjusted profit for the period by the sum of the number of ordinary shares and dilutive potential ordinary shares excluding other share-based payments without dilutive effect.

 

35


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

25.

Cash Generated from Operations

Cash flows from operating activities for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

1. Profit for the period

   W 859,901      W 651,001  

2. Adjustments for:

     

Income tax expense

     303,072        230,773  

Interest income

     (187,272      (186,653

Interest expense

     169,096        191,351  

Dividend income

     (76,629      (132,033

Depreciation

     1,787,379        1,768,333  

Amortization of intangible assets

     371,951        395,129  

Depreciation of right-of-use assets

     287,931        289,368  

Provisions for severance benefits (defined benefits)

     107,482        111,104  

Allowance for bad debts

     50,860        63,530  

Loss on disposal of investments in subsidiaries, associates and joint ventures

     356        117  

Impairment loss of investments in Subsidiaries, Associates and Joint Ventures

     —          1,681  

Loss (gain) on disposal of property and equipment

     22,159        32,548  

Loss (gain) on disposal of intangible assets

     2,890        1,534  

Loss (gain) on disposal of right-of-use assets

     8,497        962  

Loss (gain) on foreign currency translation

     186,530        49,064  

Loss (gain) on valuation of derivatives, net

     (190,648      (50,348

Loss (gain) on valuation of financial assets at fair value through profit or loss

     (16,862      112  

Loss (gain) on disposal of financial assets at fair value through profit or loss

     (21,722      576  

Others

     4,613        (17,610

3. Changes in operating assets and liabilities

     

Decrease (increase) in trade receivables

     28,007        (186,832

Decrease (increase) in finance lease receivables

     624        (1,740

Increase in other receivables

     (48,166      (56,271

Decrease (increase) in other current assets

     (114,216      5,479  

Increase in other non-current assets

     (42,578      (36,132

Decrease (increase) in inventories

     201,559        (140,466

Increase in trade payables

     123,317        229,780  

Increase (decrease) in other payables

     187,355        (149,292

Increase (decrease) in other current liabilities

     (54,344      43,311  

Decrease in other non-current liabilities

     (18,721      (1,423

Increase in provisions

     4,520        3,476  

 

36


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won)    2021      2020  

Increase in deferred revenue

     21,307        15,853  

Post-employment benefits paid (defined benefits)

     (139,685      (103,723

Decrease in plan assets

     114,131        93,879  
  

 

 

    

 

 

 

4.  Cash generated from operations (1+2+3)

   W 3,932,694      W 3,116,438  
  

 

 

    

 

 

 

Significant transactions not affecting cash flows for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  

Reclassification of the current portion of borrowings

   W 964,721      W 619,771  

Reclassification of construction-in-progress to property and equipment

     1,667,046        835,957  

Reclassification of other payables from property and equipment

     (588,034      (507,904

Reclassification of other payables from intangible assets

     210,242        (339,208

Reclassification of other payables from net defined benefit liabilities

     (7,731      (126

 

26.

Cash Generated from Financing Activities

Changes in liabilities arising from financial activities for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021  
                 Non-cash        
     Beginning     Cash flows     Newly
acquired
     Exchange
differences
    Fair value
changes
    Others     Ending  

Borrowings

   W 6,945,768     W 4,615     W —        W 19,510     W —       W (770   W 7,143,123  

Financial lease liabilities

     1,066,144       (291,059     244,789        —         —         (12,088     1,007,786  

Derivative liabilities

     120,349       —         —          1,176       (3,116     (108,011     10,398  

Derivative assets

     (7,684     216       —          (185,809     (11,481     113,444       (91,314
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total

   W 8,124,577     W (286,228   W 244,789      W 8,877     W (14,597   W (7,425   W 8,069,993  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

(in millions of Korean won)    2020  
     Beginning     Cash flows     Non-cash     Ending  
                 Newly
acquired
     Exchange
differences
    Fair value
changes
    Others        

Borrowings

   W 7,028,040     W 371,537     W —        W 49,841     W —       W 12,730     W 7,462,148  

Financial lease liabilities

     1,120,825       (328,785     306,250        —         —         (1,364     1,096,926  

Derivative liabilities

     18,632       —         —          3,200       11,152       (6,797     26,187  

Derivative assets

     (55,423     16,452       —          (51,178     (21,718     6,777       (105,090
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total

   W 8,112,074     W 59,204     W 306,250      W 1,863     W (10,566   W 11,346     W 8,480,171  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

37


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

27.

Related Party Transactions

The list of related parties of the Company as at September 30, 2021, is as follows:

 

Relationship    Name of Entity
Subsidiaries   

KT Alpha Co., Ltd.(KT Hitel Co., Ltd.), KTCS Corporation, KTIS Corporation, KT Service

Bukbu Co., Ltd., KT Service Nambu Co., Ltd., KT Linkus Co., Ltd., KT Telecop Co., Ltd.,

KTDS Co., Ltd., Nasmedia, Co., Ltd., KT M&S Co., Ltd., GENIE Music Corporation,

KT Estate Inc., KT Skylife Co., Ltd., H&C Network, KTGDH Co., Ltd., KT Sat Co., Ltd.,

KT Submarine Co., Ltd., KT Sports Co., Ltd., KT Strategic Investment Fund No.2,

KT America, Inc., KT Japan Co., Ltd., KT AMC, KT Commerce Inc., BC Card Co., Ltd.,

VP Inc., BC Card Science and Technology (Shanghai) Co., Ltd., Skylife TV Co., Ltd.,

Initech Co., Ltd., Smartro Co., Ltd., East Telecom LLC, KT NEXR Co., Ltd.,

KT Rwanda Networks Ltd., KT-Michigan Global Contents Fund, Autopion Co., Ltd.,

AOS Ltd., KT M Mobile Co., Ltd., KT investment Co., Ltd, PT. BC Card Asia Pacific,

Whowho&Company Co., Ltd., KT Hongkong Telecommunications Co., Ltd.,

KT Strategic Investment Fund No.3, PlayD Co., Ltd., Korea Telecom Singapore Pte, Ltd.,

Texnoprosistem LLC, KT Music Contents Fund No.2, KT Strategic Investment Fund No.4,

BC-VP Strategic Investment Fund No.1, KT MOS Bukbu Co., Ltd.,

KT MOS Nambu Co., Ltd., Nasmedia Thailand Co., Ltd., Next Connect PFV,

KT Huimangjieum, KT Strategic Investment Fund No.5, K-REALTY RENTAL HOUSING

REIT 3, Storywiz Co., Ltd., KT Engineering Co., Ltd.(KT ENGCORE Co., Ltd.),

KT Studio Genie Co., Ltd., Lolab Co., Ltd., KHS Corporation, HCN Co., Ltd.,

MEDIA GENIE Co., Ltd., KT Seezn Co., Ltd., MILLIE Co., Ltd., KT ES Pte. Ltd.,

Epsilon Global Communications PTE. Ltd., Epsilon Telecommunications (SP) PTE. Ltd., Epsilon Telecommunications (US) PTE. Ltd., Epsilon Telecommunications Limited,

7D Digital Limited, Epsilon Telecommunications (HK) Limited, Epsilon US Inc., Epsilon Telecommunications (BG) EOOD, Epsilon M E A General Trading LLC,

K-REALTY RENTAL HOUSING REIT V

Associates   

KIF Investment Fund, K-REALTY CR REITs No.1, Boston Global Film & Contents Fund L.P., QTT Global (Group) Company Ltd., CU Industrial Development Co., Ltd,

KD Living, Inc., LoginD Co., Ltd., K-REALTY CR-REIT 6, K Bank Inc.,

ISU-kth Contents Investment Fund, Daiwon Broadcasting Co., Ltd.,

KT-DSC Creative Economy Youth Start-up Investment Fund,

Korea Electronic Vehicle Charging Service, K-REALTY RENTAL HOUSING REIT 2,

AI RESEARCH INSTITUTE, KT-IBKC Future Investment Fund 1,

Gyeonggi-KT Yoojin Superman Fund, FUNDA Co., Ltd, CHAMP IT Co., Ltd.,

Alliance Internet Corp., Little big pictures, Virtua Realm Sendirian Berhad, KT Philippines,

KT-Smart Factory Investment Fund, Studio Discovery Co., Ltd.,

KT Young Entrepreneurs DNA Investment Fund, Hyundai Robotics Co., Ltd.,

IGIS Professional Investors Private Investment Real Estate Investment LLC No 395, ,

Mogyo Limited Company Specializing in the Cultural Industry,

Maruee Limited Company Specializing in the Cultural Industry, Trustay Co., Ltd.,

The Skyk Co., Ltd., StorySoop Inc., Mastern No.127 Logispoint Daegu Co., Ltd.,

SMART KOREA KT NEXT VENTURE FUND, KT Early Stage Investment Fund,

Pacific Professional Investors Private Investment Real Estate Investment LLC No. 55,

Mastern KT Multi-Family Real Estate Private Equity Investment Fund 1, Home Choice Corp

 

38


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

The amount of instalment handset sales receivable inherited from KTIS Corporation, KTCS Corporation and KT Commerce Inc, KT M&S Co., Ltd. for the nine-month period ended September 30, 2021 is W 395,037 million.

The Company has entered into an additional agreement with KT M Mobile Co., Ltd. regarding wholesale provision of telecommunication services. In connection with the agreement, the Company offsets receivables, partially or in-full, against payables for joining mobile telecommunications services and network usage arising from telecommunication operations.

Outstanding balances of receivables and payables in relation to transactions with related parties as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)  
     September 30, 2021  
     Receivables      Payables  
     Trade
receivables
     Loans and
others
     Other
receivables
    

Lease

receivables

     Trade
payables
     Other
payables
    

Lease

liabilities

 

Subsidiaries

                    

KT Linkus Co., Ltd.

   W —        W —        W —        W —        W —        W 14,751      W —    

KT Telecop Co., Ltd.

     821        —          320        —          2,165        33,195        10  

KTCS Corporation

     745        —          6,025        211        —          53,716        —    

KTIS Corporation

     498        —          6,174        649        —          39,337        —    

KT Service Bukbu Co., Ltd.

     12        —          —          21        —          18,393        —    

KT Service Nambu Co., Ltd.

     —          —          —          —          —          20,139        —    

KT Skylife Co., Ltd.

     4,674        —          6,452        44        —          7,925        —    

KTDS Co., Ltd.

     634        —          7,077        —          —          103,133        —    

KT Estate Inc.

     3        —          46,081        —          —          24,672        45,112  

Skylife TV Co., Ltd

     8        —          24        —          —          1,673        —    

BC Card Co., Ltd.1

     414        —          6,223        —          —          902        5  

KT Sat Co., Ltd.

     1,829        —          —          —          —          1,204        —    

KT Alpha Co., Ltd. 3

(KT Hitel Co., Ltd.)

     5,433        —          356        —          15,113        10,033        —    

KT Commerce Inc.

     84        —          —          —          1,785          26,132        —    

KT M&S Co., Ltd.

     124        8,400        505        —          —          97,443        —    

GENIE Music Corporation

     1        —          349        —          —          19,237        —    

KT M Mobile Co., Ltd.

     24,438        —          68        —          —          469        —    

Nasmedia, Co., Ltd.

     3,520        —          —          —          —          1,201        —    

KT MOS Bukbu Co., Ltd.

     —          —          —          —          —          8,017        —    

KT MOS Nambu Co., Ltd.

     —          —          —          —          —          8,374        —    

 

39


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

                                                                                                                             
(in millions of Korean won)  
     September 30, 2021  
     Receivables      Payables  
     Trade
receivables
     Loans and
others
     Other
receivables
    

Lease

receivables

     Trade
payables
     Other
payables
    

Lease

liabilities

 

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.)

     —          —          1,395        —          327        55,843        7  

KHS Corporation

     1        —          —          —          —          —          —    

Others

     18,952        11,854        10,096        379        752        36,261        35  

Associates and joint ventures

                    

K-REALTY CR REITs No.1

     —          —          12,100               —          —          4,098  

K Bank Inc.

     342        —          259        —          —          —          —    

Others

     81        —          1        —          —          1,430        —    

Total

     W    62,614        W20,254        W103,505        W1,304        W20,142        W583,481        W49,267  

 

                                                                                                                             
(in millions of Korean won)  
     December 31, 2020  
     Receivables      Payables  
     Trade
receivables
     Loans and
others
     Other
receivables
    

Lease

receivables

     Trade
payables
     Other
payables
    

Lease

liabilities

 

Subsidiaries

                    

KT Powertel Co., Ltd

   W 796      W —        W 931      W —        W —        W 5,365      W —    

KT Linkus Co., Ltd.

     605        —          —          —          —          10,339        —    

KT Telecop Co., Ltd.

     1,228        —          401        —          1,942        25,707        —    

KTCS Corporation

     172        —          7,044        —          —          50,363        14  

KTIS Corporation

     688        —          3,474        —          —          40,189        —    

KT Service Bukbu Co., Ltd.

     15        —          —          22        —          21,678        —    

KT Service Nambu Co., Ltd.

     3        —          —          —          —          23,742        —    

KT Skylife Co., Ltd.

     1,899        —          5,507        —          —          9,762        —    

KTDS Co., Ltd.

     10,210        —          3,072        —          —          96,644        —    

KT Estate Inc.

     8,687        —          46,338        —          —          21,276        35,880  

Skylife TV Co., Ltd 2

     —          3,687        —          —          —          1,849        —    

BC Card Co., Ltd.1

     494        —          4,858        —          —          612        6  

KT Sat Co., Ltd.

     1,750        —          —          —          —          1,206        —    

KT Alpha Co., Ltd. 3

(KT Hitel Co., Ltd.)

     2,071        —          461        —          13,335        11,393        —    

KT Commerce Inc.

     107        —          —          —          9,243        46,708        —    

KT M Hows Co., Ltd. 3

     157        —          —          —          —          2,799        —    

KT M&S Co., Ltd.

     153        3,650        567        6        —          114,262        —    

GENIE Music Corporation

     81        —          285        —          —          26,680        —    

KT M Mobile Co., Ltd.

     14,170        —          96        —          —          498        —    

 

40


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won)  
     December 31, 2020  
     Receivables      Payables  
     Trade
receivables
     Loans and
others
     Other
receivables
    

Lease

receivables

     Trade
payables
     Other
payables
    

Lease

liabilities

 

Nasmedia, Co., Ltd.

     5,355        —          —          —          —          1,263        —    

KT MOS Bukbu Co., Ltd.

     8        —          713        —          —          9,293        —    

KT MOS Nambu Co., Ltd.

     —          —          —          —          —          9,174        —    

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

     5        —          3,298        32        1,327        99,173        7  

Others

     3,271        700        2,048        —          462        3,686        40  

Associates and joint ventures

                    

K-REALTY CR REITs No.1

     —          —          16,200        —          —          —          20,857  

K Bank Inc.

     274        —          —                 —          2        —    

Others

     45        —          16               —          5        —    

Others

                    

KHS Corporation

     6        —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 52,250      W 8,037      W 95,309      W 60      W 26,309      W 633,668      W 56,804  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1

As at September 30, 2021, W 731 million of the unsettled amount (December 31, 2020: W 580 million) in credit card transactions with BC Card Co., Ltd. is included in trade payables.

2 

As at September 30, 2020, the convertible bonds issued by Skylife TV Co., Ltd. amounting to W 3,000 million is classified as financial assets at fair value through profit or loss.

3

For the nine-month period ended September 30, 2021, KT Alpha Co., Ltd. (KT Hitel Co., Ltd.) merged with KTM House Co., Ltd. as a surviving company. Alpha Co., Ltd. (KT Hitel Co., Ltd.) merged KTM House Co., Ltd. into an extinct company for the nine-month period ended September 30, 2021.

Significant transactions with related parties for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021  
     Sales      Purchases      Acquisition of lease
receivables
     Acquisition of
right-of-use
assets
    

Finance

income

    

Finance

costs

     Dividends
received
 
     Operating
revenue
    

Other

income

     Operating
expenses
     Others 1  

Subsidiaries

                          

KT Powertel Co., Ltd 2

   W 3,233      W —        W 508      W —        W —        W —        W 1      W —        W —    

KT Linkus Co., Ltd.

     6,536        2        44,921        —          —          —          —          —          —    

KT Telecop Co., Ltd.

     10,055        —          119,561        —          —          —          —          —          —    

KTCS Corporation

     70,132        54        234,926        9        —          —          6        —          254  

KTIS Corporation

     42,169        —          216,857        —          —          —          29        —          816  

KT Service Bukbu Co., Ltd.

     13,345        2        153,364        —          —          —          1        —          —    

KT Service Nambu Co., Ltd.

     9,732        5        183,244        —          —          —          —          —          —    

KT Skylife Co., Ltd.

     38,769        7        26,073        —          —          —          1        —          8,368  

 

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KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean
won)
   2021  
     Sales      Purchases      Acquisition of lease
receivables
     Acquisition of
right-of-use
assets
    

Finance

income

    

Finance

costs

     Dividends
received
 
     Operating
revenue
    

Other

income

     Operating
expenses
     Others 1  

KTDS Co., Ltd.

     10,565        17        314,261        91        —          —          1        —          3,000  

KT Estate Inc.

     10,725        —          73,014        —          —          38        —          732        —    

Skylife TV Co., Ltd.

     1,846        —          6,057        —          —          —          25        —          —    

BC Card Co., Ltd.

     7,723        3        22,948        —          —          —          3        —          14,686  

KT Sat Co., Ltd.

     15,085        —          7,999        —          —          —          —          —          —    

KT Alpha Co., Ltd.

(KT Hitel Co., Ltd.)

     30,311        —          59,977        —          —          —          —          —          —    

KT Commerce Inc.

     714        —          79,757        42,057        —          —          —          —          —    

KT M Hows Co., Ltd. 2

     861        —          460        —          —          —          —          —          —    

KT M&S Co., Ltd.

     324,728        91        160,897        —          —          —          —          —          —    

GENIE Music Corporation

     1,437        —          43,937        —          —          —          —          —          —    

KT M Mobile Co., Ltd.

     95,662        —          16,288        —          —          —          —          —          —    

Nasmedia, Co., Ltd.

     608        —          4,515        —          —          —          1        —          2,994  

KT MOS Nambu Co., Ltd.

     1,379        —          48,948        525        —          —          —          —          —    

KT MOS Bukbu Co., Ltd.

     1,896        —          50,121        —          —          —          —          —          —    

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.)

     407        —          26,313        91,522        —          —          —          —          —    

KHS Corporation

     9        —          2,519        —          —          —          —          —          —    

Others

     19,543        5        57,272        1        557        —          27        —          15,134  

Associates and joint ventures

                          

K-REALTY CR REITs No.1

     —          —          —          —          —          —          —          149        40,142  

K Bank Inc.

     2,999        33        50        —          —          —          —          —          —    

Others

     666        103        4,522        —          —          —          —          —          6,120  

Others

                          

KHS Corporation 3

     8        —          1,744        —          —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 721,143      W 322      W 1,961,053      W 134,205      W 557      W 38      W 95      W 881      W 91,514  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1 

Amounts include acquisition of property, equipment and others.

2 

Transaction amount before being excluded from subsidiaries.

3

Transaction amount before being included as a subsidiary.

 

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Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won)    2020  
     Sales      Purchases      Acquisition of
right-of-use
assets
    

Finance

income

    

Finance

costs

     Dividends
received
 
     Operating
revenue
    

Other

income

     Operating
expenses
     Others 1  

Subsidiaries

                       

KT Powertel Co., Ltd

   W 5,769      W —        W 1,264      W —        W —        W —        W —        W —    

KT Linkus Co., Ltd.

     8,190        2        44,184        511        —          —          —          —    

KT Telecop Co., Ltd.

     8,056        —          35,347        —          —          —          1        —    

KTCS Corporation

     54,933        75        237,821        1,404        —          —          —          254  

KTIS Corporation

     36,909        —          216,682        —          —          1        —          918  

KT Service Bukbu Co., Ltd.

     10,580        3        151,077        —          —          1        —          —    

KT Service Nambu Co., Ltd.

     8,803        3        182,485        20        —          —          —          —    

KT Skylife Co., Ltd.

     24,044        13        29,633        —          —          —          2        8,368  

KTDS Co., Ltd.

     10,133        1        250,943        4        —          1        —          5,208  

KT Estate Inc.

     8,101        —          93,347        —          1        —          1,314        42,680  

Skylife TV Co., Ltd.

     2,677        —          5,370        —          —          67        —          —    

BC Card Co., Ltd.

     6,927        24        22,243        —          —          4        —          52,013  

KT Sat Co., Ltd.

     11,433        —          9,752        —          —          —          —          —    

KT Alpha Co., Ltd.

(KT Hitel Co., Ltd.)

     19,389        —          44,664        793        —          —          —          —    

KT Commerce Inc.

     710        —          106,918        40,308        —          —          —          —    

KT M Hows Co., Ltd.

     1,068        —          486        —          —          —          —          1,520  

KT M&S Co., Ltd.

     301,159        65        146,694        —          —          —          —          —    

GENIE Music Corporation

     3,312        —          42,740        —          —          —          —          —    

KT M Mobile Co., Ltd.

     63,930        —          6,525        —          —          —          —          —    

Nasmedia, Co., Ltd.

     443        —          4,893        —          —          —          —          2,470  

KT MOS Nambu Co., Ltd.

     1,342        5        44,979        6,994        —          —          —          —    

KT MOS Bukbu Co., Ltd.

     1,822        —          47,228        —          —          —          —          —    

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.)

     208        —          22,603        103,868        —          —          1        —    

Others

     11,312        5        33,663        —          —          5        1        1,294  

Associates and joint ventures

                       

K-REALTY CR REITs No.1

     —          —          —          —          —          —          1,008        8,061  

K Bank Inc.

     1,790        —          3        —          —          —          —          —    

KIF Investment Fund

     —          —          —          —          —          —          —          9,241  

Others

     372        70        2,453        —          —          —          —          —    

Others

                       

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.) 2

     149        —          25,082        61,409        —          —          —          —    

KHS Corporation

     25        —          8,056        —          —          —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 603,586      W 266      W 1,817,135      W 215,311      W 1      W 79      W 2,327      W 132,027  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1 

Amounts include acquisition of property, equipment and others.

2

Transaction amount before being included as a subsidiary.

 

43


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Key management compensation for the nine-month periods ended September 30, 2021 and 2020, consists of:

 

(in millions of Korean won)    2021      2020  

Salaries and other short-term benefits

   W 1,622      W 1,560  

Post-employment benefits

     311        285  

Stock-based compensation

     503        468  
  

 

 

    

 

 

 

Total

   W 2,436      W 2,313  
  

 

 

    

 

 

 

Fund transactions with related parties for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021  
     Loan transactions      Borrowing transactions1      Equity contributions
in cash
 
     Loans      Collections      Borrowings      Refunds  

Subsidiaries

              

KT Strategic Investment Fund No.5

   W —        W —        W —        W —        W 6,460  

KTIS Corporation

     —          —          —          7        —    

KT Estate Inc

     —          —          38        21,172        —    

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.)

     —          —          —          2        —    

KT Studio Genie Co., Ltd.

     102        102        —          —          220,687  

KT M&S Co., Ltd.

     37,700        32,950        —          —          —    

Skylife TV Co., Ltd

     —          —          —          —          (3,000

KT Linkus Co., Ltd.

     —          —          —          1        —    

KT ES Pte. LTd

     —          —          —          —          93,440  

Others

     14        —          —          19        6,815  

Associates and joint ventures

              

KT-Smart Factory Investment Fund

     —          —          —          —          1,000  

K-REALTY CR REIT 1

     —          —          —          11,767        —    

KT Young Entrepreneurs DNA Investment Fund

     —          —          —          —          7,700  

KT-IBKC Future Investment Fund 1

     —          —          —          —          (4,940

Other

     —          —          —          —          4,280  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 37,816      W 33,052      W 38      W 32,968      W 332,442  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
1 

Borrowing transactions include lease transactions.

 

(in millions of Korean won)    2020  
     Loan transactions      Borrowing transactions1      Equity contributions
in cash
 
     Loans      Collections      Borrowings      Refunds  

Subsidiaries

              

KTIS Corporation

   W —        W —        W —        W 16      W —    

KT Estate Inc.

     —          —          1        20,240        —    

KBTO Sp.z o.o.

     —          —          —          —          1,681  

 

44


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(in millions of Korean won)    2020  
     Loan transactions      Borrowing transactions1      Equity contributions
in cash
 
     Loans      Collections      Borrowings      Refunds  

KT M&S Co., Ltd.

     13,200        13,235        —          —          —    

Storywiz Co., Ltd.

     202        202        —          —          14,000  

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.)

     —          —          —          21        28,000  

Others

     —          —             84        8,001  

Associates and joint ventures

              

KT-Smart Factory Investment Fund

     —          —          —          —          2,000  

K-REALTY CR REITs No.1

     —          —          —          18,934        —    

KT-CKP New Media Investment Fund

     —          —          —          —          (148

KT Young Entrepreneurs DNA Investment Fund

     —          —          —          —          3,300  

Hyundai Robotics Co., Ltd.

     —          —          —          —          50,000  

Gyeonggi-KT Yoojin Superman Fund

     —          —          —          —          1,000  

Others

              

KT Engineering Co., Ltd.

(KT ENGCORE Co., Ltd.). 2

     —          —          —          34        —    

Total

   W 13,402      W 13,437      W 1      W 39,329      W 107,834  

 

1 

Borrowing transactions include lease transactions.

2

Transaction amount before being included as a subsidiary.

At the end of the reporting period, the Company entered into a credit card agreement with a limit of W4,736 million (December 31, 2020: W4,731 million) with BC Card Co., Ltd.

At the end of reporting period, there are no collateral and payment guarantee provided by the related parties.

 

28.

Fair Value

During the period ended September 30, 2021, there have been no significant changes in the business or economic environment that affect the fair value of the Company’s financial assets and liabilities.

 

45


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

  (1)

Fair Value of Financial Instruments by Category

Carrying amount and fair value of financial instruments by category as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021      December 31, 2020  
     Carrying
amount
     Fair value      Carrying
amount
     Fair value  

Financial assets

           

Cash and cash equivalents

   W 1,829,451        1       W 1,541,210        1   

Trade and other receivables

           

Financial assets measured at amortized cost 2

     3,648,432        1         3,085,047        1   

Financial assets at fair value through other comprehensive income

     539,652        539,652        1,118,619        1,118,619  

Other financial assets

           

Financial assets measured at amortized cost

     72,510        1         262,477        1   

Financial assets at fair value through profit or loss

     200,321        200,321        155,805        155,805  

Financial assets at fair value through other comprehensive income

     101,718        101,718        22,860        22,860  

Derivative financial assets for hedging

     91,314        91,314        7,684        7,684  
  

 

 

       

 

 

    

Total

   W 6,483,398         W 6,193,702     
  

 

 

       

 

 

    

Financial liabilities

           

Trade and other payables

   W 4,963,881        1       W 5,015,237        1   

Borrowings

     7,143,123        1         6,945,768        1   

Other financial liabilities

           

Derivative financial liabilities for hedging

     10,398        10,398        120,349        120,349  
  

 

 

       

 

 

    

Total

   W 12,117,402         W 12,081,354     
  

 

 

       

 

 

    

 

1 

The Company did not conduct a fair value estimation since the book amount is a reasonable approximation of fair value.

 

2 

With the application of Korean IFRS 1107, lease receivables and lease liabilities are excluded from fair value disclosure.

 

  (2)

Fair Value Hierarchy

To provide an indication about the reliability of the inputs used in determining fair value, the Company classifies its financial instruments into the three levels prescribed under the accounting standards. Financial instruments that are measured at fair value are categorized by the fair value hierarchy, and the defined levels are as follows:

 

 

Level 1: The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the Company is the current bid price. These instruments are included in level 1.

 

 

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

 

 

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

 

46


Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

Fair value hierarchy classifications of financial assets and financial liabilities that are measured at fair value or its fair value is disclosed as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
     Level 1      Level 2      Level 3      Total  

Assets

           

Trade and other receivables

           

Financial assets at fair value through other comprehensive income

   W —        W 539,652      W —        W 539,652  

Other financial assets

           

Financial assets at fair value through profit or loss

     179        —          200,142        200,321  

Financial assets at fair value through other comprehensive income

     40,576        —          61,142        101,718  

Derivative financial assets for hedging

     —          58,199        33,115        91,314  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W 40,755      W 597,851      W 294,399      W 933,005  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Other financial liabilities

           

Derivative financial liabilities for hedging

   W —        W 10,398      W —        W 10,398  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W —        W 10,398      W —        W 10,398  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(in millions of Korean won)    December 31, 2020  
     Level 1      Level 2      Level 3      Total  

Assets

           

Trade and other receivables

           

Financial assets at fair value through other comprehensive income

   W —        W 1,118,619      W —        W 1,118,619  

Other financial assets

           

Financial assets at fair value through profit or loss

     110        —          155,695        155,805  

Financial assets at fair value through other comprehensive income

     1,825        —          21,035        22,860  

Derivative financial assets for hedging

     —          7,684        —          7,684  

Total

   W 1,935      W 1,126,303      W 176,730      W 1,304,968  
Liabilities            

Other financial liabilities

           

Derivative financial liabilities for hedging

   W —        W 116,155      W 4,194      W 120,349  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   W —        W 116,155      W 4,194      W 120,349  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

  (3)

Transfers Between Fair Value Hierarchy Levels of Recurring Fair Value Measurements

There are no transfers between Level 1 and Level 2 of the fair value hierarchy for recurring fair value measurements.

Details of changes in Level 3 of the fair value hierarchy for recurring fair value measurements are as follows:

 

(in millions of Korean won)    2021  
     Financial assets  
     Financial assets at fair
value through profit or
loss
     Financial assets at fair
value through other
comprehensive income
     Derivative financial
assets for hedging
 

Beginning balance

   W 155,695      W 21,035      W (4,194

Amount recognized in profit or loss

     —          —          42,898  

Amount recognized in other comprehensive income

     —          —          (5,589

Acquisition amount

     66,520        25,750        —    

Transfers

     (18,044      14,357        —    

Disposal amount

     (4,029      —          —    
  

 

 

    

 

 

    

 

 

 

Ending balance

   W 200,142      W 61,142      W 33,115  
  

 

 

    

 

 

    

 

 

 
(in millions of Korean won)    2020  
     Financial assets  
     Financial assets at fair
value through profit or
loss
     Financial assets at fair
value through other
comprehensive income
     Derivative financial
assets for hedging
 

Beginning balance

   W 131,112      W 18,964      W 17,642  

Amount recognized in profit or loss

     —          —          5,211  

Amount recognized in other comprehensive income

     —          —          7,211  

Acquisition amount

     5,828        —          —    

Transfers

     —          —          —    

Disposal amount

     (937      (418      —    
  

 

 

    

 

 

    

 

 

 

Ending balance

   W 136,003      W 18,546      W 30,064  
  

 

 

    

 

 

    

 

 

 

 

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Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(4)

Valuation Techniques and Inputs

Valuation techniques and inputs used in recurring and non-recurring fair value measurements and disclosed fair value categorized within Level 2 and Level 3 of the fair value hierarchy as at September 30, 2021 and December 31, 2020, are as follows:

 

(in millions of Korean won)    September 30, 2021  
     Fair value      Level      Valuation techniques  

Assets

        

Trade and other receivables

        

Financial assets at fair value through other comprehensive income

   W 539,652        2        DCF Model  

Other financial assets

        

Financial assets at fair value through profit or loss

     200,142        3       

DCF Model,

Adjusted net asset model

 

 

Financial assets at fair value through other comprehensive income

     61,142        3        DCF Model  

Derivative financial assets for hedging

     58,199        2        DCF Model  
     33,115        3       

Hull-White Model,

DCF Model

 

 

Liabilities

        

Other financial liabilities

        

Derivative financial liabilities for hedging

   W 10,398        2        DCF Model  

 

(in millions of Korean won)    December 31, 2020  
     Fair value      Level      Valuation techniques  

Assets

        

Trade and other receivables

        

Financial assets at fair value through other comprehensive income

   W 1,118,619        2        DCF Model  

Other financial assets

        

Financial assets at fair value through profit or loss

     155,695        3       

DCF Model,

Adjusted net asset model

 

 

Financial assets at fair value through other comprehensive income

     21,035        3        DCF Model  

Derivative financial assets for hedging

     7,684        2        DCF Model  

Liabilities

        

Other financial liabilities

        

Derivative financial liabilities for hedging

     116,155        2        DCF Model  
     4,194        3       

Hull-White Model,

DCF Model

 

 

 

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Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

(5)

Valuation Processes for Fair Value Measurements Categorized Within Level 3

The Company uses external experts that perform the fair value measurements required for financial reporting purposes. External experts report directly to the Chief Financial Officer (CFO) and discuss valuation processes and results with the CFO in line with the Company’s closing dates.

 

(6)

Gains and Losses on Valuation at the Transaction Date

In the case that the Company values derivative financial instruments using inputs not based on observable market data, and the fair value calculated by valuation methods using such data differs from the transaction price, then the fair value of the financial instrument is recognized at the transaction price. The difference between the fair value at initial recognition and the transaction price is deferred and amortized using a straight-line method by maturity of the financial instrument. However, in the case that the inputs of the valuation method become observable in markets, the remaining deferred difference is immediately recognized in full in profit or loss.

In relation to this, details and changes of the total deferred difference for the nine-month periods ended September 30, 2021 and 2020, are as follows:

 

(in millions of Korean won)    2021      2020  
     Derivatives used for
hedging
     Derivatives used for
hedging
 

I. Beginning balance

   W 2,257      W 3,682  

II. New transactions

     —          —    

III. Recognized at fair value through profit or loss

     (1,069      (1,069
  

 

 

    

 

 

 

IV. Ending balance (I+II+III)

   W 1,188      W 2,613  
  

 

 

    

 

 

 

 

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Table of Contents

KT Corporation

Notes to the Separate Interim Financial Statements

September 30, 2021 and 2020 (Unaudited), and December 31, 2020

 

 

29.

Changes in Accounting Policies - Determination of Lease Term Considering Economic Penalty

The Company has changed its accounting policy by adopting accounting treatments in accordance with the agenda decisions for ‘Lease Term and Useful Life of Leasehold Improvements’ issued by the IFRS Interpretations Committee on December 16, 2019. The changes in accounting policy have been firstly retrospectively applied to the 2020 annual consolidated financial statements in accordance with Korean IFRS 1008 Accounting Policies, Changes in Accounting Estimates and Errors. The Company adjusted the comparative consolidated financial statements for the three and nine-month period ended September 30, 2020.

In relation to the changes in accounting policy, the adjusted amounts recognized in each line item in the financial statements are as follows:

Statements of Profit or Loss

 

(in millions of Korean won)    Periods ended September 30, 2020  
     Amount based on previous policy      Adjustment     Amount based on changed policy  
    

Three

Months

    

Nine

Months

    

Three

Months

   

Nine

Months

   

Three

Months

    

Nine

Months

 

Operating expenses

   W 4,313,663      W 12,530,098      W (1,708   W (5,111   W 4,311,955      W 12,524,987  

Other income

     65,459        292,509        283       3,816       65,742        296,325  

Other expenses

     50,876        162,309        —         —         50,876        162,309  

Finance income

     29,818        273,943        —         —         29,818        273,943  

Finance cost

     29,924        283,449        2,126       6,957       32,050        290,406  

Income tax expense

     58,043        230,773        —         —         58,043        230,773  

Profit for the period

     163,237        649,031        (135     1,970       163,102        651,001  

Basic earnings per share

     665        2,646        —         8       665        2,654  

Diluted earnings per share

     665        2,645        (1     8       664        2,653  

 

51