Form 6-K - Report of foreign issuer [Rules 13a-16 and 15d-16]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE MONTH OF MARCH 2024

Commission File Number: 333-04906

SK Telecom Co., Ltd.

(Translation of registrant’s name into English)

65, Euljiro, Jung-gu

Seoul 04539, Korea

(Address of principal executive office)

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

Form 20-F ☒ Form 40-F ☐

SIGNATURES

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


SK TELECOM CO., LTD.
(Registrant)

By: /s/ Hee Jun Chung
(Signature)
Name: Hee Jun Chung
Title: Vice President

Date: March 7, 2024

SK TELECOM CO., LTD.

Separate Financial Statements

For the years ended December 31, 2023 and 2022

(With the Independent Auditor’s Report Thereon)

Contents


	Page

Independent Auditor’s Report		1

Separate Financial Statements		4

Separate Statements of Financial Position		5

Separate Statements of Income		7

Separate Statements of Comprehensive Income		8

Separate Statements of Changes in Equity		9

Separate Statements of Cash Flows		10

Notes to the Separate Financial Statements		12

Report on audit of Internal Control over Financial Reporting		116

Management’s Annual Report on Internal Control over Financial Reporting		118

Independent Auditor’s Report

(English Translation of a Report Originally Issued in Korean)

The Shareholders and Board of Directors

SK Telecom Co., Ltd.

Opinion

We have audited the accompanying separate financial statements of SK Telecom Co., Ltd. (the “Company”) which comprise the separate statements of financial position as of December 31, 2023 and 2022, and the separate statements of income, comprehensive income, changes in equity and cash flows for each of the two years in the period ended December 31, 2023, and notes to the separate financial statements, including a summary of material accounting policies.

In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of the Company as of December 31, 2023 and 2022, and its separate financial performance and its separate cash flows for each for each of the two years in the period ended December 31, 2023 in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”).

We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on the criteria established in Conceptual Framework for Designing and Operating Internal Control over Financial Reporting in accordance with the Korean Standards on Auditing (“KSA”) issued by the Operating Committee of internal control over financial reporting, and our report dated March 6, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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

Key Audit Matter

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate financial statements of the current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

Cut-off of revenues from the wireless services

As described in notes 3 (21) and 27 to the separate financial statements, the Company’s revenue from the wireless services is recognized based on data from a complex array of information technology systems which process a significant volume of transactions with its customers. Furthermore, the transactions involve a variety of contractual terms from new subscriptions to deactivations or churn, and changes of rate plans during the period. Therefore, we have identified timing of revenue recognition related to the Company’s wireless services as a key audit matter. Related revenue from the wireless services amounted to W10,554,390 million in 2023.

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

•

Inspecting major contracts with subscribers to assess whether the Company’s revenue recognition policies based on the terms and conditions as set out in the contracts, are consistent with reference to the requirements of KIFRS 1115;

•

Testing internal controls relating to the timing of revenue recognition for the wireless services; and

•

Evaluating the appropriateness of the timing of revenue recognition by recalculating the prorated revenue based on the subscribed rate plan and comparing it with the billing information.

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

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

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

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

Auditor’s Responsibilities for the Audit of the Separate Financial Statements

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

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

•

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

•

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

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

•

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

•

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

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

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

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

The engagement partner on the audit resulting in this independent auditor’s report is Yoo, Jung Ho.

LOGO

March 6, 2024

This report is effective as of March 6, 2024, the independent auditor’s report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the date of independent auditor’s report date to the time this report is used. Such events and circumstances could significantly affect the accompanying separate financial statements and may result in modifications to this report.

SK TELECOM CO., LTD.

SEPARATE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

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

Ryu, Young-Sang

Chief Executive Officer

SK TELECOM CO., LTD.

SK TELECOM CO., LTD.

Separate Statements of Financial Position

As of December 31, 2023 and 2022


(In millions of won)	*Note*		December 31, 2023		December 31, 2022
Assets
Current Assets:
Cash and cash equivalents		34,35	W	631,066		1,217,504
Short-term financial instruments		4,34,35		186,364		169,829
Accounts receivable – trade, net		5,34,35,36		1,495,617		1,425,695
Short-term loans, net		5,34,35,36		68,806		70,043
Accounts receivable – other, net		5,34,35,36,37		343,036		435,096
Contract assets		7,35		9,228		12,100
Prepaid expenses		6		1,828,646		1,908,987
Guarantee deposits		5,34,35,36		72,479		63,516
Derivative financial assets		19,34,35,38		—		123,999
Inventories, net				28,096		23,355
Advanced payments and others		5,34,35		40,506		48,336

				4,703,844		5,498,460

Non-Current Assets:
Long-term financial instruments		4,34,35		354		354
Long-term investment securities		8,34,35		1,426,290		1,155,188
Investments in subsidiaries, associates and joint ventures		9		4,670,568		4,621,807
Property and equipment, net		10,12,36		9,076,459		9,519,663
Investment property, net		11		46,080		52,023
Goodwill		13		1,306,236		1,306,236
Intangible assets, net		14		2,250,829		2,693,400
Long-term loans, net		5,34,35,36		119		194
Long-term accounts receivable – other		5,34,35,37		308,868		377,858
Long-term contract assets		7,35		12,385		20,998
Long-term prepaid expenses		6		898,754		935,710
Guarantee deposits, net		5,34,35,36		91,220		92,019
Long-term derivative financial assets		19,34,35,38		118,533		126,737
Defined benefit assets		18		85,144		31,225
Other non-current assets				249		249

				20,292,088		20,933,661

Total Assets			W	24,995,932		26,432,121

(Continued)

SK TELECOM CO., LTD.

Separate Statements of Financial Position, Continued

As of December 31, 2023 and 2022


(In millions of won)	Note		December 31, 2023			December 31, 2022
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable – other		34,35,36	W	1,794,997			2,334,484
Contract liabilities		7		59,814			80,654
Withholdings		34,35		608,352			604,681
Accrued expenses		34,35		911,460			871,095
Income tax payable		31		133,543			82,554
Provisions		17,39		31,313			31,651
Short-term borrowings		15,34,35,38		—			100,000
Current portion of long-term debt, net		15,34,35,38		1,249,516			1,383,097
Lease liabilities		34,35,36,38		341,075			337,320
Current portion of long-term payables – other		16,34,35,38		367,770			398,874
Other current liabilities		34,35		7,630			11,725

				5,505,470			6,236,135

Non-Current Liabilities:
Debentures, excluding current portion, net		15,34,35,38		5,807,423			5,705,873
Long-term borrowings, excluding current portion, net		15,34,35,38		250,000			640,000
Long-term payables – other		16,34,35,38		892,683			1,239,467
Long-term contract liabilities		7		4,398			12,745
Long-term derivative financial liabilities		19,34,35,38		295,876			302,593
Long-term lease liabilities		34,35,36,38		885,470			1,041,991
Long-term provisions		17		69,791			65,754
Deferred tax liabilities		31		801,995			754,321
Other non-current liabilities		34,35		46,733			49,860

				9,054,369			9,812,604

Total Liabilities				14,559,839			16,048,739

Shareholders’ Equity:
Share capital		1,20		30,493			30,493
Capital surplus and others		20,21,22,23		(4,766,147	)		(4,506,693	)
Retained earnings		24,25		15,032,473			14,691,461
Reserves		26		139,274			168,121

Total Shareholder’s Equity				10,436,093			10,383,382

Total Liabilities and Shareholder’s Equity			W	24,995,932			26,432,121

The accompanying notes are an integral part of the separate financial statements.

SK TELECOM CO., LTD.

Separate Statements of Income

For the years ended December 31, 2023 and 2022


(In millions of won, except for earnings per share)	*Note*		2023			2022
Operating revenue:		27,36
Revenue			W	12,589,220			12,414,588
Operating expenses:		36
Labor				943,924			992,964
Commissions		6		4,831,879			4,792,121
Depreciation and amortization				2,698,436			2,693,630
Network interconnection				490,114			532,621
Leased lines				189,059			191,212
Advertising				174,403			161,294
Rent				127,182			121,067
Cost of goods sold				548,155			544,286
Others		28		1,130,198			1,064,262

				11,133,350			11,093,457

Operating profit				1,455,870			1,321,131

Finance income		30		342,646			134,965
Finance costs		30		(441,390	)		(387,606	)
Other non-operating income		29		40,844			45,162
Other non-operating expenses		29		(24,019	)		(29,005	)
Gain (loss) relating to investments in subsidiaries, associates and joint ventures, net		9		(19,012	)		61,603

Profit before income tax				1,354,939			1,146,250

Income tax expense		31		295,189			276,760

Profit for the year			W	1,059,750			869,490

Earnings per share:		32
Basic earnings per share (in won)			W	4,798			3,921
Diluted earnings per share (in won)				4,794			3,919

The accompanying notes are an integral part of the separate financial statements.

SK TELECOM CO., LTD.

Separate Statements of Comprehensive Income

For the years ended December 31, 2023 and 2022

(In millions of won)

Note

2023

2022

Profit for the year

1,059,750

869,490

Other comprehensive income (loss):

Items that will not be reclassified subsequently to profit or loss, net of taxes:

Remeasurement of defined benefit assets

43,656

(4,899

)

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

26,30

(39,221

)

(481,023

)

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

Net change in unrealized fair value of derivatives

19,26,30

(11,488

)

(13,792

)

Other comprehensive loss for the year, net of taxes

(7,053

)

(499,714

)

Total comprehensive income

1,052,697

369,776

The accompanying notes are an integral part of the separate financial statements.

SK TELECOM CO., LTD.

Separate Statements of Changes in Equity

For the years ended December 31, 2023 and 2022


(In millions of won)
					Capital surplus and others																	Retained earnings			Reserves
	*Note*		Share capital		Paid-in surplus		Treasury shares			Hybrid bonds			Share option			Other			Sub-total			Retained earnings			Reserves			Total equity
Balance as of January 1, 2022			W	30,493		1,771,000		(57,314	)		398,759			47,166			(6,735,882	)		(4,576,271	)		14,770,618			638,016			10,862,856
Total comprehensive income (loss):
Profit for the year				—		—		—			—			—			—			—			869,490			—			869,490
Other comprehensive loss		18,19,26,30		—		—		—			—			—			—			—			(29,819	)		(469,895	)		(499,714	)

				—		—		—			—			—			—			—			839,671			(469,895	)		369,776

Transactions with owners:
Annual dividends		33		—		—		—			—			—			—			—			(361,186	)		—			(361,186	)
Interim dividends		33		—		—		—			—			—			—			—			(542,876	)		—			(542,876	)
Share option		23		—		—		—			—			47,129			25,132			72,261			—			—			72,261
Interest on hybrid bonds		22		—		—		—			—			—			—			—			(14,766	)		—			(14,766	)
Transactions of treasury shares		21		—		—		20,612			—			(92,234	)		68,939			(2,683	)		—			—			(2,683	)

				—		—		20,612			—			(45,105	)		94,071			69,578			(918,828	)		—			(849,250	)

Balance as of December 31, 2022			W	30,493		1,771,000		(36,702	)		398,759			2,061			(6,641,811	)		(4,506,693	)		14,691,461			168,121			10,383,382

Balance as of January 1, 2023			W	30,493		1,771,000		(36,702	)		398,759			2,061			(6,641,811	)		(4,506,693	)		14,691,461			168,121			10,383,382
Total comprehensive income (loss):
Profit for the year				—		—		—			—			—			—			—			1,059,750			—			1,059,750
Other comprehensive income (loss)		18,19,26,30		—		—		—			—			—			—			—			21,794			(28,847	)		(7,053	)

				—		—		—			—			—			—			—			1,081,544			(28,847	)		1,052,697

Transactions with owners:
Annual dividends		33		—		—		—			—			—			—			—			(180,967	)		—			(180,967	)
Interim dividends		33		—		—		—			—			—			—			—			(542,282	)		—			(542,282	)
Share option		23		—		—		—			—			7,757			(600	)		7,157			—			—			7,157
Interest on hybrid bonds		22		—		—		—			—			—			—			—			(17,283	)		—			(17,283	)
Repayments of hybrid bonds		22		—		—		—			(398,759	)		—			(1,241	)		(400,000	)		—			—			(400,000	)
Issuance of hybrid bonds		22		—		—		—			398,509			—			—			398,509			—			—			398,509
Transactions of treasury shares		21		—		—		(265,279	)		—			—			159			(265,120	)		—			—			(265,120	)

				—		—		(265,279	)		(250	)		7,757			(1,682	)		(259,454	)		(740,532	)		—			(999,986	)

Balance as of December 31, 2023			W	30,493		1,771,000		(301,981	)		398,509			9,818			(6,643,493	)		(4,766,147	)		15,032,473			139,274			10,436,093

The accompanying notes are an integral part of the separate financial statements.

SK TELECOM CO., LTD.

Separate Statements of Cash Flows

For the years ended December 31, 2023 and 2022


(In millions of won)	*Note*		2023			2022
Cash flows from operating activities:
Cash generated from operating activities:
Profit for the year			W	1,059,750			869,490
Adjustments for income and expenses		38		3,334,194			3,470,169
Changes in assets and liabilities related to operating activities		38		(148,374	)		214,858

				4,245,570			4,554,517
Interest received				32,673			31,516
Dividends received				208,026			50,927
Interest paid				(283,654	)		(220,723	)
Income tax paid				(194,275	)		(343,956	)

Net cash provided by operating activities				4,008,340			4,072,281

Cash flows from investing activities:
Cash inflows from investing activities:
Decrease in short-term financial instruments, net				—			201,376
Collection of short-term loans				126,398			115,121
Decrease in long-term financial instruments				—			330,032
Proceeds from disposals of long-term investment securities				17,939			55,114
Proceeds from disposals of investments in subsidiaries, associates and joint ventures				26,819			382,114
Proceeds from disposals of non-current assets held for sale				—			20,136
Proceeds from disposals of property and equipment				9,731			12,795
Proceeds from disposals of intangible assets				4,423			3,680

				185,310			1,120,368
Cash outflows for investing activities:
Increase in short-term financial instruments, net				(11,115	)		—
Increase in short-term loans				(125,072	)		(122,506	)
Increase in long-term financial instruments				—			(330,032	)
Acquisitions of long-term investment securities				(284,509	)		(372,672	)
Acquisitions of investments in subsidiaries, associates and joint ventures				(90,355	)		(93,215	)
Acquisitions of property and equipment				(1,977,806	)		(2,074,860	)
Acquisitions of intangible assets				(67,459	)		(91,914	)

				(2,556,316	)		(3,085,199	)

Net cash used in investing activities				W(2,371,006	)		(1,964,831	)

(Continued)

SK TELECOM CO., LTD.

Separate Statements of Cash Flows, Continued

For the years ended December 31, 2023 and 2022


(In millions of won)	*Note*	*2023*			*2022*
Cash flows from financing activities:
Cash inflows from financing activities:
Proceeds from short-term borrowings		W	—			100,000
Proceeds from long-term borrowings			—			440,000
Proceeds from issuance of debentures			941,185			1,050,820
Cash inflows from settlement of derivatives			126,000			768
Proceeds from issuance of hybrid bonds			398,509			—

			1,465,694			1,591,588
Cash outflows for financing activities:
Repayments of short-term borrowings			(100,000	)		—
Repayments of long-term borrowings			(100,000	)		(7,096	)
Repayments of long-term payables – other			(400,245	)		(400,245	)
Repayments of debentures			(1,309,000	)		(970,000	)
Payments of dividends			(723,215	)		(904,020	)
Repayments of hybrid bonds			(400,000	)		—
Payments of interest on hybrid bonds			(17,283	)		(14,766	)
Repayments of lease liabilities			(354,235	)		(344,199	)
Acquisition of treasury shares			(285,487	)		—

			(3,689,465	)		(2,640,326	)

Net cash used in financing activities			(2,223,771	)		(1,048,738	)

Net increase (decrease) in cash and cash equivalents			(586,437	)		1,058,712
Cash and cash equivalents at beginning of the year			1,217,504			158,823
Effects of exchange rate changes on cash and cash equivalents			(1	)		(31	)

Cash and cash equivalents at end of the year		W	631,066			1,217,504

The accompanying notes are an integral part of the separate financial statements.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

1.	Reporting Entity

SK Telecom Co., Ltd. (“the Company”) was incorporated on March 29, 1984, under the laws of the Republic of Korea (“Korea”) to provide cellular telephone communication services in Korea. The head office of the Company is located at 65, Eulji-ro, Jung-gu, Seoul, Korea.

The Company’s common shares are listed on the Stock Market of Korea Exchange, and its depositary receipts (DRs) are listed on the New York Stock Exchange. Meanwhile, the Board of Directors of the Company resolved to cancel the listing of the Company’s DRs on the London Stock Exchange on June 22, 2023, and the DRs were delisted from the London Stock Exchange as of July 31, 2023. As of December 31, 2023, the Company’s total issued shares are held by the following shareholders:


	Number of shares		Percentage of total shares issued (%)
SK Inc.		65,668,397		30.01
National Pension Service		16,330,409		7.46
Institutional investors and other shareholders		126,854,437		57.97
Kakao Investment Co., Ltd.		3,846,487		1.76
Treasury shares		6,133,414		2.80

		218,833,144		100.00

2.	Basis of Preparation

These separate financial statements were prepared in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”), as prescribed in the Act on External Audits of Stock Companies of Korea. The accompanying separate financial statements have been translated into English from Korean financial statements. In the event of any differences in interpreting the financial statements or the independent auditor’s report thereon, Korean version, which is used for regulatory reporting purposes, shall prevail.

These financial statements are separate financial statements prepared in accordance with KIFRS 1027, Separate Financial Statements, presented by a parent and an investor with joint control of or significant influence over an investee, in which the investments are accounted for at cost less impairment, if any.

The separate financial statements were authorized for issuance by the Board of Directors on February 2, 2024, which will be submitted for final approval at the shareholders’ meeting to be held on March 26, 2024.

(1)

Basis of measurement

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

•

derivative financial instruments measured at fair value;

•

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

•

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

•

liabilities measured at fair value for cash-settled share-based payment arrangement; and

•

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

2.	Basis of Preparation, Continued

(2)

Functional and presentation currency

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

(3)

Use of estimates and judgments

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

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

1) Critical judgments

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

2) Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year is included in the following notes: loss allowance (notes 5 and 35), estimated useful lives of costs to obtain a contract (notes 3 (21), and 6), property and equipment and intangible assets (notes 3 (7), (8), 10 and 14), impairment of goodwill (notes 3 (10) and 13), recognition of provision (notes 3 (15) and 17), measurement of defined benefit liabilities (notes 3 (14) and 18), transaction of derivative instruments (notes 3 (6) and 19) and recognition of deferred tax assets (liabilities) (notes 3 (23) and 31).

3) Fair value measurement

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

2.	Basis of Preparation, Continued

(3)

Use of estimates and judgments, Continued

3) Fair value measurement, Continued

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

•

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

•

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

•

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

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

Information about assumptions used for fair value measurements is included in note 19 and note 35.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies

The material accounting policies applied by the Company in the preparation of its separate financial statements in accordance with KIFRS are included below. Except for certain standards and amendments which are effective for annual periods beginning on or after January 1, 2023, the material accounting policies applied by the Company in these separate financial statements are the same as those applied by the Company in its separate financial statements as of and for the year ended December 31, 2022. The Company has not early adopted any standards, and interpretations or amendments that have been issued but are not yet effective.

The new and amended standards and interpretations that are effective for annual periods beginning on or after January 1, 2023 are as follows. These amended standards had no material impact on the Company’s separate financial statements.

•

Disclosure of Accounting Polices (Amendments to KIFRS 1001)

•

Disclosures of Profit or Loss on Financial Liabilities with Conditions for Adjusting an Exercise Price (Amendments to KIFRS 1001)

•

Definition of Accounting Estimates (Amendments to KIFRS 1008)

•

Deferred Tax related to Assets and Liabilities Arising from a Single Transaction (Amendments to KIFRS 1012)

•

KIFRS 1117 Insurance Contracts and its amendments

•

International tax reform - Pillar Two model rules (Amendments to KIFRS 1012)

The Pillar Two model rules is scheduled to take effect for the Company’s fiscal year beginning January 1, 2024. As the Company falls within the scope of the enacted Pillar Two model rules, it has assessed the potential exposure to Pillar Two income tax. The assessment of potential exposure to Pillar Two income tax is based on the most recent tax returns of the Company’s ultimate controlling entity group, country-by-country reporting, and financial statements. The Company expects that the exposure to Pillar Two income tax will be immaterial.

(1)

Operating segments

The Company presents disclosures relating to operating segments on its consolidated financial statements in accordance with KIFRS 1108, Operating Segments, and such disclosures are not separately disclosed on these separate financial statements.

(2)

Investments in subsidiaries, associates, and joint ventures

These separate financial statements are prepared and presented in accordance with KIFRS 1027, Separate Financial Statements. The Company applies the cost method to investments in subsidiaries, associates and joint ventures in accordance with KIFRS 1027. Dividends from subsidiaries, associates, and joint ventures are recognized in profit or loss when the right to receive the dividends is established.

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(3)

Cash and cash equivalents

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

(4)

Inventories

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

(5)

Non-derivative financial assets

Recognition and initial measurement

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(5)

Non-derivative financial assets, Continued

Classification and subsequent measurement

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

•

FVTPL

•

FVOCI – equity investment

•

FVOCI – debt investment

•

Financial assets at amortized cost

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

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

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

•

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

•

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

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

•

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

•

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

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(5)

Non-derivative financial assets, Continued

2) Classification and subsequent measurement, Continued

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


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

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

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

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

Impairment

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

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

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(5)

Non-derivative financial assets, Continued

Derecognition

Financial assets

The Company derecognizes a financial asset when:

•

the contractual rights to the cash flows from the financial asset expire; or

•

it transfers the rights to receive the contractual cash flows in a transaction in which either:

•

substantially all of the risks and rewards of ownership of the financial asset are transferred; or

•

the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

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

Interest rate benchmark reform

When the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortized cost changed as a result of interest rate benchmark reform, the Company updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by the reform. A change in the basis for determining the contractual cash flows is required by interest rate benchmark reform if the following conditions are met:

•

the change is necessary as a direct consequence of the reform; and

•

the new basis for determining the contractual cash flows is economically equivalent to the previous basis – i.e., the basis immediately before the change.

When changes were made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, the Company first updated the effective interest rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. After that, the Company applied the policies on accounting for modifications to the additional changes.

Offsetting

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(6)

Derivative financial instruments, including hedge accounting

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

Hedge accounting

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

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

Hedges directly affected by interest rate benchmark reform

When uncertainty arises about the interest rate benchmark designated as a hedged risk and the timing or the amount of the interest rate benchmark-based cash flows of the hedged item or of the hedging instrument as a result of IBOR reform, for the purpose of evaluating whether there is an economic relationship between the hedged items and the hedging instruments, the Company assumes that the interest rate benchmark on which the hedged items and the hedging instruments are based is not altered as a result of interest rate benchmark reform.

For a cash flow hedge of a forecast transaction, the Company assumes that the benchmark interest rate will not be altered as a result of interest rate benchmark reform for the purpose of assessing whether the forecast transaction is highly probable and determining whether a previously designated forecast transaction in a discontinued cash flow hedge is still expected to occur.

The Company will cease applying the specific policy for assessing the economic relationship between the hedged item and the hedging instrument

•

to a hedged item or hedging instrument when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the respective item or instrument; or

•

when the hedging relationship is discontinued.

When the basis for determining the contractual cash flows of the hedged item or hedging instrument changes as a result of IBOR reform and therefore there is no longer uncertainty arising about the cash flows of the hedged item or the hedging instrument, the Company amends the hedge documentation of that hedging relationship to reflect the change(s) required by IBOR reform.

The Company amends the formal hedge documentation by the end of the reporting period during which a change required by IBOR reform is made to the hedged risk, hedged item or hedging instrument. These amendments in the formal hedge documentation do not constitute the discontinuation of the hedging relationship or the designation of a new hedging relationship.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(6)

Derivative financial instruments, including hedge accounting, Continued

1) Hedge accounting, Continued

Hedges directly affected by interest rate benchmark reform, Continued

If changes are made in addition to those changes required by interest rate benchmark reform to the financial asset or financial liability designated in a hedging relationship or to the designation of the hedging relationship, the Company determines whether those additional changes result in the discontinuation of hedging accounting. If the additional changes do not result in the discontinuation of hedging accounting, the Company amend the formal designation of the hedging relationship.

When the interest rate benchmark on which the hedged future cash flows had been based is changed as required by IBOR reform, for the purpose of determining whether the hedged future cash flows are expected to occur, the Company deems that the hedging reserve recognized in OCI for that hedging relationship is based on the alternative benchmark rate on which the hedged future cash flows will be based.

Cash flow hedge

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

Other derivative financial instruments

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(7)

Property and equipment

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

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

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

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(7)

Property and equipment, Continued

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


		Useful lives (years)
Buildings and structures		15, 30
Machinery		3 ~ 8, 10, 30
Other property and equipment		4 ~10

The Company reviews estimated residual values, expected useful lives, and depreciation methods annually at the end of each reporting date and adjusts, if appropriate. The change is accounted for as a change in an accounting estimate.

(8)

Intangible assets

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

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

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


		Useful lives (years)
Frequency usage rights		5 ~ 10
Land usage rights		5
Industrial rights		5, 10
Facility usage rights		10, 20
Other		3 ~ 20

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

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(9)

Investment property

Investment properties are properties held to earn rentals and/or for capital appreciation. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are reported at cost less accumulated depreciation and accumulated impairment losses.

Subsequent expenditures are recognized in carrying amount of an asset or as a separate asset if it is probable that future economic benefits associated with the assets will flow into the Company and the cost of an asset can be measured reliably. The carrying amount of those parts that are replaced is derecognized. The costs associated with routine maintenance and repairs are recognized in profit or loss as incurred.

Investment property, except for land, is depreciated on a straight-line basis over estimated useful lives of 30 years. In addition, right-of-use asset classified as investment property is depreciated using the straight-line basis from the commencement date to the end of the lease term.

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(10)

Impairment of non-financial assets

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

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

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(11)

Leases

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

Company as a lessee

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

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

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

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

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

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

•

fixed payments, including in-substance fixed payments;

•

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

•

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

•

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(11)

Leases, Continued

1) Company as a lessee, Continued

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

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

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

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

Company as a lessor

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

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

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

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

If an arrangement contains lease and non-lease components, then the Company applies KIFRS 1115 to allocate the consideration in the contract.

The Company applies derecognition and impairment requirements in KIFRS 1109 to the net investment in the lease. The Company further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(12)

Non-current assets held for sale

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sales rather than through continuing use, are classified as held for sale. In order to be classified as held for sale, the assets (or disposal groups) must be available for immediate sale in their present condition and their sale must be highly probable. The assets or disposal groups that are classified as non-current assets held for sale are measured at the lower of their carrying amounts and fair value less cost to sell. The Company recognizes an impairment loss for any initial or subsequent write-down of assets (or disposal groups) to fair value less costs to sell and a gain for any subsequent increase in fair value less costs to sell up to the cumulative impairment loss previously recognized.

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

(13)

Non-derivative financial liabilities

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

Financial liabilities at fair value through profit or loss

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

Other financial liabilities

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

Derecognition of financial liability

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(14)

Employee benefits

Short-term employee benefits

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

Other long-term employee benefits

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

Retirement benefits: defined contribution plans

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

Retirement benefits: defined benefit plans

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

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

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(15)

Provisions

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

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

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

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(16)

Emissions Rights

The Company accounts for greenhouse gases emission right and the relevant liability as below pursuant to the Act on Allocation and Trading of Greenhouse Gas Emission in Korea.

Greenhouse Gases Emission Right

Greenhouse Gases Emission Right consists of emission allowances, which are allocated from the government free of charge or purchased from the market. The cost includes any directly attributable costs incurred during the normal course of business.

The Company derecognizes an emission right asset when the emission allowance is unusable, disposed or submitted to government in which the future economic benefits are no longer expected to be probable.

Emissions liability

Emission liability is a present obligation of submitting emission rights to the government with regard to emission of greenhouse gas. The emission liability is measured based on the expected quantity of emission for the performing period in excess of emission allowance in possession and the unit price for such emission rights in the market at the end of the reporting period. The emissions liabilities are derecognized when they are surrendered to the government.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(17)

Transactions in foreign currencies

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

Exchange differences arising from monetary items except for financial liabilities designated cashflow hedging instruments are recognized in profit or loss. If a gain or loss on a non-monetary item is recognized in other comprehensive income, any foreign exchange differences are also recognized in other comprehensive income. When a gain or loss on a non-monetary item is recognized in profit or loss, any foreign exchange differences are also recognized in profit or loss.

(18)

Share capital

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

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

(19)

Hybrid bond

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

(20)

Share-based payment

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

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(21)

Revenue

Identification of performance obligations in contracts with customers

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

Allocation of the transaction price to each performance obligation

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

Incremental costs of obtaining a contract

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

Customer loyalty programs

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

Consideration payable to a customer

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(22)

Finance income and finance costs

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(23)

Income taxes

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

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

Current tax

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

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

Deferred tax

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

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

3.	Material Accounting Policies, Continued

(23)

Income taxes, Continued

2) Deferred tax, Continued

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

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

Uncertainty over income tax treatments

The Company assesses the uncertainty over income tax treatments pursuant to KIFRS 1012. If the Company concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Company reflects the effect of uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the entity expects to better predict the resolution of the uncertainty:

•

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

•

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

(24)

Earnings per share

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

(25)

Standards issued but not yet effective

The new and amended standards and interpretations that are issued, but not yet effective for annual period beginning after January 1, 2023 are disclosed below. The following amendments are not expected to have a material impact on the Company’s separate financial statements.

•

Classification of Liabilities as Current or Non-current (Amendments to KIFRS 1001).

•

Disclosures of Information on Supplier Finance Arrangements (Amendments to KIFRS 1007 and KIFRS 1107)

•

Lease Liability in a Sale and Leaseback (Amendments to KIFRS 1116)

•

Disclosures of Crypto assets (Amendments to KIFRS 1001)

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

4.	Deposits with Restrictions on Use

Deposits which are restricted in use as of December 31, 2023 and 2022 are summarized as follows:


(In millions of won)
		December 31, 2023		December 31, 2022
Short-term financial instruments	Charitable trust fund(*1)	W	79,000		79,000
	Litigations-related seizure(*2)		—		14
Long-term financial instruments	Collateral deposits for time deposit(*3)		130		130
	Guarantee deposit		12		12
	Collateral deposit(*4)		212		212

		W	79,354		79,368

(*1)

The charitable trust fund is for shared growth established by SK Group and profits from the charitable trust fund are only used for the purpose of financial support for small and medium-sized enterprises that cooperate with SK Group. As of December 31, 2023, the funds cannot be withdrawn before maturity (W63,000 million on July 5, 2024 and W16,000 million on July 10, 2024).

(*2)	The deposit is restricted in use due to the court’s order for seizure and collection of bonds.

(*3)

The deposit is for registration of electrical construction business and specialized energy construction business in accordance with Enforcement Decree of the Electrical Constriction Business Act and Enforcement Decree of the Framework Act on the Construction Industry, respectively. Accordingly, the deposit is restricted in use while the Company operates the businesses.

(*4)	The deposit is for registration of mechanical facility construction business and general construction business in accordance with Enforcement Decree of the Framework Act on the Construction Industry. Accordingly, the deposit is restricted in use while the Company operates the businesses.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

5.	Trade and Other Receivables

(1)

Details of trade and other receivables as of December 31, 2023 and 2022 are as follows:


(In millions of won)	December 31, 2023
	Gross amount		Loss allowance			Carrying amount
Current assets:
Accounts receivable – trade	W	1,589,862		(94,245	)		1,495,617
Short-term loans		69,501		(695	)		68,806
Accounts receivable – other(*)		370,860		(27,824	)		343,036
Guarantee deposits		72,479		—			72,479
Accrued income		2,643		—			2,643

		2,105,345		(122,764	)		1,982,581
Non-current assets:
Long-term loans		41,155		(41,036	)		119
Long-term accounts receivable – other(*)		308,868		—			308,868
Guarantee deposits		91,220		—			91,220

		441,243		(41,036	)		400,207

	W	2,546,588		(163,800	)		2,382,788

(*) Gross and carrying amounts of accounts receivable – other as of December 31, 2023 include W273,945 million of financial instruments classified as fair value through profit or loss (“FVTPL”).


(In millions of won)	December 31, 2022
	Gross amount		Loss allowance			Carrying amount
Current assets:
Accounts receivable – trade	W	1,511,926		(86,231	)		1,425,695
Short-term loans		70,751		(708	)		70,043
Accounts receivable – other(*)		467,800		(32,704	)		435,096
Guarantee deposits		63,516		—			63,516
Accrued income		1,168		—			1,168

		2,115,161		(119,643)			1,995,518
Non-current assets:
Long-term loans		41,231		(41,037	)		194
Long-term accounts receivable – other(*)		377,858		—			377,858
Guarantee deposits		92,019		—			92,019

		511,108		(41,037	)		470,071

	W	2,626,269		(160,680	)		2,465,589

(*)	Gross and carrying amounts of accounts receivable – other as of December 31, 2022 include W332,669 million of financial instruments classified as fair value through profit or loss (“FVTPL”).

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

5.	Trade and Other Receivables, Continued

(2)

Changes in the loss allowance on accounts receivable – trade measured at amortized cost for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	Beginning balance		Impairment		*Write-offs()**			Collection of receivables previously written-off		Ending balance
2023	W	86,231		28,765		(28,442	)		7,691		94,245
2022	W	92,762		16,053		(31,500	)		8,916		86,231

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

(3)

The Company applies the practical expedient that allows the Company to estimate the loss allowance for accounts receivable – trade at an amount equal to the lifetime expected credit losses. The expected credit losses include the forward-looking information. To make the assessment, the Company uses its historical credit loss experience over the past three years and classifies the accounts receivable – trade by their credit risk characteristics and days overdue. Details of loss allowance on accounts receivable – trade as of December 31, 2023 are as follows:


(In millions of won)
		Less than 6 months			6 months ~ 1 year			1 ~ 3 years			More than 3 years
Telecommunications service revenue	Expected credit loss rate		0.46	%		48.91	%		73.36	%		99.98	%
	Gross amount	W	1,144,931			18,062			47,666			17,412
	Loss allowance		5,288			8,835			34,970			17,409

Other revenue	Expected credit loss rate		2.20%			50.30%			56.58%			97.32%
	Gross amount	W	336,220			2,199			8,583			14,789
	Loss allowance		7,389			1,106			4,856			14,392

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

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

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

6.	Prepaid Expenses

The Company pays commissions to its retail stores and authorized dealers for wireless telecommunications services based on their performance of attracting new customers and renewing contracts with existing customers, and recognizes costs that would not occur in case of not signing contracts with new and existing customers as prepaid expenses among the commissions. These prepaid expenses are amortized on a straight-line basis over the periods that the Company expects to maintain its customers.

(1)

Details of prepaid expenses as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Current assets:
Incremental costs of obtaining contracts	W	1,795,410		1,877,900
Others		33,236		31,087

	W	1,828,646		1,908,987

Non-current assets:
Incremental costs of obtaining contracts	W	863,650		904,746
Others		35,104		30,964

	W	898,754		935,710

(2)	Incremental costs of obtaining contracts

The amortization in connection with incremental costs of obtaining contracts recognized for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)	2023		2022
Amortization recognized	W	2,390,984		2,407,314

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

7.	Contract Assets and Liabilities

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

(1)

Details of contract assets and liabilities as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Contract assets:
Allocation of consideration between performance obligations	W	21,613		33,098
Contract liabilities:
Wireless service contracts		19,149		18,544
Customer loyalty programs		7,164		7,706
Others		37,899		67,149

	W	64,212		93,399

(2)

The amount of revenue recognized for the years ended December 31, 2023 and 2022 related to the contract liabilities carried forward from the prior periods are W75,521 million and W54,981million, respectively. Details of revenue expected to be recognized from contract liabilities as of December 31, 2023 are as follows:


(In millions of won)
	Less than 1 year		1 ~ 2 years		More than 2 years		Total
Wireless service contracts	W	19,149		—		—		19,149
Customer loyalty programs		5,716		970		478		7,164
Others		34,949		2,950		—		37,899

	W	59,814		3,920		478		64,212

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

8.	Long-term Investment Securities

Details of long-term investment securities as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	Category	December 31, 2023		December 31, 2022
Equity instruments	FVOCI(*)	W	1,207,605		1,066,785
Debt instruments	FVTPL		218,685		88,403

		W	1,426,290		1,155,188

(*)	The Company designated investments in equity instruments that are not held for trading as financial assets at FVOCI, and the amounts of those equity instruments as of December 31, 2023 and 2022 are W1,207,605 million and W1,066,785 million, respectively.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

9.	Investments in Subsidiaries, Associates and Joint Ventures

(1)

Investments in subsidiaries, associates and joint ventures as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Investments in subsidiaries	W	3,259,021		3,200,863
Investments in associates and joint ventures		1,411,547		1,420,944

	W	4,670,568		4,621,807

(2)

Details of investments in subsidiaries as of December 31, 2023 and 2022 are as follows:


(In millions of won, except for share data)
	December 31, 2023						December 31, 2022
	Number of shares		Ownership (%)		Carrying amount		Carrying amount
SK Telink Co., Ltd.(*1)		1,432,627		100.0	W	244,015		243,988
SK Broadband Co., Ltd.(*1)		299,052,435		74.4		2,216,865		2,215,427
SK Communications Co., Ltd.		43,427,530		100.0		24,927		24,927
PS&Marketing Corporation(*1)		66,000,000		100.0		313,989		313,934
SERVICE ACE Co., Ltd. (*1)		4,385,400		100.0		21,946		21,927
SK Telecom China Holdings Co., Ltd.		—		100.0		48,096		48,096
SK Telecom Americas, Inc. (*2)		122		100.0		70,269		31,203
Atlas Investment(*3)		—		100.0		193,661		159,631
SK stoa Co., Ltd. (*1)		3,631,355		100.0		40,057		40,029
Quantum Innovation Fund I(*4,5)		—		59.9		1,297		11,626
SAPEON Inc.		400,000		62.5		48,456		48,456
SK O&S Co., Ltd. and others(*1,6)		—		—		35,443		41,619

					W	3,259,021		3,200,863

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

9.	Investments in Subsidiaries, Associates and Joint Ventures, Continued

(2)

Details of investments in subsidiaries as of December 31, 2023 and 2022 are as follows, Continued:

(*1)	The Company granted Performance Share Units (“PSU”) stock options to executives of its subsidiaries, resulting in a cumulative total contribution of W1,614 million. There is no change in the ownership interest. (See note 23)

(*2)	The Company additionally contributed W39,066 million in cash for the year ended December 31, 2023, but there is no change in the ownership interest.

(*3)	The Company additionally contributed W34,030 million in cash for the year ended December 31, 2023, but there is no change in the ownership interest.

(*4)	The Company additionally contributed W240 million in cash for the year ended December 31, 2023, but there is no change in the ownership interest.

(*5)	The Company disposed of a portion of shares in Quantum Innovation Fund I at W16,974 million from which it recognized W6,405 million of gain relating to investments in subsidiaries for the year ended December 31, 2023, but there is no change in the ownership interest.

(*6)

The Company disposed of a portion of shares in SK telecom Japan Inc., which was a subsidiary of the Company, to SK hynix Inc. and SK Square Co., Ltd., from which it recognized W1,654 million of loss relating to investments in subsidiaries for the year ended December 31, 2023, and the remaining ownership interest is reclassified as investments in associates as of December 31, 2023.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

9.	Investments in Subsidiaries, Associates and Joint Ventures, Continued

(3)

Details of investments in associates and joint ventures as of December 31, 2023 and 2022 are as follows:


(In millions of won, except for share data)
	December 31, 2023						December 31, 2022
	Number of shares		Ownership (%)		Carrying amount		Carrying amount
Investments in associates:
SK China Company Ltd.		10,928,921		27.3	W	601,192		601,192
Korea IT Fund(*1)		190		63.3		220,957		220,957
SK Technology Innovation Company		14,700		49.0		45,864		45,864
SM Culture & Contents Co., Ltd.(*2)		22,033,898		22.8		41,578		65,341
SK South East Asia Investment Pte. Ltd.		300,000,000		20.0		344,240		344,240
Citadel Pacific Telecom Holdings, LLC (*3)		1,734,109		15.0		36,487		36,487
Invites Genomics Co., Ltd.(*4) (Formerly, Invites Healthcare Co., Ltd.)		489,999		31.1		—		—
CMES Inc.(*3)		42,520		7.7		900		900
Konan Technology Inc.		2,359,160		20.7		22,413		22,413
12CM JAPAN and others(*3,5,6,7)		—		—		87,916		77,550

						1,401,547		1,414,944

Investments in joint ventures:
UTC Kakao-SK Telecom ESG Fund(*8)		—		48.2		10,000		6,000

					W	1,411,547		1,420,944

(*1)	Investments in Korea IT Fund was classified as investment in associates as the Company does not have control over the investee under the contractual agreement with other shareholders.

(*2)	The Company recognized an impairment loss of W23,763 million as the recoverable amount was assessed to be less than the carrying amount for the year ended December 31, 2023.

(*3)	These investments were classified as investments in associates as the Company can exercise significant influence through its right to appoint the members of the Board of Directors even though the Company has less than 20% of equity interests.

(*4)	The Company recognized the carrying amount of investments in Invites Genomics Co., Ltd. (Formerly, Invites Healthcare Co., Ltd.) in entirety as an impairment loss for the year ended December 31, 2022.

(*5)	The Company disposed of a portion of shares in SK telecom Japan Inc., which was a subsidiary of the Company, resulting in the reclassification of the remaining shares as an investment in associates for the year ended December 2023.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

9.	Investments in Subsidiaries, Associates and Joint Ventures, Continued

(3)

Details of investments in associates and joint ventures as of December 31, 2023 and 2022 are as follows, Continued:

(*6)

The Company additionally contributed W6,000 million of investment in KB ESG Fund of the three telecommunications companies, W28 million in F&U Credit information Co., Ltd. and W215 million of investment in KDX Korea Data Exchange for the year ended December 31, 2023. Also, the Company obtained significant influence by contributing W6,500 million to Telecom Daean Evaluation Jun B Corporation Co., Ltd., and W520 million to Covet Co., Ltd., for the year ended December 31, 2023.

(*7)	The Company disposed of a portion of shares in Start-up Win-Win Fund for W550 million and a portion of SK-KNET Youth Startup Investment Cooperative for W4,400 million in cash for the year ended December 31, 2023.

(*8)

The Company additionally contributed W4,000 million in cash to the investee for the year ended December 31, 2023, but there is no change in the ownership interest. The Company has joint control over the investee pursuant to the agreement with the other shareholders, thus the investment in the investee was classified as investments in joint ventures.

(4)

The market value of investments in listed associates as of December 31, 2023 and 2022 are as follows:


(In millions of won, except for share data)
	December 31, 2023						December 31, 2022
	Market price per share (in won)		Number of shares		Market value		Market price per share (in won)		Number of shares		Market value
SM Culture & Contents Co., Ltd.	W	1,887		22,033,898		41,578		2,960		22,033,898		65,220
Konan Technology Inc.		32,600		2,359,160		76,909		28,250		1,179,580		33,323

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

10.

Property and Equipment

(1)

Property and equipment as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023
	Acquisition cost		Accumulated depreciation			Accumulated Impairment loss			Carrying amount
Land	W	723,069		—			—			723,069
Buildings		1,313,507		(744,787	)		(450	)		568,270
Structures		939,983		(704,932	)		(1,601	)		233,450
Machinery		27,625,424		(22,394,558	)		—			5,230,866
Right-of-use assets		1,983,163		(756,288	)		—			1,226,875
Other		1,493,783		(1,056,929	)		—			436,854
Construction in progress		657,075		—			—			657,075

	W	34,736,004		(25,657,494	)		(2,051	)		9,076,459


(In millions of won)
	December 31, 2022
	Acquisition cost		Accumulated depreciation			Accumulated Impairment loss			Carrying amount
Land	W	646,286		—			—			646,286
Buildings		1,264,103		(700,677	)		(450	)		562,976
Structures		933,702		(667,774	)		(1,601	)		264,327
Machinery		27,420,063		(22,145,451	)		—			5,274,612
Right-of-use assets		2,033,034		(660,568	)		—			1,372,466
Other		1,505,800		(1,061,476	)		—			444,324
Construction in progress		954,672		—			—			954,672

	W	34,757,660		(25,235,946	)		(2,051	)		9,519,663

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

10.

Property and Equipment, Continued

(2) Changes in property and equipment for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Ending balance
Land	W	646,286		8		(388	)		77,163			—			723,069
Buildings		562,976		372		(152	)		47,161			(42,087	)		568,270
Structures		264,327		1,279		(200	)		6,477			(38,433	)		233,450
Machinery		5,274,612		98,114		(493	)		1,470,364			(1,611,731	)		5,230,866
Right-of-use assets		1,372,466		253,838		(36,160	)		(4,768	)		(358,501	)		1,226,875
Other		444,324		536,726		(874	)		(476,653	)		(66,669	)		436,854
Construction in progress		954,672		1,026,496		(26	)		(1,324,067	)		—			657,075

	W	9,519,663		1,916,833		(38,293	)		(204,323	)		(2,117,421	)		9,076,459


(In millions of won)
	2022
	Beginning balance		Acquisition		Disposal			Transfer			Depreciation			Ending balance
Land	W	621,614		—		(89	)		24,761			—			646,286
Buildings		564,976		353		(182	)		39,082			(41,253	)		562,976
Structures		290,813		1,293		(32	)		10,428			(38,175	)		264,327
Machinery		5,331,485		108,792		(43,577	)		1,464,892			(1,586,980	)		5,274,612
Right-of-use assets		1,370,897		410,640		(37,386	)		(18,651	)		(353,034	)		1,372,466
Other		439,982		759,010		(728	)		(671,632	)		(82,308	)		444,324
Construction in progress		698,641		1,211,667		(1,709	)		(953,927	)		—			954,672

	W	9,318,408		2,491,755		(83,703	)		(105,047	)		(2,101,750	)		9,519,663

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

11.

Investment Property

(1)

Investment property as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023							December 31, 2022
	Acquisition cost		Accumulated depreciation			Carrying amount		Acquisition cost		Accumulated depreciation			Carrying amount
	Acquisition cost		Accumulated depreciation			Carrying amount		Acquisition cost		Accumulated depreciation			Carrying amount
Land	W	16,288		—			16,288		16,485		—			16,485
Buildings		55,629		(37,345	)		18,284		58,248		(39,182	)		19,066
Right-of-use assets		21,313		(9,805	)		11,508		23,505		(7,033	)		16,472

	W	93,230		(47,150	)		46,080		98,238		(46,215	)		52,023

(2)

Changes in investment property for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023
	Beginning balance		Transfer			Depreciation			Ending balance
Land	W	16,485		(197	)		—			16,288
Buildings		19,066		1,059			(1,841	)		18,284
Right-of-use assets		16,472		5,402			(10,366	)		11,508

	W	52,023		6,264			(12,207	)		46,080


(In millions of won)
	2022
	Beginning balance		Transfer			Depreciation			Ending balance
Land	W	17,084		(599	)		—			16,485
Buildings		21,768		(743	)		(1,959	)		19,066
Right-of-use assets		6,248		18,015			(7,791	)		16,472

	W	45,100		16,673			(9,750	)		52,023

(3)

The Company recognized lease income of W22,773 million and W22,745 million from investment property for the years ended December 31, 2023 and 2022, respectively.

(4)

The fair value of investment property is W157,071 million and W182,142 million as of December 31, 2023 and 2022, respectively.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

12.

Leases

(1)

Company as a lessee

Details of the right-of-use assets as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Right-of-use assets:
Land, buildings and structures	W	971,929		1,113,958
Others		254,946		258,508

	W	1,226,875		1,372,466

Details of amounts recognized in the separate statements of income for the years ended December 31, 2023 and 2022 as a lessee are as follows:


(In millions of won)
	2023		2022
Depreciation of right-of-use assets:
Land, buildings and structures	W	281,187		278,406
Others(*)		77,314		74,628

	W	358,501		353,034

Interest expense on lease liabilities	W	31,824		25,377

(*)	Others include the amount reclassified as research and development expenses related to the lease contract for research and development facilities.

Expenses related to short-term leases and leases of low-value assets that the Company recognized are immaterial.

The total cash outflows due to lease payments for the years ended December 31, 2023 and 2022 amounted to W386,268 million and W369,746 million, respectively.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

12.

Lease, Continued

(2)

Company as a lessor

Finance lease

The Company recognized interest income of W146 million and W227 million for lease receivables for the years ended December 31, 2023 and 2022, respectively.

The following table sets out a maturity analysis of lease receivables, presenting the undiscounted lease payments to be received subsequent to December 31, 2023.


(In millions of won)
	Amount
Less than 1 year	W	8,349
1 ~ 2 years		2,478

Undiscounted lease payments	W	10,827

Unrealized finance income		64
Net investment in the lease		10,763

Operating lease

The Company recognized lease income of W112,162 million and W113,468 million for the years ended December 31, 2023 and 2022, respectively, of which variable lease payments received are W6,389 million and W8,622 million, respectively.

The following table sets out a maturity analysis of lease payments, presenting the undiscounted fixed payments to be received subsequent to December 31, 2023.


(In millions of won)
	Amount
Less than 1 year	W	58,283
1 ~ 2 years		10,439
2 ~ 3 years		1,727
3 ~ 4 years		105
4 ~ 5 years		98
More than 5 years		434

	W	71,086

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

13.

Goodwill

Goodwill as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Goodwill related to merger of Shinsegi Telecom, Inc.	W	1,306,236		1,306,236

The recoverable amount of the CGU is based on its value in use calculated by applying the post-tax annual discount rate of 5.4% (2022: 6.7%) (pre-tax annual discount rate for 2023 and 2022 are 8.4% and 9.0%, respectively) to the estimated future post-tax cash flows based on financial budgets for the next five years. An annual growth rate of 0.0% (2022: 0.0%) was applied for the cash flows expected to be incurred after five years and is not expected to exceed the Company’s long-term wireless telecommunication industry growth rate.

14.

Intangible Assets

(1)

Intangible assets as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023
	Acquisition cost		Accumulated amortization			Accumulated impairment loss			Carrying amount
Frequency usage rights(*1)	W	3,564,907		(1,958,301	)		—			1,606,606
Land usage rights		35,144		(34,602	)		—			542
Industrial rights		51,959		(33,169	)		—			18,790
Facility usage rights		61,553		(48,118	)		—			13,435
Club memberships(*2)		80,963		—			(21,962	)		59,001
Other(*3)		3,792,089		(3,239,634	)		—			552,455

	W	7,586,615		(5,313,824	)		(21,962	)		2,250,829


(In millions of won)
	December 31, 2022
	Acquisition cost		Accumulated amortization			Accumulated impairment loss			Carrying amount
Frequency usage rights(*1)	W	3,767,590		(1,499,158	)		(186,000	)		2,082,432
Land usage rights		36,819		(35,692	)		—			1,127
Industrial rights		48,216		(29,104	)		—			19,112
Facility usage rights		59,222		(45,977	)		—			13,245
Club memberships(*2)		78,859		—			(21,962	)		56,897
Other(*3)		3,671,908		(3,151,321	)		—			520,587

	W	7,662,614		(4,761,252	)		(207,962	)		2,693,400

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

14.

Intangible Assets, Continued

(1)

Intangible assets as of December 31, 2023 and 2022 are as follows, Continued:

(*1)

The Company was reassigned 800 MHz, 1.8 GHz and 2.1 GHz band of frequency licenses from the Ministry of Science and Information and Communication Technology (“ICT”) in exchange for W227,200 million, W547,800 million and W411,700 million, respectively, for the year ended December 31, 2021. The band of frequency was assigned to the Company at the date of initial lump sum payment for the year ended December 31, 2021 and the annual payments in installment for the remaining balances are made in the next five years starting from the date of initial lump sum payment.

(*2)	Club memberships are classified as intangible assets with indefinite useful lives and are not amortized.

(*3)	Other intangible assets primarily consist of computer software and others.

(2)	Changes in intangible assets for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023
	Beginning balance		Acquisition		Disposal			Transfer		Amortization			Ending balance
Frequency usage rights	W	2,082,432		—		—			—		(475,826	)		1,606,606
Land usage rights		1,127		125		(15	)		40		(735	)		542
Industrial rights		19,112		4,549		(350	)		—		(4,521	)		18,790
Facility usage rights		13,245		1,884		(16	)		1,072		(2,750	)		13,435
Club memberships		56,897		3,595		(1,491	)		—		—			59,001
Other		520,587		57,306		(1,501	)		195,930		(219,867	)		552,455

	W	2,693,400		67,459		(3,373	)		197,042		(703,699	)		2,250,829


(In millions of won)
	2022
	Beginning balance		Acquisition		Disposal			Transfer			Amortization			Ending balance
Frequency usage rights	W	2,559,689		—		—			—			(477,257	)		2,082,432
Land usage rights		2,449		—		—			—			(1,322	)		1,127
Industrial rights		10,934		13,428		(824	)		(111	)		(4,315	)		19,112
Facility usage rights		14,355		1,396		(2	)		260			(2,764	)		13,245
Club memberships		51,356		6,113		(572	)		—			—			56,897
Other		564,547		70,977		(382	)		115,904			(230,459	)		520,587

	W	3,203,330		91,914		(1,780	)		116,053			(716,117	)		2,693,400

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

14.

Intangible Assets, Continued

(3)

Research and development expenditures recognized as expense for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Research and development costs expensed as incurred	W	336,377		338,389

(4)

Details of frequency usage rights as of December 31, 2023 are as follows:

(In millions of won)

Amount

Description

Commencement
of amortization

Completion of
amortization

800 MHz license

109,789

LTE service

Jul. 2021

Jun. 2026

1.8 GHz license

308,534

LTE service

Dec. 2021

Dec. 2026

2.6 GHz license

364,250

LTE service

Sept. 2016

Dec. 2026

2.1 GHz license

231,879

W-CDMA and LTE service

Dec. 2021

Dec. 2026

3.5 GHz license

592,154

5G service

Apr. 2019

Nov. 2028

W1,606,606

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

15.

Borrowings and Debentures

(1)

Short-term borrowings as of December 31, 2023 and 2022 are as follows:

(In millions of won)

Lender

Annual interest
rate (%)

Maturity

December 31, 2023

December 31, 2022

BNK Securities. Co., Ltd.

—

100,000

(2)

Long-term borrowings as of December 31, 2023 and 2022 are as follows:


(In millions of won)
Lender	Annual interest rate (%)		Maturity		December 31, 2023			December 31, 2022
Mizuho Bank, Ltd.		1.35		May. 20, 2024	W	100,000			100,000
DBS Bank Ltd.		1.30		May. 28, 2024		200,000			200,000
DBS Bank Ltd.		2.65		Mar. 10, 2025		200,000			200,000
Credit Agricole CIB		3.30		Apr. 29, 2024		50,000			50,000
Mizuho Bank, Ltd.		3.29		Nov. 27, 2023		—			100,000
Nonghyup Bank(*)		MOR + 1.36		Nov. 17, 2024		40,000			40,000
Credit Agricole CIB		4.89		Nov. 28, 2025		50,000			50,000

						640,000			740,000
Less current portions						(390,000	)		(100,000	)

					W	250,000			640,000

(*)	6M MOR rates are 3.85% and 4.35% as of December 31, 2023 and 2022, respectively.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

15.

Borrowings and Debentures, Continued

(3)

Debentures as of December 31, 2023 and 2022 are as follows:

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


	Purpose	Maturity		Annual interest rate (%)		December 31, 2023		December 31, 2022
Unsecured corporate bonds	Operating and		2032		3.45	W	90,000		90,000
	Refinancing fund
Unsecured corporate bonds	Operating fund		2023		3.03		—		230,000
Unsecured corporate bonds			2033		3.22		130,000		130,000
Unsecured corporate bonds			2024		3.64		150,000		150,000
Unsecured corporate bonds	Refinancing fund		2024		2.82		190,000		190,000
Unsecured corporate bonds	Operating and		2025		2.49		150,000		150,000
Unsecured corporate bonds	Refinancing fund		2030		2.61		50,000		50,000
Unsecured corporate bonds	Operating fund		2025		2.66		70,000		70,000
Unsecured corporate bonds			2030		2.82		90,000		90,000
Unsecured corporate bonds	Operating and		2025		2.55		100,000		100,000
Unsecured corporate bonds	Refinancing fund		2035		2.75		70,000		70,000
Unsecured corporate bonds	Operating fund		2026		2.08		90,000		90,000
Unsecured corporate bonds			2036		2.24		80,000		80,000
Unsecured corporate bonds			2026		1.97		120,000		120,000
Unsecured corporate bonds			2031		2.17		50,000		50,000
Unsecured corporate bonds	Refinancing fund		2027		2.55		100,000		100,000
Unsecured corporate bonds	Operating and		2032		2.65		90,000		90,000
	Refinancing fund
Unsecured corporate bonds	Refinancing fund		2027		2.84		100,000		100,000
Unsecured corporate bonds			2023		2.81		—		100,000
Unsecured corporate bonds			2028		3.00		200,000		200,000
Unsecured corporate bonds			2038		3.02		90,000		90,000
Unsecured corporate bonds	Operating and		2023		2.33		—		150,000
Unsecured corporate bonds	Refinancing fund		2038		2.44		50,000		50,000
Unsecured corporate bonds	Operating fund		2024		2.09		120,000		120,000
Unsecured corporate bonds			2029		2.19		50,000		50,000
Unsecured corporate bonds			2039		2.23		50,000		50,000
Unsecured corporate bonds	Operating and		2024		1.49		60,000		60,000
Unsecured corporate bonds	Refinancing fund		2029		1.50		120,000		120,000
Unsecured corporate bonds			2039		1.52		50,000		50,000
Unsecured corporate bonds			2049		1.56		50,000		50,000
Unsecured corporate bonds	Operating fund		2024		1.76		70,000		70,000
Unsecured corporate bonds			2029		1.79		40,000		40,000
Unsecured corporate bonds			2039		1.81		60,000		60,000
Unsecured corporate bonds	Operating and		2023		1.64		—		170,000
	Refinancing fund
Unsecured corporate bonds	Operating fund		2025		1.75		130,000		130,000
Unsecured corporate bonds			2030		1.83		50,000		50,000
Unsecured corporate bonds			2040		1.87		70,000		70,000

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

15.

Borrowings and Debentures, Continued

(3)

Debentures as of December 31, 2023 and 2022 are as follows, Continued:

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


	Purpose	Maturity		Annual interest rate (%)		December 31, 2023			December 31, 2022
Unsecured corporate bonds	Refinancing fund		2025		1.40		140,000			140,000
Unsecured corporate bonds			2030		1.59		40,000			40,000
Unsecured corporate bonds			2040		1.76		110,000			110,000
Unsecured corporate bonds			2024		1.17		80,000			80,000
Unsecured corporate bonds			2026		1.39		80,000			80,000
Unsecured corporate bonds			2031		1.80		50,000			50,000
Unsecured corporate bonds			2041		1.89		100,000			100,000
Unsecured corporate bonds			2024		2.47		90,000			90,000
Unsecured corporate bonds			2026		2.69		70,000			70,000
Unsecured corporate bonds			2041		2.68		40,000			40,000
Unsecured corporate bonds			2025		3.80		240,000			240,000
Unsecured corporate bonds			2027		3.84		70,000			70,000
Unsecured corporate bonds			2042		3.78		40,000			40,000
Unsecured corporate bonds			2025		4.00		300,000			300,000
Unsecured corporate bonds			2027		4.00		95,000			95,000
Unsecured corporate bonds			2024		4.79		100,000			100,000
Unsecured corporate bonds			2025		4.73		110,000			110,000
Unsecured corporate bonds			2027		4.74		60,000			60,000
Unsecured corporate bonds			2032		4.69		40,000			40,000
Unsecured corporate bonds			2026		3.65		110,000			—
Unsecured corporate bonds			2028		3.83		190,000			—
Unsecured corporate bonds			2026		3.72		80,000			—
Unsecured corporate bonds			2028		3.80		200,000			—
Unsecured corporate bonds			2030		3.96		70,000			—
Unsecured corporate bonds			2026		4.54		115,000			—
Unsecured corporate bonds			2028		4.68		100,000			—
Unsecured corporate bonds			2030		4.72		50,000			—
Unsecured corporate bonds			2033		4.72		30,000			—
Unsecured global bonds	Operating fund		2027		6.63		515,760 (USD 400,000)			506,920 (USD 400,000)
			2023		3.75		—			633,650 (USD 500,000)
Floating rate notes(*)	Operating fund		2025		SOFR rate +1.17		386,820 (USD 300,000	)		380,190 (USD 300,000	)

						6,682,580			7,005,760
Less discounts on bonds							(15,641)			(16,790)

						6,666,939			6,988,970
Less current portions of bonds							(859,516)			(1,283,097)

						W 5,807,423			5,705,873

(*)	Interest rates applied are SOFR rate 5.38% as of December 31, 2023 and LIBOR rate (3 month) 4.75% + 0.91% as of December 31, 2022.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

16.

Long-Term Payables – Other

(1)

As of December 31, 2023 and 2022, details of long-term payables – other related to the acquisition of frequency usage rights are as follows (See note 14):


(In millions of won)
	December 31, 2023			December 31, 2022
Long-term payables – other	W	1,290,225			1,690,470
Present value discount on long-term payables – other		(29,772	)		(52,129	)
Current portion of long-term payables – other		(367,770	)		(398,874	)

Carrying amount at year end	W	892,683			1,239,467

(2)

The sum of portions repaid among the principal of long-term payables – other for the years ended December 31, 2023 and 2022 amounts to W400,245 million and W400,245 million, respectively. The repayment schedule of the principal amount of long-term payables – other as of December 31, 2023 is as follows:


(In millions of won)
	Amount
Less than 1 year	W	369,150
1 ~ 3 years		738,300
3 ~ 5 years		182,775

	W	1,290,225

17.

Provisions

Changes in provisions for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023												As of December 31, 2023
	Beginning balance		Increase		Utilization			Reversal			Ending balance		Current		Non-current
Provision for restoration	W	95,569		6,500		(1,787	)		—			100,282		30,491		69,791
Emission allowance		1,836		2,279		(520	)		(2,773	)		822		822		—

	W	97,405		8,779		(2,307	)		(2,773	)		101,104		31,313		69,791


(In millions of won)
	2022												As of December 31, 2022
	Beginning balance		Increase		Utilization			Reversal			Ending balance		Current		Non-current
Provision for restoration	W	94,684		5,595		(4,046	)		(664	)		95,569		29,815		65,754
Emission allowance		1,885		2,369		—			(2,418	)		1,836		1,836		—

	W	96,569		7,964		(4,046	)		(3,082	)		97,405		31,651		65,754

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

18.

Defined Benefit Assets

(1)

Details of defined benefit assets as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023			December 31, 2022
Present value of defined benefit obligations	W	493,541			508,622
Fair value of plan assets		(578,685	)		(539,847	)

	W	(85,144	)		(31,225	)

(2)

Principal actuarial assumptions as of December 31, 2023 and 2022 are as follows:


	December 31, 2023	December 31, 2022
Discount rate for defined benefit obligations	4.36%	5.31%
Expected rate of salary increase	5.21%	8.37%

Discount rate for defined benefit obligation is determined based on market yields of high-quality corporate bonds with similar maturities for estimated payment term of defined benefit obligation. Expected rate of salary increase is determined based on the Company’s historical promotion index, inflation rate and salary increase ratio.

(3)

Changes in present value of defined benefit obligations for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Binning balance	W	508,622			483,001
Current service cost		56,564			50,997
Interest cost		26,487			15,094
Remeasurement
- Demographic assumption		(740	)		(26,132	)
- Financial assumption		(70,134	)		25,392
- Adjustment based on experience		12,836			(6,059	)
Benefit paid		(38,347	)		(28,932	)
Others(*)		(1,747	)		(4,739	)

Ending balance	W	493,541			508,622

(*)	Others include changes in liabilities due to employee’s transfers among affiliates for the years ended December 31, 2023 and 2022.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

18.

Defined Benefit Assets, Continued

(4)

Changes in fair value of plan assets for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Beginning balance	W	539,847			476,099
Interest income		27,753			15,296
Remeasurement		94			(10,898	)
Contribution		50,000			92,000
Benefit paid		(36,124	)		(32,335	)
Others(*)		(2,885	)		(315	)

Ending balance	W	578,685			539,847

(*)	Others include changes in assets due to the employee’s transfers among affiliates for the years ended December 31, 2023 and 2022.

The Company’s expected contributions to the defined benefit plan for the year ended December 31, 2024, amounts to W83,836 million.

(5)

Total cost of defined benefit plan, which is recognized in profit or loss for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Current service cost	W	56,564			50,997
Net interest income		(1,266	)		(202	)

	W	55,298			50,795

Costs related to the defined benefit plan except for the amounts transferred to construction in progress are included in labor expenses and research and development expenses.

(6)

Details of plan assets as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Equity instruments	W	65		7,504
Debt instruments		101,638		96,134
Short-term financial instruments, etc.		476,982		436,209

	W	578,685		539,847

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

18.

Defined Benefit Assets, Continued

(7)

Sensitivity analysis

As of December 31, 2023, effects on defined benefit obligations if each of significant actuarial assumptions changes within expectable and reasonable range are as follows:


(In millions of won)
	0.5% Increase		0.5% Decrease
Discount rate	W	(13,387)		14,131
Expected salary increase rate		14,277		(13,645)

The sensitivity analysis does not consider dispersion of all cash flows that are expected from the plan but provides approximate values of sensitivity for the assumptions used.

A weighted average duration of defined benefit obligations as of December 31, 2023 and 2022 are 6.20 years and 7.07 years, respectively.

(8)

Defined contribution plan

The amount recognized as an expense for defined contribution plans are W8,698 million and W7,107 million for the years ended December 31, 2023 and 2022, respectively.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

19.

Derivative Instruments

(1)

Currency and interest rate swap contracts under cash flow hedge accounting as of December 31, 2023 are as follows:


(In thousands of foreign currencies)
Borrowing date	Hedging Instrument (Hedged item)	Hedged risk	Financial institution	Duration of contract
Jul. 20, 2007	Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000)	Foreign currency risk	Morgan Stanley and four other banks	Jul. 20, 2007 ~ Jul. 20, 2027
Mar. 4, 2020	Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000)	Foreign currency risk and interest rate risk	Citibank	Mar. 4, 2020 ~ Jun. 4, 2025

(2)

In relation to the merger of SK Broadband Co., Ltd. for the year ended December 31, 2020, the Company has entered into a shareholders’ agreement with the shareholders of the acquirees. Pursuant to the agreement, when certain conditions are met within a period of time subsequent to the merger, the shareholders of the acquirees can exercise their drag-along rights and require the Company to sell its shares in SK Broadband Co., Ltd. should the shareholders exercise their drag-along rights, the Company also can exercise its call options over the shares held by those shareholders. The Company recognized a long-term derivative financial liability of W295,876 million and W302,593 million for the rights prescribed in the shareholders’ agreement as of December 31, 2023 and 2022, respectively.

The fair value of SK Broadband Co., Ltd.’s common stock was estimated using 5-year projected cash flows discounted at 6.2% per annum. The fair value of the derivative financial liability was determined by using the Binomial Model based on various assumptions including the price of common stock and its price fluctuations. The significant unobservable inputs used in the fair value measurement and inter-relationship between significant unobservable inputs and fair value measurement are as follows:


Significant unobservable inputs		Correlations between inputs and fair value measurements
Fair value of SK Broadband Co., Ltd.’s common stock		The estimated fair value of derivative liabilities would decrease (increase) if the fair value of common stock would increase (decrease)
Volatility of stock price		The estimated fair value of derivative liabilities would decrease (increase) if the volatility of stock price increase (decrease)

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

19.

Derivative Instruments, Continued

(3)

The Company has entered into the agreement with Newberry Global Limited, whereby the Company has been granted subscription right and contingent subscription right to acquire Newberry series-C redeemable convertible preferred stock for the year ended December 31, 2020. The Company recognized derivative financial assets of W13,136 million and W8,083 million as of December 31, 2022 for subscription right and contingent subscription right, respectively. There is no balance for derivative financial assets as of December 31, 2023, as the exercise period expired without the exercise of subscription rights and contingent subscription rights for the year ended December 31, 2023.

(4)

The Company has entered into the agreement with HAEGIN Co., Ltd., whereby the Company has been granted contingent subscription right to acquire HAEGIN Co., Ltd.’s common stock for the year ended December 31, 2022. The Company is able to exercise the right in accordance with the agreement when certain conditions are met and recognized long-term derivative financial assets of W2,323 million for the contingent subscription right as of December 31, 2023. The fair value of HAEGIN Co., Ltd.’s common stock was estimated using 5-year projected cash flows discounted at 13.0% per annum. Meanwhile, if the fair value of HAEGIN Co., Ltd.’s common stock, significant unobservable input used in the fair value measurement, increases (decreases), the estimated fair value of derivative asset would increase (decrease). If the volatility of stock price, significant unobservable input used in the fair value measurement, increases (decreases), the estimated fair value of derivative asset would increase (decrease).

(5)

The fair value of derivative financial instruments to which the Company applies cash flow hedging is recorded in the separate financial statements as long-term derivative financial assets. As of December 31, 2023, details of fair values of the derivatives assets are as follows:


(In millions of won, thousands of foreign currencies)
Hedging instrument (Hedged item)	Cash flow hedge		Fair value
Non-current assets:
Fixed-to-fixed cross currency swap (U.S. dollar denominated bonds face value of USD 400,000)	W	80,426		80,426
Floating-to-fixed cross currency interest rate swap (U.S. dollar denominated bonds face value of USD 300,000)		35,784		35,784

	W	116,210		116,210

As of December 31, 2023, the changes in fair value of derivatives designated as hedging instrument, which are all effective in hedging, were recognized in full in other comprehensive income.

(6)

The fair value of derivatives held for trading is recorded in the financial statements as long-term derivative financial assets and long-term derivative financial liabilities. As of December 31, 2023, details of fair values of the derivative assets and liabilities are as follows:


(In millions of won)
	Held for trading			Fair value
Non-current assets:
Contingent subscription right	W	2,323			2,323

	W	2,323			2,323

Non-current liabilities:
Drag-along and call option rights	W	(295,876	)		(295,876	)

	W	(295,876	)		(295,876	)

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

20.

Share Capital and Capital Surplus and Others

(1)

Details of share capital as of December 31, 2023 and 2022 are as follows:


(In millions of won, except for share data)
	December 31, 2023		December 31, 2022
Number of authorized shares		670,000,000		670,000,000
Par value (in won)	W	100		100
Number of issued shares		218,833,144		218,833,144
Share capital:
Common share(*)	W	30,493		30,493

(*)	In 2002 and 2003, the Company retired treasury shares with reduction of its retained earnings before appropriation. As a result, the Company’s issued shares have decreased without change in share capital.

(2)

There were no changes in share capital for the years ended December 31, 2023 and 2022.

(3)

Details of shares outstanding as of December 31, 2023 and 2022 are as follows:

(In shares)

December 31, 2023

December 31, 2022

Issued
shares

Treasury
shares

Outstanding
shares

Issued
shares

Treasury
shares

Outstanding
shares

Shares outstanding

218,833,144

6,133,414

212,699,730

218,833,144

801,091

218,032,053

(4)

Details of capital surplus and others as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023			December 31, 2022
Paid-in surplus	W	1,771,000			1,771,000
Treasury shares(Note 21)		(301,981	)		(36,702	)
Hybrid bonds(Note 22)		398,509			398,759
Share option(Note 23)		9,818			2,061
Others(*)		(6,643,493	)		(6,641,811	)

	W	(4,766,147	)		(4,506,693	)

(*)	The amount includes a change in equity amounting to W5,767,210 million due to the spin-off that was accounted for as a transaction under common control.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

21.

Treasury Shares

(1)

Treasury shares as of December 31, 2023 and 2022 are as follows:


(In millions of won, except for the number of shares)
	December 31, 2023		December 31, 2022
Number of shares		6,133,414		801,091
Acquisition cost	W	301,981		36,702

(2)

Changes in treasury shares for the years ended December 31, 2023 and 2022 are as follows:


(In shares)
	2023			2022
Treasury shares as of January 1		801,091			1,250,992
Acquisition(*1)		5,773,410			—
Disposal(*2)		(441,087	)		(449,901	)

Treasury shares as of December 31		6,133,414			801,091

(*1)	The Company acquired 5,773,410 of its treasury shares for W285,487 million in an effort to increase shareholder value by stabilizing its stock price for the years ended December 31, 2023.

(*2)

The Company distributed 441,087 treasury shares (acquisition cost: W20,208 million) as bonus payment to the employees, resulting in gain on disposal of treasury shares of W212 million for the year ended December 31, 2023. Also, the Company distributed 449,901 treasury shares (acquisition cost: W20,612 million) as bonus payment to the employees, resulting in gain on disposal of treasury shares of W4,813 million for the year ended December 31, 2022

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

22.

Hybrid Bonds

Hybrid bonds classified as equity as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	Type	Issuance date		*Maturity(1)**		Annual interest rate (%)(*2)		December 31, 2023			December 31, 2022
Series 3 hybrid bonds	Unsecured subordinated bearer bond		June 5, 2023		June 5, 2083		4.95	W	400,000			—
Series 2-1 hybrid bonds	Unsecured subordinated bearer bond		June 7, 2018		June 7, 2078		3.70		—			300,000
Series 2-2 hybrid bonds	Unsecured subordinated bearer bond		June 7, 2018		June 7, 2078		3.65		—			100,000
Issuance costs									(1,491	)		(1,241	)

								W	398,509			398,759

The Company redeemed previously issued hybrid bonds and issued new hybrids bonds for the year ended December 31, 2023. As there is no contractual obligation to deliver financial assets to the holders of hybrid bonds, the Company classified the hybrid bonds as equity.

These are subordinated bonds that rank before common shares in the event of a liquidation or reorganization of the Company.

(*1)	The Company has a right to extend the maturity without any notice or announcement.

(*2)	Annual interest rate is determined as yield rate of 5-year national bond plus premium. According to the step-up clause, additional premium of 0.25% and 0.75%, respectively, after 10 years and 25 years from the issuance date are applied.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

23.

Share-Based Payment Arrangement

(1)

The terms and conditions related to the grants of the share-based payment arrangement are as follows:

Share-based payment arrangement with cash alternatives

Series

1-3

Grant date

March 24, 2017

February 22, 2019

March 26, 2019

March 26, 2020

March 25, 2021

Types of shares to be issued

Registered common shares

Grant method

Reissue of treasury shares,

Cash settlement

Number of shares (in share)

67,320

8,907

5,266

376,313

87,794

Exercise price (in won)

57,562

53,052

50,862

38,452

50,276

Exercise period

Mar. 25, 2021 ~
Mar. 24, 2024

Feb. 23, 2021 ~
Feb. 22, 2024

Mar. 27, 2021 ~
Mar. 26, 2024

Mar. 27, 2023 ~
Mar. 26, 2027

Mar. 26, 2023 ~
Mar. 25, 2026

Vesting

conditions

4 years’

service from the
grant date

2 years’

service from the
grant date

2 years’

service from the
grant date

3 years’

service from

the grant date

2 years’

service from

the grant date


	Series
	7-1	7-2
Grant date	March 25, 2022
Types of shares to be issued	Registered common shares
Grant method	Reissue of treasury shares, Cash settlement
Number of shares (in share)	295,275	109,704
Exercise price (in won)	56,860	56,860
Exercise period	Mar. 26, 2025 ~ Mar. 25, 2029	Mar. 26, 2024 ~ Mar. 25, 2027
Vesting conditions	2 years’ service from the grant date	2 years’ service from the grant date

(*)	The remaining parts of 1-2st and 2nd share options were fully forfeited, and the 8th share option was canceled for the year ended December 31, 2023.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

23.

Share-Based Payment Arrangement, Continued

(1)

The terms and conditions related to the grants of the share-based payment arrangement are as follows, Continued:

Cash-settled share-based payment arrangement


	Granted in 2021		Granted in 2022
	Share appreciation rights of SK Telecom Co., Ltd.(*)	Share appreciation rights of SK Square Co., Ltd.(*)	Share appreciation rights of SK Telecom Co., Ltd.
Grant date	January 1, 2021		January 1, 2022
Grant method	Cash settlement
Number of shares (in share)	183,246	118,456	338,525
Exercise price (in won)	50,276		56,860
Exercise period	Jan. 1, 2023 ~ Mar. 28, 2024		Jan. 1, 2024 ~ Mar. 25, 2025
Vesting conditions	2 years’ service from the grant date		2 years’ service from the grant date

(*)	Parts of the grant that have not met the vesting conditions have been forfeited for the year ended December 31, 2022.

Equity-settled share-based payment arrangement

The Company newly established Performance Share Units (“PSU”) for executives of the Company and major subsidiaries as part of the compensation based on the growth of corporate value for the year ended December 31, 2023, and the details are as follows:


		PSU of SK Telecom Co., Ltd.
Grant date		March 28, 2023
Types of shares to be issued		Registered common shares
Grant method		Reissue of treasury shares
Number of shares(*)		Fluctuates according to the share price on the expiration date and the cumulative increase rate of KOSPI200
Reference share price (in won)		47,280
Reference index (KOSPI200)		315
Maturity (exercise date)		The day in which the annual general meeting of shareholders is held after 3 years from the grant date
Vesting conditions		Full service in the year in which the grant date is included

(*)	The initial grant amount is a total of W10,813 million, and the amount calculated according to the adjustment rate based on the share price on the expiration date and the cumulative increase rate of KOSPI200 will be paid in shares.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

23.

Share-Based Payment Arrangement, Continued

(2)

Share compensation expense for share-based payment arrangements with cash alternatives recognized for the year ended December 31, 2023 and the remaining share compensation expense to be recognized in subsequent periods are as follows:


(In millions of won)	Share compensation expense
As of December 31, 2022	W	155,579
For the year ended December 31, 2023		2,171
In subsequent periods		504

	W	158,254

The liabilities recognized by the Company in relation to the share-based payment arrangement with cash alternatives are W5,530 million and W4,221 million, respectively, which are included in accrued expenses as of December 31, 2023 and 2022.

As of December 31, 2023 and 2022, the carrying amount of liabilities recognized by the Company in relation to the cash-settled share-based payment arrangement are W1,133 million and W906 million, respectively.

Share compensation expenses recognized for equity-settled share-based payment arrangement are W4,653 million for the year ended December 31, 2023.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

23.

Share-Based Payment Arrangement, Continued

(3)

The Company used binomial option-pricing model in the measurement of the fair value of share options at the remeasurement date and the inputs used in the model are as follows:

Share-based payment arrangement with cash alternatives

(i)

SK Telecom Co., Ltd.


(In won)	Series
	1-3			3			4			5			6
Risk-free interest rate		3.52	%		3.49	%		3.52	%		3.14	%		3.18	%
Estimated option’s life		7 years			5 years			5 years			7 years			5 years
Share price on the remeasurement date		50,100			50,100			50,100			50,100			50,100
Expected volatility		16.80	%		16.80	%		16.80	%		16.80	%		16.80	%
Expected dividends yield		6.60	%		6.60	%		6.60	%		6.60	%		6.60	%
Exercise price		57,562			53,052			50,862			38,452			50,276
Per-share fair value of the option		63			310			1,157			11,648			3,400


(In won)	Series
	7-1			7-2
Risk-free interest rate		3.15	%		3.14	%
Estimated option’s life		7 years			5 years
Share price on the remeasurement date		50,100			50,100
Expected volatility		16.80	%		16.80	%
Expected dividends yield		6.60	%		6.60	%
Exercise price		56,860			56,860
Per-share fair value of the option		2,466			1,974

(ii)

SK Square Co., Ltd.


(In won)	Series
	1-3			3			4			5			6
Risk-free interest rate		2.07	%		1.91	%		1.78	%		1.52	%		1.55	%
Estimated option’s life		7 years			5 years			5 years			7 years			5 years
Share price (Closing price on the preceding day)		52,500			51,800			50,600			34,900			49,800
Expected volatility		13.38	%		8.30	%		7.70	%		8.10	%		25.70	%
Expected dividends yield		3.80	%		3.80	%		3.90	%		5.70	%		4.00	%
Exercise price		57,562			53,052			50,862			38,452			50,276
Per-share fair value of the option		3,096			1,720			1,622			192			8,142

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

23.

Share-Based Payment Arrangement, Continued

(3)

The Company used binomial option-pricing model in the measurement of the fair value of share options at the remeasurement date and the inputs used in the model are as follows, Continued:

Cash-settled share-based payment arrangement


(In won)	Granted in 2021						Granted in 2022
	Share appreciation rights of SK Telecom Co., Ltd.			Share appreciation rights of SK Square Co., Ltd.			Share appreciation rights of SK Telecom Co., Ltd.
Risk-free interest rate		3.52	%		3.52	%		3.37	%
Estimated option’s life		3.25 years			3.25 years			3.25 years
Share price on the remeasurement date		50,100			52,600			50,100
Expected volatility		16.80	%		30.90	%		16.80	%
Expected dividends yield		6.60	%		0.00	%		6.60	%
Exercise price		50,276			50,276			56,860
Per-share fair value of the option		1,387			4,706			949

Equity-settled share-based payment arrangement


(In won)
	PSU of SK Telecom Co., Ltd.
Risk-free interest rate		3.26	%
Estimated option’s life		3 years
Share price on the expected grant date		48,500
Expected volatility		18.67	%
Expected dividends yield		4.90	%
Per-share fair value of the option		27,525

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

24.

Retained Earnings

(1)

Retained earnings as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Appropriated:
Legal reserve	W	22,320		22,320
Reserve for business expansion		9,831,138		9,631,138
Reserve for technology development		4,565,300		4,365,300

		14,396,438		13,996,438
Unappropriated		613,715		672,703

	W	15,032,473		14,691,461

(2)

Legal reserve

The Korean Commercial Act requires the Company to appropriate as a legal reserve at least 10% of cash dividends paid for each accounting period until the reserve equals 50% of outstanding share capital. The legal reserve may not be utilized for cash dividends, but may only be used to offset a future deficit, if any, or may be transferred to share capital.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

25.

Statements of Appropriation of Retained Earnings

Details of statements of appropriation of retained earnings for the years ended December 31, 2023 and 2022 are as follows:

Date of appropriation for 2023: March 26, 2024

Date of appropriation for 2022: March 28, 2023


(In millions of won)
	2023			2022
Unappropriated retained earnings:
Unappropriated retained earnings	W	91,736			390,674
Remeasurement of defined benefit assets		43,656			(4,899	)
Reclassification of valuation loss on FVOCI		(21,862	)		(24,920	)
Interim dividends: 2023: W2,490 per share, 2,490% on par value 2022: W2,490 per share, 2,490% on par value		(542,282	)		(542,876	)
Interest on hybrid bonds		(17,283	)		(14,766	)
Profit for the year		1,059,750			869,490

		613,715			672,703

Reversal of appropriation of retained earnings:
Reserve for business expansion		(150,000	)		(200,000	)
Reserve for technology development		(150,000	)		(200,000	)
Appropriation of retained earnings:
Cash dividends: 2023: W 1,050 per share, 1,050% on par value 2022: W830 per share, 830% on par value		223,335			180,967

		(523,335	)		(580,967	)

Unappropriated retained earnings to be carried over to subsequent year	W	90,380			91,736

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

26.

Reserves

(1)

Details of reserves, net of taxes, as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023			December 31, 2022
Valuation gain on FVOCI	W	139,548			156,907
Valuation gain (loss) on derivatives		(274	)		11,214

	W	139,274			168,121

(2)

Changes in reserves for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	Valuation gain on financial assets at FVOCI			Valuation gain (loss) on derivatives			Total
Balance as of January 1, 2022	W	613,010			25,006			638,016
Changes, net of taxes		(456,103	)		(13,792	)		(469,895	)

Balance as of December 31, 2022		156,907			11,214			168,121

Balance as of January 1, 2023		156,907			11,214			168,121
Changes, net of taxes		(17,359	)		(11,488	)		(28,847	)

Balance as of December 31, 2023	W	139,548			(274	)		139,274

(3)

Changes in valuation gain on financial assets at FVOCI for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Balance as of January 1	W	156,907			613,010
Amount recognized as other comprehensive loss for the year, net of taxes		(39,221	)		(481,023	)
Amount reclassified to retained earnings, net of taxes		21,862			24,920

Balance as of December 31	W	139,548			156,907

(4)

Changes in valuation gain (loss) on derivatives for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Balance as of January 1	W	11,214			25,006
Amount recognized as other comprehensive loss for the year, net of taxes		(14,262	)		(19,967	)
Amount reclassified to profit, net of taxes		2,774			6,175

Balance as of December 31	W	(274	)		11,214

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

27.

Operating Revenue

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


(In millions of won)
	2023		2022
Products transferred at a point in time:
Product sales	W	115,062		108,233
Services transferred over time:
Wireless service revenue(*1)		10,554,390		10,463,131
Cellular interconnection revenue		445,244		485,496
Other(*2)		1,474,524		1,357,728

		12,474,158		12,306,355

	W12,589,220		12,414,588

(*1)	Wireless service revenue includes revenue from wireless voice and data transmission services, which is collected from the wireless subscribers.

(*2)	Other revenue includes revenue from billing and collection services as well as other miscellaneous services.

The Company has a right to receive consideration from a customer in an amount that corresponds directly with the value of telecommunications service provided; thus, the Company applies practical expedient method and recognizes revenue in the amount to which the Company has a right to invoice.

Most of the Company’s transactions are occurring in Korea as it principally operates its businesses in Korea.

28.

Other Operating Expenses

Details of other operating expenses for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Communication	W	26,827		27,041
Utilities		377,028		301,284
Taxes and dues		23,229		37,538
Repair		257,829		267,067
Research and development		336,377		338,389
Training		28,771		28,778
Bad debt for accounts receivable – trade		28,765		16,053
Supplies and others		51,372		48,112

	W	1,130,198		1,064,262

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

29.

Other Non-Operating Income and Expenses

Details of other non-operating income and expenses for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Other non-operating income:
Gain on disposal of property and equipment and intangible assets	W	20,825		14,073
Others		20,019		31,089

	W	40,844		45,162

Other non-operating expenses:
Loss on disposal of property and equipment and intangible assets	W	3,929		5,722
Donations		12,966		11,442
Bad debt for accounts receivable – other		4,349		2,071
Others		2,775		9,770

	W	24,019		29,005

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

30.

Finance Income and Costs

(1)

Details of finance income and costs for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Finance income:
Interest income	W	36,937		34,124
Gain on sale of accounts receivable – other		—		1,043
Dividends		209,195		50,927
Gain on foreign currency transactions		9,015		7,945
Gain on foreign currency translations		300		345
Gain relating to financial instruments at FVTPL		87,199		40,581

	W	342,646		134,965


(In millions of won)
	2023		2022
Finance costs:
Interest expense	W	325,769		287,865
Loss on sale of accounts receivable – other		65,027		61,841
Loss on foreign currency transactions		8,115		9,304
Loss on foreign currency translations		660		961
Loss relating to financial instruments at FVTPL		41,819		27,635

	W	441,390		387,606

(2)

Details of interest income included in finance income for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Interest income on cash equivalents and short-term financial instruments	W	18,484		11,268
Interest income on loans and others		18,453		22,856

	W	36,937		34,124

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

30.

Finance Income and Costs, Continued

(3)

Details of interest expenses included in finance costs for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Interest expense on borrowings	W	27,151		23,413
Interest expense on debentures		200,571		184,049
Others		98,047		80,403

	W	325,769		287,865

(4)

Finance income and costs by category of financial instruments for the years ended December 31, 2023 and 2022 are as follows. Bad debt expense for accounts receivable – trade, loans and receivables are presented and explained separately in notes 5 and 35.

Finance income and costs


(In millions of won)
	2023
	Finance income(*)		Finance costs
Financial assets:
Financial assets at FVTPL	W	87,758		106,846
Financial assets at FVOCI		39,681		—
Financial assets at amortized cost		36,299		8,726
Derivatives designated as hedging instrument		2,343		—

		166,081		115,572

Financial liabilities:
Financial liabilities at FVTPL		6,717		—
Financial liabilities at amortized cost		1,503		325,818

		8,220		325,818

	W	174,301		441,390

(*)	Finance income does not include W168,345 million of dividends received from subsidiaries and associates for the year ended December 31, 2023.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

30.

Finance Income and Costs, Continued

(4)

Finance income and costs by category of financial instruments for the years ended December 31, 2023 and 2022 are as follows. Bad debt expense (reversal of loss allowance) for accounts receivable – trade, loans and receivables are presented and explained separately in notes 5 and 35, Continued:

Finance income and costs, Continued


(In millions of won)
	2022
	Finance income(*)		Finance costs
Financial assets:
Financial assets at FVTPL	W	34,466		89,329
Financial assets at FVOCI		1,495		—
Financial assets at amortized cost		26,987		10,245
Derivatives designated as hedging instrument		—		146

		62,948		99,720

Financial liabilities:
Financial liabilities at amortized cost		18,432		—
Derivatives designated as hedging instrument		4,152		287,886

		22,584		287,886

	W	85,532		387,606

(*)	Finance income does not include W49,433 million of dividends received from subsidiaries and associates for the year ended December 31, 2022.

Other comprehensive income (loss)


(In millions of won)
	2023		2022
Financial assets:
Financial assets at FVOCI	W	(39,221)		(481,023)
Derivatives designated as hedging instrument		(11,488)		(13,792)

		(50,709)		(494,815)

(5)

Details of impairment losses for financial assets for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Accounts receivable – trade	W	28,765		16,053
Other receivables		4,349		2,071

	W	33,114		18,124

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

31.

Income Tax Expense

(1)

Income tax expenses for the years ended December 31, 2023 and 2022 consist of the following:


(In millions of won)
	2023			2022
Current tax expense:
Current year	W	249,527			197,216
Current tax of prior years		(4,247	)		66,055

		245,280			263,271

Deferred tax expense:
Changes in net deferred tax assets		49,909			13,489

Income tax expense	W	295,189			276,760

(2)

The difference between income taxes computed using the statutory corporate income tax rates and the recorded income taxes for the years ended December 31, 2023 and 2022 is attributable to the following:


(In millions of won)
	2023			2022
Profit before income tax	W	1,354,939			1,146,250
Income taxes at statutory income tax rate		347,342			304,857
Non-taxable income		(37,230	)		(8,814	)
Non-deductible expenses		13,071			9,870
Tax credit and tax reduction		(51,843	)		(5,332	)
Changes in unrecognized deferred taxes		25,671			(4,572	)
Income tax paid (refund)		(4,247	)		48,775
Changes in tax rate and other		2,425			(68,024	)

Income tax expense	W	295,189			276,760

(3)

Deferred taxes directly charged to (credited from) equity for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Valuation gain on financial assets measured at fair value	W	12,922			166,188
Valuation gain on derivatives		3,843			5,199
Remeasurement of defined benefit assets		(14,477	)		(800	)
Loss on disposal of treasury shares		(53	)		(28,108	)

	W	2,235			142,479

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

31.

Income Tax Expense, Continued

(4)

Changes in deferred tax assets (liabilities) for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)	2023
	Beginning			Deferred tax expense (income)			Directly charged to (credited from) equity			Ending
Deferred tax assets (liabilities) related to temporary differences:
Loss allowance	W	43,512			64			—			43,576
Accrued interest income		(293	)		38			—			(255	)
Financial assets measured at fair value		(12,930	)		(5,313	)		12,922			(5,321	)
Investments in subsidiaries, associates and joint ventures		5,034			(20,764	)		—			(15,730	)
Property and equipment		(345,754	)		(53,025	)		—			(398,779	)
Retirement benefit obligation		2,919			(293	)		(14,477	)		(11,851	)
Valuation gain on derivatives		18,112			2,144			3,843			24,099
Gain (loss) on foreign currency translation		20,624			34			—			20,658
Incremental costs to acquire a contract		(707,002	)		33,422			—			(673,580	)
Right-of-use assets		(344,023	)		35,307			—			(308,716	)
Lease liabilities		345,739			(37,106	)		—			308,633
Others		129,858			(56,259	)		(53	)		73,546

	W	(844,204	)		(101,751	)		2,235			(943,720	)

Tax credit		89,883			51,842			—			141,725

	W	(754,321	)		(49,909	)		2,235			(801,995	)

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

31.

Income Tax Expense, Continued

(4)

Changes in deferred tax assets (liabilities) for the years ended December 31, 2023 and 2022 are as follows, Continued:


(In millions of won)	2022
	Beginning			Deferred tax expense (income)			Directly charged to (credited from) equity			Ending
Deferred tax assets (liabilities) related to temporary differences:
Loss allowance	W	45,734			(2,222	)		—			43,512
Accrued interest income		(87	)		(206	)		—			(293	)
Financial assets measured at fair value		(158,404	)		(20,714	)		166,188			(12,930	)
Investments in subsidiaries, associates and joint ventures		59			4,975			—			5,034
Property and equipment		(271,151	)		(74,603	)		—			(345,754	)
Retirement benefit obligation		6,947			(3,228	)		(800	)		2,919
Valuation gain on derivatives		11,846			1,067			5,199			18,112
Gain (loss) on foreign currency translation		21,368			(744	)		—			20,624
Incremental costs to acquire a contract		(744,267	)		37,265			—			(707,002	)
Right-of-use assets		(359,798	)		15,775			—			(344,023	)
Lease liabilities		357,488			(11,749	)		—			345,739
Others		122,394			35,572			(28,108	)		129,858

	W	(967,871)			(18,812	)		142,479			(844,204	)

Tax credit		84,560			5,323			—			89,883

	W	(883,311)			(13,489	)		142,479			(754,321	)

(5)

Details of temporary differences not recognized as deferred tax assets (liabilities) in the statements of financial position as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Loss allowance	W	77,405		77,405
Investments in subsidiaries, associates and joint ventures		585,877		483,857
Other temporary differences		372,134		372,134

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

32.

Earnings per Share

Earnings per share is calculated to profit of the Company per common share and dilutive potential common share, and details are as follows:

(1)

Basic earnings per share

Basic earnings per share for the years ended December 31, 2023 and 2022 are calculated as follows:


(In millions of won, except for share data and basic earnings per share)
	2023			2022
Profit for the year	W	1,059,750			869,490
Interest on hybrid bonds		(17,283	)		(14,766	)

Profit for the year on common shares		1,042,467			854,724
Weighted average number of common shares outstanding		217,264,615			217,994,490

Basic earnings per share (in won)	W	4,798			3,921

The weighted average number of common shares outstanding for the years ended December 31, 2023 and 2022 are calculated as follows:


(In shares)	2023
	Number of common shares			Weighted average number of common shares
Issued shares as of January 1, 2023		218,833,144			218,833,144
Treasury shares as of January 1, 2023		(801,091	)		(801,091	)
Acquisition of treasury shares		(5,773,410	)		(1,154,633	)
Disposal of treasury shares		441,087			387,195

		212,699,730			217,264,615


(In shares)	2022
	Number of common shares			Weighted average number of common shares
Issued shares as of January 1, 2022		218,833,144			218,833,144
Treasury shares as of January 1, 2022		(1,250,992	)		(1,250,992	)
Disposal of treasury shares		449,901			412,338

		218,032,053			217,994,490

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

32.

Earnings per Share, Continued

(2)

Diluted earnings per share

Diluted earnings per share for the years ended December 31, 2023 and 2022 are calculated as follows:


(In millions of won, except for share data and diluted earnings per share)
	2023		2022
Profit for the year on common shares	W	1,042,467		854,724
Adjusted weighted average number of common shares outstanding		217,452,721		218,108,742

Diluted earnings per share (in won)	W	4,794		3,919

The adjusted weighted average number of common shares outstanding for the years ended December 31, 2023 and 2022 are calculated as follows:


(In shares)
	2023			2022
Outstanding shares as of January 1		218,032,053			217,582,152
Effect of treasury shares		(767,438	)		412,338
Effect of share option		188,106			114,252

Adjusted weighted average number of common shares outstanding		217,452,721			218,108,742
		217,452,721			218,108,742

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

33.

Dividends

(1)

Details of dividends declared

Details of dividend declared for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won, except for face value and share data)
Year	Dividend type	Number of shares outstanding		Face value (in won)		Dividend ratio			Dividends
2023	Cash dividends (Interim)		218,466,141		100		830	%	W	181,327
	Cash dividends (Interim)		218,473,140		100		830	%		181,333
	Cash dividends (Interim)		216,412,898		100		830	%		179,623
	Cash dividends (Year-end)		212,699,730		100		1,050	%		223,335

									W	765,618

2022	Cash dividends (Interim)		218,002,830		100		830	%	W	180,942
	Cash dividends (Interim)		218,032,053		100		830	%		180,967
	Cash dividends (Interim)		218,032,053		100		830	%		180,967
	Cash dividends (Year-end)		218,032,053		100		830	%		180,967

									W	723,843

(2)

Dividends yield ratio

Dividends yield ratios for the years ended December 31, 2023 and 2022 are as follows:


(In won)
Year	Dividend type	Dividend per share		Closing price at year-end		Dividend yield ratio
2023	Cash dividends		3,540		50,100		7.07	%
2022	Cash dividends		3,320		47,400		7.00	%

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

34.

Categories of Financial Instruments

(1)

Financial assets by category as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023
	Financial assets at FVTPL		Equity instruments at FVOCI		Financial assets at amortized cost		Derivatives hedging instrument		Total
Cash and cash equivalents	W	4,774		—		626,292		—		631,066
Financial instruments		47,364		—		139,354		—		186,718
Long-term investment securities(*)		218,685		1,207,605		—		—		1,426,290
Accounts receivable – trade		—		—		1,495,617		—		1,495,617
Loans and other receivables		273,945		—		612,432		—		886,377
Derivative financial assets		2,323		—		—		116,210		118,533

	W	547,091		1,207,605		2,873,695		116,210		4,744,601

(*)	The Company designated W1,207,605 million of equity instruments that are not held for trading as financial assets at FVOCI.


(In millions of won)
	December 31, 2022
	Financial assets at FVTPL		Equity instruments at FVOCI		Financial assets at amortized cost		Derivatives hedging instrument		Total
Cash and cash equivalents	W	1,390		—		1,216,114		—		1,217,504
Financial instruments		90,815		—		79,368		—		170,183
Long-term investment securities(*)		88,403		1,066,785		—		—		1,155,188
Accounts receivable – trade		—		—		1,425,695		—		1,425,695
Loans and other receivables		332,669		—		707,225		—		1,039,894
Derivative financial assets		28,114		—		—		222,622		250,736

	W	541,391		1,066,785		3,428,402		222,622		5,259,200

(*)	The Company designated W1,066,785 million of equity instruments that are not held for trading as financial assets at FVOCI.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

34.

Categories of Financial Instruments, Continued

(2)

Financial liabilities by category as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Total
Derivative financial liabilities	W	295,876		—		295,876
Borrowings		—		640,000		640,000
Debentures		—		6,666,939		6,666,939
Lease liabilities(*)		—		1,226,545		1,226,545
Accounts payable – other and others		—		4,146,076		4,146,076

	W	295,876		12,679,560		12,975,436


(In millions of won)
	December 31, 2022
	Financial liabilities at FVTPL		Financial liabilities at amortized cost		Total
Derivative financial liabilities	W	302,593		—		302,593
Borrowings		—		840,000		840,000
Debentures		—		6,988,970		6,988,970
Lease liabilities(*)		—		1,379,311		1,379,311
Accounts payable – other and others		—		5,009,512		5,009,512

	W	302,593		14,217,793		14,520,386

(*)	The categorization of financial liabilities is not applicable to lease liabilities, but they are classified as financial liabilities measured at amortized cost, considering the nature of measuring liabilities.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

35.

Financial Risk Management

(1)

Financial risk management

The Company is exposed to market risk, credit risk and liquidity risk. Market risk is the risk related to the changes in market prices, such as foreign exchange rates, interest rates and price fluctuations. The Company implements a risk management system to monitor and manage these specific risks.

The Company’s financial assets consist of cash and cash equivalents, financial instruments, long-term investment securities, accounts receivable – trade and others, etc. Financial liabilities consist of accounts payable – other and others, borrowings, debentures, lease liabilities and others.

Market risk

(i)

Currency risk

The Company’s currency risk is mainly related to changes in recognized assets and liabilities due to exchange rate fluctuations. If the Company determines that it is necessary to hedge currency risk for business purposes, the Company manages currency risk by using currency swaps, etc. Currency risk occurs on forecasted transactions and recognized assets and liabilities which are denominated in a currency other than the functional currency of the Company.

Monetary assets and liabilities denominated in foreign currencies as of December 31, 2023 are as follows:


(In millions of won, thousands of foreign currencies)
	Assets				Liabilities
	Foreign currencies		Won equivalent		Foreign currencies		Won equivalent
USD		24,551	W	31,656		706,572	W	911,054
EUR		654		933		3		4
Others		—		336		—		—

			W	32,925			W	911,058

In addition, the Company has entered into cross currency swaps to hedge against currency risk related to foreign currency debentures. (See Note 19)

As of December 31, 2023, a hypothetical change in exchange rates by 10% would have increased (decreased) the Company’s profit before income tax and equity as follows:


(In millions of won)
	Profit before income tax							Equity
	If increased by 10%		If decreased by 10%			If increased by 10%		If decreased by 10%
USD	W	1,982		(1,982	)	W	1,982		(1,982	)
EUR		93		(93	)		93		(93	)
Others		34		(34	)		34		(34	)

	W	2,109		(2,109	)	W	2,109		(2,109	)

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

35.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Market risk, Continued

(ii)

Interest rate risk

The interest rate risk of the Company arises from borrowings, debentures and long-term payables – other. Since the Company’s interest-bearing assets are mostly fixed-interest bearing assets, the Company’s revenue and operating cash flows from the interest-bearing assets are not influenced by the changes in market interest rates.

The Company performs various analysis to reduce interest rate risk and to optimize its financing. To minimize risks arising from changes in interest rates, the Company takes various measures, such as refinancing, renewal, alternative financing and hedging.

As of December 31, 2023, floating-rate borrowings and debentures amount to W40,000 million and W386,820 million, respectively, and the Company has entered into interest rate swaps to hedge interest rate risk related to the floating-rate debentures. Therefore, profit before income tax for the year ended December 31, 2023 would not have been affected by the changes in interest rates of floating-rate debentures. If the interest rate increases (decreases) by 1%p with all other variables held constant, profit before income tax and equity for the year ended December 31, 2023 would change by W400 million in relation to the floating-rate borrowings which have not entered into interest rate swaps.

As of December 31, 2023, the floating-rate long-term payables – other are W1,290,225 million. If the interest rate increases (decreases) by 1%p with all other variables held constant, profit before income tax and equity for the year ended December 31, 2023, would change by W12,902 million in relation to the floating-rate long-term payables – other that are exposed to interest rate risk.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

35.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Market risk, Continued

(ii)

Interest rate risk, Continued

Non-derivative financial liabilities

The Company’s non-derivative financial liabilities subject to interest rate benchmark reform as of December 31, 2022 were floating-rate bonds indexed to USD LIBOR. The Company completed discussion with the counterparty about including the fallback clauses as of December 31, 2023.

Derivatives

The Company’s derivative instruments designated as cash flow hedge are governed by contracts based on the International Swaps and Derivatives Association (“ISDA”) master agreements. As part of interest rate benchmark reform, ISDA has included a new fallback clause regarding which alterative benchmark interest rate to be applied when the calculation of major IBOR is suspended in the master agreement. The master agreement is applied to derivative contracts after January 25, 2021 and the transaction parties are required to adhere to ISDA protocol to include the same fallback clause into derivative contracts executed before January 25, 2021. The Company has adhered to ISDA protocol for transition to the alternative benchmark interest rate and the fallback clause will be included when counterparties adhere to the protocol to include. The Company’s counterparties have adhered to ISDA protocol and agreed to include the fallback clause.

(iii)

Price fluctuations risk

As of December 31, 2023, the Company holds equity instruments in an active trading market, exposing it to price fluctuation risk. Assuming all other variables remain constant, the impact on the Company’s profit before income tax and equity resulting from a 10% fluctuation in the per-share stock price of the equity securities for the year ended December 31, 2023 is as follows.

(In millions of won)

Profit before income tax

Equity

If increased by 10%

If decreased by 10%

If increased by 10%

If decreased by 10%

—

84,647

(84,647

)

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

35.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Credit risk

The maximum credit exposure as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023		December 31, 2022
Cash and cash equivalents	W	631,021		1,217,467
Financial instruments		186,718		170,183
Investment securities		—		900
Accounts receivable – trade		1,495,617		1,425,695
Contract assets		21,613		33,098
Loans and other receivables		886,377		1,039,894
Derivative financial assets		118,533		250,736

	W	3,339,879		4,137,973

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. To manage credit risk, the Company evaluates the credit worthiness of each customer or counterparty by considering the party’s financial information, its own trading records and other factors. Based on such information, the Company establishes credit limits for each customer or counterparty.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

35.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Credit risk, Continued

(i) Accounts receivable – trade and contract assets

The Company establishes a loss allowance in respect of accounts receivable – trade and contract assets. The main components of this allowance are a specific loss component that relates to individually significant exposures and a collective loss component established for groups of similar assets in respect of losses that are expected to occur. The collective loss allowance is determined based on historical data of collection statistics for similar financial assets. Details of changes in loss allowance for the year ended December 31, 2023 are included in note 5.

(ii) Debt investments

The credit risk arises from debt investments included in W186,718 million of financial instruments, and W886,377 million of loans and other receivables. To limit the exposure to this risk, the Company transacts only with financial institutions with credit ratings that are considered to be low credit risk.

Most of the Company’s debt investments are considered to have a low risk of default and the borrower has a strong capacity to meet its contractual cash flow obligations in the near term. Thus the Company measured the loss allowance for the debt investments at an amount equal to 12-month expected credit losses.

Meanwhile, the Company monitors changes in credit risk at each reporting date. The Company recognized the loss allowance at an amount equal to lifetime expected credit losses when the credit risk on the debt investments is assumed to have increased significantly if it is more than 30 days past due.

The Company’s maximum exposure to credit risk is equal to each financial asset’s carrying amount. The gross carrying amounts of each financial asset except for the accounts receivable – trade and derivative financial assets as of December 31, 2023 are as follows:


(In millions of won)
	Financial assets at FVTPL		Financial assets at amortized cost
	Financial assets at FVTPL		12-month ECL			Lifetime ECL – not credit impaired			Lifetime ECL – credit impaired
Gross carrying amount	W	321,309		747,476			7,570			66,295
Loss allowance		—		(2,590	)		(3,089	)		(63,876	)

Carrying amount	W	321,309		744,886			4,481			2,419

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

35.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

2) Credit risk, Continued

(ii)

Debt investments, Continued

Changes in the loss allowance for the debt investments for the year ended December 31, 2023 are as follows:


(In millions of won)
	12-month ECL			Lifetime ECL – not credit impaired			Lifetime ECL – credit impaired			Total
December 31, 2022	W	2,803			3,314			68,332			74,449
Remeasurement of loss allowance, net		655			3,043			651			4,349
Transfer to lifetime ECL – not credit impaired		(868	)		868			—			—
Transfer to lifetime ECL – credit impaired		—			(4,136	)		4,136			—
Amounts written off		—			—			(16,156	)		(16,156	)
Recovery of amounts written off		—			—			6,913			6,913

December 31, 2023	W	2,590			3,089			63,876			69,555

(iii) Cash and cash equivalents

The Company deposits W631,021 million of cash and cash equivalents as of December 31, 2023 (W1,217,467 million as of December 31, 2022) at banks and financial institutions with credit ratings above the certain level. The impairment on cash and cash equivalents was measured using a 12-month expected credit loss, taking into account the short-term exposure. The Company assessed the risk of cash and cash equivalents based on the counterparty’s external credit rating, determining it to be low.

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

35.

Financial Risk Management, Continued

(1)

Financial risk management, Continued

Liquidity risk

The Company’s approach to managing liquidity is to ensure that it will always maintain sufficient cash and cash equivalents balances and have enough liquidity through various committed credit lines. The Company maintains enough liquidity within credit lines through active operating activities.

Contractual maturities of financial liabilities as of December 31, 2023 are as follows:


(In millions of won)
	Carrying amount		Contractual cash flows		Less than 1 year		1 – 5 years		More than 5 years
Borrowings(*)	W	640,000		656,806		401,710		255,096		—
Debentures(*)		6,666,939		7,684,857		1,083,773		4,416,636		2,184,448
Lease liabilities		1,226,545		1,346,200		345,144		839,668		161,388
Accounts payable – other and others(*)		4,146,076		4,256,188		3,266,135		990,053		—

	W	12,679,560		13,944,051		5,096,762		6,501,453		2,345,836

(*)	The contractual cash flow is amount that includes interest payables.

The Company does not expect that the cash flows included in the maturity analysis could occur significantly earlier or in significantly different amounts.

As of December 31, 2023, periods in which cash flows from cash flow hedge derivatives are expected to occur are as follows:

(In millions of won)

Carrying
amount

Contractual
cash flows

Less than 1
year

1 – 5 years

Assets

116,210

123,260

30,928

92,332

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

35.

Financial Risk Management, Continued

(2)

Capital management

The Company manages its capital to ensure that it will be able to continue as a going concern while maximizing the return to shareholders through the optimization of its debt and equity structure. The overall strategy of the Company is the same as that for the year ended December 31, 2022.

The Company monitors its debt-equity ratio as a capital management indicator. This ratio is calculated as total liabilities divided by total equity from the separate financial statements.

Debt-equity ratio as of December 31, 2023 and 2022 are as follows:


(In millions of won)
	December 31, 2023			December 31, 2022
Total liabilities	W	14,559,839			16,048,739
Total equity		10,436,093			10,383,382
Debt-equity ratios		139.51	%		154.56	%

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

35.

Financial Risk Management, Continued

(3)

Fair value

Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2023 and 2022 are as follows:


(In millions of won)	December 31, 2023
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that are measured at fair value:
FVTPL	W	547,091		—		326,083		221,008		547,091
Derivative hedging instruments		116,210		—		116,210		—		116,210
FVOCI		1,207,605		1,131,033		—		76,572		1,207,605

	W	1,870,906		1,131,033		442,293		297,580		1,870,906

Financial liabilities that are measured at fair value:
Derivative financial liabilities	W	295,876		—		—		295,876		295,876
Financial liabilities that are not measured at fair value:
Borrowings	W	640,000		—		638,536		—		638,536
Debentures		6,666,939		—		6,503,016		—		6,503,016
Long-term payables – other		1,260,453		—		1,294,977		—		1,294,977

	W	8,567,392		—		8,436,529		—		8,436,529


(In millions of won)	December 31, 2022
	Carrying amount		Level 1		Level 2		Level 3		Total
Financial assets that are measured at fair value:
FVTPL	W	541,391		—		424,876		116,515		541,391
Derivative hedging instruments		222,622		—		222,622		—		222,622
FVOCI		1,066,785		987,065		—		79,720		1,066,785

	W	1,830,798		987,065		647,498		196,235		1,830,798

Financial liabilities that are measured at fair value:
Derivative financial liabilities	W	302,593		—		—		302,593		302,593
Financial liabilities that are not measured at fair value:
Borrowings	W	840,000		—		817,771		—		817,771
Debentures		6,988,970		—		6,488,453		—		6,488,453
Long-term payables – other		1,638,341		—		1,614,934		—		1,614,934

	W	9,467,311		—		8,921,158		—		8,921,158

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

35.

Financial Risk Management, Continued

(3)

Fair value, Continued

Fair value and carrying amount of financial assets and liabilities including fair value hierarchy as of December 31, 2023 and 2022 are as follows, Continued:

The above information does not include fair values of financial assets and liabilities of which fair values have not been measured as carrying amounts are reasonable approximation of fair values.

Fair value of the financial instruments that are traded in an active market (financial assets at FVOCI) is measured based on the bid price at the end of the reporting date.

The Company uses various valuation methods for determination of fair value of financial instruments that are not traded in an active market. Derivative financial contracts and long-term liabilities are measured using the discounted present value methods. Other financial assets are determined using the methods such as discounted cash flow and market approach. Inputs used in such valuation methods include swap rate, interest rate and risk premium, and the Company performs valuation using the inputs which are consistent with natures of assets and liabilities measured.

Interest rates used by the Company for the fair value measurement as of December 31, 2023 are as follows:


		Interest rate
Derivative instruments		3.80% ~ 4.43%
Borrowings and debentures		3.84% ~ 3.84%
Long-term payables – other		3.72% ~ 3.85%

There have been no transfers between Level 1 and Level 2 for the year ended December 31, 2023. The changes of financial assets and liabilities classified as Level 3 for the year ended December 31, 2023 are as follows:


(In millions of won)	Balance as of January 1, 2023			Gain (loss) for the year			OCI			Acquisition		Disposal			Balance as of December 31, 2023
Financial assets:
FVTPL	W	116,515			(39,896	)		—			152,110		(7,721	)		221,008
FVOCI		79,720			—			(3,148	)		—		—			76,572

	W	196,235			(39,896	)		(3,148	)		152,110		(7,721	)		297,580

Financial liabilities:
FVTPL	W	(302,593	)		6,717			—			—		—			(295,876	)

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

35.

Financial Risk Management, Continued

(4)

Enforceable master netting agreement or similar agreement

Carrying amount of financial instruments recognized to which offset agreements are applicable as of December 31, 2023 and 2022 are as follows:


(In millions of won)	December 31, 2023
	Gross financial instruments recognized		Amount offset			Net financial instruments presented on the separate statement of financial position
Financial assets:
Accounts receivable – trade and others	W	72,597		(72,597	)		—
Financial liabilities:
Accounts payable – other and others	W	74,388		(72,597	)		1,791


(In millions of won)	December 31, 2022
	Gross financial instruments recognized		Amount offset			Net financial instruments presented on the separate statement of financial position
Financial assets:
Accounts receivable – trade and others	W	82,987		(82,987	)		—
Financial liabilities:
Accounts payable – other and others	W	85,955		(82,987	)		2,968

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

36.

Transactions with Related Parties

(1)

List of related parties


Relationship		Company
Ultimate controlling entity		SK Inc.
Subsidiaries		SK Broadband Co., Ltd. and 24 others(*)
Joint venture		UTC Kakao-SK Telecom ESG Fund
Associates		SK China Company Ltd. and 44 others
Others		The Ultimate controlling entity’s subsidiaries and associates and others.

(*)	As of December 31, 2023, subsidiaries of the Company are as follows:


Subsidiary		Ownership percentage (%)(*1)		Primary business
Subsidiaries owned by the Company	SK Telink Co., Ltd.		100.0	International telecommunication and Mobile Virtual Network Operator service
	SK Communications Co., Ltd.		100.0	Internet website services
	SK Broadband Co., Ltd.		74.4	Fixed-line telecommunication services
	PS&Marketing Corporation		100.0	Communications device retail business
	SERVICE ACE Co., Ltd.		100.0	Call center management service
	SERVICE TOP Co., Ltd.		100.0	Call center management service
	SK O&S Co., Ltd.		100.0	Base station maintenance service
	SK Telecom China Holdings Co., Ltd.		100.0	Investment (Holdings company)
	SK Global Healthcare Business Group., Ltd.		100.0	Investment
	YTK Investment Ltd.		100.0	Investment
	Atlas Investment		100.0	Investment
	SK Telecom Americas, Inc		100.0	Information gathering and consulting
	Quantum Innovation Fund I		59.9	Investment
	Happy Hanool Co., Ltd.		100.0	Service
	SK stoa Co., Ltd.		100.0	Other telecommunication retail business
	SAPEON Inc.		62.5	Manufacturing non-memory and other electronic integrated circuits
Subsidiaries owned by SK Broadband Co., Ltd.	Home & Service Co., Ltd.		100.0	Operation of information and communication facility
Subsidiaries owned by SK Broadband Co., Ltd.	Media S Co., Ltd.		100.0	Production and supply services of broadcasting programs
Subsidiary owned by PS&Marketing Corporation	SK m&service Co., Ltd.		100.0	Database and internet website service
Subsidiary owned by Quantum Innovation Fund I	PanAsia Semiconductor Materials LLC.		66.4	Investment
Subsidiary owned by SAPEON Inc.	SAPEON Korea Inc.		100.0	Manufacturing non-memory and other electronic integrated circuits
Subsidiaries owned by SK Telecom Americas, Inc.(*2)	Global AI Platform Corporation Korea		100.0	Software development and supply services
Subsidiaries owned by SK Telecom Americas, Inc.(*2)	Global AI Platform Corporation		100.0	Software development and supply services
Others(*3)	SK Telecom Innovation Fund, L.P.		100.0	Investment
	SK Telecom China Fund I L.P.		100.0	Investment

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

36.

Transactions with Related Parties, Continued

(1)

List of related parties, Continued:

(*1)	The ownership interest represents direct ownership interest in subsidiaries either by the Company or subsidiaries of the Company.

(*2)	SK Telecom Americas, Inc., a subsidiary of the Company, newly established Global AI Platform Corporation Korea Co., Ltd. and Global AI Platform Corporation for the year ended December 31, 2023.

(*3)	Others are owned by Atlas Investment and another subsidiary of the Company.

As of December 31, 2023, the Company belongs to SK Group, a conglomerate as defined in the Monopoly Regulation and Fair Trade Act. All of the other entities included in SK Group are considered related parties of the Company.

(2)

Compensation for the key management

The Company considers registered directors who have substantial role and responsibility in planning, operations and relevant controls of the business as key management. The compensation given to such key management for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023		2022
Salaries	W	4,139		3,487
Defined benefit plan expenses		1,005		761
Share option		2,542		1,598

	W	7,686		5,846

Compensation for the key management includes salaries, non-monetary salaries and defined benefits made in relation to the pension plan and compensation expenses related to share options granted.

100

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

36.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)		2023
Scope	Company	Operating revenue and others		Operating expense and others (*1)		Acquisition of property and equipment and others
Ultimate Controlling Entity	SK Inc.(*2)	W	12,897		542,435		79,080

Subsidiaries	SK Broadband Co., Ltd. (*3)		312,739		598,966		1,259
	PS&Marketing Corporation(*4)		7,226		1,257,951		1,483
	SK O&S Co., Ltd.		3,309		252,121		73,450
	SK Telink Co., Ltd.(*5)		108,567		12,838		—
	SERVICE ACE Co., Ltd.(*6)		15,058		125,219		—
	SERVICE TOP Co., Ltd.(*7)		10,933		127,703		—
	SK Communications Co., Ltd.		1,440		3,309		1,936
	Others		9,529		26,665		1,008

			468,801		2,404,772		79,136

Associates	F&U Credit information Co., Ltd.		2,151		45,122		552
	SK USA, Inc		—		5,384		—
	Daehan Kanggun BcN Co., Ltd.		12,972		—		—
	Others(*8)		8,806		15,717		827

			23,929		66,223		1,379

Others	SK Innovation Co., Ltd.		19,164		13,709		—
	SK Networks Co., Ltd.		1,256		12,303		—
	SK Networks Service Co., Ltd.		538		45,101		2,758
	SK Energy Co., Ltd.		1,837		363		—
	Content Wavve Corp.		14,478		87,238		—
	Happy Narae Co., Ltd.		148		30,242		79,776
	SK Shieldus Co., Ltd.		50,997		93,776		14,595
	Eleven Street Co., Ltd.		7,325		32,693		—
	SK Planet Co., Ltd.		5,793		79,926		7,642
	SK hynix Inc.		47,486		178		—
	Tmap Mobility Co., Ltd.		15,397		8,907		—
	Dreamus Company		4,815		76,755		284
	One Store Co., Ltd.		15,696		160		—
	UNA Engineering Inc. (Formerly, UbiNS Co., Ltd.)		—		5,842		18,177
	Others		33,481		27,223		13,142

			218,411		514,416		136,374

		W	724,038		3,527,846		295,969

101

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

36.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the years ended December 31, 2023 and 2022 are as follows, Continued:

(*1)	Operating expense and others include lease payments by the Company.

(*2)	Operating expense and others include W218,019 million of dividends paid by the Company.

(*3)	Operating revenue and others include W149,526 million of dividend income received.

(*4)	Operating expense and others include W685,233 million paid to PS&Marketing Corporation relating to purchase of accounts receivable resulting from sale of handsets.

(*5)	Operating revenue and others include W3,009 million of dividend income received.

(*6)	Operating revenue and others include W4,004 million of dividend income received.

(*7)	Operating revenue and others include W3,000 million of dividend income received.

(*8)	Operating revenue and others include W2,165 million of dividends received from Korea IT Fund, W5,906 million of dividends received from Citadel Pacific Telecom Holdings, LLC and W735 million of dividends received from UNISK(Beijing) Information Technology Co., Ltd.

102

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

36.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the years ended December 31, 2023 and 2022 are as follows, Continued:


(In millions of won)		2022
Scope	Company	Operating revenue and others		Operating expense and others (*1)		Acquisition of property and equipment and others
Ultimate Controlling Entity	SK Inc.(*2)	W	13,225		575,336		74,929

Subsidiaries	SK Broadband Co., Ltd.		144,568		577,970		4,666
	PS&Marketing Corporation(*3)		9,414		1,298,018		1,224
	SK O&S Co., Ltd. (*4)		6,093		238,871		84,966
	SK Telink Co., Ltd.(*5)		105,052		16,135		—
	SERVICE ACE Co., Ltd.(*6)		19,080		123,773		—
	SERVICE TOP Co., Ltd.(*7)		16,359		128,163		—
	SK Communications Co., Ltd.		1,334		3,466		2,331
	Broadband Nowon Co., Ltd.(*8)		13,725		—		—
	Others		4,252		28,198		799

			319,877		2,414,594		93,986

Associates	F&U Credit information Co., Ltd.		1,229		42,877		265
	SK USA, Inc		—		5,043		—
	HanaCard Co., Ltd.(*9)		2,629		1,133		22
	Daehan Kanggun BcN Co., Ltd.		20,290		—		—
	Others(*10)		13,700		421		80

			37,848		49,474		367

Others	SK Innovation Co., Ltd.		14,463		13,890		—
	SK Networks Co., Ltd.		1,396		15,020		288
	SK Networks Service Co., Ltd.		778		43,065		3,030
	SK Energy Co., Ltd.		2,239		302		—
	Content Wavve Corp.		6,781		108,745		175
	Happy Narae Co., Ltd.		143		15,199		129,375
	SK Shieldus Co., Ltd.		32,036		96,085		19,379
	Eleven Street Co., Ltd.		8,529		29,248		—
	SK Planet Co., Ltd.		7,965		84,257		9,850
	SK hynix Inc.		47,145		75		—
	Tmap Mobility Co., Ltd.		13,810		4,925		892
	Dreamus Company		6,101		84,919		649
	One Store Co., Ltd.		16,610		1		—
	UNA Engineering Inc. (Formerly, UbiNS Co., Ltd.)		—		4,001		22,799
	Others		31,027		29,150		20,554

			189,023		528,882		206,991

		W	559,973		3,568,286		376,273

103

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

36.

Transactions with Related Parties, Continued

(3)

Transactions with related parties for the years ended December 31, 2023 and 2022 are as follows, Continued:

(*1)	Operating expense and others include lease payments by the Company.

(*2)	Operating expense and others include W272,524 million of dividends paid by the Company.

(*3)	Operating expense and others include W690,052 million paid to PS&Marketing Corporation relating to purchase of accounts receivable resulting from sale of handsets.

(*4)	Operating revenue and others include W3,000 million of dividend income received.

(*5)	Operating revenue and others include W3,009 million of dividend income received.

(*6)	Operating revenue and others include W8,003 million of dividend income received.

(*7)	Operating revenue and others include W8,000 million of dividend income received.

(*8)	Operating revenue and others include W13,721 million of dividend income received before the related party relationship terminated.

(*9)	HanaCard Co., Ltd. was excluded from the related parties due to the disposal of the Company’s shares in the entity for the year ended December 31, 2022, and the transactions above occurred before the disposal.

(*10)

Operating revenue and others include W13,700 million of dividend income received from Korea IT Fund.

104

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

36.

Transactions with Related Parties, Continued

(4)

Account balances with related parties as of December 31, 2023 and 2022 are as follows:


(In millions of won)		December 31, 2023
		Receivables				Payables
Scope	Company	Loans		Accounts receivable – trade, etc.		Accounts payable – other, etc.
Ultimate Controlling Entity	SK Inc.	W	—		1,411		85,758

Subsidiaries	SK Broadband Co., Ltd.		—		60,464		234,710
	PS&Marketing Corporation		—		1,230		57,560
	SK O&S Co., Ltd.		—		7		68,671
	SK Telink Co., Ltd.		—		22,632		18,154
	SERVICE ACE Co., Ltd.		—		460		26,828
	SERVICE TOP Co., Ltd.		—		—		24,208
	SK Communications Co., Ltd.		—		2		7,033
	Others		—		3,230		15,775

			—		88,025		452,939

Associates	F&U Credit information Co., Ltd.		—		3		4,060
	Daehan Kanggun BcN Co., Ltd.(*1)		22,147		4,702		—
	SK USA, Inc		—		—		972
	Konan Technology Inc.		—		—		224
	Others		—		—		2,239

			22,147		4,705		7,495

Others	SK hynix Inc.		—		6,806		2,251
	SK Planet Co., Ltd.		—		9,313		5,579
	Eleven Street Co., Ltd.		—		1,957		2,842
	One Store Co., Ltd.		—		509		14,691
	SK Shieldus Co., Ltd.		—		10,972		10,157
	SK Innovation Co., Ltd.		—		3,308		27,806
	SK Networks Co., Ltd.		—		41		32,003
	SK Networks Services Co., Ltd.		—		—		8,314
	SK RENT A CAR Co., Ltd.		—		70		14,101
	Incross Co., Ltd.		—		1,607		659
	UNA Engineering Inc. (Formerly, UbiNS Co., Ltd.)		—		—		2,558
	Mintit Co., Ltd.		—		17,025		—
	Happy Narae Co., Ltd.		—		8		5,193
	Content Wavve Co., Ltd.		—		1,476		—
	Dreamus Company		—		504		2,315
	Others		—		7,776		2,976

			—		61,372		131,445

			W22,147		155,513		677,637

(*1)	As of December 31, 2023, the Company recognized loss allowance for the entire balance of loans to Daehan Kanggun BcN Co., Ltd.

105

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

36.

Transactions with Related Parties, Continued

(4)

Account balances with related parties as of December 31, 2023 and 2022 are as follows, Continued:


(In millions of won)		December 31, 2022
		Receivables				Payables
Scope	Company	Loans		Accounts receivable – trade, etc.		Accounts payable – other, etc.
Ultimate Controlling Entity	SK Inc.	W	—		2,247		78,030

Subsidiaries	SK Broadband Co., Ltd.		—		37,790		204,562
	PS&Marketing Corporation		—		1,393		64,880
	SK O&S Co., Ltd.		—		3		50,213
	SK Telink Co., Ltd.		—		17,921		18,684
	SERVICE ACE Co., Ltd.		—		379		26,720
	SERVICE TOP Co., Ltd.		—		2		26,536
	SK Communications Co., Ltd.		—		5		7,671
	Others		—		1,085		20,529

			—		58,578		419,795

Associates	F&U Credit information Co., Ltd.		—		5		4,775
	Wave City Development Co., Ltd.(*1)		—		901		—
	Daehan Kanggun BcN Co., Ltd.(*2)		22,147		3,199		—
	SK USA, Inc		—		—		1,519

			22,147		4,105		6,294

Others	SK hynix Inc.		—		13,705		311
	SK Planet Co., Ltd.		—		6,648		28,097
	Eleven Street Co., Ltd.		—		454		8,018
	One Store Co., Ltd.		—		1,648		13,823
	SK Shieldus Co., Ltd.		—		13,324		12,473
	SK Innovation Co., Ltd.		—		5,592		32,305
	SK Networks Co., Ltd.		—		426		36,903
	SK Networks Services Co., Ltd.		—		—		9,241
	SK RENT A CAR Co., Ltd.		—		89		9,920
	Incross Co., Ltd.		—		2,335		15,527
	UNA Engineering Inc. (Formerly, UbiNS Co., Ltd.)		—		—		12,008
	Mintit Co., Ltd.		—		34,853		—
	Happy Narae Co., Ltd.		—		—		30,467
	Content Wavve Co., Ltd.		—		349		19,239
	Dreamus Company		—		146		3,659
	Others		—		8,184		11,683

			—		87,753		243,674

		W	22,147		152,683		747,793

(*1)	As of December 31, 2022, the Company recognized loss allowance amounting to W379 million on the accounts receivable – trade.

(*2)	As of December 31, 2022, the Company recognized loss allowance for the entire balance of loans to Daehan Kanggun BcN Co., Ltd.

106

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

36.

Transactions with Related Parties, Continued

(5)

The Company has granted SK REIT Co., Ltd. the right of first offer regarding the disposal of real estate owned by the Company. Whereby, the negotiation period is within 3 to 5 years from June 30, 2021, date of agreement, and the Company has been granted the right by SK REIT Co., Ltd. to lease the real estate in preference to a third party if SK REIT Co., Ltd. purchases the real estate from the Company.

(6)

There were additional investments and disposal transactions in subsidiaries, associates and joint ventures for the year ended December 31, 2023 as presented in note 9.

37.

Commitments and Contingencies

(1)

Accounts receivable from sale of handsets

The sales agents of the Company sell handsets to the Company’s subscribers on an installment basis. The Company entered into comprehensive agreements to purchase accounts receivable from handset sales with retail stores and authorized dealers and to transfer the accounts receivable from handset sales to special-purpose companies which were established with the purpose of liquidating receivables, respectively.

The accounts receivable from sale of handsets amounting to W291,747 million and W357,467 million as of December 31, 2023 and 2022, respectively, which the Company purchased according to the relevant comprehensive agreement, are recognized as accounts receivable – other and long-term accounts receivable – other.

(2)

Legal claims and litigations

As of December 31, 2023, the Company is involved in various legal claims and litigations. Provision recognized in relation to these claims and litigations is immaterial. In connection with those legal claims and litigations for which no provision was recognized, management does not believe the Company has a present obligation, nor is it expected that any of these claims or litigations will have a material impact on the Company’s financial position or operating results in the event an outflow of resources is ultimately necessary.

(3)

Obligation relating to spin-off

The Company carried out the spin-off of its business of managing investments in semiconductor, New Information and Communication Technologies(“ICT”) and other businesses and making new investments on November 1, 2021. The Company has obligation to jointly and severally reimburse the Company’s liabilities incurred prior to the spin-off with SK Square Co., Ltd., the spin-off company, in accordance with Article 530-9 (1) of Korean Commercial Act.

107

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

37.

Commitments and Contingencies, Continued

(4)

Commitment of acquisition and disposal of shares

The Board of Directors of the Company resolved the acquisition and disposal of certain shares in order to strengthen the strategic alliance with Hana Financial Group Inc.(“HFG”) at the Board of Directors’ meeting held on July 22, 2022. In accordance with the resolution, as of July 27, 2022, the Company disposed of its entire common shares of HanaCard Co., Ltd. (39,902,323 shares) and entire common shares of Finnq Co., Ltd. (6,370,000 shares) to HFG for W330,032 million and W5,733 million, respectively. Through the agreement with HFG, the Company is obligated to acquire HFG’s common shares from July 27, 2022 to January 31, 2024, after depositing W330,032 million in a specific money trust, and the Company completed the acquisition of the shares for the year ended December 31, 2022. As a part of the aforementioned transaction, as of July 27, 2022, the Company disposed of its entire common shares of SK Square Co., Ltd. (767,011 shares) to HanaCard Co., Ltd. for W31,563 million, and HanaCard Co., Ltd. is obligated to acquire the Company’s common shares from July 27, 2022 to January 31, 2024, after depositing W68,437 million in a specific money trust, and completed the acquisition of the shares for the year ended December 31, 2022., The Company, HFG, and HanaCard Co., Ltd. may not dispose of shares they have acquired under the aforementioned transaction until March 31, 2025.

(5)

The acquisition cost of property and equipment and intangible assets to be incurred in subsequent periods under arrangements is W39,459 million as of December 31, 2023.

(6)

According to the covenant for bond issuance and borrowings, the Company is required to maintain specific financial ratios, such as the debt ratio, at certain levels. The funds obtained must be used for specified purposes only, and regular reporting to lenders is mandated. Additionally, the contracts include clauses that restrict both provision of additional collateral of assets held by the Company and disposal of certain assets.

108

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

38.

Statements of Cash Flows

(1)

Adjustments for income and expenses from operating activities for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Gain on foreign currency translations	W	(300	)		(345	)
Interest income		(36,937	)		(34,124	)
Dividends		(209,195	)		(50,927	)
Gain relating to financial instruments at FVTPL		(87,199	)		(40,581	)
Gain on disposal of property and equipment and intangible assets		(20,825	)		(14,073	)
Gain on sale of accounts receivable – other		—			(1,043	)
Loss on foreign currency translations		660			961
Bad debt for accounts receivable – trade		28,765			16,053
Bad debt for accounts receivable – other		4,349			2,071
Loss relating to financial instruments at FVTPL		41,819			27,635
Gain (loss) relating to investments in subsidiaries, associates and joint ventures		19,012			(61,603	)
Depreciation and amortization		2,833,327			2,827,617
Loss on disposal of property and equipment and intangible assets		3,929			5,722
Loss on sale of accounts receivable – other		65,027			61,841
Interest expense		325,769			287,865
Expense related to defined benefit plan		55,298			50,795
Bonus paid by treasury shares		20,420			25,425
Share option		7,051			76,314
Income tax expense		295,189			276,760
Other income (expenses)		(11,965	)		13,806

	W	3,334,194			3,470,169

109

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

38.

Statements of Cash Flows, Continued

(2)

Changes in assets and liabilities from operating activities for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Accounts receivable – trade	W	(99,070	)		71,720
Accounts receivable – other		78,157			30,679
Advanced payments		9,089			(31,394	)
Prepaid expenses		66,413			4,432
Inventories		(4,741	)		(14,392	)
Long-term accounts receivable – other		60,799			(95,028	)
Long-term prepaid expenses		—			12,990
Guarantee deposits		(3,781	)		5,983
Contract assets		11,486			(3,622	)
Accounts payable – other		(225,677	)		290,890
Withholdings		4,802			(3,388	)
Deposits received		4,806			(4,149	)
Accrued expenses		33,086			37,239
Plan assets		(13,876	)		(59,665	)
Retirement benefits payment		(38,347	)		(28,932	)
Contract liabilities		(29,187	)		4,340
Others		(2,333	)		(2,845	)

	W	(148,374	)		214,858

(3)

Significant non-cash transactions for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023			2022
Decrease in accounts payable – other relating to the acquisition of property and equipment and intangible assets	W	(314,811	)		(29,247	)
Increase of right-of-use assets		253,838			410,640
Transfer from property and equipment to investment property		6,264			16,673

110

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

38.

Statements of Cash Flows, Continued

(4)

Reconciliation of liabilities arising from financing activities for the years ended December 31, 2023 and 2022 are as follows:


(In millions of won)
	2023
							Non-cash transactions
	January 1, 2023			Cash flows			Exchange rate changes(*)		Fair value changes			Other changes		December 31, 2023
	January 1, 2023			Cash flows			Exchange rate changes(*)		Fair value changes			Other changes		December 31, 2023
Total liabilities from financing activities:
Short-term borrowings	W	100,000			(100,000	)		—		—			—		—
Long-term borrowings		740,000			(100,000	)		—		—			—		640,000
Debentures		6,988,970			(367,815	)		15,412		—			30,372		6,666,939
Lease liabilities		1,379,311			(354,235	)		—		—			201,469		1,226,545
Long-term payables – other		1,638,341			(400,245	)		—		—			22,357		1,260,453
Derivative financial assets		(222,622	)		126,000			—		(19,588	)		—		(116,210	)

	W	10,624,000			(1,196,295	)		15,412		(19,588	)		254,198		9,677,727
Other cash flows from financing activities:
Payments of cash dividends				W	(723,215	)
Payments of interest on hybrid bonds					(17,283	)
Acquisition of treasury shares					(285,487	)
Proceeds of hybrid bonds					398,509
Repayments of hybrid bonds					(400,000	)

					(1,027,476	)

				W	(2,223,771	)

(*)	The effect of changes in foreign exchange rates for financial liabilities at amortized cost.

111

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

38.

Statements of Cash Flows, Continued

(4)

Reconciliation of liabilities arising from financing activities for the years ended December 31, 2023 and 2022 are as follows, Continued:


(In millions of won)
	2022
							Non-cash transactions
	January 1, 2022			Cash flows			Exchange rate changes(*)		Fair value changes			Other changes		December 31, 2022
	January 1, 2022			Cash flows			Exchange rate changes(*)		Fair value changes			Other changes		December 31, 2022
Total liabilities from financing activities:
Short-term borrowings	W	—			100,000			—		—			—		100,000
Long-term borrowings		306,728			432,904			—		—			368		740,000
Debentures		6,804,867			80,820			97,850		—			5,433		6,988,970
Lease liabilities		1,362,095			(344,199	)		—		—			361,415		1,379,311
Long-term payables – other		2,009,833			(400,245	)		—		—			28,753		1,638,341
Derivative financial assets		(152,512	)		768			—		(70,878	)		—		(222,622	)

	W	10,331,011			(129,952	)		97,850		(70,878	)		395,969		10,624,000
Other cash flows from financing activities:
Payments of cash dividends				W	(904,020	)
Payments of interest on hybrid bonds					(14,766	)

					(918,786	)

				W	(1,048,738	)

(*)	The effect of changes in foreign exchange rates for financial liabilities at amortized cost.

112

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

39.

Emissions Liabilities

(1)

The quantity of emissions rights allocated free of charge for each implementation year as of December 31, 2023 are as follows:


(In tCO2-eQ)
	Quantities allocated in 2021		Quantities allocated in 2022		Quantities allocated in 2023		Quantities allocated in 2024		Quantities allocated in 2025		Total
Emissions rights allocated free of charge(*)		1,031,526		1,223,008		1,031,526		1,021,864		1,021,864		5,329,788

(*)	The changes in quantity due to additional allocation, cancellation of allocation and others are considered.

(2)

Changes in emissions rights quantities the Company held are as follows:


(In tCO2-eQ)
	Quantities allocated in 2021			Quantities allocated in 2022			Quantities allocated in 2023			Total
Beginning		—			—			306,575			306,575
Allocation at no cost		1,031,526			1,223,008			1,031,526			3,286,060
Purchase		—			204,761			—			204,761
Surrendered or shall be surrendered		(1,051,380	)		(1,121,194	)		(1,227,222	)		(3,399,796	)
Borrowed		19,854			—			—			19,854

Ending		—			306,575			110,879			417,454

(3)

As of December 31, 2023, the estimated annual greenhouse gas emissions quantities of the Company are 1,227,222 tCO2-eQ.

113

SK TELECOM CO., LTD.

Notes to the Separate Financial Statements

For the years ended December 31, 2023 and 2022

40.

Subsequent Events

(1)

On January 25, 2024, the Board of Directors of the Company approved the disposal of treasury shares and the details of the transaction are as follows:


				Information of disposal
		Number of treasury shares		498,135 Common shares
		Price of the treasury shares (in won)		Per share W49,600
		Aggregate disposal value		W24,707 million
		Disposal date		January 29, 2024
		Purpose of disposal		Allotment of shares as bonus payment
		Method of disposal		Over-the-counter

(2)

The Board of Directors of the Company approved the acquisition and retirement of treasury shares of the Company at the Board of Directors’ meeting held on July 26, 2023. The Company acquired a total of 6,090,410 shares during the period from July 27, 2023 to January 26, 2024 through a trust agreement and 4,043,091 shares were retired on February 5, 2024.

114

Audit opinion on internal control over financial reporting

The accompanying independent auditor’s report on internal control over financial reporting is attached as a result of auditing the internal control over financial reporting of SK Telecom Co., Ltd. (the “Company”) and the separate financial statements of the Company for the year ended December 31, 2023 in accordance with the Article 8 of the Act on External Audit of Stock Companies.

Attachments:

Independent auditor’s report on Internal Control over Financial Reporting

Management’s Annual Report on Internal Control over Financial Reporting

115

Independent auditor’s report on Internal Control over Financial Reporting

(Based on a report originally issued in Korean)

SK Telecom Co., Ltd.:

The Shareholders and Board of Directors

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting (“ICFR”) of SK Telecom Co., Ltd.’s (the “Company”) based on the Conceptual Framework for Designing and Operating ICFR (“ICFR Design and Operation Framework”) established by the Operating Committee of ICFR in Korea (the “ICFR Committee”) as of December 31, 2023.

In our opinion, the Company’s ICFR has been effectively designed and operated, in all material respects, as of December 31, 2023, in accordance with the ICFR Design and Operation Framework.

We also have audited, in accordance with Korean Standards on Auditing (“KSA”), the separate statement of financial position as of December 31, 2023, the separate statements of income, comprehensive income, changes in equity, and cash flows for the year then ended, and notes to the separate financial statements, including a summary of material accounting policies, of the Company, and our report dated March 6, 2024 expressed an unqualified opinion thereon.

Basis for Opinion on ICFR

We conducted our audit in accordance with KSA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of ICFR section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of ICFR in the Republic of Korea, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for ICFR

Management is responsible for designing, operating, and maintaining effective ICFR, and for its assessing the effectiveness of ICFR, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.

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

Auditor’s Responsibilities for the Audit of ICFR

Our responsibility is to express an opinion on the Company’s ICFR based on our audit. We conducted our audit in accordance with KSA. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective ICFR was maintained in all material respects.

An audit of ICFR involves performing procedures to obtain audit evidence as to whether a material weakness exists. The procedures selected depend on the auditor’s judgment, including the assessment of the risks that a material weakness exists An audit also includes testing and evaluating the design and operation of ICFR based on obtaining an understanding of ICFR and the assessed risk.

116

ICFR definition and Inherent Limitations

A company’s ICFR is implemented by those charged with governance, management, and other employees and is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“KIFRS”). A company’s ICFR includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with KIFRS, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, ICFR may not prevent, or detect misstatements of the financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that ICFR may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The engagement partner on the audit resulting in this independent auditor’s report is Yoo, Jung Ho.

LOGO

March 6, 2024

This report is effective as of March 6, 2024, the independent auditor’s report date. Accordingly, certain material subsequent events or circumstances may have occurred during the period from the auditor’s report date to the time this report is used. Such events and circumstances could significantly affect the Company’s ICFR and may result in modifications to this report.

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Management’s Annual Report on Internal Control over Financial Reporting

English translation of a Report Originally Issued in Korean

To Shareholders, the Board of Directors and Audit Committee of

SK Telecom Co., Ltd.

We, as the Chief Executive Officer (“CEO”) and Internal Control over Financial Reporting (“ICFR”) Officer of SK Telecom Co., Ltd. (“the Company”), assessed the status of the design and operation of the Company’s ICFR for the year ending December 31, 2023.

The Company’s management including the CEO and ICFR Officer is responsible for designing and operating ICFR. We, as the CEO and ICFR Officer (collectively, “We”, “Our” or “Us”), evaluated whether the ICFR has been appropriately designed and is effectively operating to prevent and detect error or fraud which may cause material misstatement of the financial statements to ensure preparation and disclosure of reliable financial information.

We used the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’ established by the Operating Committee of Internal Control over Financial Reporting in Korea (the “ICFR Committee”)’ as the criteria for design and operation of the Company’s ICFR. We also conducted an evaluation of ICFR based on the ‘Management Guideline for Evaluating and Reporting Effectiveness of Internal Control over Financial Reporting’ established by the ICFR Committee.

Based on our assessment of ICFR operation, we concluded that the Company’s ICFR has been appropriately designed and is operating effectively in all material respects as of December 31, 2023, in accordance with the ‘Conceptual Framework for Designing and Operating Internal Control over Financial Reporting’.

We certify that this report does not contain any untrue statement of a fact, or omit to state a fact necessary to be presented herein. We also certify that this report does not contain or present any statements which might cause material misunderstandings of the readers, and we have reviewed and verified this report with sufficient care.

February 20, 2024

/s/ Kim, Yang Seob

Internal Control over Financial Reporting Officer

/s/ Ryu, Young Sang

Chief Executive Officer

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