| 19. | Provisions |
| (1) | Changes in provisions for the years ended December 31, 2017 and 2016 are as follows: |
| (In millions of won) | ||||||||||||||||||||||||||||||||
| For the year ended December 31, 2017 | As of December 31, 2017 | |||||||||||||||||||||||||||||||
| Beginning balance |
Increase | Utilization | Reversal | Other | Ending balance |
Current | Non-current | |||||||||||||||||||||||||
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Provision for installment of handset subsidy(*1) |
￦ | 24,710 | 2 | (8,898 | ) | (11,940 | ) | — | 3,874 | 3,874 | — | |||||||||||||||||||||
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Provision for restoration(*2) |
64,679 | 12,066 | (2,517 | ) | (1,006 | ) | 45 | 73,267 | 40,598 | 32,669 | ||||||||||||||||||||||
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Emission allowance(*3) |
2,788 | 4,663 | (518 | ) | (2,283 | ) | — | 4,650 | 4,650 | — | ||||||||||||||||||||||
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Other provisions |
5,740 | 952 | (3,757 | ) | — | — | 2,935 | 2,935 | — | |||||||||||||||||||||||
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| ￦ | 97,917 | 17,683 | (15,690 | ) | (15,229 | ) | 45 | 84,726 | 52,057 | 32,669 | ||||||||||||||||||||||
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| (In millions of won) | ||||||||||||||||||||||||||||||||
| For the year ended December 31, 2016 | As of December 31, 2016 | |||||||||||||||||||||||||||||||
| Beginning balance |
Increase | Utilization | Reversal | Other | Ending balance |
Current | Non-current | |||||||||||||||||||||||||
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Provision for installment of handset subsidy(*1) |
￦ | 5,670 | 37,530 | (18,490 | ) | — | — | 24,710 | 19,939 | 4,771 | ||||||||||||||||||||||
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Provision for restoration(*2) |
59,954 | 6,677 | (1,082 | ) | (913 | ) | 43 | 64,679 | 37,760 | 26,919 | ||||||||||||||||||||||
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Emission allowance(*3) |
1,477 | 1,480 | (169 | ) | — | — | 2,788 | 2,788 | — | |||||||||||||||||||||||
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Other provisions |
3,104 | 3,237 | (601 | ) | — | — | 5,740 | 5,740 | — | |||||||||||||||||||||||
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| ￦ | 70,205 | 48,924 | (20,342 | ) | (913 | ) | 43 | 97,917 | 66,227 | 31,690 | ||||||||||||||||||||||
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| (*1) | The Group recognizes a provision for handset subsidies given to the subscribers who purchase handsets on an installment basis. The amount recognized as a provision for handset subsidies is the Group’s best estimate of the expenditure required to settle the current obligations to the relevant subscribers at the end of the reporting period, which is calculated as of the present values of estimated handset subsidies to be granted over the relevant service periods, taking into account the customer retention rate for the relevant subscribers. The discount rate used in calculating the present values is based on AAA-rated corporate bonds with a two-year maturity. The customer retention rate is based on the Group’s historical retention rate. |
| (*2) | In the course of the Group’s activities, base station and other assets are installed on leased premises which are expected to have costs associated with restoring the premises to their original conditions where these assets are situated upon ceasing their use on those premises. The associated cash outflows, which are long-term in nature, are generally expected to occur at the dates of the termination of lease contracts to which the assets relate. These restoration costs are calculated on the basis of the identified costs for the current financial year, extrapolated into the future based on management’s best estimates of future trends in prices, inflation, and other factors, and are discounted to present value at a risk-adjusted rate specifically applicable to the liability. Forecasts of estimated future cash outflows are revised in light of future changes in business conditions or technological requirements. The Group records these restoration costs as property and equipment and subsequently expenses them using the straight-line method over the asset’s useful life, and records the accretion of the liability as a charge to finance costs. |
| (*3) | The Group recognizes estimated future payment for the number of emission certificates required to settle the Group’s obligation exceeding the actual number of certificates on hand as emission allowances according to the Act on Allocation and Trading of Greenhouse Gas Emission Permits. |
| (2) | The followings are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period. |
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Key assumptions |
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Provision for handset subsidy |
estimation based on historical service retention period data | |
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Provision for restoration |
estimation based on cost of demolition and inflation with an assumption of demolishing the relevant assets after six years |