Deferred Income Tax and income Tax Expense

12 Months Ended

Dec. 31, 2019

Deferred Income Tax and income Tax Expense

29.	Deferred Income Tax and income Tax Expense

The analysis of deferred tax assets and deferred tax liabilities as at December 31, 2018 and 2019, is as follows:


(In millions of Korean won)	December 31, 2018			December 31, 2019
Deferred tax assets
Deferred tax assets to be recovered within 12 months	￦	428,690		￦	419,889
Deferred tax assets to be recovered after more than 12 months		1,347,985			1,613,836

Deferred tax assets before offsetting		1,776,675			2,033,725

Deferred tax liabilities
Deferred tax liability to be recovered within 12 months		(413,409	)		(538,578	)
Deferred tax liability to be recovered after more than 12 months		(1,102,682	)		(1,495,759	)

Deferred tax liabilities before offsetting		(1,516,091	)		(2,034,337	)

Deferred tax assets after offsetting	￦	465,369		￦	424,856

Deferred tax liabilities after offsetting	￦	204,785		￦	425,468

The gross movements on the deferred income tax account for the years ended December 31, 2018 and 2019, are calculated as follows:


(In millions of Korean won)	2018			2019
Beginning	￦	583,760		￦	260,584
Changes in accounting policy		(374,307	)		—
Changes to the statement of operations		15,016			(199,527	)
Changes to other comprehensive loss (income)		36,115			(61,669	)

Ending	￦	260,584		￦	(612	)

The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:


(In millions of Korean won)	2018
	Beginning			Changes in accounting policy			Consolidated s tatemen ts of operations			Other comprehensive income			Ending
Deferred tax liabilities
Available-for-sale financial assets	￦	(30,520	)	￦	30,520		￦	—		￦	—		￦	—
Investment in subsidiaries, associates, and joint ventures		(96,650	)		—			2,867			179			(93,604	)
Depreciation		—			—			(424	)		—			(424	)
Advanced depreciation provision		(248,592	)		—			(64,592	)		—			(313,184	)
Deposits for severance benefits		(387,856	)		—			(11,126	)		—			(398,982	)
Accrued income		(2,150	)		—			592			—			(1,558	)
Reserve for technology and human resource development		(314	)		—			110			—			(204	)
Prepaid expenses		—			(352,139	)		(17,777	)		—			(369,916	)
Contract assets		—			(23,663	)		12,158			—			(11,505	)
Financial assets at fair value through profit or loss		—			(30,856	)		30,195			—			(661	)
Financial assets at fair value through other comprehensive income		—			(8,587	)		(17,638	)		(15,573	)		(41,798	)
Others		(108,749	)		—			(175,506	)		—			(284,255	)

Total	￦	(874,831	)	￦	(384,725	)	￦	(241,141	)	￦	(15,394	)	￦	(1,516,091	)

Deferred tax assets
Derivative instruments	￦	24,724		￦	—		￦	(26,128	)	￦	9,745		￦	8,341
Provision for impairment or trade receivables		121,656			(9,096	)		(12,673	)		—			99,887
Inventory valuation		—			—			121			—			121
Contribution for construction		18,271			—			(1,471	)		—			16,800
Accrued expenses		106,168			—			21,729			—			127,897
Provisions		24,079			—			12,099			—			36,178
Property and equipment		232,074			—			(1,796	)		—			230,278
Defined benefit liabilities		467,049			—			3,980			42,813			513,842
Withholding of facilities expenses		7,382			—			(773	)		—			6,609
Deduction of installment receivables		—			—			42			—			42
Assets retirement obligation		20,836			—			3,696			—			24,532
Gain or loss foreign currency translation		143			—			10,529			—			10,672


(In millions of Korean won)	2018
	Beginning		Changes in accounting policy			Conso lidated s tatement s of operations			Other comprehensive income			Ending
Deferred revenue		26,334		15,809			(2,502	)		—			39,641
Real-estate sales		8,698		661			12,369			—			21,728
Tax loss carryforward		2,699		—			1,364			—			4,063
Trade receivables		—		2,890			(1,293	)		—			1,597
Others		247,702		154			284,742			(1,049	)		531,549

Total	￦	1,307,815	￦	10,418		￦	304,035		￦	51,509		￦	1,673,777

Temporary difference, net		432,984		(374,307	)		62,894			36,115			157,686
Tax credit carryforwards		150,776		—			(47,878	)		—			102,898

Total net balance	￦	583,760	￦	(374,307	)	￦	15,016		￦	36,115		￦	260,584


(In millions of Korean won)	2019
	Beginning			Changes in accounting policy		Consolidated s tatement s of operations			Other comprehensive income			Ending
Deferred tax liabilities
Derivative instruments		—			—		(10,250	)		(648	)		(10,898	)
Investment in subsidiaries, associates, and joint ventures		(93,604	)		—		(14,622	)		35			(108,191	)
Depreciation		(424	)		—		(11,182	)		—			(11,606	)
Advanced depreciation provision		(313,184	)		—		63			—			(313,121	)
Deposits for severance benefits		(398,982	)		—		(99,126	)		1,255			(496,853	)
Accrued income		(1,558	)		—		17			—			(1,541	)
Reserve for technology and human resource development		(204	)		—		—			—			(204	)
Prepaid expenses		(369,916	)		—		(40,947	)		—			(410,863	)
Contract assets		(11,505	)		—		(42,245	)		—			(53,750	)
Financial assets at fair value through profit or loss		(661	)		—		338			—			(323	)
Financial assets at fair value through other comprehensive income		(41,798	)		—		(3,556	)		(58,483	)		(103,837	)
Others		(284,255	)		—		(238,725	)		(170	)		(523,150	)

Total		(1,516,091	)		—		(460,235	)		(58,011	)		(2,034,337	)

Deferred tax assets
Derivative instruments		8,341			—		(850	)		(7,491	)		—
Provision for impairment or trade receivables		99,887			—		(15,816	)		—			84,071
Inventory valuation		121			—		(98	)		—			23
Contribution for construction		16,800			—		(646	)		—			16,154
Unsettled expenses		127,897			—		32,539			—			160,436
Provisions		36,178			—		(3,354	)		—			32,824
Property and equipment		230,278			—		(1,623	)		—			228,655
Defined benefit liabilities		513,842			—		48,847			6,782			569,471
Withholding of facilities expenses		6,609			—		(426	)		—			6,183
Deduction of installment receivables		42			—		6			—			48
Assets retirement obligation		24,532			—		4,484			—			29,016
Gain or loss foreign currency translation		10,672			—		10,005			—			20,677
Deferred revenue		39,641			—		(3,841	)		—			35,800


(In millions of Korean won)	2019
	Beginning		Changes in accounting policy		Consolidated s tatement s of operations			Other comprehensive income			Ending
Real-estate sales		21,728		—		(8,043	)		—			13,685
Others		537,209		—		174,177			(2,949	)		708,437

Total		1,673,777		—		235,361			(3,658	)		1,905,480

Temporary difference, net		157,686		—		(224,874	)		(61,669	)		(128,857	)
Tax credit carryforwards		102,898		—		25,347			—			128,245

Total net balance		260,584		—		(199,527	)		(61,669	)		(612	)

The tax impacts recognized directly to equity as at December 31, 2017, 2018, and 2019, are as follows:


	2017									2018									2019
(In millions of Korean won)	Before recognition			Tax effect			After recognition			Before recognition			Tax effect			After recognition			Before recognition			Tax effect			After recognition
Loss on valuation of available-for-sale securities	￦	(5,561	)	￦	1,346		￦	4,215	)	￦	—		￦	—		￦	—		￦	—		￦	—		￦	—
Gain on valuation of financial assets at fair value through other comprehensive income		—			—			—			59,384			(15,573	)		43,811			225,635			(58,483	)		167,152
Gain (loss) on valuation of hedge instruments		40,694			(9,848	)		30,846			(36,756	)		9,745			(27,011	)		31,003			(8,139	)		22,864
Remeasurements of net defined benefit liabilities		(110,768	)		26,806			(83,962	)		(116,324	)		42,813			(73,511	)		(33,814	)		8,037			(25,777	)
Share of gain(loss) of associates and joint ventures, and others		13,410			(3,245	)		10,165			(1,036	)		179			(857	)		4,493			(1,327	)		3,166
Exchange differences on translation for foreign operations		(27,865	)		6,743			(21,122	)		3,989			(1,049	)		2,940			6,692			(1,759	)		4,933

Total	￦	(90,090	)	￦	21,802		￦	(68,288	)	￦	(90,743	)	￦	36,115		￦	(54,628	)	￦	234,009		￦	(61,671	)	￦	172,338

Details of income tax expense for the years ended December 31, 2017, 2018 and 2019, are calculated as follows:


(In millions of Korean won)	2017		2018			2019
Current income tax expense	￦	268,885	￦	329,581		￦	120,533
Impact of change in deferred taxes		1,771		(15,016	)		199,527

Income tax expense	￦	270,656	￦	314,565		￦	320,060

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the entities as follows:


(In millions of Korean won)	2017			2018			2019
Profit before income tax expense	￦	816,997		￦	1,033,977		￦	1,019,334

Statutory income tax expense	￦	197,251		￦	273,982		￦	269,955
Tax effect
Income not taxable for taxation purposes		(19,268	)		(85,322	)		(1,265	)
Non-deductible expenses		39,746			18,126			19,543
Tax credit		(27,211	)		(20,319	)		(39,190	)
Additional payment of income taxes		976			11,439			3,832
Tax effect and adjustment on consolidation
Goodwill impairment		20,475			137			159
Eliminated dividend income form subsidiaries		34,305			31,966			21,917
Changes of out-side tax effect		17,990			618			13,539
Investment in-kind		—			82,820			—
Intangible Asset impairment and amortization		—			—			14,052
Reversal expenses of contract cost assets		—			—			11,213
Others		6,392			1,118			6,305

Income tax expense	￦	270,656		￦	314,565		￦	320,060