Fair Value

12 Months Ended

Dec. 31, 2020

37.	Fair Value

37.1 Fair Value of Financial Instruments by Categor

Carrying amount and fair value of financial instruments by category as at December 31, 2019 and 2020, are as follows:


	December 31, 2019				December 31, 2020
(In millions of Korean won)	Carrying amount		Fair value		Carrying amount		Fair value
Financial assets
Cash and cash equivalents	￦	2,305,894		1	￦	2,634,624		1
Trade and other receivables
Financial assets measured at amortized cost 2		5,748,459		1		4,976,423		1
Financial assets at fair value through other comprehensive income		1,256,266		1,256,266		1,118,619		1,118,619
Other financial assets
Financial assets measured at amortized cost		441,804		1		671,068		1
Financial assets at fair value through profit or loss		632,324		632,324		809,919		809,919
Financial assets at fair value through other comprehensive income		557,342		557,342		258,516		258,516
Derivative financial assets for hedging		58,576		58,576		7,684		7,684

Total	￦	11,000,665			￦	10,476,853

Financial liabilities
Trade and other payables	￦	8,679,698		1	￦	7,017,639		1
Borrowings		7,298,867		1		7,316,298		1
Other financial liabilities
Financial liabilities at amortized cost		129,945		1		132,558		1
Financial liabilities at fair value through profit or loss		38		38		2,682		2,682
Derivative financial liabilities for hedging		20,096		20,096		127,929		127,929

Total	￦	16,128,644			￦	14,597,106

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

With the application of IFRS 7, lease receivables are excluded from fair value disclosure.

37.2

Fair Value Hierarchy

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

•

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

•

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

•

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

Fair value hierarchy classifications of the financial assets and financial liabilities that are measured at fair value or its fair value is disclosed as at December 31, 2019 and 2020, are as follows:


(In millions of Korean won)	December 31, 2019
(In millions of Korean won)	Level 1		Level 2		Level 3		Total
Assets
Trade and other receivables
Financial assets at fair value through other comprehensive income	￦	—	￦	1,256,266	￦	—	￦	1,256,266
Other financial assets
Financial assets at fair value through profit or loss		232		136,951		495,141		632,324
Financial assets at fair value through other comprehensive income		6,738		508,550		42,054		557,342
Derivative financial assets for hedging		—		40,788		17,788		58,576
Disclosed fair value

Investment properties		—		—		2,304,583		2,304,583

Total	￦	6,970	￦	1,942,555	￦	2,859,566	￦	4,809,091

Liabilities
Other financial liabilities
Financial liabilities at fair value through profit or loss	￦	—	￦	38	￦	—	￦	38
Derivative financial liabilities for hedging		—		20,096		—		20,096

Total	￦	—	￦	20,134	￦	—	￦	20,134


(In millions of Korean won)	December 31, 2020
(In millions of Korean won)	Level 1		Level 2		Level 3		Total
Assets
Trade and other receivables
Financial assets at fair value through other comprehensive income	￦	—	￦	1,118,619	￦	—	￦	1,118,619
Other financial assets
Financial assets at fair value through profit or loss		46,449		330,961		432,509		809,919
Financial assets at fair value through other comprehensive income		5,606		202,121		50,789		258,516
Derivative financial assets for hedging		—		7,684		—		7,684
Disclosed fair value

Investment properties		—		—		2,645,482		2,645,482

Total	￦	52,055	￦	1,659,385	￦	3,128,780	￦	4,840,220

Liabilities
Other financial liabilities
Financial liabilities at fair value through profit or loss	￦	—	￦	45	￦	2,637	￦	2,682
Derivative financial liabilities for hedging		—		123,735		4,194		127,929

Total	￦	—	￦	123,780	￦	6,831	￦	130,611

37.3 Transfers Between Fair Value Hierarchy Levels of Recurring Fair Value Measurements

There are no transfers between Level 1 and Level 2 of the fair value hierarchy for the recurring fair value measurements.

Details of changes in Level 3 of the fair value hierarchy for the recurring fair value measurements as at December 31, 2019 and 2020, are as follows:


	2019
	Financial assets						Financial liabilities
(In millions of Korean won)	Financial assets at fair value through profit or loss			Financial assets at fair value through other comprehensive income			Derivative financial assets (liabilities) for hedging			Financial liabilities at fair value through profit or loss
Beginning balance	￦	163,600		￦	311,536		￦	(10,183	)	￦	7,758
Purchases		584,671			6,081			—			—
Reclassification		225,873			(444,782	)		—			—
Disposal		(485,419	)		(941	)		—			(9,734	)
Amount recognized in profit or loss 1,2		6,416			—			14,462			1,976
Amount recognized in other comprehensive income 1		—			170,160			13,509			—

Ending balance	￦	495,141		￦	42,054		￦	17,788		￦	—

Amount recognized in profit or loss and other comprehensive income with respect to derivative financial liabilities for hedging comprises loss on valuation of derivative instruments.

Amount recognized in profit or loss with respect to financial liabilities at fair value through profit or loss comprises loss on valuation of derivative instruments.


	2020
	Financial assets						Financial liabilities
(In millions of Korean won)	Financial assets at fair value through profit or loss			Financial assets at fair value through other comprehensive income			Financial liabilities at fair value through profit or loss			Derivative financial assets (liabilities) for hedging
Beginning balance	￦	495,141		￦	42,054		￦	—		￦	(17,788	)
Purchases		374,259			13,142			2,798			—
Reclassification		208			—			—			—
Disposal		(451,663	)		(571	)		—			—
Amount recognized in profit or loss 1,2		14,564			(428	)		(161	)		29,345
Amount recognized in other comprehensive income 1		—			(3,408	)		—			(7,363	)

Ending balance	￦	432,509		￦	50,789		￦	2,637		￦	4,194

Amount recognized in profit or loss and other comprehensive income with respect to derivative financial liabilities for hedging comprises loss on valuation of derivative instruments.

Amount recognized in profit or loss with respect to financial liabilities at fair value through profit or loss comprises loss on valuation of derivative instruments.

37.4

Valuation Technique and the Inputs

Valuation techniques and inputs used in the recurring,

non-recurring

fair value measurements and disclosed fair values categorized within Level 2 and Level 3 of the fair value hierarchy as at December 31, 2019 and 2020, are as follows:


	December 31, 2019
(In millions of Korean won)	Fair value		Level		Valuation techniques
Assets
Trade and other receivables
Financial assets at fair value through other comprehensive income	￦	1,256,266		2	DCF Model
Other financial assets
Financial assets at fair value through profit or loss		632,092		2,3	DCF Model, Adjusted net asset model
Financial assets at fair value through other comprehensive income		550,604		2,3	DCF Model, Comparable Company Analysis
Derivative financial assets for hedging		58,576		2,3	Hull-White model, DCF Model
Investment properties		2,304,583		3	DCF Model
Liabilities
Other financial liabilities
Financial liabilities at fair value through profit or loss	￦	38		2	DCF Model
Derivative financial liabilities for hedging		20,096		2	DCF Model


	December 31, 2020
(In millions of Korean won)	Fair value		Level		Valuation techniques
Assets
Trade and other receivables
Financial assets at fair value through other comprehensive income	￦	1,118,619		2	DCF Model
Other financial assets
Financial assets at fair value through profit or loss		763,470		2,3	DCF Model, Adjusted net asset model
Financial assets at fair value through other comprehensive income		252,910		2,3	DCF Model, Comparable Company Analysis
Derivative financial assets for hedging		7,684		2	DCF Model
Investment properties		2,645,482		3	DCF Model
Liabilities
Other financial liabilities
Financial liabilities at fair value through profit or loss	￦	2,682		2,3	DCF Model, Binomial Option Pricing
Derivative financial liabilities for hedging		127,929		2,3	Hull-White model, DCF Model

37.5

Valuation Processes for Fair Value Measurements Categorized Within Level 3

The Group uses external experts that perform the fair value measurements required for financial reporting purposes. External experts report directly to the chief financial officer (CFO), and discusses valuation processes and results with the CFO in line with the Group’s reporting dates.

37.6

Gains and losses on valuation at the transaction dat

In the case that the Group values derivative financial instruments using inputs not based on observable market data, and the fair value calculated by the said valuation technique differs from the transaction price, then the fair value of the financial instruments is recognized as the transaction price. The difference between the fair value at initial recognition and the transaction price is deferred and amortized using a straight-line method by maturity of the financial instruments. However, in the case that inputs of the valuation techniques become observable in markets, the remaining deferred difference is immediately recognized in full in profit for the year.

In relation to this, details and changes of the total deferred difference for the years ended December 31, 2019 and 2020, are as follows:


	2019						2020
(In millions of Korean won)	Derivatives used for hedging			Derivative held for trading			Derivatives used for hedging			Derivative held for trading
I. Beginning balance	￦	5,107		￦	(2,824	)	￦	3,682		￦	—
II. New transactions		—			—			—			—
III. Recognized at fair value through profit or loss		(1,425	)		2,824			(1,425	)		—

IV. Ending balance (I+II+III)	￦	3,682		￦	—		￦	2,257		￦	—