Fair Value

12 Months Ended

Dec. 31, 2023

37.	Fair Value

(1) Fair Value of Financial Instruments by Category

Carrying amount and fair value of financial instruments by category as of December 31, 2022 and 2023, are as follows:


	December 31, 2022				December 31, 2023
(in millions of Korean won)	Carrying amount		Fair value		Carrying amount		Fair value
Financial assets
Cash and cash equivalents	￦	2,449,062		1	￦	2,879,554		1
Trade and other receivables
Financial assets measured at amortized cost 2		7,364,516		1		8,326,229		1
Financial assets at fair value through other comprehensive income		129,124		129,124		116,198		116,198
Other financial assets
Financial assets measured at amortized cost		1,060,058		1		1,385,921		1
Financial assets at fair value through profit or loss		1,064,856		1,064,856		939,661		939,661
Financial assets at fair value through other comprehensive income		1,508,192		1,508,192		1,680,168		1,680,168
Derivative financial assets for hedging		190,830		190,830		159,211		159,211

Total	￦	13,766,638			￦	15,486,942

Financial liabilities
Trade and other payables 3	￦	8,397,264		1	￦	8,317,822		1
Borrowings		10,006,685		9,405,992		10,218,165		9,979,545
Other financial liabilities
Financial liabilities at amortized cost		246,606		1		915,185		1
Financial liabilities at fair value through profit or loss		141,280		141,280		136,106		136,106
Derivative financial liabilities for hedging purpose		33,555		33,555		24,547		24,547

Total	￦	18,825,390			￦	19,611,825

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

Lease receivables are excluded from fair value disclosure in accordance with IFRS 7.

Amounts related to employee benefit plans are included in trade and other payables at the end of previous year.

(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 active markets 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 disclosed in fair value as of December 31, 2022 and 2023, are as follows:


(in millions of Korean won)	December 31, 2022
(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	￦	—	￦	129,124	￦	—	￦	129,124
Other financial assets
Financial assets at fair value through profit or loss		26,647		426,140		612,069		1,064,856
Financial assets at fair value through other comprehensive income		1,005,900		5,163		497,129		1,508,192
Derivative financial assets for hedging		—		189,717		1,113		190,830
Investment properties		—		—		5,370,047		5,370,047

Total	￦	1,032,547	￦	750,144	￦	6,480,358	￦	8,263,049

Liabilities
Borrowings	￦	—	￦	9,405,992	￦	—	￦	9,405,992
Other financial liabilities
Financial liabilities at fair value through profit or loss		—		—		141,280		141,280
Derivative financial liabilities for hedging purpose		—		33,555		—		33,555

Total	￦	—	￦	9,439,547	￦	141,280	￦	9,580,827

(in millions of Korean won)	December 31, 2023
(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	￦	—	￦	116,198	￦	—	￦	116,198
Other financial assets
Financial assets at fair value through profit or loss		13,911		156,918		768,832		939,661
Financial assets at fair value through other comprehensive income		1,230,936		5,206		444,026		1,680,168
Derivative financial assets for hedging		—		159,211		—		159,211
Investment properties		—		—		5,276,169		5,276,169

Total	￦	1,244,847	￦	437,533	￦	6,489,027	￦	8,171,407

Liabilities
Borrowings	￦	—	￦	9,979,545	￦	—	￦	9,979,545
Other financial liabilities
Financial liabilities at fair value through profit or loss		—		1,545		134,561		136,106
Derivative financial liabilities for hedging purpose		—		24,547		—		24,547

Total	￦	—	￦	10,005,637	￦	134,561	￦	10,140,198

(3)

Transfers Between Fair Value Hierarchy Levels of Recurring Fair Value Measurements

Details of transfers between Level 1 and Level 2 of the fair value hierarchy for 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 recurring fair value measurements.

Details of changes in Level 3 of the fair value hierarchy for the recurring fair value measurements as of December 31, 2022 and 2023, are as follows:


	2022
	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 for hedging		Financial liabilities at fair value through profit or loss
Beginning balance	￦	577,085		￦	323,373		￦	31,565	￦	215,332
Acquisition		226,310			262,408			—		3,046
Reclassification		(8,962	)		8,122			—		(54,921	)
Acquisition and disposition of businesses		—			(40	)		—		—
Disposal		(179,740	)		(97,426	)		(31,565)		—
Amount recognized in profit or loss 1		(2,624	)		18			—		(22,177	)
Amount recognized in other comprehensive income 2		—			674			1,113		—

Ending balance	￦	612,069		￦	497,129		￦	1,113	￦	141,280

The recognition of gains and losses on derivatives financial liabilities (assets) for hedging purposes consists entirely of derivatives valuation losses.

The recognition of gains and losses on financial liabilities measured at fair value through profit or loss consists of derivative valuation losses.


	2023
	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 for hedging		Financial liabilities at fair value through profit or loss
Beginning balance	￦	612,069		￦	497,129		￦	1,113	￦	141,280
Acquisition		216,838			10,267			—		—
Reclassification		26,471			(5,532	)		(1,113)		(7,363	)
Acquisition and disposition of businesses		252			—			—		—
Disposal		(44,323	)		(6	)		—		(5,205	)
Amount recognized in profit or loss 1,		(42,475	)		(61	)		—		5,849
Amount recognized in other comprehensive income		—			(57,771	)		—		—

Ending balance	￦	768,832		￦	444,026		￦	—	￦	134,561

The recognition of gains and losses on financial liabilities measured at fair value through profit or loss consists of derivative valuation gains and losses.

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

(in millions of Korean won)

December 31, 2022

Fair value

Level

Valuation techniques

Inputs

Assets

Trade and other receivables

Financial assets at fair value through other comprehensive income

￦

129,124

DCF Model

Guaranteed bond interest rate

Other financial assets

Financial assets at fair value through profit or loss

1,038,209

2,3

DCF Model

Adjusted Net Asset Model,

Monte-Carlo Simulation

Market Interest rate,

Underlying asset price

Financial assets at fair value through other comprehensive income

502,292

2,3

DCF Model, Market Approach Model

Discount rate

Derivative financial assets for hedging

190,830

2,3

DCF Model

Market observation
discount rate,

Swap interest rate

Investment properties

5,370,047

DCF Model

Liabilities

Borrowings

￦

9,405,992

DCF Model

Bond interest rate

Other financial liabilities

Financial liabilities at fair value through profit or loss

141,280

DCF Model

, Binomial Option Pricing Model,

Monte-Carlo Simulation

Forward exchange rate
Forward interest rate

Derivative financial liabilities for hedging

33,555

DCF Model

Market observation
discount rate

(in millions of Korean won)

December 31, 2023

Fair value

Level

Valuation techniques

Inputs

Assets

Trade and other receivables

Financial assets at fair value through other comprehensive income

￦

116,198

DCF Model

Guaranteed bond interest rate

Other financial assets

Financial assets at fair value through profit or loss

925,750

2,3

DCF Model

, Adjusted Net Asset Model,

Monte-Carlo Simulation

Market Interest rate, Underlying asset price

Financial assets at fair value through other comprehensive income

449,232

2,3

DCF Model

Market Approach Model

Discount rate

Derivative financial assets for hedging

159,211

DCF Model

Market observation discount rate,

Swap interest rate

Investment properties

5,276,169

DCF Model

Liabilities

Borrowings

￦

9,979,545

DCF Model

Bond interest rate

Other financial liabilities

Financial liabilities at fair value through profit or loss

136,106

2,3

DCF Model

Binomial Option Pricing Model,

Forward exchange rate

Forward interest rate

Derivative financial liabilities for hedging

24,547

DCF Model

Market observation discount rate

(5)

Valuation Processes for Fair Value Measurements Categorized Within Level 3

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

(

)

Gains and losses on valuation at the transaction date

In the case that the Group values derivative financial instruments using inputs not based on observable market data, and the fair value calculated by 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 or loss.

In relation to this, details and changes of the total deferred difference for the years ended December 31, 2022 and 2023, are as follows:


(in millions of Korean won)	2022			2023
(in millions of Korean won)	Derivatives used for hedging			Derivatives used for hedging
I. Beginning balance	￦	832		￦	—
II. New transactions		—			—
III. Recognized at fair value through profit or loss		(832	)		—

IV. Ending balance (I+II+III)	￦	—		￦	—