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SK Telecom Co., Ltd Background:

SK
Telecom Co., Ltd. (SKT) was founded in 1984 as the state-owned carrier Korea
Mobile Telecommunications Services Corporation.  SKT is a South Korean wireless
telecommunications company with headquarters based in Seoul, South Korea and
international offices located in Beijing, Jakarta, London, Singapore, Tokyo,
and New York.  It offers a variety of communication
services, including wireless voice transmission; wireless internet; global
roaming; text, photo, audio, and video messaging; broadband internet services; video-on-demand
and internet protocol (IP) TV services; and fixed-line telephone services, to
include long distance and voice over IP (VOIP) services.  SKT also provides business specific
communication services and applications, including internet data center
solutions and network solution services. 
It manufactures and sells projection devices and high-end audio devices.

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Telecommunications
industry growth in Korea has been among the most rapid in the world.  As of the end of 2016, SKT disclosed that it
has more than 29.6 million total connections, of which 21.07 million subscribe
to its LTE services; it is the leading wireless communication services provider
in South Korea in terms of subscribers.  The
company serves more than 27 million mobile customers (50% of the domestic Korean
market share).  SKT has international business
agreements – most notably with AT&T, Nokia, Ericsson, Qualcomm
Technologies, Samsung – for the development and standardization of 5G, which is
an emerging wireless connection built specifically to keep pace with the
significant increase of mobile internet connection devices (to include home
appliances, security cameras, cars, wearable technology, etc.).  Inability of SKT to successfully implement or
adapt network and technology to meet the continuing technological advancements
affecting the wireless telecommunications industry will likely have a material
adverse effect on their future financial condition, cash flows, and business.  SKT’s primary market competition includes LG
Corporation and KT Corporation.

Cultural Overview and Differences:

Korean
culture is rooted in, and heavily influenced by Confucian principles.  Confucianism teaches consideration to others,
respect for ancestors, hierarchical structures, social harmony, avoiding extremes
in behavior and emotion, and tradition; Korea is collectivistic and follows a power
structure with the idea that all citizens have a place in their society.  Kibun, which can be translated as pride or dignity,
is important to Koreans.  Confrontation
and disrespect can harm one’s Kibun, and is avoided; once Kibun is damaged, it
cannot be recovered.

In South
Korea, relationships are critical individual and business success.  Korean business is founded upon relationships,
where friendships are typically formed first and then business relationships.  To work effectively in Korea, it is imperative
to be honest, upright, and reputable.

            In Korea, addressing someone by their title or position is important.  Colleagues call each other by their job
positions, as titles are indicative of status.  In the United States, position titles indicate
who’s in charge, and are typically not used when addressing that person; Mr. or
Ms./Mrs. is acceptable regardless of an individual’s position, with first name
basis used once two people are on friendly terms.  ‘Sonsaengnim,’ which means “respected person,”
is frequently used when addressing someone of a higher position in Korea; one
should always show respect towards senior associates and management.  Clear lines of etiquette and order exist in
between subordinates and supervisors, and older and more senior individuals
within an organization or family per should be deferred to at all times.

In South
Korea, it is polite to decline something that is offered to you; however, it
may be perceived as impolite if the same offering is declined for a second or
third time.  It is quite common for
friends, spouses, and family members in Korea not to say “thank you” for small
gifts and acts.  In the United States, we
are very liberal with expressing thanks; it is an implied expression in South
Korea for small gifts and everyday activities (e.g. purchasing goods at a store,
meals, etc.).

Korean business
dress is conventional and conservative for both women and men.  Dark suits, white shirts, and ties are the accepted
norm for men, whereas suits, dresses, blouses, and skirts are the accepted
social norm for women.  Jeans are not
generally worn for business, and women should avoid sleeveless, tight-fitting
garments.  Unlike the United States, the color
and tones of business clothing are typically understated and subtle.

As
Koreans live and conduct business within a Confucian framework, meetings are initially
used in an introductory fashion; business may be started at a later time.  When conducting business meetings with
Koreans, it is ideal for attending members to be of equal stature with their Korean
counterparts; this shows respect and acknowledgement of status. Koreans expect
meetings to be organized in advance with sufficient notice and time to prepare.  It is expected that individuals arrive to
meetings on-time and that they are prepared.  It is more appropriate to ask open ended
questions that do not require a ‘yes’ or ‘no’ response, as Koreans typically dislike
refusals; questions should be framed in a manner that allows for discussion.  One must be mindful of another’s ‘Kibun’ and not
force an issue where there is reluctance, as you may lose the respect of the
individual(s) with whom you are addressing.

Significant
Differences in Korean GAAP and U.S. GAAP:

The
financial statements of corporations operating in Korea are prepared in
accordance with Korean International Financial Reporting Standards (K-IFRS) as
adopted by the Korean Accounting Standards Board (KASB).  K-IFRS was fully adopted in 2011, replacing
Korean GAAP (K-GAAP) rules to instill greater faith in financial statement reporting.
 

Inventory
under K-IFRS (IFRS IAS 2) is stated at the lower of cost or net
realizable value, which is determined as estimated selling price less estimated
incurred expenses.  Loss from inventory
valuation is presented as other expense.  First-in-first-out (FIFO) and weighted-average
cost are acceptable accounting methods for determining cost of inventory; last-in-first-out
(LIFO) is not permitted.  The specific
identification method is required for inventory items that are not ordinarily
interchangeable and for goods or services produced and segregated for specific
projects.  Additionally, write-downs
taken to reduce inventories to the lower of cost or net realizable value are
reversed for subsequent increases in value.

Under U.S. GAAP
(ASC 330-10), inventory is stated at the lower of cost or market.  The market is defined as the current
replacement cost subject to upper limit of net realizable value and lower limit
of net realizable value less a normal profit margin.  Loss from inventory valuation is presented as
cost of sales.  FIFO, LIFO,
weighted-average cost, and specific identification are acceptable accounting
methods for determining inventory cost.  Write-downs
taken to reduce inventories to the lower of cost or market may not be reversed
for subsequent increases in value.

Some
similarities for reporting property, plant, and equipment (PPE) exist between US
GAAP and K-IFRS, to include similar recognition criteria and requirements for depreciation
on a systematic basis.  However, some
notable differences also exist that would impact the translation of PPE from
K-IRFS to US GAAP.  Under K-IFRS (IFRS,
IAS 16), depreciation for PPE is required when useful lives are different.  Use of the revaluation model is permitted, allowing
for measurement of PPE at fair value.  Additionally,
investment property is allowed to be recorded at fair value, with changes in recognized
in the income statement.  Under US GAAP
(ASC 360), component depreciation is permitted, but is rarely used.  Revaluation is simply not allowed, and no
specific guidance exists for the accounting of investment property.Inventory
under K-IFRS (IFRS IAS 2) is stated at the lower of cost or net
realizable value, which is determined as estimated selling price less estimated
incurred expenses.  Loss from inventory
valuation is presented as other expense.  First-in-first-out (FIFO) and weighted-average
cost are acceptable accounting methods for determining cost of inventory; last-in-first-out
(LIFO) is not permitted.  The specific
identification method is required for inventory items that are not ordinarily
interchangeable and for goods or services produced and segregated for specific
projects.  Additionally, write-downs
taken to reduce inventories to the lower of cost or net realizable value are
reversed for subsequent increases in value.Under U.S. GAAP
(ASC 330-10), inventory is stated at the lower of cost or market.  The market is defined as the current
replacement cost subject to upper limit of net realizable value and lower limit
of net realizable value less a normal profit margin.  Loss from inventory valuation is presented as
cost of sales.  FIFO, LIFO,
weighted-average cost, and specific identification are acceptable accounting
methods for determining inventory cost.  Write-downs
taken to reduce inventories to the lower of cost or market may not be reversed
for subsequent increases in value.

Some
similarities for reporting property, plant, and equipment (PPE) exist between US
GAAP and K-IFRS, to include similar recognition criteria and requirements for depreciation
on a systematic basis.  However, some
notable differences also exist that would impact the translation of PPE from
K-IRFS to US GAAP.  Under K-IFRS (IFRS,
IAS 16), depreciation for PPE is required when useful lives are different.  Use of the revaluation model is permitted, allowing
for measurement of PPE at fair value.  Additionally,
investment property is allowed to be recorded at fair value, with changes in recognized
in the income statement.  Under US GAAP
(ASC 360), component depreciation is permitted, but is rarely used.  Revaluation is simply not allowed, and no
specific guidance exists for the accounting of investment property.

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