15. Intangible Assets
Details of intangible assets as of December 31, 2016 and 2017, are as follows:
| 2016 | ||||||||||||||||
| Acquisition cost | Accumulated amortization |
Accumulated impairment losses |
Carrying Amount |
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| (In millions of Korean won) | ||||||||||||||||
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Goodwill |
￦ | 331,707 | ￦ | — | ￦ | (69,315 | ) | ￦ | 262,392 | |||||||
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Other intangible assets |
1,312,732 | (877,881 | ) | (44,927 | ) | 389,924 | ||||||||||
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Total |
￦ | 1,644,439 | ￦ | (877,881 | ) | ￦ | (114,242 | ) | ￦ | 652,316 | ||||||
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| 2017 | ||||||||||||||||||||
| Acquisition cost | Accumulated amortization |
Accumulated impairment losses |
Others | Carrying Amount |
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| (In millions of Korean won) | ||||||||||||||||||||
|
Goodwill |
￦ | 344,799 | ￦ | — | ￦ | (70,517 | ) | ￦ | (832 | ) | ￦ | 273,450 | ||||||||
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Other intangible assets |
4,012,563 | (1,299,879 | ) | (43,074 | ) | — | 2,669,610 | |||||||||||||
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Total |
￦ | 4,357,362 | ￦ | (1,299,879 | ) | ￦ | (113,591 | ) | ￦ | (832 | ) | ￦ | 2,943,060 | |||||||
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Details of goodwill as of December 31, 2016 and 2017, are as follows:
| 2016 | 2017 | |||||||||||||||
| Acquisition cost | Carrying amount |
Acquisition cost | Carrying amount |
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| (In millions of Korean won) | ||||||||||||||||
|
Housing & Commercial Bank |
￦ | 65,288 | ￦ | 65,288 | ￦ | 65,288 | ￦ | 65,288 | ||||||||
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KB Cambodia Bank |
1,202 | 1,202 | 1,202 | — | ||||||||||||
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KB Securities Co., Ltd.1 |
70,265 | 58,889 | 70,265 | 58,889 | ||||||||||||
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KB Capital Co., Ltd. |
79,609 | 79,609 | 79,609 | 79,609 | ||||||||||||
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KB Savings Bank Co., Ltd. |
115,343 | 57,404 | 115,343 | 57,404 | ||||||||||||
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KB Securities Vietnam joint stock company2 |
— | — | 13,092 | 12,260 | ||||||||||||
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Total |
￦ | 331,707 | ￦ | 262,392 | ￦ | 344,799 | ￦ | 273,450 | ||||||||
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| 1 | The amount occurred from formerly known as KB Investment & Securities Co., Ltd. |
| 2 | MARITIME SECURITIES INCORPORATION changed the name to KB Securities Vietnam joint stock company. |
The changes in accumulated impairment losses of goodwill for the years ended December 31, 2016 and 2017, are as follows:
| 2016 | ||||||||||||||
| Beginning | Impairment | Others | Ending | |||||||||||
| (In millions of Korean won) | ||||||||||||||
| ￦ | (69,315) | ￦ | — | ￦ | — | ￦ | (69,315 | ) | ||||||
| 2017 | ||||||||||||||
| Beginning | Impairment | Others | Ending | |||||||||||
| (In millions of Korean won) | ||||||||||||||
| ￦ | (69,315) | ￦ | (1,202 | ) | ￦ | — | ￦ | (70,517 | ) | |||||
The details of allocating goodwill to cash-generating units and related information for impairment testing as of December 31, 2017, are as follows:
|
Housing & Commercial Bank |
KB Cambodia Bank |
KB Securities Co., Ltd.1 |
KB Capital Co., Ltd. |
KB Savings Bank Co., Ltd. and Yehansoul Savings Bank Co., Ltd. |
Total | |||||||||||||||||||||||
| Retail Banking |
Corporate Banking |
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| (In millions of Korean won) | ||||||||||||||||||||||||||||
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Carrying amounts |
￦ | 49,315 | ￦ | 15,973 | ￦ | — | ￦ | 58,889 | ￦ | 79,609 | ￦ | 57,404 | ￦ | 261,190 | ||||||||||||||
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Recoverable amount exceeded carrying amount |
8,957,260 | 3,448,191 | — | 145,177 | 623,381 | 51,402 | 13,225,411 | |||||||||||||||||||||
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Discount rate (%) |
20.47 | 20.81 | 27.57 | 25.71 | 13.00 | 14.91 | ||||||||||||||||||||||
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Permanent growth rate (%) |
1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||||||||||||||||||
| 1 | The amount occurred from formerly known as KB Investment & Securities Co., Ltd. |
| 2 | Goodwill occurred from a business combination during 2017 has not been tested for impairment. |
Goodwill is allocated to cash-generating units, based on management’s analysis, that are expected to benefit from the synergies of the combination for impairment testing, and cash-generating units consist of an operating segment or units which are not larger than an operating segment. The Group recognized the amount of ￦65,288 million related to goodwill acquired in the merger of Housing & Commercial Bank. Of those respective amounts, the amounts of ￦49,315 million and ￦15,973 million were allocated to the Retail Banking and Corporate Banking, respectively. Cash-generating units to which goodwill has been allocated is tested for impairment annually, and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the unit, including the goodwill, with the recoverable amount of the unit.
The recoverable amount of a cash-generating unit is measured at the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell is the amount obtainable from the sale in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal. If it is difficult to measure the amount obtainable from the sale, the Group measures the fair value less costs to sell by reflecting the characteristics of the measured cash-generating unit. If it is not possible to obtain reliable information to measure the fair value less costs to sell, the Group uses the asset’s value in use as its recoverable amount. Value in use is the present value of the future cash flows expected to be derived from an asset or cash-generating unit The projections of the future cash flows are based on the most recent financial budget approved by management and generally cover a period of five years. The future cash flows after projection period are estimated on the assumption that the future cash flows will increase by 1.0% for all other cash-generating units. The key assumptions used for the estimation of the future cash flows are the market size and the Group’s market share. The discount rate is a pre-tax rate that reflects assumptions regarding risk-free interest rate, market risk premium and the risks specific to the asset for which the future cash flow estimates have not been adjusted.
Details of intangible assets, excluding goodwill, as of December 31, 2016 and 2017, are as follows:
| 2016 | ||||||||||||||||
| Acquisition cost |
Accumulated amortization |
Accumulated impairment losses |
Carrying amount |
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| (In millions of Korean won) | ||||||||||||||||
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Industrial property rights |
￦ | 4,617 | ￦ | (1,612 | ) | ￦ | — | ￦ | 3,005 | |||||||
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Software |
887,098 | (749,997 | ) | — | 137,101 | |||||||||||
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Other intangible assets |
378,608 | (111,814 | ) | (44,927 | ) | 221,867 | ||||||||||
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Finance leases assets |
42,409 | (14,458 | ) | — | 27,951 | |||||||||||
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Total |
￦ | 1,312,732 | ￦ | (877,881 | ) | ￦ | (44,927 | ) | ￦ | 389,924 | ||||||
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| 2017 | ||||||||||||||||
| Acquisition cost |
Accumulated amortization |
Accumulated impairment losses |
Carrying amount |
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| (In millions of Korean won) | ||||||||||||||||
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Industrial property rights |
￦ | 9,497 | ￦ | (2,399 | ) | ￦ | — | ￦ | 7,098 | |||||||
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Software |
1,062,699 | (885,133 | ) | — | 177,566 | |||||||||||
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Other intangible assets |
501,874 | (211,321 | ) | (43,074 | ) | 247,479 | ||||||||||
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Value of Business Acquired (VOBA) |
2,395,291 | (179,193 | ) | — | 2,216,098 | |||||||||||
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Finance leases assets |
43,202 | (21,833 | ) | — | 21,369 | |||||||||||
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Total |
￦ | 4,012,563 | ￦ | (1,299,879 | ) | ￦ | (43,074 | ) | ￦ | 2,669,610 | ||||||
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The changes in intangible assets, excluding goodwill, for the years ended December 31, 2016 and 2017, are as follows:
| 2016 | ||||||||||||||||||||||||||||||||
| Beginning | Acquisition | Disposal | Transfer | Amortization1 | Business combination |
Others | Ending | |||||||||||||||||||||||||
| (In millions of Korean won) | ||||||||||||||||||||||||||||||||
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Industrial property rights |
￦ | 320 | ￦ | 3,073 | ￦ | — | ￦ | — | ￦ | (388 | ) | ￦ | — | ￦ | — | ￦ | 3,005 | |||||||||||||||
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Software |
75,009 | 91,631 | — | — | (41,540 | ) | 11,998 | 3 | 137,101 | |||||||||||||||||||||||
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Other intangible assets2 |
94,816 | 16,900 | (7,234 | ) | 1,926 | (14,701 | ) | 132,461 | (2,301 | ) | 221,867 | |||||||||||||||||||||
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Finance leases assets |
34,291 | 708 | — | — | (7,048 | ) | — | — | 27,951 | |||||||||||||||||||||||
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Total |
￦ | 204,436 | ￦ | 112,312 | ￦ | (7,234 | ) | ￦ | 1,926 | ￦ | (63,677 | ) | ￦ | 144,459 | ￦ | (2,298 | ) | ￦ | 389,924 | |||||||||||||
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| 2017 | ||||||||||||||||||||||||||||||||
| Beginning | Acquisition | Disposal | Transfer | Amortization1 | Business combination |
Others | Ending | |||||||||||||||||||||||||
| (In millions of Korean won) | ||||||||||||||||||||||||||||||||
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Industrial property rights |
￦ | 3,005 | ￦ | 4,772 | ￦ | (8 | ) | ￦ | — | ￦ | (683 | ) | ￦ | — | ￦ | 12 | ￦ | 7,098 | ||||||||||||||
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Software |
137,101 | 86,768 | (48 | ) | 1,404 | (66,655 | ) | 20,396 | (1,400 | ) | 177,566 | |||||||||||||||||||||
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Other intangible assets2 |
221,867 | 20,354 | (7,054 | ) | 14,401 | (18,437 | ) | 18,362 | (2,014 | ) | 247,479 | |||||||||||||||||||||
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Value of Business Acquired (VOBA)3 |
— | — | — | — | (179,193 | ) | 2,395,291 | — | 2,216,098 | |||||||||||||||||||||||
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Finance leases assets |
27,951 | 792 | — | — | (7,374 | ) | — | — | 21,369 | |||||||||||||||||||||||
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Total |
￦ | 389,924 | ￦ | 112,686 | ￦ | (7,110 | ) | ￦ | 15,805 | ￦ | (272,342 | ) | ￦ | 2,434,049 | ￦ | (3,402 | ) | ￦ | 2,669,610 | |||||||||||||
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| 1 | Including ￦607 million and ￦179,809 million recorded in insurance expenses and other operating expenses and others in the statements of comprehensive income for the years ended December 31, 2016 and 2017. |
| 2 | Impairment loss for membership right of other intangible asset with indefinite useful life was recognized when its recoverable amount is lower than its carrying amount, and reversal of impairment loss was recognized when its recoverable amount is higher than its carrying amount. |
| 3 | See Note 44 for details on business combination. |
The changes in accumulated impairment losses on intangible assets for the years ended December 31, 2016 and 2017, are as follows:
| 2016 | ||||||||||||||||||||
| Beginning | Impairment | Reversal | Disposal and others |
Ending | ||||||||||||||||
| (In millions of Korean won) | ||||||||||||||||||||
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Accumulated impairment losses on intangible assets |
￦ | (26,211 | ) | ￦ | (2,704 | ) | ￦ | 482 | ￦ | (16,494 | ) | ￦ | (44,927 | ) | ||||||
| 2017 | ||||||||||||||||||||
| Beginning | Impairment | Reversal | Disposal and others |
Ending | ||||||||||||||||
| (In millions of Korean won) | ||||||||||||||||||||
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Accumulated impairment losses on intangible assets |
￦ | (44,927 | ) | ￦ | (601 | ) | ￦ | 954 | ￦ | 1,500 | ￦ | (43,074 | ) | |||||||
The changes in emissions rights for year ended December 31, 2016 and 2017, are as follows:
| Applicable under 2015 |
Applicable under 2016 |
Applicable under 2017 |
Total | |||||||||||||||||||||||||||||
| Quantity | Carrying amount |
Quantity | Carrying amount |
Quantity | Carrying amount |
Quantity | Carrying amount |
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| (KAU) | (In millions of Korean won) |
(KAU) | (In millions of Korean won) |
(KAU) | (In millions of Korean won) |
(KAU) | (In millions of Korean won) |
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Beginning |
116,799 | ￦ | — | 112,137 | ￦ | — | 109,140 | ￦ | — | 338,076 | ￦ | — | ||||||||||||||||||||
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Borrowing |
8,518 | — | (8,518 | ) | — | — | — | — | — | |||||||||||||||||||||||
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Surrendered to government |
(121,261 | ) | — | — | — | — | — | (121,261 | ) | — | ||||||||||||||||||||||
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Cancel |
(4,056 | ) | — | (4,336 | ) | — | (4,220 | ) | — | (12,612 | ) | — | ||||||||||||||||||||
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Ending |
— | ￦ | — | 99,283 | ￦ | — | 104,920 | ￦ | — | 204,203 | ￦ | — | ||||||||||||||||||||
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| Applicable under 2016 |
Applicable under 2017 |
Total | ||||||||||||||||||||||
| Quantity | Carrying amount |
Quantity | Carrying amount |
Quantity | Carrying amount |
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| (KAU) | (In millions of Korean won) |
(KAU) | (In millions of Korean won) |
(KAU) | (In millions of Korean won) |
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Beginning |
99,283 | ￦ | — | 104,920 | ￦ | — | 204,203 | ￦ | — | |||||||||||||||
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Additional Allocation |
578 | — | 17,046 | — | 17,624 | — | ||||||||||||||||||
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Borrowing |
18,306 | — | (18,306 | ) | — | — | — | |||||||||||||||||
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Surrendered to government |
(117,484 | ) | — | — | — | (117,484 | ) | — | ||||||||||||||||
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Cancel |
(683 | ) | — | (398 | ) | — | (1,081 | ) | — | |||||||||||||||
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Ending |
— | ￦ | — | 103,262 | ￦ | — | 103,262 | ￦ | — | |||||||||||||||