![]() Samsung Electronics Business Report-XBRL ### SAMSUNG ELECTRONICS Co., Ltd. # 2022 Business Report ## –XBRL #### For the year ended December 31, 2022 Certain statements in the document, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.” Forward- looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our financial reports available on our website. See, also, 『 Note on Forward-Looking Statements 』 in preamble of 『 V. Management Discussion and Analysis 』 . ![]() Samsung Electronics Business Report-XBRL #### Table of Contents Certification I. Corporate Overview II. Businesses Overview III. Audited Financial Statements IV. Other Financial Matters V. Management Discussion and Analysis VI. Appendix ![]() Samsung Electronics Business Report-XBRL #### Certification ![]() Samsung Electronics Business Report-XBRL I. Corporate Overview 1. Overview A. Legal, commercial name: - Samsung Electronics Co., Ltd. B. Date of establishment: - Samsung Electronics Co., Ltd. (“SEC” or “the Company”) was established as Samsung Electronics Industry Co., Ltd. on January 13, 1969, and held an initial public offering on June 11, 1975. - SEC changed its name from Samsung Electronics Industry Co., Ltd. to Samsung Electronics Co., Ltd. following a resolution passed at the Annual General Meeting (AGM) of shareholders on February 28, 1984. C. Address, phone number, and English language website of the corporate headquarters - Address: 129, Samsung-ro, Yeongtong-gu, Suwon, Gyeonggi-do, Korea - Phone Number: +82-31-200-1114 - Website: https://www.samsung.com/sec D. Core businesses - The Company (defined below) is comprised of two business divisions – DX (Device eXperience) and DS (Device Solutions) – SDC (Samsung Display and its subsidiaries), which runs display panel business, and Harman (Harman International Industries, Inc. and its subsidiaries), which operates businesses related to automotive electronics components, etc. SEC is a global electronics firm consisting of its headquarters in Korea and 232 subsidiaries (collectively, “Samsung Electronics”, the “Company”, or “we”) across the world, including 9 regional headquarters for the DX Division, 5 regional headquarters, as well as production and sales subsidiaries, for the DS Division, and subsidiaries of SDC and Harman. Key products by each organization are set forth below: Organization Key products DX Division TVs, monitors, refrigerators, washing machines, air conditioners, hand held products (HHPs), telecommunications network systems, computers, etc. DS Division DRAM, NAND flash, mobile APs, etc. SDC OLED panels for smartphones, etc. Harman Digital cockpits, telematics, speakers, etc. In December 2021, the Company merged the CE and IM Divisions to create the DX Division; and it separated SDC and the DS Division to align with the corporate organizational structure. [DX Division] The DX Division manufactures TVs, monitors, refrigerators, washing machines, air conditioners, smartphones, tablets, and wearables. It is leading the global digital market with its differentiated technology, designs, and products, including premium TVs based on leading technologies such as Neo QLED TV; Lifestyle TVs that align with the lifestyles of customers who value experiences; and Bespoke products, which are customized to satisfy various needs of our customers. The Company has maintained its position as the leader in the TV market for 17 straight years. Moreover, for smartphones, a core product of the Division, we have developed a broad lineup ranging from low-end right through to premium models with the Galaxy series. Samsung will continue to innovate in the premium and Lifestyle TV markets while strengthening global sales of Bespoke products. ![]() Samsung Electronics Business Report-XBRL Through the Galaxy Ecosystem, we will deliver top-notch Multi-Device experiences, allowing convenient and seamless use of not just mobile products, but also TV and home appliance products. At the same time, we will keep fortifying our status and market dominance as a global brand by continually releasing new products that reflect the needs of consumers and current trends; and we will lead the global 5G market based on our end-to-end solutions, which encompass handsets, chipsets, as well as our experience in commercializing initial 5G markets. [DS Division] The Memory Business, System LSI Business, Foundry Business, and Display Panel (“DP”) Business make up the DS Division. The Memory Business manufactures and sells DRAM and NAND products; the System LSI Business designs and sells mobile application processors (“mobile APs” or “APs”) and camera sensor chips; and the Foundry Business is in charge of consignment production of semiconductors. The Memory Business continues to maintain its position at the top of the global memory market by focusing on qualitative growth, including by applying advanced process technology in DRAM and NAND Flash products; differentiating our products via centering our business portfolio on high-value solutions; and enhancing cost competitiveness. The System LSI Business has not been complacent, extending its focus from mobile to include automotive chips, and it is expanding its market power through actions such as satisfying demand with differentiated products—such as APs and CISs—based on its advanced manufacturing process technology, and by diversifying foundry suppliers. The Foundry Business is expanding by securing competitiveness via adopting core technologies and new structures in advanced processes, securing supply continuity of semiconductors amid global supply shortage and actively addressing continued strong demand for legacy processes. [SDC] In SDC, the mobile panel business’s differentiated technology is a key factor behind the increased adoption of OLED panels, while our release of products in new applications—such as foldable devices, rollable devices, and automotives—has expanded the overall market. Meanwhile, the large panel business is focusing on premium products such as high-definition, ultra-large, Quantum Dot TVs and is enhancing its competitiveness through continuous improvements in technology and productivity. [Harman] Harman consists of the automotive component business, which designs and develops connected products and solutions for automakers; and the lifestyle audio business, which provides consumer audio products and professional audio solutions. Harman, as a leader in the automotive component market, supplies car manufacturers with products that apply innovative technologies. And in the audio market, it has been firmly establishing the brand reputation among consumers and audiophiles. Harman has established an internationally renowned brand and it offers diverse product lines, using internal development and strategic acquisitions to strengthen competitiveness in each business area. ☞ See 『 II. Businesses Overview 』 for more details about each Division. E. Subsidiaries subject to consolidated accounting (summary) As of December 31, 2022, and in accordance with Korean International Financial Reporting Standards (K-IFRS) 1110, Consolidated Financial Statements , Samsung Electronics, the controlling company, had 232 consolidated subsidiaries, with the addition of 8 subsidiaries and reduction of 4 subsidiary when compared to totals as of December 31, 2021. ![]() Samsung Electronics Business Report-XBRL Classification Number of subsidiaries subject to consolidated accounting Number of major subsidiaries As of January 1, 2022 Added Removed As of December 31, 2022 Listed - - - - - Unlisted 228 8 4 232 141 Total 228 8 4 232 141 See 『 Appendix-1. Subsidiaries subject to consolidated accounting (detailed) 』 for details. [1H22: Changes in subsidiaries subject to consolidated accounting] Classification Subsidiary Reason Newly consolidated Samsung R&D Institute Ukraine (SRUKR) Establishment Samsung Electronics Uzbekistan Ltd. (SEUZ) Establishment Apostera GmbH Acquisition of shares Apostera UA, LLC Acquisition of shares DOWOOINSYS VINA COMPANY LIMITED Establishment Red Brick Lane Marketing Solutions Pvt. Ltd. Acquisition of shares SVIC #57 Venture Capital Union Establishment Stellarforest Establishment No longer consolidated Dacor Canada Co Liquidation AMX UK Limited Liquidation Harman International s.r.o Liquidation Apostera GmbH Merger ![]() Samsung Electronics Business Report-XBRL F. Whether the Company is an SME The Company is not subject to Article 2 of the Framework Act on Small and Medium Enterprises. Small and medium enterprise No Venture company No Medium-sized enterprise No G. Credit rating SEC’s credit rating is assessed by two external credit ratings agencies. As of December 31, 2022, SEC’s credit ratings were Aa2 with a stable investment outlook as rated by Moody’s (US); and AA- with a stable investment outlook as rated by S&P (US). Securities Date Ratings Credit rating agency Note Corporate bond (USD denominated; issued in 1997 and expire in 2027) Jul 2020 AA- S&P Regular review Sep 2020 Aa3 Moody’s Jul 2021 AA- S&P Aug 2021 Aa3 Moody’s Aug 2022 AA- S&P Sep 2022 Aa2 Moody’s Credit rating range: Moody’s (Aaa -C), S&P (AAA-D) [Credit ratings definitions] Moody’s Definition S&P Definition Investment grade Aaa Superior ability to repay debt obligations; lowest level of credit risk AAA Extremely strong ability to meet financial commitments; highest rating Aa1/Aa2/Aa3 High ability to repay debt obligations; very low credit risk AA+/AA/AA- Very strong capacity to meet financial commitments A1/A2/A3 Upper-medium ability to repay debt obligations; low credit risk A+/A/A- Strong capacity to meet financial commitments; susceptible to adverse effects of changes in economic conditions Baa1/Baa2/Baa3 Medium ability to repay debt obligations; moderate credit risk, speculative factors BBB+/BBB/BBB- Adequate capacity to meet financial commitments; relatively more susceptible to adverse economic conditions Speculative grade Ba1/Ba2/Ba3 Speculative; substantial credit risk BB+/BB/BB- Major ongoing uncertainties; exposure to adverse business, financial, or economic conditions can impair ability to meet financial commitments B1/B2/B3 Speculative; high credit risk B+/B/B- More vulnerable to nonpayment than those rated BB; has capacity to meet financial commitments but adverse financial or economic conditions are likely to impair ability to continue doing so Caa Speculative; very high credit risk CCC Vulnerable to nonpayment; dependent upon favorable business, financial, and economic conditions Ca Highly speculative; likelihood of being in or near default; some prospect for recovery of principal and interest CC Highly vulnerable to nonpayment; default has not yet occurred but expected to be a virtual certainty C Typically in default; little prospect for recovery of principal or interest C Highly vulnerable to nonpayment; obligation is expected to have lower ultimate recovery vis-à- vis higher rated obligations D In default or in breach of imputed promises, upon the filing of a bankruptcy petition or the taking of a similar action Please refer to 『 III. Financial Affairs-7. Matters about financing through the issuance of securities 』 for credit ratings on corporate bonds and commercial paper issued by the Company’s subsidiaries. ![]() Samsung Electronics Business Report-XBRL H. Whether the Company is listed (or registered or designated) and matters related to special listed companies The Company listed on the Korea Stock Exchange on June 11, 1975. Listed (or registered or designated) Date listed (or registered or designated) Special listed company Subject to regulations for special exception companies Stock market (KOSPI) June 11, 1975 No No 2. Company history A. Company history Jan 13, 1969 Samsung Electronics Manufacturing Incorporated Jun 11, 1975 Listed on the Korea Stock Exchange Feb 28, 1984 Renamed as Samsung Electronics Nov 1, 1988 Merged with Samsung Semiconductor and Communications Apr 1, 2012 Spun off the LCD division (established Samsung Display) Mar 5, 2017 Released advanced Quantum dot-based QLED TV Mar 10, 2017 SEA acquired shares of Harman International Industries, Inc. (100%) Jul 4, 2017 Started operations at semiconductor production fab in Pyeongtaek, the largest such facility in the world Nov 1, 2017 Sold Printing Solution business Aug 30, 2018 Launched QLED 8K TVs with Quantum Dot technology Apr 3, 2019 Launched Galaxy S10 5G, a 5G smartphone Jun 4, 2019 Released Bespoke, a refrigerator customized to customers’ lifestyles Sep 4, 2019 Unveiled Exynos 980, 5G mobile processor Sep 6, 2019 Unveiled Galaxy Fold, a foldable phone with a new form factor Jan 29, 2020 Launched AI-technology-based Grande AI washer/dryer Feb 4, 2020 Launched world’s first ultra-high speed DRAM for AI and next-generation super computers Feb 11, 2020 Unveiled Galaxy Z Flip, a foldable model with a new form factor Aug 30, 2020 Started operation of Pyeongtaek Line 2, the world’s largest semiconductor line Jan 7, 2021 Unveiled Neo QLED TV May 11, 2021 Announced expansion to the global market for Bespoke Home Jun 3, 2021 Received certification for reducing carbon emissions, water use, and waste discharge for all of our semiconductor worksites, a first in the global semiconductor industry Aug 11, 2021 Unveiled Galaxy Z Fold 3 and Galaxy Z Flip 3 Oct 12, 2021 Started mass producing highly advanced 14-nano EUV DDR5 DRAM Nov 9, 2021 Developed industry’s first LPDDR5X DRAM Nov 24, 2021 Announced investment in a new foundry production site in Taylor, Texas, USA Feb 10, 2022 Unveiled the Galaxy S22 series Feb 17, 2022 Unveiled the Bespoke Infinite Line Jun 30, 2022 Began mass production of the world’s first 3-nano GAA chips Aug 10, 2022 Unpacked Galaxy Z Fold 4 and Flip 4 Aug 19, 2022 Held a groundbreaking ceremony for the next-generation semiconductor R&D complex Sep 15, 2022 Announced a new environmental strategy Nov 7, 2022 Mass produced 1Tb 8th-generation V-NAND Dec 21, 2022 Developed highly advanced 12nm-class 16Gb DDR5 DRAM B. Company location and changes The Company’s head office is located at 129, Samsung-ro, Yeongtong-gu, Suwon, Gyeonggi-do. There were no changes in the Company’s head office location over the past five fiscal years. ![]() Samsung Electronics Business Report-XBRL C. Important changes in management executives As of December 31, 2022, SEC’s Board consisted of five Executive Directors (Jong-hee Han, Kye-hyun Kyung, Tae- moon Roh, Hark-kyu Park and Jung-bae Lee) and six Independent Directors (Han-jo Kim, Sun-uk Kim, Jeong Kim and Jun-sung Kim, Eun-nyeong Heo, Myung-hee Yoo). Date of change Type of shareholder meeting Appointed Terms expired or dismissed Newly appointed Reappointed Mar 23, 2018 AGM Executive Director Sang-hoon Lee Executive Director Ki-nam Kim Executive Director Hyun-suk Kim Executive Director Dong-jin Koh Independent Director Jeong Kim Independent Director Sun-uk Kim Independent Director Byung-gook Park - Executive Director Oh-hyun Kwon Executive Director Boo-keun Yoon (resigned) Executive Director Jong-kyun Shin (resigned) Independent Director Han-joong Kim Independent Director Byeong-gi Lee Mar 23, 2018 - CEO Ki-nam Kim CEO Hyun-suk Kim CEO Dong-jin Koh - - Mar 20, 2019 AGM Independent Director Han-jo Kim Independent Director Curie Ahn Independent Director Jae-wan Bahk Independent Director In-ho Lee Independent Director Kwang-soo Song Oct 26, 2019 - - - Executive Director Jae-yong Lee Feb 14, 2020 - - - Executive Director Sang-hoon Lee (resigned) Mar 18, 2020 AGM Executive Director Jong-hee Han Executive Director Yoon-ho Choi - - Mar 17, 2021 AGM - Executive Director Ki-nam Kim Executive Director Hyun-suk Kim Executive Director Dong-jin Koh Independent Director Byung-gook Park Independent Director Jeong Kim Independent Director Sun-uk Kim - Mar 17, 2021 - - CEO Ki-nam Kim CEO Hyun-suk Kim CEO Dong-jin Koh - Dec 31, 2021 - - - Executive Director Yoon-ho Choi (resigned) Feb 15, 2022 - CEO Jong-hee Han - CEO Ki-nam Kim (resigned) CEO Hyun-suk Kim (resigned) CEO Dong-jin Koh (resigned) Mar 16, 2022 AGM Executive Director Kye-hyun Kyung Executive Director Tae-moon Roh Executive Director Hark-kyu Park Executive Director Jung-bae Lee Independent Director Wha-jin Han Independent Director Jun-sung Kim Independent Director Han-jo Kim - Mar 16, 2022 - - - Executive Director Ki-nam Kim (resigned) Executive Director Hyun-suk Kim (resigned) Executive Director Dong-jin Koh (resigned) Mar 16, 2022 - CEO Kye-hyun Kyung - - Mar 19, 2022 - - - Independent Director Jae-wan Bahk Independent Director Curie Ahn ![]() Samsung Electronics Business Report-XBRL Date of change Type of shareholder meeting Appointed Terms expired or dismissed Newly appointed Reappointed Apr 20, 2022 - - - Independent Director Wha-jin Han (resigned) May 17, 2022 - - - Independent Director Byung-gook Park (position vacated) Nov 3, 2022 EGM Independent Director Eun-nyeong Heo Independent Director Myung-Hee Yoo - - Mar 23, 2018: Executive Directors Ki-nam Kim, Hyun-suk Kim, and Dong-jin Koh were newly appointed as CEOs at the Board meeting. Mar 17, 2021: Ki-nam Kim, Hyun-suk Kim, and Dong-jin Koh were appointed as CEO at the Board meeting. Dec 31, 2021: Yoon-ho Choi resigned from his position as Executive Director. Feb 15, 2022: Executive Directors Ki-nam Kim, Hyun-suk Kim, and Dong-jin Koh resigned from their positions as CEO; and Executive Director Jong- hee Han was appointed as CEO at the Board meeting held on the same date. Mar 16, 2022: Kye-hyun Kyung, Tae-moon Roh, Hark-kyu Park, and Jung-bae Lee were newly appointed as Executive Directors; Wha-jin Han and Jun-sung Kim as Independent Directors; and Han-jo Kim was reappointed as Independent Director at the Annual General Meeting of the shareholders. Mar 16, 2022: Ki-nam Kim, Hyun-suk Kim, and Dong-jin Koh resigned from their position as Executive Director. Mar 16, 2022: Executive Director Kye-hyun Kyung was appointed as CEO at the Board meeting. Mar 19, 2022: Jae-wan Bahk and Curie Ahn's terms as Independent Directors expired. Apr 20, 2022: Wha-jin Han resigned from her position as Independent Director. May 17, 2022: Independent Director Byung-gook Park passed away. Nov 3, 2022: Eun-nyeong Heo and Myung-hee Yoo were newly appointed as Independent Directors at the Extraordinary General Meeting of the shareholders. D. Changes in the major shareholder The major shareholder changed to Samsung Life Insurance as the shares of the previous major shareholder were inherited by beneficiaries on April 29, 2021. [ As of December 31, 2022] Date of Change Name of major shareholder Number of shares owned Share ratio Reason for change Note Apr 29, 2021 Samsung Life Insurance 1,263,050,053 21.16% Shares of the previous major shareholder were inherited by beneficiaries - Number of shares owned and share ratio are the sum of those of major shareholder and its related parties, and the number of shares is based on shares with voting rights (including those with limited voting rights in accordance with relevant laws). ☞ Please refer to 『 VII. Information on Shareholders 』 for details on the major shareholder. E. Company name changes In 2018, Harman Connected Services Finland OY, and Harman Professional Singapore Pte. Ltd changed their names to Harman Finland Oy, and Harman Singapore Pte. Ltd., respectively. In 2019, Samsung Electronics Greece S.A. (SEGR) changed its name to Samsung Electronics Greece S.M.S.A. (SEGR). In 2021, Samsung Electronics Portuguesa S.A. (SEP) changed its name to Samsung Electronics Portuguesa, Unipessoal, Lda. (SEP). ☞ Details are for SEC and major subsidiaries of SEC. See 『 1. Subsidiaries subject to consolidated accounting (detailed) 』 in 『 XII. Appendix 』 for details. F. Mergers and acquisitions In 2018, Samsung Electronics America, Inc. merged with Samsung Pay, Inc.; and Harman Connected Services, Inc. merged with Harman Connected Services Holding Corp. In the same year, SEA sold its full stake in NexusDX, Inc. ![]() Samsung Electronics Business Report-XBRL In 2019, Samsung Electronics Benelux B.V. (SEBN) acquired shares of Corephotonics Ltd. In the same year, SEC acquired a PLP business from affiliate Samsung Electro-Mechanics. In addition, Harman Becker Automotive Systems Manufacturing Kft merged with Duran Audio B.V.; and Samsung (China) Investment Co., Ltd. (SCIC) merged with Samsung Electronics (Beijing) Service Company Limited (SBSC). In 2021, Samsung Research America, Inc. (SRA) merged with Viv Labs, Inc. Furthermore, Samsung Electronics America, Inc. (SEA) merged with Prismview, LLC. ☞ Details are for SEC and major subsidiaries of SEC. See 『 1. Subsidiaries subject to consolidated accounting (detailed) 』 in 『 XII. Appendix 』 for details. G. Important changes in the Company’s business There were no changes over the past five fiscal years. H. Other important matters related to the Company’s business In December 2021, the Company merged its CE and IM Divisions to form the DX Division and changed the Mobile Communications Business to the MX Division. Also, the Company separated SDC and the DS Division in alignment with the corporate organizational structure. [As of December 2021] Before After Business organization CE Division (Visual Display, Digital Appliances, Medical Devices) DX Division (Visual Display, Digital Appliances, Medical Devices, Mobile eXperience, Network) IM Division (Mobile, Network) DS Division (Memory, System LSI, Foundry, DP) DS Division (Memory, System LSI, Foundry) SDC (DP) Harman Division Harman Regional headquarters Korea, North America, Latin America, Europe, CIS, Southwest Asia, Southeast Asia, China, Middle East, Africa Korea, North America, Latin America, Europe, CIS, Southwest Asia, Southeast Asia, China, Middle East, Africa Americas (DS), Europe (DS), China (DS), Southeast Asia (DS), Japan (DS) Americas (DS), Europe (DS), China (DS), Southeast Asia (DS), Japan (DS) 3. Changes in paid-in capital There were no changes in paid-in capital over the past five fiscal years. Due to the retirement of shares, the total par value of the shares issued is KRW 679,267 million (KRW 596,978 million in common stock and KRW 82,289 million in preferred stock), which is not equivalent to paid-in capital of KRW 897,514 million. (KRW, shares) Type of stock Classification December 31, 2022 Common Number of issued shares 5,969,782,550 Par value 100 Paid-in capital 596,978,255,000 Preferred Number of issued shares 822,886,700 Par value 100 ![]() Samsung Electronics Business Report-XBRL Type of stock Classification December 31, 2022 Paid-in capital 82,288,670,000 Total Paid-in capital 679,266,925,000 4. Stock information A. Total number of shares As of December 31, 2022, SEC’s issued shares on a cumulative basis totaled 7,780,466,850 registered common shares and 1,194,671,350 registered, non-voting preferred shares; and the Company had canceled 1,810 ,684,300 common shares and 371,784,650 preferred shares in accordance with resolutions of the Board of Directors (the Board). As of the same date, issued shares and shares outstanding totaled 5,969,782,550 for common shares and 822,886,700 for preferred shares. [As of December 31, 2022] (Shares) Classification Type of stocks Note Common Preferred Total I. Authorized shares 20,000,000,000 5,000,000,000 25,000,000,000 - II. Issued shares (cumulative) 7,780,466,850 1,194,671,350 8,975,138,200 - III. Decrease in number of shares (cumulative) 1,810,684,300 371,784,650 2,182,468,950 - 1. Capital reduction - - - - 2. Cancellation 1,810,684,300 371,784,650 2,182,468,950 Treasury shares 3. Redemption - - - - 4. Other - - - - IV. Issued shares (II-III) 5,969,782,550 822,886,700 6,792,669,250 - V. Treasury shares - - - - VI. Outstanding shares 5,969,782,550 822,886,700 6,792,669,250 - Post-split basis; SEC conducted a 50:1 stock split effective from May 3, 2018, lowering par value of every common and preferred share from KRW 5,000 to KRW 100. ![]() Samsung Electronics Business Report-XBRL B. Treasury shares In 2018, SEC completed the cancellation of all shares held in treasury as a part of its shareholder return policy, and no acquisition/disposal transaction of treasury shares was made during the reporting period. [As of Dec 31, 2022] (Shares) Acquisition method Share type Period- start Change Period-end Acquisition (+) Disposal (-) Cancellation (-) Intra-market direct acquisition (within dividend related capital gains limit) Common - - - - - Preferred - - - - - Acquisition from a trust agreement (within dividend related capital gains limit) Common - - - - - Preferred - - - - - Total Common - - - - - Preferred - - - - - C. Types of registered stock SEC has two types of registered equity securities: 1) common stock; 2) non-voting and non-cumulative preferred stock. The shareholders of preferred stock are entitled to dividend payments of an additional 1% of par value compared to shareholders of common stock. As of December 31, 2022, the number of issued non-cumulative and non-voting preferred stock totaled 822,886,700. [Current status of issued preferred stock] (KRW, Shares) Classification Contents Issued date Aug 25, 1989 (first issued date) Par value per share 100 Total amount issued (based on par value) / total number of shares issued to date 119,467,000,000 1,194,671,350 Amount to date / number of shares to date 82,289,000,000 822,886,700 Details on stock Matters on dividend Entitled to dividend payments of an additional 1% of par value compared to common shares Matters on residuary distribution - Matters on redemption Redemption conditions - Redemption method - Redemption period - ![]() Samsung Electronics Business Report-XBRL Classification Contents Redemption value per share - Redemption expected within a year - Matters on conversion Conversion conditions (including changes in conversion ratio) - Conversion period - Types of shares to be issued with the conversion - Number of shares to be issued after the conversion - Matters on voting rights No voting rights Other factors to consider when making investment decisions (matters on shareholders’ agreement and financial covenants, etc.) - Due to the cancellation of shares, the total par value of issued stocks is KRW 82,289 million and is thus different from the paid-in capital (KRW 119,467 million). The total number of shares issued to date and the number of shares to date above reflect the changes in the number of shares due to the stock split in 2018. ![]() Samsung Electronics Business Report-XBRL [Preferred stock, by issued date] (KRW, shares) Date Change Details of increase/decrease Type Number of shares Par value per share Total par value Issue price per share Total issue price Aug 25, 1989 Rights issue Preferred 3,400,000 5,000 17,000,000,000 28,800 97,920,000,000 Aug 25, 1989 Bonus issue Preferred 340,000 5,000 1,700,000,000 5,000 1,700,000,000 Oct 29, 1990 Exercise of conversion rights Preferred 371,620 5,000 1,858,100,000 29,600 10,999,952,000 Mar 19, 1991 Exercise of conversion rights Preferred 40,898 5,000 204,490,000 29,341 1,199,988,218 Mar 30, 1991 Exercise of conversion rights Preferred 5,112 5,000 25,560,000 29,341 149,991,192 Apr 8, 1991 Exercise of conversion rights Preferred 1,704 5,000 8,520,000 29,341 49,997,064 May 17, 1991 DR issuance Preferred 1,907,671 5,000 9,538,355,000 37,973 72,439,990,883 Jul 24, 1991 Exercise of conversion rights Preferred 34,081 5,000 170,405,000 29,341 999,970,621 Jul 30, 1991 Exercise of conversion rights Preferred 20,449 5,000 102,245,000 29,341 599,994,109 Jul 31, 1991 Exercise of conversion rights Preferred 64,754 5,000 323,770,000 29,341 1,899,947,114 ![]() Samsung Electronics Business Report-XBRL Date Change Details of increase/decrease Type Number of shares Par value per share Total par value Issue price per share Total issue price Aug 30, 1991 Exercise of conversion rights Preferred 214,716 5,000 1,073,580,000 29,341 6,299,982,156 Sep 30, 1991 Exercise of conversion rights Preferred 20,448 5,000 102,240,000 29,341 599,964,768 Jun 17, 1993 DR issuance Preferred 2,542,372 5,000 12,711,860,000 47,312 120,284,704,064 Oct 29, 1993 Exercise of conversion rights Preferred 105,999 5,000 529,995,000 28,302 2,999,983,698 Nov 12, 1993 DR issuance Preferred 2,158,273 5,000 10,791,365,000 55,975 120,809,331,175 Nov 29, 1993 Exercise of conversion rights Preferred 58,295 5,000 291,475,000 28,302 1,649,865,090 Nov 30, 1993 Exercise of conversion rights Preferred 19,079 5,000 95,395,000 28,302 539,973,858 Apr 6, 1994 DR issuance Preferred 1,086,956 5,000 5,434,780,000 74,502 80,980,395,912 Jun 3, 1994 Exercise of conversion rights Preferred 16,027 5,000 80,135,000 25,809 413,640,843 Jun 6, 1994 Exercise of conversion rights Preferred 9,072 5,000 45,360,000 25,809 234,139,248 Jun 13, 1994 Exercise of conversion rights Preferred 17,236 5,000 86,180,000 25,809 444,843,924 ![]() Samsung Electronics Business Report-XBRL Date Change Details of increase/decrease Type Number of shares Par value per share Total par value Issue price per share Total issue price Jun 22, 1994 Exercise of conversion rights Preferred 1,209 5,000 6,045,000 25,809 31,203,081 Jun 27, 1994 Exercise of conversion rights Preferred 16,632 5,000 83,160,000 25,809 429,255,288 Jun 28, 1994 Exercise of conversion rights Preferred 54,131 5,000 270,655,000 25,809 1,397,066,979 Jun 29, 1994 Exercise of conversion rights Preferred 292,127 5,000 1,460,635,000 25,809 7,539,505,743 Jun 30, 1994 Exercise of conversion rights Preferred 52,922 5,000 264,610,000 25,809 1,365,863,898 Jul 1, 1994 Exercise of conversion rights Preferred 232,854 5,000 1,164,270,000 25,809 6,009,728,886 Jul 4, 1994 Exercise of conversion rights Preferred 116,426 5,000 582,130,000 25,809 3,004,838,634 Jul 5, 1994 Exercise of conversion rights Preferred 188,401 5,000 942,005,000 25,809 4,862,441,409 Jul 6, 1994 Exercise of conversion rights Preferred 686,164 5,000 3,430,820,000 25,809 17,709,206,676 ![]() Samsung Electronics Business Report-XBRL Date Change Details of increase/decrease Type Number of shares Par value per share Total par value Issue price per share Total issue price Jul 7, 1994 Exercise of conversion rights Preferred 270,349 5,000 1,351,745,000 25,809 6,977,437,341 Jul 8, 1994 Exercise of conversion rights Preferred 977,068 5,000 4,885,340,000 25,809 25,217,148,012 Jul 12, 1994 Exercise of conversion rights Preferred 6,048 5,000 30,240,000 25,809 156,092,832 Jul 19, 1994 Exercise of conversion rights Preferred 68,040 5,000 340,200,000 25,809 1,756,044,360 Jul 20, 1994 Exercise of conversion rights Preferred 4,232 5,000 21,160,000 25,809 109,223,688 Aug 12, 1994 Exercise of conversion rights Preferred 944 5,000 4,720,000 25,502 24,073,888 Mar 13, 1995 Bonus issue Preferred 3,028,525 5,000 15,142,625,000 5,000 15,142,625,000 Mar 13, 1996 Bonus issue Preferred 5,462,593 5,000 27,312,965,000 5,000 27,312,965,000 Apr 14, 2003 Share cancellation Preferred -470,000 5,000 -2,350,000,000 - - Jan 15, 2004 Share cancellation Preferred -330,000 5,000 -1,650,000,000 - - May 4, 2004 Share cancellation Preferred -260,000 5,000 -1,300,000,000 - - Jan 15, 2016 Share cancellation Preferred -1,240,000 5,000 -6,200,000,000 - - ![]() Samsung Electronics Business Report-XBRL Date Change Details of increase/decrease Type Number of shares Par value per share Total par value Issue price per share Total issue price Apr 20, 2016 Share cancellation Preferred -530,000 5,000 -2,650,000,000 - - Jul 19, 2016 Share cancellation Preferred -320,000 5,000 -1,600,000,000 - - Sep 28, 2016 Share cancellation Preferred -230,000 5,000 -1,150,000,000 - - Apr 12, 2017 Share cancellation Preferred -255,000 5,000 -1,275,000,000 - - May 2, 2017 Share cancellation Preferred -1,614,847 5,000 -8,074,235,000 - - Jul 24, 2017 Share cancellation Preferred -225,000 5,000 -1,125,000,000 - - Oct 25, 2017 Share cancellation Preferred -168,000 5,000 -840,000,000 - - Jan 30, 2018 Share cancellation Preferred -178,000 5,000 -890,000,000 - - May 3, 2018 Stock split Preferred 885,556,420 100 - - - Dec 4, 2018 Share cancellation Preferred -80,742,300 100 -8,074,230,000 - - Preferred stock total 822,886,700 82,288,670,000 642,261,376,652 ![]() Samsung Electronics Business Report-XBRL 5. Changes to Articles of Incorporation The most recent changes to the Articles of Incorporation took place on March 23, 2018. There were no other changes in the Articles of Incorporation in the past three fiscal years or in 2022 as of the disclosure date of the Korean version of this report. Moreover, changes to the Articles of Incorporation were not included in the agenda for the 54th AGM, which was scheduled to be held after the disclosure date of the Korean version of this report. For details of the agenda items for the 54th AGM, please refer to the “Announcement of Shareholders’ Meeting” disclosed on Financial Supervisory Service’s DART (https://dart.fss.or.kr) on February 14, 2023. ![]() Samsung Electronics Business Report-XBRL II. Businesses Overview 1. Overview In addition to our headquarters in Korea, Samsung Electronics consists of 232 subsidiaries across the world responsible for sales and production, which include 9 regional headquarters for the Device eXperience (DX) Division, 5 regional headquarters for the Device Solutions (DS) Division, and subsidiaries of Samsung Display (SDC) and Harman. The Company’s business divisions are organized in a two-pronged framework consisting of finished products and component businesses. The finished product business consists of the DX Division, which is responsible for the production and sales of TVs, monitors, refrigerators, washing machines, air conditioners, HHPs, which includes smartphones, as well as network systems, and computers. The component business consists of the DS Division, which manufactures and sells DRAM, NAND flash, and mobile APs, and SDC, which manufactures and sells display panels (DPs), including mobile OLED panels. Harman (acquired in 2017) manufactures and sells products such as Digital cockpits, telematics, and speakers. In December 2021, the Company merged and restructured the CE and IM Divisions to form the DX Division and renamed the Mobile Communications Business to the Mobile eXperience (MX) Business. Also, SDC and the DS Division have been separated to align with the corporate organizational structure. ☞ See C. Current status of each division and D. Financial summary by organization in 『 7. Other information 』 for more details about each Division. The Company’s corporate headquarters—which oversees the DX and DS Divisions—as well as 33 consolidated subsidiaries are located in Korea. The Company’s corporate headquarters is divided along Divisions and/or Businesses, which are located in Suwon, Gumi, Gwangju, Giheung, Hwaseong, Pyeongtaek, etc. The Company’s unlisted domestic subsidiaries include Samsung Display for display panel production, Samsung Electronics Sales for domestic retail sales, Samsung Electronics Service for after-sales services, and Samsung Electronics Logitech for logistics. We have 199 unlisted overseas subsidiaries for product manufacturing, sales, and R&D, with locations in the US, Europe/CIS, Middle East/Africa, and Asia, etc. We have 45 subsidiaries in North America, including SEA (New Jersey; responsible for the sales of finished products including TV and HHPs), SII (California; manufacturing of TVs), SSI (California; sales of semiconductors and DPs), SAS (Texas; manufacturing of semiconductor products), SEDA (Brazil; manufacturing of multiple finished products) and Harman (Connecticut; automotive components) in the US. In Europe and CIS, we operate 72 subsidiaries. These include SEUK (UK), SEG (Germany), SEF (France), SEI (Italy), SERC (Russia) for sales of finished products; SEH (Hungary) and SERK (Russia) for manufacturing TVs, and SEPM (Poland) for manufacturing home appliances. We have 20 subsidiaries in Middle East and Africa, including SGE (UAE) and SSA (South Africa) for sales of finished products and SEEG (Egypt) and SSAP (South Africa) for manufacturing TVs. We have 32 subsidiaries in Asia (ex China), including SESP (Singapore), SEAU (Australia), SEPCO (Philippines), and SME (Malaysia), which are responsible for regional sales. In addition, we operate numerous production sites including SEV and SEVT (Vietnam) for HHPs, SEHC (Vietnam) for TVs, SDV (Vietnam) for DPs, and SIEL (India) for multiple products. We operate 30 subsidiaries in China, including SCIC (Beijing) and SEHK (Hong Kong) for the sales of finished products in those regions; and SSS (Shanghai) and SSCX (Xian) for semiconductors and DPs sales. Production sites for finished ![]() Samsung Electronics Business Report-XBRL products include SSEC (Suzhou) and semiconductor production facilities are located in SCS (Xian) among others. The Company' recorded total revenue of KRW 302,231.4 billion as of the year end, is an increase of 8.1% year-on-year. Major customers (listed in alphabetical order) included Apple, Best Buy, Deutsche Telekom, Qualcomm and Verizon. 2. Key products and services A. Revenue SEC is involved in the production and sales of finished products, including TVs, refrigerators, washers, air conditioners, HHPs and components such as semiconductors (DRAM, NAND Flash, mobile APs) and display panels. Through Harman, the Company also produces and sells products such as digital cockpits and telematics. In 2022, reported revenue was KRW 182,489.7 billion (60.4% of total net sales) for DX; KRW 98,455.3 billion (32.6%) for DS; KRW 34,382.6 billion (11.4%) for SDC; and KRW 13,213.7 billion (4.4%) for Harman. (KRW 100 mil) Organization Major products Revenue Portion DX Division TVs, monitors, refrigerators, washing machines, air conditioners, HHPs, network systems, computers, etc. 1,824,897 60.4% DS Division DRAM, NAND flash, mobile APs, etc. 984,553 32.6% SDC OLED smartphone panels, etc. 343,826 11.4% Harman Digital cockpit, telematics, speakers, etc. 132,137 4.4% Others Overlapping internal transactions between Divisions -263,099 -8.8% Total 3,022,314 100.0% Includes inter-divisional transactions. ☞ See 『 4. Revenue and long-term contracts 』 for information by each product. B. Average selling price changes In 2022, TV ASP decreased approximately 7% and HHP ASP increased approximately 5% year-on-year. Memory-product ASP fell approximately 17% year-on-year, and display panel (OLED panels for smartphones) ASP increased approximately 20%. The ASP of digital cockpits declined approximately 0.5% year-on-year. 3. Production materials and production facilities A. Key production materials For the DX Division, key materials include mobile AP and camera modules, which are supplied by Qualcomm, Semco, etc., and display panels for TVs and monitors, which are supplied by CSOT, etc. For the DS Division, key materials include chemicals and wafers, supplied by Soulbrain, SK Siltron, etc., and for SDC, key materials include FPCAs and windows, with suppliers such as BH, Apple, etc. For Harman, key materials include SoC (system-on-chip) products and memory products for in-vehicle solutions, which are supplied by Nvidia, Arrow, etc. (KRW 100 mil) Organization Type of purchase Item Specific usage Purchase price Portion 1) Main supplier(s) DX Division Production materials Mobile AP CPU 93,138 12.8% Qualcomm, MediaTek, etc. Production Camera module Camera for HHP 61,180 8.4% Semco, ![]() Samsung Electronics Business Report-XBRL Organization Type of purchase Item Specific usage Purchase price Portion 1) Main supplier(s) materials CammSys, etc Production materials Display panel Color picture signaler for TV, monitor 60,224 8.3% CSOT, AUO, BOE, etc. Production materials Others - 513,278 70.5% Sub total 727,820 100.0% DS Division Production materials Chemical Disk processing 28,708 14.7% Soulbrain, DongWoo Fine- Chem, etc. Production materials Wafer Semiconductor disk 28,157 14.4% SK Siltron, Sumco etc. Production materials Others - 138,263 70.9% Sub total 195,128 100.0% SDC Production materials FPCA Circuit 29,795 23.6% BH, YP Electronics, etc. Production materials Window Tempered glass 19,367 15.3% Apple, Biel, etc. Production materials Others - 77,155 61.1% Sub total 126,317 100.0% Harman Production materials SoC Chips for vehicles 8,625 10.7% Nvidia, Intel, etc. Production materials Others - 72,038 89.3% Sub total 80,663 100.0% Others Production materials - - 589 - Total 1,130,517 - Purchase price does not include sales between Divisions. Semco is a subsidiary. 1) Portion of purchase price of each item compared to total purchase price for each Division’s raw materials. ![]() Samsung Electronics Business Report-XBRL B. Production material price trends On a year-on-year basis, the price of mobile AP and camera modules, which are major production materials for the DX Division, increased approximately 77% and 13%, respectively. The price of TV and monitor display panels, which are also major production materials for the DX Division, decreased approximately 51% year-on-year. The price of wafers for semiconductor disks, which are major production materials for the DS Division, was similar compared to the previous year, and FPCAs for SDC increased approximately 37% year-on-year, respectively. Prices of tempered glass windows also increased approximately 10% compared to last year. For Harman, the price of SoCs decreased approximately 3% and memory for vehicles increased approximately 10%. C. Production capacity, output, utilization rate (Capacity) (1,000 units) Organization Item Capacity 2022 2021 2020 DX Division Image devices 55,747 54,235 51,538 HHP 332,170 319,550 321,600 DS Division Memory 1,905,731,836 1,756,009,941 1,230,287,321 SDC Display panel 2,700 3,604 7,274 Harman Digital cockpit 11,257 9,066 9,362 Production capacity for major product categories on a consolidated basis. The DX Divisions’ production capacity, by major product, is calculated as follows:  the average number of lines (x) the average output per hour (x) the average operation hours per day (x) standard days of operation Memory production capacity for the DS Division is calculated as follows:  converted output (after packaging, 1Gb equivalent) ÷ the utilization rate SDC’s production capacity is calculated as follows:  the total producible panel surface area ÷ the dimensions of eighth generation glass (2,200x2,500mm) Harman’s production capacity for Digital cockpit is calculated as follows:  the number of production (assembly and test) cells for each customer/product (x) the production capacity per hour by production cell (x) the standard operation hours per day (x) standard days of operation ![]() Samsung Electronics Business Report-XBRL (Output) In 2022, the DX Division’s image device output was 41,802 thousand units (major production sites: Mexico, Vietnam, Brazil, and Hungary), and HHP output was 229,180 thousand units (major production sites: Korea [Gumi], Vietnam, India, and Brazil). The DS Division’s memory output (1Gb equivalent) was 1,905,732 million (major production sites: Korea [Hwaseong, Pyeongtaek, etc.] and China). SDC’s output of display panels was 2,008 thousand units (major production sites: Korea [Cheonan, Asan]). Harman’s Digital cockpit output was 8,334 thousand units. (1,000 units) Organization Item Output 2022 2021 2020 DX Division Image devices 41,802 44,133 48,244 HHP 229,180 260,501 249,218 DS Division Memory 1,905,731,836 1,756,009,941 1,230,287,321 SDC Display panel 2,008 2,849 5,977 Harman Digital cockpit 8,334 6,928 6,116 Output for major product categories on a consolidated basis. (Utilization rate) DX utilization rates in 2022 were calculated as actual output relative to production capacity. The utilization rates were 75.0% for Image devices and 69.0% for HHPs. (1,000 units) Organization Item 2022 Production capacity Output Utilization rate DX Division Image devices 55,747 41,802 75.0% HHP 332,170 229,180 69.0% The DS Division and SDC respectively operate memory and display panel production in three shifts (24 hours a day). Cumulative operating days including holidays were 365 days in 2022. The utilization rate was calculated as the actual production time relative to the potential production capacity [operating days (x) number of production lines (x) 24 hours]. (Hours) Organization Item 2022 Potential production time Actual production time Utilization rate DS Division Memory 83,016 83,016 100% SDC Display panel 47,280 47,280 100% In 2022, Harman’s utilization rate was 74.0% and was calculated as actual output relative to production capacity. (1,000 units) Organization Item 2022 Production capacity Output Utilization rate Harman Digital cockpit 11,257 8,334 74.0% ![]() Samsung Electronics Business Report-XBRL D. Production facilities and investment (Key facilities for production and operation) The Company’s operational activities include production, development, marketing, and sales. In Korea, operations are located in Suwon, Gumi, Gwangju, Hwaseong, Pyeongtaek, and Asan. Overseas operations in North America, Europe, and China include a total of nine regional headquarters under the DX Division, five regional headquarters under the DS Division, and subsidiaries of SDC and Harman. [Operations] Region Operations Location Korea (DX Division, DS Division, SDC – 12 work sites) Suwon Suwon Seocho Seoul Woomyeon Seoul Giheung Yongin Hwaseong Hwaseong Pyeongtaek Pyeongtaek Cheonan Cheonan Onyang Onyang Asan Asan Gumi1 Gumi Gumi2 Gumi Gwangju Gwangju Overseas (DX Division - 9 regional headquarters) North America New Jersey, US Europe Surrey, UK China Beijing, China Southeast Asia Singapore, Singapore Southwest Asia Haryana, India CIS Moscow, Russia Middle East Dubai, UAE Africa Johannesburg, South Africa Latin America Sao Paolo, Brazil Overseas (DS Division - 5 regional headquarters) Americas San Jose, US Europe Eschborn, Germany China Shanghai, China Southeast Asia Singapore, Singapore Japan Tokyo, Japan Harman North America HQ Connecticut, US Harman’s automotive business is mainly based in the US (Novi, MI) and in Germany (Garching), and its Lifestyle business is lo cated in the US (Northridge, CA) ![]() Samsung Electronics Business Report-XBRL The Company’s property, plant and equipment include land, buildings and structures, machinery and equipment, and construction in progress. As of December 31, 2022, the total book value was KRW 168,045.4 billion, which is an increase of KRW 18,116.9 billion from year-end 2021. (KRW 100 mil) Classification Land Buildings and structures Machinery and equipment Under construction Other tangible assets Total Dec 31, 2021 Book value 98,302 388,694 795,263 180,093 36,933 1,499,285 - Acquisition cost 99,436 626,515 2,749,096 180,093 119,580 3,774,720 - Accumulated depreciation (including impairment loss) -1,134 -237,821 -1,953,833 - -82,647 -2,275,435 Change General acquisition and capital expenditure 1,389 53,021 310,101 166,757 21,002 552,270 Depreciation 1) -495 -35,339 -307,617 -16,070 -359,521 Disposal/discard/impair ment -576 -1,302 -469 -2 -465 -2,814 Others 2) 302 1,995 -132 -10,772 -159 -8,766 Dec 31, 2022 Book value 98,922 407,069 797,146 336,076 41,241 1,680,454 - Acquisition cost 100,246 677,138 3,030,006 336,076 132,485 4,275,951 - Accumulated depreciation (including impairment loss) -1,324 -270,069 -2,232,860 -91,244 -2,595,497 Market value of major tangible assets is omitted as objective assessment is difficult. 1) Land-depreciation is depreciation expense of right-of-use asset as per K-IFRS 1116 (Lease). 2) Includes effects of FX rates and government subsidies. (Capex) The Company’s capex in 2022 was KRW 53.1 trillion, with investments concentrating on capacity expansions and migration of advanced nodes as well as on infrastructure for the DS Division and SDC. Amid market uncertainties in 2023, the Company will continue to invest to secure competitiveness for next-generation technology and to prepare for future demand, at the same time, the Company will concentrate on boosting investment efficiency to ensure stable growth. [Capex, by organization] (KRW 100 mil) Organization Purpose Period Assets Investment DS division Establishment, addition, upgrade January–December 2022 Buildings, facilities, etc. 478,717 SDC Establishment, addition, upgrade January–December 2022 Buildings, facilities, etc. 24,958 Other Establishment, addition, upgrade January–December 2022 Buildings, facilities, etc. 27,478 Total 531,153 ![]() Samsung Electronics Business Report-XBRL 4. Revenue and long-term contracts A. Revenue In 2022, the Company recorded total revenue of KRW 302,231.4 billion, an increase of 8.1% year-on-year. By organization, when compared to the same period last year, revenue of the DX Division, DS Division, SDC, and Harman increased by 9.8%, 3.2%, 8.4% and 31.6%, respectively. (KRW 100 mil) Organization Revenue types Product categories 2022 2021 2020 DX Division Goods, products, services, other TVs, monitors, refrigerators, washing machines, air conditioners, HHPs, Network systems, computers, etc. 1,824,897 1,662,594 1,489,135 DS Division Goods, products, services, other DRAM, NAND flash, mobile APs, etc. 984,553 953,872 740,540 SDC Goods, products, services, other OLED panels for smartphones, etc. 343,826 317,125 305,857 Harman Goods, products, services, other Digital cockpit, telematics, speakers, etc. 132,137 100,399 91,837 Others Overlapping internal transactions between Divisions -263,099 - 237,942 -259,299 Total 3,022,314 2,796,048 2,368,070 Includes inter-divisional transactions. Figures for 2020 and 2021 were adjusted to align with those of 2022, reflecting the organizational changes in December 2021. (1) Sales, by major product (on a consolidated basis) (KRW 100 mil) Classification 2022 2021 2020 Image devices 332,795 314,974 277,118 Mobile devices 1,154,254 1,046,806 960,217 Memory 685,349 726,022 555,442 Display panels 343,826 317,125 305,857 Includes inter-divisional transactions. ![]() Samsung Electronics Business Report-XBRL (2) Revenue, by type (KRW 100 mil) Classification 2022 2021 2020 Products 2,903,461 2,658,785 2,235,963 Services and other revenue 118,853 137,263 132,107 Total 3,022,314 2,796,048 2,368,070 Other revenue consists of royalty income, etc. (3) Revenue, by region (on a separate basis) (KRW 100 mil) Classification 2022 2021 2020 Domestic 221,799 221,497 198,331 Export Americas 659,617 583,805 476,768 Europe 265,147 258,227 235,012 Asia and Africa 425,114 336,671 315,598 China 546,998 597,247 437,403 Total 2,118,675 1,997,447 1,663,112 Domestic consumption and exports on a separate basis. B. Sales channels (1) Domestic Seller Sales channel Consumer Manufacturer and buyer Exclusive agencies Consumer Distributor (general merchandise stores, discount stores, department stores, home-shopping, online, etc.) Telecommunication service provider (SKT Co., Ltd., KT Corp., LG Uplus Corp.) Direct Sales (B2B and online channels) (2) Overseas Seller Sales channel Consumer Production subsidiaries Regional sales office Retailer Consumer Dealer Retailer Distributor Dealer Retailer Telecommunication service provider, automotive OEM Direct sales (B2B and online channels) Regional distribution office Regional sales office Retailer Dealer Retailer Distributor Dealer Retailer ![]() Samsung Electronics Business Report-XBRL (3) Sales ratio (global), by channel Channel Wholesale Retail Special/direct sales Others Ratio 19% 27% 51% 3% C. Sales methods and conditions (1) Domestic Classification Channel Collection Incidental expense sharing Exclusive Retailer Credit specific Case specific cost sharing as determined by mutual agreement Distributor General merchandise store, discount store, department store, home shopping, online, etc. Case specific and contract specific Case specific cost sharing as determined by mutual agreement Telecommunication service provider SKT Co., Ltd., KT Corp. LG Uplus Corp. Case specific and contract specific Case specific cost sharing as determined by mutual agreement (joint marketing) B2B and online channels Corporate clients, etc. Case specific and contract specific N/A (2) Overseas Classification Channel Collection Incidental expense sharing Retailer Retail store Case specific and contract specific Case specific cost sharing as determined by mutual agreement Dealer General merchandise store, discount store, department store Case specific and contract specific Case specific cost sharing as determined by mutual agreement Distributor Direct sales to local distributors Case specific and contract specific Case specific cost sharing as determined by mutual agreement B2B and online channels Corporate clients, etc. Case specific and contract specific N/A D. Sales strategy - Expand market leadership based on premium products - Provide differentiated value to customers through brand, products, and services - Strengthen marketing activities to boost demand from customer/market E. Major customers In 2022, major customers (listed alphabetically) included Apple, Best Buy, Deutsche Telekom, Qualcomm, and Verizon. Sales to the five major customers accounted for approximately 16% of total sales. F. Long-term contracts As of December 31, 2022, there were no long-term contracts that have a significant impact on the Company’s financial statement. ![]() Samsung Electronics Business Report-XBRL 5. Risk management and derivative trading A. Financial risk management policy The Company’s financial risk management focuses on minimizing market risk, credit risk, and liquidity risk arising from operating activities. To mitigate these risks, the Company closely monitors each risk factor and operates corresponding financial risk management policies and program. The Company’s use of derivative instruments for hedging risks are included in this program. The finance team mainly carries out the Company’s financial risk management. After implementing the global financial risk management policies, the finance team periodically measures, evaluates, and hedges financial risks. Meanwhile, the Company manages exchange rate risk via monitoring exchange rates and conducting transactions through local finance centers in each major region (United States, United Kingdom, Singapore, China, Brazil, and Russia). Liquidity risk is managed by managing capital as a whole by each region. The Company’s assets that are under financial risk management consist of cash and cash equivalents, short-term financial instruments, financial assets at amortized cost, trade receivables and others. The Company’s liabilities under financial risk management consist of trade payables, borrowings, and others. B. Major financial risks (1) Market risk (Foreign exchange risk) The Company operates internationally and is exposed to foreign exchange risks as it conducts transactions in currencies other than the functional currency. Major currencies that are exposed to foreign exchange risk include USD, EUR, INR, and others. The Company focuses on minimizing the impact of foreign exchange fluctuation by maintaining the equal amount of assets and liabilities denominated in each foreign currency, irrespective of foreign exchange fluctuation considerations. To prevent exchange position, the Company’s foreign exchange management polic y requires normal business transactions, including import and export, as well as financing transactions such as depositing and borrowing, to be in local currency or for the cash-in currency to be matched up with the cash-out currency. In order to effectively manage foreign exchange risk, the Company periodically monitors and evaluates exchange rate risk and strictly prohibits speculative foreign exchange transactions. The impacts of a 5% change in currency rates on the profits or losses (before income tax) arising from financial assets and liabilities denominated in foreign currencies other than functional currency as of the reporting date are as follows: (KRW mil) Classification December 31, 2022 December 31, 2021 Increase Decrease Increase Decrease USD 258,655 -258,655 250,489 -250,489 EUR 92,546 -92,546 107,519 -107,519 INR 52,096 -52,096 24,216 -24,216 ![]() Samsung Electronics Business Report-XBRL (Interest rate risk) Risk of changes in interest rates for floating interest rate financial instruments is defined as the risk that the fair value of components of the consolidated statement of financial position, and future cash flows of interest income (expenses) of a financial instrument, will fluctuate because of changes in market interest rates. The Company’s position with regard to interest rate risk exposure is mainly driven by its floating interest rate debt obligations and interest-bearing deposits. The Company implemented policies and operates to minimize uncertainty arising from changes in interest rates and financial expenses. The impacts of a 1% change in interest rates on profit or loss (before income tax) arising from floating-rate financial assets and liabilities as of the reporting date are as follows: (KRW mil) Classification December 31, 2022 December 31, 2021 Increase Decrease Increase Increase Financial assets 72,750 -72,750 71,131 -71,131 Financial liabilities -8,427 8,427 -18,779 18,779 Net effect 64,323 -64,323 52,352 -52,352 (Price risk) The Company’s investment portfolio consists of direct and indirect investments in equity securities classified as financial assets at fair value through other comprehensive income and financial assets at fair value through profit or loss, which is in line with the Company’s strategy. As of December 31, 2022, a price fluctuation of marketable equity securities (listed stocks) of 1% changes ‘other comprehensive income’ (before income tax) by KRW 92,073 million and ‘profit before tax’ by KRW 3,144 million. The figures as of the same date in 2021 were KRW 116,087 million and KRW 4,784 million, respectively. (2) Credit risk Credit risk arises during the normal course of transactions and investing activities where clients or other parties fail to discharge an obligation. The Company sets and manages the client’s and counterparty’s credit limit, and evaluates their financial credit rating on a periodic basis based on the client’s and counterparty’s financial conditions, default history and other important factors. Adequate insurance coverage is maintained for trade receivables related to trading partners situated in higher risk countries. Credit risk can arise from transactions with financial institutions, which include financial instrument transactions such as cash and cash equivalents, savings, and derivative instruments. To minimize such risk, the Company transacts only with banks which have strong international credit rating (S&P A and above), and all new transactions with financial institutions with no prior transaction history are approved, managed and monitored by the Company’s finance team and the local finance center. The Company generally enters into a financial agreement with no restrictions, such as debt ratio covenants, provision of collateral, and loans or borrowings repayment. The Company requires separate approval for contracts with restrictions. ![]() Samsung Electronics Business Report-XBRL The Company estimates that its maximum exposure to credit risk is the carrying amount of its financial assets, net of impairment losses. (3) Liquidity risk Due to the nature of the Company’s business that requires making large investments, maintaining adequate level of liquidity risk is crucial. The Company maintains and manages adequate level of liquidity by periodically forecasting its capital balances, estimating required cash, managing income and expenses, and others. The Company effectively manages its liquidity risk by periodically forecasting projected cash flows and by utilizing regional cash pooling, which allows for the use of internal funds when an entity in a region lacks liquidity. The cash-pooling program allows sharing of surplus funds among entities and contributes to minimizing liquidity risk and strengthening the Company’s competitive position by reducing capital operation expenses and financial expenses. In addition, the Company’s headquarters provides payment guarantees to overseas subsidiaries to secure credit limit to brace for potential large-scale liquidity needs. The following table is an undiscounted cash flow analysis for financial liabilities according to their remaining contractual maturity from the end of the reporting date to the contractual maturity date. (1) As of December 31, 2022 (KRW mil) Less than 3 months ~6 months ~12 months 1—5 years More than 5 years Financial liabilities 42,990,570 733,984 1,925,448 5,402,672 1,562,274 (2) As of December 31, 2021 (KRW mil) Less than 3 months ~6 months ~12 months 1—5 years More than 5 years Financial liabilities 55,185,809 1,814,271 1,674,980 5,462,057 944,232 ![]() Samsung Electronics Business Report-XBRL (4) Capital risk The purpose of capital management is to protect our capability of continuously providing profit to our shareholders and stakeholders and to maintain a sound capital structure. To this end, the Company monitors capital on the basis of credit rating and the ratio of total liabilities to total equity. As of December 31, 2022, the Company has an AA- and Aa2 credit rating from S&P and Moody’s, respectively, and the figures for total liabilities and total equity are as follows: (KRW mil) Dec 31, 2022 Dec 31, 2021 Total liabilities 93,674,903 121,721,227 Total equity 354,749,604 304,899,931 Total liabilities to equity ratio 26.4% 39.9% C. Derivative instruments and put options The Company hedges foreign currency positions by trading currency forward contracts of currencies other than won for the purpose of managing foreign exchange risk. Currency forwards are bought through a bank in the purpose of trade and hedging. As of December 31, 2022, the Company had 2,545 currency forward contracts involving 35 foreign currencies, including USD,EUR, JPY and the book value of assets and liabilities as well as valuation gain and loss were as follows: (KRW mil) Assets Liabilities Valuation gain Valuation loss Currency forwards 166,087 158,686 1,351,390 1,450,638 Samsung Display (a subsidiary of the Company) may exercise its put option to sell part of its shares of Corning Incorporated back to Corning, according to the stock trade contract with Corning on April 8, 2021. Furthermore, Samsung Display may exercise its put option to sell all or part of its shares of TCL China Star Optoelectronics Technology Co. Ltd. (CSOT) to TCL Technology Group Corporation (TCL), if CSOT remains unlisted within the listing period, according to the shareholders’ agreement executed with TCL and CSOT on April 1, 2021. Fair value of the above put option as of December 31, 2022 was evaluated by Earnest & Young Global Limited. ![]() Samsung Electronics Business Report-XBRL 6. Major contracts and research and development activities A. Major contracts Account Contract information Contents Cisco Type Patent cross-license agreement Date Jan 23, 2014 Purpose and contents Eliminate risk of patent disputes and lawsuits through mutual patent licensing Google Type Patent cross-license agreement Date Jan 25, 2014 / indefinite term Purpose and contents Eliminate risk of patent disputes and lawsuits through mutual patent licensing Other Permanent license contract (including patent applications in the next 10 years) GlobalFoundries Inc. Type Process technology license agreement Date Feb 28, 2014 Purpose and contents Expand customer base of 14nm process InterDigital Type Patent license agreement Date Jun 3, 2014 Purpose and contents Eliminate risk of patent disputes and lawsuits through patent licensing Qualcomm Type Patent cross-license agreement Date Jan 1, 2018–Dec 31, 2023 Purpose and contents Eliminate risk of patent disputes and lawsuits through mutual patent licensing and signing of covenant not to sue Apple Type Withdrawal of lawsuit agreement Date Jun 26, 2018 Purpose and contents Withdraw from all lawsuits in the United States Nokia Type Patent license agreement Date Oct 19, 2018 Purpose and contents Eliminate risk of patent disputes and lawsuits through patent licensing Microsoft Type Patent cross-license agreement Date Feb 11, 2019 ![]() Samsung Electronics Business Report-XBRL Account Contract information Contents Purpose and contents Eliminate risk of patent disputes and lawsuits through mutual patent licensing Google Type EMADA Date Feb 27, 2019–Dec 31, 2022 (extended) Purpose and contents Licensing agreement for using Google apps (Play Store, YouTube, etc.) in 31 European countries (EEA) Huawei Type Patent cross-license agreement Date Feb 28, 2019 Purpose and contents Eliminate risk of patent disputes and lawsuits through mutual patent licensing AMD Type Technology licensing agreement Date May 30, 2019 Purpose and contents Secure mobile graphics design for mobile products and other applications Sharp Type Patent cross-license agreement Date July 30, 2019 Purpose and contents Eliminate risk of patent disputes and lawsuits through mutual patent licensing Ericsson Type Patent cross-license agreement Date May 7, 2021 Purpose and contents Eliminate risk of patent disputes and lawsuits through mutual patent licensing Information that may be referenced or used in other IP disputes, including contract amount, is excluded. ![]() Samsung Electronics Business Report-XBRL B. Summary of R&D activities and expenditures The Company is leading the global market by continuously developing creative and innovative products and the future technology through shifting its way of thinking and understanding customer demand. The Company is doing its utmost to cement its position in the global IT industry and become a worldwide leader in industrial technology by creating and securing next-generation technology. As of December 31, 2022, the Company’s R&D expenses were KRW 24,929.2 billion year-to-date. Among this, KRW 24,919.2 billion was recognized as expenditures, excluding government subsidies and capitalized expenses. (R&D expenses) (KRW mil) 2022 2021 2020 Total R&D expenditures 24,929,171 22,596,487 21,229,200 (Government subsidies) -9,973 -1,053 -8,228 R&D expenditures 24,919,198 22,595,434 21,220,972 Accounting Capitalization of development expenses (intangible asset) - -193,708 -109,482 R&D costs (expenses) 24,919,198 22,401,726 21,111,490 R&D expenses/revenue ratio 1) 8.2% 8.1% 9.0% On a consolidated basis. 1) Calculated using total R&D expenditures, which includes government subsidies. C. R&D organization and operations (Domestic) The Company operates three levels of R&D organizations: R&D teams of business units under each Division that develop market-ready technologies with a 1 – 2 year outlook; research institutes of each Division that develop mid- to long-term technology with a 3 – 5 year outlook; and the Samsung Advanced Institute of Technology, which develops core technology as seeds for future growth engines. Samsung Advanced Institute of Technology is the central research institute of Samsung Electronics that has been established to lead the Company into the future and serve as an incubator of cutting-edge technology. It has a creative R&D system and provides R&D direction for promising growth sectors at the Company level, exploring future growth engines and strengthening technological competitiveness of core businesses. (Overseas) The Company operates R&D organizations in the US (SRA), China (SSCR, SRC-Beijing, SRC-Nanjing, SRC-Guangzhou, SRC-Shenzen), India (SRI-Bangalore and SRI-Delhi), Bangladesh (SRBD), Israel (SRIL and SIRC), Russia (SRR), and Japan (SRJ), to carry out research activities for product development and basic technological research. The Company has established AI centers in Cambridge (United Kingdom), Moscow (Russia), Toronto (Canada), Montreal (Canada), and New York (United States), so our global team of researchers can collaborate with international experts to strengthen capabilities in AI technology. ![]() Samsung Electronics Business Report-XBRL As of December 31, 2022. ☞ See 『 1. Subsidiaries subject to consolidated financial statements (detailed) 』 in 『 XII. Appendix 』 for more details about the current status of the overseas R&D (companies). D. R&D results The Company’s key R&D results by organization in 2022 are as follows: DX Division Research project Details Neo QLED 8K • Release of ultra-high-definition, slim 8K TV based on mini LED Neo QLED 4K • Rollout of three series and seven sizes based on mini LED Grande AI Washer • Release of 24kg Grande AI Washer that features a pet-care cycle / 20kg Grande AI Dryer Galaxy Foldable • Launch of Galaxy Z Fold 4 • Release of Galaxy Z Flip 4 Galaxy S22 • Rollout of Galaxy S22 ㆍ S22+ ㆍ S22 Ultra Galaxy Tab • Release of Galaxy Tab S8 ㆍ S8+ ㆍ S8 Ultra Galaxy A • Rollout of A73 5G • Release of A53 5G • Launch of A33 5G • Release of Galaxy A23 LTE ㆍ 5G • Launch of Galaxy A13 LTE ㆍ 5G Galaxy Book • Rollout of Galaxy Book2 Pro 360 • Release of Galaxy Book2 Pro • Launch of Galaxy Book2 Go 5G Display Research Lab SIRC, SRIL SRR SRJ LED Research Lab Innovation Center Research Lab SRC-Beijing SRC-Nanjing SSCR SRC-Guangzhou SRC-Shenzhen PKG Research Lab SRI-Bangalore, Delhi SRBD Samsung Advanced Institute of Technology SRA CEO Design Research Lab Production Technology Research Lab Semiconductor Research Lab Equipment Technology Research Lab M emory Research Lab Samsung Research Digital Image Research Lab Digital Appliances Research Lab 1 Digital Appliances Research Lab 2 Health & M edical Research Lab M obile Research Lab M obile Communication Research Lab Network Research Lab System LSI Research Lab Foundry Research Lab Reliability Research Lab Environment & Safety Research Center ![]() Samsung Electronics Business Report-XBRL Wearable • Rollout of Galaxy Watch 5 • Release of Galaxy Buds 2 Pro DS Division Research project Details DRAM for mobile • Development of industry’s first LPDDR5X DRAM Exynos • Release of Exynos 2200, a premium mobile AP LSI • Release of single-chip fingerprint security IC (S3B512C) for biometric payment cards Foundry • Adoption of GAA for the 3-nano process for the first time in the world SDC Research project Details QD-Display • QD-Display (55" UHD, 65" UHD) for TV • QD-Display (34" QHD) for monitor Please refer to 『 Appendix-4. R&D results (detailed) 』 for more details. ![]() Samsung Electronics Business Report-XBRL 7. Other information A. Intellectual property Intellectual property activities are an integral part of our R&D strategies—SEC registered its first US patent in 1984 and currently holds 225,910 patents around the world. The Company holds the highest number of its patents in the US and aims to address conflicts in the US more effectively. (Number of patents registered in each country) [ As of December 31, 2022] (Unit: No. of patents) Korea US Europe China Japan Others Total Number 52,044 88,024 41,915 20,762 8,901 14,264 225,910 In 2022, the Company invested KRW 24.9 trillion in R&D and registered 9,136 domestic and 8,490 US patents. (Number of patent registrations per year) (Unit: No. of patents) 2022 2021 2020 Korea 9,136 8,437 6,648 US 8,490 8,565 8,520 These patents are mostly related to smartphones, smart TVs, memory, and system LSI products for the Company’s strategic business products or for future use. These patents not only protect the Company’s business but also play a role in keeping similar technology and patents, as well as competitors, in check. Additionally, the Company is focusing on securing early patents in new technologies ahead of others, in order to protect opportunities and have the freedom to operate when entering new businesses. The Company has signed licensing agreements with Cisco (signed in January 2014), Google (January 2014), Qualcomm (January 2018), Nokia (October 2018), Microsoft (February 2019), Sharp (July 2019), and Ericsson (May 2021) through which the Company has secured an extensive patent protection in mainstay businesses as well as in the fields of new business. The Company has also been focusing on securing design patents to protect its original design applied to smartphones and smart TVs. In 2022, the Company acquired 468 US design patents, in part for the aforementioned purposes. B. Environmental regulations The Company strictly abides by environmental regulations on products and in the workplace, as prescribed by law. In addition, in accordance with “the low carbon green growth policy” of the Korean government, the Company reports “the amount of greenhouse gas emission and energy use” to the government and provides related information to stakeholders by providing various reports, including the Samsung Sustainability Report. ![]() Samsung Electronics Business Report-XBRL (Environmental regulation of products) Environmental regulation of products are becoming stricter, reflecting the concerns of governments and regulators about potential direct and indirect impact of products to consumers’ health and safety as consumers. Accordingly, the Company is working to minimize the environmental impact throughout the entire life cycle of products from the development stage of components and products to manufacturing, distribution, use, and disposal. The Company offers “Eco-Partner Certification” to suppliers for components free of harmful substances, and runs an “eco-design evaluation” system to reflect eco-friendly elements on products (reduced use of resources, energy and harmful substances, and the use of eco-friendly materials) at the development stage, and operates a “waste electronics collection recycle system” in Europe, North America, Korea, and India for collecting and recycling waste electronics. These activities are in line with domestic and foreign environmental laws on electronics and are a differentiation factor for the Company and its products. Relevant laws are as follows: 1. law on collection and· recycle of waste electronics (e.g., EU WEEE Directive) 2. limit on the use of harmful substances (e.g., EU RoHS Directive, REACH Regulation) 3. regulation on energy efficiency (e.g., EU ErP Directive) (Environmental regulations in the workplace) The Company operates environmental pollution prevention facilities to reduce air pollution, water pollution, and waste disposal, and to minimize the discharge of pollutants, thereby minimizing impact on the surrounding environment. Environmental management of workplace is supervised by the relevant government authorities. All production facilities, domestic and overseas, have acquired the International Occupational Health and Safety Management System Certification (ISO 14001, ISO 45001) to strengthen compliance. Major Relevant Domestic and International Laws are as follows: 1. Regulations related to emission of pollutants: Water Quality and Ecosystem Conservation Act, Clean Air Conservation Act, Wastes Control Act, Noise and Vibration Control Act, Environmental Impact Assessment Act 2. Management of greenhouse gas emission: Act on Allocation and Trading of Greenhouse Gas Emission, Framework Act on Low Carbon, Green Growth 3. Others: Toxic Chemicals Control Act, Act on the Registration and Evaluation, etc. of Chemical Substances, Odor Control Law, Soil Environment Conservation Act ![]() Samsung Electronics Business Report-XBRL (Greenhouse gas emission and energy consumption management) The Company is a “controlled entity” according to Article 42 (Coping with Climate Change and Management of Targets for Energy) Paragraph 6 of Korea’s “Framework Act on Low Carbon, Green Growth”. Thus, the Company has been reporting the amount of greenhouse gas emission and energy consumption, verified by a third-party, to the authorities and disclosing it to stakeholders according to Article 44 (Reporting on Quantity of Greenhouse Gases Emitted and Quantity of Energy Consumed) of the same Act since May 2011. The reported amount of greenhouse gas emission and energy use are provided below: (Unit: tCO 2 -eq, TJ) 2022 2021 2020 Greenhouse gas (tCO 2 -eq) 19,566,237 19,267,835 17,234,522 Energy (TJ) 277,270 274,298 255,990 On a consolidated basis. Domestic manufacturing facilities, office buildings, buildings owned by the Company, leased buildings, etc. Reported Greenhouse gas emission excludes ozone depletion substances (ODS). Amounts may differ based on results of governmental evaluations on emissions. From 2015, in accordance with the Article 8 (Designation of Business Entities Eligible for Allocation) of the Act on the Allocation and Trading of Greenhouse-Gas Emission Permits, the Company is an eligible business entity under the Act. C. Current status of each division [DX Division]  Industry overview TVs are key products of the DX Division, and the TV industry went through continual technological developments. The black-and-white TV was first developed in 1926, and in 1954, RCA started mass production and sales of 21" color TVs. Such developments have led to the creation of products such as the Trinitron CRT (1967) and flat CRT (1996). As the penetration rate in major countries reached over 90%, the growth of the CRT TV industry stagnated. The industry regained strong growth momentum following the launch of flat panel TVs (“FPTVs”) like LCDs and PDPs, especially with the expansion of digital broadcasting. FPTVs replaced CRT sets on the back of their enhanced design, picture quality, etc., combined with releases of competitively priced products. The year 2010 saw the launch of 3D TVs, and the rise of internet video services along with increased consumer interest in smart devices from 2011 to 2012 led to the birth of the smart TV market. The evolution continued with the launches of Quantum Dot QLED TVs in 2017, boasting significantly enhanced resolution and picture quality, and with commercialization of 8K and Micro LED TVs. The mobile phone industry started with first generation analogue devices in the early 1980s that only supported voice communication and evolved to second generation digital ones, using technology such as CDMA and GSM, where users could send voice and text messages. Third generation mobile communication standards such as WCDMA allowed users to send photos and videos. Today, fourth generation LTE mobile communication technology with ultra-high-speed data transmission is becoming commonplace and was used in 75% of phones sold in 2021 ( Strategy Analytics , November 2022). Fifth generation mobile communication services, which will lead innovation alongside the fourth industrial revolution, was successfully launched in Korea and the US, and is now commercialized globally. As a result, 5G smartphones are accelerating the development of an ecosystem of mashup services and related industries, with the sales increasing sharply to 610 million units in 2021 from 270 million units in 2020 ( Strategy Analytics , November 2022). ![]() Samsung Electronics Business Report-XBRL The smartphone industry has grown significantly since 2007. In 2021, the smartphone portion of total HHP sales volume was approximately 77%, and the feature phone portion of the total was approximately 23%, with the latter related to demand in emerging markets ( Strategy Analytics , December 2022). For 2022, the penetration rate of smartphones is expected to have reached 52%, rising slightly from 51% in 2021 ( Strategy Analytics , December 2022). Also, as the smartphone market shows high saturation, the importance of competitive software for applications, UX, games, media, advertisements, digital wallets, AI, security, etc., is rising alongside that of competitive hardware, which includes high-performance APs, large screen AMOLED displays, foldable form factors, multiple cameras, sensors, waterproof & dustproof features, biometric recognition, and more.  Market condition In 2021, market players continued to strive for innovations in picture quality, sound, and form factor to create demand for premium TVs, but TV demand decreased year-on-year to approximately 213.54 million units due to the impacts of disruptions in global supply chains and logistics. Moreover, in 2022, TV demand declined compared to the previous year, falling to 203.26 million units sold due to the impacts of a decline in real household income triggered by the Russia-Ukraine war, increased supply instability of raw materials and energy, and expanded global inflation ( Omdia , February 2023). < Market share of TV > Product 2022 2021 2020 TV 29.7% 29.5% 31.9% Global market share in revenue; from Omdia Moreover, the smartphone market is expected to have declined from 1.36 billion units in 2021 to 1.22 billion units in 2022 due to uncertainties such as continued geopolitical instability and inflation ( Strategy Analytics , December 2022). Meanwhile, the tablet market grew to 180 million units in 2021 thanks to an increase in contactless demand triggered by COVID-19. It then started trending downward due to weak replacement demand, and it is expected to have dropped slightly to 160 million units in 2022 ( Strategy Analytics , November 2022). < Market share of Smartphone > Product 2022 2021 2020 Smartphone 21.8% 20.0% 19.6% Global market share in quantity; data from research firm Strategy Analytics . (Figure for 2022 is estimate from Strategy Analytics. )  Business condition We have maintained the top position in the overall TV market for seventeen straight years since claiming the number one spot in 2006. In 2018, we released world’s first 8K TV in the global market, once again leading the premium segment in the TV industry. Our QLED lineup includes sizes ranging from mid-sized to ultra-large screens, giving customers a variety of choices. In addition, the significantly improved picture quality was well received by consumers and experts alike. We achieved solid results by introducing ultra-large screens in the UHD lineup as well as in the QLED lineup. In 2020, we enhanced our leadership and dominance in the market with 4K and 8K QLED TVs and new Lifestyle TVs such as The Terrace, The Premiere and The Sero despite a global economic crisis due to COVID-19. ![]() Samsung Electronics Business Report-XBRL In 2021, we expanded our premium product lineup by launching Neo QLED TVs featuring significantly upgraded contrast and picture quality. Moreover, the sales portion of Lifestyle products and sound bars has increased, and a rising number of companies have participated in various smart ecosystems, including TV plus, home training, and games. Since 2021, we have been particularly strengthening our efforts toward becoming a more eco-friendly business, from raw materials to packaging, and we are enhancing accessibility to help the visually impaired and hard of hearing to conveniently use our products. In 2022, we increased our market share in the premium, ultra-large, over 75” TV market centering on innovative Neo QLED 8K technologies and further reinforced our Lifestyle TV lineups by introducing The Freestyle. In 2023, we will increase our market share by focusing on premium, flagship products, such as Neo QLED and Super Big TVs; and for Lifestyle TVs, we will expand our lineups and improve product performance to continue to provide our customers with products tailored to their needs. Furthermore, in line with the Company’s new environmental strategy, we will increase adoption of recycled plastic materials in our eco-friendly remote controls and roll out TV products that apply ultra-low power technologies. Furthermore, SEC has always been at forefront of the HHP market, and for smartphones in particular, we have maintained leadership in the global market for eleven consecutive years. To solidify our status in the overall mobile market, we always strive to improve our current products—including tablets, wearables, and accessories—while growing businesses in areas with high potential, such as digital health, digital wallet, etc. For smartphones, we are establishing optimal portfolios for each region, accounting for varying market conditions and the competitive environment, offering a wide smartphone lineup ranging from mass-market to premium devices. We have been providing premium smartphones and delivering differentiated user experiences that can meet customer needs via our cutting- edge technology, which includes Dynamic AMOLED 2X (120Hz) displays, digital key and content sharing using UWB (ultra wideband), water- and dust-proofing, high-speed cable and wireless charging, ultrasonic fingerprint-on-display (FoD), high-resolution and optical zoom/night mode camera with AI technology, 8K video recording, on top of large-screen Infinity Displays. In 2019, we secured early leadership in the 5G market with the release of the world’s first 5G smartphone while also creating a new market with Galaxy Fold, enabled by foldable displays. In 2020, we continued to lead the foldable market with the launch of Galaxy Z Flip, a new form factor that folds from top down, and a further evolved edition Galaxy Z Fold 2. In 2021, we released the third generation Galaxy Z Series with significantly enhanced durability based on unrivaled craftsmanship, leading the foldable market. In 2022, the market embraced the releases of Galaxy Z Fold 4 and Galaxy Z Flip 4, which featured further enhancements to the completeness of their respective core experiences—multi-tasking and Flex Mode. We continue to target achieving higher sales of foldable products relative to previous releases of Note models, with our mainstreaming of the new foldable series. To respond to an ever-changing market as well as customer needs, we are strengthening product competitiveness by introducing innovative features such as 5G, quad cameras, large infinity displays, and high-capacity batteries even to mid- range-and-below products. In addition, we provide richer experiences for our smartphone users with our Galaxy Eco products, including tablets that help boost productivity via virtual meetings, multitasking, and note-taking with large-screen display and S Pen; and wearables such as smart watches that provide sophisticated fitness and wellness functions—thanks to the adoption of innovative biosensor technologies—and wireless earphones that provide rich, clear sound. Not content to dwell on our achievements in hardware, we have been focusing on delivering new and helpful services like ![]() Samsung Electronics Business Report-XBRL Samsung Pay, Samsung Health, and SmartThings. To deliver a consistent and high-quality Multi-Device Experience, we are adding Bixby features to a suite of products in addition to smartphones, including TVs, refrigerators, air conditioners, etc. Moreover, we are strengthening strategic partnerships to expand our ecosystem , and we are securing new and innovative technologies by sustaining investments in fields with growth potential, including digital health and digital wallets, by utilizing SmartThings, Bixby, and Cloud, and by reinforcing our Service Business. Furthermore, we continue to innovate eco-friendly technologies, including ones to expand adoption of recycled materials in our products. A prime example is the adoption of materials repurposed from discarded fishing nets in our key products, including Galaxy S22 and S23 series and Galaxy Z Fold 4. We will continue to leverage our superior R&D capabilities to be fully prepared to keep delivering new value to customers. ![]() Samsung Electronics Business Report-XBRL [DS Division]  Industry overview In general, our Semiconductor business is divided into Memory (storage) and System LSI (logical processing). Memory semiconductor is divided into RAM products (random access memory, ones that can be both written on and read) and ROM products (read only memory). RAM is called volatile memory as the information is deleted when the power is turned off. It is used for temporary loading and storage of application programs. ROM is nonvolatile and holds memory even when power is removed; it is used in input/output system, IC cards, and more. For System LSI products, there are many categories for various applications. SoCs for mobile devices that are equipped with CPUs, GPUs, ISPs (image signal processors), and modems are our major products. The Company manufactures mobile SoCs for smartphones and tablets, image sensors, and DDIs (display driver ICs) for OLED. The Foundry Business makes customized semiconductors for other companies based on customer designs. The business resembles OEMs in the traditional manufacturing industry in the sense that companies consign the manufacturing of their products to fabrication plants, also called foundries or fabs. Due to increasing difficulty in semiconductor process and growing investment cost, the number of fabless semiconductor companies is growing, and the Foundry Business is in charge of consignment semiconductor production for such fabless companies.  Market condition For the memory market, overall memory demand remained weak, as our customers further constrained their spending due to concerns over shrinking consumer sentiment as a result of persistent external uncertainties, such as potential for a global economic recession. Demand from consumer products such as PC and mobile continued to contract, and demand from servers was partially weak due to delays in set builds and an inventory reduction trend. Amid a likely further slowdown in memory demand led by a the sluggish macro economy, the Company will focus on securing profitability by selling high-value-added, high-capacity products and continuing to lead the memory market with our differentiated, next-generation solution products. The foundry market was expected to gradually recover from the beginning of 2022 on the back of the alleviated pandemic and easing of COVID-19 restrictions, but growth has been slower than expected in the second half of the year due to the Russia-Ukraine War, China’s large-scale lockdown, and accelerated rate hikes in the US. As a result, growth in 1Q23 is projected to decelerate in consideration of weak demand, but we expect the market to gradually rebound from 2H thanks to a boost in demand, including ones related to alleviated monetary tightening in major economies and normalized conditions in the supply chain. Growth in the mid to long term is likely to continue thanks to increased penetration of 5G for mobile and heightened demand for high performance automotive-use SoCs and high performance computing. < Market share of DRAM > Product 2022 2021 2020 DRAM 43.0% 43.0% 42.7% Global market share in revenue; data from research firm DRAMeXchange . (Data for 2022 is an estimate from the Company. )  Business condition In the memory business, in 1Q23, customers may continue to adjust inventories due to weak seasonality and persistent global macro uncertainties. In response, we are thoroughly preparing for DDR5 demand for server and PC following the release of a new CPU and actively addressing demand for high-density products for server and mobile applications. Also, ![]() Samsung Electronics Business Report-XBRL we are strengthening our competitiveness by increasing the portion of high-value products centering on profitability. Furthermore, we preemptively established mass production of DRAM featuring multi-layer EUV, and by strengthening cost competitiveness via our lineups of advanced products, such as SSDs with 8th-generation V-NAND, we will further solidify our market leadership in next-generation growth sectors. System LSI is striving to overcome the global market slowdown via stronger cooperation with customers, and it is endeavoring to enhance its technological capabilities and product competitiveness through advanced development of next-generation products. For SoCs, we are strengthening the development of products that apply mobile 5G SoCs and those from advanced nodes based on our technological capabilities in AP and modem. We are expanding our lineups via custom SoCs for mobile and SoCs for automotives; and we are bolstering cooperation with customers for the development of next-generation products. In the Foundry business, we are leveraging the recent downturn as an opportunity to strengthen our business structure and enable continued growth and to improve our fundamentals. For advanced nodes, aiming to enhance completeness and to increase competitiveness in technology services for our customers, we are focusing our capabilities on the timely development of 2nd generation 3-nano products, and we are preparing to mass produce 2nd and 3rd generation 4-nano products in the first half of 2023 by securing stable yield. Moreover, we will address customer demand through timely additions of capacity via establishing new fabs, including in Pyeongtaek and Taylor, and by improving our supply capabilities. For mature nodes, we are working to enhance the performance, power efficiency, size, and cost efficiency of 8-nano and 14-nano products to upgrade technological competitiveness and leverage the nodes for the long term. Furthermore, along with improving our technological competitiveness, we are increasing penetration into the market for high-performance, low-power semiconductors for HPC, automotives, 5G, IoT, etc. by developing specialty processes that our customers need. Finally, we are reinforcing the structure of the business overall by pushing to diversify our non-mobile customer base to bolster stability and sustain growth in all market conditions. [SDC]  Industry overview Display refers to screens in electronic devices. Active matrix technology is most commonly used in displays, including OLED (organic light emitting diode), QD-OLED (quantum dot organic light emitting diode), and TFT-LCD (thin film transistor liquid crystal display). OLED panels use organic materials, which offer sharp contrast and color, high color gamut, and fast response rates. Such differentiating features provide advantages for use in smartphones where display features (multimedia contents, online experience, etc.) are important, and as a result, OLED adoption in the smartphone market is growing rapidly. The market had raised concerns over the production of high-resolution, durable panels, but we overcame various technological challenges and advanced the business. OLED panels make up for the shortcomings of LCD panels, and they can be increasingly adopted into other applications in foldables, rollables, automotives, etc. The OLED market is forecasted to keep growing. QD-OLED, a self-emissive display with quantum dots (semiconductor particles a few nanometers in size) in the panel to maximize color gamut and viewing angle, is capturing attention under expectations that it will lead the premium TV and monitor markets.  Market condition The market for smartphone display panels is expected to have decreased to 1.38 billion units in 2022 from 1.75 billion units in 2021 due to weakening consumer sentiment triggered by inflation and concerns over an economic slowdown. For smartphone-use OLED panels, the market is expected to have declined to 0.57 billion units in 2022 from 0.62 billion units in 2021, but the OLED portion of smartphone panels in 2022 likely increased to 41% from 35% in 2021 ( Omdia January 2023 ). ![]() Samsung Electronics Business Report-XBRL The market size for large display panels is also expected to have declined, falling from 0.98 billion units in 2021 to 0.88 billion units in 2022 amid a slumping market ( Omdia , January 2023). < Market share of smartphone panel > Product 2022 2021 2020 Smartphone panels 56.7% 51.4% 44.8% Global market share in revenue; figure for 2022 is estimate from research firm Omdia.  Business condition The Company has continued to stay atop the mobile OLED market in terms of market share since it successfully commercialized OLED products in 2007, marking a world’s first. We diversified our product group to include displays for foldable products, tablets, watches, laptops, and automotive applications, solidifying our position as the top player in the OLED display market. With both flexible and rigid OLED, our optimal smartphone product portfolio ranges from mass-market to premium devices as we proactively address customers’ specific needs; and we are recognized as having best-in-class technology through our introduction of foldable and OLED IT products with differentiated technologies and designs. In 2022, a decline in the smartphone market was inevitable due to persistent macro uncertainties. We endeavored to expand the application of new technologies, such as UPC (under panel camera), high refresh rate, and tech related to energy efficiency and performance, in line with the needs of our customers while also enhancing cost competitiveness to continue to increase adoption of OLED panels. Furthermore, we are diversifying our mobile panel business, which is concentrated on smartphones, to expand into IT, gaming, and automotive products and further solidify our business leadership. In the large panel business, we will continue to increase our market share in the premium market by expanding the lineup of QD-OLED products and diversifying distributors. [Harman]  Industry overview Harman competes in the automotive and lifestyle audio industries. As consumers want cutting-edge technologies for automotive components (digital cockpit, telematics, car audio, etc.), car makers demand latest technologies in areas such as car sharing and autonomous driving. As a result, competition is particularly fierce in the connectivity and entertainment solution markets between dominant players (e.g., Alpine, Aptiv, Continental, Mitsubishi, and Panasonic). Harman provides not only system solutions but also audio components (including speakers and amplifiers), and it is another segment where fierce competition between several major players (e.g., Bose, Pioneer, and Panasonic) is expected to drive technological advances as each firm introduces unique sound-management solutions. Competition is expected to remain intense. Lifestyle audio business has two segments: consumer audio and professional audio solutions. Consumer audio (portable speakers, headphones, connected audio solutions, etc.) is fragmented and a handful of companies (Amazon, Beats, Bose, Ultimate Ears, etc.) are showing early signs of dominance. We expect competition to remain intense as new players try to make inroads, given the saturated market for connected homes and smart speakers. In particular, for True Wireless headphones, for which smartphone manufacturers dominate market share, is expected to grow explosively. The professional audio solution industry (commercial audio, audio for large venues, etc., special lighting, video control solutions, etc.), led by QSC and Yamaha, is segmented by product and has seen the entrance of numerous companies offering ![]() Samsung Electronics Business Report-XBRL a wide range of products and applications.  Market condition The COVID-19 pandemic was projected to ease gradually into the end of 2022, but progress has been slower than expected, while business uncertainties have been mounting due to impacts of the Russia-Ukraine war . Against this backdrop, uncertainties in the macro economy were extremely high in 2022, including increased economic risks stemming from tightened monetary policies from central banks. Considering such factors, global automobile production in 2023 is forecast to grow 4% year-on-year ( S&P Global Light Vehicle Production Forecast, December 2022). < Market share of digital cockpit > Product 2022 2021 2020 Digital cockpits 24.7% 25.3% 27.5% Digital cockpits refer to the digital automotive component which enables safe driving environment via infotainment system, etc. Company estimates based on I.H.S and LMC data (by unit).  Business condition Harman is positioned to stay at the forefront of the automotive market and plans to continue to leverage its wide variety of brands to outfit vehicles ranging from mass-market thorough to luxury models, while also maintaining the quality that is synonymous with Harman brands. Additionally, Harman’s relentless pursuit of innovation in the audio and connectivity spaces will help ensure the development of thriving relationships with automakers. The same factors that Harman relies on within the automotive market will also be used in the consumer audio and professional audio solution market. Having won three Grammy Awards and two Academy Awards, Harman’s brands have earned a strong reputation amongst everyday consumers and audiophiles alike. New offerings in up-and-coming segments such as connected wireless and smart audio continue to help bring in new consumers and further enhance brand reputation. The COVID-19 pandemic created a challenging business environment, marked by halt in automobile production, a decline in daily travel and thus potential consumers, the closing of retailers, etc. The professional audio solution business, in particular, had adverse impacts of a reduction in the number of large-scale gatherings and events. Harman has adopted various ways to reduce costs from the onset of the COVID-19 pandemic, and we will redirect savings to other investments to compete more effectively in the market. ![]() Samsung Electronics Business Report-XBRL D. Financial summary, by organization In 2022 by organization, DX accounted for 60.4% of revenue with reported revenue of KRW 182,489.7 billion; DS contributed approximately 32.6% with revenue of KRW 98,455.3 billion; SDC was responsible for 11.4% with revenue of KRW 34,382.6 billion; and Harman contributed 4.4% with revenue of KRW 13,213.7 billion. In 2022, DX accounted for 29.4% of total operating profit with an operating profit of KRW 12,746.1 billion; DS contributed 54.9% with KRW 23,815.8 billion; SDC accounted for 13.7% with a total operating profit of KRW 5,953.0 billion; and Harman contributed 2.0% with an operating profit of KRW 880.5 billion. (KRW 100 mil) Organization Classification 2022 2021 2020 Amount Portion of corresponding total Amount Portion of corresponding total Amount Portion of corresponding total DX Division Revenue 1,824,897 60.4% 1,662,594 59.5% 1,489,135 62.9% Operating profit 127,461 29.4% 173,866 33.7% 151,520 42.1% Total assets 2,279,669 38.6% 2,479,832 42.0% 2,303,623 43.6% DS Division Revenue 984,553 32.6% 953,872 34.1% 740,540 31.3% Operating profit 238,158 54.9% 291,920 56.5% 188,062 52.2% Total assets 2,620,558 44.3% 2,258,223 38.3% 1,885,692 35.7% SDC Revenue 343,826 11.4% 317,125 11.3% 305,857 12.9% Operating profit 59,530 13.7% 44,574 8.6% 22,369 6.2% Total assets 737,798 12.5% 668,836 11.3% 661,929 12.5% Harman Revenue 132,137 4.4% 100,399 3.6% 91,837 3.9% Operating profit 8,805 2.0% 5,991 1.2% 555 0.2% Total assets 171,023 2.9% 158,874 2.7% 147,020 2.8% Includes inter-divisional transactions. Figures for 2020 and 2021 were adjusted to align with those of 2022, reflecting the organizational changes in December 2021.  Reasonable allocation of common SG&A (selling general & administrative) expenses and assets (1) For common SG&A expenses, specific expenses that are allocable to a specific product/model are allocated to Divisions that are responsible for such product/model. However, common expenses that cannot be attributed to a specific product/model category are reasonably allocated throughout the Company based on an allocation standard (expense-to- revenue ratio, number of personnel, etc.). (2) For common assets, assets that can be directly allocated (inventory assets, fixed assets, investment assets, etc.) are allocated to the corresponding organizational unit. Assets that are commonly managed and cannot be directly allocated are allocated to each Division based on an allocation standard (expense-to-revenue ratio, pre-tax profit, etc.) ![]() Samsung Electronics Business Report-XBRL III. Audited Financial Statements 1. Introduction Deloitte Anjin conducted audits on the consolidated/separate financial statements of financial position of the Company as of December 31, 2022, December 31, 2021, and December 31, 2020, and the related consolidated/separate statements of profit or loss, comprehensive income, changes in equity and cash flows for the years then ended and expressed an unqualified opinion on those financial statements. All of the Company’s subsidiaries received unqualified opinion for the years ended December 31, 2022, 2021, and 2020. Period end Company Auditor Audit Opinion Emphasis of Matter Key Audit Matter(s) Dec 31, 2022 Deloitte Anjin Unqualified Not applicable (Consolidated) 1. Sales deduction related to the sales promotion activities of products (Separate) 1. Sales deduction related to the sales promotion activities of products Dec 31, 2021 Deloitte Anjin Unqualified Not applicable (Consolidated) 1. Sales deduction related to the sales promotion activities of products (Separate) 1. Sales deduction related to the sales promotion activities of products Dec 31, 2020 Deloitte Anjin Unqualified Not applicable (Consolidated) 1. Sales deduction related to the sales promotion activities of products 2. Impairment of goodwill and intangible assets with indefinite useful lives (Separate) 1. Sales deduction related to the sales promotion activities of products ※ Audit opinion on both separate and consolidated financial statements. 2. Auditor's report A. Consolidated financial statements Auditor’s report of consolidated financial statements start from the next page. ![]() CONSOLIDATED FINANCIAL STATEMENTS OF SAMSUNG ELECTRONICS CO., LTD. AND ITS SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS Page Independent Auditor’s Report 1-4 Consolidated Financial Statements Consolidated Statements of Financial Position 5-7 Consolidated Statements of Profit or Loss 8 Consolidated Statements of Comprehensive Income 9 Consolidated Statements of Changes in Equity 10-13 Consolidated Statements of Cash Flows 14-15 Notes to the Consolidated Financial Statements 16 ![]() #### Independent Auditor’sReport To the Shareholders and the Board of Directors of Samsung Electronics Co., Ltd. Audit Opinion We have audited the accompanying consolidated financial statements of Samsung Electronics Co., Ltd. and its subsidiaries (the “Company”), which comprise the consolidated statement s of financial position as of December 31, 2022 and 2021, and the consolidated statements of profit or loss, the consolidated statements of comprehensive income, the consolidated statements of changes in equity and the consolidated statements of cash flows, for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K - IFRS”). Basis for Audit Opinion We conducted our audits in accordance with the International Standards on Auditing (“ I SAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants ( “ IESBA Code ” ) together with the ethical requirements that are relevant to our audit of the financial statements, and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Key Audit Matter The key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the consolidated financial statements of the current period. This matter was addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. (A) Sales deduction related to sales promotion activities Reasons why the matter was determined to be a key audit matter: The Device eXperience (DX) business division performs sales promotion activities, such as price or volume discounts and incentives, based on explicit or implicit agreements with customers, including retail and telecommunication companies. As disclosed in Notes 2 (Significant Accounting Policies) and 3 (Critical Accounting Estimates and Assumptions), these activities are recognized as deductions from revenue at the expected payment amount. As for the appropriateness of the revenue deduction amounts, such amounts may involve significant management estimates and judgments. In addition, we believe that those amounts could be material to the consolidated financial statements. As such, we determined the sales deduction related to sales promotion activities as a key audit matter. Deloitte Anjin LLC 9F., One IFC, 10, Gukjegeumyung-ro, Youngdeungpo-gu, Seoul 07326, Korea Tel: +82 (2) 6676 1000 Fax: +82 (2) 6674 2114 www.deloitteanjin.co.kr ![]() How the Key Audit Matter was addressed in the audit: Our audit procedures with respect to the Company’s sales promotion activities related to the sales of products included, but were not limited to the following: • Obtained an understanding of management’s accounting policies, processes and internal controls related to the sales deduction. • Obtained an understanding and evaluated the Company’s information technology system related to the sales deduction. • Assessed the Company’s internal controls relating to the approval process of the sales deduction policy. • Evaluated the Company’s internal controls relating to the approval process of the sales deduction estimation and post-settled amounts. • Evaluated the estimates and accompanying assumptions by inspecting supporting documentation relating to the sales deduction transactions. • Examined the sales deduction amount by comparing the sales deduction estimates to post-settled amounts and inspecting supporting documentation. Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of the accompanying consolidated financial statements in accordance with K-IFRS, and for such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management of the Company is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. -2- ![]() As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal cont rol. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We are solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. -3- ![]() The engagement partner on the audit resulting in this independent auditor ’s report is Byung Moon Yoo. Seoul, Korea February 15, 2023 Notice to Readers This report is effective as of February 15, 2023, the auditor ’s report date. Certain subsequent events or circumstances may have occurred between the auditor ’ s report date and the time the auditor ’s report is read. Such events or circumstances could significantly affect the financial statements and may result in modifications to the auditor ’s report. -4- ![]() Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF FINANCIAL POSITION The above consolidated statements of financial position should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) December 31, December 31, December 31, December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Assets Current assets Cash and cash equivalents 4, 28 49,680,710 39,031,415 38,477,921 30,229,997 Short-term financial instruments 4, 28 65,102,886 81,708,986 50,422,462 63,283,957 Short-term financial assets at amortized cost 4, 28 414,610 3,369,034 321,117 2,609,331 Short-term financial assets at fair value through profit or loss 4, 6, 28 29,080 40,757 22,523 31,566 Trade receivables 4, 5, 7, 28 35,721,563 40,713,415 27,666,503 31,532,713 Non-trade receivables 4, 7, 28 6,149,209 4,497,257 4,762,589 3,483,145 Prepaid expenses 2,867,823 2,336,252 2,221,141 1,809,437 Inventories 8 52,187,866 41,384,404 40,419,724 32,052,397 Other current assets 4, 28 6,316,834 5,081,665 4,892,415 3,935,772 218,470,581 218,163,185 169,206,395 168,968,315 Non-current assets Financial assets at fair value through other comprehensive income 4, 6, 28 11,397,012 13,965,839 8,827,034 10,816,602 Financial assets at fair value through profit or loss 4, 6, 28 1,405,468 1,525,344 1,088,541 1,181,385 Investment in associates and joint ventures 9 10,893,869 8,932,251 8,437,348 6,918,066 Property, plant and equipment 10 168,045,388 149,928,539 130,151,868 116,120,291 Intangible assets 11 20,217,754 20,236,244 15,658,737 15,673,057 Net defined benefit assets 14 5,851,972 2,809,590 4,532,377 2,176,039 Deferred income tax assets 25 5,101,318 4,261,214 3,950,992 3,300,328 Other non-current assets 4, 7, 28 7,041,145 6,798,952 5,453,397 5,265,819 229,953,926 208,457,973 178,100,294 161,451,587 Total assets 448,424,507 426,621,158 347,306,689 330,419,902 -5- ![]() Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF FINANCIAL POSITION The above consolidated statements of financial position should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) December 31, December 31, December 31, December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Liabilities and Equity Current liabilities Trade payables 4, 28 10,644,686 13,453,351 8,244,355 10,419,678 Short-term borrowings 4, 5, 12, 28 5,147,315 13,687,793 3,986,617 10,601,254 Other payables 4, 28 17,592,366 15,584,866 13,625,362 12,070,545 Advances received 17 1,314,934 1,224,812 1,018,422 948,622 Withholdings 4, 28 1,298,244 1,294,052 1,005,496 1,002,249 Accrued expenses 4, 17, 28 29,211,487 27,928,031 22,624,421 21,630,379 Current income tax liabilities 4,250,397 6,749,149 3,291,951 5,227,245 Current portion of long-term liabilities 4, 12, 13, 28 1,089,162 1,329,968 843,561 1,030,066 Provisions 15 5,844,907 5,372,872 4,526,905 4,161,312 Other current liabilities 4, 17, 28 1,951,354 1,492,239 1,511,331 1,155,744 78,344,852 88,117,133 60,678,421 68,247,094 Non-current liabilities Debentures 4, 13, 28 536,093 508,232 415,206 393,628 Long-term borrowings 4, 12, 28 3,560,672 2,866,156 2,757,756 2,219,850 Long-term other payables 4, 28 2,753,305 2,991,440 2,132,446 2,316,883 Net defined benefit liabilities 14 268,370 465,884 207,854 360,829 Deferred income tax liabilities 25 5,111,332 23,198,205 3,958,748 17,967,108 Long-term provisions 15 1,928,518 2,306,994 1,493,645 1,786,777 Other non-current liabilities 4, 17, 28 1,171,761 1,267,183 907,535 981,439 15,330,051 33,604,094 11,873,190 26,026,514 Total liabilities 93,674,903 121,721,227 72,551,611 94,273,608 -6- ![]() Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF FINANCIAL POSITION The above consolidated statements of financial position should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) December 31, December 31, December 31, December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Equity attributable to owners of the Company Preference shares 18 119,467 119,467 92,528 92,528 Ordinary shares 18 778,047 778,047 602,601 602,601 Share premium 4,403,893 4,403,893 3,410,834 3,410,834 Retained earnings 19 337,946,407 293,064,763 261,740,930 226,979,906 Other components of equity 20 1,938,328 (2,128,473) 1,501,243 (1,648,512) 345,186,142 296,237,697 267,348,136 229,437,357 Non-controlling interests 31 9,563,462 8,662,234 7,406,942 6,708,937 Total equity 354,749,604 304,899,931 274,755,078 236,146,294 Total liabilities and equity 448,424,507 426,621,158 347,306,689 330,419,902 -7- ![]() Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF PROFIT OR LOSS The above consolidated statements of profit or loss should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) For the years ended December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Revenue 29 302,231,360 279,604,799 234,079,475 216,555,107 Cost of sales 21 190,041,770 166,411,342 147,188,160 128,886,293 Gross profit 112,189,590 113,193,457 86,891,315 87,668,814 Selling and administrative expenses 21, 22 68,812,960 61,559,601 53,295,930 47,678,173 Operating profit 29 43,376,630 51,633,856 33,595,385 39,990,641 Other non-operating income 23 1,962,071 2,205,695 1,519,632 1,708,320 Other non-operating expense 23 1,790,176 2,055,971 1,386,499 1,592,358 Share of net profit of associates and joint ventures 9 1,090,643 729,614 844,708 565,089 Financial income 24 20,828,995 8,543,187 16,132,145 6,616,735 Financial expense 24 19,027,689 7,704,554 14,737,026 5,967,210 Profit before income tax 46,440,474 53,351,827 35,968,345 41,321,217 Income tax expense 25 (9,213,603) 13,444,377 (7,135,975) 10,412,727 Profit for the year 55,654,077 39,907,450 43,104,320 30,908,490 Profit attributable to Owners of the Company 54,730,018 39,243,791 42,388,632 30,394,483 Non-controlling interests 924,059 663,659 715,688 514,007 Earnings per share (in Korean won, in US dollars) 26 - Basic 8,057 5,777 6.24 4.47 - Diluted 8,057 5,777 6.24 4.47 -8- ![]() Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) For the years ended December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Profit for the year 55,654,077 39,907,450 43,104,320 30,908,490 Other comprehensive income (loss) Items that will not be reclassified subsequently to profit or loss: Gain (loss) on valuation of financial assets at fair value through other comprehensive income, net of tax 6, 20 (1,969,498) 2,980,896 (1,525,385) 2,308,717 Share of other comprehensive income (loss) of associates and joint ventures, net of tax 9, 20 (6,318) 51,816 (4,893) 40,132 Remeasurement of net defined benefit liabilities (assets), net of tax 14, 20 1,153,679 (524,606) 893,529 (406,310) Items that may be reclassified subsequently to profit or loss: Share of other comprehensive income (loss) of associates and joint ventures, net of tax 9, 20 (44,192) 160,163 (34,227) 124,047 Gain on overseas business translation, net of tax 20 4,884,886 7,283,620 3,783,365 5,641,195 Gain (loss) on valuation of cash flow hedge derivatives 20 (12,893) 50,410 (9,986) 39,043 Other comprehensive income (loss) for the year, net of tax 4,005,664 10,002,299 3,102,403 7,746,824 Total comprehensive income for the year 59,659,741 49,909,749 46,206,723 38,655,314 Comprehensive income attributable to: Owners of the Company 58,745,107 49,037,912 45,498,335 37,980,071 Non-controlling interests 914,634 871,837 708,388 675,243 -9- ![]() Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes. (In millions of Korean won) 2021 KRW Notes Preference shares Ordinary shares Share premium Retained earnings Other components of equity Accumulated other comprehensive income attributable to assets held- for-sale Equity attributable to owners of the parent company Non- controlling interests Total Balance as of January 1, 2021 119,467 778,047 4,403,893 271,068,211 (8,687,155) (12,132) 267,670,331 8,277,685 275,948,016 Profit for the year - - - 39,243,791 - - 39,243,791 663,659 39,907,450 Gain (loss) on valuation of financial assets at fair value through other comprehensive income, net of tax 6, 20 - - - 3,232,934 (359,117) - 2,873,817 107,079 2,980,896 Share of other comprehensive income (loss) of associates and joint ventures, net of tax 9, 20 - - - - 225,464 - 225,464 (13,485) 211,979 Gain on overseas business translation, net of tax 20 - - - - 7,164,982 - 7,164,982 118,638 7,283,620 Remeasurement of net defined benefit liabilities, net of tax 14, 20 - - - - (520,552) - (520,552) (4,054) (524,606) Gain on valuation of cash flow hedge derivatives 20 - - - - 50,410 - 50,410 - 50,410 Reclassification to held-for-sale - - - - (12,132) 12,132 - - - Total comprehensive income for the year - - - 42,476,725 6,549,055 12,132 49,037,912 871,837 49,909,749 Dividends declared 19 - - - (20,480,721) - - (20,480,721) (32,005) (20,512,726) Capital transaction under common control - - - - - - - 12,553 12,553 Changes in consolidated entities - - - - - - - (477,617) (477,617) Other - - - 548 9,627 - 10,175 9,781 19,956 Total transactions with owners - - - (20,480,173) 9,627 - (20,470,546) (487,288) (20,957,834) Balance as of December 31, 2021 119,467 778,047 4,403,893 293,064,763 (2,128,473) - 296,237,697 8,662,234 304,899,931 -10- ![]() Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes. (In thousands of US dollars (Note 2.29)) 2021 USD Notes Preference shares Ordinary shares Share premium Retained earnings Other components of equity Accumulated other comprehensive income attributable to assets held- for-sale Equity attributable to owners of the parent company Non- controlling interests Total Balance as of January 1, 2021 92,528 602,601 3,410,834 209,943,483 (6,728,239) (9,396) 207,311,811 6,411,102 213,722,913 Profit for the year - - - 30,394,483 - - 30,394,483 514,007 30,908,490 Gain (loss) on valuation of financial assets at fair value through other comprehensive income, net of tax 6, 20 - - - 2,503,921 (278,138) - 2,225,783 82,934 2,308,717 Share of other comprehensive income (loss) of associates and joint ventures, net of tax 9, 20 - - - - 174,623 - 174,623 (10,444) 164,179 Gain on overseas business translation, net of tax 20 - - - - 5,549,309 - 5,549,309 91,886 5,641,195 Remeasurement of net defined benefit liabilities, net of tax 14, 20 - - - - (403,170) - (403,170) (3,140) (406,310) Gain on valuation of cash flow hedge derivatives 20 - - - - 39,043 - 39,043 - 39,043 Reclassification to held-for-sale - - - - (9,396) 9,396 - - - Total comprehensive income for the year - - - 32,898,404 5,072,271 9,396 37,980,071 675,243 38,655,314 Dividends declared 19 - - - (15,862,406) - - (15,862,406) (24,788) (15,887,194) Capital transaction under common control - - - - - - - 9,722 9,722 Changes in consolidated entities - - - - - - - (369,916) (369,916) Other - - - 425 7,456 - 7,881 7,574 15,455 Total transactions with owners - - - (15,861,981) 7,456 - (15,854,525) (377,408) (16,231,933) Balance as of December 31, 2021 92,528 602,601 3,410,834 226,979,906 (1,648,512) - 229,437,357 6,708,937 236,146,294 -11- ![]() Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes. (In millions of Korean won) 2022 KRW Notes Preference shares Ordinary shares Share premium Retained earnings Other components of equity Accumulated other comprehensive income attributable to assets held- for-sale Equity attributable to owners of the parent company Non- controlling interests Total Balance as of January 1, 2022 119,467 778,047 4,403,893 293,064,763 (2,128,473) - 296,237,697 8,662,234 304,899,931 Profit for the year - - - 54,730,018 - - 54,730,018 924,059 55,654,077 Gain (loss) on valuation of financial assets at fair value through other comprehensive income, net of tax 6, 20 - - - (38,937) (1,867,530) - (1,906,467) (63,031) (1,969,498) Share of other comprehensive income (loss) of associates and joint ventures, net of tax 9, 20 - - - - (51,848) - (51,848) 1,338 (50,510) Gain on overseas business translation, net of tax 20 - - - - 4,863,930 - 4,863,930 20,956 4,884,886 Remeasurement of net defined benefit liabilities, net of tax 14, 20 - - - - 1,122,367 - 1,122,367 31,312 1,153,679 Loss on valuation of cash flow hedge derivatives 20 - - - - (12,893) - (12,893) - (12,893) Total comprehensive income for the year - - - 54,691,081 4,054,026 - 58,745,107 914,634 59,659,741 Dividends declared 19 - - - (9,809,437) - - (9,809,437) (5,523) (9,814,960) Capital transactions under common control - - - - - - - (176) (176) Changes in consolidated entities - - - - - - - 124 124 Others - - - - 12,775 - 12,775 (7,831) 4,944 Total transactions with owners - - - (9,809,437) 12,775 - (9,796,662) (13,406) (9,810,068) Balance as of December 31, 2022 119,467 778,047 4,403,893 337,946,407 1,938,328 - 345,186,142 9,563,462 354,749,604 -12- ![]() Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes. (In thousands of US dollars (Note 2.29)) 2022 USD Notes Preference shares Ordinary shares Share premium Retained earnings Other components of equity Accumulated other comprehensive income attributable to assets held- for-sale Equity attributable to owners of the parent company Non- controlling interests Total Balance as of January 1, 2022 92,528 602,601 3,410,834 226,979,906 (1,648,512) - 229,437,357 6,708,937 236,146,294 Profit for the year - - - 42,388,632 - - 42,388,632 715,688 43,104,320 Gain (loss) on valuation of financial assets at fair value through other comprehensive income, net of tax 6, 20 - - - (30,157) (1,446,410) - (1,476,567) (48,818) (1,525,385) Share of other comprehensive income (loss) of associates and joint ventures, net of tax 9, 20 - - - - (40,156) - (40,156) 1,036 (39,120) Gain on overseas business translation, net of tax 20 - - - - 3,767,134 - 3,767,134 16,231 3,783,365 Remeasurement of net defined benefit liabilities, net of tax 14, 20 - - - - 869,278 - 869,278 24,251 893,529 Loss on valuation of cash flow hedge derivatives 20 - - - - (9,986) - (9,986) - (9,986) Total comprehensive income for the year - - - 42,358,475 3,139,860 - 45,498,335 708,388 46,206,723 Dividends declared 19 - - - (7,597,451) - - (7,597,451) (4,277) (7,601,728) Capital transactions under common control - - - - - - - (136) (136) Changes in consolidated entities - - - - - - - 96 96 Others - - - - 9,895 - 9,895 (6,066) 3,829 Total transactions with owners - - - (7,597,451) 9,895 - (7,587,556) (10,383) (7,597,939) Balance as of December 31, 2022 92,528 602,601 3,410,834 261,740,930 1,501,243 - 267,348,136 7,406,942 274,755,078 -13- ![]() Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS The above consolidated statements of cash flows should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) For the years ended December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Operating activities Profit for the year 55,654,077 39,907,450 43,104,320 30,908,490 Adjustments 27 33,073,439 49,055,633 25,615,519 37,993,797 Changes in assets and liabilities arising from operating activities 27 (16,998,948) (16,286,884) (13,165,758) (12,614,262) Cash generated from operations 71,728,568 72,676,199 55,554,081 56,288,025 Interest received 2,136,795 1,406,706 1,654,957 1,089,500 Interest paid (714,543) (434,441) (553,417) (336,476) Dividends received 529,421 299,033 410,039 231,602 Income tax paid (11,498,895) (8,842,049) (8,905,943) (6,848,204) Net cash from operating activities 62,181,346 65,105,448 48,159,717 50,424,447 Investing activities Net decrease in short-term financial instruments 15,214,321 10,917,128 11,783,556 8,455,362 Net decrease (increase) in short-term financial assets at amortized cost 3,050,104 (336,959) 2,362,319 (260,976) Net decrease in short-term financial assets at fair value through profit or loss 11,677 30,694 9,044 23,773 Disposal of long-term financial instruments 8,272,909 10,216,082 6,407,403 7,912,399 Acquisition of long-term financial instruments (4,393,754) (6,981,810) (3,402,981) (5,407,442) Disposal of financial assets at fair value through other comprehensive income 496,090 2,919,888 384,224 2,261,466 Acquisition of financial assets at fair value through other comprehensive income (37,687) (1,121,201) (29,189) (868,375) Disposal of financial assets at fair value through profit or loss 166,315 350,212 128,812 271,241 Acquisition of financial assets at fair value through profit or loss (158,244) (208,262) (122,561) (161,300) Disposal of investment in associates and joint ventures 13,233 19,169 10,249 14,846 Acquisition of investment in associates and joint ventures (907,958) (47,090) (703,217) (36,471) Disposal of property, plant and equipment 217,878 358,284 168,747 277,492 Acquisition of property, plant and equipment (49,430,428) (47,122,106) (38,284,077) (36,496,272) Disposal of intangible assets 23,462 1,752 18,171 1,357 Acquisition of intangible assets (3,696,304) (2,706,915) (2,862,803) (2,096,517) Cash outflow from business combinations (31,383) (5,926) (24,306) (4,590) Cash inflow from sale of assets-held-for-sale - 661,168 - 512,077 Cash inflow (outflow) from other investing activities (413,035) 8,129 (319,897) 6,296 Net cash used in investing activities (31,602,804) (33,047,763) (24,476,506) (25,595,633) -14- ![]() Samsung Electronics Co., Ltd. and its subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS The above consolidated statements of cash flows should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) For the years ended December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Financing activities Net decrease in short-term borrowings 27 (8,339,149) (2,616,943) (6,458,706) (2,026,833) Increase in long-term borrowings 27 271,997 58,279 210,663 45,137 Repayment of debentures and long-term borrowings 27 (1,508,465) (894,749) (1,168,313) (692,987) Dividends paid (9,814,426) (20,510,350) (7,601,315) (15,885,353) Net decrease in non-controlling interests (6) (27,270) (5) (21,121) Net cash used in financing activities (19,390,049) (23,991,033) (15,017,676) (18,581,157) Reclassification to assets held-for-sale - 139 - 108 Effect of foreign exchange rate changes (539,198) 1,582,046 (417,611) 1,225,300 Net increase in cash and cash equivalents 10,649,295 9,648,837 8,247,924 7,473,065 Cash and cash equivalents Beginning of the year 39,031,415 29,382,578 30,229,997 22,756,932 End of the year 49,680,710 39,031,415 38,477,921 30,229,997 -15- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2022 and 2021, and For the years ended December 31, 2022 and 2021 1. General Information 1.1 Company Overview Samsung Electronics Co., Ltd. (“SEC”) was incorporated under the laws of the Republic of Korea in 1969 and listed its shares on the Korea Stock Exchange in 1975. SEC and its subsidiaries (collectively referred to as the “Company”) operate four business divisions: DX, DS, SDC and Harman. DX (Device eXperience) division includes digital TVs, refrigerators, mobile phones and communication systems. DS (Device Solutions) division includes memory, foundry, and system LSI. SDC includes display panels products. Harman division includes connected car systems, audio and visual products, enterprise automation solutions and connected services. The Company is domiciled in the Republic of Korea and is located in Suwon, the Republic of Korea. These consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards (“ Korean IFRS ”) 1110, Consolidated Financial Statements . SEC, as the controlling company, consolidates its 232 subsidiaries, including Samsung Display and Samsung Electronics America. The Company also applies the equity method of accounting for its 37 associates and joint ventures, including Samsung Electro-Mechanics Co., Ltd. 1.2 Consolidated Subsidiaries The consolidated subsidiaries as of December 31, 2022 are as follows: Area Subsidiaries Industry Percentage of ownership (%) 1 America Samsung Electronics America, Inc. (SEA) Sale of electronic devices 100.0 Samsung International, Inc. (SII) Manufacture of electronic devices 100.0 Samsung Mexicana S.A. de C.V (SAMEX) Manufacture of electronic devices 100.0 Samsung Electronics Home Appliances America, LLC (SEHA) Manufacture of home appliances 100.0 Samsung Research America, Inc. (SRA) R&D 100.0 Samsung Next LLC (SNX) Management of overseas subsidiaries 100.0 Samsung Next Fund LLC (SNXF) Technology business, venture capital investments 100.0 NeuroLogica Corp. Manufacture and sale of medical equipment 100.0 Samsung HVAC America, LLC Sale of air conditioning products 100.0 Joyent, Inc. Cloud services 100.0 Dacor Holdings, Inc. Management of overseas subsidiaries 100.0 Dacor, Inc. Manufacture and sale of home appliances 100.0 SmartThings, Inc. Sale of smart home electronics 100.0 TeleWorld Solutions, Inc. (TWS) Installation & optimization of network devices 100.0 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -16- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Area Subsidiaries Industry Percentage of ownership (%) 1 America Samsung Semiconductor, Inc. (SSI) Sale of semiconductor and display panels 100.0 Samsung Austin Semiconductor LLC. (SAS) Manufacture of semiconductors 100.0 Samsung Oak Holdings, Inc. (SHI) Management of overseas subsidiaries 100.0 SEMES America, Inc. Semiconductor equipment services 100.0 Samsung Electronics Canada, Inc. (SECA) Sale of electronic devices 100.0 AdGear Technologies Inc. Digital advertising platforms 100.0 Samsung Electronica da Amazonia Ltda. (SEDA) Manufacture and sale of electronic devices 100.0 Samsung Electronics Mexico S.A. de C.V. (SEM) Sale of electronic devices 100.0 SamsungElectronicsDigital ApplianceMexico,S.A. deC.V.(SEDAM) Manufacture of home appliances 100.0 Samsung Electronics Latinoamerica (Zona Libre), S. A. (SELA) Sale of electronic devices 100.0 Samsung Electronics Latinoamerica Miami, Inc. (SEMI) Sale of electronic devices 100.0 Samsung Electronica Colombia S.A. (SAMCOL) Sale of electronic devices 100.0 Samsung Electronics Argentina S.A. (SEASA) Marketing and services 100.0 Samsung Electronics Chile Limitada (SECH) Sale of electronic devices 100.0 Samsung Electronics Peru S.A.C. (SEPR) Sale of electronic devices 100.0 Samsung Electronics Venezuela, C.A. (SEVEN) Marketing and services 100.0 Samsung Electronics Panama. S.A. (SEPA) Consulting 100.0 Harman International Industries, Inc. Management of overseas subsidiaries 100.0 Harman Becker Automotive Systems, Inc. Manufacture and sale of audio products, R&D 100.0 Harman Connected Services, Inc. Connected service provider 100.0 Harman Connected Services Engineering Corp. Connected service provider 100.0 Harman da Amazonia Industria Eletronica e Participacoes Ltda. Manufacture and sale of audio products 100.0 Harman de Mexico, S. de R.L. de C.V. Manufacture of audio products 100.0 Harman do Brasil Industria Eletronica e Participacoes Ltda. Sale of audio products, R&D 100.0 Harman Financial Group LLC Management company 100.0 Harman International Industries Canada Ltd. Sale of audio products 100.0 Harman International Mexico, S. de R.L. de C.V. Sale of audio products 100.0 Harman KG Holding, LLC Management of overseas subsidiaries 100.0 Harman Professional, Inc. Sale of audio products, R&D 100.0 Beijing Integrated Circuit Industry International Fund, L.P Venture capital investments 61.4 China Materialia New Materials 2016 Limited Partnership Venture capital investments 99.0 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -17- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Area Subsidiaries Industry Percentage of ownership (%) 1 Europe & CIS Samsung Electronics (UK) Ltd. (SEUK) Sale of electronic devices 100.0 Samsung Electronics Ltd. (SEL) Management of overseas subsidiaries 100.0 Samsung Semiconductor Europe Limited (SSEL) Sale of semiconductor and display panels 100.0 Samsung Electronics GmbH (SEG) Sale of electronic devices 100.0 Samsung Electronics Holding GmbH (SEHG) Management of overseas subsidiaries 100.0 Samsung Semiconductor Europe GmbH (SSEG) Sale of semiconductor and display panels 100.0 Samsung Electronics France S.A.S (SEF) Sale of electronic devices 100.0 Samsung Electronics Italia S.P.A. (SEI) Sale of electronic devices 100.0 Samsung Electronics Iberia, S.A. (SESA) Sale of electronic devices 100.0 Samsung Electronics Portuguesa, Unipessoal, Lda. (SEP) Sale of electronic devices 100.0 Samsung Electronics Hungarian Private Co., Ltd. (SEH) Manufacture and sale of electronic devices 100.0 Samsung Electronics Europe Logistics B.V. (SELS) Logistics 100.0 Samsung Electronics Benelux B.V. (SEBN) Sale of electronic devices 100.0 Samsung Electronics Europe Holding Cooperatief U.A. (SEEH) Management of overseas subsidiaries 100.0 Samsung Electronics Nordic Aktiebolag (SENA) Sale of electronic devices 100.0 Samsung Electronics Slovakia s.r.o. (SESK) Manufacture of TV and monitors 100.0 Samsung Display Slovakia, s.r.o. (SDSK) Toll processing of display panels 100.0 Samsung Electronics Polska, SP.Zo.o (SEPOL) Sale of electronic devices 100.0 Samsung Electronics Poland Manufacturing SP.Zo.o (SEPM) Manufacture of home appliances 100.0 Samsung Electronics Romania LLC (SEROM) Sale of electronic devices 100.0 Samsung Electronics Austria GmbH (SEAG) Sale of electronic devices 100.0 Samsung Electronics Switzerland GmbH (SESG) Sale of electronic devices 100.0 Samsung Electronics Czech and Slovak s.r.o. (SECZ) Sale of electronic devices 100.0 Samsung Electronics Baltics SIA (SEB) Sale of electronic devices 100.0 Samsung Electronics Greece S.M.S.A (SEGR) Sale of electronic devices 100.0 Samsung Electronics Air Conditioner Europe B.V. (SEACE) Sale of air conditioning products 100.0 Samsung Nanoradio Design Center (SNDC) R&D 100.0 Samsung Denmark Research Center ApS (SDRC) R&D 100.0 Samsung Cambridge Solution Centre Limited (SCSC) R&D 100.0 SAMSUNG Zhilabs, S.L. Development and sale of network solutions 100.0 Foodient Ltd. R&D 100.0 Samsung Electronics Rus Company LLC (SERC) Sale of electronic devices 100.0 Samsung Electronics Rus Kaluga LLC (SERK) Manufacture of TV 100.0 Samsung Electronics Ukraine Company LLC (SEUC) Sale of electronic devices 100.0 Samsung R&D Institute Ukraine (SRUKR) R&D 100.0 Samsung Electronics Central Eurasia LLP (SECE) Sale of electronic devices 100.0 Samsung Electronics Overseas B.V. (SEO) Sale of electronic devices 100.0 Samsung R&D Institute Rus LLC (SRR) R&D 100.0 Samsung Electronics Caucasus Co., Ltd. (SECC) Marketing 100.0 Samsung Electronics Uzbekistan Ltd. (SEUZ) Marketing 100.0 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -18- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Area Subsidiaries Industry Percentage of ownership (%) 1 Europe & CIS AKG Acoustics GmbH Manufacture and sale of audio products 100.0 Apostera UA, LLC Connected Service Provider 100.0 Harman Audio Iberia Espana Sociedad Limitada Sale of audio products 100.0 Harman Automotive UK Limited Manufacture of audio products 100.0 Harman Becker Automotive Systems GmbH Manufacture and sale of audio products, R&D 100.0 Harman Becker Automotive Systems Italy S.R.L. Sale of audio products 100.0 Harman Becker Automotive Systems Manufacturing Kft Manufacture of audio products, R&D 100.0 Harman Belgium SA Sale of audio products 100.0 Harman Connected Services AB. Connected service provider 100.0 Harman Finland Oy Connected service provider 100.0 Harman Connected Services GmbH Connected service provider 100.0 Harman Connected Services Poland Sp.zoo Connected service provider 100.0 Harman Connected Services UK Ltd. Connected service provider 100.0 Harman Consumer Nederland B.V. Sale of audio products 100.0 Harman Deutschland GmbH Sale of audio products 100.0 Harman Finance International GP S.a.r.l Management of overseas subsidiaries 100.0 Harman France SNC Sale of audio products 100.0 Harman Holding GmbH & Co. KG Management company 100.0 Harman Hungary Financing Ltd. Financing company 100.0 Harman Inc. & Co. KG Management of overseas subsidiaries 100.0 Harman International Estonia OU R&D 100.0 Harman International Industries Limited Sale of audio products, R&D 100.0 Harman International Romania SRL R&D 100.0 Harman Finance International, SCA Financing company 100.0 Harman Management GmbH Management of overseas subsidiaries 100.0 Harman Professional Kft Manufacture of audio products, R&D 100.0 Harman Professional Denmark ApS Sale of audio products, R&D 100.0 Red Bend Software Ltd. Software design 100.0 Red Bend Software SAS Software design 100.0 Studer Professional Audio GmbH Sale of audio products, R&D 100.0 Harman Connected Services OOO Connected service provider 100.0 Harman RUS CIS LLC Sale of audio products 100.0 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -19- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Area Subsidiaries Industry Percentage of ownership (%) 1 Middle East & Africa Samsung Gulf Electronics Co., Ltd. (SGE) Sale of electronic devices 100.0 Samsung Electronics Turkiye (SETK) Sale of electronic devices 100.0 Samsung Electronics Industry and Commerce Ltd. (SETK-P) Manufacture of electronic devices 100.0 Samsung Electronics Levant Co.,Ltd. (SELV) Sale of electronic devices 100.0 Samsung Electronics Maghreb Arab (SEMAG) Sale of electronic devices 100.0 Samsung Electronics Egypt S.A.E (SEEG) Manufacture and sale of electronic devices 100.0 Samsung Electronics Israel Ltd. (SEIL) Marketing 100.0 Samsung Electronics Tunisia S.A.R.L (SETN) Marketing 100.0 Samsung Electronics Pakistan (Private) Ltd. (SEPAK) Marketing 100.0 Samsung Electronics Saudi Arabia Ltd. (SESAR) Sale of electronic devices 100.0 Samsung Semiconductor Israel R&D Center, Ltd. (SIRC) R&D 100.0 Corephotonics Ltd. R&D 100.0 Samsung Electronics South Africa (Pty) Ltd. (SSA) Sale of electronic devices 100.0 Samsung Electronics South Africa Production (Pty) Ltd. (SSAP) Manufacture of TV and monitors 100.0 Samsung Electronics West Africa Ltd. (SEWA) Marketing 100.0 Samsung Electronics East Africa Ltd. (SEEA) Marketing 100.0 Global Symphony Technology Group Private Ltd. Management of overseas subsidiaries 100.0 Harman Connected Services Morocco Connected service provider 100.0 Harman Industries Holdings Mauritius Ltd. Management of overseas subsidiaries 100.0 Red Bend Ltd. Manufacture of audio products 100.0 Asia (Excluding China) Samsung Asia Pte. Ltd. (SAPL) Management of overseas subsidiaries 100.0 Samsung Electronics Singapore Pte. Ltd. (SESP) Sale of electronic devices 100.0 Samsung Malaysia Electronics (SME) Sdn. Bhd. (SME) Sale of electronic devices 100.0 Samsung Electronics Display (M) Sdn. Bhd. (SDMA) Manufacture of electronic devices 100.0 Samsung Electronics (M) Sdn. Bhd. (SEMA) Manufacture of home appliances 100.0 Samsung Vina Electronics Co., Ltd. (SAVINA) Sale of electronic devices 100.0 Samsung Electronics Vietnam Co., Ltd. (SEV) Manufacture of electronic devices 100.0 Samsung Electronics Vietnam THAINGUYEN Co., Ltd. (SEVT) Manufacture of communication equipment 100.0 Samsung Electronics HCMC CE Complex Co., Ltd. (SEHC) Manufacture and sale of electronic devices 100.0 Samsung Display Vietnam Co., Ltd. (SDV) Manufacture of display panels 100.0 DOWOOINSYS VINA COMPANY LIMITED Manufacture of display components 100.0 PT Samsung Electronics Indonesia (SEIN) Manufacture and sale of electronic devices 100.0 PT Samsung Telecommunications Indonesia (STIN) Sale of electronic devices and services 100.0 Thai Samsung Electronics Co., Ltd. (TSE) Manufacture and sale of electronic devices 91.8 Laos Samsung Electronics Sole Co., Ltd. (LSE) Marketing 100.0 Samsung Electronics Philippines Corporation (SEPCO) Sale of electronic devices 100.0 Samsung Electronics Australia Pty. Ltd. (SEAU) Sale of electronic devices 100.0 Samsung Electronics New Zealand Limited (SENZ) Sale of electronic devices 100.0 Samsung India Electronics Private Ltd. (SIEL) Manufacture and sale of electronic devices 100.0 Red Brick Lane Marketing Solutions Pvt. Ltd. Marketing 100.0 Samsung Display Noida Private Limited (SDN) Manufacture of display panels 100.0 Samsung R&D Institute India-Bangalore Private Limited (SRI-B) R&D 100.0 Samsung R&D Institute BanglaDesh Limited (SRBD) R&D 100.0 Samsung Nepal Services Pvt, Ltd. (SNSL) Service 100.0 Samsung Japan Corporation (SJC) Sale of semiconductor and display panels 100.0 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -20- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Area Subsidiaries Industry Percentage of ownership (%) 1 Asia (Excluding China) Samsung R&D Institute Japan Co., Ltd. (SRJ) R&D 100.0 Samsung Electronics Japan Co., Ltd. (SEJ) Sale of electronic devices 100.0 Harman International Industries PTY Ltd. Management of overseas subsidiaries 100.0 Harman Connected Services Corp. India Pvt. Ltd. Connected service provider 100.0 Harman International (India) Private Limited Sale of audio products, R&D 100.0 Harman International Japan Co., Ltd. Sale of audio products, R&D 100.0 Harman Singapore Pte. Ltd. Sale of audio products 100.0 China Samsung (CHINA) Investment Co., Ltd. (SCIC) Sale of electronic devices 100.0 Samsung Electronics Hong Kong Co., Ltd. (SEHK) Sale of electronic devices 100.0 Samsung Electronics Taiwan Co., Ltd. (SET) Sale of electronic devices 100.0 Tianjin Samsung Electronics Co., Ltd. (TSEC) Manufacture of TV and monitors 91.2 Suzhou Samsung Electronics Co., Ltd. (SSEC) Manufacture of home appliances 88.3 Samsung Suzhou Electronics Export Co., Ltd. (SSEC-E) Manufacture of home appliances 100.0 Samsung Electronics Suzhou Computer Co., Ltd. (SESC) R&D 100.0 Tianjin Samsung Telecom Technology Co., Ltd. (TSTC) Manufacture of communication equipment 90.0 Beijing Samsung Telecom R&D Center (SRC-Beijing) R&D 100.0 Samsung Electronics China R&D Center (SRC-Nanjing) R&D 100.0 Samsung Mobile R&D Center China-Guangzhou (SRC-Guangzhou) R&D 100.0 Samsung R&D Institute China-Shenzhen (SRC-Shenzhen) R&D 100.0 Shanghai Samsung Semiconductor Co., Ltd. (SSS) Sale of semiconductor and display panels 100.0 Samsung (China) Semiconductor Co., Ltd. (SCS) Manufacture of semiconductors 100.0 Samsung SemiConductor Xian Co., Ltd. (SSCX) Sale of semiconductor and display panels 100.0 Samsung Electronics Suzhou Semiconductor Co., Ltd. (SESS) Toll processing of semiconductors 100.0 Tianjin Samsung LED Co., Ltd. (TSLED) Manufacture of LED 100.0 Samsung Semiconductor (China) R&D Co., Ltd. (SSCR) R&D 100.0 Samsung Display Dongguan Co., Ltd. (SDD) Manufacture of display panels 100.0 Samsung Display Tianjin Co., Ltd. (SDT) Manufacture of display panels 95.0 SEMES (XIAN) Co., Ltd. Semiconductor equipment services 100.0 Samsung Semiconductor Investment L.P. І Technology business, Venture capital investments 99.0 Harman (China) Technologies Co., Ltd. Manufacture of audio products 100.0 Harman (Suzhou) Audio and Infotainment Systems Co., Ltd. Sale of audio products 100.0 Harman Automotive Electronic Systems (Suzhou) Co., Ltd. Manufacture of audio products, R&D 100.0 Harman Commercial (Shanghai) Co., Ltd. Sale of audio products 100.0 Harman Connected Services Solutions (Chengdu) Co., Ltd. Connected service provider 100.0 Harman Holding Limited Sale of audio products 100.0 Harman International (China) Holdings Co., Ltd. Sale of audio products, R&D 100.0 Harman Technology (Shenzhen) Co., Ltd. Sale of audio products, R&D 100.0 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -21- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Area Subsidiaries Industry Percentage of ownership (%) 1 Domestic Samsung Display Co., Ltd. Manufacture and sale of display panels 84.8 SU Materials Manufacture of display components 50.0 STECO Co., Ltd. Manufacture of semiconductor components 70.0 SEMES Co., Ltd. Manufacture and sale of semiconductor/FPD 91.5 Samsung Electronics Service Co., Ltd. Repair services for electronic devices 99.3 Samsung Electronics Service Customer Satisfaction Co., Ltd. Call center for repair services for electronic devices 100.0 Samsung Electronics Sales Co., Ltd. Sale of electronic devices 100.0 Samsung Electronics Logitech Co., Ltd. General logistics agency 100.0 Samsung Medison Co., Ltd. Manufacture and sale of medical equipment 68.5 Stella Forest of Hope Manufacture of food 100.0 Mirero System Co., Ltd. Development and supply of semiconductor process defect and quality control software 99.9 Dowooinssys Co., Ltd. Manufacture of display components 69.0 Gf-System Co., Ltd. Manufacture of display components 100.0 Harman International Korea Software development and supply, etc. 100.0 Samsung Venture Capital Union #21 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #22 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #26 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #28 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #29 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #32 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #33 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #37 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #40 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #42 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #43 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #45 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #48 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #52 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #55 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #56 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #57 Technology business, Venture capital investments 99.0 Growth type private equity trust specialized in semiconductors Investment on semiconductor industry 66.7 System LSI Mutual benefit private equity trust Investment on semiconductor industry 62.5 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -22- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1.3 Summary of Financial Data of Major Consolidated Subsidiaries Summary of financial data of major consolidated subsidiaries is as follows: (1) 2022 (In millions of Korean won) As of December 31, 2022 For the year ended December 31, 2022 Major subsidiaries 1 Assets Liabilities Sales Profit (loss) for the year Samsung Display 57,302,567 7,282,718 30,779,405 4,365,588 Samsung Electronics America, Inc. (SEA) 37,883,156 12,258,315 46,738,920 219,670 Samsung Asia Pte. Ltd. (SAPL) 26,894,611 2,678,285 - 8,699,679 Harman and its subsidiaries 2 17,102,324 6,380,456 13,211,151 631,019 Samsung (China) Semiconductor Co., Ltd. (SCS) 17,095,000 2,970,835 9,679,757 638,385 Samsung Electronics Vietnam THAINGUYEN Co., Ltd. (SEVT) 15,718,299 2,358,140 36,336,963 2,721,701 Samsung (CHINA) Investment Co., Ltd. (SCIC) 13,830,988 9,764,636 2,865,831 257,878 Samsung Semiconductor, Inc. (SSI) 12,199,102 5,930,369 43,009,331 88,467 Samsung Electronics Vietnam Co., Ltd. (SEV) 10,931,037 1,408,387 23,667,565 1,646,165 Samsung Electronics Europe Holding Cooperatief U.A. (SEEH) 10,841,515 6,272,800 - 57,997 Samsung Austin Semiconductor LLC. (SAS) 9,301,017 828,494 3,663,909 208,879 Samsung Display Vietnam Co., Ltd. (SDV) 7,471,680 1,608,448 25,773,970 1,301,926 Samsung India Electronics Private Ltd. (SIEL) 6,772,537 3,571,863 16,180,492 508,510 Shanghai Samsung Semiconductor Co., Ltd. (SSS) 5,067,891 2,858,382 21,370,622 318,578 Samsung Eletronica da Amazonia Ltda. (SEDA) 4,600,508 1,342,517 7,485,104 (38,490) Samsung Electronics HCMC CE Complex Co., Ltd. (SEHC) 3,732,057 980,448 6,253,401 386,119 Thai Samsung Electronics Co., Ltd. (TSE) 3,263,473 486,820 4,824,734 168,524 Samsung Electronics (UK) Ltd. (SEUK) 2,819,792 1,708,064 5,929,357 243,396 Samsung Electronics Benelux B.V. (SEBN) 2,377,730 597,044 2,834,008 25,411 Samsung Electronics Hungarian Private Co. Ltd. (SEH) 2,374,317 452,628 3,935,745 199,742 Samsung Electronics Europe Logistics B.V. (SELS) 2,194,975 2,021,491 15,409,984 20,347 Samsung Display Dongguan Co., Ltd. (SDD) 2,135,132 265,835 2,556,608 111,643 SEMES Co., Ltd. 2,065,558 602,323 2,889,238 185,762 Samsung Electronics GmbH (SEG) 1,968,273 1,907,132 6,567,011 3,695 Samsung Electronics Mexico S.A. De C.V. (SEM) 1,816,895 996,002 3,270,016 110,386 1 Summary of condensed financial information is based on separate financial statements of each subsidiary. 2 Consolidated financial data of an intermediate company that includes Harman International Industries, Inc. and its subsidiaries. -23- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (2) 2021 (In millions of Korean won) As of December 31, 2021 For the year ended December 31, 2021 Major subsidiaries 1 Assets Liabilities Sales Profit (loss) for the year Samsung Display 54,967,156 9,081,737 28,755,975 2,770,060 Samsung Electronics America, Inc. (SEA) 42,982,054 19,246,751 42,325,524 823,914 Samsung (China) Semiconductor Co., Ltd. (SCS) 19,049,536 5,168,738 7,341,018 1,708,832 Samsung Electronics Vietnam THAINGUYEN Co., Ltd. (SEVT) 17,521,446 3,425,127 32,184,024 2,298,273 Harman and its subsidiaries 2 15,887,380 6,104,012 10,015,092 357,612 Samsung Asia Pte. Ltd. (SAPL) 14,683,789 58,381 - 4,668,478 Samsung Electronics Europe Holding Cooperatief U.A. (SEEH) 14,651,496 8,998,502 - 24,527 Samsung Semiconductor, Inc. (SSI) 13,744,799 7,955,060 33,895,805 74,531 Samsung (CHINA) Investment Co., Ltd. (SCIC) 13,599,093 9,685,278 2,615,685 451,062 Samsung Electronics Vietnam Co., Ltd. (SEV) 13,023,272 2,085,411 21,583,038 1,455,704 Samsung Austin Semiconductor LLC (SAS) 8,705,085 958,537 3,703,472 759,206 Shanghai Samsung Semiconductor Co., Ltd. (SSS) 7,765,126 5,799,690 31,326,186 325,397 Samsung India Electronics Private Ltd. (SIEL) 7,765,019 3,236,745 12,222,643 522,672 Samsung Display Vietnam Co., Ltd. (SDV) 6,821,066 2,486,703 21,722,446 981,311 Samsung Eletronica da Amazonia Ltda. (SEDA) 4,589,505 1,671,097 6,020,523 490,202 Samsung Electronics HCMC CE Complex Co., Ltd. (SEHC) 3,129,104 919,721 6,551,242 472,666 Thai Samsung Electronics Co., Ltd. (TSE) 3,018,358 474,223 4,443,031 142,191 Samsung Electronics (UK) Ltd. (SEUK) 2,925,062 1,992,367 5,621,922 241,403 Samsung Electronics Benelux B.V. (SEBN) 2,612,357 766,034 2,569,603 284,816 Samsung Electronics Hungarian Private Co., Ltd. (SEH) 2,504,075 641,004 4,357,137 157,616 Samsung Electronics Europe Logistics B.V. (SELS) 2,305,275 2,144,805 14,700,517 13,943 Samsung Electronics GmbH (SEG) 2,289,391 2,228,650 6,385,080 2,158 Samsung Display Dongguan Co., Ltd. (SDD) 2,149,277 339,425 3,987,674 163,637 Samsung International, Inc. (SII) 2,125,719 1,041,168 7,948,982 105,444 Samsung Electronics Taiwan Co., Ltd. (SET) 2,033,992 1,459,353 5,638,204 50,966 1 Summary of condensed financial information is based on separate financial statements of each subsidiary. 2 Consolidated financial data of an intermediate company that includes Harman International Industries, Inc. and its subsidiaries. -24- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1.4 Changes in Consolidation Scope Changes in consolidation scope during the year ended December 31, 2022 are as follows: Change Area Subsidiary Description Included Europe & CIS Samsung R&D Institute Ukraine (SRUKR) Establishment Samsung Electronics Uzbekistan Ltd. (SEUZ) Establishment Apostera GmbH Acquisition Apostera UA, LLC Acquisition Asia (Excluding China) DOWOOINSYS VINA COMPANY LIMITED Establishment Red Brick Lane Marketing Solutions Pvt. Ltd. Acquisition Domestic Samsung Venture Capital Union #57 Establishment Stella Forest of Hope Establishment Excluded America Dacor Canada Co. Liquidation Europe & CIS AMX UK Limited Liquidation Harman International s.r.o Liquidation Apostera GmbH Merger 2. Significant Accounting Policies 2.1 Basis of Presentation The principal accounting policies used to prepare the consolidated financial statements are set out below. Except for the effect of the amendments to the Korean IFRS and new interpretations set out below, the principal accounting policies used to prepare the consolidated financial statements as of and for the year ended December 31, 2022 are consistent with those used to prepare the consolidated financial statements as of and for the year ended December 31, 2021. The Company maintains its accounting records in Korean won and prepares the statutory financial statements in Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”). The accompanying consolidated financial statements have been restructured, and translated into English from the Korean language financial statements. Certain information attached to the Korean language financial statements that are not required for a fair presentation of the Company’s financial position, financial performance or cash flows, are not presented in the accompanying consolidated financial statements. The consolidated financial statements of the Company have been prepared in accordance with Korean IFRS. These are the standards, subsequent amendments and related interpretations issued by the International Accounting Standards Board (IASB) that have been adopted by the Republic of Korea. Korean IFRS permits the use of critical accounting estimates in the preparation of the consolidated financial statements and requires management judgments in applying the accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 3. -25- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.2 Changes in Accounting Policies and Disclosures (A) New and amended standards adopted by the Company The Company applied the following amended and/or enacted standards for the first time for their annual reporting period commencing on January 1, 2022: Amendments to Korean IFRS 1116, Lease The amendments to Korean IFRS 1116 introduced a practical expedient that provided practical relief to lessees in accounting for rent concessions occurring as a direct consequence of COVID-19. The amendments extend the practical expedient to apply to reduction in lease payments originally due on or before June 30, 2022. The application of amendments does not have a significant impact on the Company’s year-end consolidated financial statements. Amendments to Korean IFRS 1103, Business Combinations The amendments update Korean IFRS 1103 so that it refers to the amended conceptual framework for financial reporting for assets and liabilities recognized upon business combination, along with adding requirement that for transactions and other events within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 to identify the liabilities it has assumed in a business combination. The amendments also add an explicit statement that an acquirer does not recognize contingent assets acquired in a business combination. The application of amendments does not have a significant impact on the Company’s year-end consolidated financial statements. Amendments to Korean IFRS 1016, Property, Plant and Equipment The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss. The application of amendments does not have a significant impact on the Company’s year-end consolidated financial statements. Amendments to Korean IFRS 1037, Provisions, Contingent Liabilities and Contingent Assets The amendments specify that the cost of fulfilling a contract comprises the costs that relate directly to the contract, and that costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract and an allocation of other costs that relate directly to fulfilling contracts. The application of the amendments does not have a significant impact on the Company’s year-end consolidated financial statements. -26- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (B) New and amended standards not yet adopted by the Company The amended accounting standards issued that are not mandatory for the annual reporting periods commencing on January 1, 2022 and has not been early adopted by the Company are as follows: Amendments to Korean IFRS 1001 Presentation of Financial Statements The amendments clarify that the classification of liabilities as current or non-current is based on the rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability, and elucidate that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted. Amendments to Korean IFRS 1001 Presentation of Financial Statements The amendments require companies to define and disclose their 'material' accounting policy information instead of its 'significant' accounting policies. The amendments explain how an entity can identify material accounting policy information. The amendments to K-IFRS 1001 are effective for annual periods beginning on or after January 1, 2023, with earlier application permitted and are applied prospectively. Amendments to Korean IFRS 1008 Accounting Policies, Changes in Accounting Estimates and Errors The amendments clarify the definition of a change in accounting estimates, and specify how to distinguish from a change in accounting policies. The amendments are effective for annual periods beginning on or after January, 1 2023 to changes in accounting policies and changes in accounting estimates that occur on or after the beginning of that period, with earlier application permitted. Amendments to Korean IFRS 1012, Income Taxes The amendments add to the initial recognition exemption that the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition. The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted. -27- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.3 Consolidation The Company prepares the consolidated financial statements in accordance with Korean IFRS 1110 Consolidated Financial Statements. (A) Subsidiaries Subsidiaries are all entities (including the special purpose entities) over which the Company has control. The Company controls the corresponding investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of a subsidiary begins from the date the Company obtains control of a subsidiary and ceases when the Company loses control of the subsidiary. The Company applies the acquisition method to account for business combinations. The consideration transferred is measured at the fair values of the assets transferred, and identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at their fair values at the acquisition date. The Company recognizes any non- controlling interest in the acquiree on an acquisition-by-acquisition basis in the event of liquidation at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net assets. Acquisition -related costs are expensed as incurred. The excess of consideration transferred, of any non-controlling interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognized directly in the profit or loss as a bargain purchase. Balances of receivables and payables, income and expenses and unrealized gains or losses on transactions between the entities within the Company are eliminated. Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Company. (B) Changes in ownership interests in subsidiaries without change of control Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between the fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals of non-controlling interests are also recorded in equity. (C) Disposal of subsidiaries If the Company loses control of a subsidiary, any investment continuously retained in the subsidiary is re-measured at its fair value at the date when control is lost and any resulting differences are recognized in profit or loss. Such fair value becomes the initial carrying amount for the subsequent measurement of the retained interest accounted for as an associate, joint venture, or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of such entity are accounted as if the Company had directly disposed of the related assets or liabilities. As a result, the previously recognized other comprehensive income are reclassified into profit or loss or equity. (D) Non-controlling interests Each component of profit or loss and other comprehensive income is attributed to owners of the parent and to non-controlling interests. Total comprehensive income is attributed to owners of the parent and to non-controlling interests even if this results in a negative balance of non-controlling interests. -28- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (E) Associates Associates are all entities over which the Company has significant influence but does not have control, generally investees of which from 20% to 50% voting shares are owned by the Company. Investments in associates are accounted for using the equity method of accounting, after initially being recognized at cost. Unrealized gains on transactions between the Company and its associates are eliminated to the extent of the Company’s interest in the associates. If the Company’s share of losses of an associate equals or exceeds its interest in the associate (including long-term interests that, in substance, form part of the Company’s net investment in the associate), the Company discontinues recogni zing its share of further losses. After the Company’s interest is reduced to zero, additional losses are provided for, and a liability is recognized, only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate. If there is objective evidence of impairment for the investment in the associate, the Company recognizes the difference between the recoverable amount of the associate and its carrying amount as an impairment loss. If an associate uses accounting policies other than those of the Company for like transactions and events in similar circumstances, adjustments shall be made, if necessary, to make the associate’s accounting policies conform to those of the Company when the associate’s finan cial statements are used by the entity in applying the equity method. (F) Joint arrangements A joint arrangement of which two or more parties have joint control is classified as either a joint operation or a joint venture. A joint operator has rights to the assets, and obligations for the liabilities, relating to the joint operation and recognizes the assets, liabilities, revenues and expenses relating to its interest in a joint operation. A joint venturer has rights to the net assets relating to the joint venture and accounts for that investment using the equity method. 2.4 Foreign Currency Translation (A) Functional and presentation currency Items included in the consolidated financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which each entity operates (the “functional currency”). The consolidated financial statements are presented in Korean won, which is the parent company ’ s functional and presentation currency. (B) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss. Exchange differences arising on non-monetary financial assets and liabilities such as equity instruments at fair value through profit or loss and equity instruments at fair value through other comprehensive income are recognized in profit or loss and other comprehensive income, respectively, as part of the fair value gain or loss. (C) Translation into the presentation currency The results and financial position of all the foreign entities that have a functional currency different from the presentation currency of the Company are translated into the presentation currency as follows:  Assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate at the end of the reporting date.  Income and expenses for each consolidated statement of profit or loss are translated at average exchange rates, unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the as-of rate on the dates of the transactions.  All resulting exchange differences are recognized in other comprehensive income. -29- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.5 Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term investment assets with high liquidity that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. 2.6 Financial Assets (A) Classification From January 1, 2018, the initial application date for Korean IFRS 1109 Financial Instruments, the Company classifies its financial assets in the following measurement categories: - Financial assets measured at fair value (changes in fair value recognized in either other comprehensive income, or profit or loss) - Financial assets measured at amortized cost. The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash flows. For financial assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. The Company reclassifies debt investments only when its business model for managing those assets changes. For investments in equity instruments that are not held for trading, classification will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. Changes in fair value of the investments in equity instruments that are not elected to be accounted for as other comprehensive income are recognized in profit or loss. (B) Measurement At initial recognition, the Company measures a financial asset at its fair value. In the case of financial asset not measured at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset or the issuance of the financial liabilities are added to its fair value. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Hybrid (combined) contracts with embedded derivatives are considered in their entirety when determining whether their cash flows solely consist of the payments of principal and interest. a) Debt instruments Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset and the cash flow characteristics of the asset. The Company classifies its debt instruments into one of the following three measurement categories: ① Financial assets measured at amortized cost Assets that are held for collection of contractual cash flows where those cash flows represent solely the payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in ‘financial income’ using the effective interest rate method. -30- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ② Financial assets measured at fair value through other comprehensive income Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash fl ows represent solely the payments of principal and interest, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment loss (reversal of impairment loss), interest income and foreign exchange gains and losses which are recognized in profit or loss. When the financial assets are derecognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. Interest income from these financial assets is included in ‘financial income’ using the effective interest rate method. Foreign exchange gains and losses are presented in ‘financial income’ or ‘financial expenses’ and impairment losses are presented in ‘other non - operating expenses’. ③ Financial assets measured at fair value through profit or loss Assets that do not meet the criteria for amortized cost or fair value through other comprehensive income are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss and presented in the consolidated statement of profit or loss within ‘other non - operating income’ or ‘other non - operating expenses’ in the year in which it arises. b) Equity instruments The Company subsequently measures all equity investments at fair value. Where the Company’s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. When the financial asset is derecognized, the cumulative gain or loss on valuation of financial assets at fair value through other comprehensive income recognized in equity is reclassified to retained earnings. Dividend income from such investments continue to be recognized in profit or loss as ‘other non - operating income’ when the right to receive the payments is established. Changes in the fair value of financial assets at fair value through profit or loss are recognized in ‘other non - operating income’ o r ‘other non - operating expenses’ in the consolidated statement s of profit or loss as applicable. (C) Impairment The Company assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortized cost and fair value through other comprehensive income. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Company applies the simplified approach, which requires expected lifetime losses to be recognized from initial recognition of the receivables. (D) Recognition and derecognition Regular way purchases and sales of financial assets are recognized or derecognized on a trade date basis. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership. If a transfer does not result in derecognition because the Company has retained substantially all the risks and rewards of ownership of the transferred asset, the Company continues to recognize the transferred asset in its entirety and recognizes a financial liability for the consideration received. The Company classifies the financial liability as ‘borrowings’ in the consolidated statement of financial position. -31- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (E) Offsetting of financial instruments Financial assets and liabilities are offset and the net amount is reported in the statements of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the assets and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business, even in the event of default, insolvency or bankruptcy of the Company or the counterparty. 2.7 Trade Receivables Trade receivables are amounts due from customers for inventories sold or services performed in the ordinary course of business. If collection is expected within one year or less, they are classified as current assets. If collection is expected beyond one year, they are presented as non-current assets. Trade receivables are recognized initially at transaction price and subsequently measured at amortized cost using the effective interest method, less loss allowance, unless the trade receivables bear significant financial component. 2.8 Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined using the average cost method, except for materials in transit. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overheads (based on normal operating capacity). It excludes costs of idle plant and abnormal waste. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. The Company regularly estimates the changes in future customer demand in the products that may cause a significant change in the valuation allowance and recognizes the valuation allowance if there is any case such as excess, obsolescence and decline in market value. Loss on valuation of inventories is recorded as cost of sales. 2.9 Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditures that are directly attributable to the acquisition. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the cost will flow to the Company and the cost can be measured reliably. The carrying amounts of the replaced parts are derecognized and the repairs and maintenance expenses are recognized in profit or loss in the period they are incurred. Depreciation on tangible assets is calculated using the straight-line method to allocate the difference between their cost and their residual values over their estimated useful lives. Land is not depreciated. Costs that are directly attributable to the acquisition, construction or production of a qualifying asset, including capitalized interest costs, form part of the cost of that asset and are amortized over the estimated useful lives. The Company’s policy is that property, plant and equipment should be depreciated over the following estimated useful lives: Estimated useful lives Buildings and structures 15, 30 years Machinery and equipment 5 years Other 5 years -32- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The depreciation method, residual values and useful lives of property, plant and equipment are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated r ecoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within the consolidated statement of profit or loss as ‘other non-operating income’ or ‘other non - operating expenses’. 2.10 Borrowing Costs General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Other borrowing costs are expensed in the period in which they are incurred. 2.11 Intangible Assets Goodwill represents the excess of the cost of acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiaries, associates, joint ventures and businesses at the date of acquisition. Goodwill on an acquisition of businesses is included in intangible assets and goodwill on an acquisition of associates and joint ventures’ shares is included in the investments in associates and joint ventures. Intangible assets, except for goodwill, are initially recognized at their historical cost and carried at cost less accumulated amortization and accumulated impairment losses. Internally generated development costs are the aggregate costs recognized after meeting the asset recognition criteria, including technical feasibility, and determined to have future economic benefits. Membership rights and certain trademarks are regarded as intangible assets with an indefinite useful life and not amortized because there is no foreseeable limit to the period over which the assets are expected to be utilized. However, the Company records impairment based on its reasonable estimation of the benefits associated with the membership rights and assessment of impairment indicators, such as a decline in the market value. Intangible assets with definite useful lives such as trademarks, licenses, and other intangible assets, are amortized using the straight-line method over their estimated useful lives. The Company’s policy is that intangible assets should be amortized over the following estimated useful lives: Estimated useful lives Development costs 2 years Trademarks, licenses and other intangible assets 3 - 25 years 2.12 Impairment of Non-Financial Assets Goodwill or intangible assets with indefinite useful lives are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be re coverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. -33- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.13 Assets Held-for-Sale (Disposal Group) Non-current assets (or disposal groups) are classified as assets held-for-sale when their carrying amount is to be recovered principally through a sale transaction and the sale is considered highly probable. The assets are measured at the lower of their carrying amount and the fair value less costs to sell. Gain or loss on disposal is determined by comparing the proceeds with the carrying amount of relevant assets, and is recognized in the statements of profit or loss as ‘other non - operating income’ or ‘other non - operating expenses’. 2.14 Financial Liabilities (A) Classification and measurement The Company shall classify all financial liabilities as financial liabilities measured subsequently at amortized cost, except for the following: - Financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value. - Financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies. Such financial liabilities are measured based on the methodology described in Note 2.6 Financial Assets. - Financial guarantee contracts. After the initial recognition, an issuer of such a contract shall subsequently measure it at the higher of: (a) The amount of the loss allowance determined based on the expected credit losses. (b) The amount initially recognized less the cumulative amount of income recognized in accordance with the principles of Korean IFRS 1115 Revenue from Contracts with Customers, when appropriate . - Commitments to provide loan at below-market interest rate. An issuer of such a commitment shall subsequently measure it at the higher of: (a) The amount of the loss allowance determined based on the expected credit losses. (b) The amount initially recognized less the cumulative amount of income recognized in accordance with the principles of Korean IFRS 1115 Revenue from Contracts with Customers , when appropriate . - Contingent consideration recognized by an acquirer in a business combination to which Korean IFRS 1103 Business Combinations applies. Such contingent consideration shall subsequently be measured at fair value with changes recognized in profit or loss. (B) Derecognition Financial liabilities are removed from the consolidated statements of financial position when it is extinguished; for example, when the obligation specified in the contract is discharged or cancelled or expired or when the terms of an existing financial liability are substantially modified. The difference between the carrying amount of a financial liability extinguished or transferred to another party and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss. 2.15 Trade Payables Trade payables are amounts due to suppliers for inventories purchased or services received in the ordinary course of business. If payment is expected to be made within 12 months, they are classified as current liabilities. If not, they are presented as non- current liabilities. Non-current trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. -34- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.16 Borrowings Borrowings are recognized initially at fair value, net of transaction costs, and are subsequently measured at amortized cost. Any difference between cost and the redemption value is recognized in the consolidated statement of profit or loss over the period of the borrowings using the effective interest method. If the Company has an indefinite right to defer payment for a period longer than 12 months after the end of the reporting date, such liabilities are recorded as non-current liabilities, otherwise, they are recorded as current liabilities. 2.17 Provisions and Contingent Liabilities A provision is recognized when the Company has present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are not recognized for future operating losses. Provisions are measured at present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized as interest expense. The Company discloses a contingent liability if there is a possible obligation from past events in which the existence may only be identified through the occurrence of uncertain future events; or there is a present obligations that the possibility on the outflow of economic resources is uncertain; or the amount of economic resources required to settle the present obligation cannot be reasonably estimated. 2.18 Employee Benefits The Company has a variety of retirement pension plans including a defined benefit plan and a defined contribution plan. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate fund. The Company has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service received in the current and prior periods. For a defined contribution plans, the Company pays contributions to annuity plans that are managed either publicly or privately on a mandatory, contractual or voluntary basis. The Company has no further future payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, a defined benefit plan establishes an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability (asset) recognized in the consolidated statement of financial position with respect to the defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have the terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses resulting from the changes in actuarial assumptions, and the differences between the previous actuarial assumptions and what has actually occurred, are recognized in other comprehensive income in the period in which they were incurred. When plan amendments, curtailments and settlements occur, past service costs or gain or loss from settlements are immediately recognized in profit or loss. -35- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.19 Financial Guarantee Contract Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due. The liability is initially measured at fair value and then subsequently measured at the higher of the following, and is recognized in the consolidated statements of financial position within ‘other financial liabilities’: - the amount determined in accordance with the expected credit loss model and - the amount initially recognized less the cumulative amount of income recognized in accordance with Korean IFRS 1115 Revenue from Contracts with Customers , where appropriate . 2.20 Current and Deferred Tax The tax expense for the year comprises current and deferred tax. Current and deferred tax is recognized in profit or loss, except to the extent that it relates to the items recognized in other comprehensive income or directly in equity. The tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Deferred tax is recognized for temporary differences arising between the tax bases of assets and liabilities and their carrying amounts as expected tax consequences at the recovery or settlement of the carrying amounts of those assets and liabilities. However, deferred tax assets and liabilities are not recognized if they arise from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither the accounting nor taxable profit. Deferred tax assets are recognized only to the extent that it is probable that a future taxable profit will be available against which the temporary differences can be utilized. A deferred tax liability is recognized for taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. In addition, a deferred tax asset is recognized for deductible temporary differences arising from such investments to the extent that it is probable the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset the current tax assets against the current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities with an intention to settle the balances on a net basis. 2.21 Derivative Instruments The Company initially recognizes rights and obligations from derivative contracts as assets and liabilities at fair value. Gain or loss arising from these contracts are recognized in profit or loss. Qualified hedged amount from cash flow hedge and hedge of a net investment in a foreign operation is deferred in equity. The Company applies cash flow hedge accounting to hedge the price risk associated with inventory purchase and other. The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income, and the ineffective portion is recognized in financial income or expenses. 2.22 Dividend Dividend is recognized as a liability when approved by the Company’s shareholders. -36- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.23 Share Capital Ordinary shares and preference shares with no repayment obligations are classified as equity. When the Company or a subsidiary acquires the Company’s ordinary shares, the acquisition costs, including direct transaction costs, are deducted from equity until the redemption or reissuance as treasury shares. Consideration received on the reissuance of treasury shares is credited to equity attributable to owners of the parent company. 2.24 Revenue Recognition Revenue mainly comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Company’s activities. Revenue is shown net of value-added tax, returns, sales incentives and discounts and after eliminating intercompany transactions. The Company applied Korean IFRS 1115 Revenue from Contracts with Customers to the annual period beginning January 1, 2018. The Company shall recognize revenue in accordance with Korean IFRS 1115 Revenue from Contracts with Customers by applying the following 5 steps: ① Identify the contracts with the customers, ② Identify the separate performance obligations, ③ Determine the transaction price of the contract, ④ Allocate the transaction price to each of the separate performance obligations, and ⑤ Recognize the revenue as each performance obligation is satisfied. (A) Identification of performance obligations The Company exports various products and merchandise in accordance with Incoterms Group C trading conditions (Incoterms CIF and other). Since the seller provides the shipping service after the control of the product or merchandise has been transferred to the customer, the shipping service (including insurance) is recognized as a separate performance obligation. (B) Performance obligations satisfied over time The Company delivers products to customers and installs them in accordance with the system air conditioner contracts awarded by the Public Procurement Service. According to Korean IFRS 1115 Revenue from Contracts with Customers the Company should recognize revenue over time if the Company creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced. The Company recognizes the revenue from system air conditioner installation over time as the customer controls the outcome of the service. (C) Variable consideration The Company estimates amount of variable consideration by using the ‘ expected value method’ or the ‘ most likely amount method ’ , depending on which method the Company expects to better predict the amount of consideration. The Company recognizes revenue only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur, and classifies the amount which the Company does not expect to be entitled as contract liabilities. The Company measures refund liability at the amount of consideration received for which the Company does not expect to be entitled. The Company has a right to recover the product from the customer when the customer exercises his right of return and recognizes an asset and a corresponding adjustment to cost of sales. The asset is measured with reference to the former carrying amount of the product less the costs to recover the products. (D) Allocation of the transaction price The transaction price in an arrangement must be allocated to each separate performance obligation based on the relative standalone selling prices of the goods or services being provided to a customer. The Company determines the standalone selling price for each separate performance obligation by using methods such as the ‘adjusted market assessment approach’. -37- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.25 Leases A lease is a contract, whereby the lessor conveys to the lessee, the right to control the use of an identified asset for a period of time in exchange for consideration. At inception of a contract, the Company assesses whether the contract is, or contains, a lease. However, the Company did not reassess all contracts at initial application of Korean IFRS 1116 Leases because the Company applied the practical expedient to contracts entered into before January 1, 2019. For a contract that is, or contains, a lease, both lessee and lessor account for each lease component within the contract as a lease separately from the non-lease components of the contract. In lessee accounting, however, the Company does not account for them separately but instead applies the practical expedient to account for each lease component and any associated non- lease components as a single lease component. (A) Lessee accounting The Company recognizes a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments at the commencement date of the lease. The right-of-use asset is initially measured at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment losses, adjusted for the remeasurement of lease liability. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term from the commencement date of the lease and is classified as ‘property, plant and equipment’ in the consolidated financial statements. At the commencement date, the lease liability is measured at the present value of the lease payments that are not paid at that date. When measuring the present value, the lease payments are discounted using the interest rate implicit in the lease. If such implicit rate cannot be readily determined, the Company uses the Company’s incremental borrowing rate. The lease liability is subsequently increased by the amount of interest expenses recognized on the lease liability and reduced by the lease payments made. Lease liabilities are remeasured when the future lease payments are changed due to the following:  Changes in an index or rate  Changes in amounts expected to be payable by the lessee under the residual value guarantees  Changes in the assessment of whether a purchase option or an option to renew is reasonably certain to be exercised, or  Changes in the assessment of whether it is reasonably certain that an option to terminate the lease will not be exercised. Lease liabilities are classified as ‘current portion of long - term liabilities’ and/ or ‘long - term borrowings’ in the consolidated financial statements. The Company elected the practical expedient for short-term leases (leases that have a lease term of 12 months or less at the commencement date) and leases of low-value assets (leases for which the underlying asset is valued at USD 5,000 or less), and the lease payments are recognized as an expense on a straight-line basis over the lease term. (B) Lessor accounting The accounting treatment as a lessor did not change significantly from the Korean IFRS 1116 Leases initially applied on January 1, 2019. The Company classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to ownership at the inception of the lease. A lease other than a finance lease is classified as an operating lease. Lease income from operating leases is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred by the lessor in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income. -38- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2.26 Government Grants Government grants are recognized at their fair values when there is reasonable assurance that the grant will be received and the Company will comply with the conditions attached to it. Government grants relating to costs are deferred and recognized in the consolidated statements of profit or loss over the period necessary to match the costs they are intended to compensate. Government grants relating to assets are recognized in liabilities as deferred income government grants, and depreciated over the expected lives of the related assets, and are credited to the consolidated statements of profit or loss. 2.27 Earnings per Share Basic earnings per share is calculated by dividing the net profit for the period available to the ordinary shareholders by the weighted-average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the profit for the year attributable to owners of the parent company from the consolidated statements of profit or loss by the weighted-average number of ordinary shares outstanding and potential dilutive shares. Potential dilutive shares are used in the calculation of dilutive earnings per share only when they have dilutive effects. 2.28 Reportable Segments Reportable segments are disclosed in a manner consistent with the reporting provided to the chief operating decision-maker. The chief operating decision-maker is responsible for making strategic decisions on resource allocation and assessing performance of the reportable segments. The Management Committee, which makes strategic decisions, is regarded as the chief operating decision-maker. 2.29 Convenience Translation into United States Dollar Amounts The Company operates primarily in Korean won and its official accounting records are maintained in Korean won. The US dollar amounts provided in the consolidated financial statements represent supplementary information solely for the convenience of the reader. All Korean won amounts are expressed in US dollar at the rate of W 1,291.1 to USD 1, the average exchange rate for the year ended December 31, 2022. Such presentation is not in accordance with generally accepted accounting principles, and should not be construed as a representation that the Korean won amounts shown could be readily converted, realized or settled in US dollar at this or at any other rate. 2.30 Approval of the Consolidated Financial Statements These consolidated financial statements were approved by the Board of Directors on January 31, 2023, and may be modified and approved at the Annual General Shareholders’ Meetings. -39- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. Critical Accounting Estimates and Assumptions The Company makes estimates and assumptions concerning the future. The estimates and assumptions are continuously assessed, considering historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. In particular, the spread of COVID-19 in the year ended December 31, 2020 may result in changes to the Company’s assumptions and estimates but its potential financial impact cannot be reasonably estimated as of the reporting date. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. (A) Revenue recognition A refund liability and a right to the returned goods are recognized for the products expected to be returned at the time of sale. Accumulative experience is used to estimate such returns at the time of sale at a portfolio level (through expected value method), and the Co mpany’s revenue is affected by the changes in expected return rate. Sales of goods are recognized based on the considerations specified in the contract, net of sales incentives, when control of the products has transferred. The sales deduction, which affects the Company’s revenue, is reasonably estimated based on the historical experience and past contracts. (B) Provision for warranty The Company recognizes provision for warranty on products sold. The Company accrues provision for warranty based on the best estimate of amounts necessary to settle future and existing claims at the end of each reporting period. The amounts are estimated based on the past experience. (C) Fair value of financial instruments The fair value of financial instruments that are not traded in an active market is determined by using a variety of methods and assumptions that are mainly based on market conditions existing at the end of each reporting period. (D) Impairment of financial assets The loss allowance for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assu mptions and selecting the inputs to the impairment calculation based on the Company’s past history, existing market conditions as well as forward looking estimates at the end of each reporting period. (E) Lease In determining the lease term, the Company considers all facts and circumstances that create an economic incentive to exercise an extension option, or not to exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The lease term is reassessed if an option is actually exercised (or not exercised) or the Company becomes obliged to exercise (or not exercise) it. The Company reassesses whether it is reasonably certain to exercise an extension option (or not to exercise such option) upon the occurrence of either a significant event or a significant change in circumstances that is within the control of the lessee. -40- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (F) Net defined benefit liabilities (assets) The net defined benefit liabilities (assets) depend on a number of factors that are determined on an actuarial basis using a number of assumptions including the discount rate. Any changes in these assumptions will impact the carrying amount of the net defined benefit liability. The Company, in consideration of the interest rates of high-quality corporate bonds, determines the appropriate discount rate at the end of each year. This is the interest rate that is used to determine the present value of estimated future cash outflows expected to be required to settle the net defined benefit liabilities (assets). The principal actuarial assumptions associated with the net defined benefit liabilities (assets) are based on the current market expectations. (G) Impairment of goodwill and intangible assets that have an indefinite useful life At the end of each reporting period, the Company tests whether goodwill and intangible assets that have an indefinite useful life have become impaired by comparing the carrying amounts of assets or cash-generating units to the recoverable amounts. The recoverable amounts of assets or cash-generating units have been determined based on value-in-use calculations, and these calculations are based on estimates. (H) Income taxes Income taxes on the Company ’s taxable income from operating activities are subject to various tax laws and determinations of each tax authority across various countries throughout the world. There is uncertainty in determining the eventual tax effects on the taxable income from operating activities. The Company has recognized current tax and deferred tax at the end of the fiscal year based on the best estimate of future taxes payable as a result of operating activities. However, the resulting deferred income tax assets and liabilities may not equal the actual future taxes payable and such difference may impact the current tax and deferred income tax assets and liabilities upon the determination of eventual tax effects. Regarding taxes payable in Korea, if a certain portion of taxable income is not used for investments or for increases in wages or dividends, in accordance with the Tax System For Recirculation of Corporate Income , the Company is liable to pay additional income tax calculated based on the Korean tax law. The current and deferred taxes at the end of the fiscal year are based on the best estimate of future taxes payable, which can differ from the actual future taxes payable as a result of changes in investments, wages and dividends; this results in an additional uncertainty in measuring the final tax effects. The Company assesses uncertainty over a tax treatment. When the Company concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Company will reflect the effect of uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the Company expects to better predict the resolution of the uncertainty: - The most likely amount: the single most likely amount in a range of possible outcomes. - The expected value: the sum of the probability-weighted amounts in a range of possible outcomes. -41- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 4. Financial Instruments by Category (A) Categorizations of financial assets and liabilities as of December 31, 2022 and 2021 are as follows: (1) As of December 31, 2022 (In millions of Korean won) Financial assets measured at amortized cost Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through profit or loss Other financial assets 1 Total Financial assets Cash and cash equivalents 49,680,710 - - - 49,680,710 Short-term financial instruments 65,102,886 - - - 65,102,886 Short-term financial assets at amortized cost 414,610 - - - 414,610 Short-term financial assets at fair value through profit or loss - - 29,080 - 29,080 Trade receivables 35,721,563 - - - 35,721,563 Financial assets at fair value through other comprehensive income - 11,397,012 - - 11,397,012 Financial assets at fair value through profit or loss - - 1,405,468 - 1,405,468 Other 9,945,209 - 334,263 61,404 10,340,876 Total 160,864,978 11,397,012 1,768,811 61,404 174,092,205 1 Other financial assets include derivatives designated as hedging instruments which are not subject to categorizations. (In millions of Korean won) Financial liabilities measured at amortized cost Financial liabilities measured at fair value through profit or loss Other financial liabilities 1 Total Financial liabilities Trade payables 10,644,686 - - 10,644,686 Short-term borrowings 1,577,958 - 3,569,357 5,147,315 Other payables 16,328,237 - - 16,328,237 Current portion of long-term liabilities 215,143 - 874,019 1,089,162 Debentures 536,093 - - 536,093 Long-term borrowings 33,846 - 3,526,826 3,560,672 Long-term other payables 2,289,236 - - 2,289,236 Other 12,047,761 334,415 27,353 12,409,529 Total 43,672,960 334,415 7,997,555 52,004,930 1 Other financial liabilities include collateralized borrowings, lease liabilities and derivatives designated as hedging instruments, which are not subject to categorizations. -42- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (2) As of December 31, 2021 (In millions of Korean won) Financial assets measured at amortized cost Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through profit or loss Other financial assets 1 Total Financial assets Cash and cash equivalents 39,031,415 - - - 39,031,415 Short-term financial instruments 81,708,986 - - - 81,708,986 Short-term financial assets at amortized cost 3,369,034 - - - 3,369,034 Short-term financial assets at fair value through profit or loss - - 40,757 - 40,757 Trade receivables 40,713,415 - - - 40,713,415 Financial assets at fair value through other comprehensive income - 13,965,839 - - 13,965,839 Financial assets at fair value through profit or loss - - 1,525,344 - 1,525,344 Other 8,711,973 - 279,127 49,089 9,040,189 Total 173,534,823 13,965,839 1,845,228 49,089 189,394,979 1 Other financial assets include derivatives designated as hedging instruments which are not subject to categorizations. (In millions of Korean won) Financial liabilities measured at amortized cost Financial liabilities measured at fair value through profit or loss Other financial liabilities 1 Total Financial liabilities Trade payables 13,453,351 - - 13,453,351 Short-term borrowings 2,131,692 - 11,556,101 13,687,793 Other payables 14,126,970 - - 14,126,970 Current portion of long-term liabilities 518,065 - 811,903 1,329,968 Debentures 508,232 - - 508,232 Long-term borrowings 1,500 - 2,864,656 2,866,156 Long-term other payables 2,562,158 - - 2,562,158 Others 10,444,290 323,526 13,868 10,781,684 Total 43,746,258 323,526 15,246,528 59,316,312 1 Other financial liabilities include collateralized borrowings, lease liabilities, and derivatives designated as hedging instruments, which are not subject to categorizations. -43- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (B) Net gains or losses on each category of financial assets and liabilities for the years ended December 31, 2022 and 2021 are as follows: (1) 2022 (In millions of Korean won) Financial assets measured at amortized cost Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through profit or loss Other financial assets 1 Total Financial assets Gain (loss) on valuation (other comprehensive income) - (1,969,498) - 53,180 (1,916,318) Gain (loss) on valuation/disposal (profit or loss) (36,550) - 83,332 474 47,256 Reclassification from other comprehensive income to profit or loss - - - 310 310 Interest income 2,720,213 - 266 - 2,720,479 Foreign exchange differences (profit or loss) (822,011) - - - (822,011) Dividend income - 413,467 1,134 - 414,601 Impairment/reversal (profit or loss) (19,124) - - - (19,124) 1 Other financial assets include derivatives designated as hedging instruments which are not subject to categorizations. (In millions of Korean won) Financial liabilities measured at amortized cost Financial liabilities measured at fair value through profit or loss Other financial liabilities 1 Total Financial liabilities Gain (loss) on valuation (other comprehensive income) - - (10,621) (10,621) Gain (loss) on valuation/disposal (profit or loss) - (91,056) (45) (91,101) Reclassification from other comprehensive income to profit or loss - - 59 59 Interest expense (322,529) - (440,486) (763,015) Foreign exchange differences (profit or loss) 574,771 - 155,952 730,723 1 Other financial liabilities include collateralized borrowings, lease liabilities, and derivatives designated as hedging instruments, which are not subject to categorizations. -44- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (2) 2021 (In millions of Korean won) Financial assets measured at amortized cost Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through profit or loss Other financial assets 1 Total Financial assets Gain (loss) on valuation (other comprehensive income) - 2,980,896 - 27,715 3,008,611 Gain (loss) on valuation/disposal (profit or loss) (1,969) - 420,100 437 418,568 Reclassification from other comprehensive income to profit or loss - - - (148) (148) Interest income 1,278,051 - 227 - 1,278,278 Foreign exchange differences (profit or loss) 29,834 - - - 29,834 Dividend income - 133,532 2,308 - 135,840 Impairment/reversal (profit or loss) (27,194) - - - (27,194) 1 Other financial assets include derivatives designated as hedging instruments which are not subject to categorizations. (In millions of Korean won) Financial liabilities measured at amortized cost Financial liabilities measured at fair value through profit or loss Other financial liabilities 1 Total Financial liabilities Gain on valuation (other comprehensive loss) - - 22,695 22,695 Gain (loss) on valuation/disposal (profit or loss) - (65,368) - (65,368) Reclassification from other comprehensive income to profit or loss - - (121) (121) Interest expense (213,477) - (218,063) (431,540) Foreign exchange differences (profit or loss) 362,820 - 3,447 366,267 1 Other financial liabilities include collateralized borrowings, lease liabilities, and derivatives designated as hedging instruments, which are not subject to categorizations. -45- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. Transfer of Financial Assets Trade receivables of the Company have been discounted through factoring agreements with banks during the years ended December 31, 2022 and 2021. Trade receivables provided as collaterals in such factoring transactions do not meet the requirements for asset derecognition as risks and rewards are not substantially transferred in the event of a debtor default due to the recourse obligation, etc. Financial liabilities recognized in relation to these transaction s are included as ‘short -term borrowings’ on the consolidated statements of financial position (refer to Note 12). The following table presents a breakdown of discounted trade receivables as of December 31, 2022 and 2021: (In millions of Korean won) December 31, 2022 December 31, 2021 Carrying amount of the discounted trade receivables 1 3,569,357 11,556,101 Carrying amount of the related borrowings 3,569,357 11,556,101 1 The discounted trade receivables include the intercompany balances. 6. Financial Assets at Fair Value (A) Details of financial assets at fair value as of December 31, 2022 and 2021 are as follows: (1) Financial assets at fair value through other comprehensive income (In millions of Korean won) December 31, 2022 December 31, 2021 Non-current portion Equity instruments 11,397,012 13,965,839 (2) Financial assets at fair value through profit or loss (In millions of Korean won) December 31, 2022 December 31, 2021 Current portion Debt instruments 29,080 40,757 Non-current portion Equity instruments 773,063 905,094 Debt instruments 632,405 620,250 Subtotal 1,405,468 1,525,344 Total 1,434,548 1,566,101 -46- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (B) Changes in financial assets at fair value for the years ended December 31, 2022 and 2021 are as follows: (1) Financial assets at fair value through other comprehensive income (In millions of Korean won) 2022 2021 Balance as of January 1 13,965,839 12,575,216 Acquisition 35,013 1,146,868 Disposal (20,913) (3,551,604) Fair value valuation gain (loss) (2,636,448) 3,653,253 Other 53,521 142,106 Balance as of December 31 11,397,012 13,965,839 (2) Financial assets at fair value through profit or loss (In millions of Korean won) 2022 2021 Balance as of January 1 1,525,344 1,202,969 Acquisition 158,244 208,262 Disposal (80,718) (142,406) Fair value valuation gain (loss) (198,594) 275,447 Other 1,192 (18,928) Balance as of December 31 1,405,468 1,525,344 (C) Changes in gain (loss) on valuation of financial assets at fair value through other comprehensive income for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 6,222,980 7,071,415 Fair value valuation gain (loss) (2,636,448) 3,653,253 Reclassification to retained earnings due to disposals 49,946 (4,501,688) Balance as of December 31 3,636,478 6,222,980 Income tax effects on equity and non-controlling interests (887,369) (1,606,341) Total 2,749,109 4,616,639 -47- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (D) Details of listed equity securities of financial assets at fair value as of December 31, 2022 and 2021 are as follows: (In millions of Korean won, number of shares and percentage) December 31, 2022 December 31, 2021 Number of shares owned Percentage of ownership 1 (%) Acquisition cost Carrying amount (Market value) Carrying amount (Market value) Samsung Heavy Industries 134,027,281 15.2 932,158 684,879 759,935 Hotel Shilla 2,004,717 5.1 13,957 166,592 156,368 iMarket Korea 647,320 1.9 324 6,538 6,926 SFA 3,644,000 10.2 38,262 132,642 131,366 Wonik Holdings 3,518,342 4.6 30,821 13,536 17,521 Wonik IPS 3,701,872 7.5 32,428 91,621 156,589 ASML Holding N.V. 6,297,787 1.5 363,012 4,287,121 5,974,280 Wacom Co., Ltd. 8,398,400 5.1 62,013 46,750 79,256 BYD Company Limited 2,380,100 0.1 79,049 110,971 118,862 Corning Incorporated 80,000,000 9.5 3,980,636 3,238,205 3,530,893 Other 563,635 742,890 1,155,113 Total 6,096,295 9,521,745 12,087,109 1 Ownership represents the Company’s ownership of the total ordinary shares issued by each entity. 7. Trade and Non-Trade Receivables (A) Trade and non-trade receivables as of December 31, 2022 and 2021 are as follows: December 31, 2022 December 31, 2021 (In millions of Korean won) Trade Non-trade Trade Non-trade Receivables 36,238,032 7,051,536 41,250,034 5,572,176 Less: Loss allowance (312,221) (78,101) (310,880) (72,805) Subtotal 35,925,811 6,973,435 40,939,154 5,499,371 Less: Non-current portion (204,248) (824,226) (225,739) (1,002,114) Current portion 35,721,563 6,149,209 40,713,415 4,497,257 (B) Movements in the loss allowance for receivables for the years ended December 31, 2022 and 2021 are as follows: 2022 2021 (In millions of Korean won) Trade Non-trade Trade Non-trade Balance as of January 1 310,880 72,805 318,731 59,487 Bad debt expense (reversal) 8,784 7,312 17,990 9,009 Write-off (3,557) (6,154) (19,095) (2,424) Other (3,886) 4,138 (6,746) 6,733 Balance as of December 31 312,221 78,101 310,880 72,805 -48- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (C) The details of trade and non-trade receivables classified by past due date to measure expected credit losses as of December 31, 2022 and 2021 are as follows: December 31, 2022 December 31, 2021 (In millions of Korean won) Trade Non-trade Trade Non-trade Receivables not past due 33,177,298 5,890,018 39,677,264 5,125,414 Past due 1 : Less than 31 days overdue 2,206,622 981,889 1,229,479 196,783 31 days to 90 days overdue 642,859 52,972 36,545 51,804 Over 90 days overdue 211,253 126,657 306,746 198,175 Subtotal 3,060,734 1,161,518 1,572,770 446,762 Total 36,238,032 7,051,536 41,250,034 5,572,176 1 The Company does not consider trade and non-trade receivables that are overdue for less than or equal to 31 days as impaired. (D) The maximum exposure to current credit risk is equivalent to the carrying amount of receivables as of December 31, 2022. The Company has in place insurance contracts covering the Company’s major receivables. 8. Inventories Inventories as of December 31, 2022 and 2021 are as follows: December 31, 2022 December 31, 2021 (In millions of Korean won) Gross amount Valuation allowance Carrying amount Gross amount Valuation allowance Carrying amount Finished goods 17,526,178 (1,493,952) 16,032,226 13,000,200 (719,621) 12,280,579 Work in process 21,612,965 (1,535,446) 20,077,519 13,967,331 (493,713) 13,473,618 Raw materials and supplies 16,268,974 (1,289,694) 14,979,280 14,864,486 (679,645) 14,184,841 Materials in transit 1,098,841 - 1,098,841 1,445,366 - 1,445,366 Total 56,506,958 (4,319,092) 52,187,866 43,277,383 (1,892,979) 41,384,404 The inventories recognized as expense for the year ended December 31, 2022, amount to W 186,396,549 million (2021: W 164,319,031 million). The amount includes loss on valuation of inventories. -49- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 9. Investments in Associates and Joint Ventures (A) Changes in investments in associates and joint ventures for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 8,932,251 8,076,779 Acquisition 1,006,998 47,090 Disposal (20,894) (34,664) Share of profit 1,090,643 729,614 Other 1 (115,129) 113,432 Balance as of December 31 10,893,869 8,932,251 1 Other consists of dividends, impairment, and reclassification. (B) Major investments in associates and joint ventures as of December 31, 2022 are as follows: (1) Investments in associates Investee Nature of relationship with associate Percentage of ownership (%) 1 Principal business location Fiscal period-end Samsung Electro- Mechanics Co., Ltd. Manufacture and supply electronic components including passive components, circuit boards, and modules 23.7 Korea December Samsung SDS Co., Ltd. Provide IT services including computer programming, system integration and management and logistical services 22.6 Korea December Samsung Biologics Co., Ltd. New business investment 31.2 Korea December Samsung SDI Co., Ltd. 2 Manufacture and supply electronic components including secondary cell batteries 19.6 Korea December Cheil Worldwide, Inc. Advertising agency 25.2 Korea December 1 Ownership represents the Company’s ownership of the total ordinary shares issued by each entity. 2 The Company’s ownership of ordinary shares outstanding is 20.6%. (2) Investments in joint ventures Investee Nature of relationship with joint venture Percentage of ownership (%) 1 Principal business location Fiscal period-end Samsung Corning Advanced Glass, LLC Manufacture and supply industrial glass devices 50.0 Korea December 1 Ownership represents the Company’s ownership of the total ordinary shares issued by each entity. -50- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (C) Details of investments in associates and joint ventures as of December 31, 2022 and 2021 are as follows: (1) Investments in associates (In millions of Korean won) December 31, 2022 Investee Acquisition cost Net asset value of equity shares 1 Carrying amount Samsung Electro-Mechanics 359,237 1,765,507 1,764,249 Samsung SDS 147,963 1,857,481 1,870,338 Samsung Biologics 1,424,358 2,804,547 2,808,673 Samsung SDI 1,242,605 3,318,875 2,691,223 Cheil Worldwide 506,162 347,510 649,161 Other 645,255 718,801 907,333 Total 4,325,580 10,812,721 10,690,977 1 The Company’s portion of net asset value of associates is based on the Company’s percentage of ownership. (In millions of Korean won) December 31, 2021 Investee Acquisition cost Net asset value of equity shares 1 Carrying amount Samsung Electro-Mechanics 359,237 1,573,570 1,556,386 Samsung SDS 147,963 1,632,847 1,652,155 Samsung Biologics 443,193 1,571,809 1,577,664 Samsung SDI 1,242,605 2,960,235 2,529,650 Cheil Worldwide 506,162 320,301 621,292 Other 644,903 578,547 793,748 Total 3,344,063 8,637,309 8,730,895 1 The Company’s portion of net asset value of associates is based on the Company’s percentage of ownership. (2) Investments in joint ventures (In millions of Korean won) December 31, 2022 Investee Acquisition cost Net asset value of equity shares 1 Carrying amount Samsung Corning Advanced Glass 215,000 137,727 137,745 Other 259,994 67,632 65,147 Total 474,994 205,359 202,892 1 The Company’s portion of net asset value of joint ventures is based on the Company’s percentage of ownership. (In millions of Korean won) December 31, 2021 Investee Acquisition cost Net asset value of equity shares 1 Carrying amount Samsung Corning Advanced Glass 215,000 135,584 135,580 Other 259,994 67,517 65,776 Total 474,994 203,101 201,356 1 The Company’s portion of net asset value of joint ventures is based on the Company’s percentage of ownership. -51- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (D) Details of the valuation of investments in associates and joint ventures using the equity method are as follows: (1) For the year ended December 31, 2022 (In millions of Korean won) Balance as of January 1 Share of profit (loss) Share of other comprehensive income Other 1 Balance as of December 31 Samsung Electro-Mechanics 1,556,386 242,139 2,880 (37,156) 1,764,249 Samsung SDS 1,652,155 241,962 18,154 (41,933) 1,870,338 Samsung Biologics 1,577,664 250,028 (183) 981,164 2,808,673 Samsung SDI 2,529,650 194,242 (19,207) (13,462) 2,691,223 Cheil Worldwide 621,292 55,476 1,140 (28,747) 649,161 Samsung Corning Advanced Glass 135,580 1,999 144 22 137,745 Other 859,524 104,797 (53,438) 61,597 972,480 Total 8,932,251 1,090,643 (50,510) 921,485 10,893,869 1 Other consists of acquisitions, disposals, dividends, impairment and reclassification. (2) For the year ended December 31, 2021 (In millions of Korean won) Balance as of January 1 Share of profit Share of other comprehensive income Other 1 Balance as of December 31 Samsung Electro-Mechanics 1,333,819 207,949 51,702 (37,084) 1,556,386 Samsung SDS 1,525,857 137,926 30,305 (41,933) 1,652,155 Samsung Biologics 1,453,012 124,979 (327) - 1,577,664 Samsung SDI 2,326,037 128,483 88,594 (13,464) 2,529,650 Cheil Worldwide 586,057 47,619 12,008 (24,392) 621,292 Samsung Corning Advanced Glass 123,356 12,376 (129) (23) 135,580 Other 728,641 70,282 29,826 30,775 859,524 Total 8,076,779 729,614 211,979 (86,121) 8,932,251 1 Other consists of acquisitions, disposals, dividends, impairment, and reclassification. -52- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (E) Summary of the condensed financial information of major associates and joint ventures (1) Summary of condensed financial information of major associates and dividends received from associates as of December 31, 2022 and 2021, and for the years ended December 31, 2022 and 2021 are as follows: 2022 (In millions of Korean won) Samsung Electro- Mechanics Samsung SDS Samsung Biologics Samsung SDI Cheil Worldwide 1. Condensed financial information Condensed statements of financial position : Current assets 4,888,319 8,005,764 6,457,657 9,651,702 2,193,979 Non-current assets 6,108,852 3,946,660 10,124,394 20,605,823 557,466 Current liabilities 2,525,123 2,493,323 4,181,542 8,006,939 1,335,643 Non-current liabilities 778,563 992,132 3,416,034 5,033,084 194,373 Non-controlling interests 154,991 243,777 - 731,779 9,388 Condensed statements of comprehensive income: Revenue 9,441,276 17,234,750 3,001,295 20,124,070 4,253,367 Profit from continuing operations, net of tax 1 993,519 1,099,745 798,056 1,952,149 193,732 Profit from discontinued operation, net of tax 1 - - - - - Other comprehensive income (loss) 1 (9,601) 80,368 6,995 (139,877) (1,122) Total comprehensive income 1 983,918 1,180,113 805,051 1,812,272 192,610 2. Details of adjustments from the carrying amount of investments in associates Net assets (a) 7,538,494 8,223,192 8,984,475 16,485,723 1,212,041 Ownership percentage (b) 2 23.4% 22.6% 31.2% 20.1% 28.7% Net assets of equity shares (a x b) 1,765,507 1,857,481 2,804,547 3,318,875 347,510 Goodwill 7,081 26,801 3,645 - 298,779 Intercompany transactions and other 3 (8,339) (13,944) 481 (627,652) 2,872 Carrying amount of associates 1,764,249 1,870,338 2,808,673 2,691,223 649,161 3. Dividends from associates Dividends 37,155 41,933 - 13,463 28,748 1 Profit (loss) attributable to owners of the investee 2 Ownership percentage includes ordinary and preference shares. 3 Consists of unrealized gains and losses and other differences. -53- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 2021 (In millions of Korean won) Samsung Electro- Mechanics Samsung SDS Samsung Biologics Samsung SDI Cheil Worldwide 1. Condensed financial information Condensed statements of financial position: Current assets 4,598,269 7,575,968 2,823,175 7,444,907 2,018,598 Non-current assets 5,343,105 2,941,464 5,146,835 18,388,286 523,513 Current liabilities 2,234,657 2,370,290 1,107,295 6,461,286 1,224,222 Non-current liabilities 835,592 703,442 1,871,614 4,175,208 190,622 Non-controlling interests 152,177 214,980 - 492,435 10,125 Condensed statements of comprehensive income: Revenue 9,675,036 13,630,002 1,568,007 13,553,220 3,325,712 Profit from continuing operations, net of tax 1 1,055,411 611,171 393,589 1,169,801 165,485 Loss from discontinued operation, net of tax 1 (162,966) - - - - Other comprehensive income (loss) 1 151,809 134,163 (1,270) 623,792 32,535 Total comprehensive income 1 1,044,254 745,334 392,319 1,793,593 198,020 2. Details of adjustments from the carrying amount of investments in associates Net assets (a) 6,718,948 7,228,720 4,991,101 14,704,264 1,117,142 Ownership percentage (b) 2 23.40% 22.60% 31.50% 20.10% 28.70% Net assets of equity shares (a x b) 1,573,570 1,632,847 1,571,809 2,960,235 320,301 Goodwill 7,081 26,801 3,645 - 298,779 Intercompany transactions and other 3 (24,265) (7,493) 2,210 (430,585) 2,212 Carrying amount of associates 1,556,386 1,652,155 1,577,664 2,529,650 621,292 3. Dividends from associates Dividends 24,770 41,933 - 13,463 24,392 1 Profit (loss) attributable to owners of the investee. 2 Ownership percentage includes ordinary and preference shares. 3 Consists of unrealized gains and losses and other differences. -54- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (2) Summary of condensed financial information of major joint ventures and dividends received from joint ventures as of December 31, 2022 and 2021, and for the years ended December 31, 2022 and 2021 are as follows: Samsung Corning Advanced Glass (In millions of Korean won) 2022 2021 1. Condensed financial information Condensed statements of financial position: Current assets 170,103 163,083 Non-current assets 125,507 141,411 Current liabilities 19,794 31,779 Non-current liabilities 363 1,547 Condensed statements of comprehensive income: Revenue 133,634 204,130 Profit from continuing operations, net of tax 1 3,998 24,753 Profit (loss) from discontinued operations, net of tax 1 - - Other comprehensive income (loss) 1 288 (305) Total comprehensive income 1 4,286 24,448 2. Details of adjustments from the carrying amount of investments in joint ventures Net assets (a) 275,453 271,168 Ownership percentage (b) 50.00% 50.00% Net assets of equity shares (a x b) 137,727 135,584 Intercompany transactions and other 2 18 (4) Carrying amount of joint ventures 137,745 135,580 3. Dividends from joint ventures Dividends - - 1 Profit (loss) attributable to owners of the parent company. 2 Consists of unrealized gains and losses and other differences. (3) Profit (loss) attributable to owners of the parent company from associates and joint ventures which are not individually material for the years ended December 31, 2022 and 2021 are as follows: 2022 2021 (In millions of Korean won) Associates Joint ventures Associates Joint ventures Profit from continuing operations 102,930 1,867 68,646 1,636 Other comprehensive income (loss) (50,761) (2,677) 29,258 568 Total comprehensive income (loss) 52,169 (810) 97,904 2,204 -55- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (F) Details of marketable investments in associates as of December 31, 2022 and 2021 are as follows: (In millions of Korean won and number of shares) December 31, 2022 December 31, 2021 Number of shares held Market value Market value Samsung Electro-Mechanics 17,693,084 2,308,947 3,494,384 Samsung SDS 17,472,110 2,149,070 2,734,385 Samsung Biologics 22,217,309 18,240,411 18,815,659 Samsung SDI 13,462,673 7,956,440 8,818,051 Cheil Worldwide 29,038,075 669,328 663,520 (G) Other matters On July 12, 2018, the Korea Securities and Futures Commission determined an initial measure following an investigation relating to Samsung Biologics Co., Ltd., an associate of the Company, and its accounting for its investment in Samsung Bioepis Co., Ltd, a joint venture between Biogen Therapeutics Inc. and Samsung Biologics Co., Ltd. This measure included a recommendation to dismiss the director in charge, prosecution charges, and external auditor designation by the regulator, on the basis that the Joint Venture Agreement was not disclosed in the notes to the financial statements. On November 14, 2018, the Korea Securities and Futures Commission determined a second measure which included a penalty of W 8,000 million, a recommendation to dismiss the CEO, a requirement to restate its financial statements, and further prosecution charges. To prove justification of its accounting treatment, Samsung Biologics Co., Ltd. filed a suit for cancellation of the aforementioned measures to the Seoul Administrative Court, which is currently in progress. On September 24, 2021, the Seoul Administrative Court announced a decision to cancel the first measure charged by the Korea Securities and Futures Commission, and suspended its execution until the final rulings of the appeal. On October 16, 2021, the Korea Securities and Futures Commission appealed and the litigation is in progress at Seoul High Court. Samsung Biologics Co., Ltd. also filed for suspending the execution of the initial and second measures. On January 22, 2019 and February 19, 2019, the Seoul Administrative Court pronounced decisions to suspend the second and initial measure, respectively, until the final rulings. The Korea Securities and Futures Commission immediately appealed against the decisions but the appeals were dismissed by the Seoul High Court on May 13, 2019 and May 24, 2019, in relation to the second and first measures, respectively. On May 23, 2019 and June 10, 2019, the Korea Securities and Futures Commission re-appealed against the dismissals relating to the second and first measures, respectively. On September 6, 2019 and October 11, 2019, the Supreme Court of Korea dismissed the Korea Securities and Futures Commission’s re -appeal relating to the second and first measures, respectively, and confirmed the decision to suspend the execution of these measures. Although the future outcome of the administrative litigation cannot be estimated, should Samsung Biologics Co., Ltd. be required to restate its financial statements to amend its historical accounting treatment relating to its investment in Samsung Bioepis Co., Ltd., the Company’s share of profit or loss relating to its equity method investment, the amount of investment in associates, and retained earnings, for the years ended December 31, 2015 and onwards, and the profit on disposal of investment for the year ended December 31, 2016, may be impacted. Given the timing of completion and the final result of the administrative litigation between Samsung Biologics Co., Ltd. and the Korea Securities and Futures Commission is uncertain and cannot currently be estimated, it is not possible for the Company to recognize the effects of these proceedings in the current period consolidated financial statements. -56- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 10. Property, Plant and Equipment (A) Changes in property, plant and equipment for the years ended December 31, 2022 and 2021 are as follows: 2022 (In millions of Korean won) Land Buildings and structures Machinery and equipment Construction in progress Other Total Balance as of January 1 9,830,154 38,869,440 79,526,297 18,009,324 3,693,324 149,928,539 Acquisition cost 9,943,570 62,651,459 274,909,571 18,009,324 11,958,070 377,471,994 Accumulated depreciation and impairment (113,416) (23,782,019) (195,383,274) - (8,264,746) (227,543,455) Acquisitions and capital expenditures 1 138,925 5,302,095 31,010,080 16,675,741 2,100,119 55,226,960 Depreciation (49,516) (3,533,917) (30,761,685) - (1,606,980) (35,952,098) Disposals/scrap (57,596) (127,935) (35,098) (193) (34,208) (255,030) Impairment (reversal) - (2,255) (11,815) - (12,323) (26,393) Other 2 30,200 199,490 (13,148) (1,077,308) (15,824) (876,590) Balance as of December 31 9,892,167 40,706,918 79,714,631 33,607,564 4,124,108 168,045,388 Acquisition cost 10,024,569 67,713,808 303,000,627 33,607,564 13,248,490 427,595,058 Accumulated depreciation and impairment (132,402) (27,006,890) (223,285,996) - (9,124,382) (259,549,670) 1 The capitalized borrowing costs are W 41,634 million and interest rate used to calculate the borrowing costs eligible for capitalization is 2.1%~4.1%. 2 Other includes effects of changes in foreign currency exchange rates and effects of the offset related to government grants. 2021 (In millions of Korean won) Land Buildings and structures Machinery and equipment Construction in progress Other Total Balance as of January 1 9,772,156 34,552,004 60,994,130 20,175,917 3,458,685 128,952,892 Acquisition cost 9,850,942 55,026,369 233,056,501 20,175,917 10,496,584 328,606,313 Accumulated depreciation and impairment (78,786) (20,474,365) (172,062,371) - (7,037,899) (199,653,421) Acquisitions and capital expenditures 1 117,933 6,608,620 43,862,769 (2,320,520) 1,696,362 49,965,164 Depreciation (47,517) (3,174,672) (26,552,958) - (1,510,062) (31,285,209) Disposals, scrap (49,683) (91,964) (18,307) (469) (6,200) (166,623) Impairment (reversal) - (12,135) (131,985) - (7,082) (151,202) Other 2 37,265 987,587 1,372,648 154,396 61,621 2,613,517 Balance as of December 31 9,830,154 38,869,440 79,526,297 18,009,324 3,693,324 149,928,539 Acquisition cost 9,943,570 62,651,459 274,909,571 18,009,324 11,958,070 377,471,994 Accumulated depreciation and impairment (113,416) (23,782,019) (195,383,274) - (8,264,746) (227,543,455) 1 The capitalized borrowing costs are W 24,908 million and interest rate used to calculate the borrowing costs eligible for capitalization is 0.3~1.1%. 2 Other includes effects of changes in foreign currency exchange rates and effects of the offset related to government grants. -57- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (B) Changes in the right-of-use assets included in the property, plant and equipment for the years ended December 31, 2022 and 2021 are as follows: 2022 (In millions of Korean won) Land Buildings and structures Machinery and equipment Other Total Balance as of January 1 525,954 2,841,970 191,059 391,584 3,950,567 Acquisition 32,632 1,542,889 29,098 507,041 2,111,660 Depreciation (49,516) (823,543) (58,000) (116,287) (1,047,346) Cancellation of contracts (13,741) (111,145) (263) (4,220) (129,369) Other 1 7,874 1,425 13,257 9,541 32,097 Balance as of December 31 503,203 3,451,596 175,151 787,659 4,917,609 1 Other includes effects of changes in foreign currency exchange rates. 2021 (In millions of Korean won) Land Buildings and structures Machinery and equipment Other Total Balance as of January 1 441,603 2,105,360 109,372 313,538 2,969,873 Acquisition 112,419 1,326,322 136,680 173,490 1,748,911 Depreciation (57,699) (553,324) (54,233) (66,868) (732,124) Cancellation of contracts (398) (60,742) (1,265) (4,790) (67,195) Other 1 30,029 24,354 505 (23,786) 31,102 Balance as of December 31 525,954 2,841,970 191,059 391,584 3,950,567 1 Other includes effects of changes in foreign currency exchange rates. (C) Details of depreciation of property, plant and equipment for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Cost of sales 32,285,800 27,868,090 Selling and administrative expenses, and etc. 3,666,298 3,417,119 Total 35,952,098 31,285,209 -58- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11. Intangible Assets (A) Changes in intangible assets for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 Intellectual property rights Development cost Membership Goodwill Other Total Balance as of January 1 4,153,236 236,910 241,219 5,844,259 9,760,620 20,236,244 External acquisitions 299,484 - 8,905 - 2,375,986 2,684,375 Internally generated/developed - - - - - - Amortization (268,070) (151,892) - - (2,735,599) (3,155,561) Disposals/scrap (50,979) - (417) - (402) (51,798) Impairment (reversal) - - (509) - (5,753) (6,262) Other 1 145,079 - 4,356 170,163 191,158 510,756 Balance as of December 31 4,278,750 85,018 253,554 6,014,422 9,586,010 20,217,754 1 Other includes the cumulative effect of changes in foreign currency exchange rates and others. (In millions of Korean won) 2021 Intellectual property rights Development cost Membership Goodwill Other Total Balance as of January 1 4,033,904 371,391 229,987 5,673,642 8,159,578 18,468,502 External acquisitions 333,073 - 8,757 - 3,648,484 3,990,314 Internally generated/developed - 193,708 - - - 193,708 Amortization (278,288) (321,608) - - (2,362,256) (2,962,152) Disposals/scrap (51,236) - (195) - (1,696) (53,127) Impairment (reversal) (52,101) - (1,586) - - (53,687) Other 1 167,884 (6,581) 4,256 170,617 316,510 652,686 Balance as of December 31 4,153,236 236,910 241,219 5,844,259 9,760,620 20,236,244 1 Other includes effects of reclassification of licenses and changes in foreign currency exchange rates. -59- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (B) Goodwill Goodwill is allocated to each cash-generating unit. Details of goodwill as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 DX segment 1,249,290 1,214,730 DS segment 159,359 160,026 SDC segment 138,754 138,061 Harman segment 4,466,339 4,330,139 Other 680 1,303 Total 6,014,422 5,844,259 Goodwill impairment reviews are performed annually, and the recoverable amounts of cash-generating units have been determined based on the value-in-use calculations, etc. These calculations generally use the pre-tax cash flow projections based on the financial budgets approved by management covering a five-year period, unless it is reasonable to use long-term financial budgets longer than five years in the new technology business. Perpetual cash flows beyond the five-year period are extrapolated using a constant growth rate assumption. The growth rate applied was capped at the long-term average growth rate for the industry . (C) Details of amortization of intangible assets for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Cost of sales 2,211,481 2,136,937 Selling and administrative expenses and other 944,080 825,215 Total 3,155,561 2,962,152 -60- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 12. Borrowings (A) Details of the carrying amounts of borrowings as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) Financial institutions Interest rates (%) as of Dec 31, 2022 December 31, 2022 December 31, 2021 Short-term borrowings Collateralized borrowings 1 Woori Bank and others 0.1~16.7 3,569,357 11,556,101 Non-collateralized borrowings Citibank and others 0.1~38.5 1,577,958 2,131,692 Total 5,147,315 13,687,793 Current portion of long-term borrowings Bank borrowings BNP and others 38.9~53.2 208,915 40,415 Lease liabilities 2 CSSD and others 3.5 874,019 811,902 Total 1,082,934 852,317 Long-term borrowings Bank borrowings Industrial Bank of Korea and others 1.6~5.9 33,846 1,500 Lease liabilities 2 CSSD and others 3.5 3,526,826 2,864,656 Total 3,560,672 2,866,156 1 Collateralized borrowings are secured by trade receivables. 2 Interest expenses arising from the lease liabilities for the years ended December 31, 2022 and 2021 amount to W 140,111 million and W 106,877 million, respectively, which were determined using the weighted average incremental borrowing rate. The right-of-use assets are pledged as collateral to the lessor in the event of default. Short-term lease payments and low- valued asset lease payments that are not included in measurement of lease liabilities during the years ended December 31, 2022 and 2021 amount to W 211,283 million and W 129,686 million, respectively. (B) Maturities of long-term borrowings outstanding as of December 31, 2022 are as follows: (In millions of Korean won) Long-term borrowings Repayment terms 2023 208,915 2024 1,000 2025 31,346 2026 - 2027 and thereafter 1,500 Total 242,761 (C) Maturities of lease liabilities outstanding as of December 31, 2022 are as follows: (In millions of Korean won) Lease liabilities Repayment terms 2023 1,021,767 2024 866,188 2025 690,763 2026 582,745 2027 and thereafter 1,905,034 Total 5,066,497 -61- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 13. Debentures (A) Details of the carrying amounts of debentures as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) Issue date Due date Interest rates (%) as of Dec 31, 2022 December 31, 2022 December 31, 2021 US dollar denominated straight bonds 1 1997.10.2 2027.10.1 7.7 31,683 35,565 (US$ 25 million) (US$ 30 million) US dollar denominated debenture bonds 2 2015.5.11 2025.5.15 4.2 506,920 474,200 (US$ 400 million) (US$ 400 million) EURO denominated debenture bonds 3 2015.5.27 2022.5.27 2.0 - 469,819 - (EUR 350 million) Less: Discounts (543) (708) Add: Premium 4,261 7,007 Less: Current portion (6,228) (477,651) Total 536,093 508,232 1 US dollar denominated straight bonds are repaid annually for twenty years after a ten-year grace period from the date of issuance. Interest is paid semi-annually. 2 Harman International Industries, Inc. issued US dollar denominated debenture bonds. These debentures are repaid on the date of 10 years maturity and interest is paid semi-annually. 3 Harman Finance International, SCA issued Euro denominated debenture bonds. These debentures are repaid on the date of 7 years maturity and interest is paid annually. These debentures were fully repaid early on March 1, 2022. (B) Maturities of debentures outstanding as of December 31, 2022 are as follows: (In millions of Korean won) Debentures Repayment terms 2023 6,337 2024 6,337 2025 513,257 2026 6,337 2027 and thereafter 6,335 Total 538,603 -62- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14. Net Defined Benefit Liabilities (Assets) (A) Details of net defined benefit liabilities (assets) recognized in the statements of financial position as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Present value of funded defined benefit obligations 13,639,460 14,391,209 Present value of unfunded defined benefit obligations 370,848 266,976 Subtotal 14,010,308 14,658,185 Fair value of plan assets (19,593,910) (17,001,891) Total (5,583,602) (2,343,706) (B) The components of defined benefit costs recognized in profit or loss for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Current service cost 1,365,600 1,247,857 Net interest income (99,356) (38,326) Past service cost (253) 2,718 Other 28,713 3,847 Total 1,294,704 1,216,096 The amount recognized as an expense of defined contribution plans for the years ended December 31, 2022 and 2021 are W 145,395 million and W 144,248 million, respectively. (C) The expenses related to the defined benefit plans recognized in the statements of profit or loss for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Cost of sales 514,589 480,331 Selling and administrative expenses and other 780,115 735,765 Total 1,294,704 1,216,096 -63- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (D) Changes in the defined benefit obligations for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 14,658,185 12,948,999 Current service cost 1,365,600 1,247,857 Interest cost 528,884 396,730 Past service cost (253) 2,718 Remeasurement: Actuarial gains or losses arising from changes in demographic assumptions 34,917 (34,014) Actuarial gains or losses arising from changes in financial assumptions (2,496,879) 126,297 Other 521,452 473,668 Benefits paid (630,019) (519,043) Other 1 28,421 14,973 Balance as of December 31 14,010,308 14,658,185 1 Other includes effects of changes in foreign currency exchange rates and business combinations. (E) Changes in the fair value of plan assets for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 17,001,891 13,840,043 Interest income on plan assets 628,240 435,056 Remeasurement of plan assets (312,565) (146,239) Contributions by employer 2,741,417 3,263,765 Benefits paid (498,246) (397,678) Other 1 33,173 6,944 Balance as of December 31 19,593,910 17,001,891 1 Other includes effects of changes in foreign currency exchange rates and business combinations. Expected contributions to post-employment benefit plans to be paid in 2023 as of December 31, 2022 are W 1,940,341 million. (F) Plan assets as of December 31, 2022 and 2021 consist of the following: (In millions of Korean won) December 31, 2022 December 31, 2021 Principal guaranteed fixed income financial instruments and other 18,766,006 16,935,143 Other 827,904 66,748 Total 19,593,910 17,001,891 Plan assets are mostly invested in instruments which have a quoted price in active markets. -64- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (G) The principal actuarial assumptions as of December 31, 2022 and 2021 are as follows: (In percentage) December 31, 2022 December 31, 2021 Discount rate 4.3~6.4 0.2~7.2 Salary growth rate (including the effects of inflation) 2.0~6.4 1.5~10.0 (H) The sensitivity analysis of the defined benefit obligations as of December 31, 2022 and 2021 to changes in the weighted principal assumptions is as follows: (In percentage) December 31, 2022 December 31, 2021 Discount rate 1% p increase 92 91 1% p decrease 109 110 Salary growth rate 1% p increase 109 110 1% p decrease 92 91 (I) The weighted average maturity of the defined benefit obligations is 8.38 years as of December 31, 2022. 15. Provisions Changes in provisions for the year ended December 31, 2022 are as follows: (In millions of Korean won) Warranty (A) Royalty expenses (B) Long-term incentives (C) Other (D, E) Total Balance as of January 1 1,978,294 1,561,809 734,283 3,405,480 7,679,866 Charged to profit or loss 2,186,312 629,713 302,229 759,669 3,877,923 Payment (1,873,519) (712,635) (255,658) (1,070,410) (3,912,222) Other 1 18,639 67,719 2,409 39,091 127,858 Balance as of December 31 2,309,726 1,546,606 783,263 3,133,830 7,773,425 1 Other includes effects of changes in foreign currency exchange rates. (A) The Company accrues warranty reserves for estimated costs of quality assurance, exchanges, repairs, recalls, and future services based on historical experience and terms of warranty programs. (B) The Company recognizes provisions for the estimated royalty expenses that are under negotiation with counterparties. The timing and amount of payment depend on the settlement of the negotiation. (C) The Company has a long-term incentive plan for its executives based on a three-year management performance criteria and recognizes a provision for the estimated incentive cost for the accrued period. (D) The Company records provisions for future expenses expected to be incurred for products that have been discontinued from manufacturing and sales. -65- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (E) The Company makes provisions for the carrying amounts of emission rights held by the Company and the emission in excess of the emission rights for the applicable years. Details of emission rights and liabilities as of December 31, 2022 are as follows: (1) The amount of emission rights allocated free of charge in the current commitment period and the estimated amount of emission as of December 31, 2022 are as follows: (In ten thousand metric tons) December 31, 2022 Allocated emission permits 1 1,754 Estimated volume of emission 1,957 1 As of December 31, 2022, emission permits allocated to the Company for the remaining plan periods are 4,905 ten thousand tons. (2023: 1,645 ten thousand, 2024: 1,630 ten thousand, 2025: 1,630 ten thousand) (2) Changes in the emission rights for the year ended December 31, 2022 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 46,073 44,865 Increase 1,872 1,422 Decrease (28,378) (214) Balance as of December 31 1 19,567 46,073 1 The quantity of emission right is 6,742 ten thousand ton and there is no emission rights provided as provision of collateral as of December 31, 2022. (3) Changes in emissions liabilities for the year ended December 31, 2022 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 45,049 31,876 Charged to profit or loss 16,167 13,374 Submission (28,378) (201) Balance as of December 31 32,838 45,049 16. Commitments and Contingencies (A) Litigation As of December 31, 2022, the Company is involved in various claims, disputes, and investigations conducted by regulatory bodies that arose during the normal course of business with numerous entities. Although the outflow of resources and timing of these matters are uncertain, the Company believes the outcome will not have a material impact on the financial position of the Company. (B) Other commitments (1) As of December 31, 2022, the Company has trade financing agreements, trade notes receivable discounting facilities, and loan facilities with accounts receivable pledged as collateral with 26 financial institutions including Woori Bank, with a combined limit of up to W 21,609,679 million. In addition, the Company has a trade financing agreement (up to W 16,020,930 million) with 23 financial institutions including Shinhan Bank and loan facilities with accounts receivable pledged as collateral and other financial agreements (up to W 1,589,717 million). (2) As of December 31, 2022, unfulfilled agreements relating to the acquisition of property, plant and equipment and intangible assets amount to W 8,553,336 million. -66- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17. Contract Liabilities The Company has recognized contract liabilities related to contracts with customers as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Contract liabilities 1 13,255,682 13,235,108 1 Contract liabilities include advances received, accrued expenses, other current liabilities and others. The revenue recognized during the year ended December 31, 2022 in relation to carried-forward contract liabilities as of January 1, 2022 amounts to W 1,051,027 million. 18. Share Capital As of December 31, 2022, the Company ’s total number of authorized shares is 25,000,000,000 shares (W 100 per share). The Company has issued 5,969,782,550 shares of ordinary shares and 822,886,700 shares of preference shares as of December 31, 2022, excluding the retired shares. As of the December 31, 2022, the number of shares outstanding is the same as the number of shares issued above, and no changes were made to the number of shares outstanding during the years ended December 31, 2022 and 2021. Due to the retirement of shares, the total par value of the shares issued is W 679,267 million (ordinary shares of W 596,978 million and preference shares of W 82,289 million), which does not agree with paid-in capital of W 897,514 million. -67- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 19. Retained Earnings (A) Retained earnings as of December 31, 2022 and 2021 consist of the following: (In millions of Korean won) December 31, 2022 December 31, 2021 Discretionary reserve, etc. 192,294,496 170,814,107 Unappropriated retained earnings 145,651,911 122,250,656 Total 337,946,407 293,064,763 (B) Details of interim and year-end dividends are as follows: (1) Interim dividends (Record date: March 31, June 30 and September 30, 2022 and 2021) (In millions of Korean won and number of shares) 2022 2021 1 st Quarter Number of shares eligible for dividends Ordinary shares 5,969,782,550 5,969,782,550 Preference shares 822,886,700 822,886,700 Dividend rate (based on par value) 361% 361% Dividend amount Ordinary shares 2,155,092 2,155,092 Preference shares 297,062 297,062 Total 2,452,154 2,452,154 2 nd Quarter Number of shares eligible for dividends Ordinary shares 5,969,782,550 5,969,782,550 Preference shares 822,886,700 822,886,700 Dividend rate (based on par value) 361% 361% Dividend amount Ordinary shares 2,155,092 2,155,092 Preference shares 297,062 297,062 Total 2,452,154 2,452,154 3 rd Quarter Number of shares eligible for dividends Ordinary shares 5,969,782,550 5,969,782,550 Preference shares 822,886,700 822,886,700 Dividend rate (based on par value) 361% 361% Dividend amount Ordinary shares 2,155,092 2,155,092 Preference shares 297,062 297,062 Total 2,452,154 2,452,154 (2) Year-end dividends (Record date: December 31, 2022 and 2021) (In millions of Korean won and number of shares) 2022 2021 Number of shares eligible for dividends Ordinary shares 5,969,782,550 5,969,782,550 Preference shares 822,886,700 822,886,700 Dividend rate (based on par value) Ordinary shares 361% 361% Preference shares 362% 362% Dividend amount Ordinary shares 2,155,092 2,155,092 Preference shares 297,884 297,884 Total 2,452,976 2,452,976 -68- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 20. Other Components of Equity Other components of equity as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Gain on valuation of financial assets at fair value through other comprehensive income 2,749,109 4,616,639 Share of other comprehensive income of associates and joint ventures 114,987 166,835 Gain (loss) on overseas business translation 1,039,197 (3,824,733) Remeasurement of net defined benefit liabilities (assets) (2,051,610) (3,173,977) Other 86,645 86,763 Total 1,938,328 (2,128,473) 21. Expenses by Nature Expenses by nature for the years ended December 31, 2022 and 2021 consist of the following: (In millions of Korean won) 2022 2021 Changes in finished goods, work in process, and other (10,355,548) (4,517,560) Raw materials used, merchandise purchased, and other 112,591,917 95,625,437 Wages and salaries 30,078,623 28,207,782 Post-employment benefit 1,440,099 1,360,344 Depreciation 35,952,098 31,285,209 Amortization 3,155,561 2,962,152 Welfare 6,091,626 5,073,002 Utilities 6,142,317 4,928,929 Outsourcing 6,597,467 5,594,602 Advertising 6,112,951 5,376,015 Sales promotion expenses 7,110,649 6,286,159 Other 53,936,970 45,788,872 Total 1 258,854,730 227,970,943 1 Equal to the sum of cost of sales and selling and administrative expenses in the consolidated statements of profit or loss. -69- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 22. Selling and Administrative Expenses Selling and administrative expenses for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Selling and administrative expenses Wages and salaries 7,763,588 7,245,981 Post-employment benefit 330,115 310,823 Commissions and service charges 7,457,896 6,192,568 Depreciation 1,574,757 1,529,507 Amortization 664,346 543,544 Advertising 6,112,951 5,376,015 Sales promotion expenses 7,110,649 6,286,159 Transportation 3,214,301 2,792,690 Service charges 3,671,913 4,039,642 Other 5,993,246 4,840,946 Subtotal 43,893,762 39,157,875 Research and development expenses Total expenses 24,919,198 22,595,434 Capitalized expenses - (193,708) Subtotal 24,919,198 22,401,726 Total 68,812,960 61,559,601 23. Other Non-Operating Income and Expenses Details of other non-operating income and expenses for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Other non-operating income Dividend income 414,601 135,840 Rental income 140,908 132,801 Gain on disposal of property, plant and equipment 159,123 340,400 Other 1,247,439 1,596,654 Total 1,962,071 2,205,695 (In millions of Korean won) 2022 2021 Other non-operating expenses Loss on disposal of property, plant and equipment 61,256 75,586 Donations 305,941 270,927 Other 1,422,979 1,709,458 Total 1,790,176 2,055,971 -70- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 24. Financial Income and Expenses Details of financial income and expenses for the years ended December 31, 2022 and 2021 are as follows: ( In millions of Korean won ) 2022 2021 Financial income Interest income 2,720,479 1,278,278 Interest income from financial assets measured at amortized cost 2,720,213 1,278,051 Interest income from financial assets measured at fair value through profit or loss 266 227 Foreign exchange differences 16,537,855 6,525,676 Gains from derivatives 1,570,661 739,233 Total 20,828,995 8,543,187 ( In millions of Korean won ) 2022 2021 Financial expenses Interest expenses 763,015 431,540 Interest expenses from financial liabilities measured at amortized cost 322,529 213,477 Other financial liabilities 440,486 218,063 Foreign exchange differences 16,809,703 6,486,093 Losses from derivatives 1,454,971 786,921 Total 19,027,689 7,704,554 The Company recognizes foreign exchange gains and losses arising from foreign currency transactions and translation as financial income and expenses. -71- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 25. Income Tax Expense (A) Income tax expense for the years ended December 31, 2022 and 2021 consists of the following: (In millions of Korean won) 2022 2021 Current taxes Current tax on profits for the year 7,391,099 11,135,521 Adjustments recognize in the current year (501,683) (195,237) Subtotal 6,889,416 10,940,284 Deferred taxes Changes in deferred taxes arising from unused tax credits (1,080,068) (332,975) Changes in deferred taxes arising from temporary differences (15,407,692) 2,172,312 Changes in deferred taxes arising from unused tax losses 160,123 507,313 Other 224,618 157,443 Subtotal (16,103,019) 2,504,093 Items charged directly to equity - - Income tax expense (9,213,603) 13,444,377 (B) The tax on the Company’s profit before income tax differs from the theoretical amount that would arise using the weighted-average statutory tax rate applicable to profits of the Company as follows: (In millions of Korean won) 2022 2021 Profit before income tax 46,440,474 53,351,827 Tax calculated at weighted average of applicable tax rates 1 13,652,900 15,760,775 Adjustments : Permanent differences (2,090,031) (464,839) Temporary differences for which no deferred income tax was recognized 769,211 (80,250) Tax credits and exemptions (5,185,576) (4,627,136) Results of interest in subsidiaries, etc. (16,186,745) 2,267,026 Impact of changes in tax rates (376) 8,691 Other (172,986) 580,110 Subtotal (22,866,503) (2,316,398) Income tax expense (9,213,603) 13,444,377 1 The weighted average of statutory tax rates are applied to the respective profits of the Company applicable to each tax authority as of December 31, 2022 and 2021. -72- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (C) The movement in deferred income tax assets and liabilities resulting from the tax effect of temporary differences for the years ended December 31, 2022 and 2021 are as follows: (1) 2022 Temporary differences Deferred income tax assets (liabilities) (In millions of Korean won) Balance as of January 1 Increase (Decrease) Balance as of December 31 Balance as of January 1 Increase (Decrease) Balance as of December 31 Deferred tax arising from temporary differences Revaluation of land (3,406,625) 3,195 (3,403,430) (936,822) 38,317 (898,505) Investments in subsidiaries, associates and joint ventures 1 (126,816,779) (18,391,837) (145,208,616) (20,614,554) 15,654,307 (4,960,247) Accumulated depreciation and other (3,814,598) (3,782,747) (7,597,345) (1,771,793) (794,742) (2,566,535) Accrued income (22,153) 108,861 86,708 6,853 32,827 39,680 Provisions, accrued expenses and other 15,979,455 2,799,841 18,779,296 4,560,874 658,256 5,219,130 Foreign currency translation 62,615 670,489 733,104 12,076 173,824 185,900 Asset impairment losses 1,134,048 (69,523) 1,064,525 258,886 (24,152) 234,734 Other (492,225) (1,356,462) (1,848,687) (638,757) (330,945) (969,702) Subtotal (117,376,262) (20,018,183) (137,394,445) (19,123,237) 15,407,692 (3,715,545) Deferred tax arising from tax losses Unused tax losses 2,015,448 (520,129) 1,495,319 436,481 (160,123) 276,358 Deferred tax arising from tax credits Unused tax credits 1,687,065 1,243,873 2,930,938 1,666,362 1,080,068 2,746,430 Deferred tax recognized in equity Loss (gain) on valuation of financial assets at fair value through other comprehensive income and other (3,575,094) (61,384) (3,636,478) (3,155,310) 3,104,918 (50,392) Remeasurement of net defined benefit liabilities (assets) 4,447,510 (1,627,945) 2,819,565 1,238,713 (505,578) 733,135 Subtotal 872,416 (1,689,329) (816,913) (1,916,597) 2,599,340 682,743 Deferred tax assets 4,261,214 840,104 5,101,318 Deferred tax liabilities (23,198,205) 18,086,873 (5,111,332) Total (18,936,991) 18,926,977 (10,014) 1 Deferred tax assets are not recognized if it is probable that the temporary differences will not reverse in the foreseeable future for investments in subsidiaries, associates and joint ventures. -73- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (2) 2021 Temporary differences Deferred income tax assets (liabilities) (In millions of Korean won) Balance as of January 1 Increase (Decrease) Balance as of December 31 Balance as of January 1 Increase (Decrease) Balance as of December 31 Deferred tax arising from temporary differences Revaluation of land (3,420,886) 14,261 (3,406,625) (940,744) 3,922 (936,822) Investments in subsidiaries, associates and joint ventures 1 (111,924,859) (14,891,920) (126,816,779) (19,172,409) (1,442,145) (20,614,554) Accumulated depreciation and other (2,285,841) (1,528,757) (3,814,598) (992,777) (779,016) (1,771,793) Accrued income (139,406) 117,253 (22,153) (31,486) 38,339 6,853 Provisions, accrued expenses and other 13,121,416 2,858,039 15,979,455 3,764,808 796,066 4,560,874 Foreign currency translation (24,683) 87,298 62,615 (10,077) 22,153 12,076 Asset impairment losses 1,855,765 (721,717) 1,134,048 453,486 (194,600) 258,886 Other 562,628 (1,054,853) (492,225) (21,726) (617,031) (638,757) Subtotal (102,255,866) (15,120,396) (117,376,262) (16,950,925) (2,172,312) (19,123,237) Deferred tax arising from tax losses Unused tax losses 3,618,601 (1,603,153) 2,015,448 943,794 (507,313) 436,481 Deferred tax arising from tax credits Unused tax credits 1,328,527 358,538 1,687,065 1,333,387 332,975 1,666,362 Deferred tax recognized in equity Loss on valuation of financial assets at fair value through other comprehensive income and other (1,660,421) (1,914,673) (3,575,094) (909,176) (2,246,134) (3,155,310) Remeasurement of net defined benefit liabilities (assets) 3,735,320 712,190 4,447,510 1,047,075 191,638 1,238,713 Subtotal 2,074,899 (1,202,483) 872,416 137,899 (2,054,496) (1,916,597) Deferred tax assets 4,275,000 (13,786) 4,261,214 Deferred tax liabilities (18,810,845) (4,387,360) (23,198,205) Total (14,535,845) (4,401,146) (18,936,991) 1 Deferred tax assets are not recognized if it is probable that the temporary differences will not reverse in the foreseeable future for investments in subsidiaries, associates and joint ventures. The Company assessed that the deferred tax asset is realizable as the estimated average annual taxable income in future years exceeds the tax loss carry forwards and tax credit carry forwards to be reversed in each accounting period. Temporary differences in which deferred tax effects were not recognized due to uncertainty regarding the ultimate realizability of such assets as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Unused tax losses 594,798 706,512 Unused tax credits 46,550 47,929 Expected expiry dates of unused tax losses and credits for which no deferred tax asset is recognized are as follows: (In millions of Korean won) 2022 2023 2024 2025 and after Unused tax losses 69,464 1,776 - 523,558 Unused tax credits 7,466 4,157 29,972 4,955 -74- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (D) Details of the period when the deferred tax assets (liabilities) are recovered (settled) as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Deferred tax assets Deferred tax assets to be recovered within 12 months 3,249,661 2,999,046 Deferred tax assets to be recovered after more than 12 months 1,851,657 1,262,168 Subtotal 5,101,318 4,261,214 Deferred tax liabilities Deferred tax liabilities to be settled after more than 12 months (5,111,332) (23,198,205) Total (10,014) (18,936,991) 26. Earnings per Share (A) Basic earnings per share Basic earnings per share for the years ended December 31, 2022 and 2021 are calculated as follows: (1) Ordinary shares (In millions of Korean won, thousands of number of shares) 2022 2021 Profit for the year attributable to owners of the parent company 54,730,018 39,243,791 Profit for the year available for ordinary shares 48,099,117 34,488,944 Weighted-average number of ordinary shares outstanding 5,969,783 5,969,783 Basic earnings per ordinary share (in Korean won) 8,057 5,777 (2) Preference shares (In millions of Korean won, thousands of number of shares) 2022 2021 Profit for the year attributable to owners of the parent company 54,730,018 39,243,791 Profit for the year available for preference shares 6,630,901 4,754,847 Weighted-average number of preference shares outstanding 822,887 822,887 Basic earnings per preference share (in Korean won) 8,058 5,778 (B) Diluted earnings per share The Company does not have dilutive potential ordinary shares and as a result, basic earnings per share and diluted earnings per share are the same for the years ended December 31, 2022 and 2021. -75- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 27. Statements of Cash Flows (A) The Company used the indirect method to present cash flows from operating activities. Adjustments and changes in assets and liabilities arising from operating activities for the years ended December 31, 2022 and 2021 are as follows: - Adjustments (In millions of Korean won) 2022 2021 Adjustments: Income tax expense (9,213,603) 13,444,377 Financial income (5,778,279) (2,485,679) Financial expenses 4,336,254 1,917,705 Post-employment benefits 1,440,099 1,360,344 Depreciation 35,952,098 31,285,209 Amortization 3,155,561 2,962,152 Bad debt expenses 8,784 17,990 Dividend income (414,601) (135,840) Share of profit of associates and joint ventures (1,090,643) (729,614) Gain on disposal of property, plant and equipment (159,123) (340,400) Loss on disposal of property, plant and equipment 61,256 75,586 Loss on valuation of inventories 4,408,767 1,735,741 Others 366,869 (51,938) Total 33,073,439 49,055,633 - Changes in assets and liabilities arising from operating activities (In millions of Korean won) 2022 2021 Changes in assets and liabilities : Decrease (increase) in trade receivables 7,856,258 (7,302,604) Increase in non-trade receivables (1,524,173) (204,348) Decrease (increase) in prepaid expenses 3,506 (204,971) Increase in inventories (13,311,072) (9,712,379) Increase (decrease) in trade payables (5,298,547) 1,027,017 Increase (decrease) in other payables (1,443,409) 1,516,076 Increase (decrease) in advances received 106,977 (24,371) Increase in withholdings 25,392 275,998 Increase in accrued expenses 919,271 3,340,697 Increase (decrease) in provisions (34,298) 1,862,320 Payment of post-employment benefits (707,887) (606,870) Increase in plan assets (2,243,171) (2,866,087) Other (1,347,795) (3,387,362) Total (16,998,948) (16,286,884) -76- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (B) Significant non-cash investing and financing transactions for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Valuation of financial assets at fair value through other comprehensive income (2,636,448) 3,653,253 Valuation of investments in associates and joint ventures (50,510) 211,979 Reclassification of construction in progress to property, plant and equipment 36,047,916 50,451,574 Acquisition of right-of-use assets (New lease contracts established) 2,111,660 1,748,911 Reclassification of current portion of debentures 6,228 477,651 Reclassification of current portion of long-term borrowings 1,082,934 852,317 (C) Changes in liabilities arising from financing activities for the years ended December 31, 2022 and 2021 are as follows: (1) 2022 (In millions of Korean won) As of January 1 Cash flows from financing activities Non-cash transactions New lease contracts Other 1 As of December 31 Short-term borrowings 13,687,793 (8,339,149) - (201,329) 5,147,315 Debentures and long-term borrowings 4,704,356 (1,236,468) 2,111,660 (393,621) 5,185,927 Total 18,392,149 (9,575,617) 2,111,660 (594,950) 10,333,242 1 Other includes amortization and effects of changes in foreign currency exchange rates. (2) 2021 (In millions of Korean won) As of January 1 Cash flows from financing activities Non-cash transactions New lease contracts Other 1 As of December 31 Short-term borrowings 16,553,429 (2,616,943) - (248,693) 13,687,793 Debentures and long-term borrowings 3,663,952 (836,470) 1,748,912 127,962 4,704,356 Total 20,217,381 (3,453,413) 1,748,912 (120,731) 18,392,149 1 Other includes amortization, effects of changes in foreign currency exchange rates. For the years ended December 31, 2022 and 2021, cash outflows from principal repayment (financial activities) amount to W 998,531 million and W 876,437 million, respectively, and cash outflows due to interest expenses (operating activities) in relation to the lease liabilities amount to W 140,111 million and W 106,877 million, respectively. (D) The Company reported cash receipts and payments arising from transactions occurring frequently, of large gross amounts, and with short-term maturities, such as short-term financial instruments, borrowings and other, on a net basis. As of December 31, 2022, mo st of the Company’s cash and cash equivalents consist of bank deposits. -77- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 28. Financial Risk Management The Company’s financial risk management focuses on minimizing the market risk, credit risk, and liquidity risk arising from operating activities. To mitigate these risks, the Company implements and operates a financial risk policy and program that closely monitors and manages such risks. In addition, the Company uses derivatives to hedge certain risk exposure. The finance team mainly carries out the Company ’s financial risk management. After implementing the global financial risk management policies, the finance team periodically measures, evaluates, and hedges the financial risk and also establishes and implements the global financial risk management policy. The Company also manages the foreign exchange risk by monitoring the foreign exchange rate fluctuations at local finance centers across major regions (United States, United Kingdom, Singapore, China, Brazil, and Russia) and acting as an agent of foreign exchange transactions. In addition, the Company manages the liquidity risk by utilizing a globally integrated finance structure. The Company’s financial assets that are under the financial risk management are comprised of cash and cash equivalents, short-term financial instruments, financial assets at amortized cost, trade receivables and others. The Company’s financial liabilities under financial risk management are comprised of trade payables, borrowings, and others. (A) Market risk (1) Foreign exchange risk The Company is exposed to the foreign exchange risk arising from its global operations performed in currencies other than its functional currency. The major currencies that are exposed to the foreign exchange risk are the US dollar, Euro, and Indian Rupee. The Company focuses on minimizing the impact of the foreign exchange fluctuation by maintaining the equal amount of assets and liabilities denominated in each foreign currency, irrespective of the foreign exchange fluctuation considerations. To prevent the exchange position, the Company’s foreign exchange management policy requires the normal business transactions, including imports and exports, as well as the financing transactions such as depositing and borrowing, to be in local currency or for the cash-in currency to be matched up with the cash-out currency. Moreover, the Company periodically evaluates and monitors the foreign exchange risk to efficiently mitigate such risk, and the speculative foreign exchange transactions are strictly prohibited. As of December 31, 2022 and 2021, when the currency rates change by 5%, the impact on profit or loss (before income tax effects) arising from financial assets and liabilities denominated in foreign currencies other than the functional currency are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Increase Decrease Increase Decrease USD 258,655 (258,655) 250,489 (250,489) EUR 92,546 (92,546) 107,519 (107,519) INR 52,096 (52,096) 24,216 (24,216) -78- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (2) Interest rate risk Risk of changes in interest rates for floating interest rate financial instruments is defined as the risk that the fair value of components of the statements of financial position, and future cash flows of interest income (expenses) of a financial instrument, will fluctuate because of the changes in market interest rates. The Company’s position with regard to interest rate risk exposure is mainly driven by its floating interest rate debt obligations and interest-bearing deposits. The Company implemented policies and operates to minimize uncertainty arising from changes in interest rates and financial expenses. As of December 31, 2022 and 2021, changes in profit or loss (before income tax effects) as a result of a 1%p change in interest rates on floating interest rate financial assets and liabilities are presented below: (In millions of Korean won) December 31, 2022 December 31, 2021 Increase Decrease Increase Decrease Financial assets 72,750 (72,750) 71,131 (71,131) Financial liabilities (8,427) 8,427 (18,779) 18,779 Net effect 64,323 (64,323) 52,352 (52,352) (3) Price risk The Company’s investment portfolio consists of direct and indirect investments in equity instruments classified as financial assets at fair value through other comprehensive income and financial assets at fair value through profit or loss, which is in line with the Company’s strategy. As of December 31, 2022 and 2021, price fluctuation of marketable equity securities (listed stocks) by 1% would result in changes in other comprehensive income (before income tax) of W 92,073 million and W 116,087 million, respectively, and changes in profit before tax of W 3,144 million and W 4,784 million, respectively. (B) Credit risk Credit risk arises during the normal course of transactions and investing activities where clients or other parties fail to discharge an obligation. The Company monitors and sets the client’s and the counterparty’s credit limit s on a periodic basis based on the client’s and counterparty’s financial conditions, default histor ies and other important factors. Adequate insurance coverage is maintained for trade receivables related to the trading partners situated in higher risk countries. Credit risk can arise from transactions with financial institutions which include financial instrument transactions such as cash and cash equivalents, deposits, and derivative instruments. To minimize such risk, the Company transacts only with banks which have strong international credit ratings (S&P A and above), and all new transactions with financial institutions with no prior transaction history are approved, managed and monitored by the Company’s finance team and the local finance center. The Company generally enters into a financial agreement with no restrictions, such as debt ratio covenants, provision of collateral and/or repayment of loans/ borrowings. The Company requires separate approvals for contracts with restrictions. As of December 31, 2022 and 2021, the Company estimates that its maximum exposure to credit risk is the carrying amount of its financial assets, net of impairment losses. -79- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (C) Liquidity risk Due to large investments made by the Company, maintaining adequate levels of liquidity risk is critical. The Company strives to achieve this goal by periodically forecasting its capital balance, estimating the required cash levels, and managing income and expenses. The Company manages its liquidity risk by periodically forecasting the projected cash flows. If abnormal signs are identified, the Company works with the local finance center and provides liquidity support by utilizing a globally integrated finance structure, such as Cash Pooling. In addition, the Company maintains a liquidity management process which provides an additional financial support from the local finance center and the Company. The Cash Pooling program allows the sharing of surplus funds among the entities and contributes to minimizing the liquidity risk and strengthening the Company’s competit ive position by reducing capital operation expenses and financial expenses. For the need of large scale of liquidity, the Company secures the credit limit for overseas subsidiaries through payment guarantees. As of December 31, 2022 and 2021, the following table is an undiscounted cash flow analysis for financial liabilities according to their remaining contractual maturity. December 31, 2022 (In millions of Korean won) Less than 3 months 4 - 6 months 7 – 12 months 1 - 5 years More than 5 years Financial liabilities 42,990,570 733,984 1,925,448 5,402,672 1,562,274 December 31, 2021 (In millions of Korean won) Less than 3 months 4 – 6 months 7 - 12 months 1 - 5 years More than 5 years Financial liabilities 55,185,809 1,814,271 1,674,980 5,462,057 944,232 The table above shows the Company’s financial liabilities based on the remaining period at the consolidated statement s of financial position date until the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. The Company ’s derivative financial liabilities of W 119,061 million (December 31, 2021: W 113,590 million) has been included within the less than 3 months bucket. These are the Company’s trading portfolio of derivative instruments, on a net settlement term, of which the contractual maturities are not essential for understanding its cash flows. These contracts are managed on a net fair value basis rather than by the maturity date. Net settled derivatives consist of forwards on currency rates used by the Company to manage the exchange rate profile. Derivatives that are settled on a gross basis by the delivery of underlying items, including derivatives for hedging, will be settled within the next 60 months from the end of the reporting period. These derivatives are not included in the table above. There is no maximum liquidity risk exposure from those other than the above financial liabilities (e.g., payment and performance guarantees) as of December 31, 2022. -80- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (D) Derivative financial instruments The Company applies cash flow hedge accounting to hedge the foreign currency risk of forecasted transaction including hedging the price risk associated with inventory. Details of derivative financial instruments that qualify as cash flow hedges as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Assets Liabilities Assets Liabilities Currency forward exchange contracts Current items 44,567 11,035 34,075 11,090 Non-current items 15,703 15,813 16,790 3,280 Total 60,270 26,848 50,865 14,370 For the years ended December 31, 2022 and 2021, the Company recognizes the gains and losses relating to the effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges in other comprehensive income, which amount to the loss of W 12,893 million (after tax) and gain of W 50,410 million (after tax), respectively, and recognizes the gains and losses relating to the ineffective portion in profit or loss, which amount to the gain of W 611 million (before tax) and loss of W 451 million (before tax), respectively. For the years ended December 31, 2022 and 2021, gains and losses reclassified directly from other comprehensive income to profit or loss amount to the loss of W 4,602 million (after tax) and the gain of W 1,117 million (after tax), respectively and the gains reclassified from other comprehensive income to the carrying amount of inventory amount to the gain of W 55,856 million (after tax) and the gain of W 1,539 million (after tax), respectively. (E) Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to shareholders through the optimisation of the debt and equity balance. The Company’s capital risk management policy has not changed since the prior reporting periods. The Company has maintained an AA- and Aa2 credit ratings from S&P and Moody’s, respectively. The total liabilities to equity ratios as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Total liabilities 93,674,903 121,721,227 Total equity 354,749,604 304,899,931 Debt ratio 26.4% 39.9% -81- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (F) Fair value estimation (1) Carrying amounts and fair values of financial instruments by category as of December 31, 2022 and 2021 are as follows: December 31, 2022 December 31, 2021 (In millions of Korean won) Carrying amount Fair value Carrying amount Fair value Financial assets Cash and cash equivalents 49,680,710 (\*1) 39,031,415 (\*1) Short-term financial instruments 65,102,886 (\*1) 81,708,986 (\*1) Short-term financial assets at amortized cost 414,610 (\*1) 3,369,034 (\*1) Short-term financial assets at fair value through profit or loss 29,080 29,080 40,757 40,757 Trade receivables 35,721,563 (\*1) 40,713,415 (\*1) Financial assets at fair value through other comprehensive income 11,397,012 11,397,012 13,965,839 13,965,839 Financial assets at fair value through profit or loss 1,405,468 1,405,468 1,525,344 1,525,344 Other ( \* 2) 10,340,876 395,667 9,040,189 328,216 Total financial assets 174,092,205 189,394,979 Financial liabilities Trade payables 10,644,686 (\*1) 13,453,351 (\*1) Short-term borrowings 5,147,315 (\*1) 13,687,793 (\*1) Other payables 16,328,237 (\*1) 14,126,970 (\*1) Current portion of long-term liabilities 1,089,162 6,580 1,329,968 554,106 - Current portion of long-term borrowing 1,082,934 (\*1)(\*3) 852,317 (\*1)(\*3) - Current portion of debentures 6,228 6,580 477,651 554,106 Debentures 536,093 521,129 508,232 546,339 Long-term borrowings 3,560,672 (\*1)(\*3) 2,866,156 (\*1)(\*3) Long-term other payables ( \* 2) 2,289,236 (\*1) 2,562,158 (\*1) Other ( \* 2) 12,409,529 361,768 10,781,684 337,394 Total financial liabilities 52,004,930 59,316,312 (\*1) Assets and liabilities whose carrying amount is a reasonable approximation of fair value are excluded from the fair value disclosures. (\*2) Assets measured at the cost of W 9,945,209 million (December 31, 2021: W 8,711,973 million) and liabilities measured at the cost of W 12,047,761 million (December 31, 2021: W 10,444,290 million) are excluded as the carrying amount is a reasonable estimation of fair value. (\*3) Lease liabilities, classified under the current portion of long-term liabilities and long-term borrowings, are excluded from the fair value disclosures in accordance with Korean IFRS 1107. -82- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (2) Fair value hierarchy classifications of the financial instruments that are measured or disclosed at fair value as of December 31, 2022 and 2021 are as follows: December 31, 2022 (In millions of Korean won) Level 1 Level 2 Level 3 Total balance 1) Assets Short-term financial assets at fair value through profit or loss - 29,080 - 29,080 Financial assets at fair value through other comprehensive income 9,207,295 - 2,189,717 11,397,012 Financial assets at fair value through profit or loss 314,449 - 1,091,019 1,405,468 Other - 373,176 22,491 395,667 2) Liabilities Current portion of debentures - 6,580 - 6,580 Debentures - 521,129 - 521,129 Other - 354,364 7,404 361,768 December 31, 2021 (In millions of Korean won) Level 1 Level 2 Level 3 Total balance 1) Assets Short-term financial assets at fair value through profit or loss - 35,620 5,137 40,757 Financial assets at fair value through other comprehensive income 11,608,708 - 2,357,131 13,965,839 Financial assets at fair value through profit or loss 478,401 - 1,046,943 1,525,344 Other - 307,213 21,003 328,216 2) Liabilities Current portion of debentures - 554,106 - 554,106 Debentures - 546,339 - 546,339 Other - 331,956 5,438 337,394 The levels of the fair value hierarchy and its application to financial assets and liabilities are described below. ㆍ Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities ㆍ Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly ㆍ Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) The fair value of financial instruments traded in active markets is based on quoted market prices at the statements of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Company is the current bid price. These instruments are included in Level 1. The instruments included in Level 1 are listed equity investments, most of which are classified as financial assets at fair value through other comprehensive income. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on the entity-specific estimates. If all significant inputs required for a fair value of an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs are not based on observable market data, the instrument is included in Level 3. -83- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The Company performs the fair value measurements required for financial reporting purposes, including Level 3 fair values and discusses valuation processes and results at least once every quarter in line with the Company’s quarterly reporting dates. The Company’s policy is to recognize transfers between levels at the end of the reporting period, if corresponding events or changes in circumstances have occurred. Specific valuation techniques used to value financial instruments include: ㆍ Quoted market prices or dealer quotes for similar instruments ㆍ The fair value of forward foreign exchange contracts is determined using forward exchange rates at the statements of financial position date, with the resulting value discounted back to present value Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments. For trade and other receivables that are classified as current assets, the book value approximates a reasonable estimate of fair value. (3) Valuation technique and the inputs The Company utilizes a present value technique to discount cash flow and others using a proper interest rate for corporate bonds, government and public bonds, and bank debentures that are classified as Level 2 in the fair value hierarchy. The following table presents the valuation technique and the inputs used for major financial instruments classified as Level 3 as of December 31, 2022. (In millions of Korean won and percentage) Classification Fair value Valuation technique Level 3 inputs Input range (Weighted average) Financial assets at fair value through other comprehensive income Samsung Venture Investment 32,073 Discounted cash flow Permanent growth rate -1.0%~1.0%(0.0%) Weighted average cost of capital 15.8%~17.8%(16.8%) MiCo Ceramics Co., Ltd. 29,385 Discounted cash flow Permanent growth rate 0.0%~1.0%(0.5%) Weighted average cost of capital 13.1%~15.1%(14.1%) TCL China Star Optoelectronics Technology Co., Ltd. (CSOT) 1,244,889 Discounted cash flow and others Permanent growth rate -1.0%~1.0%(0.0%) Weighted average cost of capital 10.6%~12.6%(11.6%) China Star Optoelectronics Semiconductor Display Technology Ltd. (CSOSDT) 230,263 Discounted cash flow Permanent growth rate -1.0%~1.0%(0.0%) Weighted average cost of capital 10.6%~12.6%(11.6%) Others Put option on equity instruments 22,491 Binomial model Risk-free discount rate 4.0%~4.5%, 2.5% Price volatility 22.3%~32.3%(27.3%) 25.3%~35.3%(30.3%) -84- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (4) Changes in Level 3 instruments for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Financial assets Balance as of January 1 3,430,214 6,449,139 Acquisitions 207,730 1,075,389 Disposals (207,252) (402,782) Amount recognized in profit or loss 73,782 463,818 Amount recognized in other comprehensive income (loss) (197,830) 1,543,511 Other (3,417) (5,698,861) Balance as of December 31 3,303,227 3,430,214 (In millions of Korean won) 2022 2021 Financial liabilities Balance as of January 1 5,438 9,248 Amount recognized in profit or loss 1,966 (784) Other - (3,026) Balance as of December 31 7,404 5,438 (5) Sensitivity analysis for recurring fair value measurements categorized within Level 3 Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable changes in the fair value of financial instruments which are affected by the unobservable parameters, using a statistical technique. When the fair value is affected by more than two input parameters, the amounts represent the most favorable or unfavorable. The results of the sensitivity analysis for the effect on profit or loss (before tax amount for other comprehensive income or loss) from changes in inputs for major financial instruments which are categorized within Level 3 and subject to sensitivity analysis are as follows: (In millions of Korean won) Favorable changes Unfavorable changes Classification Profit or loss Equity Profit or loss Equity Financial assets at fair value through other comprehensive income 1 - 112,515 - (79,168) Others 2 2,669 - (3,750) - 1 For equity securities, changes in fair value are calculated with the correlation between the growth rate (-1%~1%) and the discount rate, which are significant unobservable inputs. 2 Changes were calculated based on the correlation between the fair value and price volatility (-5%~5%), which is a significant unobservable input. -85- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 29. Segment Information (A) Operating segment information The chief operating decision-maker has been identified as the Management Committee. The Company determines operating segments based on the units reported to the Management Committee. The Management Committee reviews the operating profits of each operating segment in order to assess the performance and to make strategic decisions regarding the allocation of resources to the segments. Sales revenue consists mostly of product sales. The operating segments are product-based and are identified based on the internal organization and revenue streams. As of the reporting date, the operating segments are comprised of DX, DS, SDC, Harman, and others. The segment information for each reporting period is prepared after allocating the intercompany reconciliations to depreciation, amortization of intangible assets and operating profits. Total assets and liabilities of each operating segment are excluded from the disclosure as these have not been provided regularly to the Management Committee. (1) For the year ended December 31, 2022 (In millions of Korean won) DX DS SDC Harman Total 1 Net revenue 182,489,720 98,455,270 34,382,619 13,213,694 302,231,360 Depreciation 2,520,708 28,196,959 4,768,498 331,342 35,952,098 Amortization 1,678,572 809,270 237,182 211,549 3,155,561 Operating profit 12,746,074 23,815,810 5,952,973 880,548 43,376,630 1 Other operating segments are not separately disclosed. Net revenue by major product for the year ended December 31, 2022 are as follows: (In millions of Korean won) Image devices Mobile devices Memory Display panels Total 1 Net revenue 33,279,488 115,425,375 68,534,930 34,382,619 302,231,360 1 Other products are not separately disclosed. -86- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (2) For the year ended December 31, 2021 (In millions of Korean won) DX DS SDC Harman Total 1 Net revenue 166,259,437 95,387,173 31,712,526 10,039,922 279,604,799 Depreciation 2,373,076 22,848,912 5,504,216 311,237 31,285,209 Amortization 1,435,220 939,922 239,821 229,772 2,962,152 Operating profit 17,386,554 29,192,021 4,457,365 599,097 51,633,856 1 Other operating segments are not separately disclosed. Net revenue by major product for the year ended December 31, 2021 are as follows: (In millions of Korean won) Image devices Mobile devices Memory Display panels Total 1 Net revenue 31,497,420 104,680,574 72,602,237 31,712,526 279,604,799 1 Other products are not separately disclosed. (B) Regional information The regional segment information provided to the Management Committee for the reportable segments as of and for the years ended December 31, 2022 and 2021 are as follows: (1) As of and for the year ended December 31, 2022 (In millions of Korean won) Korea America Europe Asia and Africa China Intercompany elimination Consolidated Net revenue 48,654,656 118,974,561 50,283,975 48,692,399 35,625,769 - 302,231,360 Non-current assets 1 144,936,912 14,022,225 5,839,813 9,056,272 15,338,153 (930,233) 188,263,142 1 Financial instruments, deferred tax assets, investments in associates and joint ventures, and others are excluded from non-current assets. (2) As of and for the year ended December 31, 2021 (In millions of Korean won) Korea America Europe Asia and Africa China Intercompany elimination Consolidated Net revenue 43,971,631 97,903,868 50,323,287 41,834,609 45,571,404 - 279,604,799 Non-current assets 1 127,116,179 10,758,956 5,951,905 9,088,409 18,244,469 (995,135) 170,164,783 1 Financial instruments, deferred tax assets, investments in associates and joint ventures, and others are excluded from non-current assets. -87- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30. Related Party Transactions (A) Sale and purchase transactions Sale and purchase transactions with related parties for the years ended December 31, 2022 and 2021 are as follows: 2022 (In millions of Korean won) Name of company 1 Sales Disposal of non-current assets Purchases Purchase of non-current assets Associates and joint ventures Samsung SDS 214,105 - 1,865,588 378,770 Samsung Electro-Mechanics 62,274 767 1,401,483 120 Samsung SDI 82,062 - 803,556 24,926 Cheil Worldwide 31,782 - 964,096 361 Other 1,353,769 - 15,158,969 125,053 Total 1,743,992 767 20,193,692 529,230 Other related parties Samsung C&T 51,447 - 433,100 7,423,404 Other 345,901 188 1,595,487 1,910,813 Total 397,348 188 2,028,587 9,334,217 Other 2 Samsung Engineering 1,666 - 53,793 3,249,254 S-1 13,634 - 510,311 54,069 Other 166,052 - 550,757 746,749 Total 181,352 - 1,114,861 4,050,072 1 Transactions with separate entities that are related parties of the Company. 2 Although these entities are not related parties of the Company in accordance with Korean IFRS 1024 , they belong to the same large enterprise group in accordance with the Monopoly Regulation and Fair Trade Act. 2021 (In millions of Korean won) Name of company 1 Sales Disposal of non-current assets Purchases Purchase of non-current assets Associates and joint ventures Samsung SDS 142,435 - 1,732,273 569,840 Samsung Electro-Mechanics 47,031 - 1,525,854 - Samsung SDI 76,160 269 671,169 36,180 Cheil Worldwide 27,740 - 758,877 16 Other 1,288,094 68 12,361,130 118,099 Total 1,581,460 337 17,049,303 724,135 Other related parties Samsung C&T 79,183 32,705 334,386 4,045,297 Other 352,919 - 1,608,435 633,109 Total 432,102 32,705 1,942,821 4,678,406 Other 2 Samsung Engineering 787 - 48,284 2,404,314 S-1 13,819 - 469,979 35,762 Other 129,439 2,371 496,451 261,614 Total 144,045 2,371 1,014,714 2,701,690 1 Transactions with separate entities that are related parties of the Company. 2 Although these entities are not related parties of the Company in accordance with Korean IFRS 1024 , they belong to the same large enterprise group in accordance with the Monopoly Regulation and Fair Trade Act. -88- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (B) Balances of receivables and payables Balances of receivables and payables arising from the sales and purchases of goods and services as of December 31, 2022 and 2021 are as follows: December 31, 2022 (In millions of Korean won) Name of company 1 Receivables Payables 2 Associates and joint ventures Samsung SDS 49,792 512,022 Samsung Electro-Mechanics 385 133,952 Samsung SDI 121,605 92,452 Cheil Worldwide 223 453,545 Other 371,575 1,236,016 Total 543,580 2,427,987 Other related parties Samsung C&T 217,818 2,783,240 Other 20,830 250,103 Total 238,648 3,033,343 Othe r 3 Samsung Engineering 331 1,251,039 S-1 3,839 73,102 Other 15,647 545,684 Total 19,817 1,869,825 1 Balances due from and to separate entities that are related parties of the Company. 2 Payables and others include lease liabilities. 3 Although these entities are not related parties of the Company in accordance with Korean IFRS 1024 , they belong to the same large enterprise group in accordance with the Monopoly Regulation and Fair Trade Act. December 31, 2021 (In millions of Korean won) Name of company 1 Receivables Payables 2 Associates and joint ventures Samsung SDS 64,521 616,949 Samsung Electro-Mechanics 3,659 176,549 Samsung SDI 130,638 100,835 Cheil Worldwide 206 428,090 Other 397,709 1,361,554 Total 596,733 2,683,977 Other related parties Samsung C&T 220,550 1,739,997 Other 20,306 251,766 Total 240,856 1,991,763 Other 3 Samsung Engineering 338 1,151,536 S-1 2,423 40,558 Other 48,703 185,256 Total 51,464 1,377,350 1 Balances due from and to separate entities that are related parties of the Company. 2 Payables and others include lease liabilities. 3 Although these entities are not related parties of the Company in accordance with Korean IFRS 1024 , they belong to the same large enterprise group in accordance with the Monopoly Regulation and Fair Trade Act. -89- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (C) For the years ended December 31, 2022 and 2021, the Company invested W 907,958 million and W 47,090 million, respectively, in associates and joint ventures. In addition, the Company recovered W 13,087 million and W 19,169 million of investments in associates and joint ventures for the years ended December 31, 2022 and 2021. (D) For the year ended December 31, 2022, the Company declared W 1,663,149 million of dividends (W 3,527,449 million for the year ended December 31, 2021) to the related parties. In addition, for the year ended December 31, 2022, the Company declared W 128,232 million (W 267,738 million for the year ended December 31, 2021) of dividends to the entities that are not related parties of the Company in accordance with Korean IFRS 1024 , but belong to the same conglomerate according to the Monopoly Regulation and Fair Trade Act. As of December 31, 2022 and 2021, there is no dividend payables to the entities that are not in scope of Korean IFRS 1024. (E) For the year ended December 31, 2022, the Company entered into lease agreements with its related parties amounted to W 25,243 million (W 12,602 million for the year ended December 31, 2021), and the lease payments made to the related parties for the years ended December 31, 2022 and 2021 amounted to W 22,607 million and W 31,893 million, respectively. (F) Key management compensation The compensation paid or payable to key management (executive directors) for their services for the years ended December 31, 2022 and 2021 consists of: (In millions of Korean won) 2022 2021 Short-term employee benefits 14,768 20,370 Post-employment benefits 612 886 Other long-term employee benefits 5,434 8,092 -90- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31. Information for Non-Controlling Interests (A) Changes in accumulated non-controlling interests The profit or loss allocated to non-controlling interests and accumulated non-controlling interests of subsidiaries that are material to the Company for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) Samsung Display Co., Ltd. and its subsidiaries 2022 2021 Percentage of non-controlling interests 15.2% 15.2% Balance as of January 1 8,028,555 7,723,784 Profit for the year 853,290 580,164 Dividends (3,947) (3,123) Other (24,186) (272,270) Balance as of December 31 8,853,712 8,028,555 (B) The summarized financial information for each subsidiary with non-controlling interests that are material to the Company before the intercompany eliminations for the years December 31, 2022 and 2021 are as follows: (1) Summarized consolidated statements of financial position (In millions of Korean won) Samsung Display Co., Ltd. and its subsidiaries December 31, 2022 December 31, 2021 Current assets 42,082,412 35,220,985 Non-current assets 23,070,658 24,773,119 Current liabilities 6,294,310 7,539,403 Non-current liabilities 1,220,097 1,359,478 Equity attributable to: 57,638,663 51,095,223 Owners of the parent company 57,552,528 51,012,895 Non-controlling interests 86,135 82,328 (2) Summarized consolidated statements of comprehensive income (In millions of Korean won) Samsung Display Co., Ltd. and its subsidiaries 2022 2021 Sales 34,298,283 31,557,504 Profit for the year 6,614,496 3,511,314 Other comprehensive income (loss) (67,942) 1,256,904 Total comprehensive income attributable to: 6,546,554 4,768,218 Owners of the parent company 6,539,633 4,752,963 Non-controlling interests 6,921 15,255 -91- ![]() Samsung Electronics Co., Ltd. and its subsidiaries NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (3) Summarized consolidated statements of cash flows (In millions of Korean won) Samsung Display Co., Ltd. and its subsidiaries 2022 2021 Cash flows from operating activities 11,395,827 10,943,029 Cash flows from investing activities (8,654,933) (9,927,110) Cash flows from financing activities (1,146,117) (1,284,749) Effect of exchange rate changes on cash and cash equivalents (44,426) 52,154 Increase (decrease) in cash and cash equivalents 1,550,351 (216,676) Cash and cash equivalents at beginning of the year 758,859 975,535 Cash and cash equivalents at end of year 2,309,210 758,859 -92- ![]() Samsung Electronics Business Report-XBRL B. Separate financial statements Auditor’s report of separate financial statements start from the next page. ![]() #### SEPARATE FINANCIAL STATEMENTS OF SAMSUNG ELECTRONICS CO., LTD. #### INDEX TO FINANCIAL STATEMENTS Page Independent Auditor’s Report 1-4 Separate Financial Statements Separate Statements of Financial Position 5-7 Separate Statements of Profit or Loss 8 Separate Statements of Comprehensive Income 9 Separate Statements of Changes in Equity 10-13 Separate Statements of Cash Flows 14-15 Notes to the Separate Financial Statements 16 ![]() #### Independent Auditor’sReport To the Shareholders and the Board of Directors of Samsung Electronics Co., Ltd. Audit Opinion We have audited the accompanying financial statements of Samsung Electronics Co., Ltd. (the “Company”), which comprise the separate statements of financial position as of December 31, 2022 and 2021, and the separate statements of profit or loss, the separate statements of comprehensive income, the separate statements of changes in equity and the separate statements of cash flows, for the years then ended, and notes to the separate financial statements, including a summary of significant accounting policies. In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of the Company as of December 31, 2022 and 2021, and its separate financial performance and its separate cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K - IFRS”). Basis for Audit Opinion We conducted our audits in accordance with the International Standards on Auditing (“ ISAs ”) . Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Separate Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants ( “ IESBA Code ” ) together with the ethical requirements that are relevant to our audit of the financial statements, and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Key Audit Matter The key audit matter is a matter that, in our professional judgment, was of most significance in our audit of the separate financial statements of the current period. This matter was addressed in the context of our audit of the separate financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. (A) Sales deduction related to sales promotion activities Reasons why the matter was determined to be a key audit matter: The Device eXperience (DX) business division performs sales promotion activities, such as price or volume discounts and incentives, based on explicit or implicit agreements with customers, including retail and telecommunication companies. As disclosed in Notes 2 (Significant Accounting Policies) and 3 (Critical Accounting Estimates and Assumptions), these activities are recognized as deductions from revenue at the expected payment amount. As for the appropriateness of the revenue deduction amounts, such amounts may involve significant management estimates and judgments. In addition, we believe that those amounts could be material to the separate financial statements. As such, we determined the sales deduction related to sales promotion activities as a key audit matter. Deloitte Anjin LLC 9F., One IFC, 10, Gukjegeumyung-ro, Youngdeungpo-gu, Seoul 07326, Korea Tel: +82 (2) 6676 1000 Fax: +82 (2) 6674 2114 www.deloitteanjin.co.kr ![]() How the Key Audit Matter was addressed in the audit: Our audit procedures with respect to the Company’s sales promotion activities related to the sales of products included, but were not limited to the following: • Obtained an understanding of management’s accounting policies, processes , and internal controls related to the sales deduction. • Obtained an understanding and evaluated the Company’s information technology system related to the sales deduction. • Assessed the Company’s internal controls relating to the approval process of the sales deduction policy. • Evaluated the Company’s internal controls relating to the approval process of the sales deduction estimation and post-settled amounts. • Evaluated the estimates and accompanying assumptions by inspecting supporting documentation relating to the sales deduction transactions. • Examined the sales deduction amount by comparing the sales deduction estimates to post-settled amounts and inspecting supporting documentation. Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements Management is responsible for the preparation and fair presentation of the accompanying separate financial statements in accordance with K-IFRS, and for such internal control as they determine is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error. In preparing the separate financial statements, management of the Company is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as a pplicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are r esponsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Separate Financial Statements Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whol e are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: -2- ![]() • Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the C ompany’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We are solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. -3- ![]() The engagement partner on the audit resulting in this independent auditor’s report is Byung Moon Yoo. Seoul, Korea February 15, 2023 Notice to Readers This report is effective as of February 15, 2023, the auditor ’s report date. Certain subsequent events or circumstances may have occurred between the auditor ’s report date and the time the auditor ’s report is read. Such events or circumstances could significantly affect the financial statements and may result in modifications to the auditor ’s report. -4- ![]() Samsung Electronics Co., Ltd. SEPARATE STATEMENTS OF FINANCIAL POSITION The above separate statements of financial position should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) December 31, December 31, December 31, December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Assets Current assets Cash and cash equivalents 4, 28 3,921,593 3,918,872 3,037,290 3,035,183 Short-term financial instruments 4, 28 137 15,000,576 106 11,618,010 Trade receivables 4, 5, 7, 28 20,503,223 33,088,247 15,879,833 25,626,988 Non-trade receivables 4, 7, 28 2,925,006 1,832,488 2,265,430 1,419,270 Prepaid expenses 1,047,900 817,689 811,603 633,304 Inventories 8 27,990,007 15,973,053 21,678,380 12,371,198 Other current assets 4, 28 2,674,792 2,922,491 2,071,638 2,263,481 59,062,658 73,553,416 45,744,280 56,967,434 Non-current assets Financial assets at fair value through other comprehensive income 4, 6, 28 1,364,325 1,662,532 1,056,676 1,287,638 Financial assets at fair value through profit or loss 4, 6, 28 283 2,135 219 1,654 Investments in subsidiaries, associates and joint ventures 9 57,397,249 56,225,599 44,454,414 43,546,966 Property, plant and equipment 10 123,266,986 103,667,025 95,470,805 80,290,552 Intangible assets 11 8,561,424 8,657,456 6,630,859 6,705,237 Net defined benefit assets 14 4,410,223 2,324,291 3,415,736 1,800,173 Deferred income tax assets 25 2,142,512 1,211,100 1,659,385 938,002 Other non-current assets 4, 7, 28 3,878,090 3,808,630 3,003,597 2,949,799 201,021,092 177,558,768 155,691,691 137,520,021 Total assets 260,083,750 251,112,184 201,435,971 194,487,455 -5- ![]() Samsung Electronics Co., Ltd. SEPARATE STATEMENTS OF FINANCIAL POSITION The above separate statements of financial position should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) December 31, December 31, December 31, December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Liabilities and Equity Current liabilities Trade payables 4, 28 8,729,315 11,557,441 6,760,892 8,951,287 Short-term borrowings 4, 5, 12, 28 2,381,512 9,204,268 1,844,491 7,128,745 Other payables 4, 28 18,554,543 13,206,753 14,370,573 10,228,686 Advances received 17 320,689 474,731 248,375 367,681 Withholdings 4, 28 523,354 624,585 405,340 483,744 Accrued expenses 4, 17, 28 8,359,296 8,275,410 6,474,310 6,409,340 Current income tax liabilities 2,533,481 5,599,896 1,962,192 4,337,143 Current portion of long-term liabilities 4, 12, 13, 28 135,753 139,328 105,141 107,910 Provisions 15 4,059,491 3,643,853 3,144,093 2,822,180 Other current liabilities 17 488,613 341,038 378,433 264,135 46,086,047 53,067,303 35,693,840 41,100,851 Non-current liabilities Debentures 4, 13, 28 24,912 29,048 19,294 22,498 Long-term borrowings 4, 12, 28 654,979 431,915 507,284 334,520 Long-term other payables 4, 28 2,439,232 2,653,715 1,889,196 2,055,314 Long-term provisions 15 1,423,165 1,659,774 1,102,247 1,285,502 Other non-current liabilities 39,224 76,697 30,378 59,401 4,581,512 4,851,149 3,548,399 3,757,235 Total liabilities 50,667,559 57,918,452 39,242,239 44,858,086 -6- ![]() Samsung Electronics Co., Ltd. SEPARATE STATEMENTS OF FINANCIAL POSITION The above separate statements of financial position should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) December 31, December 31, December 31, December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Equity Preference shares 18 119,467 119,467 92,528 92,528 Ordinary shares 18 778,047 778,047 602,601 602,601 Share premium 4,403,893 4,403,893 3,410,834 3,410,834 Retained earnings 19 204,388,016 188,774,335 158,299,388 146,206,526 Other components of equity 20 (273,232) (882,010) (211,619) (683,120) Total equity 209,416,191 193,193,732 162,193,732 149,629,369 Total liabilities and equity 260,083,750 251,112,184 201,435,971 194,487,455 -7- ![]() Samsung Electronics Co., Ltd. SEPARATE STATEMENTS OF PROFIT OR LOSS The above separate statements of profit or loss should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) For the years ended December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Revenue 29 211,867,483 199,744,705 164,092,267 154,703,124 Cost of sales 21 152,589,393 135,823,433 118,181,134 105,195,827 Gross profit 59,278,090 63,921,272 45,911,133 49,507,297 Selling and administrative expenses 21, 22 33,958,761 31,928,110 26,301,205 24,728,457 Operating profit 29 25,319,329 31,993,162 19,609,928 24,778,840 Other non-operating income 23 4,576,378 7,359,004 3,544,424 5,699,580 Other non-operating expense 23 296,344 745,978 229,520 577,762 Financial income 24 9,734,299 3,796,979 7,539,256 2,940,776 Financial expense 24 9,641,742 3,698,675 7,467,570 2,864,640 Profit before income tax 29,691,920 38,704,492 22,996,518 29,976,794 Income tax expense 25 4,273,142 7,733,538 3,309,566 5,989,658 Profit for the year 25,418,778 30,970,954 19,686,952 23,987,136 Earnings per share 26 (in Korean won, in US dollars) - Basic 3,742 4,559 2.90 3.53 - Diluted 3,742 4,559 2.90 3.53 -8- ![]() Samsung Electronics Co., Ltd. SEPARATE STATEMENTS OF COMPREHENSIVE INCOME The above separate statements of comprehensive income should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) For the years ended December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Profit for the year 25,418,778 30,970,954 19,686,952 23,987,136 Other comprehensive income (loss) Items that will not be reclassified subsequently to profit or loss: Loss on valuation of financial assets at fair value through other comprehensive income, net of tax 6, 20 (208,883) (99,916) (161,781) (77,385) Remeasurement of net defined benefit assets, net of tax 14, 20 822,001 (513,309) 636,643 (397,560) Items that may be reclassified subsequently to profit or loss - - - - Other comprehensive income (loss) for the year, net of tax 613,118 (613,225) 474,862 (474,945) Total comprehensive income for the year 26,031,896 30,357,729 20,161,814 23,512,191 -9- ![]() Samsung Electronics Co., Ltd. SEPARATE STATEMENTS OF CHANGES IN EQUITY The above separate statements of changes in equity should be read in conjunction with the accompanying notes. (In millions of Korean won) 2021 KRW Notes Preference shares Ordinary shares Share premium Retained earnings Other components of equity Total Balance as of January 1, 2021 119,467 778,047 4,403,893 178,284,102 (268,785) 183,316,724 Profit for the year - - - 30,970,954 - 30,970,954 Loss on valuation of financial assets at fair value through other comprehensive income, net of tax 6, 20 - - - - (99,916) (99,916) Remeasurement of net defined benefit assets, net of tax 14, 20 - - - - (513,309) (513,309) Total comprehensive income (loss) for the year - - - 30,970,954 (613,225) 30,357,729 Dividends declared 19 - - - (20,480,721) - (20,480,721) Total transactions with owners - - - (20,480,721) - (20,480,721) Balance as of December 31, 2021 119,467 778,047 4,403,893 188,774,335 (882,010) 193,193,732 -10- ![]() Samsung Electronics Co., Ltd. SEPARATE STATEMENTS OF CHANGES IN EQUITY The above separate statements of changes in equity should be read in conjunction with the accompanying notes. (In thousands of US dollars (Note 2.29)) 2021 USD Notes Preference shares Ordinary shares Share premium Retained earnings Other components of equity Total Balance as of January 1, 2021 92,528 602,601 3,410,834 138,081,796 (208,175) 141,979,584 Profit for the year - - - 23,987,136 - 23,987,136 Loss on valuation of financial assets at fair value through other comprehensive income, net of tax 6, 20 - - - - (77,385) (77,385) Remeasurement of net defined benefit assets, net of tax 14, 20 - - - - (397,560) (397,560) Total comprehensive income (loss) for the year - - - 23,987,136 (474,945) 23,512,191 Dividends declared 19 - - - (15,862,406) - (15,862,406) Total transactions with owners - - - (15,862,406) - (15,862,406) Balance as of December 31, 2021 92,528 602,601 3,410,834 146,206,526 (683,120) 149,629,369 -11- ![]() Samsung Electronics Co., Ltd. SEPARATE STATEMENTS OF CHANGES IN EQUITY The above separate statements of changes in equity should be read in conjunction with the accompanying notes. (In millions of Korean won) 2022 KRW Notes Preference shares Ordinary shares Share premium Retained earnings Other components of equity Total Balance as of January 1, 2022 119,467 778,047 4,403,893 188,774,335 (882,010) 193,193,732 Profit for the year - - - 25,418,778 - 25,418,778 Gain (loss) on valuation of financial assets at fair value through other comprehensive income, net of tax 6, 20 - - - 4,340 (213,223) (208,883) Remeasurement of net defined benefit assets, net of tax 14, 20 - - - - 822,001 822,001 Total comprehensive income for the year - - - 25,423,118 608,778 26,031,896 Dividends declared 19 - - - (9,809,437) - (9,809,437) Total transactions with owners - - - (9,809,437) - (9,809,437) Balance as of December 31, 2022 119,467 778,047 4,403,893 204,388,016 (273,232) 209,416,191 -12- ![]() Samsung Electronics Co., Ltd. SEPARATE STATEMENTS OF CHANGES IN EQUITY The above separate statements of changes in equity should be read in conjunction with the accompanying notes. (In thousands of US dollars (Note 2.29)) 2022 USD Notes Preference shares Ordinary shares Share premium Retained earnings Other components of equity Total Balance as of January 1, 2022 92,528 602,601 3,410,834 146,206,526 (683,120) 149,629,369 Profit for the year - - - 19,686,952 - 19,686,952 Gain (loss) on valuation of financial assets at fair value through other comprehensive income, net of tax 6, 20 - - - 3,361 (165,142) (161,781) Remeasurement of net defined benefit assets, net of tax 14, 20 - - - - 636,643 636,643 Total comprehensive income for the year - - - 19,690,313 471,501 20,161,814 Dividends declared 19 - - - (7,597,451) - (7,597,451) Total transactions with owners - - - (7,597,451) - (7,597,451) Balance as of December 31, 2022 92,528 602,601 3,410,834 158,299,388 (211,619) 162,193,732 -13- ![]() Samsung Electronics Co., Ltd. SEPARATE STATEMENTS OF CASH FLOWS The above separate statements of cash flows should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) For the years ended December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Operating activities Profit for the year 25,418,778 30,970,954 19,686,952 23,987,136 Adjustments 27 31,039,388 25,168,062 24,040,138 19,492,771 Changes in assets and liabilities arising from operating activities 27 (6,868,269) (5,781,655) (5,319,504) (4,477,916) Cash generated from operations 49,589,897 50,357,361 38,407,586 39,001,991 Interest received 339,560 282,918 262,991 219,121 Interest paid (287,488) (125,036) (222,661) (96,841) Dividends received 3,551,435 6,560,011 2,750,602 5,080,756 Income tax paid (8,404,655) (5,825,185) (6,509,441) (4,511,631) Net cash from operating activities 44,788,749 51,250,069 34,689,077 39,693,396 Investing activities Net decrease in short-term financial instruments 15,000,439 13,600,708 11,617,904 10,533,806 Disposal of financial assets at fair value through other comprehensive income 10,976 - 8,501 - Acquisition of financial assets at fair value through other comprehensive income - (234,975) - (181,989) Disposal of financial assets at fair value through profit or loss 1,744 912 1,351 706 Disposal of investments in subsidiaries, associates and joint ventures 165,089 605,607 127,862 469,045 Acquisition of investments in subsidiaries, associates and joint ventures (1,001,723) (138,858) (775,839) (107,546) Disposal of property, plant and equipment 288,684 408,560 223,587 316,431 Acquisition of property, plant and equipment (39,160,176) (36,021,504) (30,329,723) (27,898,808) Disposal of intangible assets 6,242 5,809 4,834 4,499 Acquisition of intangible assets (3,298,378) (2,459,929) (2,554,608) (1,905,225) Cash outflow from other investing activities (136,783) (201,537) (105,939) (156,091) Net cash used in investing activities (28,123,886) (24,435,207) (21,782,070) (18,925,172) -14- ![]() Samsung Electronics Co., Ltd. SEPARATE STATEMENTS OF CASH FLOWS The above separate statements of cash flows should be read in conjunction with the accompanying notes. (In millions of Korean won, in thousands of US dollars (Note 2.29)) For the years ended December 31, Notes 2022 2021 2022 2021 KRW KRW USD USD Financing activities Net decrease in short-term borrowings 27 (6,700,826) (3,288,858) (5,189,818) (2,547,235) Repayment of debentures and long-term borrowings 27 (155,264) (117,963) (120,253) (91,363) Dividends paid (9,808,974) (20,478,233) (7,597,092) (15,860,478) Net cash used in financing activities (16,665,064) (23,885,054) (12,907,163) (18,499,076) Effect of foreign exchange rate changes 2,922 19 2,263 15 Net increase in cash and cash equivalents 2,721 2,929,827 2,107 2,269,163 Cash and cash equivalents Beginning of the year 3,918,872 989,045 3,035,183 766,020 End of the year 3,921,593 3,918,872 3,037,290 3,035,183 -15- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS As of December 31, 2022 and 2021, and For the years ended December 31, 2022 and 2021 1. General Information Samsung Electronics Co., Ltd. (the “Company”) was incorporated under the laws of the Republic of Korea in 1969 and listed its shares on the Korea Stock Exchange in 1975. The Company operates two business divisions: Device eXperience (“DX”) and Device Solutions (“DS”). DX division includes digital TVs, refrigerators, mobile phones, and communication systems. DS division includes semiconductor products such as memory, foundry and system LSI. The Company is domiciled in the Republic of Korea and is located in Suwon, the Republic of Korea. These financial statements have been prepared in accordance with Korean IFRS 1027, Separate Financial Statements . 2. Significant Accounting Policies 2.1 Basis of Presentation The principal accounting policies used to prepare the separate financial statements are set out below. Except for the effect of the amendments to the Korean IFRS and new interpretations set out below, the principal accounting policies used to prepare the separate financial statements as of and for the year ended December 31, 2022 are consistent with those used to prepare the separate financial statements as of and for the year ended December 31, 2021. The Company maintains its accounting records in Korean won and prepares the statutory financial statements in Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (“Korean IFRS”). The a ccompanying separate financial statements have been restructured and translated into English from the Korean language financial statements. Certain information attached to the Korean language financial statements that are not required for a fair presentation of the Company’s financial position, financial performance, or cash flows, are not presented in the accompanying separate financial statements. The separate financial statements of the Company have been prepared in accordance with Korean IFRS. These are the standards, subsequent amendments and related interpretations issued by the International Accounting Standards Board (IASB) that have been adopted by the Republic of Korea. Korean IFRS permits the use of critical accounting estimates in the preparation of the separate financial statements and requires management judgments in applying the accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the separate financial statements, are disclosed in Note 3. -16- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 2.2 Changes in Accounting Policies and Disclosures (A) New and amended standards adopted by the Company The Company applied the following amended and/or enacted standards for the first time for their annual reporting period commencing on January 1, 2022: Amendments to Korean IFRS 1116, Lease The amendments to Korean IFRS 1116 introduced a practical expedient that provided practical relief to lessees in accounting for rent concessions occurring as a direct consequence of COVID-19. The amendments extend the practical expedient to apply to reduction in lease payments originally due on or before 30 June 2022. The application of amendments does not have a sig nificant impact on the Company’s year -end financial statements. Amendments to Korean IFRS 1103, Business Combinations The amendments update Korean IFRS 1103 so that it refers to the amended conceptual framework for financial reporting for assets and liabilities recognized upon business combination, along with adding requirement that for transactions and other events within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 to identify the liabilities it has assumed in a business combination. The amendments also add an explicit statement that an acquirer does not recognize contingent assets acquired in a business combination. The application of amendments does not have a significant impact on the Company’s year-end financial statements. Amendments to Korean IFRS 1016, Property, Plant and Equipment The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss. The application of amendments does not have a significant impact on the Company’s year -end financial statements. Amendments to Korean IFRS 1037, Provisions, Contingent Liabilities and Contingent Assets The amendments specify that the cost of fulfilling a contract comprises the costs that relate directly to the contract, and that costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract and an allocation of other costs that relate directly to fulfilling contracts. The application of the amendments does not have a significant impact on the Company’s year-end financial statements. (B) New and amended standards not yet adopted by the Company The amended accounting standards issued that are not mandatory for the annual reporting period commencing on January 1, 2022 and have not been early adopted by the Company are as follows: Amendments to Korean IFRS 1001, Presentation of Financial Statements The amendments clarify that the classification of liabilities as current or non-current is based on the rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability, and elucidate that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services. The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted. -17- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS Amendments to Korean IFRS 1001, Presentation of Financial Statements The amendments require companies to define and disclose their 'material' accounting policy information instead of its 'significant' accounting policies. The amendments explain how an entity can identify material accounting policy information. The amendments to K-IFRS 1001 are effective for annual periods beginning on or after January 1, 2023, with earlier application permitted and are applied prospectively. Amendments to Korean IFRS 1008, Accounting Policies, Changes in Accounting Estimates and Errors The amendments clarify the definition of a change in accounting estimates, and specify how to distinguish from a change in accounting policies. The amendments are effective for annual periods beginning on or after January, 1 2023 to changes in accounting policies and changes in accounting estimates that occur on or after the beginning of that period, with earlier application permitted. Amendments to Korean IFRS 1012, Income Taxes The amendments add to the initial recognition exemption that the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition. The amendments are effective for annual reporting periods beginning on or after January 1, 2023, with earlier application permitted. 2.3 Subsidiaries, Associates and Joint Ventures The Company, as the ultimate controlling company in accordance with Korean IFRS 1110 Consolidated Financial Statements recognizes investments in subsidiaries, associates and joint ventures under the cost method in accordance with Korean IFRS 1027 Separate Financial Statements on the Company’s separate financial statemen ts. If there is any objective evidence that the investment in the subsidiaries, associates and joint ventures is impaired, the Company recognizes the difference between the recoverable amount and its carrying amount as an impairment loss. 2.4 Foreign Currency Translation (A) Functional and presentation currency Items included in the separate financial statements of each of the Company’s entities are measured using the currency of the primary economic environment in which each entity operates (the “functional currency”). The separate financial statements are presented in Korean won, which is the parent company ’ s functional and presentation currency. (B) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in profit or loss. Exchange differences arising on non-monetary financial assets and liabilities such as equity instruments at fair value through profit or loss and equity instruments at fair value through other comprehensive income are recognized in profit or loss and other comprehensive income, respectively, as part of the fair value gain or loss. -18- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 2.5 Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, and other short-term investment assets with high liquidity that are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. 2.6 Financial Assets (A) Classification From January 1, 2018, the initial application date for Korean IFRS 1109 Financial Instruments, the Company classifies its financial assets in the following measurement categories: - Financial assets measured at fair value (changes in fair value recognized in either other comprehensive income, or profit or loss). - Financial assets measured at amortized cost. The classification depends on the Company’s business model for managing the financial assets and the contractual terms of the cash flows. For financial assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. The Company reclassifies debt investments only when its business model for managing those assets changes. For investments in equity instruments that are not held for trading, classification will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. Changes in fair value of the investments in equity instruments that are not elected to be accounted for as other comprehensive income are recognized in profit or loss. -19- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (B) Measurement At initial recognition, the Company measures a financial asset at its fair value. In the case of financial asset not measured at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset or the issuance of the financial liabilities are added to its fair value. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss. Hybrid (combined) contracts with embedded derivatives are considered in their entirety when determining whether their cash flows solely consist of the payments of principal and interest. a) Debt instruments Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset and the cash flow characteristics of the asset. The Company classifies its debt instruments into one of the following three measurement categories: ① Financial assets measured at amortized cost Assets that are held for collection of contractual cash flows where those cash flows represent solely the payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in profit or loss when the asset is derecognized or impaired. Interest income from these financial assets is included in ‘financial income’ using the effective interest rate method. ② Financial assets measured at fair value through other comprehensive income Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash fl ows represent solely the payments of principal and interest, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment loss (reversal of impairment loss), interest income and foreign exchange gains and losses which are recognized in profit or loss. When the financial assets are derecognized, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss. Interest income from these financial assets is included in ‘financial income’ using the effective interest rate method. Foreign exchange gains and losses are presented in ‘financial income’ or ‘financial expenses’ and impairment losses are presented in ‘other non - operating expenses’. ③ Financial assets measured at fair value through profit or loss Assets that do not meet the criteria for amortized cost or fair value through other comprehensive income are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss and presented in the separate statement of profit or l oss within ‘other non - operating income’ or ‘other non - operating expenses’ in the year in which it arises. -20- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS b) Equity instruments The Company subsequently measures all equity investments at fair value. Where the Company’s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. When the financial asset is derecognized, the cumulative gain or loss on valuation of financial assets at fair value through other comprehensive income recognized in equity is reclassified to retained earnings. Dividend income from such investments continue to be recognized in profit or loss as ‘other non - operating income’ when the right to receive the payments is established. Changes in the fair value of financial assets at fair value through profit or loss are recognized in ‘other non -operating income’ or ‘other non - operating expenses’ in the separate statements of profit or loss as applicable. (C) Impairment The Company assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortized cost and fair value through other comprehensive income. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Company applies the simplified approach, which requires expected lifetime losses to be recognized from initial recognition of the receivables. (D) Recognition and derecognition Regular way purchases and sales of financial assets are recognized or derecognized on a trade date basis. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership. If a transfer does not result in derecognition because the Company has retained substantially all the risks and rewards of ownership of the transferred asset, the Company continues to recognize the transferred asset in its entirety and recognizes a financial liability for the consideration received. The Company classifies the financial liability as ‘borrowings’ in the separate statement of financial position. (E) Offsetting of financial instruments Financial assets and liabilities are offset and the net amount is reported in the statements of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or, realize the assets and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business, even in the event of default, insolvency or bankruptcy of the Company or the counterparty. 2.7 Trade Receivables Trade receivables are amounts due from customers for inventories sold or services performed in the ordinary course of business. If collection is expected within one year or less, they are classified as current assets. If collection is expected beyond one year, they are presented as non-current assets. Trade receivables are recognized initially at transaction price and subsequently measured at amortized cost using the effective interest method, less loss allowance, unless the trade receivables bear significant financial component. -21- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 2.8 Inventories Inventories are stated at lower of the cost and net realizable value. Cost is determined using the average cost method, except for materials in transit. The cost of finished goods and work in progress comprises raw materials, direct labor, other direct costs and related production overheads (based on normal operating capacity). It excludes costs of idle plant and abnormal waste. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. The Company regularly estimates the changes in future customer demand in the products that may cause a significant change in the valuation allowance and recognizes the valuation allowance if there is any case such as excess, obsolescence and decline in market value. Loss on valuation of inventories is recorded as cost of sales. 2.9 Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditures that are directly attributable to the acquisition. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as approp riate, only when it is probable that future economic benefits associated with the cost will flow to the Company and the cost can be measured reliably. The carrying amounts of the replaced parts are derecognized and the repairs and maintenance expenses are recognized in profit or loss in the period they are incurred. Depreciation on tangible assets is calculated using the straight-line method to allocate the difference between their cost and their residual values over their estimated useful lives. Land is not depreciated. Costs that are directly attributable to the acquisition, construction or production of a qualifying asset, including capitalized interest costs, form part of the cost of that asset and are amortized over the estimated useful lives. The Com pany’s policy is that property, plant and equipment should be depreciated over the following estimated useful lives: Estimated useful lives Buildings and structures 15, 30 years Machinery and equipment 5 years Other 5 years The depreciation method, residual values and useful lives of property, plant and equipment are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amoun t is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the separate statements of profit or loss as ‘other non - operating income’ or ‘other no n- operating expenses’. 2.10 Borrowing Costs General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. Other borrowing costs are expensed in the period in which they are incurred. -22- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 2.11 Intangible Assets Goodwill represents the excess of the cost of acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired subsidiaries, associates, joint ventures and businesses at the date of acquisition. Goodwill on an acquisition of businesses is included in intangible assets and goodwill on an acquisition of subsidiaries, associates and joint ventures’ shares is included in the investments in subsidiaries, associates and joint ventures. Intangible assets, except for goodwill, are initially recognized at their historical cost and carried at cost less accumulated amortization and accumulated impairment losses. Internally generated development costs are the aggregate costs recognized after meeting the asset recognition criteria, including technical feasibility, and determined to have future economic benefits. Membership rights and certain trademarks are regarded as intangible assets with an indefinite useful life and not amortized because there is no foreseeable limit to the period over which the assets are expected to be utilized. However, the Company records impairment based on its reasonable estimation of the benefits associated with the membership rights and assessment of impairment indicators, such as a decline in the market value. Intangible assets with definite useful lives such as trademarks, licenses, and other intangible assets, are amortized using the straight-line method over their estimated useful lives. The Company’s policy is that intangible assets should be amortized over the following estimated useful lives: Estimated useful lives Development costs 2 years Trademarks, licenses and other intangible assets 5 - 10 years 2.12 Impairment of Non-Financial Assets Goodwill or intangible assets with indefinite useful lives are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. 2.13 Assets Held-for-Sale (Disposal Group) Non-current assets (or disposal groups) are classified as assets held-for-sale when their carrying amount is to be recovered principally through a sale transaction and the sale is considered highly probable. The assets are measured at the lower of carrying amount and the fair value less costs to sell. Gain or loss on disposal is determined by comparing the proceeds with the carrying amount of relevant assets, and is recognized in the statements of profit or loss as ‘ other non-operating income’ or ‘ other non-operating expenses’. -23- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 2.14 Financial Liabilities (A) Classification and measurement The Company shall classify all financial liabilities as financial liabilities measured subsequently at amortized cost, except for the following: - Financial liabilities at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured at fair value. - Financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies. Such financial liabilities are measured based on the methodology described in Note 2.6 Financial Assets. - Financial guarantee contracts. After the initial recognition, an issuer of such a contract shall subsequently measure it at the higher of: (a) The amount of the loss allowance determined based on the expected credit losses. (b) The amount initially recognized less the cumulative amount of income recognized in accordance with the principles of Korean IFRS 1115 Revenue from Contracts with Customers , when appropriate . - Commitments to provide loan at below-market interest rate. An issuer of such a commitment shall subsequently measure it at the higher of: (a) The amount of the loss allowance determined based on the expected credit losses. (b) The amount initially recognized less the cumulative amount of income recognized in accordance with the principles of Korean IFRS 1115 Revenue from Contracts with Customers , when appropriate . - Contingent consideration recognized by an acquirer in a business combination to which Korean IFRS 1103 Business Combinations applies. Such contingent consideration shall subsequently be measured at fair value with changes recognized in profit or loss. (B) Derecognition Financial liabilities are removed from the separate statements of financial position when it is extinguished; for example, when the obligation specified in the contract is discharged or cancelled or expired or when the terms of an existing financial liability are substantially modified. The difference between the carrying amount of a financial liability extinguished or transferred to another party and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognized in profit or loss. 2.15 Trade Payables Trade payables are amounts due to suppliers for inventories purchased or services received in the ordinary course of business. If payment is expected to be made within 12 months, they are classified as current liabilities. If not, they are presented as non-current liabilities. Non-current trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. 2.16 Borrowings Borrowings are recognized initially at fair value, net of transaction costs, and are subsequently measured at amortized cost. Any difference between cost and the redemption value is recognized in the separate statement of profit or loss over the period of the borrowings using the effective interest method. If the Company has an indefinite right to defer payment for a period longer than 12 months after the end of the reporting date, such liabilities are recorded as non-current liabilities, otherwise, they are recorded as current liabilities. -24- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 2.17 Provisions and Contingent Liabilities A provision is recognized when the Company has present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are not recognized for future operating losses. Provisions are measured at present value of the expenditures expected to be required to settle the obligation using a pre- tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognized as interest expense. The Company discloses a contingent liability if there is a possible obligation from past events in which the existence may only be identified through the occurrence of uncertain future events; or there is a present obligation that the possibility on the outflow of economic resources is uncertain; or the amount of economic resources required to settle the present obligation cannot be reasonably estimated. 2.18 Employee Benefits The Company has a variety of retirement pension plans including a defined benefit plan and a defined contribution plan. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate fund. The Company has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service received in the current and prior periods. For a defined contribution plans, the Company pays contributions to annuity plans that are managed either publicly or privately on a mandatory, contractual or voluntary basis. The Company has no further future payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, a defined benefit plan establishes an amount of pension benefit that an employee will receive upon retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability (asset) recognized in the separate statements of financial position with respect to the defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have the terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses resulting from the changes in actuarial assumptions, and the differences between the previous actuarial assumptions and what has actually occurred, are recognized in other comprehensive income in the period in which they were incurred. When plan amendments, curtailments and settlements occur, past service costs or gain or loss from settlements are immediately recognized in profit or loss. -25- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 2.19 Financial Guarantee Contract Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due. The liability is initially measured at fair value and then subsequently measured at the higher of the following, and is recognized in the separate statements of financial p osition within ‘other financial liabilities’: - the amount determined in accordance with the expected credit loss model and - the amount initially recognized less the cumulative amount of income recognized in accordance with Korean IFRS 1115 Revenue from Contracts with Customers , where appropriate. 2.20 Current and Deferred Tax The tax expense for the year comprises current and deferred tax. Current and deferred tax is recognized in profit or loss, except to the extent that it relates to the items recognized in other comprehensive income or directly in equity. The tax expense is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Deferred tax is recognized for temporary differences arising between the tax bases of assets and liabilities and their carrying amounts as expected tax consequences at the recovery or settlement of the carrying amounts of those assets and liabilities. However, deferred tax assets and liabilities are not recognized if they arise from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither the accounting nor taxable profit. Deferred tax assets are recognized only to the extent that it is probable that a future taxable profit will be available against which the temporary differences can be utilized. A deferred tax liability is recognized for taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, except to the extent that the Company is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. In addition, a deferred tax asset is recognized for deductible temporary differences arising from such investments to the extent that it is probable the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset the current tax assets against the current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities with an intention to settle the balances on a net basis. 2.21 Derivative Instruments The Company initially recognizes rights and obligations from derivative contracts as assets and liabilities at fair value. Gain or loss arising from these contracts are recognized in profit or loss. Qualified hedged amount from cash flow hedge and hedge of a net investment in a foreign operation is deferred in equity. The Company applies cash flow hedge accounting to hedge the price risk associated with inventory purchase and other. The effective portion of changes in fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive income, and the ineffective portion is recognized in financial income or expenses. 2.22 Dividend Dividend is recognized as a liability when approved by the Company’s shareholders. -26- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 2.23 Share Capital Ordinary shares and preference shares with no repayment obligations are classified as equity. When the Company acquires its ordinary shares, the acquisition costs, including direct transaction costs, are deducted from equity until the redemption or reissuance as treasury shares. Consideration received on the reissuance of treasury shares is credited to equity attributable to owners of the parent company. 2.24 Revenue Recognition Revenue mainly comprises the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Company’s activities. Revenue is shown net of value-added tax, returns, sales incentives and discounts and after eliminating intercompany transactions. The Company applied Korean IFRS 1115 Revenue from Contracts with Customers to the annual period beginning January 1, 2018. The Company shall recognize revenue in accordance with Korean IFRS 1115 Revenue from Contracts with Customers by applying the following 5 steps: ① Identify the contracts with the customers, ② Identify the separate performance obligations, ③ Determine the transaction price of the contract, ④ Allocate the transaction price to each of the separate performance obligations, and ⑤ Recognize the revenue as each performance obligation is satisfied. (A) Identification of performance obligations The Company exports various products and merchandise in accordance with Incoterms Group C trading conditions (Incoterms CIF, and other). Since the seller provides the shipping service after the control of the product or merchandise has been transferred to the customer, the shipping service (including insurance) is recognized as a separate performance obligation. (B) Performance obligations satisfied over time The Company delivers products to customers and installs them in accordance with the system air conditioner contracts awarded by the Public Procurement Service. According to Korean IFRS 1115 Revenue from Contracts with Customers , the Company should recognize revenue over time if the Company creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced. The Company recognizes the revenue from system air conditioner installation over time as the customer controls the outcome of the service. (C) Variable consideration The Company estimates amount of variable consideration by using the ‘ expected value method’ or the ‘ most likely amount method’ , depending on which method the Company expects to better predict the amount of consideration. The Company recognizes revenue only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur, and classifies the amount which the Company does not expect to be entitled as contract liabilities. The Company measures refund liability at the amount of consideration received for which the Company does not expect to be entitled. The Company has a right to recover the product from the customer when the customer exercises his right of return and recognizes an asset and a corresponding adjustment to cost of sales. The asset is measured with reference to the former carrying amount of the product less the costs to recover the products. -27- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (D) Allocation of the transaction price The transaction price in an arrangement must be allocated to each separate performance obligation based on the relative standalone selling prices of the goods or services being provided to a customer. The Company determines the standalone selling price for each separate performance obligation by using methods such as the ‘adjusted market assessment approach’. 2.25 Leases A lease is a contract, whereby the lessor conveys to the lessee, the right to control the use of an identified asset for a period of time in exchange for consideration. At inception of a contract, the Company assesses whether the contract is, or contains, a lease. However, the Company did not reassess all contracts at initial application of Korean IFRS 1116 Leases because the Company applied the practical expedient to contracts entered into before January 1, 2019. For a contract that is, or contains, a lease, both lessee and lessor account for each lease component within the contract as a lease separately from the non-lease components of the contract. In lessee accounting, however, the Company does not account for them separately but instead applies the practical expedient to account for each lease component and any associated non-lease components as a single lease component. (A) Lessee accounting The Company recognizes a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments at the commencement date of the lease. The right-of-use asset is initially measured at cost and subsequently measured at cost less accumulated depreciation and accumulated impairment losses, adjusted for the remeasurement of lease liability. The right-of-use asset is depreciated over the shorte r of the asset’s useful life and the lease term from the commencement date of the lease and is classified as ‘property, plant and equipment’ in the separate financial statements. At the commencement date, the lease liability is measured at the present value of the lease payments that are not paid at that date. When measuring the present value, the lease payments are discounted using the interest rate implicit in the lease. If such implicit rate cannot be readily determined, the Company uses the Company’s incremental borrowing rate. The lease liability is subsequently increased by the amount of interest expenses recognized on the lease liability and reduced by the lease payments made. Lease liabilities are remeasured when the future lease payments are changed due to the following:  Changes in an index or rate  Changes in amounts expected to be payable by the lessee under the residual value guarantee  Changes in the assessment of whether a purchase option or an option to renew is reasonably certain to be exercised, or  Changes in the assessment of whether it is reasonably certain that an option to terminate the lease will not be exercised. Lease liabilities are classified as ‘current portion of long - term liabilities’ and/ or ‘long - term borrowings’ in the separat e financial statements. The Company elected the practical expedient for short-term leases (leases that have a lease term of 12 months or less at the commencement date) and leases of low-value assets (leases for which the underlying asset is valued at USD 5,000 or less), and the lease payments are recognized as an expense on a straight-line basis over the lease term. -28- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (B) Lessor accounting The accounting treatment as a lessor did not change significantly from the accounting treatment applied before the initial application of the Korean IFRS 1116 Leases on January 1, 2019. The Company classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to ownership at the inception of the lease. A lease other than a finance lease is classified as an operating lease. Lease income from operating leases is recognized in income on a straight-line basis over the lease term. Initial direct costs incurred by the lessor in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized as an expense over the lease term on the same basis as the lease income. 2.26 Government Grants Government grants are recognized at their fair values when there is reasonable assurance that the grant will be received and the Company will comply with the conditions attached to it. Government grants relating to costs are deferred and recognized in the separate statements of profit or loss over the period necessary to match the costs they are intended to compensate. Government grants relating to assets are recognized in liabilities as deferred income government grants, and are depreciated over the expected lives of the related assets, and credited to the statements of profit or loss. 2.27 Earnings per Share Basic earnings per share is calculated by dividing the net profit for the period available to the ordinary shareholders by the weighted-average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the profit for the year attributable to the Company from the separate statements of profit or loss by the weighted-average number of ordinary shares outstanding and potential dilutive shares. Potential dilutive shares are used in the calculation of dilutive earnings per share only when they have dilutive effects. 2.28 Reportable Segments Reportable segments are disclosed in a manner consistent with the reporting provided to the chief operating decision- maker. The chief operating decision-maker is responsible for making strategic decisions on resource allocation and assessing performance of the reportable segments. The Management Committee, which makes strategic decisions, is regarded as the chief operating decision-maker. 2.29 Convenience Translation into United States Dollar Amounts The Company operates primarily in Korean won and its official accounting records are maintained in Korean won. The US dollar amounts provided in the separate financial statements represent a supplementary information solely for the convenience of the reader. All Korean won amounts are expressed in U.S. dollar at the rate of W 1,291.2 to USD 1, the average exchange rate for the year ended December 31, 2022. Such presentation is not in accordance with generally accepted accounting principles, and should not be construed as a representation that the Korean won amounts shown could be readily converted, realized or settled in US dollar at this or at any other rate. 2.30 Approval of the Separate Financial Statements These separate financial statements were approved by the Board of Directors on January 31, 2023, and may be modified and approved at the Annual General Shareholders’ Meetings. -29- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 3. Critical Accounting Estimates and Assumptions The Company makes estimates and assumptions concerning the future. The estimates and assumptions are continuously assessed, considering historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. In particular, the spread of COVID-19 since 2020 may result in changes to the Company’s assumptions and estimates but its potential financial impact cannot be reasonably estimated as of the reporting date. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. (A) Revenue recognition A refund liability and a right to the returned goods are recognized for the products expected to be returned at the time of sale. Accumulative experience is used to estimate such returns at the time of sale at a portfolio level (through expected value method), and the Company’s revenue is affected by the changes in expected return rate. Sales of goods are recognized based on the considerations specified in the contract, net of sales incentives, when control of the products has transferred. The sales deduction, which affects the Company’s revenue, is reasonably estimated based on the historical experience and past contracts. (B) Provision for warranty The Company recognizes provision for warranty on products sold. The Company accrues provision for warranty based on the best estimate of amounts necessary to settle future and existing claims at the end of each reporting period. The amounts are estimated based on the past experience. (C) Fair value of financial instruments The fair value of financial instruments that are not traded in an active market is determined by using a variety of methods and assumptions that are mainly based on market conditions existing at the end of each reporting period. (D) Impairment of financial assets The loss allowance for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation based on the Company’s p ast history, existing market conditions as well as forward looking estimates at the end of each reporting period. (E) Lease In determining the lease term, the Company considers all facts and circumstances that create an economic incentive to exercise an extension option, or not to exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The lease term is reassessed if an option is actually exercised (or not exercised) or the Company becomes obliged to exercise (or not exercise) it. The Company reassesses whether it is reasonably certain to exercise an extension option (or not to exercise such option), upon the occurrence of either a significant event or a significant change in circumstances that is within the control of the lessee. -30- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (F) Net defined benefit liabilities (assets) The net defined benefit liabilities (assets) depend on a number of factors that are determined on an actuarial basis using a number of assumptions including the discount rate. Any changes in these assumptions will impact the carrying amount of the net defined benefit liability. The Company, in consideration of the interest rates of high-quality corporate bonds, determines the appropriate discount rate at the end of each year. This is the interest rate that is used to determine the present value of the estimated future cash outflows expected to be required to settle the net defined benefit liabilities (assets). The principal actuarial assumptions associated with the net defined benefit liabilities (assets) are based on the current market expectations. (G) Impairment of goodwill and intangible assets that have an indefinite useful life At the end of each reporting period, the Company tests whether goodwill and intangible assets that have an indefinite useful life have become impaired by comparing the carrying amounts of assets or cash-generating units to the recoverable amounts. The recoverable amounts of assets or cash-generating units have been determined based on the value-in-use calculations, and these calculations are based on estimates. (H) Income taxes Income taxes on the Company’s taxable income from operating activities are subject to various tax laws and determinations of each tax authority across various countries throughout the world. There is uncertainty in determining the eventual tax effects on the taxable income from operating activities. The Company has recognized current tax and deferred tax at the end of the fiscal year based on the best estimate of future taxes payable as a result of operating activities. However, the resulting deferred income tax assets and liabilities may not equal the actual future taxes payable and such difference may impact the current tax and deferred income tax assets and liabilities upon the determination of eventual tax effects. Regarding taxes payable in Korea, if a certain portion of taxable income is not used for investments or for increases in wages or dividends, in accordance with the Tax System for Recirculation of Corporate Income , the Company is liable to pay additional income tax calculated based on the Korean tax law. The current and deferred taxes at the end of the fiscal year are based on the best estimate of future taxes payable, which can differ from the actual future taxes payable as a result of changes in investments, wages and dividends; this results in an additional uncertainty in measuring the final tax effects. The Company assesses uncertainty over a tax treatment . When the Company concludes it is not probable that the taxation authority will accept an uncertain tax treatment, the Company will reflect the effect of uncertainty for each uncertain tax treatment by using either of the following methods, depending on which method the Company expects to better predict the resolution of the uncertainty: - The most likely amount: the single most likely amount in a range of possible outcomes. - The expected value: the sum of the probability-weighted amounts in a range of possible outcomes. -31- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 4. Financial Instruments by Category (A) Categorizations of financial assets and liabilities as of December 31, 2022 and December 31, 2021 are as follows: (1) As of December 31, 2022 (In millions of Korean won) Financial assets measured at amortized cost Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through profit or loss Total Financial assets Cash and cash equivalents 3,921,593 - - 3,921,593 Short-term financial instruments 137 - - 137 Trade receivables 20,503,223 - - 20,503,223 Financial assets at fair value through other comprehensive income - 1,364,325 - 1,364,325 Financial assets at fair value through profit or loss - - 283 283 Other 5,470,355 - - 5,470,355 Total 29,895,308 1,364,325 283 31,259,916 (In millions of Korean won) Financial liabilities measured at amortized cost Other financial liabilities 1 Total Financial liabilities Trade payables 8,729,315 - 8,729,315 Short-term borrowings - 2,381,512 2,381,512 Other payables 18,324,604 - 18,324,604 Current portion of long-term liabilities 6,228 129,525 135,753 Debentures 24,912 - 24,912 Long-term borrowings - 654,979 654,979 Long-term other payables 2,083,790 - 2,083,790 Other 3,145,473 - 3,145,473 Total 32,314,322 3,166,016 35,480,338 1 Other financial liabilities include collateralized borrowings and lease liabilities which are not subject to categorizations. -32- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (2) As of December 31, 2021 (In millions of Korean won) Financial assets measured at amortized cost Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through profit or loss Total Financial assets Cash and cash equivalents 3,918,872 - - 3,918,872 Short-term financial instruments 15,000,576 - - 15,000,576 Trade receivables 33,088,247 - - 33,088,247 Financial assets at fair value through other comprehensive income - 1,662,532 - 1,662,532 Financial assets at fair value through profit or loss - - 2,135 2,135 Other 5,076,418 - - 5,076,418 Total 57,084,113 1,662,532 2,135 58,748,780 (In millions of Korean won) Financial liabilities measured at amortized cost Other financial liabilities 1 Total Financial liabilities Trade payables 11,557,441 - 11,557,441 Short-term borrowings - 9,204,268 9,204,268 Other payables 12,948,960 - 12,948,960 Current portion of long-term liabilities 5,810 133,518 139,328 Debentures 29,048 - 29,048 Long-term borrowings - 431,915 431,915 Long-term other payables 2,335,218 - 2,335,218 Others 3,056,156 - 3,056,156 Total 29,932,633 9,769,701 39,702,334 1 Other financial liabilities include collateralized borrowings and lease liabilities which are not subject to categorizations. -33- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (B) Net gains or net losses on each category of financial assets and liabilities for the years ended December 31, 2022 and 2021 are as follows: (1) For the year ended December 31, 2022 (In millions of Korean won) Financial assets measured at amortized cost Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through profit or loss Total Financial assets Gain (loss) on valuation (other comprehensive income) - (208,883) - (208,883) Gain on valuation/disposal (profit or loss) - - 271,057 271,057 Interest income 339,242 - - 339,242 Foreign exchange differences (profit or loss) (668,955) - - (668,955) Dividend income - 3,594 - 3,594 Impairment/reversal (profit or loss) (2,130) - - (2,130) (In millions of Korean won) Financial liabilities measured at amortized cost Other financial liabilities 1 Total Financial liabilities Interest expense (45,883) (244,200) (290,083) Foreign exchange differences (profit or loss) 477,397 132,902 610,299 1 Other financial liabilities include collateralized borrowings, lease liabilities which are not subject to categorizations. -34- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (2) For the year ended December 31, 2021 (In millions of Korean won) Financial assets measured at amortized cost Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through profit or loss Total Financial assets Gain (loss) on valuation (other comprehensive income) - (99,916) - (99,916) Gain on valuation/disposal (profit or loss) - - 14,003 14,003 Interest income 260,396 - - 260,396 Foreign exchange differences (profit or loss) 69,874 - - 69,874 Dividend income - 3,118 593 3,711 Impairment/reversal (profit or loss) (17,144) - - (17,144) (In millions of Korean won) Financial liabilities measured at amortized cost Other financial liabilities 1 Total Financial liabilities Interest expense (49,982) (100,002) (149,984) Foreign exchange differences (profit or loss) 317,176 (21,167) 296,009 1 Other financial liabilities include collateralized borrowings, lease liabilities which are not subject to categorizations. 5. Transfer of Financial Assets Trade receivables of the Company have been discounted through factoring agreements with banks during the years ended December 31, 2022 and 2021. Trade receivables provided as collaterals in such factoring transactions do not meet the requirements for asset derecognition as risks and rewards are not substantially transferred in the event of a debtor default due to the recourse obligation, etc. Financial liabilities recognized in relation to these transactions are included as ‘short - term borrowings’ on the separate statement s of financial position (refer to Note 12). The following table presents a breakdown of discounted trade receivables as of December 31, 2022 and 2021: (In millions of Korean won) December 31, 2022 December 31, 2021 Carrying amount of the discounted trade receivables 2,381,512 9,204,268 Carrying amount of the related borrowings 2,381,512 9,204,268 -35- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 6. Financial Assets at Fair Value (A) Details of financial assets at fair value as of December 31, 2022 and December 31, 2021 are as follows: (1) Financial assets at fair value through other comprehensive income (In millions of Korean won) December 31, 2022 December 31, 2021 Equity instruments 1,364,325 1,662,532 (2) Financial assets at fair value through profit or loss (In millions of Korean won) December 31, 2022 December 31, 2021 Debt instruments 283 2,135 (B) Changes in financial assets at fair value for the years ended December 31, 2022 and 2021 are as follows: (1) Financial assets at fair value through other comprehensive income (In millions of Korean won) 2022 2021 Balance as of January 1 1,662,532 1,539,659 Acquisition - 260,642 Disposal (10,976) - Fair value valuation loss (285,585) (137,815) Other (1,646) 46 Balance as of December 31 1,364,325 1,662,532 (2) Financial assets at fair value through profit or loss (In millions of Korean won) 2022 2021 Balance as of January 1 2,135 3,107 Disposal (1,744) (912) Other (108) (60) Balance as of December 31 283 2,135 -36- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (C) Changes in gain (loss) on valuation of financial assets at fair value through other comprehensive income for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 124,937 262,752 Fair value valuation loss (285,585) (137,815) Reclassification to retained earnings due to disposal (5,987) - Balance as of December 31 (166,635) 124,937 Income tax effects on equity 43,991 (34,358) Total (122,644) 90,579 (D) Details of listed equity securities of financial assets at fair value as of December 31, 2022 and 2021 are as follows: December 31, 2022 December 31, 2021 (In millions of Korean won, number of shares and percentage) Number of shares owned Percentage of ownership 1 (%) Acquisition cost Carrying amount (Market value) Carrying amount (Market value) Samsung Heavy Industries 134,027,281 15.2 932,158 684,879 759,935 Hotel Shilla 2,004,717 5.1 13,957 166,592 156,368 iMarket Korea 647,320 1.9 324 6,538 6,926 Skylife 240,000 0.5 3,344 1,954 2,194 Yongpyong Resort 400,000 0.8 1,869 1,412 1,958 A-Tech Solution 1,592,000 15.9 26,348 12,879 26,188 Wonik Holdings 1,759,171 2.3 15,410 5,972 8,761 Wonik IPS 1,850,936 3.8 16,214 45,811 78,295 Dongjin Semichem 2,467,894 4.8 48,277 73,913 125,863 Soulbrain Holdings 461,741 2.2 30,752 10,989 15,976 Soulbrain 373,368 4.8 24,866 81,357 103,983 S&S Tech 1,716,116 8.0 65,933 45,220 63,153 YIK Corp 9,601,617 11.7 47,336 26,933 59,530 Kctech 1,022,216 4.9 20,720 15,129 24,584 Lotvacuum 1,267,668 7.1 18,990 14,326 21,805 Newpower 2,140,939 4.9 12,739 7,579 13,723 Fine Semitech 1,522,975 7.0 43,009 23,758 38,607 DNF 810,030 7.0 20,964 10,692 18,509 Marvell 173,187 0.0 11,705 8,129 17,962 SoundHound 1,702,957 0.9 13,719 3,820 - Total 1,368,634 1,247,882 1,544,320 1 Ownership represents the Company’s ownership of the total ordinary shares issued by each entity. -37- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 7. Trade and Non-Trade Receivables (A) Trade and non-trade receivables as of December 31, 2022 and 2021 are as follows: December 31, 2022 December 31, 2021 (In millions of Korean won) Trade Non-trade Trade Non-trade Receivables 20,720,707 2,945,898 33,353,467 1,855,136 Less: Loss allowance (56,432) (6,387) (56,610) (4,397) Subtotal 20,664,275 2,939,511 33,296,857 1,850,739 Less: Non-current portion (161,052) (14,505) (208,610) (18,251) Current portion 20,503,223 2,925,006 33,088,247 1,832,488 As of December 31, 2022, trade receivables discounted through factoring agreements were accounted for as collateral borrowings and amount of the trade receivables were W 2,381,512 million (as of December 31, 2021, W 9,204,268 million) (refer to Note 12). (B) Movements in the loss allowance for receivables for the years ended December 31, 2022 and 2021 are as follows: 2022 2021 (In millions of Korean won) Trade Non-trade Trade Non-trade Balance as of January 1 56,610 4,397 37,469 7,014 Bad debt expense (reversal) (178) 1,994 19,235 (1,998) Write-off - (4) (94) (619) Balance as of December 31 56,432 6,387 56,610 4,397 (C) The details of trade and non-trade receivables classified by past due date to measure expected credit losses as of December 31, 2022 and 2021 are as follows: December 31, 2022 December 31, 2021 (In millions of Korean won) Trade Non-trade Trade Non-trade Receivables not past due 19,948,076 2,237,287 32,986,766 1,640,450 Past due 1 : Less than 31 days overdue 581,231 651,489 181,986 31,420 31 days to 90 days overdue 89,722 30,611 26,727 17,586 Over 90 days overdue 101,678 26,511 157,988 165,680 Subtotal 772,631 708,611 366,701 214,686 Total 20,720,707 2,945,898 33,353,467 1,855,136 1 The Company does not consider trade and non-trade receivables that are overdue for less than or equal to 31 days as impaired. (D) The maximum exposure to current credit risk is equivalent to the carrying amount of receivables as of December 31, 2022 . The Company has in place insurance contracts covering the Company’s major receivables. -38- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 8. Inventories Inventories as of December 31, 2022 and 2021 are as follows: December 31, 2022 December 31, 2021 (In millions of Korean won) Gross amount Valuation allowance Carrying amount Gross amount Valuation allowance Carrying amount Finished goods 8,589,879 (956,427) 7,633,452 3,884,713 (366,987) 3,517,726 Work in process 16,738,121 (1,216,059) 15,522,062 9,384,285 (222,291) 9,161,994 Raw materials and supplies 4,891,951 (492,006) 4,399,945 3,211,380 (258,464) 2,952,916 Materials in transit 434,548 - 434,548 340,417 - 340,417 Total 30,654,499 (2,664,492) 27,990,007 16,820,795 (847,742) 15,973,053 The inventories recognized as expense for the year ended December 31, 2022, amount to W 151,436,315 million (2021: W 135,609,737 million). The amount includes loss on valuation of inventories. -39- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 9. Investments in Subsidiaries, Associates and Joint Ventures (A) Changes in investments in subsidiaries, associates and joint ventures for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 56,225,599 56,587,548 Acquisition 1,272,296 138,858 Disposal (164,503) (567,693) Impairment (reversal) 63,857 66,886 Balance as of December 31 57,397,249 56,225,599 (B) Major investments in associates as of December 31, 2022 are as follows: (refer to Note 30 for list of the Company ’ s subsidiaries) Investee Nature of relationship with associate Percentage of ownership (%) 1 Principal business location Fiscal period-end Samsung Electro- Mechanics Co., Ltd. Manufacture and supply electronic components including passive components, circuit boards, and modules 23.7 Korea December Samsung SDS Co., Ltd. Provide IT services including computer programming, system integration and management, and logistical services 22.6 Korea December Samsung Biologics Co., Ltd. New business investment 31.2 Korea December Samsung SDI Co., Ltd. 2 Manufacture and supply electronic components including secondary cell batteries 19.6 Korea December Cheil Worldwide, Inc. Advertising agency 25.2 Korea December 1 Ownership represents the Company’s ownership of the total ordinary shares issued by each entity. 2 The Company’s ownership of ordinary shares outstanding is 20.6%. -40- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS - (C) A summary of the condensed financial information of major subsidiaries and associates as of and for the years ended December 31, 2022 and 2021 is as follows: (1) Major subsidiaries (In millions of Korean won) 2022 Assets Liabilities Sales Profit (loss) for the year Samsung Display Co., Ltd. (SDC) 1 57,302,567 7,282,718 30,779,405 4,365,588 Samsung Electronics America, Inc. (SEA) 1 37,883,156 12,258,315 46,738,920 219,670 Samsung Asia Pte. Ltd. (SAPL) 1 26,894,611 2,678,285 - 8,699,679 Samsung (China) Semiconductor Co., Ltd. (SCS) 17,095,000 2,970,835 9,679,757 638,385 Samsung (CHINA) Investment Co., Ltd. (SCIC) 1 13,830,988 9,764,636 2,865,831 257,878 Samsung Electronics Europe Holding Cooperatief U.A. (SEEH) 1 10,841,515 6,272,800 - 57,997 Samsung India Electronics Private Ltd. (SIEL) 1 6,772,537 3,571,863 16,180,492 508,510 Shanghai Samsung Semiconductor Co., Ltd. (SSS) 1 5,067,891 2,858,382 21,370,622 318,578 Samsung Eletronica da Amazonia Ltda. (SEDA) 4,600,508 1,342,517 7,485,104 (38,490) Thai Samsung Electronics Co., Ltd. (TSE) 1 3,263,473 486,820 4,824,734 168,524 Samsung Electronics (UK) Ltd. (SEUK) 1 2,819,792 1,708,064 5,929,357 243,396 Samsung Electronics Benelux B.V. (SEBN) 1 2,377,730 597,044 2,834,008 25,411 Samsung Electronics Hungarian Private Co. Ltd. (SEH) 2,374,317 452,628 3,935,745 199,742 Samsung Electronics Europe Logistics B.V. (SELS) 2,194,975 2,021,491 15,409,984 20,347 SEMES Co., Ltd. 1 2,065,558 602,323 2,889,238 185,762 1 The above summary of condensed financial information is based on separate financial statements of each subsidiary. (In millions of Korean won) 2021 Assets Liabilities Sales Profit for the year Samsung Display Co., Ltd. (SDC) 1 54,967,156 9,081,737 28,755,975 2,770,060 Samsung Electronics America, Inc. (SEA) 1 42,982,054 19,246,751 42,325,524 823,914 Samsung (CHINA) Investment Co., Ltd. (SCIC) 1 13,599,093 9,685,278 2,615,685 451,062 Samsung (China) Semiconductor Co., Ltd. (SCS) 1 19,049,536 5,168,738 7,341,018 1,708,832 Samsung Electronics Europe Holding Cooperatief U.A. (SEEH) 1 14,651,496 8,998,502 - 24,527 Samsung Asia Private Ltd. (SAPL) 1 14,683,789 58,381 - 4,668,478 Shanghai Samsung Semiconductor Co., Ltd. (SSS) 1 7,765,126 5,799,690 31,326,186 325,397 Samsung Eletronica da Amazonia Ltda. (SEDA) 4,589,505 1,671,097 6,020,523 490,202 Samsung India Electronics Private Ltd. (SIEL) 1 7,765,019 3,236,745 12,222,643 522,672 Thai Samsung Electronics Co., Ltd. (TSE) 1 3,018,358 474,223 4,443,031 142,191 Samsung Electronics (UK) Ltd. (SEUK) 1 2,925,062 1,992,367 5,621,922 241,403 Samsung Electronics GmbH (SEG) 2,289,391 2,228,650 6,385,080 2,158 Samsung Electronics Hungarian Private Co., Ltd. (SEH) 2,504,075 641,004 4,357,137 157,616 Samsung Electronics Benelux B.V. (SEBN) 1 2,612,357 766,034 2,569,603 284,816 Samsung Electronics Europe Logistics B.V. (SELS) 2,305,275 2,144,805 14,700,517 13,943 1 The above summary of condensed financial information is based on separate financial statements of each subsidiary. -41- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (2) Major associates 2022 (In millions of Korean won) Samsung Electro- Mechanics Samsung SDS Samsung Biologics Samsung SDI Cheil Worldwide Current assets 4,888,319 8,005,764 6,457,657 9,651,702 2,193,979 Non-current assets 6,108,852 3,946,660 10,124,394 20,605,823 557,466 Current liabilities 2,525,123 2,493,323 4,181,542 8,006,939 1,335,643 Non-current liabilities 778,563 992,132 3,416,034 5,033,084 194,373 Revenue 9,441,276 17,234,750 3,001,295 20,124,070 4,253,367 Profit from continuing operations 1 993,519 1,099,745 798,056 1,952,149 193,732 Profit or loss from discontinued operation, net of tax 1 - - - - - Other comprehensive income (loss) 1 (9,601) 80,368 6,995 (139,877) (1,122) Total comprehensive income 1 983,918 1,180,113 805,051 1,812,272 192,610 1 Profit (loss) attributable to owners of the parent company. 2021 (In millions of Korean won) Samsung Electro- Mechanics Samsung SDS Samsung Biologics Samsung SDI Cheil Worldwide Current assets 4,598,269 7,575,968 2,823,175 7,444,907 2,018,598 Non-current assets 5,343,105 2,941,464 5,146,835 18,388,286 523,513 Current liabilities 2,234,657 2,370,290 1,107,295 6,461,286 1,224,222 Non-current liabilities 835,592 703,442 1,871,614 4,175,208 190,622 Revenue 9,675,036 13,630,002 1,568,007 13,553,220 3,325,712 Profit from continuing operations 1 1,055,411 611,171 393,589 1,169,801 165,485 Loss from discontinued operation, net of tax 1 (162,966) - - - - Other comprehensive income (loss) 1 151,809 134,163 (1,270) 623,792 32,535 Total comprehensive income 1 1,044,254 745,334 392,319 1,793,593 198,020 1 Profit (loss) attributable to owners of the parent company. -42- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (D) Fair value of marketable investments in associates as of December 31, 2022 and are 2021 as follows: December 31, 2022 December 31, 2021 (In millions of Korean won and number of shares) Number of shares held Market value Carrying amount Market value Carrying amount Samsung Electro-Mechanics 17,693,084 2,308,947 445,244 3,494,384 445,244 Samsung SDS 17,472,110 2,149,070 560,827 2,734,385 560,827 Samsung Biologics 22,217,309 18,240,411 1,595,892 18,815,659 443,193 Samsung SDI 13,462,673 7,956,440 1,242,605 8,818,051 1,242,605 Cheil Worldwide 29,038,075 669,328 491,599 663,520 491,599 -43- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 10. Property, Plant and Equipment (A) Changes in property, plant and equipment for the years ended December 31, 2022 and 2021 are as follows: 2022 (In millions of Korean won) Land Buildings and structures Machinery and equipment Construction in progress Other Total Balance as of January 1 7,780,994 21,841,816 57,135,313 15,307,502 1,601,400 103,667,025 Acquisition cost 7,782,125 33,244,532 175,487,461 15,307,502 4,022,759 235,844,379 Accumulated depreciation and impairment (1,131) (11,402,716) (118,352,148) - (2,421,359) (132,177,354) Acquisitions and capital expenditures 1 154 3,246,081 26,182,600 13,481,591 1,085,750 43,996,176 Depreciation (439) (1,827,588) (21,889,623) - (594,290) (24,311,940) Disposals/scrap (27,720) (20,264) (137,496) - (8,247) (193,727) Other - 6,577 135,746 (20,729) (12,142) 109,452 Balance as of December 31 7,752,989 23,246,622 61,426,540 28,768,364 2,072,471 123,266,986 Acquisition cost 7,754,559 36,449,026 199,823,339 28,768,364 4,886,059 277,681,347 Accumulated depreciation and impairment (1,570) (13,202,404) (138,396,799) - (2,813,588) (154,414,361) 1 The capitalized borrowing costs are ₩ 40,577 million, and interest rate used to calculate the borrowing costs eligible for capitalization is 4.1%. 2021 (In millions of Korean won) Land Buildings and structures Machinery and equipment Construction in progress Other Total Balance as of January 1 7,800,435 19,087,134 43,749,609 13,994,259 1,535,487 86,166,924 Acquisition cost 7,801,259 28,992,675 146,778,918 13,994,259 3,535,985 201,103,096 Accumulated depreciation and impairment (824) (9,905,541) (103,029,309) - (2,000,498) (114,936,172) Acquisitions and capital expenditures 1 5,295 4,385,819 31,501,402 1,339,173 607,076 37,838,765 Depreciation (406) (1,614,006) (18,016,803) - (532,894) (20,164,109) Disposals/scrap (24,319) (5,104) (108,737) - (5,402) (143,562) Other (11) (12,027) 9,842 (25,930) (2,867) (30,993) Balance as of December 31 7,780,994 21,841,816 57,135,313 15,307,502 1,601,400 103,667,025 Acquisition cost 7,782,125 33,244,532 175,487,461 15,307,502 4,022,759 235,844,379 Accumulated depreciation and impairment (1,131) (11,402,716) (118,352,148) - (2,421,359) (132,177,354) 1 The capitalized borrowing costs are ₩ 21,911 million, and interest rate used to calculate the borrowing costs eligible for capitalization is 1.1%. -44- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (B) Changes in the right-of-use assets included in the property, plant and equipment for the years ended December 31, 2022 and 2021 are as follows: 2022 (In millions of Korean won) Land Buildings and structures Machinery and equipment Other Total Balance as of January 1 2,279 510,528 39,038 178,480 730,325 Acquisition 26 261,999 1,380 410,088 673,493 Depreciation (439) (128,754) (23,276) (19,120) (171,589) Cancellation of contract - (1,070) - (737) (1,807) Other - (3) 4,993 601 5,591 Balance as of December 31 1,866 642,700 22,135 569,312 1,236,013 2021 (In millions of Korean won) Land Buildings and structures Machinery and equipment Other Total Balance as of January 1 2,593 144,615 70,429 188,236 405,873 Acquisition 91 446,071 4,674 992 451,828 Depreciation (405) (80,085) (36,065) (9,617) (126,172) Disposals/scrap - (28) - (1,131) (1,159) Other - (45) - - (45) Balance as of December 31 2,279 510,528 39,038 178,480 730,325 (C) Details of depreciation of property, plant and equipment for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Cost of sales 22,486,452 18,479,655 Selling and administrative expenses and other 1,825,488 1,684,454 Total 24,311,940 20,164,109 -45- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 11. Intangible Assets (A) Changes in intangible assets for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 Intellectual property rights Development cost Membership Other Total Balance as of January 1 1,226,241 236,910 195,135 6,999,170 8,657,456 External acquisitions 232,768 - 5,795 2,315,598 2,554,161 Internally generated/ developed - - - - - Amortization (217,808) (151,892) - (2,235,367) (2,605,067) Disposals/scrap (47,915) - (197) - (48,112) Impairment - - (863) - (863) Other - - - 3,849 3,849 Balance as of December 31 1,193,286 85,018 199,870 7,083,250 8,561,424 (In millions of Korean won) 2021 Intellectual property rights Development cost Membership Other Total Balance as of January 1 1,195,319 371,392 194,277 5,241,660 7,002,648 External acquisitions 286,963 - 4,329 3,610,518 3,901,810 Internally generated/ developed - 193,708 - - 193,708 Amortization (218,754) (321,608) - (1,851,408) (2,391,770) Disposals/scrap (42,031) - - (557) (42,588) Impairment - - (3,471) - (3,471) Other 4,744 (6,582) - (1,043) (2,881) Balance as of December 31 1,226,241 236,910 195,135 6,999,170 8,657,456 (B) Details of amortization of intangible assets for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Cost of sales 2,006,928 1,931,598 Selling and administrative expenses and other 598,139 460,172 Total 2,605,067 2,391,770 -46- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 12. Borrowings (A) Details of the carrying amounts of borrowings as of December 31, 2022 and December 31, 2021 are as follows: (In millions of Korean won) Financial institutions Interest rate (%) as of Dec 31, 2022 December 31, 2022 December 31, 2021 Short-term borrowings Collateralized borrowings 1 Woori Bank and other 0.0~16.7 2,381,512 9,204,268 Current portion of long-term borrowings Lease liabilities 2 - 1.6 129,525 133,518 Long-term borrowings Lease liabilities 2 - 1.6 654,979 431,915 1 Collateralized borrowings are secured by trade receivables. 2 Interest expenses arising from the lease liabilities for the years ended December 31, 2022 and 2021 amount to W 10,876 million and W 4,939 million, respectively, which were determined using the weighted average incremental borrowing rate. The right- of-use assets are pledged as collateral to lessors in the event of default. Short-term lease payments and low- valued asset lease payments that are not included in measurement of lease liabilities during the years ended December 31, 2022 and 2021 amount to W 63,103 million and W 56,750 million, respectively. (B) Maturities of lease liabilities outstanding as of December 31, 2022 are as follows: (In millions of Korean won) Lease liabilities Repayment terms 2023 149,150 2024 151,838 2025 146,916 2026 131,801 2027 and thereafter 303,645 Total 883,350 -47- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 13. Debentures (A) Details of the carrying amounts of debentures as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) Issue date Due date Interest rate (%) as of Dec 31, 2022 December 31, 2022 December 31, 2021 US dollar denominated straight bonds 1 Oct 2, 1997 Oct 1, 2027 7.7 31,683 35,565 (USD 25 million) (USD 30 million) Less: Discounts (543) (707) Less: Current Portion (6,228) (5,810) Total 24,912 29,048 1 US dollar denominated straight bonds are repaid annually for twenty years after a ten-year grace period from the date of issuance. Interest is paid semi-annually. (B) Maturities of debentures outstanding as of December 31, 2022 are as follows: (In millions of Korean won) Debentures Repayment terms 2023 6,337 2024 6,337 2025 6,337 2026 6,337 2027 and thereafter 6,335 Total 31,683 -48- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 14. Net Defined Benefit Liabilities (Assets) (A) Details of net defined benefit liabilities (assets) recognized in the statements of financial position as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Present value of funded defined benefit obligations 10,729,126 11,155,187 Present value of unfunded defined benefit obligations 29,546 18,449 Subtotal 10,758,672 11,173,636 Fair value of plan assets (15,168,895) (13,497,927) Total (4,410,223) (2,324,291) (B) The components of defined benefit costs recognized in profit or loss for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Current service cost 1,030,033 907,450 Net interest income (91,902) (40,104) Total 938,131 867,346 (C) The expenses related to the defined benefit plans recognized in the statements of profit or loss for the years ended December 31, 2022 and 2021 are as follows : (In millions of Korean won) 2022 2021 Cost of sales 373,835 341,934 Selling and administrative expenses and other 564,296 525,412 Total 938,131 867,346 (D) Changes in the defined benefit obligations for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 11,173,636 9,754,082 Current service cost 1,030,033 907,450 Interest cost 401,973 296,029 Remeasurement: Actuarial gains or losses arising from changes in demographic assumptions - - Actuarial gains or losses arising from changes in financial assumptions (1,779,803) 150,624 Other 356,672 429,051 Benefits paid (455,787) (374,416) Other 31,948 10,816 Balance as of December 31 10,758,672 11,173,636 -49- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (E) Changes in the fair value of plan assets for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 13,497,927 10,916,538 Interest income on plan assets 493,875 336,133 Remeasurement of plan assets (249,943) (128,336) Contributions by employer 1,757,800 2,640,100 Benefits paid (355,311) (276,733) Other 24,547 10,225 Balance as of December 31 15,168,895 13,497,927 Expected contributions to post-employment benefit plans to be paid in 2023 as of December 31, 2022 are W 1,451,728 million. (F) As of December 31, 2022, plan assets are invested in principal guaranteed fixed income financial instruments and others. (G) The principal actuarial assumptions as of December 31, 2022 and 2021 are as follows: (In percentage) December 31, 2022 December 31, 2021 Discount rate 6.1 3.8 Salary growth rate (including the effects of inflation) 5.8 5.3 (H) The sensitivity analysis of the defined benefit obligations as of December 31, 2022 and 2021 to changes in the weighted principal assumptions is as follows: (In percentage) December 31, 2022 December 31, 2021 Discount rate 1%p increase 92 91 1%p decrease 109 110 Salary growth rate 1%p increase 109 110 1%p decrease 92 91 (I) The weighted average maturity of the defined benefit obligations is 8.1 years as of December 31, 2022. -50- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 15. Provisions Changes in provisions for the year ended December 31, 2022 are as follows: (In millions of Korean won) Warranty (A) Royalty expenses (B) Long-term incentives (C) Other (D, E) Total Balance as of January 1 386,713 1,496,525 558,982 2,861,407 5,303,627 Charged to profit or loss 764,209 590,483 184,480 865,232 2,404,404 Payment (563,257) (608,120) (194,281) (964,082) (2,329,740) Other - 67,718 - 36,647 104,365 Balance as of December 31 587,665 1,546,606 549,181 2,799,204 5,482,656 (A) The Company accrues warranty reserves for estimated costs of quality assurance, exchanges, repairs, recalls, and future services based on historical experience and terms of warranty programs. (B) The Company recognizes provisions for the estimated royalty expenses that are under negotiation with counterparties. The timing and amount of payment depend on the settlement of the negotiation. (C) The Company has a long-term incentive plan for its executives based on a three-year management performance criteria and recognizes a provision for the estimated incentive cost for the accrued period. (D) The Company records provisions for future expenses expected to be incurred for products that have been discontinued from manufacturing and sales. -51- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (E) The Company makes provisions for the carrying amounts of emission rights held by the Company and the emission in excess of the emission rights for the applicable years. Details of emission rights and liabilities as of December 31, 2022 are as follows: (1) The amount of emission rights allocated free of charge in the current commitment period and the estimated amount of emission as of December 31, 2022 are as follows: (In ten thousand metric tons) December 31, 2022 Allocated emission rights 1 1,147 Estimated volume of emission 1,521 1 The quantity of allocated emission right for the remaining planned period is 3,361 ten thousand metric ton (2023: 1,127 ten thousand, 2024: 1,117 ten thousand, 2025: 1,117 ten thousand). (2) Changes in the emission rights for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 46,073 44,865 Acquisition 1,872 1,312 Submission (28,378) (104) Balance as of December 31 1 19,567 46,073 1 The quantity of emission right is 4,589 ten thousand metric ton and no emission rights is provided as collateral as of December 31, 2022 . (3) Changes in the emission liabilities for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Balance as of January 1 45,049 31,777 Charged to the statement of profit or loss 16,154 13,376 Submission (28,378) (104) Balance as of December 31 32,825 45,049 -52- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 16. Commitments and Contingencies (A) Guarantees (1) Debt guarantees provided by the Company for overseas subsidiaries as of December 31, 2022 are as follows: (In millions of Korean won and thousands of US dollars) Debtor Creditor Period Actual indebtedness Guaranteed amount SETK BNP and others Dec 16, 2023 303,386 984,692 SEDAM Citibank and others Dec 16, 2023 197,405 680,540 SETK-P BNP and others Dec 16, 2023 32,506 164,749 SEIL Citibank Dec 16, 2023 12,248 19,770 Other Others - - 8,474,399 Total 545,545 10,324,150 USD 430,476 USD 8,146,572 (2) The ceiling amount of guarantees provided by the Company for the execution of contracts by overseas subsidiaries is W 469,262 million as of December 31, 2022. (3) The Company has not been provided any collateral or guarantees from its related parties as of December 31, 2022. (B) Litigation As of December 31, 2022, the Company is involved in various claims, disputes, and investigations conducted by regulatory bodies that arose during the normal course of business with numerous entities. Although the outflow of resources and timing of these matters are uncertain, the Company believes the outcome will not have a material impact on the financial position of the Company. (C) Joint liabilities related to the divestiture The Company, Samsung Display Co., Ltd. and others are jointly and severally liable to fulfill the debts of Samsung Display Co., Ltd. and others which relate to the periods prior to Samsung Display Co., Ltd.’s separation from the Company. (D) Other commitments (1) As of December 31, 2022, the Company has trade financing agreements, trade notes receivable discounting facilities, and loan facilities with accounts receivable pledged as collateral with 5 financial institutions including Woori Bank, with a combined limit of up to W 10,411,963 million. In addition, the Company has a trade financing agreement (up to USD 8,950 million) with 19 financial institutions including Shinhan Bank, and loan facilities with accounts receivable pledged as collateral related to purchase payments with 4 financial institutions including Industrial Bank of Korea (up to W 415,048 million). (2) As of December 31, 2022, unfulfilled agreements relating to the acquisition of property, plant and equipment and intangible assets amount to W 7,191,569 million. -53- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 17. Contract Liabilities The Company has recognized contract liabilities related to contracts with customers as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Contract liabilities 1 1,133,426 1,104,756 1 Contract liabilities include advances received, accrued expenses, other current liabilities and others. The revenue recognized during the year ended December 31, 2022 in relation to carried-forward balance of contract liabilities as of January 1, 2022 amounts to W 361,591 million. 18. Share Capital As of December 31, 2022 , the Company’s total number of authorized shares is 25,000,000,000 shares (W 100 per share). The Company has issued 5,969,782,550 shares of ordinary shares and 822,886,700 shares of preference shares as of December 31, 2022, excluding the retired shares. As of the December 31, 2022, the number of shares outstanding is the same as the number of shares issued above, and no changes were made to the number of shares outstanding during the years ended December 31, 2022 and 2021. Due to the retirement of shares, the total par value of the shares issued is W 679,267 million (ordinary shares of W 596,978 million and preference shares of W 82,289 million), which does not agree with paid-in capital of W 897,514 million. -54- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 19. Retained Earnings (A) Retained earnings as of December 31, 2022 and 2021 consist of the following: (In millions of Korean won) December 31, 2022 December 31, 2021 Appropriated retained earnings Legal reserves: Earned profit reserves 1 450,789 450,789 Discretionary reserves 185,870,540 164,709,023 Subtotal 186,321,329 165,159,812 Unappropriated retained earnings 18,066,687 23,614,523 Total 204,388,016 188,774,335 1 The Commercial Code of the Republic of Korea requires the Company to appropriate as a legal reserve, an amount equal to a minimum of 10% of annual cash dividends declared, until the reserve equals 50% of its issued capital stock. As of December 31, 2022, since the Company’s profit reserves reached 50% of its capital stock, the Company has no obligation for additional reserves. -55- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (B) Separate statements of appropriation of retained earnings for the years ended December 31, 2022 and 2021 are as follows: The appropriation of retained earnings for the year ended December 31, 2022, is expected to be appropriated at the shareholders’ meeting. The appropriation date for the year ended December 31, 2021 was March 16, 2022. (In millions of Korean won) 2022 2021 Retained earnings before appropriations Unappropriated retained earnings carried over from prior year 30 30 Interim dividends: In 2022 - W 1,083 (dividend rate: 1083%) (7,356,461) (7,356,461) In 2021 - W 1,083 (dividend rate: 1083%) Profit for the year 25,418,778 30,970,954 Disposal of financial assets measured at fair value through profit or loss 4,340 - Retained earnings available for appropriation 18,066,687 23,614,523 Transfers from other reserves - - Appropriations of retained earnings Cash dividends: 2,452,976 2,452,976 In 2022: Ordinary shares - W 361 (dividend rate: 361%) Preference shares - W 362 (dividend rate: 362%) In 2021: Ordinary shares - W 361 (dividend rate: 361%) Preference shares - W 362 (dividend rate: 362%) Reserve for research and human resources development 15,613,681 21,161,517 Total appropriations of retained earnings 18,066,657 23,614,493 Unappropriated retained earnings to be carried forward 30 30 -56- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (C) Details of interim and year-end dividends are as follows: (1) Interim dividends (Record date: March 31, June 30 and September 30, 2022 and 2021) (In millions of Korean won and number of shares) 2022 2021 1 st Quarter Number of shares eligible for dividends Ordinary shares 5,969,782,550 5,969,782,550 Preference shares 822,886,700 822,886,700 Dividend rate (based on par value) 361% 361% Dividend amount Ordinary shares 2,155,092 2,155,092 Preference shares 297,062 297,062 Total 2,452,154 2,452,154 2 nd Quarter Number of shares eligible for dividends Ordinary shares 5,969,782,550 5,969,782,550 Preference shares 822,886,700 822,886,700 Dividend rate (based on par value) 361% 361% Dividend amount Ordinary shares 2,155,092 2,155,092 Preference shares 297,062 297,062 Total 2,452,154 2,452,154 3 rd Quarter Number of shares eligible for dividends Ordinary shares 5,969,782,550 5,969,782,550 Preference shares 822,886,700 822,886,700 Dividend rate (based on par value) 361% 361% Dividend amount Ordinary shares 2,155,092 2,155,092 Preference shares 297,062 297,062 Total 2,452,154 2,452,154 (2) Year-end dividends (Record date: December 31, 2022 and 2021) (In millions of Korean won and number of shares) 2022 2021 Number of shares eligible for dividends Ordinary shares 5,969,782,550 5,969,782,550 Preference shares 822,886,700 822,886,700 Dividend rate (based on par value) Ordinary shares 361% 361% Preference shares 362% 362% Dividend amount Ordinary shares 2,155,092 2,155,092 Preference shares 297,884 297,884 Total 2,452,976 2,452,976 -57- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 20. Other Components of Equity Other components of equity as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Gain (loss) on valuation of financial assets at fair value through other comprehensive income (122,644) 90,579 Remeasurement of net defined benefit assets (1,910,996) (2,732,997) Others 1,760,408 1,760,408 Total (273,232) (882,010) 21. Expenses by Nature Expenses by nature for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Changes in finished goods, work in process, and other (10,475,794) (1,423,122) Raw materials used, merchandise purchased, and other 107,383,581 90,519,249 Wages and salaries 14,861,811 14,870,760 Post-employment benefit 974,711 898,132 Depreciation 24,311,940 20,164,109 Amortization 2,605,067 2,391,770 Welfare 3,220,421 2,630,171 Utilities 3,779,467 2,903,838 Outsourcing 3,623,225 3,106,610 Advertising 1,662,135 1,945,358 Sales promotion expenses 1,385,835 1,066,434 Other 33,215,755 28,678,234 Total 1 186,548,154 167,751,543 1 Equal to sum of cost of sales and selling and administrative expenses in the separate statements of profit or loss. -58- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 22. Selling and Administrative Expenses Selling and administrative expenses for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Selling and administrative expenses Wages and salaries 2,308,767 2,396,978 Post-employment benefit 171,358 163,395 Commissions 2,652,491 2,397,640 Depreciation 412,787 396,881 Amortization 361,653 220,616 Advertising 1,662,135 1,945,358 Sales promotion expenses 1,385,835 1,066,434 Transportation 790,774 907,948 Service charges 935,838 1,675,628 Other 2,333,072 1,911,866 Subtotal 13,014,710 13,082,744 Research and development expenses Total expenses 20,944,051 19,039,074 Capitalized expenses - (193,708) Subtotal 20,944,051 18,845,366 Total 33,958,761 31,928,110 -59- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 23. Other Non-Operating Income and Expenses Details of other non-operating income and expenses for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Other non-operating income Dividend income 3,952,338 6,560,011 Rental income 173,719 164,197 Gain on disposal of property, plant and equipment 115,861 278,849 Other 334,460 355,947 Total 4,576,378 7,359,004 (In millions of Korean won) 2022 2021 Other non-operating expenses Loss on disposal of property, plant and equipment 18,842 13,366 Donations 220,309 195,457 Other 57,193 537,155 Total 296,344 745,978 -60- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 24. Financial Income and Expenses Details of financial income and expenses for the years ended December 31, 2022 and 2021 are as follows: ( In millions of Korean won ) 2022 2021 Financial income Interest income 339,242 260,396 Interest income from financial assets measured at amortized cost 339,242 260,396 Foreign exchange differences 9,124,484 3,497,401 Gain from derivatives 270,573 39,182 Total 9,734,299 3,796,979 ( In millions of Korean won ) 2022 2021 Financial expenses Interest expenses 290,083 149,984 Interest expenses from financial liabilities measured at amortized cost 45,883 49,982 Other financial liabilities 244,200 100,002 Foreign exchange differences 9,351,659 3,485,602 Losses from derivatives - 63,089 Total 9,641,742 3,698,675 The Company recognizes foreign exchange gains and losses arising from foreign currency transactions and translation as financial income and expenses. -61- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 25. Income Tax Expense (A) Income tax expense for the years ended December 31, 2022 and 2021 consists of the following: (In millions of Korean won) 2022 2021 Current taxes Current tax on profits for the year 5,926,928 8,041,604 Adjustments recognized in the current year (449,536) (321,952) Subtotal 5,477,392 7,719,652 Deferred taxes Changes in deferred taxes arising from unused tax credits (1,010,632) (332,351) Changes in deferred taxes arising from temporary differences (193,618) 346,237 Subtotal (1,204,250) 13,886 Items charged directly to equity - - Income tax expense 4,273,142 7,733,538 (B) The tax on the Company’s profit before income tax differs from the theoretical amount that would arise using the tax rate applicable to profits of the Company as follows: (In millions of Korean won) 2022 2021 Profit before income tax 29,691,920 38,704,492 Tax calculated at tax rates applicable to profits 1 8,165,278 10,643,735 Adjustments: Non-taxable income (47,446) (34,706) Disallowed expense 507,992 651,517 Tax credits (4,133,747) (3,420,702) Other (218,935) (106,306) Subtotal (3,892,136) (2,910,197) Income tax expense 4,273,142 7,733,538 1 The statutory tax rate regulated by tax law as of December 31, 2022 and 2021 is applied. -62- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (C) The movement in deferred income tax assets and liabilities resulting from the tax effect of temporary differences for the years ended December 31, 2022 and 2021 are as follows: (1) 2022 Temporary differences Deferred tax assets (liabilities) (In millions of Korean won) Balance as of January 1 Increase (Decrease) Balance as of December 31 Balance as of January 1 Increase (Decrease) Balance as of December 31 Deferred tax arising from temporary differences Revaluation of land (3,406,625) 3,195 (3,403,430) (936,822) 38,317 (898,505) Investments in subsidiaries, associates and joint ventures 1 (3,837,368) - (3,837,368) (853,165) 34,127 (819,038) Accumulated depreciation and other (2,456,302) (3,733,239) (6,189,541) (675,483) (958,555) (1,634,038) Accrued income (54,107) 44,687 (9,420) (14,879) 12,392 (2,487) Provisions, accrued expenses, and other 11,098,305 2,589,469 13,687,774 3,052,034 561,538 3,613,572 Foreign currency translation (5,313) 562,866 557,553 (1,461) 148,655 147,194 Asset impairment losses 1,096,297 (105,290) 991,007 220,916 (36,634) 184,282 Post-employment benefits (6,093,355) 685,667 (5,407,688) (1,675,673) 248,043 (1,427,630) Valuation effects from spin-off 2 10,586,822 - 10,586,822 - - - Other 3,897,591 624,521 4,522,112 478,445 145,735 624,180 Subtotal 10,825,945 671,876 11,497,821 (406,088) 193,618 (212,470) Deferred tax arising from unused tax credits Unused tax credits 672,053 1,153,334 1,825,387 614,893 1,010,632 1,625,525 Deferred tax recognized in equity Loss (gain) on valuation of financial assets at fair value through other comprehensive income and other (124,938) 291,573 166,635 (34,358) 78,349 43,991 Remeasurement of net defined benefit assets 3,769,652 (1,173,189) 2,596,463 1,036,653 (351,187) 685,466 Subtotal 3,644,714 (881,616) 2,763,098 1,002,295 (272,838) 729,457 Total 1,211,100 931,412 2,142,512 1 Deferred tax assets are not recognized if it is probable that the temporary differences will not reverse in the foreseeable future for investments in subsidiaries, associates and joint ventures. 2 Difference in carrying amount for accounting and tax purposes for the shares of Samsung Display Co., Ltd. , the Company’s subsidiary, acquired through spin-off of the LCD division in the past. As of the reporting date, the Company does not have plans to dispose of its investments in Samsung Display Co., Ltd. As it is probable that the temporary differences will not reverse in the foreseeable future, deferred tax assets were not recognized. -63- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (2) 2021 Temporary differences Deferred tax assets (liabilities) (In millions of Korean won) Balance as of January 1 Increase (Decrease) Balance as of December 31 Balance as of January 1 Increase (Decrease) Balance as of December 31 Deferred tax arising from temporary differences Revaluation of land (3,420,886) 14,261 (3,406,625) (940,744) 3,922 (936,822) Investments in subsidiaries, associates and joint ventures 1 (3,994,444) 157,076 (3,837,368) (909,018) 55,853 (853,165) Accumulated depreciation and other (514,103) (1,942,199) (2,456,302) (141,379) (534,104) (675,483) Accrued income (112,810) 58,703 (54,107) (31,023) 16,144 (14,879) Provisions, accrued expenses, and other 9,540,744 1,557,561 11,098,305 2,623,704 428,330 3,052,034 Foreign currency translation (51,955) 46,642 (5,313) (14,288) 12,827 (1,461) Asset impairment losses 1,744,851 (648,554) 1,096,297 399,268 (178,352) 220,916 Post-employment benefits (4,223,358) (1,869,997) (6,093,355) (1,161,424) (514,249) (1,675,673) Valuation effects from spin-off 2 10,586,822 - 10,586,822 - - - Other 1,038,962 2,858,629 3,897,591 115,053 363,392 478,445 Subtotal 10,593,823 232,122 10,825,945 (59,851) (346,237) (406,088) Deferred tax arising from unused tax credits Unused tax credits 282,542 389,511 672,053 282,542 332,351 614,893 Deferred tax recognized in equity Loss on valuation of financial assets at fair value through other comprehensive income and other (262,753) 137,815 (124,938) (72,257) 37,899 (34,358) Remeasurement of net defined benefit assets 3,061,640 708,012 3,769,652 841,951 194,702 1,036,653 Subtotal 2,798,887 845,827 3,644,714 769,694 232,601 1,002,295 Total 992,385 218,715 1,211,100 1 Deferred tax assets are not recognized if it is probable that the temporary differences will not reverse in the foreseeable future for investments in subsidiaries, associates and joint ventures. 2 Difference in carrying amount for accounting and tax purposes for the shares of Samsung Display Co., Ltd., the Company’s subsidiary acquired through a spin-off of the LCD division in the past. As of the reporting date, the Company does not have plans to dispose of its investments in Samsung Display Co., Ltd. As it is probable that the temporary differences will not reverse in the foreseeable future, deferred tax assets were not recognized. (D) Details of the period when the deferred tax assets (liabilities) are recovered (settled) as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Net deferred tax assets (liabilities) to be recovered (settled) within 12 months 2,267,807 2,837,162 Net deferred tax assets (liabilities) to be recovered (settled) after more than 12 months (125,295) (1,626,062) Total 2,142,512 1,211,100 -64- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 26. Earnings per Share (A) Basic earnings per share Basic earnings per share for the years ended December 31, 2022 and 2021 are calculated as follows: (1) Ordinary shares (In millions of Korean won, thousands of number of shares) 2022 2021 Profit for the year 25,418,778 30,970,954 Profit for the year available for ordinary shares 22,338,739 27,218,306 Weighted-average number of ordinary shares outstanding 5,969,783 5,969,783 Basic earnings per ordinary share (in Korean won) 3,742 4,559 (2) Preference shares (In millions of Korean won, thousands of number of shares) 2022 2021 Profit for the year 25,418,778 30,970,954 Profit for the year available for preference shares 3,080,039 3,752,648 Weighted-average number of preference shares outstanding 822,887 822,887 Basic earnings per preference share (in Korean won) 3,743 4,560 (B) Diluted earnings per share The Company does not have dilutive potential ordinary shares and as a result, basic earnings per share and diluted earnings per share are the same for the years ended December 31, 2022 and 2021. -65- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 27. Statements of Cash Flows (A) The Company used the indirect method to present cash flows from operating activities. Adjustments and changes in assets and liabilities arising from operating activities for the years ended December 31, 2022 and 2021 are as follows: - Adjustments (In millions of Korean won) 2022 2021 Adjustments : Income tax expense 4,273,142 7,733,538 Financial income (1,224,148) (514,303) Financial expenses 1,565,955 636,934 Post-employment benefits 974,711 898,132 Depreciation 24,311,940 20,164,109 Amortization 2,605,067 2,391,770 Bad debt expenses (reversal) (178) 19,235 Dividends income (3,952,338) (6,560,011) Gain on disposal of property, plant and equipment (115,861) (278,849) Loss on disposal of property, plant and equipment 18,842 13,366 Loss on valuation of inventories and others 2,529,351 696,536 Others 52,905 (32,395) Total 31,039,388 25,168,062 - Changes in assets and liabilities arising from operating activities (In millions of Korean won) 2022 2021 Changes in assets and liabilities : Decrease (increase) in trade receivables 12,354,628 (8,102,318) Decrease (increase) in non-trade receivables (711,933) 54,306 Decrease (increase) in prepaid expenses 11,033 (198,371) Increase in inventories (14,337,291) (2,732,143) Increase (decrease) in trade payables (2,494,560) 4,935,529 Increase in other payables 1,522,457 1,004,128 Increase (decrease) in advances received (154,042) 50,363 Increase (decrease) in withholdings (101,231) 191,872 Increase in accrued expenses 88,828 920,919 Increase in provisions 74,664 1,570,118 Payment of post-employment benefits (492,366) (405,203) Increase in plan assets (1,402,489) (2,363,367) Other (1,225,967) (707,488) Total (6,868,269) (5,781,655) -66- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (B) Significant non-cash investing and financing transactions for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Valuation of financial assets at fair value through other comprehensive income (285,585) (137,815) Reclassification of construction in progress to property, plant and equipment 30,539,179 36,663,946 Acquisition of right-of-use assets (new lease contracts established) 673,493 451,828 Reclassification of current portion of debentures 6,228 5,810 Reclassification of current portion of long-term borrowings 129,525 133,518 (C) Changes in liabilities arising from financing activities for the years ended December 31, 2022 and 2021 are as follows: (1) 2022 Cash flows from financing activities Non-cash transactions (In millions of Korean won) As of January 1 New lease contracts Other 1 As of December 31 Short-term borrowings 9,204,268 (6,700,826) - (121,930) 2,381,512 Debentures and long-term borrowings 600,291 (155,264) 673,493 (302,876) 815,644 Total 9,804,559 (6,856,090) 673,493 (424,806) 3,197,156 1 Other includes amortization and effects of changes in foreign currency exchange rates. (2) 2021 Cash flows from financing activities Non-cash transactions (In millions of Korean won) As of January 1 New lease contracts Other 1 As of December 31 Short-term borrowings 12,520,367 (3,288,858) - (27,241) 9,204,268 Debentures and long-term borrowings 269,877 (117,963) 451,828 (3,451) 600,291 Total 12,790,244 (3,406,821) 451,828 (30,692) 9,804,559 1 Other includes amortization and effects of changes in foreign currency exchange rates. (D) For the years ended December 31, 2022 and 2021, cash outflows from repayment of the principal (financial activities) were W 149,337 million and W 112,523 million, respectively, while cash outflows due to interest expenses (operating activities) in relation to the lease liabilities amount to W 10,876 million and W 4,939 million, respectively. (E) The Company reported cash receipts and payments arising from transactions occurring frequently, of large gross amounts, and with short-term maturities, such as short-term financial instruments, borrowings and other, on a net basis. As of December 31, 2022 , most of the Company’s cash and cas h equivalents consist of bank deposits. -67- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 28. Financial Risk Management The Company’s financial risk management focuses on minimizing the market risk, credit risk, and liquidity risk arising from operating activities. To mitigate these risks, the Company implements and operates a financial risk policy and program that closely monitors and manages such risks. In addition, the Company uses derivatives to hedge certain risk exposure. The finance team mainly carries out the Company’s financial risk management. After implementing the global financial risk management policies, the finance team periodically measures, evaluates, and hedges the financial risk and also establishes and implements the global financial risk management policy. The Company also manages the foreign exchange risk by monitoring the foreign exchange rate fluctuations at local finance centers across major regions (United States, United Kingdom, Singapore, China, Brazil, and Russia) and acting as an agent of foreign exchange transactions. In addition, the Company manages the liquidity risk by utilizing a globally integrated finance structure. The Company’s financial assets that are under the financial risk management are comprised of cash and cash equivalents, short- term financial instruments, trade receivables and others. The Company’s financial liabilities under financial risk management are comprised of trade payables, borrowings, and others. (A) Market risk (1) Foreign exchange risk The Company is exposed to the foreign exchange risk arising from its global operations performed in currencies other than its functional currency. The major currencies that are exposed to the foreign exchange risk are the US dollar, Euro, and Indian Rupee. The Company focuses on minimizing the impact of the foreign exchange fluctuation by maintaining the equal amount of assets and liabilities denominated in each foreign currency, irrespective of the foreign exchange fluctuation considerations. To prevent the exchange position, the Company’s foreign exchange management policy requires the normal business transactions, including imports and exports, as well as the financing transactions such as depositing and borrowing, to be in local currency or for the cash-in currency to be matched up with the cash-out currency. Moreover, the Company periodically evaluates and monitors the foreign exchange risk to efficiently mitigate such risk, and the speculative foreign exchange transactions are strictly prohibited. As of December 31, 2022 and 2021, when the currency rates change by 5%, the impact on profit or loss (before income tax effects) arising from financial assets and liabilities denominated in foreign currencies other than the functional currency are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Increase Decrease Increase Decrease USD 77,795 (77,795) 119,312 (119,312) EUR (53,114) 53,114 (33,776) 33,776 INR 52,012 (52,012) 25,057 (25,057) -68- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (2) Interest rate risk Risk of changes in interest rates for floating interest rate financial instruments is defined as the risk that the fair value of components of the statements of financial position, and future cash flows of interest income (expenses) of a financial instrument, will fluctuate because of the chan ges in market interest rates. The Company’s position with regard to interest rate risk exposure is mainly driven by its floating interest rate debt obligations and interest-bearing deposits. The Company implemented policies and operates to minimize uncertainty arising from changes in interest rates and financial expenses. (3) Price risk The Company’s investment portfolio consists of direct and indirect investments in equity instruments classified as financial assets at fair value through other comprehensive income, which is in line with the Company’s strategy. As of December 31, 2022 and 2021, price fluctuation of marketable equity securities (listed stocks) by 1% would result in changes in other comprehensive income (before income tax) of W 12,479 million and W 15,443 million, respectively. (B) Credit risk Credit risk arises during the normal course of transactions and investing activities where clients or other parties fail to discharge an obligation. The Company monitors and sets the client’s and the count erparty’s credit limit s on a periodic basis based on the client’s and counterparty’s financial conditions, default histor ies and other important factors. Adequate insurance coverage is maintained for trade receivables related to the trading partners situated in higher risk countries. Credit risk can arise from transactions with financial institutions which include financial instrument transactions such as cash and cash equivalents, deposits, and derivative instruments. To minimize such risk, the Company transacts only with banks which have strong international credit ratings (S&P A and above), and all new transactions with financial institutions with no prior transaction history are approved, managed and monitored by the Company’s finance team and the local finance center. The Company generally enters into a financial agreement with no restrictions, such as debt ratio covenants, provision of collateral and/or repayment of loans/ borrowings. The Company requires separate approvals for contracts with restrictions. As of December 31, 2022 and 2021, the Company estimates that its maximum exposure to credit risk is the carrying amount of its financial assets, net of impairment losses. (C) Liquidity risk Due to large investments made by the Company, maintaining adequate levels of liquidity risk is critical. The Company strives to achieve this goal by periodically forecasting its capital balance, estimating the required cash levels, and managing income and expenses. The Company manages its liquidity risk by periodically forecasting the projected cash flows. If abnormal signs are identified, the Company works with the local finance center and provides liquidity support by utilizing a globally integrated finance structure, such as Cash Pooling. In addition, the Company maintains a liquidity management process which provides an additional financial support from the local finance center and the Company. The Cash Pooling program allows the sharing of surplus funds among the entities and contributes to minimizing the liquidity risk and strengthening the Company’s competitive position by reducing capital operation expenses and financial expenses. For the need of large scale of liquidity, the Company secures the credit limit for overseas subsidiaries through payment guarantees. -69- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS As of December 31, 2022 and 2021, the following table is an undiscounted cash flow analysis for financial liabilities according to their remaining contractual maturity. December 31, 2022 (In millions of Korean won) Less than 3 months 4 – 6 months 7 – 12 months 1 - 5 years More than 5 years Financial liabilities 31,354,944 316,725 1,096,183 2,431,415 472,135 December 31, 2021 (In millions of Korean won) Less than 3 months 4 – 6 months 7 – 12 months 1 - 5 years More than 5 years Financial liabilities 35,764,225 435,581 728,627 2,798,560 87,798 The table above shows the Company’s financial liabilities based on the remaining period at the separate statement s of financial position date until the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. The maximum liquidity risk exposure from those other than the above financial liabilities (e.g., payment guarantees for affiliated companies, performance bonds, and other) as of December 31, 2022 and 2021 are W 10,793,412 million and W 10,211,619 million, respectively. (D) Capital risk management The purpose of capital management is to maintain a sound capital structure. The Company monitors capital on the basis of credit ratings and debt ratio. Debt ratio is calculated by dividing the total liabilities by total equity in the financial statements. The Company has maintained an AA- and Aa2 credit ratings from S&P and Moody’s, respectively. The debt ratio as of December 31, 2022 and 2021 are as follows: (In millions of Korean won) December 31, 2022 December 31, 2021 Total liabilities 50,667,559 57,918,452 Total equity 209,416,191 193,193,732 Debt ratio 24.2% 30.0% -70- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (E) Fair values estimation (1) Carrying amounts and fair value of financial instruments by category as of December 31, 2022 and 2021 are as follows: December 31, 2022 December 31, 2021 (In millions of Korean won) Carrying amount Fair value Carrying amount Fair value Financial assets Cash and cash equivalents 3,921,593 (\*1) 3,918,872 (\*1) Short-term financial instruments 137 (\*1) 15,000,576 (\*1) Trade receivables 20,503,223 (\*1) 33,088,247 (\*1) Financial assets at fair value through other comprehensive income 1,364,325 1,364,325 1,662,532 1,662,532 Financial assets at fair value through profit or loss 283 283 2,135 2,135 Other 5,470,355 (\*1) 5,076,418 (\*1) Total financial assets 31,259,916 58,748,780 Financial liabilities Trade payables 8,729,315 (\*1) 11,557,441 (\*1) Short-term borrowings 2,381,512 (\*1) 9,204,268 (\*1) Other payables 18,324,604 (\*1) 12,948,960 (\*1) Current portion of long-term liabilities 135,753 6,580 139,328 6,276 - Current portion of long-term borrowing 129,525 (\*2) 133,518 (\*2) - Current portion of debentures 6,228 6,580 5,810 6,276 Debentures 24,912 27,845 29,048 35,863 Long-term borrowings 654,979 (\*2) 431,915 (\*2) Long-term other payables 2,083,790 (\*1) 2,335,218 (\*1) Other 3,145,473 (\*1) 3,056,156 (\*1) Total financial liabilities 35,480,338 39,702,334 (\*1) Assets and liabilities whose carrying amount is a reasonable approximation of fair value are excluded from the fair value disclosures. (\*2) Lease liabilities, classified under the current portion of long-term liabilities and long-term borrowings, are excluded from the fair value disclosures in accordance with Korean IFRS 1107. -71- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (2) Fair value hierarchy classifications of the financial instruments that are measured at fair value or its fair value disclosed as of December 31, 2022 and 2021 are as follows: December 31, 2022 (In millions of Korean won) Level 1 Level 2 Level 3 Total balance 1) Assets Financial assets at fair value through other comprehensive income 1,247,882 - 116,443 1,364,325 Financial assets at fair value through profit or loss - - 283 283 2) Liabilities Current portion of debentures - 6,580 - 6,580 Debentures - 27,845 - 27,845 December 31, 2021 (In millions of Korean won) Level 1 Level 2 Level 3 Total balance 1) Assets Financial assets at fair value through other comprehensive income 1,544,320 - 118,212 1,662,532 Financial assets at fair value through profit or loss - - 2,135 2,135 2) Liabilities Current portion of debentures - 6,276 - 6,276 Debentures - 35,863 - 35,863 The levels of the fair value hierarchy and its application to financial assets and liabilities are described below. ㆍ Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities ㆍ Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly ㆍ Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) The fair value of financial instruments traded in active markets is based on quoted market prices at the statements of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Company is the current bid price. These instruments are included in Level 1. The instruments included in Level 1 are listed equity investments, most of which are classified as financial assets at fair value through other comprehensive income. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on the entity-specific estimates. If all significant inputs required for a fair value of an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs are not based on observable market data, the instrument is included in Level 3. -72- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS The Company performs the fair value measurements required for financial reporting purposes, including Level 3 fair values and discusses valuation processes and results at least once every quarter in line with the Company’s quarterly reporting dates. The Company’s policy is to recognize transfers between levels at t he end of the reporting period, if corresponding events or changes in circumstances have occurred. Specific valuation techniques used to value financial instruments include: ㆍ Quoted market prices or dealer quotes for similar instruments ㆍ The fair value of forward foreign exchange contracts is determined using forward exchange rates at the statements of financial position date, with the resulting value discounted back to present value Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments. For trade and other receivables that are classified as current assets, the book value approximates a reasonable estimate of fair value. (3) Valuation technique and the inputs The Company utilizes a present value technique to discount future cash flows using a proper interest rate for corporate bonds, government and public bonds, and bank debentures that are classified as Level 2 in the fair value hierarchy. The following table presents the valuation technique and the inputs used for major financial instruments classified as Level 3 as of December 31, 2022. (In millions of Korean won, and percentage) Classification Fair value Valuation technique Level 3 inputs Input range (Weighted average) Financial assets at fair value through other comprehensive income Samsung Venture Investment 32,073 Discounted cash flow Permanent growth rate -1.0%~1.0%(0.0%) Weighted average cost of capital 15.8%~17.8%(16.8%) MiCo Ceramics Co., Ltd. 29,385 Discounted cash flow and other Permanent growth rate 0.0%~1.0%(0.5%) Weighted average cost of capital 13.1%~15.1%(14.1%) (4) Changes in Level 3 instruments for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won) 2022 2021 Financial assets Balance as of January 1 120,347 130,242 Disposals (12,720) (912) Amount recognized in profit or loss for the year (108) - Amount recognized in other comprehensive income 22,926 2,736 Other (13,719) (11,719) Balance as of December 31 116,726 120,347 -73- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (5) Sensitivity analysis for recurring fair value measurements categorized within Level 3 Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable changes in the fair value of financial instruments which are affected by the unobservable parameters, using a statistical technique. When the fair value is affected by more than two input parameters, the amounts represent the most favorable or unfavorable. The results of the sensitivity analysis for the effect on other comprehensive income or loss (before-tax amount for other comprehensive income or loss) from changes in inputs for major financial instruments which are categorized within Level 3 and subject to sensitivity analysis are as follows: (In millions of Korean won) Favorable changes Unfavorable changes Classification Profit or loss Equity Profit or loss Equity Financial assets at fair value through other comprehensive income 1 - 2,970 - (2,374) 1 For equity securities, changes in fair value are calculated with the correlation between the growth rate (-1% ~1%) and the discount rate, which are significant unobservable inputs. -74- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 29. Segment Information The chief operating decision-maker has been identified as the Management Committee. The Company determines operating segments based on the units reported to the Management Committee. The Management Committee reviews the operating profits of each operating segment in order to assess the performance and to make strategic decisions regarding the allocation of resources to the segment. Sales revenue consists mostly of product sales. The operating segments are product-based and are identified based on the internal organization and revenue streams. As of the reporting date, the operating segments are comprised of DX, DS, and others. Total assets and liabilities of each operating segment are excluded from the disclosure as these have not been provided regularly to the Management Committee. (1) For the year ended December 31, 2022 (In millions of Korean won) DX DS Total 1 Sales 117,257,647 97,102,386 211,867,483 Depreciation 542,437 23,589,388 24,311,940 Amortization 1,631,289 754,791 2,605,067 Operating profit 3,083,254 22,232,180 25,319,329 1 Other operating segments are not separately disclosed. (2) For the year ended December 31, 2021 (In millions of Korean won) DX DS Total 1 Sales 107,675,342 94,373,136 199,744,705 Depreciation 537,479 19,457,650 20,164,109 Amortization 1,382,922 891,431 2,391,770 Operating profit 6,389,720 25,592,201 31,993,162 1 Other operating segments are not separately disclosed. -75- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS 30. Related Party Transactions (A) Subsidiaries List of subsidiaries as of December 31, 2022 are as follows: Area Subsidiaries Industry Percentage of ownership (%) 1 America Samsung Electronics America, Inc. (SEA) Sale of electronic devices 100.0 Samsung International, Inc. (SII) Manufacture of TV and monitors 100.0 Samsung Mexicana S.A. de C.V (SAMEX) Manufacture of electronic devices 100.0 Samsung Electronics Home Appliances America, LLC (SEHA) Manufacture of home appliances 100.0 Samsung Research America, Inc (SRA) R&D 100.0 Samsung Next LLC (SNX) Management of overseas subsidiaries 100.0 Samsung Next Fund LLC (SNXF) Technology business, venture capital investments 100.0 NeuroLogica Corp. Manufacture and sale of medical equipment 100.0 Samsung HVAC America, LLC Sale of air conditioning products 100.0 Joyent, Inc. Cloud services 100.0 Dacor Holdings, Inc. Management of overseas subsidiaries 100.0 Dacor, Inc. Manufacture and sale of home appliances 100.0 SmartThings, Inc. Sale of smart home electronics 100.0 TeleWorld Solutions, Inc. (TWS) Installation and optimization of network devices 100.0 Samsung Semiconductor, Inc. (SSI) Sale of semiconductor and display panels 100.0 Samsung Austin Semiconductor LLC. (SAS) Manufacture of semiconductors 100.0 Samsung Oak Holdings, Inc. (SHI) Management of overseas subsidiaries 100.0 SEMES America, Inc. Semiconductor equipment services 100.0 Samsung Electronics Canada, Inc. (SECA) Sale of electronic devices 100.0 AdGear Technologies Inc. Digital advertising platforms 100.0 Samsung Eletronica da Amazonia Ltda. (SEDA) Manufacture and sale of electronic devices 100.0 Samsung Electronics Mexico S.A. de C.V. (SEM) Sale of electronic devices 100.0 Samsung Electronics Digital Appliance Mexico, S.A. de C.V. (SEDAM) Manufacture of home appliances 100.0 Samsung Electronics Latinoamerica (Zona Libre), S. A. (SELA) Sale of electronic devices 100.0 Samsung Electronics Latinoamerica Miami, Inc. (SEMI) Sale of electronic devices 100.0 Samsung Electronica Colombia S.A. (SAMCOL) Sale of electronic devices 100.0 Samsung Electronics Argentina S.A. (SEASA) Marketing and services 100.0 Samsung Electronics Chile Limitada (SECH) Sale of electronic devices 100.0 Samsung Electronics Peru S.A.C. (SEPR) Sale of electronic devices 100.0 Samsung Electronics Venezuela, C.A. (SEVEN) Marketing and services 100.0 Samsung Electronics Panama. S.A. (SEPA) Consulting 100.0 Harman International Industries, Inc. Management of overseas subsidiaries 100.0 Harman Becker Automotive Systems, Inc. Manufacture and sale of audio products, R&D 100.0 Harman Connected Services, Inc. Connected service provider 100.0 Harman Connected Services Engineering Corp. Connected service provider 100.0 Harman da Amazonia Industria Eletronica e Participacoes Ltda. Manufacture and sale of audio products 100.0 Harman de Mexico, S. de R.L. de C.V. Manufacture of audio products 100.0 Harman do Brasil Industria Eletronica e Participacoes Ltda. Sale of audio products, R&D 100.0 Harman Financial Group LLC Management company 100.0 Harman International Industries Canada Ltd. Sale of audio products 100.0 Harman International Mexico, S. de R.L. de C.V. Sale of audio products 100.0 Harman KG Holding, LLC Management of overseas subsidiaries 100.0 Harman Professional, Inc. Sale of audio products, R&D 100.0 Beijing Integrated Circuit Industry International Fund, L.P Venture capital investments 61.4 China Materialia New Materials 2016 Limited Partnership Venture capital investments 99.0 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -76- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS Area Subsidiaries Industry Percentage of ownership (%) 1 Europe & CIS Samsung Electronics (UK) Ltd. (SEUK) Sale of electronic devices 100.0 Samsung Electronics Ltd. (SEL) Management of overseas subsidiaries 100.0 Samsung Semiconductor Europe Limited (SSEL) Sale of semiconductor and display panels 100.0 Samsung Electronics GmbH (SEG) Sale of electronic devices 100.0 Samsung Electronics Holding GmbH (SEHG) Management of overseas subsidiaries 100.0 Samsung Semiconductor Europe GmbH (SSEG) Sale of semiconductor and display panels 100.0 Samsung Electronics France S.A.S (SEF) Sale of electronic devices 100.0 Samsung Electronics Italia S.P.A. (SEI) Sale of electronic devices 100.0 Samsung Electronics Iberia, S.A. (SESA) Sale of electronic devices 100.0 Samsung Electronics Portuguesa, Unipessoal, Lda. (SEP) Sale of electronic devices 100.0 Samsung Electronics Hungarian Private Co. Ltd. (SEH) Manufacture and sale of electronic devices 100.0 Samsung Electronics Europe Logistics B.V. (SELS) Logistics 100.0 Samsung Electronics Benelux B.V. (SEBN) Sale of electronic devices 100.0 Samsung Electronics Europe Holding Cooperatief U.A. (SEEH) Management of overseas subsidiaries 100.0 Samsung Electronics Nordic Aktiebolag (SENA) Sale of electronic devices 100.0 Samsung Electronics Slovakia s.r.o (SESK) Manufacture of TV and monitors 100.0 Samsung Display Slovakia, s.r.o. (SDSK) Toll processing of display panels 100.0 Samsung Electronics Polska, SP.Zo.o (SEPOL) Sale of electronic devices 100.0 Samsung Electronics Poland Manufacturing SP.Zo.o (SEPM) Manufacture of home appliances 100.0 Samsung Electronics Romania LLC (SEROM) Sale of electronic devices 100.0 Samsung Electronics Austria GmbH (SEAG) Sale of electronic devices 100.0 Samsung Electronics Switzerland GmbH (SESG) Sale of electronic devices 100.0 Samsung Electronics Czech and Slovak s.r.o. (SECZ) Sale of electronic devices 100.0 SAMSUNG ELECTRONICS BALTICS SIA (SEB) Sale of electronic devices 100.0 Samsung Electronics Greece S.M.S.A (SEGR) Sale of electronic devices 100.0 Samsung Electronics Air Conditioner Europe B.V. (SEACE) Sale of air conditioning products 100.0 Samsung Nanoradio Design Center (SNDC) R&D 100.0 Samsung Denmark Research Center ApS (SDRC) R&D 100.0 Samsung Cambridge Solution Centre Limited (SCSC) R&D 100.0 SAMSUNG Zhilabs, S.L. Development and sale of network solutions 100.0 FOODIENT LTD. R&D 100.0 Samsung Electronics Rus Company LLC (SERC) Sale of electronic devices 100.0 Samsung Electronics Rus Kaluga LLC (SERK) Manufacture of TV 100.0 Samsung Electronics Ukraine Company LLC (SEUC) Sale of electronic devices 100.0 Samsung R&D Institute Ukraine (SRUKR) R&D 100.0 Samsung Electronics Central Eurasia LLP (SECE) Sale of electronic devices 100.0 Samsung Electronics Overseas B.V. (SEO) Sale of electronic devices 100.0 Samsung R&D Institute Rus LLC (SRR) R&D 100.0 Samsung Electronics Caucasus Co. Ltd (SECC) Marketing 100.0 Samsung Electronics Uzbekistan Ltd. (SEUZ) Marketing 100.0 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -77- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS Area Subsidiaries Industry Percentage of ownership (%) 1 Europe & CIS AKG Acoustics Gmbh Manufacture and sale of audio products 100.0 Apostera UA, LLC Connected service provider 100.0 Harman Audio Iberia Espana Sociedad Limitada Sale of audio products 100.0 Harman Automotive UK Limited Manufacture of audio products 100.0 Harman Becker Automotive Systems GmbH Manufacture and sale of audio products, R&D 100.0 Harman Becker Automotive Systems Italy S.R.L. Sale of audio products 100.0 Harman Becker Automotive Systems Manufacturing Kft Manufacture of audio products, R&D 100.0 Harman Belgium SA Sale of audio products 100.0 Harman Connected Services AB. Connected service provider 100.0 Harman Finland Oy Connected service provider 100.0 Harman Connected Services GmbH Connected service provider 100.0 Harman Connected Services Poland Sp.zoo Connected service provider 100.0 Harman Connected Services UK Ltd. Connected service provider 100.0 Harman Consumer Nederland B.V. Sale of audio products 100.0 Harman Deutschland GmbH Sale of audio products 100.0 Harman Finance International GP S.a.r.l Management of overseas subsidiaries 100.0 Harman France SNC Sale of audio products 100.0 Harman Holding Gmbh & Co. KG Management company 100.0 Harman Hungary Financing Ltd. Financing company 100.0 Harman Inc. & Co. KG Management of overseas subsidiaries 100.0 Harman International Estonia OU R&D 100.0 Harman International Industries Limited Sale of audio products, R&D 100.0 Harman International Romania SRL R&D 100.0 Harman Finance International, SCA Financing company 100.0 Harman Management Gmbh Management of overseas subsidiaries 100.0 Harman Professional Kft Manufacture of audio products, R&D 100.0 Harman Professional Denmark ApS Sale of audio products, R&D 100.0 Red Bend Software Ltd. Software design 100.0 Red Bend Software SAS Software design 100.0 Studer Professional Audio GmbH Sale of audio products, R&D 100.0 Harman Connected Services OOO Connected service provider 100.0 Harman RUS CIS LLC Sale of audio products 100.0 Middle East & Africa Samsung Gulf Electronics Co., Ltd. (SGE) Sale of electronic devices 100.0 Samsung Electronics Türkiye (SETK) Sale of electronic devices 100.0 Samsung Electronics Industry and Commerce Ltd. (SETK-P) Manufacture of electronic devices 100.0 Samsung Electronics Levant Co.,Ltd. (SELV) Sale of electronic devices 100.0 Samsung Electronics Maghreb Arab (SEMAG) Sale of electronic devices 100.0 Samsung Electronics Egypt S.A.E (SEEG) Manufacture and sale of electronic devices 100.0 Samsung Electronics Israel Ltd. (SEIL) Marketing 100.0 Samsung Electronics Tunisia S.A.R.L (SETN) Marketing 100.0 Samsung Electronics Pakistan(Private) Ltd. (SEPAK) Marketing 100.0 Samsung Electronics Saudi Arabia Ltd. (SESAR) Sale of electronic devices 100.0 Samsung Semiconductor Israel R&D Center, Ltd. (SIRC) R&D 100.0 Corephotonics Ltd. R&D 100.0 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -78- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS Area Subsidiaries Industry Percentage of ownership (%) 1 Samsung Electronics South Africa(Pty) Ltd. (SSA) Sale of electronic devices 100.0 Samsung Electronics South Africa Production (pty) Ltd. (SSAP) Manufacture of TV and monitors 100.0 Samsung Electronics West Africa Ltd. (SEWA) Marketing 100.0 Samsung Electronics East Africa Ltd. (SEEA) Marketing 100.0 Global Symphony Technology Group Private Ltd. Management of overseas subsidiaries 100.0 Harman Connected Services Morocco Connected service provider 100.0 Harman Industries Holdings Mauritius Ltd. Management of overseas subsidiaries 100.0 Red Bend Ltd. Manufacture of audio products 100.0 Asia (Excluding China) Samsung Asia Pte. Ltd. (SAPL) Management of overseas subsidiaries 100.0 Samsung Electronics Singapore Pte. Ltd. (SESP) Sale of electronic devices 100.0 Samsung Malaysia Electronics (SME) Sdn. Bhd. (SME) Sale of electronic devices 100.0 Samsung Electronics Display (M) Sdn. Bhd. (SDMA) Manufacture of electronic devices 100.0 Samsung Electronics (M) Sdn. Bhd. (SEMA) Manufacture of home appliances 100.0 Samsung Vina Electronics Co., Ltd. (SAVINA) Sale of electronic devices 100.0 Samsung Electronics Vietnam Co., Ltd. (SEV) Manufacture of electronic devices 100.0 Samsung Electronics Vietnam THAINGUYEN Co., Ltd. (SEVT) Manufacture of communication equipment 100.0 Samsung Electronics HCMC CE Complex Co., Ltd. (SEHC) Manufacture and sale of electronic devices 100.0 Samsung Display Vietnam Co., Ltd. (SDV) Manufacture of display panels 100.0 DOWOOINSYS VINA COMPANY LIMITED Manufacture of display components 100.0 PT Samsung Electronics Indonesia (SEIN) Manufacture and sale of electronic devices 100.0 PT Samsung Telecommunications Indonesia (STIN) Sale of electronic devices and services 100.0 Thai Samsung Electronics Co., Ltd. (TSE) Manufacture and sale of electronic devices 91.8 Laos Samsung Electronics Sole Co., Ltd (LSE) Marketing 100.0 Samsung Electronics Philippines Corporation (SEPCO) Sale of electronic devices 100.0 Samsung Electronics Australia Pty. Ltd. (SEAU) Sale of electronic devices 100.0 Samsung Electronics New Zealand Limited (SENZ) Sale of electronic devices 100.0 Samsung India Electronics Private Ltd. (SIEL) Manufacture and sale of electronic devices 100.0 Red Brick Lane Marketing Solutions Pvt. Ltd. Marketing 100.0 Samsung Display Noida Private Limited (SDN) Manufacture of display panels 100.0 Samsung R&D Institute India-Bangalore Private Limited (SRI-Bangalore) R&D 100.0 Samsung R&D Institute BanglaDesh Limited (SRBD) R&D 100.0 Samsung Nepal Services Pvt, Ltd (SNSL) Service 100.0 Samsung Japan Corporation (SJC) Sale of semiconductor and display panels 100.0 Samsung R&D Institute Japan Co. Ltd. (SRJ) R&D 100.0 Samsung Electronics Japan Co., Ltd. (SEJ) Sale of electronic devices 100.0 Harman Connected Services Corp. India Pvt. Ltd. Connected service provider 100.0 Harman International (India) Private Limited Sale of audio products, R&D 100.0 Harman International Industries PTY Ltd. Management of overseas subsidiaries 100.0 Harman International Japan Co., Ltd. Sale of audio products, R&D 100.0 Harman Singapore Pte. Ltd. Sale of audio products 100.0 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -79- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS Area Subsidiaries Industry Percentage of ownership (%) 1 China Samsung (CHINA) Investment Co., Ltd. (SCIC) Sale of electronic devices 100.0 Samsung Electronics Hong Kong Co., Ltd. (SEHK) Sale of electronic devices 100.0 Samsung Electronics Taiwan Co., Ltd. (SET) Sale of electronic devices 100.0 Tianjin Samsung Electronics Co., Ltd. (TSEC) Manufacture of TV and monitors 91.2 Suzhou Samsung Electronics Co., Ltd. (SSEC) Manufacture of home appliances 88.3 Samsung Suzhou Electronics Export Co., Ltd. (SSEC-E) Manufacture of home appliances 100.0 Samsung Electronics Suzhou Computer Co., Ltd. (SESC) R&D 100.0 Tianjin Samsung Telecom Technology Co., Ltd. (TSTC) Manufacture of communication equipment 90.0 Beijing Samsung Telecom R&D Center (SRC-Beijing) R&D 100.0 Samsung Electronics China R&D Center (SRC-Nanjing) R&D 100.0 Samsung Mobile R&D Center China-Guangzhou (SRC-Guangzhou) R&D 100.0 Samsung R&D Institute China-Shenzhen (SRC-Shenzhen) R&D 100.0 Shanghai Samsung Semiconductor Co., Ltd. (SSS) Sale of semiconductor and display panels 100.0 Samsung (China) Semiconductor Co., Ltd. (SCS) Manufacture of semiconductors 100.0 Samsung SemiConductor Xian Co., Ltd. (SSCX) Sale of semiconductor and display panels 100.0 Samsung Electronics Suzhou Semiconductor Co., Ltd. (SESS) Toll processing of semiconductors 100.0 Tianjin Samsung LED Co., Ltd. (TSLED) Manufacture of LED 100.0 Samsung Semiconductor (China) R&D Co., Ltd. (SSCR) R&D 100.0 Samsung Display Dongguan Co., Ltd. (SDD) Manufacture of display panels 100.0 Samsung Display Tianjin Co., Ltd. (SDT) Manufacture of display panels 95.0 SEMES (XIAN) Co., Ltd. Semiconductor/FPD equipment services 100.0 Samsung Semiconductor Investment L.P.Ⅰ Technology business, venture capital investments 99.0 Harman (China) Technologies Co., Ltd. Manufacture of audio products 100.0 Harman (Suzhou) Audio and Infotainment Systems Co., Ltd. Sale of audio products 100.0 Harman Automotive Electronic Systems (Suzhou) Co., Ltd. Manufacture of audio products, R&D 100.0 Harman Commercial (Shanghai) Co., Ltd. Sale of audio products 100.0 Harman Connected Services Solutions (Chengdu) Co., Ltd. Connected service provider 100.0 Harman Holding Limited Sale of audio products 100.0 Harman International (China) Holdings Co., Ltd. Sale of audio products, R&D 100.0 Harman Technology (Shenzhen) Co., Ltd. Sale of audio products, R&D 100.0 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -80- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS Area Subsidiaries Industry Percentage of ownership (%) 1 Domestic Samsung Display Co., Ltd. Manufacture and sale of display panels 84.8 SU Materials Manufacture of display components 50.0 STECO Co., Ltd. Manufacture of semiconductor components 70.0 SEMES Co., Ltd. Manufacture and sale of semiconductor/FPD 91.5 Samsung Electronics Service Co., Ltd. Repair services for electronic devices 99.3 Samsung Electronics Service Customer Satisfaction Co., Ltd. Call center for repair services for electronic devices 100.0 Samsung Electronics Sales Co., Ltd. Sale of electronic devices 100.0 Samsung Electronics Logitech Co., Ltd. General logistics agency 100.0 Samsung Medison Co., Ltd. Manufacture and sale of medical equipment 68.5 Stella Forest of Hope Manufacture and production of food 100.0 Mirero System Co., Ltd. Development and supply of semiconductor process defect and quality control software 99.9 Dowooinssys Co., Ltd. Manufacture of display components 69.0 Gf-System Co., Ltd. Manufacture of display components 100.0 Harman International Korea Software development and supply, etc. 100.0 Samsung Venture Capital Union #21 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #22 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #26 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #28 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #29 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #32 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #33 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #37 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #40 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #42 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #43 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #45 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #48 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #52 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #55 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #56 Technology business, Venture capital investments 99.0 Samsung Venture Capital Union #57 Technology business, Venture capital investments 99.0 Growth type private equity trust specialized in semiconductors Investment on semiconductor industry 66.7 System LSI mutual benefit private equity trust Investment on semiconductor industry 62.5 1 Ownership represents the Company’s ownership of the voting rights in each entity, including subsidiaries’ ownerships. -81- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (B) Sale and purchase transactions Sale and purchase transactions with related parties for the years ended December 31, 2022 and 2021 are as follows: (In millions of Korean won ) 2022 Name of company 1 Sales and other Disposal of non- current assets Purchases and other Purchase of non- current assets Subsidiaries Samsung Display Co., Ltd. 283,011 - 981,927 - Samsung Electronics America, Inc. (SEA) 35,303,291 632 209,912 - Samsung Asia Pte. Ltd. (SAPL) 42 - 30,982 - Harman and its subsidiaries 2 - - 76,891 - Samsung (China) Semiconductor Co., Ltd. (SCS) 184,796 10,644 9,679,473 5,534 Samsung Electronics Vietnam THAINGUYEN Co., Ltd. (SEVT) 8,668,668 - 25,941,259 831 Samsung (CHINA) Investment Co., Ltd. (SCIC) 1,588,710 - 9,035 - Samsung Semiconductor, Inc. (SSI) 40,907,261 - 532,962 - Samsung Electronics Vietnam Co., Ltd. (SEV) 5,804,935 256 16,441,332 50 Samsung Electronics Europe Holding Cooperatief U.A. (SEEH) - - - - Samsung Austin Semiconductor LLC. (SAS) 1,053 - 3,663,909 2,457 Samsung Display Vietnam Co., Ltd. (SDV) 2,073,972 - - - Samsung India Electronics Private Ltd. (SIEL) 7,439,341 112 5,798,974 - Shanghai Samsung Semiconductor Co., Ltd. (SSS) 16,490,821 - 47 - Samsung Eletronica da Amazonia Ltda. (SEDA) 1,262,369 - 2,174 - Samsung Electronics HCMC CE Complex Co., Ltd. (SEHC) 628,854 2,791 4,830,861 1,680 Thai Samsung Electronics Co., Ltd. (TSE) 1,578,349 - 2,615,512 - Samsung Electronics (UK) Ltd. (SEUK) 1,529,791 - 98,891 - Samsung Electronics Benelux B.V. (SEBN) 788,385 - 2,333 - Samsung Electronics Hungarian Private Co. Ltd. (SEH) 408,409 141 2,191 - Samsung Electronics Europe Logistics B.V. (SELS) 4,772,554 - 5,104 - Samsung Display Dongguan Co., Ltd. (SDD) 249,142 - - - SEMES Co., Ltd. 8,224 - 2,283,556 - Samsung Electronics GmbH (SEG) 3,865,859 - 6,948 - Samsung Electronics Mexico S.A. De C.V. (SEM) 2,442,869 - 6,950 - Other 58,705,560 4,198 23,123,295 2,213 Total 194,986,266 18,774 96,344,518 12,765 Associates and joint ventures Samsung SDS Co., Ltd 212,376 - 1,672,853 348,752 Samsung Electro-Mechanics Co., Ltd 60,343 767 919,709 120 Samsung SDI Co., Ltd 60,325 - 422,836 24,874 Cheil Worldwide Inc. 31,194 - 931,489 361 Other 617,779 - 881,585 10,224 Total 982,017 767 4,828,472 384,331 Other related parties Samsung C&T Corporation 44,359 - 84,635 7,018,252 Other 283,122 188 602,014 132,512 Total 327,481 188 686,649 7,150,764 Other 3 Samsung Engineering Co., Ltd 1,490 - 32,677 3,106,154 S-1 Corporation 7,530 - 428,907 45,864 Other 136,969 - 251,907 540,591 Total 145,989 - 713,491 3,692,609 1 Transactions with separate entities that are related parties of the Company. 2 Transactions with the intermediate parent company, including Harman International Industries, Inc. and its subsidiaries. 3 Although these entities are not related parties of the Company in accordance with Korean IFRS 1024 , they belong to the same large enterprise group according to the Monopoly Regulation and Fair Trade Act. -82- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (In millions of Korean won ) 2021 Name of company 1 Sales and other Disposal of non- current assets Purchases and other Purchase of non- current assets Subsidiaries Samsung Display Co., Ltd. 234,883 2,475 916,709 - Samsung Electronics America, Inc. (SEA) 32,860,328 - 165,629 - Samsung (China) Semiconductor Co., Ltd. (SCS) 167,937 190,056 7,340,085 9,857 Samsung Electronics Vietnam THAINGUYEN Co., Ltd. (SEVT) 9,380,604 686 21,146,962 1,111 Harman and its subsidiaries 2 65 - 48,387 - Samsung Electronics Vietnam Co., Ltd. (SEV) 6,652,988 1,716 15,387,219 317 Samsung (CHINA) Investment Co., Ltd. (SCIC) 1,525,639 - 9,019 - Samsung Semiconductor, Inc. (SSI) 31,894,007 - 409,852 - Samsung Asia Pte. Ltd. (SAPL) 18 - 22,855 - Samsung Austin Semiconductor LLC (SAS) 598 1,183 3,703,472 7,511 Samsung India Electronics Private Ltd. (SIEL) 4,327,075 2,609 3,373,962 - Shanghai Samsung Semiconductor Co., Ltd. (SSS) 25,683,936 - 3,885 - Samsung Display Vietnam Co., Ltd. (SDV) 1,314,121 - - - Samsung Eletronica da Amazonia Ltda. (SEDA) 3,151,503 403 8,600 - Samsung Electronics (UK) Ltd. (SEUK) 1,535,053 - 91,821 1 Samsung International, Inc. (SII) 417,680 - 7,721,915 - Thai Samsung Electronics Co., Ltd. (TSE) 1,459,938 - 2,489,534 - Samsung Electronics HCMC CE Complex Co., Ltd. (SEHC) 652,277 3,222 5,183,912 900 Samsung Electronics Taiwan Co., Ltd. (SET) 4,853,191 - 674 - Samsung Electronics Hungarian Private Co., Ltd. (SEH) 547,190 - 547 - Samsung Electronics Europe Logistics B.V. (SELS) 4,294,662 - 11,007 - Samsung Electronics Benelux B.V. (SEBN) 365,818 - 2,695 - Samsung Electronics GmbH (SEG) 3,332,793 - 7,646 - Samsung Display Dongguan Co., Ltd. (SDD) 288,980 - - - Other 53,602,392 10,982 15,648,603 3,784 Total 188,543,676 213,332 83,694,990 23,481 Associates and joint ventures Samsung SDS Co., Ltd 141,014 - 1,542,039 530,412 Samsung Electro-Mechanics Co., Ltd 45,303 - 975,086 - Samsung SDI Co., Ltd 49,995 269 360,350 30,627 Cheil Worldwide Inc. 26,794 - 720,533 16 Other 595,551 68 773,381 8,011 Total 858,657 337 4,371,389 569,066 Other related parties Samsung C&T Corporation 66,745 - 78,054 3,902,417 Other 303,093 - 564,706 92,577 Total 369,838 - 642,760 3,994,994 Other 3 Samsung Engineering Co., Ltd 598 - 38,556 2,106,166 S-1 Corporation 7,132 - 401,224 27,744 Other 106,714 2,371 200,387 38,531 Total 114,444 2,371 640,167 2,172,441 1 Transactions with separate entities that are related parties of the Company. 2 Transactions with the intermediate parent company, including Harman International Industries, Inc. and its subsidiaries. 3 Although these entities are not related parties of the Company in accordance with Korean IFRS 1024 , they belong to the same large enterprise group according to the Monopoly Regulation and Fair Trade Act. -83- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (C) Balances of receivables and payables Balances of receivables and payables arising from the sales and purchases of goods and services as of December 31, 2022 and December 31, 2021 are as follows: (In millions of Korean won) December 31, 2022 Name of company 1 Receivables and other 2 Payables and other 3 Subsidiaries Samsung Display Co., Ltd. 32,521 108,011 Samsung Electronics America, Inc. (SEA) 868,937 983,709 Samsung Asia Pte. Ltd. (SAPL) 1,604 1,812 Harman and its subsidiaries 4 - 6,537 Samsung (China) Semiconductor Co., Ltd. (SCS) 57,423 751,693 Samsung Electronics Vietnam THAINGUYEN Co., Ltd. (SEVT) 606,030 2,396,411 Samsung (CHINA) Investment Co., Ltd. (SCIC) 131,285 283,459 Samsung Semiconductor, Inc. (SSI) 4,700,427 263,757 Samsung Electronics Vietnam Co., Ltd. (SEV) 369,380 1,748,670 Samsung Electronics Europe Holding Cooperatief U.A. (SEEH) 693 - Samsung Austin Semiconductor LLC. (SAS) 21,309 386,640 Samsung Display Vietnam Co., Ltd. (SDV) 196,643 7 Samsung India Electronics Private Ltd. (SIEL) 1,219,298 312,243 Shanghai Samsung Semiconductor Co., Ltd. (SSS) 1,623,968 77 Samsung Eletronica da Amazonia Ltda. (SEDA) 227,180 3,037 Samsung Electronics HCMC CE Complex Co., Ltd. (SEHC) 234,870 358,082 Thai Samsung Electronics Co., Ltd. (TSE) 115,103 379,098 Samsung Electronics (UK) Ltd. (SEUK) 76,264 - Samsung Electronics Benelux B.V. (SEBN) 18,403 - Samsung Electronics Hungarian Private Co. Ltd. (SEH) 11,449 - Samsung Electronics Europe Logistics B.V. (SELS) 273,816 506,872 Samsung Display Dongguan Co., Ltd. (SDD) 20,177 11 SEMES Co., Ltd. 54,327 561,368 Samsung Electronics GmbH (SEG) 10,607 - Samsung Electronics Mexico S.A. De C.V. (SEM) 230,508 1,093 Other 6,565,258 2,226,116 Total 17,667,480 11,278,703 Associates and joint ventures Samsung SDS Co., Ltd 49,439 468,830 Samsung Electro-Mechanics Co., Ltd 385 101,960 Samsung SDI Co., Ltd 114,618 51,199 Cheil Worldwide Inc. 43 444,017 Other 203,575 159,668 Total 368,060 1,225,674 Other related parties Samsung C&T Corporation 194,539 2,718,294 Other 14,679 160,305 Total 209,218 2,878,599 Other 5 Samsung Engineering Co., Ltd 286 1,181,947 S-1 Corporation 3,085 59,352 Other 4,113 478,136 Total 7,484 1,719,435 1 Transactions with separate entities that are related parties of the Company. 2 The Company has not recognized bad debt allowance in relation to the receivables due from subsidiaries as of December 31, 2022. 3 Payables and others include lease liabilities. 4 Transactions with the intermediate parent company, including Harman International Industries, Inc. and its subsidiaries. 5 Although these entities are not related parties of the Company in accordance with Korean IFRS 1024, they belong to the same large enterprise group according to the Monopoly Regulation and Fair Trade Act. -84- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (In millions of Korean won) December 31, 2021 Name of Company 1 Receivables and other 2 Payables and other 3 Subsidiaries Samsung Display Co., Ltd. 23,791 119,401 Samsung Electronics America, Inc. (SEA) 4,708,011 143,310 Samsung (China) Semiconductor Co., Ltd. (SCS) 59,110 726,945 Samsung Electronics Vietnam THAINGUYEN Co., Ltd. (SEVT) 734,283 4,049,400 Harman and its subsidiaries 4 - 7,541 Samsung Electronics Vietnam Co., Ltd. (SEV) 414,781 2,301,949 Samsung (CHINA) Investment Co., Ltd. (SCIC) 138,307 77,540 Samsung Electronics Europe Holding Cooperatief U.A. (SEEH) 316 - Samsung Semiconductor, Inc. (SSI) 7,320,890 123,555 Samsung Asia Pte. Ltd. (SAPL) 1,736 2,164 Samsung Austin Semiconductor LLC (SAS) 4,645 277,682 Samsung India Electronics Private Ltd. (SIEL) 1,099,927 463,652 Shanghai Samsung Semiconductor Co., Ltd. (SSS) 4,337,520 217 Samsung Display Vietnam Co., Ltd. (SDV) 161,441 - Samsung Eletronica da Amazonia Ltda. (SEDA) 258,490 1,040 Samsung Electronics (UK) Ltd. (SEUK) 201,717 19,595 Samsung International, Inc. (SII) 32,564 259,847 Thai Samsung Electronics Co., Ltd. (TSE) 132,508 334,943 Samsung Electronics HCMC CE Complex Co., Ltd. (SEHC) 167,225 430,960 Samsung Electronics Taiwan Co., Ltd. (SET) 372,716 32,145 Samsung Electronics Hungarian Private Co., Ltd. (SEH) 58,694 99 Samsung Electronics Europe Logistics B.V. (SELS) 629,882 1,715 Samsung Electronics Benelux B.V. (SEBN) 45,171 3,351 Samsung Electronics GmbH (SEG) 223,603 2,272 Samsung Display Dongguan Co., Ltd. (SDD) 18,025 - Other 9,220,424 2,284,643 Total 30,365,777 11,663,966 Associates and joint ventures Samsung SDS Co., Ltd 64,364 574,443 Samsung Electro-Mechanics Co., Ltd 2,415 108,103 Samsung SDI Co., Ltd 113,845 54,076 Cheil Worldwide Inc. 59 421,901 Other 192,550 166,311 Total 373,233 1,324,834 Other related parties Samsung C&T Corporation 195,355 1,640,615 Other 15,839 125,470 Total 211,194 1,766,085 Other 5 Samsung Engineering Co., Ltd 289 1,099,881 S-1 Corporation 2,058 29,620 Other 4,286 56,476 Total 6,633 1,185,977 1 Transactions with separate entities that are related parties of the Company. 2 The Company has not recognized any bad debt allowance in relation to the receivables due from subsidiaries as of December 31, 2021. 3 Payables and others include lease liabilities. 4 Transactions with the intermediate parent company, including Harman International Industries, Inc. and its subsidiaries. 5 Although these entities are not related parties of the Company in accordance with Korean IFRS 1024, they belong to the same large enterprise group according to the Monopoly Regulation and Fair Trade Act. -85- ![]() Samsung Electronics Co., Ltd. NOTES TO THE SEPARATE FINANCIAL STATEMENTS (D) For the years ended December 31, 2022 and 2021, the Company invested W 119,598 million and W 138,858 million, respectively, in subsidiaries, and received W 164,503 million and W 592,520 million in return of investments, respectively. In addition, the Company invested W 882,125 million in associates and joint ventures for the year ended December 31, 2022, but there was no additional investment in associates and joint ventures for the year ended December 31, 2021 or return of those investments for the years ended December 31, 2022 and 2021, respectively. (E) For the years ended December 31, 2022 and 2021, the Company declared dividend of W 1,663,149 million and W 3,527,449 million, respectively, to related parties. In addition, for the years ended December 31, 2022 and 2021, the Company declared dividends of W 128,232 million and W 267,738 million, respectively, to the entities that are not related parties of the Company in accordance with Korean IFRS 1024 , but belong to the same conglomerate according to the Monopoly Regulation and Fair Trade Act. As of December 31, 2022 and December 31, 2021, no dividends declared remains unpaid. (F) For the years ended December 31, 2022 and 2021, assets leased from related parties amounted to W 20 million and W 63,887 million, respectively, and lease payments made to the related parties amounted to W 46,819 million and W 51,703 million, respectively. (G) As of December 31, 2022, the Company provides guarantees in relation to borrowings of the related parties (refer to Note 13). (H) Key management compensation The compensation paid or payable to key management (executive directors) for their services for the years ended December 31, 2022 and 2021 consists of: (In millions of Korean won) 2022 2021 Short-term employee benefits 14,768 20,370 Post-employment benefits 612 886 Other long-term employee benefits 5,434 8,092 31. Subsequent Event In accordance to the resolution of the Board of Directors on February 14, 2023, the Company concluded a W 20 trillion loan agreement with Samsung Display Co., Ltd., the subsidiary, on February 16, 2023. -86- ![]() Samsung Electronics Business Report-XBRL IV. Other Financial matters 1. Financial statements A. Consolidated financial statements (KRW mil) Classification 54th 53rd 52nd December 31, 2022 December 31, 2021 December 31, 2020 Current assets 218,470,581 218,163,185 198,215,579 - Cash and cash equivalents 49,680,710 39,031,415 29,382,578 - Short-term financial instruments 65,102,886 81,708,986 92,441,703 - Other current financial assets 414,610 3,409,791 2,828,562 - Trade receivables 35,721,563 40,713,415 30,965,058 - Inventories 52,187,866 41,384,404 32,043,145 - Others 15,362,946 11,915,174 10,554,533 Non-current assets 229,953,926 208,457,973 180,020,139 - Other non-current financial assets 12,802,480 15,491,183 13,778,185 - Investment in associates and joint ventures 10,893,869 8,932,251 8,076,779 - Property, plant, and equipment 168,045,388 149,928,539 128,952,892 - Intangible assets 20,217,754 20,236,244 18,468,502 - Others 17,994,435 13,869,756 10,743,781 Total assets 448,424,507 426,621,158 378,235,718 Current liabilities 78,344,852 88,117,133 75,604,351 Non-current liabilities 15,330,051 33,604,094 26,683,351 Total liabilities 93,674,903 121,721,227 102,287,702 Equity attributable to owners of the parent company 345,186,142 296,237,697 267,670,331 - Capital stock 897,514 897,514 897,514 - Share premium 4,403,893 4,403,893 4,403,893 - Retained earnings 337,946,407 293,064,763 271,068,211 - Others 1,938,328 -2,128,473 -8,699,287 Non-controlling interests 9,563,462 8,662,234 8,277,685 Total Equity 354,749,604 304,899,931 275,948,016 Jan–Dec 2022 Jan–Dec 2021 Jan–Dec 2020 Revenue 302,231,360 279,604,799 236,806,988 Operating profit 43,376,630 51,633,856 35,993,876 Profit for the period 55,654,077 39,907,450 26,407,832 - Owners of the parent company 54,730,018 39,243,791 26,090,846 - Non-controlling interests 924,059 663,659 316,986 Basic earnings per share (KRW) 8,057 5,777 3,841 Diluted earnings per share (KRW) 8,057 5,777 3,841 Number of companies subject to consolidation accounting 232 229 242 Data shown in conformity with K-IFRS. Please refer to the footnotes of the 52nd – 54th Consolidated Audit Report for the calculation of basic earnings per share (ordinary shares). ![]() Samsung Electronics Business Report-XBRL B. Separate financial statements (KRW mil) Classification 54th 53rd 52nd December 31, 2022 December 31, 2021 December 31, 2020 Current assets 59,062,658 73,553,416 73,798,549 - Cash and cash equivalents 3,921,593 3,918,872 989,045 - Short-term financial instruments 137 15,000,576 29,101,284 - Trade receivables 20,503,223 33,088,247 24,736,740 - Inventories 27,990,007 15,973,053 13,831,372 - Others 6,647,698 5,572,668 5,140,108 Non-current assets 201,021,092 177,558,768 155,865,878 - Other non-current financial assets 1,364,608 1,664,667 1,542,766 - Subsidiary, associate, and joint venture investments 57,397,249 56,225,599 56,587,548 - Property, plant and equipment 123,266,986 103,667,025 86,166,924 - Intangible assets 8,561,424 8,657,456 7,002,648 - Others 10,430,825 7,344,021 4,565,992 Total assets 260,083,750 251,112,184 229,664,427 Current liabilities 46,086,047 53,067,303 44,412,904 Non-current liabilities 45,81,512 4,851,149 1,934,799 Total liabilities 50,667,559 57,918,452 46,347,703 - Capital stock 897,514 897,514 897,514 - Share premium 4,403,893 4,403,893 4,403,893 - Retained earnings 204,388,016 188,774,335 178,284,102 - Others -273,232 -882,010 -268,785 Total Equity 209,416,191 193,193,732 183,316,724 Evaluation method of subsidiary, associate, and joint venture investment securities Cost methods Cost methods Cost methods Jan–Dec 2022 Jan–Dec 2021 Jan–Dec 2020 Revenue 211,867,483 199,744,705 166,311,191 Operating profit 25,319,329 31,993,162 20,518,974 Profit for the period 25,418,778 30,970,954 15,615,018 Basic earnings per share (KRW) 3,742 4,559 2,299 Diluted earnings per share (KRW) 3,742 4,559 2,299 Data shown in conformity with K-IFRS. Please refer to the footnotes of the 52nd – 54th Consolidated Audit Report for the calculation of basic earnings per share (ordinary shares). ![]() Samsung Electronics Business Report-XBRL 2. Dividends We continue to work to enhance shareholder value alongside our efforts to strengthen competitiveness of our products and businesses. We utilized 50% of the free cash flow as the shareholder return pool for 2018 to 2020 as part of our shareholder return policy for 2018 to 2020 and paid annual, regular dividends of KRW 9.6 trillion. A special cash dividend of KRW 10.7 trillion was paid out at the same time as the 2020 end-year, regular dividend. The shareholder return policy for 2021 to 2023 was announced in January 2021. For this term, we kept the shareholder return pool at 50% of the free cash flow, but increased the annual, regular dividend to KRW 9.8 trillion. Any remaining portion of the 50% of the free cash flow will be paid out to shareholders. Dividends paid in the three most recent fiscal years are as follows: [Key dividend indices] Classification 2022 2021 2020 Par value per share (KRW) 100 100 100 Consolidated net profit 1) (KRW mil) 54,730,018 39,243,791 26,090,846 Separate net profit (KRW mil) 25,418,778 30,970,954 15,615,018 EPS 2) (KRW) 8,057 5,777 3,841 Total cash dividend (KRW mil) 9,809,438 9,809,438 20,338,075 Total stock dividend (KRW mil) - - - Dividend payout ratio (%) 17.9 25.0 78.0 Cash dividend yield (%) Common 2.5 1.8 4.0 Preferred 2.7 2.0 4.2 Stock dividend yield (%) Common - - - Preferred - - - Cash dividend per share (KRW) Common 1,444 1,444 2,994 Preferred 1,445 1,445 2,995 Stock dividend per share (share) Common - - - Preferred - - - Total cash dividend for 2022 in the above table is a figure prior to the approval at the AGM, and if the amount is rejected or adjusted at the AGM, the details will be published in future reports. Dividends were KRW 2,452,154 million or KRW 361 per share in the first three quarters of 2022 and the first three quarters of 2021, and KRW 2,404,605 million or KRW 354 per share in each of the first three quarters of 2020. For further information relating to total cash dividend, see retained earnings in 『 3. Note to Consolidated Financial Statements 』 in 『 Ⅲ. Financial Affairs 』 . 1) Equity attributable to owners of the parent. 2) Basic earnings per common share on a consolidated basis. For further information relating to the calculation of basic EPS, see Earnings Per Share in 『 3. Note to Consolidated Financial Statements 』 in 『 Ⅲ. Financial Affairs 』 . ![]() Samsung Electronics Business Report-XBRL History of dividend payouts is as follows: Number of continuous dividend payments Average dividend yield Quarterly/biannual dividends End-year dividends Past 3 years Past 5 years 36 42 2.7% 2.9% The number of continuous dividend payments includes the quarterly dividend for the quarter and the end-year dividend for the recent business year. Continuous payment of the end-year dividend started in 1981, biannual dividend in 1999, and quarterly dividend in 2017. The average dividend yield is based on common shares. The average dividend yield of preferred shares for the past 3 years and past 5 years are 3.0% and 3.3% respectively. The “ past 3 years ” refers to the period from 2020 to 2022, and the “ past 5 years ” refers to the period from 2018 to 2022. For the dividend yield of 2022, please refer to the table of key dividends above (common shares at 2.5%, preferred shares at 2.7%). ![]() Samsung Electronics Business Report-XBRL 3. Matters about financing through the issuance of securities 3-1 Financing through the issuance of securities [Issuance of equity securities] N/A [Issuance of debt securities] A. List of issued debt securities (As of December 31, 2022) (KRW mil, %) Issuing company Type of securities Issuance method Date of Issuance Total nominal amount Interest rate Rating (rating institution) Maturity date Payment status Management company Samsung Electronics Corporate bonds Public offering Oct 2,1997 126,730 7.7 Aa2(Moody's), AA-(S&P) Oct 1, 2027 Partial redemption Goldman Sachs et al. Harman International Industries, Inc Corporate bonds Public offering May 11, 2015 506,920 4.2 Baa1 (Moody's), A- (S&P) May 15, 2025 Unredeemed J.P.Morgan et al. Harman Finance International, SCA (\*1) Corporate bonds Public offering May 27, 2015 469,819 2.0 Baa1 (Moody's), A- (S&P) May 27, 2022 Redeemed HSBC et al. Dowinsys Co., Ltd Corporate bonds Private placement Feb 28, 2020 23,000 0.5 - Feb 28, 2025 Unredeemed - Dowinsys Co., Ltd Corporate bonds Private placement Dec 8, 2022 42,000 0.5 - Dec 8, 2027 Unredeemed - SEMES Commercial paper Private placement Jul 28, 2022 80,000 3.0 A1 Aug 26, 2022 Redeemed - SEMES Commercial paper Private placement Aug 30, 2022 30,000 3.3 A1 Sep 29, 2022 Redeemed - Total - - - 1,278,469 - - - - - ※ The rating institutions of Commercial paper are NICE Investors Service and Korea Ratings Corporation. (\*1) The corporate bonds were redeemed on March 1st, 2022, prior to the original maturity date. ![]() Samsung Electronics Business Report-XBRL B. Commercial Paper Unredeemed Balance Not Applicable (Reporting Date: December 31, 2022) (KRW mil) Maturity Under 10 days Above 10 days / under 30 days Above 30 days / under 90 days Above 90 days / under 180 days Above 180 days / under 1 year Above 1 year / under 2 years Above 2 years / under 3 years Above 3 years Total Unredeemed balance Public - - - - - - - - - Private - - - - - - - - - Total - - - - - - - - - C. Short-term Bond Unredeemed Balance Not Applicable (Reporting Date: December 31, 2022) (KRW mil) Maturity Under 10 days Above 10 days / under 30 days Above 30 days / under 90 days Above 90 days / under 180 days Above 180 days / under 1 year Total Issue limit Balance limit Unredeemed balance Public - - - - - - - - Private - - - - - - - - Total - - - - - - - - ![]() Samsung Electronics Business Report-XBRL D. Corporate Bond Unredeemed Balance (Reporting Date: December 31, 2022) (KRW mil) Maturity Under 1 year Above 1 year / under 2 years Above 2 years / under 3 years Above 3 years / under 4 years Above 4 years / under 5 years Above 5 years / under 10 years Above 10 years Total Unredeemed balance Public 6,337 6,337 513,257 6,337 6,335 - - 538,790 Private - - 23,000 - 42,000 - - 65,000 Total 6,337 6,337 536,257 6,337 48,335 - - 603,603 ※ Based on consolidated financial statements. ※ The exchange rate as of the reporting date has been applied. ※ Unredeemed balance of corporate bonds of Dowinsys are intercompany balances eliminated in consolidated financial statements. - Corporate Bond Unredeemed Balance (Samsung Electronics) (Reporting Date: December 31, 2022) (KRW mil) Maturity Under 1 year Above 1 year / under 2 years Above 2 years / under 3 years Above 3 years / under 4 years Above 4 years / under 5 years Above 5 years / under 10 years Above 10 years Total Unredeemed balance Public 6,337 6,337 6,337 6,337 6,335 - - 31,683 Total 6,337 6,337 6,337 6,337 6,335 - - 31,683 ※ The exchange rate as of the reporting date has been applied . - Corporate Bond Unredeemed Balance (Harman) (Reporting Date: December 31, 2022) (KRW mil) Maturity Under 1 year Above 1 year / under 2 years Above 2 years / under 3 years Above 3 years / under 4 years Above 4 years / under 5 years Above 5 years / under 10 years Above 10 years Total Unredeemed balance Public - - 506,920 - - - - 506,920 Total - - 506,920 - - - - 506,920 ※ The exchange rate as of the reporting date has been applied. ![]() Samsung Electronics Business Report-XBRL - Corporate Bond Unredeemed Balance (Dowinsys) (Reporting Date: December 31, 2022) (KRW mil) Maturity Under 1 year Above 1 year / under 2 years Above 2 years / under 3 years Above 3 years / under 4 years Above 4 years / under 5 years Above 5 years / under 10 years Above 10 years Total Unredeemed balance Private - - 23,000 - 42,000 - - 65,000 Total - - 23,000 - 42,000 - - 65,000 ※ Unredeemed balance of corporate bonds of Dowinsys are intercompany balances eliminated in consolidated financial statements. E. Hybrid Bond Unredeemed Balance Not Applicable (Reporting Date: December 31, 2022) (KRW mil) Maturity Under 1 year Above 1 year / under 5 years Above 5 years / under 10 years Above 10 years / under 15 years Above 15 years / under 20 years Above 20 years / under 30 years Above 30 years Total Unredeemed balance Public - - - - - - - - Private - - - - - - - - Total - - - - - - - - ![]() Samsung Electronics Business Report-XBRL F. Contingent Convertible Bond Unredeemed Balance Not Applicable (Reporting Date: December 31, 2022) (KRW mil) Maturity Under 1 year Above 1 year / under 2 years Above 2 years / under 3 years Above 3 years / under 4 years Above 4 years / under 5 years Above 5 years / under 10 years Above 10 years / under 20 years Above 20 years / under 30 years Above 30 years Total Unredeemed balance Public - - - - - - - - - - Private - - - - - - - - - - Total - - - - - - - - - - ![]() Samsung Electronics Business Report-XBRL G. Details and Compliance of the Bond Management Contract (Samsung Electronics) (Reporting Date: December 31, 2022) (KRW mil, %)% Name of security Date of issuance Maturity date Issued amount Settlement date of bond management contract Debenture management company US$ 100,000,000 7.7% debenture Oct 2, 1997 Oct 1, 2027 126,730 Oct 2, 1997 The Bank of New York Mellon Trust Company, N.A. (Reporting Date: December 31, 2022) Financial ratios Contract details Not applicable Implementation status Not applicable Constraint on collateral Contract details Less than 10% of net tangible assets Implementation status Compliant (there is no collateral for the relevant assets) Constraint on disposal of assets Contract details Certain requirements, such as transfer of obligations on the bond, must be satisfied to dispose all or most of an asset Implementation status Compliant (disposed assets accounted for 0.2% of the total assets during 2022) Constraint on governance Contract Details Not applicable Implementation status Not applicable Submission of implementation report Implementation status Not applicable ※ The exchange rate as of the base date has been applied. ※ The date of the bond management contract was signed on the same day as the Fiscal Agency Agreement; accordingly, the Bank of New York Mellon Trust Company, N.A. is under the authority of the Fiscal Agent. ※ The net tangible assets subjected to the limitation of collaterals are production facilities and stocks owned by the Company. ※ The reporting date is the date when most recent financial statements were prepared, which are used to determine the status of implementation. ※ The constraint on governance is as of the reporting date. ![]() Samsung Electronics Business Report-XBRL 3-2 Use of funds financed through the issuance of securities Not applicable ![]() Samsung Electronics Business Report-XBRL 4. Other financial information A. Restatement of financial statements and other matters to note (1) Restatement of financial statements: Not Applicable (2) Acquisition, divestment, asset sales, and sale of business The major acquisition, divestment and transfer of business during past three years are as follows. [Sale of SSL, SSM] On August 28, 2020, Samsung Display Co., Ltd., the Company’s subsidiary, decided to sell its 100% ownership in Samsung Suzhou Module Co., Ltd. (“SSM”) and 60% ownership in Samsung Suzhou LCD Co., Ltd. (“SSL”) to TCL China Star Optoelectronics Technologies Co. Ltd. (“CSOT”). The sales were completed on April 1, 2021. (3) Information on the accounting treatment of the sales of assets related to asset backed securities and contingent liabilities Accounting Treatment of the sale of assets related to asset backed securities: - Not applicable Litigation The Company is involved in various claims, disputes, and investigations conducted by regulatory bodies, which arose during the normal course of business with numerous entities. Although the outflow of resources and timing of these matters are uncertain, as of the reporting date, the Company believes the outcome will not have a material impact on the financial position of the Company. Debt guarantee - Domestic: Not applicable ![]() Samsung Electronics Business Report-XBRL - Overseas: (USD thousand) Company Relationship Creditor Guarantee Transactions Limit of guarantee Expiry date Beginning of period Increase/ decrease End of period SEA Subsidiary BOA etc. Dec 16, 2023 - - - 1,278,000 SEM Subsidiary BBVA etc. Nov 08, 2023 - - - 715,000 SAMCOL Subsidiary Citibank etc. Dec 16, 2023 - - - 210,000 SEDA Subsidiary BRADESCO etc. Dec 16, 2023 - - - 409,000 SECH Subsidiary Citibank etc. Dec 16, 2023 - - - 62,000 SEPR Subsidiary BBVA etc. Dec 16, 2023 - - - 150,000 SSA Subsidiary SCB etc. Dec 16, 2023 - - - 318,000 SEMAG Subsidiary SocGen etc. Dec 16, 2023 - - - 110,000 SETK Subsidiary BNP etc. Dec 16, 2023 102,275 137,120 239,395 777,000 SETK-P Subsidiary BNP etc. Dec 16, 2023 33,334 -7,685 25,649 130,000 SECE Subsidiary Citibank Dec 16, 2023 - - - 60,000 SEEG Subsidiary HSBC Jun 13, 2023 - - - 85,000 SEIN Subsidiary BNP etc. Nov 08, 2023 - - - 70,000 SJC Subsidiary Mizuho Bank etc. Dec 16, 2023 - - - 832,572 SEUC Subsidiary Credit Agricole etc. Dec 16, 2023 - - - 150,000 SEDAM Subsidiary Citibank etc. Dec 16, 2023 - 155,768 155,768 537,000 SECA Subsidiary BoA Nov 08, 2023 - - - 70,000 SELA Subsidiary Citibank Dec 16, 2023 - - - 60,000 SEEH Subsidiary HSBC etc. Dec 16, 2023 - - - 888,400 SERK Subsidiary SMBC etc. Dec 16, 2023 - - - 45,000 SELV Subsidiary Citibank Dec 16, 2023 - - - 10,000 SEIL Subsidiary Citibank Dec 16, 2023 10,947 -1,283 9,664 15,600 SAPL Subsidiary BOA etc. Dec 16, 2023 - - - 404,000 SAVINA Subsidiary HSBC Jun 13, 2023 - - - 51,000 SCIC Subsidiary HSBC etc. Dec 16, 2023 - - - 300,000 SME Subsidiary SCB Nov 08, 2023 - - - 110,000 SAMEX Subsidiary Citibank Dec 16, 2023 - - - 5,000 SEASA Subsidiary Citibank Dec 16, 2023 - - - 2,000 SSAP Subsidiary SCB Nov 08, 2023 - - - 35,000 SEPM Subsidiary HSBC Jun 13, 2023 - - - 35,000 SESAR Subsidiary HSBC Jun 13, 2023 - - - 20,000 AdGear Technologies Inc. Subsidiary BOA Nov 08, 2023 - - - 2,000 Harman International Industries, Inc. Subsidiary JP Morgan Jun 13, 2023 - - - 100,000 Harman International Japan Co., Ltd. Subsidiary MUFG Nov 08, 2023 - - - 25,000 Harman RUS CIS LLC Subsidiary SocGen May 31, 2022 - - - - Harman Holding Limited Subsidiary HSBC Jun 13, 2023 - - - 30,000 Harman do Brasil Industria Eletronica e Participacoes Ltda. Subsidiary SocGen Nov 08, 2023 - - - 15,000 Harman da Amazonia Industria Eletronica e Participacoes Ltda. Harman International Industries Limited Subsidiary HSBC Jun 13, 2023 - - - 30,000 Harman Finance International, SCA Subsidiary JP Morgan etc. Mar 01, 2022 396,304 -396,304 - - SDN Subsidiary SIEL Nov 22, 2024 571,121 -57,755 513,366 603,960 SAS Subsidiary Epcor The date of debt expiration - - - 340,000 DOWOOINSYS VINA COMPANY LIMITED Subsidiary ANZ Nov 09, 2025 - 20,000 20,000 20,000 Total 1,113,981 -150,139 963,842 9,110,532 ※ Information above are prepared on a consolidated basis. Debt guarantees for Harman Finance International, SCA are provided by Harman International Industries, Inc., SDN by Samsung Display Co., Ltd., SAS by SEA, and DOWOOINSYS VINA COMPANY LIMITED by Dowinsys , respectively. ※ SEC requires Board approval for individual guarantees exceeding 2.5% of total equity. When the guarantee amount is between 0.1% and/or less than 2.5%, the approval decision is delegated to the Management Committee. Samsung Display Co., Ltd requires Board approval for individual guarantees over KRW 10,000 million. ※ SEC claims fees on the debt guarantees depending on the maturity date of each debt guarantee, general loan interest rate, etc. In 2022, the Company claimed approximately USD 547,000 in guarantee fees and, as of the reporting date, has not collected the amount. ![]() Samsung Electronics Business Report-XBRL In 2022, Samsung Display Co., Ltd. claimed approximately USD 3,080,000 in guarantee fees to SDN and, as of the reporting date, has not collected the amount. Refer to the notes to the consolidated financial statements for the information on contingent liabilities. (4) Other matters requiring attention in relation to the use of the financial statements A. Emphasis of matter and key audit matter in Independent auditor’s report Period Emphasis of matter Key audit matter 2022 Not applicable (Consolidated financial statement) 1. Sales deduction related to the Sales promotion activities of products (Separate financial statement) 1. Sales deduction related to the Sales promotion activities of products 2021 Not applicable (Consolidated financial statement) 1. Sales deduction related to the Sales promotion activities of products (Separate financial statement) 1. Sales deduction related to the Sales promotion activities of products 2020 Not applicable (Consolidated financial statement) 1. Sales deduction related to the Sales promotion activities of products 2. Impairment of goodwill and intangible assets with indefinite useful lives (Separate financial statement) 1. Sales deduction related to the Sales promotion activities of products ![]() Samsung Electronics Business Report-XBRL B. Allowance for bad debt The allowances for bad debt by account over the past 3 years are as follows: (KRW mil, %) Period Account Receivables amount Allowance amount Allowance 2022 Trade receivables 36,033,784 312,221 0.9% Short-term loans 22,403 215 1.0% Other receivables 6,227,068 77,859 1.3% Advances 1,741,031 3,965 0.2% Trade receivables (long-term) 204,248 - 0.0% Other receivables (long-term) 824,468 242 0.0% Advances (long-term) 2,382,711 10,969 0.5% Long-term loans 225,983 1,206 0.5% Total 47,661,696 406,677 0.9% 2021 Trade receivables 41,024,295 310,880 0.8% Short-term loans 17,895 73 0.4% Other receivables 4,569,772 72,515 1.6% Advances 1,122,660 3,847 0.3% Trade receivables (long-term) 225,739 - 0.0% Other receivables (long-term) 1,002,404 290 0.0% Advances (long-term) 1,770,999 9,003 0.5% Long-term loans 199,577 917 0.5% Total 49,933,341 397,525 0.8% 2020 Trade receivables 31,283,789 318,731 1.0% Short-term loans 7,813 73 0.9% Other receivables 3,663,822 59,283 1.6% Advances 890,413 3,371 0.4% Trade receivables (long-term) 85,575 - 0.0% Other receivables (long-term) 401,582 204 0.1% Advances (long-term) 1,397,698 5,972 0.4% Long-term loans 113,944 1,309 1.1% Total 37,844,636 388,943 1.0% ※ Based on consolidated financial statements. ※ Receivables amount represents the value after deducting present value discount account. ![]() Samsung Electronics Business Report-XBRL Allowance for bad debt by year (KRW mil) 2022 2021 2020 1. Allowance for bad debt (beginning balance) 397,525 388,943 411,310 2. Net bad debt expense ( ① - ② + ③ ) 16,658 25,926 65,575 ① Bad debt expense, etc (Write-off) 9,711 22,400 40,487 ② Bad debt recovered - - 745 ③ Others 6,947 3,526 25,833 3. Bad debts expense 25,810 34,508 43,208 4. Allowance for bad debts (Ending balance) 406,677 397,525 388,943 ※ Based on consolidated financial statements. The guideline for bad debt allowances for trade receivables (1) Calculation of bad debt allowance  Bad debt allowance is calculated using an expected credit loss impairment model which is based on write-off experience rate and future expected bad debt amount. (2) Calculation basis of write-off experience rate and future expected bad debt:  Write-off experience rate for each aging group of receivables is calculated based on the actual rate of credit losses to three-year average receivables balance.  Future expected bad debt is determined taking into consideration cases of debtor bankruptcy, compulsory execution, death, disappearance, credit information of debtor and forward-looking information. [Bad debt allowance by circumstance] Circumstance Rate of allowance Dispute or conflict 25% Receivable through utilization of third party collection agency 50% Receivable under litigation 75% Customer filed or in the process of filing bankruptcy 100% ![]() Samsung Electronics Business Report-XBRL (3) Instruction: Write-off is recorded when trade receivables contain the following characteristics: ㆍ Objective proof of bad debts, such as bankruptcy, compulsory execution, discontinuance of business, debtor’s death or disappearance ㆍ Legal action has failed or the right of collection has been extinguished. ㆍ When the third party collection agency notifies that collection is not possible. ㆍ When the collateral is sold or insurance is received. ㆍ When collection expense exceeds receivables amount. The outstanding period of trade receivables (Reporting Date: December 31, 2022) (KRW mil, %) Less than 6 months 6 months ~ 1 year 1 year ~ 3 years More than 3 years Total Amount 36,067,812 4,549 68,147 97,524 36,238,032 Ratio 99.5% 0.0% 0.2% 0.3% 100.0% ※ Base on consolidated financial statements. ※ Receivables amount represents the value after deducting present value discount account. ![]() Samsung Electronics Business Report-XBRL C. Inventory - The inventory status by Division over the last three years is as follows: ( KRW mil, % ) ※ Based on consolidated financial statements Division Category 2022 2021 2020 Note DX Finished goods 7,712,885 8,894,766 7,088,063 Work in process 1,013,606 799,218 592,903 Raw material 10,520,293 11,384,887 7,862,310 Material in transit 943,322 1,299,624 876,270 Total 20,190,106 22,378,495 16,419,546 DS Finished goods 6,601,087 2,490,097 1,719,095 Work in process 18,756,104 11,809,911 10,639,866 Raw material 3,639,061 2,118,424 1,674,081 Material in transit 61,352 36,685 46,587 Total 29,057,604 16,455,117 14,079,629 SDC Finished goods 811,518 294,777 134,963 Work in process 542,473 874,229 650,762 Raw material 788,521 810,325 603,779 Material in transit 23,626 48,253 33,271 Total 2,166,138 2,027,584 1,422,775 Harman Finished goods 799,919 533,008 502,117 Work in process 119,890 105,271 80,237 Raw material 913,085 736,109 337,386 Material in transit 269,715 321,128 224,961 Total 2,102,609 1,695,516 1,144,701 Total Finished goods 16,032,226 12,280,579 9,387,886 Work in process 20,077,519 13,473,618 11,818,090 Raw material 14,979,280 14,184,841 9,790,766 Material in transit 1,098,841 1,445,366 1,046,403 Total 52,187,866 41,384,404 32,043,145 Inventory ratio (%) [Inventory ÷ Total Assets] ⅹ 100 11.6% 9.7% 8.5% Inventory turnover (x) [ Yearly COGS ÷ {(Beginning of inventory + End of inventory)÷2}] 4.1 4.5 4.9 ![]() Samsung Electronics Business Report-XBRL Inventory counts (1) Inspection date ㆍ End of May and November (twice a year) ㆍ For the difference in inventories between the inspection date and at the end of the year, the Company checks all the warehouse record during the period in order to confirm the existence of the inventories as of the date of the financial statements. (2) Inspection method ㆍ Internal warehouse: Closed & entire quantity inspection ※ Sample inspection for semi-conductor and DP work-in-progress inventories, SVC materials ㆍ Outside warehouse Perform check for the possession confirmation documents and sample tests at the third party warehouse and inventory- in-transit. ㆍ External auditors join and observe the inspection and carry out sample tests to check the existence and completeness. ※ For the HQ, the most recent inventory inspection was conducted from May 29 to June 5, 2022, and the subsidiaries conducted the inventory inspection during the same period as HQ. Inventory aging and valuation Inventories are stated at the lower of cost or net realizable value. Inventory as of December 31, 2022 are as follows: ( KRW mil ) Category Acquisition cost Inventory valuation reserve Balance Note Finished goods 17,526,178 -1,493,952 16,032,226 Work in process 21,612,965 -1,535,446 20,077,519 Raw material 16,268,974 -1,289,694 14,979,280 Material in transit 1,098,841 - 1,098,841 Total 56,506,958 -4,319,092 52,187,866 ※ Based on consolidated financial statements D. Fair value estimation Refer to 3. Financial Instruments by Category and 25. Financial Risk Management in 『Ⅲ . Financial Affairs 』 . ![]() Samsung Electronics Business Report-XBRL V. Management Discussion and Analysis 1. Note on forward-looking statements This annual report includes forward-looking statements that relate to future events and can be generally identified by phrases containing words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words or phrases of similar meaning. These forward-looking statements are not guarantees of future performance and may involve known and unknown risks, uncertainties and other factors that may affect our actual results, performance, achievements or financial position, making them materially different from the actual future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Unless otherwise specified, all data presented in this report is from our consolidated financial statements. Uncertain events that could positively or negatively affect the Company’s management condition and financial performance include, but are not limited to: • Trends of financial markets domestically and abroad, including changes in exchange rates and interest rates • The Company’s strategic decision making, including disposals and purchases of businesses • Unexpected sudden changes in core businesses within DX, DS, SDC and Harman • Other changes domestically and abroad that can affect management condition and financial performance The Company assumes no obligation to revise or update this report to reflect risks or uncertainties that arise after the reporting period. (Responsibility statement) In accordance with article 3(2) c) of the Transparency Law (Luxembourg), Jong-Hee Han and Hark-kyu Park, as a CEO and the executive in charge of reporting confirm that, to the best of their knowledge, the consolidated financial statements and the statutory non-consolidated financial statements prepared in accordance with the applicable set of accounting standards give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole and that the management report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. 2. Overview The business environment remained challenging in 2022 as uncertainties in the global economy intensified due to increasingly aggressive monetary tightening globally, the Russia-Ukraine war, and supply issues involving raw materials and energy. Despite the formidable economic conditions, Samsung Electronics achieved a total revenue of KRW 302 trillion and operating profit of KRW 43 trillion on a consolidated basis and a total revenue of KRW 212 trillion and operating profit of KRW 25 trillion on a standalone basis. Our financial structure remained sound—we recorded a debt ratio of 26.4%, capital adequacy ratio of 79.1%, and ROE of 16.9% on a consolidated basis. On a standalone basis, the respective figures were 24.2%, 80.5%, and 12.6%. Our brand value in 2022 was evaluated at an all-time high of USD 87.7 billion ( Interbrand ; November 2022), up 17% from last year’s figure and maintaining our position as the world’s fifth most valuable brand. On the business side, we further solidified our market power and industry leadership by launching the Galaxy Z Fold 4 and Z Flip 4 while strengthening our lineup of Neo QLED TVs and Bespoke products; and we further enhanced the profitability and cost competitiveness of the component business based on our capabilities in core technologies, which include the world’s first adoption of multi-step EUV technology. In 2023, global economic uncertainties, such as continued monetary tightening and prolonged supply issues for raw ![]() Samsung Electronics Business Report-XBRL paradigm in the IT industry will present numerous hurdles. However, we will leverage such challenges as opportunities and devote all our energy—via relentless innovations and thorough preparations—to improve our earnings and ensure swift responses to future opportunities. ![]() Samsung Electronics Business Report-XBRL 3. Financial position and performance (consolidated) A. Financial position (KRW mil) Classification 2022 2021 Increase/decrease change Current assets 218,470,581 218,163,185 307,396 0.1% - Cash and cash equivalents 49,680,710 39,031,415 10,649,295 27.3% - Short-term financial instruments 65,102,886 81,708,986 -16,606,100 -20.3% - Other current financial assets 443,690 3,409,791 -2,966,101 -87.0% - Trade and other receivables 35,721,563 40,713,415 -4,991,852 -12.3% - Inventories 52,187,866 41,384,404 10,803,462 26.1% - Other current assets 15,333,866 11,915,174 3,418,692 28.7% Non-current assets 229,953,926 208,457,973 21,495,953 10.3% - Other non-current financial assets 12,802,480 15,491,183 -2,688,703 -17.4% - Associates and joint ventures 10,893,869 8,932,251 1,961,618 22.0% - Property, plant and equipment 168,045,388 149,928,539 18,116,849 12.1% - Intangible assets 20,217,754 20,236,244 -18,490 -0.1% - Other non-current assets 17,994,435 13,869,756 4,124,679 29.7% Total assets 448,424,507 426,621,158 21,803,349 5.1% Current liabilities 78,344,852 88,117,133 -9,772,281 -11.1% Non-current liabilities 15,330,051 33,604,094 -18,274,043 -54.4% Total liabilities 93,674,903 121,721,227 -28,046,324 -23.0% Equity attributable to owners of the parent 345,186,142 296,237,697 48,948,445 16.5% Non-controlling interest 9,563,462 8,662,234 901,228 10.4% Total equity 354,749,604 304,899,931 49,849,673 16.3% Total liabilities and equity 448,424,507 426,621,158 21,803,349 5.1% Capital adequacy ratio 79.1% 71.5% 7.6%p Debt-to-equity ratio 26.4% 39.9% -13.5%p Inventory turnover 4.1 4.5 -0.4 Presented in accordance with K-IFRS. If the agenda item related to the approval of financial statements is rejected or adjusted at the AGM, the details will be published in future reports. ![]() Samsung Electronics Business Report-XBRL Samsung Electronics’ total assets in 2022 were KRW 448.4245 trillion, an increase of KRW 21.8033 trillion (5.1%) from the previous year. The increase is mainly attributable to inventories, which increased by KRW 10.8035 trillion, and to an increase in tangible assets caused by facility investments worth KRW 18.1168 trillion for the semiconductor and DP businesses. Total liabilities were KRW 93.6749 trillion, a decrease of KRW 28.0463 trillion (23.0%) from the previous year. This includes a decrease of KRW 9.7723 trillion (11.1%) in current liabilities and a decrease of KRW 18.2740 trillion (54.4%) in non-current liabilities. The changes are attributable to the KRW 8.5405 trillion and KRW 18.0869 trillion decreases in short-term borrowings and deferred income tax liabilities, respectively. Total equity was KRW 354.7496 trillion, an increase of KRW 49.8497 trillion (16.3%) from the previous year. Retained earnings grew by KRW 44.8816 trillion year-on-year from net income of KRW 54.7300 trillion and dividends of KRW 9.8094 trillion. Other components of equity increased by KRW 4.0668 trillion due to factors such as the overseas operations translation difference. In terms of financial ratios, the Company maintained a sound financial structure as the capital adequacy ratio increased by 7.6%pts from the previous year to 79.1% and the debt-to-equity ratio decreased by 13.5%pts from the previous year to 26.4%. B. Performance (KRW mil) Classification 2022 2021 Increase/decrease Change Sales 302,231,360 279,604,799 22,626,561 8.1% Cost of sales 190,041,770 166,411,342 23,630,428 14.2% Gross profit 112,189,590 113,193,457 -1,003,867, -0.9% Selling and administrative expenses 68,812,960 61,559,601 7,253,359 11.8% Operating profit 43,376,630 51,633,856 -8,257,226 -16.0% Other income 1,962,071 2,205,695 -243,624 -11.0% Other expenses 1,790,176 2,055,971 -265,795 -12.9% Gain on valuation using the equity method of accounting 1,090,643 729,614 361,029 49.5% Financial income 20,828,995 8,543,187 12,285,808 143.8% Financial expenses 19,027,689 7,704,554 11,323,135 147.0% Income before income tax expense 46,440,474 53,351,827 -6,911,353 -13.0% Income tax expense -9,213,603 13,444,377 -22,657,980 -168.5% Net income 55,654,077 39,907,450 15,746,627 39.5% Equity attributable to owners of the parent 54,730,018 39,243,791 15,486,227 39.5% Non-controlling interests 924,059 663,659 260,400 39.2% Presented in accordance with K-IFRS. If the agenda item related to the approval of financial statements is rejected or adjusted at the AGM, the details will be published in future reports. In 2022, revenue increased year-on-year by KRW 22.6266 trillion (8.1%) to an all-time annual high of KRW 302.2314 trillion, driven by expanding sales of premium products, such as Neo QLED TV, Bespoke, and flagship smartphones, as ![]() Samsung Electronics Business Report-XBRL well as currency effects on the DS Division. However, operating profit decreased year-on-year by KRW 8.2572 trillion (16.0%) to KRW 43.3766 trillion due to a decline in semiconductor ASP and the impacts of increased logistics costs from the finished product businesses. Income before income taxes decreased year-on-year by KRW 6.9114 trillion (13.0%) to KRW 46.4405 trillion, and net income increased by KRW 15.7466 trillion (39.5%) to KRW 55.6541 trillion. We continued to maintain a sound financial structure, highlighted by a year-on-year increase in ROE of 3.2%pts to 16.9%, and an increase in net profit ratio of 4.1%pts to 18.4%. ![]() Samsung Electronics Business Report-XBRL [Performance by division] ( KRW mil ) Classification Division 2022 2021 Change Amount Share Amount Share Amount (%) Revenue DX Division 182,489,720 60.4% 166,259,437 59.5% 16,230,283 9.8% DS Division 98,455,270 32.6% 95,387,173 34.1% 3,068,097 3.2% SDC 34,382,619 11.4% 31,712,526 11.3% 2,670,093 8.4% Harman 13,213,694 4.4% 10,039,922 3.6% 3,173,772 31.6% Overall revenue 302,231,360 100.0% 279,604,799 100.0% 22,626,561 8.1% Operating profit DX Division 12,746,074 29.4% 17,386,554 33.7% -4,640,480 -26.7% DS Division 23,815,810 54.9% 29,192,021 56.5% -5,376,211 -18.4% SDC 5,952,973 13.7% 4,457,365 8.6% 1,495,608 33.6% Harman 880,548 2.0% 599,097 1.2% 281,451 47.0% Overall operating profit 43,376,630 100.0% 51,633,856 100.0% -8,257,226 -16.0% Includes inter-divisional revenue and operating profit. (DX Division) The DX Division’s revenue in 2022 increased by KRW 16.2303 trillion (9.8%) from the previous year to KRW 182.4897 trillion, but operating profit decreased by KRW 4.6405 trillion (26.7%) to KRW 12.7461 trillion. Revenue growth was driven by sales of premium products, which include Neo QLED TVs, Bespoke products, and flagship smartphones, but operating profit declined due to the impacts of increased logistics costs. In the DX Division, the VD/DA businesses are sustaining growth led by sales of premium products, including those for Neo QLED TVs featuring premium technology, as well as for products tailored to experience-oriented lifestyles, such as our Lifestyle TVs, Bespoke products, and new home appliance products. In the Visual Display Business, we are expanding our leadership in the premium, ultra-large, over 75” TV market with QLED TVs featuring quantum dot technology, and we are growing market power with continued releases of new Lifestyle TV products, such as The Terrace and The Premier. In addition, we keep pushing the boundary of the overall market with diverse new products such as The Wall micro LED TV, soundbars, and LED signage. Based on positive responses for our new products, Samsung has remained atop the global TV market for 17 consecutive years, spanning from 2006 to 2022, fortifying our industry leadership. In 2023, the Company will continue to innovate to lift demand for premium TVs and sales of Lifestyle products. We will leverage micro LED technology to lead form factor in the industry; and we will present new lifestyles through additional design differentiations, which include an expansion of our lineup of lifestyle products that reflect changing patterns of how consumers use screens, including the way they connect mobile devices and content and how they interact with fitness training and gaming at home. Furthermore, as part of our Company’s new environmental strategy, we will strive to ensure sustainable growth by adopting more components made from recycled plastic in our eco-friendly remote controls and by releasing new TV products that offer ultra-low-power technology. In the Digital Appliance Business, we continue to launch products and services that not only offer advanced functions based on highly-efficient, eco-friendly technologies, but also increase convenience in our consumers’ lives, all based on a deep understanding of the changing life patterns of our consumers. We are also creating new value with smart appliances that connect with various devices as well as a suite of services centering on Bixby and SmartThings. In 2023, we aim to keep innovating user experiences by expanding global sales through differentiated Bespoke product ![]() Samsung Electronics Business Report-XBRL lineups. For our high margin B2B businesses, which include system air conditioners and built-in home appliances, we will strengthen our competitiveness to win more orders and maintain growth momentum by offering differentiated eco-friendly features and adopting customized products, for example. In addition, we will offer customized services by connecting products so our consumers can enjoy unparalleled user experiences; and we will fortify our status as a global brand in home appliances by strengthening activities that promote ESG by reducing energy use and expanding adoption of eco-friendly materials, to name a few. Even amid challenging market conditions, including prolonged geopolitical issues and effects of inflation and the economic downturn, the DX Division’s MX Business achieved solid results, including an increase in market share in the flagship smartphone market on the back of bolstered product competitiveness. In the premium segment, following the launch of the Galaxy Z Flip and Galaxy Z Fold 2 in 2020, we released the S-series in 2021 to deliver experiences tailored to the various lifestyles of our users, further expanding our premium user base. Foldables, along with S-series models, are spearheading growth of our flagship products by offering unique user experiences. Moreover, the Galaxy Ecosystem allowed customers to experience expanded connectivity between various products and services and take advantage of collaborations with global partners, leading growth in the tablet, PC, and wearables businesses to exceed market and thus highlight strength in this segment in 2021. In 2022, facing heightened market uncertainties, including geopolitical issues, and stagnant demand, we focused our capabilities on our flagship products, increasing the sales portion and ensuring smooth supply of S22 Ultra—the top model in the S-series—thereby fortifying our status in the flagship market. In 2023, we will aggressively pursue strategies to overcome challenges in the mobile market, which is expected to contract. We will push to expand our premium customer base by promoting the S23 and S23 Ultra to strengthen our leadership in the flagship market; and for foldables, we will stay atop the global market by further fortifying our market-leading position via our technology and broad cooperation with partners. In addition, we will actively address demand to transition to 5G via mass-market products in emerging markets, such as Southeast Asia and Latin America, to pursue overall growth in smartphones. Furthermore, by closely collaborating with the DX Division, the MX Business will expand our Multi Device experience, which enables convenient use of not only mobile products, but also TVs and home appliances, enabling our customers to enjoy an ultimate experience via the Galaxy Ecosystem. Under a management philosophy that prioritizes future-oriented values and customer experiences, we will continue to preemptively address changing market landscapes and diversifying customer needs. We are endeavoring to preemptively secure core technologies and platforms—such as eXtended Reality (XR), chipsets, and digital health/wallets—that will power next-gen growth engines based on open cooperation; all while continuing to achieve solid results and lead the mobile market. (DS Division) In the DS Division, revenue in 2022 increased by KRW 3.0681 trillion (3.2%) year-on-year to KRW 98.4553 trillion, but operating profit decreased by KRW 5.3762 trillion (18.4%) to KRW 23.8158 trillion compared to the prior year due to the repercussions of a decline in semiconductor ASP in the second half of the year. The Memory Business is focusing on bolstering competitive edges by maintaining its dominant position in cost competitiveness via technology leadership and through timely responses to market demand, even amid challenging business conditions that include a global economic slowdown and sluggish demand. In 2023, we expect customer inventory adjustments to continue and macro factors to keep dampening consumer sentiment in the short-term, and we will prepare for various scenarios—including a potential demand recovery in the second half—and continue to monitor market conditions to proactively address changes. For DRAM, we further strengthened our technological competitiveness by preemptively establishing a DRAM mass production system that applies multi-step EUV technology—a world’s first. We are focusing on qualitative growth by ![]() Samsung Electronics Business Report-XBRL operating portfolios centered on high-value and high-capacity products. Furthermore, we will actively address DDR5 demand from server and PC resulting from full-fledged adoption of a new CPU while ensuring timely responses to growing demand centering on high-capacity server and mobile products via an optimized product mix. For NAND, we will work toward bolstering cost competitiveness and fortifying market leadership by securing a lineup of advanced products via promoting the full-fledged adoption of 8th-generation V-NAND in 2023, and by migrating to 7th- generation V-NAND products, which demonstrates our exceptional technological capabilities. System LSI is sustaining growth momentum by maximizing revenue with the goal of transforming into a platform supplier by fully realizing synergies among various application products. Moreover, based on our product competitiveness, we will continue to expand our customer base and actively secure new technologies to prepare for market changes. For SoCs, we are securing additional customers, including for mobile- and automotive-use SoCs, while reinforcing our product lineup by leveraging our 5G technology, and we are continuing to prepare for the future by developing next-generation IP technologies. For image sensors, we launched 200MP sensors for mobile products for the first time in the world, leveraging our technological capabilities in micro-pixel ISOCELL; and for automotive image sensors, we continue to increase orders. For Foundry in 2023, we expect growth to slow with the depressed market carried forth from 2H22 likely to keep weighing on demand and influencing inventory adjustments at customers, so we aim to use the year as an opportunity to sharpen our competitive edges by improving our fundamentals while working to overcome the downturn. For advanced nodes, we are concentrating on an early ramp of the 2nd generation 3nm GAA process and on the development of the next-generation 2nm process. For matured nodes, we aim to develop specialty processes that are customized to customer needs and expand our customer base to include various industries by diversifying within applications, including HPC, automotives, and IoT. In addition, we will endeavor to strengthen our services that promote shared growth with our customers by providing a platform offering customer-centric design and improved VoC functionality. (SDC) SDC’s revenue in 2022 was KRW 34.3826 trillion, up KRW 2.6701 trillion (8.4%) from the previous year, and operating profit increased by KRW 1.4956 trillion (33.6%) to KRW 5.9530 trillion. Both revenue and operating profit increased on the back of expanded sales of value-added OLED panels and currency effects. The mobile display business achieved solid earnings, led mainly by high-end products, despite a decline in smartphone demand due to weakened consumer sentiment caused by concerns over inflation, rate hikes, and the economic downturn. We actively addressed our customers’ increasingly sophisticated needs by establishing an optimal product portfolio that ranges from mass-market through to premium products with our Flexible and Rigid OLED panels. Indeed, our industry- leading technological capabilities have been recognized based on our products’ differentiated technologies and performance. In the large display business, we delivered tangible achievements with our preemptive business restructuring, which includes the transition to QD-OLED. We have commenced our QD-OLED business in earnest and it is operating seamlessly, with stable mass production via the early securing of yields and a successful entry into the premium market. In 2023, we expect the business landscape to remain challenging due to unstable market conditions triggered by inflation and tight monetary policies and as our peers enter the market in earnest. For the mobile panel business, we will leverage our technological gap in the high-end smartphone market, which is likely to stay relatively solid; and we will strengthen our market dominance through our superior cost competitiveness. Moreover, we will further solidify our leadership by diversifying our product portfolio by expanding into IT, gaming, and automotive products. In the large panel business, amid expectations for sluggish demand due to prolonged economic uncertainties, we will keep enhancing profitability by strengthening sales foundations in the premium market based on a stabilized yield. ![]() Samsung Electronics Business Report-XBRL (Harman) For Harman in 2022, revenue increased by KRW 3.1738 trillion (31.6%) to KRW 13.2137 trillion and operating profit increased by KRW 0.2815 trillion (47.0%) to KRW 0.8805 trillion. Both revenue and operating profit grew thanks to improved earnings from the automotive sector on the back of alleviated chip supply issues and as consumer audio sales remained strong. Harman recorded its strongest results since its acquisition in the automotive components, consumer audio, and professional solution markets, despite a challenging business environment marked by disruptions in global logistics. Harman was able to expand its business capabilities through internal innovations as well as synergies with mobile, IT, display, and semiconductor technologies from various businesses of Samsung Electronics. As a leader in the car component market, we supply car manufacturers with products that apply innovative technologies, all while maintaining quality at a level befitting a premium brand. In the infotainment market, we gained early dominance by preemptively addressing the transition to digital cockpits, and we won the industry’s first order for 5G Telematics Control Units (TCUs) via our development of differentiated technologies. We will focus our capabilities on providing a more convenient, pleasant, and safe in-cabin experience by preparing for the era of autonomous vehicles based on such technological innovations. In the consumer audio market, we have used our innovative technologies to firmly establish the brand’s reputation among consumers and audiophiles. In particular, JBL has sold the most Bluetooth speakers in the global market for seven consecutive years, and it is sustaining notable growth momentum in the wireless earphone market. In 2023, we expect to see a significant decline in global GDP growth compared to 2022 and additional deterioration of the business environment, including stagnant automotive and audio markets. However, we will strive to secure product and cost competitiveness via thorough preparations and technology innovations while remaining committed to enhancing shareholder value by achieving solid earnings. C. New and closed businesses N/A ![]() Samsung Electronics Business Report-XBRL D. Changes in organizational structure In December 2021, the Company merged and restructured the CE and IM Divisions to form the DX Division and renamed the Mobile Communications Business to the Mobile eXperience (MX) Business. Also, SDC and the DS Division have been separated to align with the corporate organizational structure. [ As of December 2021] Before After Business organization CE Division (Visual Display, Digital Appliances, Health & Medical Equipment) DX Division (Visual Display, Digital Appliances, Health & Medical Equipment, Mobile eXperience, Network) IM Division (Mobile, Network) DS Division (Memory, System LSI, Foundry, DP) DS Division (Memory, System LSI, Foundry) SDC (DP) Harman Division Harman Regional headquarters Korea, North America, Latin America, Europe, CIS, Southwest Asia, Southeast Asia, China, Middle East, Africa Korea, North America, Latin America, Europe, CIS, Southwest Asia, Southeast Asia, China, Middle East, Africa Americas (DS), Europe (DS), China (DS), Southeast Asia (DS), Japan (DS) Americas (DS), Europe (DS), China (DS), Southeast Asia (DS), Japan (DS) ![]() Samsung Electronics Business Report-XBRL E. Foreign exchange risk The Company experiences currency gains and losses based on the different functional currency of each entity due to global operations. As such, the Company is exposed to foreign currency volatility from exchange positions of currencies, especially related to the US dollar, Euro and Indian rupee. (closing rate end at year-end by currency) Currency 2022 2021 Change Change (%) USD 1,267.30 1,185.50 81.80 6.9% EUR 1,351.20 1,342.34 8.86 0.7% INR 15.31 15.93 -0.62 -3.9% The foreign currency exposure to financial assets and liabilities of a 5% currency rate change against the Korean won (before income tax) are presented below: (KRW mil) Currency December 31, 2022 December 31, 2021 Increase Decrease Increase Decrease USD 258,655 -258,655 250,489 -250,489 EUR 92,546 -92,546 107,519 -107,519 INR 52,096 -52,096 24,216 -24,216 To minimize foreign exchange risk arising from operating activities, the Company maintains the same level of equity and liability in each currency regardless of foreign exchange fluctuations. The Company’s foreign exchange management policy requires normal business transactions (including imports and exports) to be conducted in the local currency or for the cash- in currency to be matched with the cash-out currency. The Company effectively manages its foreign exchange risk by regular monitoring foreign exchange rates and limits all foreign exchange transactions besides the purpose of hedging risks. F. Recognition of asset impairment loss The Company conducts an annual review on asset impairment of CGUs (cash generating unit). The recoverable amount of a CGU is based on the calculation of value in use, and the value in use is calculated using a BTCF (before tax cash flow) assumption that based on the financial budget for the next five years (or longer if mid- to long-term plans for new businesses with emerging technologies are deemed appropriate) approved by the management committee. In calculating terminal-year cash flow for period that exceeds the term, assumption of fixed average growth (does not exceed industry average) was used. Impairment losses are recognized to the extent the carrying amount exceeds the recoverable amount of a CGU. The recoverable amount is determined by choosing the greater figure between the use-value and fair-value, which deducts the disposal amount per cost. Recognized impairment gains or losses in 2022 reached KRW 26.4 billion for tangible assets and KRW 6.3 billion for intangible assets. Refer to 『 3. Notes to consolidated financial statements 』 of 『 III. Financial Affairs 』 and 『 B. Equity Investments in other corporations 』 of 『 IX. Affiliates and Subsidiaries 』 for more details about asset impairment loss. ![]() Samsung Electronics Business Report-XBRL 4. Liquidity, financing, and expenditure Due to large investments made by the Company, maintaining adequate levels of liquidity is critical. The Company strives to achieve this goal by periodically forecasting its cash flow, estimating required cash levels, and managing income and expenses. The Company preemptively manages risks by predicting cash flow on a regular basis. We efficiently manage liquidity risk through cash pooling by region, which allows the use of internal funds in case of lack of funds in the region. The cash pooling program allows sharing of surplus funds among entities and contributes to minimizing liquidity risk and strengthening the Company’s competitive position by reducing capital operating expenses and finance expenses. In addition, the Company provides payment guarantees, securing the limit of borrowing for overseas subsidiaries to prepare for any potential need for large-scale liquidity. A. Current status of liquidity The Company has ample liquidity, and its cash coverage (liquid funds/borrowings) is 1,115%. 2022 2021 Cash coverage (liquid funds/borrowings) 1,115% 675% The Company’s liquidity as of December 31, 2022, is presented below: (KRW mil) Classification 2022 2021 Change Liquid funds Cash and cash equivalents 49,680,710 39,031,415 10,649,295 Short-term financial instruments 65,102,886 81,708,986 -16,606,100 Short-term financial assets at amortized cost 414,610 3,369,034 -2,954,424 Financial assets at fair value through profit or loss 29,080 40,757 -11,677 Total financial assets 115,227,286 124,150,192 -8,922,906 Borrowings Short-term borrowings 5,147,315 13,687,793 -8,540,478 Current portion of long-term liabilities 1,089,162 1,329,968 -240,806 Debentures 536,093 508,232 27,861 Long-term borrowings 3,560,672 2,866,156 694,516 Total financial liabilities 10,333,242 18,392,149 -8,058,907 Net cash (liquid funds – borrowings) 104,894,044 105,758,043 -863,999 Current portion of long-term liabilities is current portion of long-term borrowings and current portion of debentures. ![]() Samsung Electronics Business Report-XBRL As of the end of 2022, the Company had KRW 115.2273 trillion of financial assets. These liquid funds include: i) cash and cash equivalents; ii) short-term financial instruments; iii) short-term financial assets at amortized cost; and iv) financial assets at fair value through other comprehensive income. This balance decreased by KRW 8.9229 trillion from KRW 124.1502 trillion at the end of the previous year. The Company’s borrowings (including debentures) are KRW 10.3332 trillion, a decrease of KRW 8.0589 trillion from KRW 18.3921 trillion at the end of the previous year. The Company’s liquidity includes an inflow of KRW 62.1813 trillion in cash flows from operating activities and an outflow of KRW 53.1267 trillion in acquisition of tangible and intangible assets, and KRW 9.8144 in dividends. The Company’s net cash (liquid funds – borrowings) in 2022 is KRW 104.8940 trillion, which is a decrease of KRW 0.8640 trillion from KRW 105.7580 trillion at the end of the previous year. B. Financing and expenditures (Borrowings) As of December 31, 2022, the Company’s borrowings (including debentures) are presented below: (KRW mil) Classification Creditor Annual interest rate (%) 2022 2021 Short-term borrowings Collateralized borrowings Woori Bank, etc. 0.0–16.7 3,569,357 11,556,101 Non-collateralized borrowings CitiBank, etc. 0.1–38.5 1,577,958 2,131,692 Total short-term borrowings - - 5,147,315 13,687,793 Liquid long-term borrowings Bank borrowings BNP, etc. 38.9 – 53.2 208,915 40,415 Capital lease liabilities CSSD, etc. 3.5 874,019 811,902 Total liquid long-term borrowings 1,082,934 852,317 Long-term borrowings Bank borrowings Industrial Bank of Korea, etc. 1.6–5.9 33,846 1,500 Capital lease liabilities CSSD, etc. 3.5 3,526,826 2,864,656 Total long-term borrowings - 3,560,672 2,866,156 (KRW mil) Classification Issuance date Maturity date Annual interest rate (%) 2022 2021 Debentures USD denominated straight bonds Oct 2, 1997 Oct 1, 2027 7.7 31,683 (USD 25,000,000) 35,565 (USD 30,000,000) ![]() Samsung Electronics Business Report-XBRL USD denominated debenture bonds May 11, 2015 May 15, 2025 4.2 506,920 (USD 400,000,000) 474,200 (USD 400,000,000) EUR denominated debenture bonds May 27, 2015 May 27, 2022 2.0 - 469,819 (EUR 350,000,000) Sub Total 538,603 979,584 Premium on bonds payable (discount on bonds payable) 3,718 6,299 Total 542,321 985,883 Deduction: Current debentures (6,228) (477,651) Non-current debentures 536,093 508,232 (Borrowings and payment of borrowings) The Company’s short-term borrowing increases or decreases depending on the discount amount of trade receivables. In 2022, short-term borrowing decreased by KRW 8.5405 trillion, while KRW 0.4816 trillion of long-term borrowing increased due to increased capital lease liabilities. (Plan for payment of borrowings) The Company’s plan for payment of borrowings (including debentures) is presented below: (KRW mil) Year of payment Amount of payment 2023 6,384,334 2024 873,525 2025 1,235,366 2026 589,082 2027~ 1,912,869 Total 10,995,176 Amount calculated excluding bond discount, premium on bonds payable, and present value of bonds payable discount. (Compliance to bond management contract conditions) The Company’s bonds are subject to conditions to protect investors such as constraint on collateral, constraint on disposal of assets, etc., and the Company complies with these conditions. 5. Off-balance sheet activities - Refer to 『 2. Notes to consolidated financial statements 』 in 『 III. Financial Affairs 』 ![]() Samsung Electronics Business Report-XBRL 6. Other information for investment decision making A. Significant accounting policies and estimation - The Company applied the following major amended and enacted standards for the annual period beginning on January 1, 2022: Amendments to Korean IFRS 1116, Lease During the year ended December 31, 2020, the amendments to Korean IFRS 1116 introduced a practical expedient that provided practical relief to lessees in accounting for rent concessions occurring as a direct consequence of COVID-19. The amendments extend the practical expedient to apply to reduction in lease payments originally due on or before 30 June 2022. The application of the amendments does not have a significant impact on the consolidated financial statements. Amendments to Korean IFRS 1103, Business Combinations The amendments add to Korean IFRS 1103 a requirement that, for obligations within the scope of IAS 37, an acquirer applies Korean IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets or Korean IFRS 2121 Levies to determine whether at the acquisition date a present obligation exists as a result of the past events. The amendments also add an explicit statement that an acquirer does not recognize contingent assets acquired in a business combination. The application of the amendments does not have a significant impact on the consolidated financial statements. Amendments to Korean IFRS 1016 Property, Plant and Equipment The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of producing those items, in profit or loss. The application of the amendments does not have a significant impact on the consolidated financial statements. Amendments to Korean IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract and an allocation of other costs that relate directly to fulfilling the contract. The application of the amendments does not have a significant impact on the consolidated financial statements. B. Environment and employees - Refer to 『 3. Matters related to sanctions 』 in 『 XI. Other information 』 for environmental sanctions or administrative actions. - No significant changes in employee positions during this period. C. Legal regulations - Refer to 『 3. Matters related to sanctions 』 in 『 XI. Other information 』 for major legal regulations on the Company’s businesses. ![]() Samsung Electronics Business Report-XBRL D. Derivatives and risk management policy - To manage exchange rate risk, overseas companies hedge by buying or selling currency forwards for a foreign currency position that is not among the companies' functional currencies. - Refer to 『 5. Risk management and derivative trading 』 in 『 II. Businesses Overview 』 and 『 3. Notes to Financial Statements 』 in 『 III. Financial Affairs 』 for the Company’s key derivatives and risk management policy. ![]() Samsung Electronics Business Report-XBRL VI. Appendix A. TCFD Recommendations and Recommended Disclosures - The Company included in Sustainability Report climate-related financial disclosures consistent with the TCFD Recommendations and Recommended Disclosures.