.2

KB SECURITIES CO., LTD.

Separate Financial Statements

December 31, 2025 and 2024

(With Independent Auditor’s Report Thereon)

KB SECURITIES CO., LTD.

Index

December 31, 2025 and 2024

 

		Page(s)
Independent Auditor’s Report			1~3
Separate Financial Statements
Separate Statements of Financial Position			4
Separate Statements of Profit or Loss			5
Separate Statements of Comprehensive Income			6
Separate Statements of Changes in Equity			7
Separate Statements of Cash Flows			8
Notes to the Separate Financial Statements			9-140
Report on Independent Auditor’s Review of Internal Control over Financial Reporting			141-142
Report on the Effectiveness of Internal Control over Financial Reporting			143-148

Independent Auditor’s Report

(English Translation of a Report Originally Issued in Korean)

To the Board of Directors and Shareholders of KB Securities Co.,Ltd.

Opinion

We have audited the separate financial statements of KB Securities Co.,Ltd. (the Company), which comprise the separate statements of financial position as at December 31, 2025 and 2024, and the separate statement of profit or loss, separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows for the year then ended, and notes to the separate financial statements, including material accounting policy information.

In our opinion, the accompanying separate financial statements present fairly, in all material respects, the separate financial position of KB Securities Co.,Ltd. as at December 31, 2025 and 2024, and its separate financial performance and its separate cash flows for the years then ended in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS).

Basis for Opinion

We conducted our audit in accordance with Korean Standards on Auditing. 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 ethical requirements of the Republic of Korea that are relevant to our audit of the separate financial statements and we have fulfilled our other ethical responsibilities in accordance with the ethical requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Other Matter

Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such separate financial statements may differ from those generally accepted and applied in other countries.

Responsibilities of Management and Those Charged with Governance for the Separate Financial Statements

Management is responsible for the preparation and fair presentation of the separate financial statements in accordance with Korean IFRS, and for such internal control as management determines 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 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.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

 

1

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 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 Korean Standards on Auditing 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 Korean Standards on Auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

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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.

 

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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 entity’s internal control.

 

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

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Conclude on the appropriateness of 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 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.

 

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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.

 

2

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.

/s/ Samil PricewaterhouseCoopers

Seoul, Korea

March 05, 2026

 

 

3

KB SECURITIES Co., Ltd.

Separate Statements of Financial Position

December 31, 2025 and 2024

 

 

(in Korean won)		Notes				2025				2024
Assets
Cash and deposits			5,36,37,38				3,767,944,128,595				2,952,551,951,253
Financial assets at fair value through profit or loss			6,36,37,38				42,376,304,042,704				36,753,823,519,333
Derivative financial assets			7,36,37,38,39				1,611,961,052,874				1,395,942,910,151
Financial assets at fair value through other comprehensive income			8,36,37,38				9,459,679,647,147				6,481,713,944,068
Investments in subsidiaries			9				638,647,274,515				768,913,285,170
Investments in associates			9				346,345,075,073				244,815,981,444
Financial assets measured at amortised cost			10,36,37,38,39				8,635,267,843,336				8,100,472,956,531
Property and equipment			11,40				228,692,054,701				243,820,525,074
Investment properties			12				14,001,887,948				20,239,722,505
Intangible assets			13				221,477,760,424				241,869,772,994
Deferred tax assets			35				—				81,938,532,931
Other financial assets			14,36,37,38,39				6,222,041,704,574				2,857,380,118,961
Other assets			15				364,180,592,573				173,584,230,752
Total assets							73,886,543,064,464				60,317,067,451,167
Liabilities
Deposit liabilities			16,36,37,38				12,124,648,436,191				7,744,650,276,148
Financial liabilities at fair value through profit or loss			6,36,37,38,39				10,907,226,138,761				10,568,567,281,885
Derivative financial liabilities			7,36,37,38,39				2,087,034,755,184				1,922,667,377,892
Borrowings			17,36,37,38,39				35,563,421,133,548				30,520,337,600,595
Net defined benefit liabilities			18				76,936,041,402				67,888,481,699
Deferred tax liabilities35			35				90,560,876,795				—
Provisions			19				110,132,844,118				137,397,544,569
Other financial liabilities			20,36,37,38,39,40				5,768,687,545,754				2,294,298,047,391
Other liabilities			21				465,140,939,100				381,561,433,870
Total liabilities							67,193,788,710,853				53,637,368,044,049
Equity
Share capital			22				1,493,102,120,000				1,493,102,120,000
Hybrid securities			23				756,092,772,000				756,092,772,000
Other paid-in capital			24				1,479,110,085,557				1,479,110,085,557
Retained earnings			25				2,657,923,577,324				2,658,003,781,948
Other components of equity			26				306,525,798,730				293,390,647,613
Total equity							6,692,754,353,611				6,679,699,407,118
Total liabilities and equity							73,886,543,064,464				60,317,067,451,167

The above separate statements of financial position should be read in conjunction with the accompanying notes.

 

4

KB SECURITIES Co., Ltd.

Separate Statements of Profit or Loss

Years Ended December 31, 2025 and 2024

 

 

(in Korean won)		Notes				2025				2024
Operating income
Fee and commission income			27				1,202,239,750,516				995,537,172,854
Gain on valuation and disposal of financial instruments			28				9,655,956,046,858				6,720,923,329,573
Interest income			29				1,579,483,450,418				1,610,651,941,834
Interest income from financial instruments at FVTPL							810,161,763,253				839,778,185,014
Interest income in applying of effective interest rate							769,321,687,165				770,873,756,820
Gain on valuation and disposal of financial assets measured at amortised costs			30				2,542,233,294				13,770,336,723
Gain on foreign currency transactions			31				1,192,985,739,030				1,024,613,462,449
Other operating income			32				262,612,618,653				245,893,137,460
							13,895,819,838,769				10,611,389,380,893
Operating expenses
Fee and commission expense			27				268,307,962,290				212,931,569,896
Loss on valuation and disposal of financial instruments			28				9,407,604,430,419				6,578,355,851,254
Interest expense			29				1,021,196,098,769				1,065,865,474,972
Loss on valuation and disposal of financial assets measured at amortised cost			30				48,920,013,281				44,480,620,826
Loss on foreign currency transactions			31				1,102,628,613,261				881,734,131,235
Selling and administrative expenses			33				1,013,235,227,816				925,849,578,530
Other operating expenses			32				166,574,520,807				148,242,136,982
							13,028,466,866,643				9,857,459,363,695
Operating profit							867,352,972,126				753,930,017,198
Non-operating income			34				98,231,136,327				83,088,361,334
Non-operating expenses			34				145,435,961,591				95,504,150,942
Profit before income tax							820,148,146,862				741,514,227,590
Income tax expense			35				206,765,219,318				159,145,243,061
Profit for the year							613,382,927,544				582,368,984,529

The above separate statements of profit or loss should be read in conjunction with the accompanying notes.

 

5

KB SECURITIES Co., Ltd.

Separate Statements of Comprehensive Income

Years Ended December 31, 2025 and 2024

 

 

(in Korean won)		Notes				2025				2024
Profit for the year							613,382,927,544				582,368,984,529
Other comprehensive income(loss)
Items that will not be reclassified to profit or loss
Net gains on valuation of equity instruments at fair value through other comprehensive income			8,26				66,955,384,270				(1,234,364,827	)
Fair value changes on financial liabilities designated at fair value due to own credit risk			6,26				(3,225,599,161	)			(5,514,924,589	)
Remeasurements of the net defined benefit liabilities			18,26				(6,223,233,556	)			(4,745,765,249	)
Revaluation of property and equipment			26				(867,736,179	)			—
Items that may be subsequently reclassified to profit or loss
Net gains(losses) on valuation of debt instrument at fair value through other comprehensive income			8,26				(38,367,096,425	)			8,677,907,545
Other comprehensive income for the year, net of tax							18,271,718,949				(2,817,147,120	)
Total comprehensive income for the year							631,654,646,493				579,551,837,409

The above separate statements of comprehensive income should be read in conjunction with the accompanying notes.

 

6

KB SECURITIES Co., Ltd.

Separate Statements of Changes in Equity

Years Ended December 31, 2025 and 2024

 

 

										Other paid in capital
		Share Capital				Hybrid Securities				Share Premium				Other Equity				Retained Earnings				Other Components of Equity				Total Equity
Balance at January 1, 2024			1,493,102,120,000				626,093,392,000				1,142,353,750,001				336,756,335,556				2,261,273,077,370				297,633,593,206				6,157,212,268,133
Issuance of hybrid securities			—				129,999,380,000				—				—				—				—				129,999,380,000
Dividends of hybrid securities			—				—				—				—				(37,064,078,424	)			—				(37,064,078,424	)
Dividends			—				—				—				—				(150,000,000,000	)			—				(150,000,000,000	)
Replacement due to disposal of equity investments at FVOCI			—				—				—				—				1,425,798,473				(1,425,798,473	)			—
Total comprehensive income
Profit for the year			—				—				—				—				582,368,984,529				—				582,368,984,529
Other comprehensive income			—				—				—				—				—				(2,817,147,120	)			(2,817,147,120	)
Balance at December 31, 2024			1,493,102,120,000				756,092,772,000				1,142,353,750,001				336,756,335,556				2,658,003,781,948				293,390,647,613				6,679,699,407,118
Balance at January 1, 2025			1,493,102,120,000				756,092,772,000				1,142,353,750,001				336,756,335,556				2,658,003,781,948				293,390,647,613				6,679,699,407,118
Dividends of hybrid securities			—				—				—				—				(38,599,700,000	)			—				(38,599,700,000	)
Dividends			—				—				—				—				(580,000,000,000	)			—				(580,000,000,000	)
Replacement due to disposal of equity investments at FVOCI			—				—				—				—				1,051,211,175				(1,051,211,175	)			—
Replacement of Revaluation Surplus due to disposal of property and equipment			—				—				—				—				4,085,356,657				(4,085,356,657	)			—
Total comprehensive income
Profit for the year			—				—				—				—				613,382,927,544				—				613,382,927,544
Other comprehensive income			—				—				—				—				—				18,271,718,949				18,271,718,949
Balance at December 31, 2025			1,493,102,120,000				756,092,772,000				1,142,353,750,001				336,756,335,556				2,657,923,577,324				306,525,798,730				6,692,754,353,611

The above separate statements of changes in equity should be read in conjunction with the accompanying notes.

 

7

KB SECURITIES Co., Ltd.

Separate Statements of Cash Flows

Years Ended December 31, 2025 and 2024

 

 

(in Korean won)		Notes				2025				2024
Cash flows from operating activities
Cash generated from operating activities
Profit for the year							613,382,927,544				582,368,984,529
Adjustment for non-cash items			43				(785,205,806,661	)			(212,175,136,823	)
Changes in operating assets and liabilities			43				(848,324,501,139	)			(1,855,957,202,259	)
							(1,020,147,380,256	)			(1,485,763,354,553	)
Interest received							1,539,820,421,343				1,550,443,037,620
Interest paid							(1,019,826,846,046	)			(1,042,793,269,591	)
Dividends received							120,997,793,989				113,413,709,540
Income taxes paid							(249,075,505,611	)			(266,284,033,929	)
Net cash used in operating activities							(628,231,516,581	)			(1,130,983,910,913	)
Cash flows from investing activities
Decrease in long-term deposit							(73,480,000,000	)			—
Acquisition of financial assets at fair value through other comprehensive income							(11,735,348,404,508	)			(5,810,505,707,282	)
Disposal of financial assets at fair value through other comprehensive income							8,826,591,230,785				4,537,441,905,557
Acquisition of investments of subsidiaries and associates			9				(167,692,097,387	)			(124,199,902,708	)
Disposal of investment of subsidiaries and associates			9				103,692,715,240				101,621,289,695
Acquisition of property and equipment			11				(23,652,678,618	)			(27,177,227,776	)
Disposal of property and equipment			11				29,667,329,292				—
Acquisition of intangible assets			13				(57,377,618,151	)			(63,829,037,442	)
Disposal of intangible assets			13				1,528,165,692				11,562,328,808
Disposal of investment properties			12				1,459,865,433				—
Others							(33,327,025	)			(91,281,928	)
Net cash provided by (used in) investing activities							(3,094,644,819,247	)			(1,375,177,633,076	)
Cash flows from financing activities
Increase in borrowings			43				3,103,317,183,882				1,848,040,493,951
Issuance of debentures			43				2,000,000,000,000				1,700,000,000,000
Repayment of debentures			43				(830,000,000,000	)			(810,000,000,000	)
Decrease in guarantee deposit liabilities			43				140,691,763				50,069,007
Dividends paid			25				(580,000,000,000	)			(150,000,000,000	)
Redemption of principal elements of lease payments			43				(35,884,675,718	)			(34,529,148,847	)
Issuance of hybrid securities			23				—				129,999,380,000
Dividends of hybrid securities			25				(38,599,700,000	)			(42,652,275,000	)
Net cash provided by financing activities							3,618,973,499,927				2,640,908,519,111
Effect of exchange rate changes on cash and cash equivalents							2,889,548,978				15,979,335,695
Net increase in cash and cash equivalents							(101,013,286,923	)			150,726,310,817
Cash and cash equivalents at the beginning of the year			5				592,896,175,519				442,169,864,702
Cash and cash equivalents at the end of the year			5				491,882,888,596				592,896,175,519

The above separate statements of cash flows should be read in conjunction with the accompanying notes.

 

8

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

1. The Company

KB Securities Co., Ltd. (the “Company” or “KB Securities”, formerly, Hyundai Securities Co., Ltd.) was established on June 1, 1962, under the name of Kookil Securities Co., Ltd. On June 5, 1986, the Company changed its name to “Hyundai Securities Co., Ltd.”. After several capital increases, the share capital of the Company amounts to W 1,493,102 million as at December 31, 2025.

The Company became a wholly owned subsidiary of KB Financial Group Inc. on October 19, 2016, through a comprehensive exchange of shares. At the end of the reporting period, KB Financial Group Inc. owns 100% of ordinary shares of the Company.

Meanwhile, the Company merged with KB Investment & Securities Co., Ltd. (the “KB Investment & Securities”) on December 30, 2016 as a surviving company and changed its name to KB Securities Co., Ltd. As at December 31, 2025, the Company has 74 branch offices in Korea and two overseas branch offices.

2. Material Accounting Policies

The material accounting policies applied in the preparation of these separate financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of Preparation

The Company maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying separate financial statements have been condensed, restructured and translated into English from the Korean language financial statements.

Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Company’s financial position, financial performance or cash flows, is 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 and related interpretations issued by the International Accounting Standards Board (IASB) that have been adopted by the Republic of Korea.

The separate financial statements have been prepared on the historical cost basis except for the following items:

 

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Certain financial assets and liabilities (including derivatives instruments), certain classes of property, plant and equipment and investment properties measured at fair value

 

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Assets held for sale measured at fair value less costs to sell, and

 

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Defined benefit obligation and plan assets measured at fair value

The preparation of the separate financial statements requires the use of certain significant accounting estimates. Management also needs to exercise judgement in applying the Company’s 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.

 

9

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

2.2 Changes in Accounting Policy and Disclosures

2.2.1 New and amended standards adopted by the Company

The Company has applied the following amended standards for the first time for its annual reporting period commencing January 1, 2025.

 

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Amendment of Korean IFRS No.1021 “The Effects of Changes in Foreign Exchange Rates” and Korean IFRS No.1101 “First-time Adoption of International Financial Reporting Standards”—Lack of exchangeability

The amendments require the Group to estimate the exchangeability of the currency, and to disclose information related to the currency not exchangeable into the other currency with estimation of foreign exchange rates. These amendments do not have a significant impact on the financial statements.

 

•

Amendment of Korean IFRS No.1117 “Insurance contracts”

If the estimation methods of input variables used to measure an insurance contract differ from the principled estimation methods required by insurance-related regulations, and if the differences and their impact on the financial statements are judged to be relevant and material to users of the financial statements, they are disclosed.

2.2.2 The following amended standards have been published that are not mandatory for December 31, 2025 reporting periods and have not been early adopted by the Company.

 

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Amendments to Korean IFRS No.1109 Financial Instruments and Korean IFRS No.1107 Financial Instruments – Disclosure

The amendments of Korean IFRS 1109, Financial Instruments, and Korean IFRS 1107, Financial Instruments: Disclosure have been made for the purpose of addressing questions raised in practice and reflecting new requirements. The amendments should be applied for annual reporting periods beginning on or after January 1, 2026, and earlier application is permitted. The main amendments are as follows: The Company is in the process of reviewing the impact of these amendments on the financial statements.

 

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Allowing financial liabilities to be considered settled (derecognized) through electronic payment systems before the settlement date, if certain criteria are met.

 

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Clarifying and adding additional guidance for assessing whether a financial asset meets the criteria for payments of principal and interest only.

 

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Disclosing the impact on the company and the extent to which the company is exposed, of contractual terms that change the timing or amount of cash flows under the contract, for each type of financial instrument.

 

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Additional disclosures for FVOCI-designated equity instruments

 

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Annual Improvement of Korean IFRS Volume 11

Annual Improvements to Korean IFRS Volume 11 should be applied for annual reporting periods beginning on or after January 1, 2026, and earlier application is permitted. The Company does not expect that these amendments have a significant impact on the consolidated financial statements.

 

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Korean IFRS No. 1101, First-Time Adoption of Korean IFRS : Application of Hedge Accounting upon First-Time Adoption of K-IFRS

 

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Korean IFRS No. 1107, Financial Instruments: Disclosure: Derecognition of Profit and Loss, Guidance on Practice

 

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Korean IFRS No. 1109, Financial Instruments: Derecognition of Lease Liabilities and Definition of Transaction Price

 

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Korean IFRS No. 1110, Consolidated Financial Statements: Determination of De facto Agent

 

10

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

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Korean IFRS No. 1007, Cash Flow Statement: Cost Method

 

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Amendments to Korean Accounting Standards No. 1109, “Financial Instruments,” and Korean Accounting Standards No. 1107, “Financial Instruments: Disclosures”- Contracts Related to Power Reliant on Nature

The amendments define contracts related to power dependent on nature as contracts that expose companies to the volatility of the underlying electricity supply because the source of electricity generation depends on uncontrollable natural conditions (e.g., weather). The amendments also clarify that “contracts to purchase or sell power dependent on nature” are subject to the self-use exception. Furthermore, The amendments change hedge accounting requirements, including allowing the designation of “variable notional quantities” of “expected power transactions dependent on nature” as “hedged items,” and add related disclosures. These amendments are effective for the year beginning on or after January 1, 2026, with early adoption permitted. These amendments do not have a significant impact on the financial statements.

 

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Enactment of Corporate Accounting Standards No. 1118, “Presentation and Disclosure of Financial Statements”

Korean IFRS 1118, “Presentation and Disclosure of Financial Statements,” replaces Korean IFRS 1001, “Presentation of Financial Statements.” The new presentation requirements introduced by Korean IFRS 1118, particularly regarding the definition of operating profit or loss, will enhance the comparability of financial performance across comparable companies. Furthermore, the disclosure requirement for “performance measures defined by management” will enhance transparency. The standard will be effective for the year beginning on or after January 1, 2027, with early adoption permitted. In accordance with the standard’s retrospective requirement, comparative information for the year ended December 31, 2026, will be restated in accordance with Korean IFRS 1118.

The Company has not yet adopted Korean IFRS 1118 and is currently assessing the impact of its adoption. The Company is developing a transition plan and is preparing, as scheduled, its first interim financial statements under No. 1118 for the period ended March 31, 2027, and its annual financial statements for the year ended December 31, 2027.

2.3 Foreign Currency Translation

(a) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (“the functional currency”). The financial statements are presented in Korean won, which is the 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 remeasured. 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. They are deferred in other comprehensive income if they relate to qualifying cash flow hedges and qualifying effective portion of hedge of net investments in foreign operations, or are attributable to monetary part of the net investment in a foreign operation.

 

11

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities held at fair value through other comprehensive income are recognized in other comprehensive income.

2.4 Investments in Associates and Subsidiaries

The Company has prepared the separate financial statements in accordance with Korean IFRS No.1027, Separate Financial Statements. Investments in associates and subsidiaries are recognized at cost. The Company recognizes dividend income from subsidiaries or associates in profit or loss when its right to receive dividend is established.

2.5 Recognition and Measurement of Financial Instruments

2.5.1 Classification

The Company classifies financial assets as follows.

 

•

Those to be measured at fair value (through profit or loss or other comprehensive income)

 

•

Those to be measured at amortised 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 when, and only when its business model for managing those assets changes.

For investments in equity instruments that are not held for trading, this 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 non-designated equity investment are recognized in profit or loss.

2.5.2 Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

2.5.2.1 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:

 

12

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

(a) Amortised cost

Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised 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 ‘interest income’ using the effective interest rate method.

(b) 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 flows represent solely 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 asset is 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 ‘interest income’ using the effective interest rate method. Foreign exchange gains and losses are presented in ‘gain or loss on foreign currency transaction’ and impairment losses are presented in ‘loss on valuation and disposal of financial instrument’.

(c) Fair value through profit or loss

Assets that do not meet the criteria for amortised 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 net in the statement of profit or loss within ‘gain or loss on valuation and disposal of financial instrument’ in the year in which it arises.

2.5.2.2 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. Dividend income from such investments continues to be recognized in profit or loss when the right to receive payments is established.

Changes in the fair value of financial assets at fair value through profit or loss are recognized in ‘gain or loss on valuation and disposal of financial instrument’ in the statement of profit or loss. Impairment loss (reversal of impairment loss) on equity investments measured at fair value through other comprehensive income are not reported separately from other changes in fair value.

2.5.3 Impairment

The Company assesses on a forward-looking basis expected credit losses associated with its debt instruments carried at amortised cost and fair value through other comprehensive income. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

Expected credit losses are a probability-weighted estimate of credit losses (i.e. the present value of all cash shortfalls) over the expected life of the financial instrument. The Company measures expected credit losses by reflecting reasonable and supportable information that is reasonably available at the reporting date without undue cost or effort, including information about past events, current conditions and forecasts of future economic conditions.

 

13

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

The Company uses the following three measurement techniques in accordance with Korean IFRS:

 

•

General approach: for financial assets and off-balance-sheet unused credit line that below two approaches are not applied

 

•

Simplified approach: for receivables, contract assets and lease receivables

 

•

Credit-impaired approach: for purchased or originated credit-impaired financial assets

Different measurement approaches are applied depending on significant increase in credit risk. 12 month expected credit losses is recognized when credit risk has not significantly increased since initial recognition. A loss allowance at an amount equal to lifetime expected credit losses is recognized when credit risk has significantly increased since initial recognition. Lifetime is presumed to be a period to the contractual maturity date of a financial asset (the expected life of the financial asset).

The Company determines whether the credit risk has increased significantly since initial recognition using the following information. One or more of the following circumstances is deemed significant increase in credit risk.

 

•

More than 30 days past due;

 

•

Decline in credit rating at period end by more than certain notches as compared to that at initial recognition;

 

•

Decline in ratings below certain level in the early warning system;

Under simplified approach, the Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses. Under credit-impaired approach, the Company shall only recognize the cumulative changes in lifetime expected credit losses since initial recognition as a loss allowance for purchased or originated credit-impaired financial assets.

The Company generally deems credit-impaired in case of one or more of the following circumstances:

 

•

90 days or more past due;

 

•

Legal proceedings related to collection;

 

•

Refinancing;

 

•

Corporate borrowers that are rated C or D;

 

•

Debt restructuring.

2.5.3.1 Forward-looking information

The Company uses forward-looking information, when it determines whether the credit risk has increased significantly since initial recognition and measures expected credit losses.

The Company assumes the risk component has a certain correlation with the business cycle, and calculates the expected credit loss by reflecting the forward-looking information with macroeconomic variables on the measurement inputs.

Forward-looking information used in calculation of expected credit loss is derived after comprehensive consideration of a variety of factors including scenario in management planning, risk situation scenario for stress test, third party forecast, and others.

2.5.3.2 Measuring expected credit losses on financial assets at amortised cost

The amount of the expected credit losses on financial assets at amortised cost is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The Company estimates expected future cash flows for financial assets that are individually significant (individual assessment of impairment).

 

14

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

For financial assets that are not individually significant, the Company collectively estimates expected credit loss by grouping loans with homogeneous credit risk profile (collective assessment of impairment).

 

•

Individual assessment of impairment

Individual assessment of impairment losses are calculated using management’s best estimate on present value of expected future cash flows. The Company uses all the available information including operating cash flow of the borrower and net realizable value of any collateral held.

 

•

Collective assessment of impairment

Collective assessment of loss allowance involves historical loss experience along with incorporation of forward-looking information. Such process incorporates factors such as type of collateral, product and borrowers, credit rating, size of portfolio and recovery period and applies ‘probability of default’ (PD) on a company of assets and ‘loss given default’ (LGD) by type of recovery method. Also, the expected credit loss model involves certain assumption to determine input based on loss experience and forward-looking information. These models and assumptions are periodically reviewed to reduce gap between loss estimate and actual loss experience.

2.5.3.3 Measuring expected credit losses on financial assets at fair value through other comprehensive income

Measuring method of expected credit losses on financial assets at fair value through other comprehensive income is equal to the method of financial assets at amortised cost, except for loss allowances that are recognized as other comprehensive income. Amounts recognized in other comprehensive income for sale or repayment of financial assets at fair value through other comprehensive income are reclassified to profit or loss.

2.5.4 Recognition and Derecognition

Regular way purchases and sales of financial assets are recognized or derecognized on trade-date, the date on which the Company commits to purchase or sell the asset. 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 classified the financial liability as “borrowings” in the statement of financial position.

The Company writes off the carrying amount and allowance of financial assets in its entirety or to a portion thereof when the principal and interest are determined to be no longer recoverable. In general, the Company considers write-off when it is determined that the debtor does not have sufficient resources or income to cover the principal and interest, and this write-off decision is made in accordance with internal regulations.

2.5.5 Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount reported in the statements of financial position where 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 and in the event of default, insolvency or bankruptcy of the Company or the counterparty.

 

15

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

2.6 Financial Liabilities

2.6.1 Classification and Measurement

The Company’s financial liabilities at fair value through profit or loss are financial instruments held for trading. A financial liability is held for trading if it is incurred principally for the purpose of repurchasing in the near term. A derivative that is not designated as hedging instruments and an embedded derivative that is separated are also classified as held for trading.

The Company classifies non-derivative financial liabilities, except for financial liabilities at fair value through profit or loss, financial guarantee contracts and financial liabilities that arise when a transfer of financial assets does not qualify for derecognition, as financial liabilities carried at amortised cost and present as ‘deposits liabilities’, ‘borrowings’, and ‘other financial liabilities’ in the statement of financial position.

2.6.2 Derecognition

Financial liabilities are removed from the statement of financial position when it is extinguished; for example, when the obligation specified in the contract is discharged or canceled 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.

The Company’s financial liabilities at fair value through profit or loss are financial instruments held for trading. A financial liability is held for trading if it is incurred principally for the purpose of repurchasing in the near term. A derivative that is not a designated as hedging instruments and an embedded derivative that is separated are also classified as held for trading. Financial liabilities designated the financial liabilities at fair value through profit or loss is the structured financial liabilities containing embedded derivatives issued by the Company.

The changes in fair value of financial liabilities at fair value through profit or loss due to the change of credit risk is recognized as other comprehensive income(instead of profit and loss) and this other comprehensive income can not be transferred to profit and loss in subsequent events.

2.7 Derivative Financial Instruments

The Company enters into numerous derivative financial instrument contracts such as stock options, stock swaps, interest rate swaps and others for trading purposes or sale and issue of derivative combined securities. These derivative financial instruments are presented as derivative financial instruments within the financial statements irrespective of transaction purpose and subsequent measurement requirement.

Derivatives are initially recognized at fair value on the date a derivative contract enters into and are subsequently re-measured at their fair value. The changes of the fair value of derivatives financial instruments held for trading are recognized in profit or loss as ‘gain or loss on valuation and disposal of financial instrument’.

Fair value of derivative instrument traded in active market is a quoted price. In case of fair value of relatively simple derivative instruments such as options, interest rate or currency swaps and others is calculated using one or more valuation techniques like cash flow discount model, option pricing model which is based on observable data and appropriate considering the nature of objects.

Also, fair value of more complex derivative instrument is calculated using valuation techniques based on unobservable data in the market. The accuracy of the valuation techniques is approved by periodical review.

 

16

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

2.7.1 Day 1 Profit and Loss

Accordance with Korean IFRS, if there is no available price from active market and if the Company uses a valuation technique that uses unobservable valuation parameters from market for the fair value at initial recognition of financial instruments, there could be a difference between the transaction price and the amount determined using that valuation technique. In these circumstances, the fair value of financial instruments is recognized as the transaction price and the difference is amortised by using the straight line method over the life of the financial instruments.

2.7.2 Credit risk adjustments

In case of exchange-traded derivative instrument, credit risk is not reflected on the fair value because exchange-traded derivative instrument is traded in public exchange, and it is not available to identify certain counterparties. Fair value of OTC derivative instrument only reflects credit risk.

2.7.3 Hedge accounting

The accounting treatment of changes of fair value for the derivatives varies as the character of hedging items and the purpose of hedging. The Company holds derivative contracts for the purpose of hedging the risk and the Company designates certain derivatives as hedging instruments to hedge the risk as follows.

 

(a)	Fair value hedge : a hedge of the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm commitment

 

(b)	Cash flow hedge : a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with all, or a component of, the recognized asset or liability or a highly probable forecast transaction

 

(c)	Hedge of net investments in foreign operations

On initial designation of the hedge, the Company formally documents the relationship between the hedging instrument(s) and hedged items, including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship.

The fair value of derivatives for hedge is disclosed in note 37.

Changes in the fair value of a derivative hedging instrument designated as a fair value hedge are recognized in profit or loss. The gain or loss from remeasuring the hedging instrument at fair value and the gain or loss on the hedged item attributable to the hedged risk are recognized in profit or loss

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item is fully amortised to profit or loss by the maturity of the financial instrument using the effective interest method.

The accounting treatments of hedge of net investments in foreign operations are similar to those of cash flow hedge.

If hedging instruments qualify for a hedge of net investments in foreign operations, the effective portion of changes in fair value of hedging instrument is recognized in other comprehensive income or loss and the ineffective portion is recognized in profit or loss. The gain or loss on the hedging instrument relating to the effective portion of the hedge that has been recognized in other comprehensive income will be reclassified from other comprehensive income or loss to profit or loss as a reclassification adjustment on the disposal or partial disposal of the foreign operation.

 

17

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

2.8 Property and Equipment

All property and equipment except for land are recognized at its cost less any accumulated depreciation and any accumulated impairment losses. The cost of property and equipment includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management and the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Land is measured at fair value on the basis of the valuation performed by an independent valuer. Revaluations are performed with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period.

If an asset’s carrying amount is increased as a result of a revaluation, the increase is recognized in other comprehensive income and the amount is accumulated in equity under the heading of revaluation surplus after netting deferred tax. However, the increase is recognized in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognized in profit or loss. If an asset’s carrying amount is decreased as a result of a revaluation, the decrease is recognized in profit or loss. However, the decrease is recognized in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognized in other comprehensive income reduces the amount accumulated in equity under the heading of revaluation surplus. The revaluation surplus included in equity in respect of an item of property and equipment is transferred directly to retained earnings when the asset is derecognized.

Depreciation of all property and equipment, except for land, is calculated using the following method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives as follows:

 

Property and equipment		Estimated useful lives		Depreciation method
Buildings		40 years		Straight-line method
Vehicles		4 years		Straight-line method
Furniture and equipment		4 years		Straight-line method
Other		4 years		Straight-line method
Right-of-use assets		1~10 years (initial date of the contract entered into ~ maturity date)		Straight-line method

The residual value, the useful life and the depreciation method applied to an asset are reviewed at least at each financial year-end and, if needed, the changes are accounted for as a change in an accounting estimate.

2.9 Investment Property

Property held to earn rentals or for capital appreciation or both is classified as investment property. Investment property is measured initially at its cost. After recognition as an asset, investment property is carried at cost less accumulated depreciation and impairment losses. Investment property, except for land, is depreciated using the straight-line method over their useful lives of 40 years.

 

18

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

2.10 Intangible Assets

Intangible assets are measured initially at cost and subsequently carried at their cost less any accumulated amortization and any accumulated impairment losses.

Intangible assets, except for goodwill, comprise software and membership rights, and are amortised using the straight-line method with no residual value over following estimated useful economic life since the asset is available for use. However, goodwill and membership rights are not amortised by considering their useful life as indefinite, because there is no expectable limit to period for use.

 

Intangible assets		Estimated useful lives		Amortization method
Development costs		4 years		Straight-line method
Software		4 years		Straight-line method

The amortization period and the amortization method for intangible assets with a finite useful life are reviewed at the end of each financial year. The management reviews the useful life of intangible assets that is not being amortised each period to determine whether events and circumstances continue to support an indefinite useful life. If management judges that previous estimates should be adjusted, the change is accounted for as a change in an accounting estimate.

2.11 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. Non-financial assets, other than goodwill, that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

2.12 Lease

Lease income from operating leases where the Company is a lessor is recognized on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognized as expense over the lease term on the same basis as lease income. The respective leased assets are included in the statement of financial position based on their nature.

The Company should assess whether a contract is, or contains a lease at the date the contract entered into and the initial application date under Korean IFRS No.1116. But the Company may elect not to reassess whether a contract is, or contains a lease for the contract entered into before the transition date by applying practical expedient permitted by Korean IFRS No.1116. The Company has gone through all the contract to assess whether the contract is, or contains, a lease at the date the contract entered into after the date of initial application.

A lessee is required to recognize a right-of-use asset (lease asset) representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Assets and liabilities arising from a lease are initially measured on a present value basis.

 

19

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

Lease liabilities include the net present value of the following lease payments:

 

•

Fixed payments (including in-substance fixed payments), less any lease incentives receivable

 

•

Variable lease payment that are based on an index or a rate

 

•

Amounts expected to be payable by the lessee under residual value guarantees

 

•

The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and

 

•

Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease

The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising the following:

 

•

The amount of the initial measurement of lease liability

 

•

Any lease payments made at or before the commencement date less any lease incentives received

 

•

Any initial direct costs incurred by the lessee, and

 

•

An estimate of restoration costs

However, short-term lease (lease that, at the commencement date, has a lease term of 12 months or less) and lease of low-value assets (For example, underlying leased asset under $ 5,000) are permitted to elect exceptional conditions.

The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term.

Related to sale and leaseback, the Company (seller-lessee) is required to apply the Korean IFRS No.1115 ‘Revenue from Contracts with Customers’ to determine whether the transfer of an asset is accounted for as a sale of that asset. However, the Company shall not reassess sale and leaseback transactions entered into before the date of initial application.

Large number of lease contracts held by the Company have extension option and termination option. These conditions are generally used for maximizing the flexibility of lease operation in a view of managing the contracts. Extension option or termination option included in the lease contracts are generally owned by the Company, not lessor. The Company re-evaluated the lease term of the lease contracts by taking into account the contract type, operation plan for branch offices, and costs related to lease termination. As a result, no significant change in the existing lease term has occurred.

2.13 Provisions

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation and the increase in the provision due to passage of time is recognized as interest expense.

 

20

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

2.14 Financial Guarantee Contracts

Financial guarantees contracts provided by the Company are initially measured at fair value on the date the guarantee was given. Subsequent to initial recognition, the Company’s liabilities under such guarantees are measured at the higher of the amounts below and recognized as ‘other financial liabilities’:

 

•

Loss allowance in accordance with Korean IFRS No.1109, ‘Financial Instruments’

 

•

The amount initially recognized less, when appropriate, the cumulative amount of income recognized in accordance with the principles of Korean IFRS No.1115, ‘Revenue from Contracts with Customers’

2.15 Revenue Recognition

The Company recognizes revenues in accordance with the following five-step revenue recognition standard (Korean IFRS No.1115 Revenue from Contracts with Customers).

 

•

Step 1: Identify the contract with a customer.

 

•

Step 2: Identify the performance obligations in the contract.

 

•

Step 3: Determine the transaction price.

 

•

Step 4: Allocate the transaction price to the performance obligations in the contract.

 

•

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

2.16 Employee Benefits

2.16.1 Retirement benefit liabilities: Defined benefit plans and Defined contribution plans

The Company has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. The contributions are recognized as employee benefit expenses when an employee has rendered service. A defined benefit plan is a pension plan that is not a defined contribution plan.

Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognized in the statement of financial position in respect of defined benefit pension plans 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 interest rates of high-quality corporate bonds that have terms to maturity approximating to the terms of the related pension obligation. The remeasurements of the net defined benefit liability are recognized in other comprehensive income.

If any plan amendments, curtailments, or settlements occur, past service costs or any gains or losses on settlement are recognized as profit or loss for the year.

2.16.2 Short-term employee benefits

Short-term employee benefits, which are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the service, are recognized in profit or loss at the undiscounted amount of short-term employee benefits expected to be paid in exchange for that service.

 

21

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

The expected cost of profit-sharing and bonus payments are recognized as liabilities when the Company has a present legal or constructive obligation to make such payments as a result of past events rendered by employees and a reliable estimate of the obligation can be made.

2.16.3 Share-based payment

The Company is under share-based payment arrangements that grant shares to the executives of the Company. When the arrangements are exercised, the Company provides share or cash equal to the monetary value of the share.

The Company measures the services acquired and the liability incurred at fair value, and the fair value is recognized as expense and accrued expenses over the vesting period. Until the liability is settled, the Company remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss as share-based payments.

2.17 Income Tax Expenses

Income tax expense comprises current income tax and deferred income tax and is recognized in profit or loss for the year, except to the extent that the tax arises from (a) a transaction or event which is recognized either in other comprehensive income or directly in equity and (b) a business combination.

2.17.1 Current income tax

Current income tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period. A difference between the taxable profit and accounting profit may arise when income or expense is included in accounting profit in one period but is included in taxable profit in a different period. Differences may also arise if there is revenue that is exempt from taxation or expenses that is not deductible in determining taxable profit (tax loss). Current income tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The Company offsets current income tax assets and current income tax liabilities if, and only if, the Company (a) has a legally enforceable right to set off the recognized amounts and (b) intends to settle on a net basis.

2.17.2 Deferred income tax

Deferred income tax is recognized, using the asset-liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amount in the financial statements. Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilized. However, deferred income tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises 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 accounting profit nor taxable profit or loss.

Deferred income tax is recognized on temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period. The Company reduces the carrying amount of a deferred income tax asset to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred income tax asset to be utilized.

 

22

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred income tax liabilities and deferred income tax assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Current income tax and deferred income tax are included in the calculation of income tax expense. Income taxes related to prior period are included in current income tax.

Deferred income taxes, recognized directly in equity or arisen from business combination, are directly deducted from equity or goodwill.

2.17.3 Tax Uncertainties

Due to the complexity of transactions and differences in tax law interpretation, tax policies adopted by the Company may present tax uncertainties. These tax uncertainties arise in tax correction claims, refund lawsuits for tax surcharges by the tax authorities, tax audits and so on. The Company accounts for such tax uncertainties in accordance with Korean IFRS No. 1012 and Korean IFRS No. 2123.

In other words, if the Company has paid an amount due to an additional tax assessment by the tax authorities but the likelihood of a future refund is high, it recognizes the amount as a corporate tax asset. Conversely, amounts expected to be paid as a result of a tax audit or similar investigation are recognized as a corporate tax liability. However, penalties and interest on refunds are regarded, based on their economic substance, as interest or fines, and are accounted for in accordance with Korean IFRS 1037.

2.18 Operating Segment Reporting

Operating segments are components of the Company, about which separate internal reporting information is evaluated regularly by the chief operating decision makers including Board of Directors in deciding how to allocate resources and to assess performance. Each segment is a strategic business unit that offers different products and services, and is managed separately because each business has different risks and opportunities, different technology required and marketing strategies.

Segment information includes the items which are directly attributable and reasonably allocated to the segment.

2.19 Other Receivables and Payables Related to Brokerage Transactions

Regarding customer brokerage transactions, the Company recognizes the receivable from and payable to the Korea Exchange (Clearing and settlement organization) and customers in total amounts, which the Company recognizes as other financial assets and other financial liabilities. The Company offsets the receivable and payable that arise between Korea Exchange and the Company within the same day.

2.20 Business Combinations

The acquisition method of accounting is used to account for business combinations by the Company. 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 measured initially at their fair values at the acquisition date.

 

23

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

The Company applies the book-value method to account for business combinations of entities under common control. Identifiable assets acquired and liabilities assumed in a business combination are measured at their book values on the financial statements of the ultimate parent entity. In addition, the difference between the sum of book values of the assets and liabilities transferred and accumulated other comprehensive income; and the consideration paid is recognized as capital surplus.

2.21 Approval of Issuance of the Financial Statements

The issuance of the December 31, 2025 separate financial statements of the Company was approved by the Board of Directors on February 4, 2026, which is subject to change with approval at the annual shareholder’s meeting.

3. Critical Accounting Estimates and Assumptions

The preparation of financial statements requires the Company to make estimates and assumptions concerning the future. Management also needs to exercise judgement in applying the Company’s accounting policies. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. As the resulting accounting estimates will, by definition, seldom equal the related actual results, it can contain a significant risk of causing a material adjustment.

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. Additional information of significant judgment and assumptions of certain items are included in relevant notes.

 

24

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

3.1 Income taxes

The Company recorded, based on its best estimate, current taxes and deferred taxes that the Company will be liable in the future for the operating results at the end of the reporting period. However, the final tax outcome in the future may be different from the amounts that were initially recorded. Such differences will impact the current and deferred income tax assets and liabilities in the period in which the final tax outcome is determined.

If certain portion of the taxable income is not used for investments or increase in wages in accordance with the Special Taxation for Facilitation of Investment and Mutually-Beneficial Cooperation, the Company is liable to pay additional income tax calculated based on the tax law. Accordingly, the measurement of current and deferred income tax is affected by the tax effects from such tax law. As the Company’s income tax is dependent on the investments and increase in wages, there exists uncertainty with regard to measuring the final tax effects.

3.2 Fair value of financial instruments

The fair value of financial instruments where no active market exists or where quoted prices are not otherwise available is determined by using valuation techniques. Financial instruments, which are not actively traded in the market and those with less transparent market prices, will have less objective fair values and require broad judgment on liquidity, concentration, uncertainty in market factors and assumptions in price determination and other risks.

As described in Note 2.5, ‘Recognition and Measurement of Financial Instruments’, diverse valuation techniques are used to determine the fair value of financial instruments, from generally accepted market valuation models to internally developed valuation models that incorporate various types of assumptions and variables.

3.3 Impairment of financial assets

In accordance with Korean IFRS No.1109, the provision for impairment for financial assets are based on assumptions about risk of default and expected loss rates. The Company uses judgment in making these assumptions 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 (Note 2.5).

3.4 Measurement of defined benefit obligation

The present value of the defined benefit liability depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of the defined benefit liability. The Company determines the appropriate discount rate at the end of the reporting period. 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 defined benefit liability. In determining the appropriate discount rate, the Company considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the pension benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability. Other key assumptions for defined benefit liability are based in part on current market conditions.

 

25

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

4. Segment Information

4.1 Types of services from which each reportable segment derives its revenues

Management of the Company decides operating segment based on the information, which is to be reported to the chief executive officer, in order to allocate resources to the segment and evaluate performance of the segment. The Company’s operating segments consist of brokerage and wealth management, investment banking, trading and other business part.

In accordance with Korean IFRS No.1108, reporting segments of the Company by type of services categories are as follows:

 

Reporting segment		Main business activities
Brokerage and wealth management		Sales and services relating to wealth management and brokerage provided to individuals, corporations and institutional investors
Investment banking		Underwriting and advisory services related to bond issuance, structured finance, initial public offering, and mergers and acquisition
Trading		Trading of securities and derivatives, and proprietary trading
Others		Other services and support services

4.2 Revenue and income of segment reporting

Financial information by operating segment for the years ended December 31, 2025 and 2024, are as follows:

 

(in thousands of Korean won)
		2025
		Operating income				Operating expense				Operating profit				Non-operating income(expense)				Profit(loss) before income tax expense(income)
Brokerage and wealth management			7,811,177,508				7,265,679,464				545,498,044				(17,324,181	)			528,173,863
Investment banking			1,081,465,860				958,205,423				123,260,437				(64,939,472	)			58,320,965
Trading			4,366,089,181				4,323,561,931				42,527,250				(1,604,868	)			40,922,382
Others			637,087,290				481,020,049				156,067,241				36,663,695				192,730,936
			13,895,819,839				13,028,466,867				867,352,972				(47,204,826	)			820,148,147

 

(in thousands of Korean won)
		2024
		Operating income				Operating expense				Operating profit				Non-operating income(expense)				Profit(loss) before income tax expense(income)
Brokerage and wealth management			5,125,756,055				4,794,443,838				331,312,217				(60,504,564	)			270,807,653
Investment banking			1,072,383,201				884,050,444				188,332,757				6,322				188,339,079
Trading			3,929,880,919				3,893,811,293				36,069,626				3,244,181				39,313,807
Others			483,369,206				285,153,789				198,215,417				44,838,272				243,053,689
			10,611,389,381				9,857,459,364				753,930,017				(12,415,789	)			741,514,228

The above reported operating income is generated from external customers and inter-segment transactions, and expense includes expenses that can be directly attributed or reasonably allocated to each segment including internal interests. Segment profit represents the profit earned by each segment, reported to the chief executive officer to determine the allocation of resources and to measure the respective segments’ performance.

 

26

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

4.3 Assets and liabilities of segments

Total assets and liabilities by each segment as at December 31, 2025 and 2024, are as follows:

 

(in thousands of Korean won)		2025
		Total assets				Total liabilities
Brokerage and wealth management			12,611,300,028				13,572,887,278
Investment banking			4,550,396,512				141,713,487
Trading			28,093,545,290				11,483,443,934
Others			28,631,301,234				41,995,744,012
			73,886,543,064				67,193,788,711

 

(in thousands of Korean won)		2024
		Total assets				Total liabilities
Brokerage and wealth management			7,565,851,146				8,306,698,054
Investment banking			4,077,781,107				207,642,939
Trading			26,389,808,564				11,811,736,915
Others			22,283,626,634				33,311,290,136
			60,317,067,451				53,637,368,044

4.4 Information on principal customers

No single customer contributed 10% or more to the Company’s revenue for the years ended December 31, 2025 and 2024.

5. Cash and Deposits

The details of cash and deposits as at December 31, 2025 and 2024, are as follows:

 

(in thousands of Korean won)		2025				2024
Cash and cash equivalents
Cash on hand			168				123
Demand deposits			115,565,427				342,209,931
Checking deposit			16,244,316				12,908,712
Foreign currency deposits			113,122,205				143,469,919
MMDA			246,950,772				87,210,942
Accommodation notes			—				7,096,548
			491,882,888				592,896,175
Deposits
Deposits for securities subscription			21,538,625				1,083,733
Reserve for claims of customers’ deposits			1,506,899,724				802,442,695
Guarantee deposits for securities lending and borrowing			389,805,312				46,752,792
Deposits for exchange-traded derivatives			461,947,188				572,602,786
Guarantee deposits for KSFC trading			1,294,281				—
Long-term deposits			146,745,000				75,000,000
Restricted due from financial institutes			39,000				39,000
Others			748,851,880				862,472,983
Allowances for credit losses of deposits			(1,059,769	)			(738,213	)
			3,276,061,241				2,359,655,776
			3,767,944,129				2,952,551,951

 

27

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

Restricted deposits as at December 31, 2025 and 2024, are as follows:

 

(in thousands of Korean won)		2025				2024
Deposits for securities subscription 1			21,538,625				1,083,733
Reserve for claims of customers’ deposits 2			1,506,899,724				802,442,695
Guarantee deposits for securities lending and borrowing 3			389,805,312				46,752,792
Deposits for exchange-traded derivatives 4			461,947,188				572,602,786
Guarantee deposits for KSFC trading 5			1,294,281				—
Long-term deposits 6			69,000,000				69,000,000
Restricted due from financial institutes 7			39,000				39,000
Others 8			748,851,880				862,472,983
			3,199,376,010				2,354,393,989

 

1

Subscription deposits are subscription margin of investors and the Company that are separately deposited at Korea Securities Finance Corporation(KSFC) or other relevant financial institutions until due date for payment for the subscription of the newly issued or sold securities in accordance with the provisions of Article 4-44 of the Regulation on Financial Investment Business.

2	The reserve for claims of customers’ deposits is deposited separately in a form of trust in KSFC to meet the demands of investors, such as return of deposit and others, in accordance with Article 74 of the Financial Investment Services and Capital Markets Act.

3	Deposited in Korea Securities Depository to guarantee for securities lending and borrowing.

4	The deposits for exchange-traded derivatives that the investors and the Company pay for foreign futures option trading to KEB Hana Bank and Forex Dealer Member.

5	In the case of an investor’s loan transaction, a certain portion of the price of securities sold is deposited at KSFC as margin.

6	Pledged deposits provided for securities lending and borrowing, repurchase agreements between institutions and retail payment through investment & securities companies are included.

7	Guarantee deposits for checking accounts

8	Deposits in foreign currency and others consist of the margin accounts for trading financial instruments in foreign markets and

deposits to court.

Changes in allowances for credit losses of deposits for the years ended December 31, 2025 and 2024, are as follows:

 

(in thousands of Korean won)		2025
		12-month expected credit losses				Lifetime expected credit losses
						Non- impaired				Impaired
Beginning			738,213				—				—
Provision			321,556				—				—
Ending			1,059,769				—				—
(in thousands of Korean won)		2024
		12-month expected credit losses				Lifetime expected credit losses
						Non- impaired				Impaired
Beginning			290,185				—				—
Provision			448,028				—				—
Ending			738,213				—				—

 

28

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

6. Financial Instruments at FVTPL

The details of financial instruments at FVTPL as at December 31, 2025 and 2024, are as follows:

 

(in thousands of Korean won)		Financial Assets at FVTPL								Financial Liabilities at FVTPL
		2025				2024				2025				2024
Financial assets required to be mandatorily measured at FVTPL			42,376,304,043				36,753,823,519				2,910,712,724				2,558,520,223
Financial assets designated at FVTPL			—				—				7,996,513,415				8,010,047,059
			42,376,304,043				36,753,823,519				10,907,226,139				10,568,567,282

6.1 Financial assets required to be mandatorily measured at FVTPL

The details of financial assets required to be mandatorily measured at FVTPL as at December 31, 2025 and 2024, are as follows:

 

(in thousands of Korean won)		2025				2024
Deposits
Reserve for claims of customers’ deposits (trust) 1			6,291,667,379				4,458,853,144
Equity instruments
Stocks			4,068,823,032				1,601,664,976
Debt instruments
Government and local government bonds			2,931,969,940				4,038,123,584
Special bonds			4,210,324,688				4,394,107,831
Corporate bonds			6,824,486,015				5,887,629,630
Corporate commercial papers			5,369,662,486				5,668,511,190
Asset-backed short-term bonds			1,124,792,053				1,731,958,269
Hybrid bond with security-like features			328,391,430				267,899,220
Investment in partnerships			717,130,999				621,369,479
Collective investment securities			6,567,589,823				4,869,469,164
Hybrid stock with bond-like features			114,874,396				169,454,179
Loans
Loans			860,312,817				937,460,555
Derivative linked securities
Equity-linked securities			80,970,708				10,897,742
Other derivative linked securities			1,021,084,300				783,440,520
Other OTC derivative combined contract			143,046,855				102,732,731
Securities in foreign currency
Stocks in foreign currency			42,276,781				49,737,589
Bonds in foreign currency			1,049,644,746				597,549,013
Investments in partnerships in foreign currency			49,909,886				52,692,465
Collective investment securities in foreign currency			186,922,175				125,807,545
Collective fund for default loss			96,241,957				82,900,562
Hybrid bonds			293,249,242				271,689,060
Exchange traded notes			134,273				—
Other short-term securities held for sale			2,798,062				29,875,071
			42,376,304,043				36,753,823,519

 

1

The reserve for claims of customers’ deposits is restricted to use because this reserve is deposited separately in a form of trust in KSFC to meet the demands of investors, such as return of deposit and others, in accordance with Article 74 of the Financial Investment Services and Capital Markets Act.

 

29

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

Details of securities sold which are classified as financial liabilities at FVTPL as at December 31, 2025 and 2024, are as follows:

 

(in thousands of Korean won)		2025				2024
Equity Securities
Stocks			1,640,199,761				798,188,133
Debt Securities
Government and local government bonds			1,243,927,993				1,758,937,852
Collective investment securities			26,584,970				1,394,238
			2,910,712,724				2,558,520,223

Assets Pledged as Collateral

The details of financial assets pledged as collateral as at December 31, 2025 and 2024, are as follows:

 

(in thousands of Korean won)		Description 1		2025				2024				Security right holder
Financial assets at FVTPL		Guarantee deposits for lending and borrowing securities and bonds			11,148,996,178				9,908,290,516			Korea Securities Depository, KSFC, etc.
		Margin required and guarantee deposits for derivatives trading			1,741,587,209				1,591,262,017			Korea Stock Exchange, etc.
		Guarantee deposits for reverse repurchase agreements			4,148,851,974				4,232,134,843			Customer, Institution
Financial assets at FVOCI		Guarantee deposits for lending and borrowing securities and bonds			4,041,764,331				2,510,367,880			Korea Securities Depository, KSFC, etc.
		Guarantee deposits for for derivatives trading			106,035,567				183,121,174			Korea Stock Exchange, etc.
		Guarantee deposits for reverse repurchase agreements			2,601,915,338				1,811,592,215			Customer, Institution
					23,789,150,597				20,236,768,645

 

1	As at December 31, 2025 and 2024, the accrued interests related to debt securities provided as collateral of W 235,903 million and W 406,426 million, respectively, are excluded.

The Company provides W 10,485,363 million and W 8,027,229 million of its borrowing securities held as collateral to KSFC and others as at December 31, 2025 and 2024, respectively.

As at December 31, 2025 and 2024, the fair values of collaterals sold or repledged as collaterals regardless of default are as follows:

 

(in thousands of Korean won)		Securities
		2025				2024
Fair value of collateral held			2,034,440,723				2,255,447,484
Fair value of collaterals sold or re-provided as collateral			—				—
			2,034,440,723				2,255,447,484

 

30

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

6.2 Financial liabilities designated at FVTPL

The details of financial liabilities designated at FVTPL as at December 31, 2025 and 2024, are as follows:

 

(in thousands of Korean won)		Financial liabilities designated at FVTPL
		2025				2024
Derivative linked securities
Equity-linked securities			3,959,492,400				4,437,103,116
Other derivative linked securities			2,440,972,492				2,062,512,677
Other OTC derivative combined contract			1,088,148,738				1,209,941,532
Exchange traded notes			507,899,785				300,489,734
			7,996,513,415				8,010,047,059

The differences between the contractual value to be paid at maturity and the carrying amount of financial liabilities at FVTPL as at December 31, 2025 and 2024, are as follows :

 

(in thousands of Korean won)		2025				2024
Contractual value to be paid at maturity			7,909,016,857				7,947,235,520
Carrying amount			7,996,513,415				8,010,047,059
Differences			(87,496,558	)			(62,811,539	)

Accumulated changes in fair value of financial liabilities at FVTPL due to the change of credit risk as at December 31, 2025 and 2024, are as follows :

 

(in thousands of Korean won)		Other comprehensive income recognized from changes of fair value due to the change of credit risk (before tax) 1
		2025				2024
Beginning of the year			23,501,476				16,008,372
Change of fair value			4,805,676				7,493,104
End of the year			28,307,152				23,501,476

 

1	The Company assessed OCI based on the probability of default corresponding to the Company’s credit rating and loss given default. The amount is before tax.

 

31

KB SECURITIES Co., Ltd.

Notes to the Separate Financial Statements

December 31, 2025 and 2024

 

7. Derivatives and Hedge Accounting

Derivatives owned by the Company as at December 31, 2025 and 2024, are as follows:

 

		2025
		Assets								Liabilities
(in thousands of Korean won)		Hedging				Trading				Hedging				Trading				Unsettled amount
Exchange-traded derivatives
Interest rate:
Futures			—				242,633				—				1,340,185				2,596,548,486
Equity:
Futures			—				395,800				—				6,880,804				3,552,399,956
Purchase options			—				164,620,094				—				—				471,966,622
Written options			—				—				—				119,129,766				885,215,546
Currency:
Futures			—				699,339				—				19,982				601,432,351
Goods:
Futures			—				1,055,889				—				1,949,104				81,630,722
			—				167,013,755				—				129,319,841				8,189,193,683
OTC derivatives
Interest rate:
Forwards			—				831,678,573				—				789,179,536				24,953,579,400
Swaps			—				170,399,971				—				288,078,925				81,372,320,305
Options			—				9,462,701				—				12,711,975				450,000,000
Currency:
Forwards			—				102,907,598				2,911,200				187,393,191				10,909,032,853
Swaps			—				911,841				—				830,633				183,715,562
Options			—				2,739,390				—				—				143,490,000
Equity:
Swaps			—				235,392,049				—				378,805,763				6,099,312,971
Purchase options			—				41,840,388				—				—				444,767,350
Written options			—				—				—				42,262,638				450,988,980
Credit:
Swaps			—				35,971,365				—				26,470,050				5,122,155,324
Goods:
Swaps			—				10,571,788								10,185,126				568,777,593
Options			—				3,071,634				—				3,109,343				101,737,280
Others:
Swaps			—				—				—				215,776,534				729,940,931
			—				1,444,947,298				2,911,200				1,954,803,714				131,529,818,549
			—				1,611,961,053				2,911,200				2,084,123,555				139,719,012,232

 

		2024
		Assets								Liabilities
(in thousands of Korean won)		Hedging				Trading				Hedging				Trading				Unsettled amount
Exchange-traded derivatives
Interest rate:
Futures			—				718,474				—				5,406,671				4,109,620,037
Equity:
Futures			—				3,260,046				—				7,962,965				2,140,518,324
Purchase options			—				9,946,986				—				—				264,716,897
Written options			—				—				—				165,495,252				1,305,007,298

 

32