JB Financial : 2021 Auditors' Report

JB Financial Group Co., Ltd. and Subsidiaries

Consolidated Financial Statements

December 31, 2021 and 2020

JB Financial Group Co., Ltd. and Subsidiaries

Index

December 31, 2021 and 2020

	Page(s)
Independent Auditor's Report ...............................................................................................	1 - 5
Consolidated Financial Statements
Consolidated Statements of Financial Position .....................................................................	6
Consolidated Statements of Comprehensive Income ...........................................................	7
Consolidated Statements of Changes in Equity ....................................................................	8
Consolidated Statements of Cash Flows ..............................................................................	9
Notes to the Consolidated Financial Statements ..................................................................	10 - 135

Independent Auditor's Report

(English Translation of a Report Originally Issued in Korean)

To the Board of Directors and Shareholders of

JB Financial Group Co., Ltd.

Opinion

We have audited the accompanying consolidated financial statements of JB Financial Group Co., Ltd. and its subsidiaries (collectively referred to as the "Group"), which comprise the consolidated statements of financial position as at December 31, 2021 and 2020, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2021 and 2020, and its consolidated financial performance and its consolidated 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 audits 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 Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements of the Republic of Korea that are relevant to our audit of the consolidated 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.

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Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Expected Credit Losses on Loans Measured at Amortized Cost

Why it is determined to be a Key Audit Matter

Korean IFRS 1109 Financial Instruments requires determination of significant increases in credit risk and measurement of expected credit losses using forward-looking information. This standard requires considerably high degree of management's interpretation and judgment because the Group uses various types of information including probability of defaults, loss given default and forward-looking information to measure expected credit losses.

The Group measures expected credit losses on loans measured at amortized cost, on an individual and collective basis. The identification of loans that are deteriorating and the assessment of the present value of expected future cash flows in determining expected credit losses are inherently uncertain, which requires a relatively high extent of management's estimates and judgments. In measuring expected losses on a collective basis, a wide range of complex inputs and assumptions are used. Given the extent of management's estimates and judgments involved, we considered expected credit losses to be a key audit matter. Especially during the year ended December 31, 2021, the Group evaluated the possibility of defaults at a high level since it was determined that credit risk of loans applying deferral of repayments or deferral of interest payments among government support policies because of the damage from Coronavirus disease 2019(COVID-19) had significantly increased. A relatively high level of judgment is involved in estimating expected credit losses of management.

The balances of loans measured at amortized cost subject to individual or collective assessment and its loss allowance are ₩ 44,246,633 million and ₩ 398,399 million, respectively (Note 15).

How our audit addressed the Key Audit Matter

(1) Assessment of expected credit losses on an individual basis

We obtained an understanding and evaluated procedures and controls relating to the assessment of expected credit losses on an individual basis. In particular, we draw attention to the assumptions used in estimating future cash flows. We evaluated whether management reasonably estimated and sufficiently reviewed key assumptions; such as growth rate of entities subject to individual assessment, and valuation of collaterals in forecasting future expected cash flow. As part of these procedures, we assessed whether sales growth rate, operating income ratio and assumptions on investment activities used in forecasting future expected cash flow were consistent with historical performance and current market conditions. Furthermore, we assessed the appropriateness of collateral valuation by conducting our own research on most recent property prices and assessing appraisal reports, models and methodologies used by management.

(2) Assessment of expected credit losses on a collective basis

We obtained an understanding and evaluated the processes and controls relating to the assessment of expected credit losses on a collective basis in accordance with impairment requirements under Korean IFRS 1109 Financial Instruments. Management assessed credit rating to recognize lifetime

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expected credit losses on loans with significant increase in credit risk and impaired loans. Other than these cases, management recognized 12 month expected credit losses. To calculate expected credit losses, management has applied forward-looking information, probability of default, and loss given default estimated through predetermined internal procedures and controls implemented for various assumptions.

We assessed the design and operating effectiveness of controls relating to credit ratings that appropriately reflect both qualitative and quantitative information. Our substantive test over accuracy and reliability of information includes agreeing qualitative and quantitative information with relevant evidence.

We assessed the appropriateness of management policies and procedures to determine significant increases in credit risk, and tested reasonableness of expected credit loss model applied by each of the three stages (Stage 1, 2 and 3) depending on how significantly credit risk was increased.

We involved our own risk specialist to statistically analyze correlation between forward-looking information, probability of defaults and loss given default. We assessed appropriateness of methodologies for adjusting probability of defaults and loss given default to reflect forward-looking information on estimation of expected credit losses. We further tested reasonableness and mathematical accuracy of information through recalculation and inspection of supporting data.

We assessed on methodologies used by management to verify that probability of default and loss given default were estimated by using sufficient and reasonable historical data. We determined that the default and loss data used were appropriately collected and used in accordance with internal control procedures. In addition, we assessed reasonableness and accuracy of probability of defaults and loss given default through procedures including recalculation, and evaluated management's default and loss data and mathematical accuracy through agreeing them with relevant evidences.

We assessed the reasonableness of key assumptions used in classification of stage and application of probability of defaults resulting from significant increase in credit risk of loans subject to deferral of repayments and interest payment due to the damage from COVID-19, and confirmed whether the relevant information is appropriately disclosed.

Emphasis of Matter

Without modifying our opinion, we draw attention to Note 4 to the consolidated financial statements of the Group. Note 4 to the consolidated financial statements describes uncertainty relating to the impact of Coronavirus disease 2019 (COVID-19) on the financial position and financial performance of the Group.

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 financial statements may differ from those generally accepted and applied in other countries.

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