Company: SHG
Filing Date: 2025-04-23
Form Type: 20-F
Source: 0001193125-25-089950
Chunk: 398

Company: SHINHAN FINANCIAL GROUP CO LTD
Filing Date: 2025-04-23
Form: 20-F
Chunk 398
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 financial instruments are measured at fair value using valuation techniques where one or more significant inputs are not based on observable market data. In order to measure the fair value of these internally measured Level 3 derivatives and derivative-combined securities, the Group uses internal valuation models such as discounted cash flow models and option models. These models use various inputs and assumptions, depending on the nature of the financial instruments, such as the volatility of the underlying asset and correlations. We identified the measurement of the fair value of the internally measured Level 3 derivatives and derivative-combined securities as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment due to significant measurement uncertainty. The assessment encompassed the evaluation of the fair value methodology, including the methods, models and significant assumptions used to estimate fair value. Such significant assumptions included the volatility of the underlying asset and correlations. The assessment also included an evaluation of the conceptual soundness and performance of the internally developed valuation models. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the measurement of fair value of the internally measured Level 3 derivatives and derivative-combined securities, including controls over the (i) valuation methodologies, including significant assumptions; (ii) independent price verification; (iii) evaluation F-4 of significant model assumptions reflected those which a market participant would use to determine an exit price in the current market environment; (iv) the valuation models used were mathematically accurate and appropriate to value the internally measured Level 3 derivatives and derivative-combined securities; and (v) relevant information used within the Group’s models that was reasonably available was considered in the fair value determination. We evaluated the Group’s fair value methodology for compliance with IFRS as issued by the IASB. We involved valuation professionals with specialized skills and knowledge who assisted in developing an independent fair value estimate for a selection of internally measured Level 3 derivatives and derivative-combined securities based on independently developed valuation models and assumptions, as applicable, using market data sources we determined to be relevant and reliable and compared our independent expectation to the Group’s fair value measurements. /s/ KPMG Samjong Accounting Corp. We have served as the Group’s auditor since 2023. Seoul, Korea April 23, 2025 F-5 Report of Independent Registered Public Accounting Firm To the board of directors and shareholders Shinhan Financial Group Co., Ltd