South Korea’s Journey towards ifrs a study from historical perspective

South Korea’s Journey towards IFRS

• A study from historical perspective

• By Qiong Qin

Map of Korea Today

• Area - Total 99,646 km² (108th)

• Capital: Seoul

• Population: 49,024,737   (25th)

• GDP: $1.180 trillion (11th)

• Per capita: $24,200 (34th)

• Currency: South Korean won

From Nobody to a World Leader

• Korea was one of the least developed countries in terms of industrial development in early 60s.

• It has been transformed into one of leading industrial countries in the world during the last 40 years.

A poor country just after Korea war (1950~53)

Korea’s Economic Miracle

Miracle that make Korea an Asian Tiger

Overview of the talk

• Three Milestones towards Miracle

• Export-Oriented Economy
• IT Flattener through Globalization
• IFRS: Opportunities and Challenges

• Implication on current translation

• Prospective and Challenges

• Conclusion

Export-Oriented Economy

• Korea's industrial development has been achieved through export-oriented strategies.

• During 1960s and 1970s, the period when Korea accomplished the development of major industries, export growth outpaced GDP growth.

South Korea's GNP vs. Export Growth Rates

IT Flattener through Globalization

• At the start of the 21st century, South Korea predicted that the IT industry would boom and become very important in the 21st century.

Korean’s commitment to R&D

Success Story of IT in Korean

IFRS: Opportunities and Challenges

Brief introduction of IFRS in Korea

• Korea Accounting Standards Board (KASB) is largely consistent with IFRS.

• The Korean Financial Accounting Standards (KFAS) are largely consistent with IFRS.

• The accounting standard-setters need to make further efforts to remove discrepancies between the local accounting standards and the IFRS.

Efforts towards IFRS (briefly)

• In light of the 1997 Asian financial crisis, South Korea's corporate culture increases the transparency

• The government is realizing that partial adoption of the IFRS standard is inadequate to ensure confidence in South Korea’s system

• Financial reporting under IFRS will be made mandatory for all listed companies, annouced on March 15, 2007

Implication on Currency Translation

• Money is called Won

• Exchange rate is about 1000 to 1

Implication of Appreciation

• Won appreciated 15% against the USD in 2004, followed by 2.3 percent in 2005

• Appreciation in currency is a good sign of competitiveness and strength.

Prospects for Harmonization

• To embrace the globally accepted accounting standard, South Korea should establish comparable, reliable and the transparent corporate financial reporting.

• The IFRS also requires fully-aligned, harmonized and consistent rules for consolidated financial reporting accounting.

Final Remark

• Korea emerges as a “tiger” of Asia

• Three milestones cultivate the need for IFRS adoption in Korean.

• Influence of current translation amplifies with globalization and flattening

Acknowledgment