K-IFRS is taking root

When Korea accepted IMF bail-out package in 1997 to overcome severe financial crisis, Korea carried out a large scale of intense restructuring. As a part of reforming, Korea Generally Accepted Accounting Principles (K-GAAP) was made out to enhance accounting creditability. K-GAAP, however, was not enough to coincide with international standard, so Korean companies used to be derided with backwardness of accounting standards. As a result, Korea International Financial Reporting Standards (K-IFRS) was phased in from 2009, and the year 2011 was the first year for listed companies and financial companies to write the financial reports in accordance with K-IFRS, as a mandatory requirement.

Accordingly, Financial Supervisory Services (FSS) conducted to examine 2011 financial reports. Total 1,600 financial reports which consist of 655 listed on Korean Composite Stock Price Index (KOSPI) and 945 listed on Korea Securities Dealers Automated Quotation (KOSDAQ) were examined with 121 items.

The result of assessment is meant to be satisfactory. The major incompleteness which can affect users to misunderstand accounting information is not found. Compared to the first quarterly report in 2011 when the major incompleteness was found in 111 reports, this result deserves to be admirable. As a matter of fact, average number of errors per company committed was found only 4.5. The number of financial reports without any errors was as many as 288. The following table is a summary of the examination result.



Volume of Capital (Billion KRW)



Less than 100



Over 2000

Average error/company







Total No. of company







According to the table, the smaller sized companies tend to make more errors than the bigger sized companies. Therefore, FSS will keep giving advices and instruction for those imperfect companies continuously. To modify the found errors, FSS is noticing privately for the companies to encourage modifying their own record.

Furthermore, there is an increasing trend that even not listed companies voluntarily make financial reports in conformity with K-IFRS voluntarily. Generally, adopting K-IFRS from 2011 is mandatory only for the listed companies and financial companies. However, despite of needlessness, 1,142 unlisted companies wrote their financial reports with using K-IFRS in 2011, and additional 261 companies are prospected to adopt K-IFRS in 2012. The major reasons for such trends to adopt K-IFRS voluntarily, notwithstanding the high converting cost, are the accordance of accounting standard between the holding company and the subsidiary company, preparation for the list, enhancing of accounting transparency and improvement of company image.

Korean financial authorities have made endeavours to achieve the competitiveness of accounting system. These endeavours are resulting in the improvement of accounting creditability of Korean companies. Also, it is positive sign for many unlisted companies to adopt K-IFRS spontaneously. At this rate, it is matter of time for IFRS to become established in Korea.

Chaehack Suh (chaeahck.suh@gmail.com)


Reconsidering the role of finance about aging society

     Korea has one of the lowest birthrates among industrialized nations. Thus the Korean government continued to devote all its energy to achieving its performance objectives. But coping with the increasing aging trend is as important as coping with the low birthrates. The progress speed to aging society of Korea is faster than that of the developed countries, which is result from the rapidly decline of birthrates and prolongation of the average span of life. Unless there is a dramatic turnaround, the nation`s senior population is expected to place an increasing strain on state spending over the coming years.

International Comparison of aging society

     The demand of financial services about long-term saving and pensions will increase steeply because of going retirement age of baby boom generation. Whereas the financial services of Korea for aging society are insufficient to meet the rapidly increasing demands. The expansion of financial services is needed to manage the pension assets over the long period by enlargement of pension’s demand. And promoting industrial markets is also needed to cope with the increasing demand about health, nursing, and medical services owing to aging society. Asset management and systematic, customized financial services providing the aging society should be enlarged and the social awareness about this should be widespread.

     Elderly people tend to have irregular incomes and most of them live on their monthly pension. The amount of pension is not sufficient to cover their living cost. Thus to manage the asset accumulation, the financial services providing aging society should be managed by some ways such as diversification and foreign investment. To meet this goal, it is essential to create an atmosphere for financial companies to make the financial products about aging society actively.

     And sales channels should be advanced to the level of the developed countries for customers to approach the aging financial goods easily. The government should intense security system for investors and contractors since the customers are generally too old to cope with irregular situation. If they are once damaged by an illegal act such as incomplete sales, then it will lead to the failure of preparing their later years. It is better way to prepare one’s later years in his early ages than in old ages. The government should manage and expand financial education program systemically. By doing this, the aged will raise their awareness about aging risk and expand their ability of selecting financial products.