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Publicly traded companies must adopt accounting method by 2011
March 20, 2010
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But a recent survey by the Financial Supervisory Service sheds light on a troubling development: Nearly 25 percent of firms that must make the switch haven’t even started preparing to implement the accounting method, officially called International Financial Reporting Standards, or IFRS. That’s raising concerns over whether Korea’s companies will be able to fully transition to the new standards in time. The International Accounting Standards Board created the new accounting guidelines so that companies can report their financial performance using a common, globally approved method - which can help clear up confusion when companies partner with foreign firms and make analyzing quarterly and annual reports easier. Korean financial regulators decided to enforce the standards here at home to boost the country’s competitiveness in the international arena. The adoption of IFRS will be mandatory for all listed companies in Korea starting next year, though it’s voluntary for companies that haven’t issued shares. The publicly traded firms that don’t switch face a stiff penalty: a delisting of their stock. Fourteen local companies - including KT&G and Pulmuone Holdings Co. - have already adopted the system. And roughly 75.1 percent of the 1,190 companies that responded to the FSS survey said they are working toward adopting IFRS. But the rest, or 296 companies, said they have not started preparing for it at all. Roughly 34 percent of that group consists of small and midsize enterprises (SMEs) with assets of less than 100 billion won. Some of these companies, according to the FSS, think that they will be able to adopt the system quickly. Others are still trying to decide on a plan to adopt the standards or said they are waiting to see how other firms do it. But they’ll likely have to start moving forward soon. According to the FSS, it takes firms anywhere from six months to more than 21 months to complete preparations. Financial officials say there will likely be a flurry of activity in the coming months. “Around 94 percent of the companies that have not started preparing for the new system are planning to begin procedures within the first half of this year,” said Jang Suk-il, an IFRS task force team head. To facilitate preparations of local firms required to adopt the IFRS by 2011, the FSS has vowed to enhance education activities, said an official from the agency. By Kim Won-bae [jyj222@joongang.co.kr] |
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