Gov. Zhin Woong-seob of the Financial Supervisory Service (FSS) intends to take charge of the introduction of the IFRS2 Phase 2 initiative in a meeting that will take place in May with the heads of Korea’s insurance firms.
The top man at FSS is expected to stress capital increases at insurance firms in accordance with the change in the international financial accounting system with the introduction of IFRS4 Phase 2, officials of the FSS said recently.
According to the financial authorities and the insurance industry, the FSS Gov. will call for a meeting with CEOs of both life and non-life insurance firms. He will meet with the CEOs of life insurance firms on May 9 and those of non-life insurance firms on May 17, officials of FSS said.
Korea's successful adoption of IFRS was possible because interested parties have thoroughly prepared for the IFRS adoption in a multilateral manner since the announcement of the Roadmap. In 2007, the Korea Accounting Standards Board (KASB) promptly announced and provided Korean translations of IFRS to help entities analyze IFRS and meet IFRS compliance requirements.
The Korean government has continuously endeavored to harmonize the domestic systems with IFRS by amending the related laws and regulations. Korean companies actively engaged in preparation for implementation of IFRS, overhauling their accounting systems. Also, related parties including the government, the FSS, KASB, Korea Exchange, Korea Institute of Certified Public Accountant (KICPA), and business associations jointly put an immense amount of time and efforts into the education and promotion of IFRS in order to address the difficulties encountered by the constituents in practice.
Adoption of IFRS inevitably involves changing related systems of a country because an accounting system is closely related to the numerous laws and regulations of that country.
The so-called Act on External Audit of Stock Companies, which governs accounting for companies in Korea, was reformed to lay a legal foundation so that K-IFRS, i.e., direct Korean translation of IFRS; set out the scope of entities subject to the mandatory application of IFRS; and align the composition and names of the basic financial statements with those of IFRS.
Furthermore, amendments were made to the Financial Investment Services and Capital Markets Act regarding the period of submission for business reports and more, and the Corporation Tax Law was reformed in a manner that would neither undermine tax burden equality nor increase tax burdens on entities. Korea put immense efforts into reorganizing its entire accounting system to have it aligned with IFRS during its preparation period since the “ Roadmap toward IFRS adoption in Korea” was announced in 2007.
Despite the multi-angled efforts, however, constituents in Korea including the users, pre parers and auditors of the financial statements encountered numerous challenges and difficulties in adapting to the new accounting standards, IFRS.
As with any case of adopting a new system, difficulties unavoidably arise in the earlier stages of the process. Thus, the hardship faced by the Korean constituents newly adapting to IFRS was almost predetermined as the constituents were required to leave behind the accounting practice they were so familiar with and adapt to a new accounting paradigm that emphasizes principles rather than specific rules; economic substance rather than legal form; consolidated financial statements rather than individual financial statements; and fair value measurement rather than historical cost measurement.
Based on such diverse efforts put into the IFRS adoption, Korea is now expecting to see improved perception of the reliability of financial statements provided by Korean companies as well as an enhanced national status in the international accounting community. After the adoption of IFRS, Korean companies listed overseas were able to cut the cost of preparing dual financial statements, and the domestic constituents engaged in vibrant discussions on the application of principle-based IFRS.
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