Five years on: Korea sees benefits of IFRS adoption
The adoption of IFRS Standards has had a positive impact on international financing for Korean firms, according to research conducted by the Korean Accounting Institute and released by the Korean Accounting Standards Board (KASB).
Since Korea adopted IFRS Standards in 2011, foreign investors have enlarged their Korean investment portfolios to include smaller firms (less than ￦100 billion or US$85 million in assets), due to the increased and improved access to financial information.
The research also shows that although accounting-related costs have increased for local firms and companies, the local preparers and users of financial statements have identified positive effects from IFRS adoption, including:
· higher use of accounting information in decision-making, higher prioritisation of accounting and greater allocation of resources to accounting;
· lower risk perceptions among foreign banks in their credit and lending decisions to Korean firms;
· fewer incidences of the ‘Korea Discount’; and
· greater attraction of foreign capital.
Hans Hoogervorst, IASB Chairman, said:
IT IS GOOD TO SEE THAT KOREAN COMPANIES ARE REAPING THE REWARDS FROM FIVE YEARS OF FULL IFRS ADOPTION. THERE IS NOW EMPIRICAL EVIDENCE TO SHOW THAT IFRS ADOPTION HAS MADE KOREAN FIRMS MORE ATTRACTIVE TO OVERSEAS INVESTORS, TO WHOM THEY CAN NOW COMMUNICATE WITH TRANSPARENCY AND EFFICIENCY THROUGH A GLOBAL FINANCIAL REPORTING LANGUAGE