Marking five years of implementing International Financial Reporting Standards (IFRS) since 2011, the Korea Accounting Standards Board (KASB), jointly with the Financial Supervisory Service (FSS), Korea Institute of Public Finance (KIPF), and Korean Institute of Certified Public Accountants (KICPA), conducted a comprehensive research project to look into whether the effects that the 'Roadmap toward IFRS adoption in Korea' initially suggested were sufficiently achieved, and if not, what the causes of insufficiency are and what relevant future improvement measures should be implemented.
Korea’s IFRS adoption is quite unique in two aspects. First, Korea adopted IFRS in a ‘Big Bang’-style simultaneous transition, instead of taking a phased-in or convergence approach. All public companies and major financial institutions in Korea were required to adopt IFRS in full at once. They were even required to apply IFRS to not only consolidated financial statements but also separate financial statements. Second, IFRS which is a principle-based accounting was adopted by Korea which is a Code law country, where rule-based accounting was prevalent. This meant that great changes were required in not only the practice but also the regulatory regime and many other related areas. Having such distinctive environment, I am certain that Korea’s experience of IFRS adoption would provide very helpful insights to the countries preparing for or planning IFRS adoption.
This study examines what has been achieved throughout the IFRS adoption process in Korea as well as what lessons Korea has learned over the last five years based on the findings of the five individual research studies constituting a comprehensive research project titled ‘IFRS adoption in Korea over the past five years: Results and Challenges’ and two other research studies the KASB conducted prior to the comprehensive research project. These seven research works which are the cornerstone of this paper are as follows:
1. Costs and Benefits of IFRS Adoption in Korea: Preparers’ Perspectives (Kim, Ko, and Park 2015)
2. IFRS Adoption and Capital Globalization in Korea (Han, Lee, Park, and Seo 2016)
3. The Economic Consequences of IFRS Adoption in Korea: Evidence from interview and survey (Paek and Jung 2016)
4. The Economic Consequences of IFRS Adoption in Korea: A literature review and empirical evidence (Song and Cheung 2016)
5. The Effect of IFRS Adoption on External Audit and Accounting Supervisory System in Korea (Jeon, Kim, and Cho 2016)
6. The Effect of IFRS Adoption on Accounting Information and Major Decision-Making Process in Public Sector (Moon 2016)
7. Review on IFRS Adoption Process and Implementation Issue (Yi and Kwon 2016)
The purpose of this study is to assess the results and challenges that Korea has experienced in the last five years of IFRS adoption process from a more systematic and multilateral point of view, and at the same time, to overcome the limitations of the prior research studies being fragmentary and short-term in their research scope. This study, nevertheless, would not be the ultimate research that completes the assessment of full effect of IFRS adoption. Rather, this study is more of an interim check to take the research to the next level by analyzing whether IFRS was successfully adopted and identifying areas for better implementation. As five years may be a relatively short period of time for properly evaluating the effects of IFRS adoption in full, further assessment of this kind should follow in the future.
I hope the stakeholders including preparers, users, auditors, regulators, standards-setter, and academics would set detailed goals based on this study and strive to achieve the goals so as to spread the positive effects and remedy and alleviate the negative effects identified in this study. Furthermore, I sincerely hope there would be follow-up research that would complement and overcome the limitations of this study.
I would like to extend my heartfelt thanks to all those who worked so hard for this extensive research for their ceaseless effort and passion in carrying out the study. First of all, I am thankful to the researchers and research participants of the individual studies mentioned above. Based on their research results, we were able to examine the perceptions of IFRS adoption from the viewpoint of various stakeholders including preparers, users, auditors, regulators, standards-setter, etc. Their work also enabled us to assess the changes in the qualitative properties of accounting information under IFRS by collating existing research works and complementing empirical analyses.
In particular, I would like to express my deepest gratitude to Professor Han Sang Yi, who authored this research paper, bringing the results of various individual researches together and drawing meaningful lessons, and Professor Catherine Heyjung Sonu, who helped improve this research paper even further for enhanced readability in English. My thanks also go to Professors Jongsoo Han, Youngsoon Cheon, Seok Woo Jeong, and Bong Hee Han for their thorough review of this paper. I am grateful to Professors In Man Song and Su Keun Kwak for sharing with me the immense responsibility of planning, executing and completing the research work and producing this research report. I would like to extend my gratitude to Mr. Huichun Park, Chief Accountant of FSS, and Mr. Yeonggyun Ahn, Vice President of KICPA, for their valuable consultation and advice on the research. Lastly, I deeply appreciate the efforts of the KASB’s Research and Education team staffs for facilitating cooperation among all those involved in this research.
Jee In Jang, Ph.D.
Chair and CEO
Korea Accounting Institute
Korea Accounting Standards Board