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South Korea’s Journey towards IFRS

South Korea’s Journey towards IFRS. A study from historical perspective By Qiong Qin. Area  - Total 99,646 km² (108 th ) Capital : Seoul Population: 49,024,737   (25 th ) GDP : $1.180 trillion (11 th ) Per capita: $24,200 (34 th ) Currency: South Korean won. Map of Korea Today.

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South Korea’s Journey towards IFRS

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  1. South Korea’s Journey towards IFRS A study from historical perspective By Qiong Qin

  2. Area - Total 99,646 km² (108th) Capital: Seoul Population: 49,024,737   (25th) GDP: $1.180 trillion (11th) Per capita: $24,200 (34th) Currency: South Korean won Map of Korea Today

  3. From Nobody to a World Leader • Korea was one of the least developed countries in terms of industrial development in early 60s. • It has been transformed into one of leading industrial countries in the world during the last 40 years.

  4. A poor country just after Korea war (1950~53)

  5. Korea’s Economic Miracle • Average Nominal Growth Rate: 20%!!! • 1960’s : 26% • 1970’s : 31% • 1980’s : 17% • 1990’s : 13% Financial crisis • US$79 (1960) US$ 24,200 (2006)

  6. Miracle that make Korea an Asian Tiger

  7. Overview of the talk • Three Milestones towards Miracle • Export-Oriented Economy • IT Flattener through Globalization • IFRS: Opportunities and Challenges • Implication on current translation • Prospective and Challenges • Conclusion

  8. Export-Oriented Economy • Korea's industrial development has been achieved through export-oriented strategies. • During 1960s and 1970s, the period when Korea accomplished the development of major industries, export growth outpaced GDP growth.

  9. South Korea's GNP vs. Export Growth Rates A clear indication of export-oriented economy

  10. Notel Simon Fraser U. (Canada) ZNISS Radiophzika (Russia) Ericsson (Sweden) • INRIA • CNRS • INSA • HHI • Siemens • Fhg-IIS • (Germany) • Univ.of London • TNOI CRL JSAT NTT RITE Yokosuka Park (Japan) • Wi-LAN • Motorola • SCO • Syracuse U. • NCGIA • (USA) PTIT (Vietnam) Surf Communication Runn com (Israel) • Tsinghna U. • Sountheast U. • Beijing U. Posts & • Telecommunications • Peking U. • NRSC • HIT (China) CPqD (Brazil) Telstra (AU) IT Flattener through Globalization • At the start of the 21st century, South Korea predicted that the IT industry would boom and become very important in the 21st century.

  11. Korean’s commitment to R&D

  12. Success Story of IT in Korean Population : 48 Million GNP : 9,700$ (No. 13) No.1 No.1 No.4 No.7 No.7 1.3 Million 70% of total household 2.4 Million 5.1% 68% No.15 on-line stock e-government Internet penetration Internet subscriber IT industry competitive (OECD) Mobile Internet (ITU)

  13. Two Driven Forces Towards International Financial Reporting Standards IFRS: Opportunities and Challenges Exported-Oriented Economy IT Globalization as a flattener

  14. Brief introduction of IFRS in Korea • Korea Accounting Standards Board (KASB) is largely consistent with IFRS. • The Korean Financial Accounting Standards (KFAS) are largely consistent with IFRS. • The accounting standard-setters need to make further efforts to remove discrepancies between the local accounting standards and the IFRS.

  15. Efforts towards IFRS (briefly) • In light of the 1997 Asian financial crisis, South Korea's corporate culture increases the transparency • The government is realizing that partial adoption of the IFRS standard is inadequate to ensure confidence in South Korea’s system • Financial reporting under IFRS will be made mandatory for all listed companies, annouced on March 15, 2007

  16. Implication on Currency Translation • Money is called Won • Exchange rate is about 1000 to 1 Exported-Oriented Economy IT Globalization Currency Translation impose high influence

  17. Implication of Appreciation • Won appreciated 15% against the USD in 2004, followed by 2.3 percent in 2005 • Appreciation in currency is a good sign of competitiveness and strength. However • The appreciation of Won hurts the exports from South Korea. A sharp deceleration in export growth (31% to 12% in 2005) • Discourages the investment from South Korean to foreign countries .

  18. Prospects for Harmonization • To embrace the globally accepted accounting standard, South Korea should establish comparable, reliable and the transparent corporate financial reporting. • The IFRS also requires fully-aligned, harmonized and consistent rules for consolidated financial reporting accounting.

  19. Final Remark • Korea emerges as a “tiger” of Asia • Three milestones cultivate the need for IFRS adoption in Korean. • Influence of current translation amplifies with globalization and flattening “History is the driving force ofthe future”

  20. Acknowledgment

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