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 Financial
Accounting Standards |
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The External Audit Act requires financial
statements of corporations with minimum
total assets of 7 billion won to be audited
according to the financial accounting standards
and other rules of FSC.
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Such standards eliminate special treatment
for foreign currency gains or losses, making
corporations recognize any such gains or losses
in their current income statements regardless
of their source. |
| Accounting
Standards for Financial Institutions |
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Consolidated accounting standards for banking,
securities and insurance industries have
been established in line with international
practices of IAS and U.S. GAAP, effective
January 1999.
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The standards adopted mark-to-market based
accounting for securities. As a result financial institutions
must report their securities at market value
and recognize all unrealized gains or losses
in the current fiscal year's income statement.
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| Introduction
of Combined Financial Statements |
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Local accounting practices require corporations
with subsidiaries to issue combined financial
statements, given the unique structure of
Korea's large conglomerates ("chaebols").
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According to the External Audit Law, the thirty
largest chaebols selected by the Korea Fair
Trade Commission are required to issue combined
financial statements |
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These combined statements assume that the subsidiaries
of a corporation constitute a single economic
entity. Thus, inter-group balances, inter-group
transactions and resulting unrealized profits
and losses must be eliminated when filing
combined financial statements, unless unrealized
profits and losses are immaterial. |
| Strengthening
of the audit system and the monitoring mechanism
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To strengthen monitoring of violations or
improper business practices of companies,
the government revised regulations related
to corporate governance. |
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All domestic securities firms, investment
trust companies and investment trust
management companies are now required
to appoint compliance officers.
กค KSE-listed companies are required to appoint
outside directors, composing of at least one-fourth
of the board. For KSE-listed companies
with assets exceeding 2 trillion won, a minimum
of one-half
the board must be appointed. For KOSDAQ-listed
companies, they are required to have outside
directors compose at least one-fourth
of the board.
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To increase transparency on KOSDAQ, stricter
rules for revoking the listing of companies
were applied in February 2001. |
กค Previously,
KOSDAQ companies discovered doing creative
accounting were given with a "negative
opinion" or initial warnings and
then given two years to rectify their records.
Now such companies
will be designated as "administrative
issues" on the first offense and delisted
if the deception
continues into the next year. |
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