Transcript Focus on Korea

South Korea’s Journey
towards IFRS
A study from historical perspective
By Qiong Qin
Map of Korea Today
 Area - Total 99,646 km² (108th)
 Capital: Seoul
 Population: 49,024,737 (25th)
 GDP: $1.180 trillion (11th)
 Per capita: $24,200 (34th)
 Currency: South Korean won
From Nobody to a World Leader
 Korea was one of the least developed
countries in terms of industrial development
in early 60s.
 It has been transformed into one of leading
industrial countries in the world during the
last 40 years.
A poor country just after Korea war (1950~53)
1960
GDP per capita (in US$)
82
Share of Manufacturing (in GDP(%))
14.4
Major Industries
Wigs
Eyelashes
Clothes
Plywood
Korea’s Economic Miracle
 Average Nominal Growth Rate: 20%!!!
16000
 1960’s : 26%
14000
12000
 1970’s : 31%
10000
8000
 1980’s : 17%
6000
Financial crisis
4000
 1990’s : 13%
2000
• US$79 (1960)
US$ 24,200 (2006)
04
02
00
98
96
94
92
90
88
86
84
82
80
78
76
74
72
70
68
66
64
62
60
0
5
Miracle that make Korea an Asian Tiger
2006
Per Capital: 24,200$
Shipbuilding
Automobile
Semiconductor
Steel
(world no.1)
(world no.5)
(world no.3)
(world no. 5)
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
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.
South Korea's GNP vs. Export Growth Rates
100
80
60
GNP Growth
Export Growth
40
20
0
-20
1962 1964 1966 1968 1970 1972 1974 1976 1978 1980
A clear indication of export-oriented economy
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.
ZNISS
• WiLAN
•
Motorola
• SCO
•
Syracuse
U.
• NCGIA
(USA)
Notel •Ericsso
HHI
Simon Fraser
• n U.
Siemens
(Swede
(Canada)
n)
• FhgIIS
(Germa
ny)
Univ.of
London
TNOI
CPqD (Brazil)
Radiophz
ika
• INRIA
• CNRS
• INSA
Surf
Communication
Runn com
• Tsinghna U.
(Israel)
• Sountheast U.
• Beijing U. Posts
Telstra
&
(AU)
Telecommunicati
ons
• Peking U.
• NRSC
• HIT (China)
(Russia)
CRL
JSAT
NTT RITE
PTIT
Yokosuka
Park(Vietn
am)
(Japan)
Korean’s commitment to R&D
Total R&D Expenditure (PPP, 1996)
Scientists & Engineers (per million
people)
6000
5000
Japan
Russia
4000
US
Australia
Denmark
3000
Germany
Canada
UK
2000
Poland
1000
France
Netherland
Sw itzerland
Finland
Korea
Austria
Spain
Italy
China
Turkey
0
Brazil
India
0
0.5
1
1.5
2
2.5
R&D expenditure as % of GNP
3
3.5
Success Story of IT in Korean
Population : 48 Million
No.1
GNP : 9,700$ (No. 13)
No.1
No.4
1.3 Million
70% of
total
household
Internet
penetration
2.4 Million
5.1%
Internet
subscriber
No.7
No.7
No.15
68%
IT industry Mobile Internet e-government on-line stock
competitive (ITU)
(OECD)
IFRS: Opportunities and Challenges
Exported-Oriented
Economy
IT Globalization as
a flattener
Two Driven Forces
Towards
International Financial Reporting Standards
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.
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
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
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 .
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.
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 of the future”
Acknowledgment