IFRS Adoption Task Force IFRS Adoption Task Force AndAnd

Korea Accounting Standards BoardKorea Accounting Standards Board

Roadmap towardIFRS Adoption in Korea

2007. 3. 15.

IFRS Adoption Task Force

Welcome SpeechLee, Hyoik

Chairman of KASB

International Financial Reporting Standards

Kim, Yong-Hwan

Chairman, IFRS Adoption Task

Force

Standing Commissioner of Securities & Futures

Commission, FSC

International Financial Reporting Standards

Need for IFRS Adoption

Convergence status and evaluation Major differences (IFRSs vs Korean Standards) Need for IFRS adoption and expected impact

Overall approach for IFRS adoption Scope of application and starting period Phased transition to consolidation-based disclosure Operation of accounting standards

Work plan for IFRS adoption Financial contribution to IASCF Next project / Phased plan

Progress report of Task Force

Main feature of adoption

Next plan

International Financial Reporting Standards

Contents

IFRS Adoption Task Force

Convergence Status Has gradually converged with IFRSs since the establishment of

KASB in 1999 23 Statements (SKASs) based on IFRSs issued as of March 2007 (All major SKASs converged to IFRSs)

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Convergence Status and Evaluation

Evaluation Phased convergence approach (not one-time complete

adoption) Certain items amended as adopted

Korea is viewed as a country non-compliant with IFRSs

IASB KASB

# of IAS(IFRS)# of issued SKASED and others

2314

37 Total 37

IFRS Adoption Task Force

6

Major differences (IFRSs vs Korean Standards)

Difference IFRS Korean standard Related items

Disclosure

Consolidated F/S based

Individual F/S based Scope of consolidationEquity methodInterim consolidated F/S

Valuation Fair value (in principle)

Cost (when objectiveValuation is impractical)

Investment propertyContingent liabilityFinancial liabilityPPE and etc.

Legal and policy objective

Accounting treatment based on substance of transaction

Special treatment for certain items for the purpose of legal and policy objective

Loan loss reserveIndividual F/S based disclosureCriteria for sale of assets through ABS

IFRS Adoption Task Force

Need for IFRS Adoption

IFRS recognized as global norm of accounting standards

Approximately 100 countries adopt or permit IFRSs

Use of current Korean standards leads to reduced reliability

Convergence with globally recognized standards enhances reliability of Korean accounting standards

7

Need for IFRS Adoption and Expected Impact

Expected Impact Proactively cope with the trend of single global standard

Enhance reliability of accounting transparency

Relieve burden of converting financial statements based on Korean standards to those based on IFRS for globally listed companies

IFRS Adoption Task Force

8

Progress Report of Task Force

IFRS Adoption Task Force organized in February 2006

16 representatives from Financial Supervisory Commission/Financial Supervisory Service, Ministry of Finance and Economy, Korea Accounting Institute, Korea Listed Companies Association, Korea Federation of Small and Medium Business, Korea Accounting Association, Korea Exchange, Korean Institute of Certified Public Accountants, and major

accounting firms

Operated three working groups

Held official Task Force conference more than once a month

Discussed issues at the public forum (21 November 2006)

Consulted with related government parties

IFRS Adoption Task Force

Follow the current enactment procedure for Korean accounting standards

Restrict modifications to minimumPursue amendments to laws that are in conflict with IFRS

Consider deletion of certain alternative accounting treatments

9

Overall Approach for IFRS Adoption

Adoption of complete set of IFRSs60 IFRSs and interpretations

IFRS Adoption Task Force

10

Mandatory for listed companies

Optional for non-listed companies (Once IFRS applied, not allowed to revert)

Scope of Application and Starting Period

Scope of Application

Any company (excluding financial institutions) From 2009

Financial institutions not permitted to apply from 2009

All listed financial institutions required to apply from 2011

All listed companies From 2011

1 year prior to application, note disclosures about IFRS effect on F/S required to protect investors and enhance comparability

Starting Period

IFRS Adoption Task Force

Scope of Consolidation

Phased Transition to Consolidation-based Disclosure

Transition for "large listed companies" from 2011 Total assets ≥ KRW 2 trillion

Transition for "all other companies" from 2013 Total assets ＜ KRW 2 trillion

(*) "early adopted companies" from early adopted year

Requires consolidation-based disclosure of non-financial information

Scope of subsidiary for consolidation in accordance with IFRS

(parent holding more than 30% share of the investee over 50% share and control over the investee)

11

Starting Period of Full Disclosure on the basis of Consolidation

IFRS Adoption Task Force

12

Manage 2 Tier System to enhance practicability and comparability and to reduce user's confusion

IFRS for listed companies and separate standards for non-listed companies

Operation of Accounting Standards

Scope ~2008 2009~2010 2011~

Early adopted company

Listed company

Non-listed company

(*)

Current Korean Standards

IFRSs

Standards for non-listed companies

[*] consider early application of standards for non-listed companies

IFRS Adoption Task Force

13

Work Plan for IFRS Adoption

Initialprocedure

Cooperation with IASCF regarding copyright contract

Main body(Bare, numbered IFRSs)

Finalized and published by 2nd half of 2007

60 IFRSs and IFRICs in total

Due process for adoption by the KASB

Applicationguidance

Scheduled to be published by 2008, to help users understand the main body (Bare, numbered IFRSs) and facilitate the application

IFRS Adoption Task Force

14

Request from chairman of IASCF

'User pays' principle

Financial Contribution to IASCF

Need for contribution to the standard-setting activities of IASB

Promote contribution as early as possible

Contribution size commensurate with national GDP level

Ensure stable fund-raising i.e. legislation in the long term

Organization of private sector-driven sponsor committee

IFRS Adoption Task Force

15

Organize "Roadmap Implementation T/F" to successfully adopt IFRS in Korea

Next Project

Project for IFRS Implementation

Monitor the progress of the Roadmap implementation Review amendment demand to laws and regulations Assess public monitoring policy for accounting and audit

practices Promote IFRS education Ensure professional quality of valuation institutions Strengthen cooperation with IASB and IASCF regarding

copyright contract

Main Agenda

IFRS Adoption Task Force

16

Phased Plan

Phases Agenda

Preparatory(2007-2008)

Cooperation with IASCF regarding copyright contract Complete due process for IFRS adoption Pursue amendments to laws and regulations Assess public monitoring policy for accounting and audit

practices

Optional(2009-2010)

IFRS application permitted for any companies Publish standards for non-listed companies Note disclosures about IFRS effect on F/S required(2010) Promote IFRS education

Mandatory(2011-2013)

IFRS application required for listed companies Application of standards for non-listed companies Consolidation-based disclosure for listed companies(2011): (Total assets ≥ KRW 2 trillion)

Analyze impact of IFRS application Consolidation-based disclosure for all listed companies(2013)

IFRS Adoption Task Force

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Conclusions

IFRS adoption will underpin enhancement of accounting transparency and reliability in Korea

Rigorous preparation required from all related parties including Investors, companies, regulators, auditors and educational institutions

Active and harmonized cooperation necessary for smooth transition to IFRS environments

IFRS Adoption Task Force

Introduction

Yoon, Jeung-HyunChairman of FSC

International Financial Reporting Standards

IFRS Adoption Task Force

Congratulatory SpeechLim, Young-Rok

Deputy Minister of Finance and Economy

International Financial Reporting Standards

IFRS Adoption Task Force

Park, Seung-Bok Chairman of Korea Listed Companies

Association

International Financial Reporting Standards

Congratulatory Speech

IFRS Adoption Task Force

Sir David Tweedie Chairman of IASB

International Financial Reporting Standards

Congratulatory Speech

IFRS Adoption Task Force

Shizuki Saito Chairman of ASBJ

International Financial Reporting Standards

Congratulatory Speech

IFRS Adoption Task Force

Q & ASuh, Chungwoo Vice-Chairman of IFRS Adoption Task Force Vice-Chairman of KASB

Choi, Sang-Mok Director of Securities Policy Division, Ministry of Finance and Economy

Chung, Wan-Kyu Director of Market Supervision Policy Division, FSC

Ryu, Jae-Gyu Head of Corporate Accounting System Office, FSS

International Financial Reporting Standards