International Accounting Harmonization: South Korea and IFRS Impact

This report examines the accounting policies of South Korea, focusing on the harmonization of its accounting standards with the International Financial Reporting Standards (IFRS). The report analyzes the reasons behind the harmonization, including the need for improved access to financial markets, better comparability of financial data, and the impact of globalization. It explores the issues encountered during the harmonization process, such as the costs and benefits of adopting new standards, political lobbying, and variations in economic and social environments. The report includes a case study of Lotte Corporation, illustrating the success and failures of the IFRS adoption. The analysis considers the impact of IFRS on financial reporting, the challenges faced, and the overall effectiveness of the harmonization efforts. The report concludes with recommendations for future improvements in the harmonization process, considering the evolving global financial landscape.

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Executive Summary
The assignment aims at the accounting policies followed by the South Korean economy and the
evaluation of the IFRS in the current accounting standards. It is important that the accounting
standards of the company or the organisations should be such that helps the investors in easy
interpretation of the financial results and the same has been taken actively into account for the
analysis and evaluation of the assignment. The reason for having a global financial reporting
framework or the harmonization of the accounting standards of companies was discussed.
Various factors that will directly affect and influence the operations of the company was
analysed. The success and failure of the harmonization of the accounting standards by the
Korean Accounting Standard Board and adoption of the same by key company like Lotte
Corporation was analysed.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Reasons for Harmonisations........................................................................................................3
Issues for Harmonisation.............................................................................................................5
Success and Failure of Harmonisation........................................................................................7
Conclusion and Recommendations..................................................................................................8
Reference.......................................................................................................................................10
Appendix........................................................................................................................................12

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Introduction
Various organisation and companies for the purpose of following and reporting of the
accounting data and informations have applied a variety of accounting standards. Primarily, there
have been four accounting standards that were followed from different areas on a global basis
like in United Kingdom, Continental Europe, Latin America and United States. Financial
informations and data presented by the companies and organisation is an important source of
assessing the growth and performance of the company (Kang & Kim, 2016). It is important that
the accounting standards of the company or the organisations should be such that helps the
investors in easy interpretation of the financial results and so that the same can be applied in the
evaluation of the financial position of the company. Comparability and verifiability are some of
the key qualitative characteristics of the company that helps the investors in verifying and
comparing the performance of the company among various companies operating in the same
industry. Harmonisation of the accounting policies followed by the South Korean economy from
the Korean Accounting Standards to the International Financial Reporting Standards has been
critically evaluated and taken into consideration (Karakaya & Kaynak, 2018). The adoption of
the IFRS by the South Korean economy was done in the year 2011 where the entities and
financial instructions have adopted the IFRS for the purpose of presentation of financial report.
Harmonisation of the accounting policies thereby forming a common ground for the preparation
of the financial report will bring the International Accounting Standards into some sort of
agreements. The difference in the treatments of the accounting transactions and belief regarding
the treatment of classifying the same has been the key issues behind the issues in the
harmonisation of accounting standards. The financial statements from the various companies in
accordance to the common accounting principles will have necessary disclosures and

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measurement method applied for the valuation of the various assets of the company (Mulyany &
Ariffin, 2018).
Discussion
Reasons for Harmonisations
Harmonisation of the accounting policies for the company will help the investors in
assessing the important financial data of the company and comparing the same with other
competitors. Every accounting standards has its own set of assumptions regarding the accounting
policies and the treatment of the various accounting transactions. Harmonisation of the
accounting standards aims at reducing the financial difference between the companies and
financial instructions in the financial reporting of the data and informations about the company.
The harmonisation of the accounting policy by the South Korean economy will allow the
financial users in easy comparison of the financial data (Olesen & Cheng, 2017). Harmonisation
of Accounting Standards will help the company in getting improved access to the financial
markets and would also improve the evaluation and assessment of the financial data by the
company. Uniformity in the accounting policies and the reporting standards in the South Korean
economy will be the key benefit of harmonisation of the accounting standards. Harmonisation of
the accounting standards will also be helping the tax authorities in evaluating the profit or loss of
the company on a global basis (Newberry, 2014). The financial users and the stakeholders of the
company such as shareholders, creditors, investors, suppliers and regulatory bodies will be able
to get a consistent and a comparable report thereby assessing the financial performance of the
company. Globalisation in the South Korean economy has been the key reason for the
harmonisation of the accounting standard. Faster economic decision process making and having
a unified global accounting policies for the companies and institution will be the benefit of the

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harmonisation of the accounting standards. The accounting policies followed by the South
Korean Economy was the Korean Accounting Standards Boards and the economy has adopted
the IFRS in the year 2011. Enhanced comparability, relevance, reliability, quality and economic
substance of the accounting information presented will be the highlights of harmonisation of the
accounting policies. The economy mandates that all listed companies should present their
financial information in accordance with the International financial Reporting Standards. The
treatment of the various transactions and accounts of the company and the treatment of the same
should be well in accordance with the global reporting framework so that the management of the
company are well guided in the treatment of the transactions and the accounting of the various
data of the company. Reporting of the various accounts of the company at the historical values
and the fair value has been the key issues in comparing the accounts and informations of the
company. On the one hand, side the fair value accounting according to the IFRS in contrast to
the financial assets and instruments are some of the key requirement. The Korean Accounting
Standard is evaluating the impact on the financial statements of the company with the application
of the IFRS in financial reporting. With the changing world and the rising economy, it is
important for the companies and organisation for having a stable and common financial reporting
framework. The financial report presented by the Lotte Corporation Ltd has been in accordance
with the IFRS, which is guided by the International Accounting Standard Board helping the
investors in assessing the financial information. Disclosures of various accounting related
informations by the company and classification of various accounts of the company has been the
key and primary benefit of following a uniform accounting standards. Investors, stakeholders and
financial report users will be able to better evaluate the performance of the companies. The

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financial information and report presented by the Lotte Corporation will be helping the investors
in classifying the financial data and informations about the company.
Issues for Harmonisation
Cost and benefit of every changes and policy, transactions and events should be analysed
and evaluated well under the various accounting policies of the company. The adoption of the
global accounting standard is significantly dependent on the convergence of the accounting
standards and the acceptance of the same by the respective accounting standard board for having
a common accounting policy (Ji, 2017). The accounts of the company and the transactions of the
company should be in accordance to the accounting standards policy as stated by the IFRS where
assumptions used by the management of the company for the purpose of reclassification and
reinstatements of accounts. The valuation of the company is done in accordance with the
accounting policies followed by the company and the respective valuation of the assets and
liabilities of the company (Sedláček, 2016). The classification and reinstatement of the accounts
of the company should be based on the policies followed by the company. The management of
the company should be reporting the financial data and informations in accordance with the
accounting policy, which helps the company in the recognition of the income and expenses of the
company.
Cost and Benefit: The cost and benefit of the adoption of the accounting standard that will be
adopted by the company for the harmonisation of the accounting standards should be well
evaluated by the company. The evaluation of the change in the accounting standards would be
based on the cost incurred by the company in the transformation and reinstatement of the
financial statements of the company (Koen, 2015). The benefit of the adoption of the common
accounting standard will be proper classification and availability of the financial information and

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data about the company in respect to the accounts of the company. The shareholders of the
company who are the key stakeholders of the company evaluate the financial position and
performance of the company. The need for having a common accounting standard and policy
will be helping the company in providing better access to data and informations about the
company (La Torre et al. 2018).
Political Lobbying: Many institutions and organisation influence the workings and operations of
the accounting standard board for the implementation of common accounting standards. The
harmonisation of the accounting standards has not been done well by the economies because of
the several influence done by some of the companies and intuitions, who have been protesting
the application of common accounting standards (Brusca and Martínez, 2016).
Variation in Economic and Social Environment: Harmonization of the accounting policy is
influenced by various social and economic factors where the accounting plays a crucial role.
Different countries have different aspects and belief regarding the financial reporting framework.
US considers the investment made by the investors and the disclosures of the financial reporting
to be of primary concern for the financial reporting. The difference in the treatments of the
accounting transactions and belief regarding the treatment of classifying the same has been the
key issues behind the issues in the harmonisation of accounting standards (Mussari and
Sorrentino, 2017).
Diverse Accounting Practise: There is a wide difference in the various accounting policy
followed by the company and the difference in the treatment and recording of the financial
informations can materially affect the financial results of companies. The divergence in the
accounting standards and policies is been well taken into consideration which affects the role of
harmonisation of accounts (Hopper, Lassou and Soobaroyen, 2017). The financial statements of

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the company should be such that it reflects the fairness and usefulness of the financial statements
of the company (Ahmed and Ali, 2015).
Gaps between Developed and Developing Countries: The policies and accounting transaction
of the companies and instructions varies on a large-scale basis from country to country. The
developing countries had a little chance for the evolving accounting standards, which would
reflect the need and circumstances of the accounting policies. The financial reporting of the
companies is in accordance with the accounting standards followed by the company. Critics in
relation to the harmonization of the accounting policy is primarily made by private organisation
and companies in the developing countries which creates a significant influence on the
accounting standards board.
Success and Failure of Harmonisation
The Lotte Corporation Ltd present the annual report of the company in accordance with
the International Financial Regulatory Standards. The accounting policy of the company has
been in well accordance with the IFRS where the classification of the company in relation to the
various accounts of the company (Crawford et al. 2014). The Korean Accounting Standards had
initially followed their own accounting standards for the purpose of accounting and classification
of the various accounting and financial information and data. The success and the failure of the
harmonisation of the various accounting standard can be well assessed with the help of the
acceptance of the accounting principles by the economy (Van der Wal, 2014). The Korean
economy adopted the IFRS in the year 2011 and has reviewed the accounting policies and
adopted the various principles associated with the IFRS. Companies listed in the stock exchange
is mandatory required by the South Korean Economy for the reporting of the financial reporting
as per the IFRS (Rossi et al. 2016). The Harmonisation of the accounting standards has been

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successful in the South Korean economy. The Korean Accounting Standards follows the aspect
of providing correct and factual information of the financial data by the companies so that the
same can be helped in the investment decision process. The financial disclosures made by the
company in contrast to the various accounting policy of the company will help the financial users
of the company in proper inspections about the financial performance of the company. With the
absence of the common reporting standards and policies the company will be not be able to
follow the qualitative characteristics of the financial reporting (Daniela, Marioara & Daniel,
2014).
The general purpose of the harmonisation of the accounting standards is to guide the
management of the company in the recording of the transactions of companies and giving
material financial informations and data about the company. On a global frontier basis majority
of the economies have adopted and harmonised the accounting standards. The success of the
harmonisation of the accounting standards is being well done by the Korean Accounting
Standard where the Board has been entering into agreements and talks for having a more broad
based accounting policy and standards. The accounting standards followed by the companies and
financial instructions helps the investor’s in interpreting the financial positions of the company.
The mandate requirement by the Korean Accounting standards for all the listed companies for
performing and including the financial reporting as per the IFRS. From company level to country
wise the adoption of the common accounting standards has been well shown by various
companies and organisations.
Conclusion and Recommendations
The harmonisation of the accounting standards and following a similar accounting policy
followed by the company will be helping the investors and various other stakeholders of the

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company in the financial comparison of the various data and reports of the company. There have
been various accounting policies followed by different companies and institutions, which have a
varied accounting standards used by the companies for the purpose of financial, reporting. It is
important that the accounting standards of the company or the organisations should be such that
helps the investors in easy interpretation of the financial results and so that the same can be
applied in the evaluation of the financial position of the company. The key reason for the
harmonisation of the accounting standards is that the global expansion of companies and access
to financial market requires that companies should have a common accounting standard. The
common accounting policy for the companies will be helping getting necessary and important
financial decisions about the company. The issues for having a global financial reporting
framework is the political and economic social factors for the company. The evaluation of the
change in the accounting standards was taken as the cost incurred by the company in the
transformation and reinstatement of the financial statements of the company. The difference in
the treatments of the accounting transactions and belief regarding the treatment of classifying the
same has been the key issues behind the issues in the harmonisation of accounting standards. The
Korean Accounting Standard have adopted the IFRS for the purpose of the global financial
reporting standard. The success and the failure of the harmonisation of the various accounting
standard can be well assessed with the help of the acceptance of the accounting principles by the
economy.
The key recommendation for the companies and the economies in respect to the
harmonisation of the accounting policies would be that having a global financial reporting will
be helping the investors and the stakeholders in better assessment of the performance of the
company. Uniformity and Comparability are some of the common aspect of having a qualitative

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financial reporting framework for the company. Disclosures of the various informations and
accounts in contrast to the operational and financial data about the company should be well given
according to the given accounting standards and policies. Proper disclosures of information and
accounting of the same for the purpose of the investment related decision has been the key long-
term objectives of the shareholders of the company.

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Appendix
1) Application of IFRS.