There’s no lemonade without lemons, and the economy of the future can’t survive without e-Finance. The Korean government has recently announced that it will invest US$18.6 billion in IT industries, the highest amount in Korean history. But what good is the development of new growth engines if it is only designed to compete in the domestic market Where is global capital when we need it Where will the global buyers be when we are finally ready for them
At the recent International e-Finance Conference held in Seoul, many professors and e-financial parties carried on an engaging discussion to find the best ways for Korean corporations, especially small and medium sized companies, to look up at the global capital market. The key of this forum was preparation and education in the Global Capital Market.
“Today, foreign investors do not have as easy access to the Korean finance system as they have in Singapore. The major issue is the language barrier. The language we currently use for online banking is Korean while Singapore uses international accounting standards,” Professor Jay Kang of accounting at San Francisco State University stated. “The Korean government has recently approved adopting the International Financial Reporting Standard (IFRS). Every bank and corporation has to change their systems by 2011.” KB Star bank invested W20 billion (US$16.24 million) to change their own system and most listed companies have adopted IFRS as well.
There are two ways to adopt IFRS to Korea by 2011, a progressive self-developing method and package using a total development method. If a company is considered a group that has many interrelated enterprises as well as a complicated interface and revenue system, the first method is appropriate. But using the package deal is the most ideal way for small and medium sized companies to save money and time in establishment process of the IFRS.
Just as Professor Kang asserted at the international conference, South Korea’s recent adoption of the IFRS promises opportunities, yet it also presents challenges to Korean corporations. Adapting the international accounting standard indeed will help both the Korean public corporations and private small and medium sized companies access global capital markets. “However, here we must note that IFRS adoption requires fundamental changes to the accounting system. To assure their full compliance with IFRS in their first IRFS financial statement, Korean companies will need to invest in educating and training their managers on international accounting and reporting practices,” Professor Jay Kang said.
In fact, Korean corporations have been required by federal law to have the president sign financial statements since 2005. Such a law did not help the presidents to not rely on subordinates. Here comes the importance of education. Professor Kang added, “Educating and training personnel requires top level managers. Judgmental problems must be trained on a top level because the area of judgement cannot be delegated to lower level operations.”
“A firm may install a company-wide accounting change program, while offering the accounting personnel opportunities for their practical training on international financial reporting, and related practical techniques of valuation, focusing on accounting technicalities. International accounting education programs catering to the senior management of Korean corporations will need to focus on accounting judgement calls,” Professor Jay Kang suggested.
The accounting matters that require complex judgments are in the purview of senior management. Korea has a bright future ahead in the matter of the global capital market due to its strength of IT and abundant resources. Now is the perfect time to learn and prepare for the upcoming global competition.