|Subject||Success stories: Two early adopters of IFRS|
As of the end of last year, a total of 14 domestic companies transitioned to IFRS including 7 KOSPI-listed companies and 7 KOSDAQ-listed companies. Among them, STX Pan Ocean and KT&G grabbed a lot of attention as major success stories.
With the IFRS adoption, they have enjoyed stronger reliability in the global market and the increase in revenues and operating profits. On top of that, the transparency of their accounting information is recognized as high in the international market.
The positive perception in the international market is conducive to the success of their international operations. KT&G is one of few food and beverage companies whose revenues from exports account for 20% of total revenues. STX Pan Ocean, a shipping company, is doing business mainly with foreign businesses.
Byun, Yong-Hee, vice president of STX, said ‘The international market views audit reports prepared using IFRS as highly reliable. In the past, we had to suffer ‘Korea discount’ in one form or another. But our transition to IFRS has contributed to boosting business value to the extent we would like.”
In some cases, the IFRS conversion can strengthen balance sheets, by boosting revenues and operating profits. According to Samil PricewaterhouseCoopers, STX Pan Ocean’s performance including non-current assets, current assets, capital, and net income have increased substantially. In particular, the rapid increase in non-current assets is attributable to the IFRS conversion which has contributed to the increase in the value of construction in-progress and book value of ships.
Lee, Won-Sun, a researcher of Taurus Investment & Securities, said “The IFRS conversion is good for global businesses. KT&G and STX Pan Ocean have earned high recognition as they have enhanced transparency of their financial statements. In addition, the adoption of consolidated financial statements gave the companies economies of scale.”
These companies have disclosed faithfully the impact of the IFRS conversion. In that regard, they have set a great role model to prospective IFRS adopters. In particular, their adoption processes provide good examples to learn from for companies in terms of manpower and cost involved in the IFRS adoption.
KT&G successfully integrated the accounting systems of its 14 subsidiaries in only one year since it began system development. It also became the first listed company who disclosed financial statements under IFRS.
One source of KT&G said “At the IFRS early adoption seminar hosted by the Financial Supervisory Service, many participants noticed that KT&G successfully delivered system integration in the shortest period of time. This is mainly attributable to the swift decision making of the CEO.”
According to the FSS, a total of 27 listed companies plan to adopt IFRS in Korea this year. They include 10 LG subsidiaries (including LG Dacom and LG electronics) and 3 Samsung subsidiaries (Samsung Electronics, Samsung SDI and Samsung Digital Imaging).
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