Financial Statement Impact of IFRS Adoption: The Case of Korea and Implication for IFRS Adoption in the U.S.

February 9, 2014 Leave a comment

Financial Statement Impact of IFRS Adoption: The Case of Korea and Implication for IFRS Adoption in the U.S.

Yoon Ho Kim 

Samsung Life Insurance

Jaywon Lee 

Korea Advanced Institute of Science and Technology (KAIST)

Sang Hyun Park 

Georgia Regents University
October 1, 2013
KAIST College of Business Working Paper Series No. 2013-033 

Abstract:      
This study investigates the financial statement impact of adopting International Financial Reporting Standards (IFRS) using a unique set of manually collected sample of Korean firms who have early-adopted IFRS. We collect approximately 90 reconciliation items and document their respective influence on asset, liability, equity and net income. Applying IFRS, asset, liability, equity and net income values all decrease. In terms of value relevance, IFRS equity values are not more value relevant than Korean GAAP (K-GAAP) values while IFRS net income values are less value relevant than K-GAAP values. In regards to earnings management, we are unable to find any significant differences between IFRS and K-GAAP. Considering that K-GAAP resembles the U.S. GAAP in many aspects, we offer some implications for IFRS adoption in the U.S.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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