Infomag - MONTHLY MAGAZINE OF THE EUROPEAN BUSINESS COMMUNITY IN KOREA

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Impact of IFRS Adoption

Aug / 2010

1.Mr. Nam Sang-woo, Senior Manager of Samil PwC 2.Mr. Alex Lee, Tax partner, Samil PwC

The EUCCK CFO and Taxation Committees jointly organized a breakfst meeting "Impact of IFRS adoption and tax implication thereon" on June 23rd.

As Korea has been recently ranked 28th in the world in terms of transparent accounting, the introduction of IFRS as the new accounting standard is welcomed experts. They believe it will improve Korea's image in the international landscape.

Within this framework, EUCCK organized its joint CFO-Taxation Committee breakfast meeting and invited speakers from Samil PwC presented key points about the impact of IFRS adoption and likely tax implications.

Mr. Nam Sang-woo, Senior Manager of SamilPwC, explained the main differences of IFRS and the existing K-GAAP, his own professional experience in implementing IFRS and lastly he made a brief introduction of the new International Standards on Auditing to be implemented hand-in-hand with the adoption of IFRS. He pointed out that the major impacts are at the consolidated level, however differences between K-GAAP and IFRS range from simple re-clasification to complex measurements and significant additional disclosures. He added that many korean companies have fail to adapt their acccounting system in a way to ensure a reliable and efficient transition.

Mr. Alex Lee,Tax partner at Samil PwC introduced the tax implications in adopting IFRS based on his professional experience and talks with government officers. Korea has a "quasi-dependent" taxation system which means that the basis to calculate taxable income uses the financial statements under GAAP but is not totally dependent. It brings as a consequence that tax laws become more complex and would likely be anmemnded with the change to IFRS.

Among the major tax implications, Mr. Lee pointed those directly related with LIFO methodology, depreciation expenses, functional currency, and reserved sales. Adoption of IFRS implies, in most of this cases different treatment, so tax authorities have been required to anmend the law. EUCCK will closely follow up the issue.