When: 2 September 2019
Where: Seoul, Korea
Chair of the International Accounting Standards Board (Board) Hans Hoogervorst delivered the keynote speech at an event organised to celebrate the 20th anniversary of the Korea Accounting Standards Board. He talked about Korea’s contribution to international standard-setting through history, encouraging continued engagement in the Board’s current and future work.
Mr. Byungdoo Sohn, Vice Chairman of the Financial Services Commission (FSC), Mr. Jiwon Jung, Chairman of Korea Exchange and President of the General Assembly of Member Organisations supporting the KASB, Mr. Joong-Kyung Choi, President of the Korean Institute of Certified Public Accountants (KICPA), Mr. Kwon-Chu Park, Chief Accountant of the Financial Supervisory Service (FSS), Mr. Eui-Hyung Kim, Chair of the KASB, current and former members of the KASB, ladies and gentlemen.
Thank you for inviting me to take part in the KASB’s 20th birthday celebrations. Congratulations on reaching this milestone. I am honoured to be here. The IASB’s 20th anniversary celebrations take place only next year, so the KASB will always be our older brother.
For both of us, this has been quite a remarkable journey.
IASB and KASB
In the past 20 years, the KASB has developed into one of the most influential national accounting standard-setters in the Asia-Oceania region. The KASB is renowned for the quality of its technical work and has produced important contributions to many of the IASB’s meetings and discussions.
I remember one particular KASB paper that shed light on how the use of multiple English terms for very similar concepts in IFRS Standards can be maddeningly confusing to non-English speakers. This paper was an eye-opener for us and since its presentation we have tried to be more disciplined in our use of English terms. English is not my first language, but I use it every day and I can assure you that the richness of the language can still be very perplexing.
Korea started influencing international standards even before the IASB and the KASB were born. Our history books show that representatives from Korea took part in meetings of the IASC—the predecessor body of the IASB—as long back as the 1980s!
Indeed, Korea can rightly claim to be an important part of the IFRS success story. Korea has always been on the forefront of rigorous implementation of IFRS standards. The new insurance contracts Standard, IFRS 17, is testimony to that fact. Korea was one of the first countries to embrace IFRS 17, even though the new standard represents a seismic shift for the Korean insurance industry.
Today, more than 140 countries have adopted IFRS, with most other countries being very close. Twenty years ago, there were big differences in the quality and consistency of financial reporting around the world. Today, that quality and consistency of financial reporting worldwide has substantially improved.
In a world increasingly characterised by division, our community stands out as a beacon of what can be achieved when we all work together.
Thanks to two decades of collective work, investors have much better information about the opportunities and risks of investing. Companies benefit from being able to standardise on a single set of accounting requirements that are accepted for use in pretty much all countries of the world. Regulators benefit from having a common accounting basis on which to base their own requirements.
These are noteworthy benefits. And let’s not forget that this progress has continued to be achieved during the time of the worst financial crisis in almost 100 years. It really has been an impressive journey.
These are shared achievements, because IFRS is a shared endeavour. It is the best example I know of cooperation in the development of standards for global finance. We rely heavily on the KASB’s technical expertise, providing insightful comments on our proposals. We value the high quality secondees you provide to work in London – eight people so far.
More broadly, we benefit from Korea’s participation at multiple levels of the organisation. Korea’s Financial Services Commission is one of the members of the Monitoring Board, the highest level of governance of our organisation. Professor Su-Keun Kwak is one of our Trustees and in Chungwoo Suh we have a very engaged Board member. Furthermore, Korea is represented on our Interpretations Committee, the Accounting Standards Advisory Forum, IFRS Advisory Council and our Emerging Economies Group.
Given that the IFRS community consists of more than 140 jurisdictions, you will understand it is not always possible for one single country to be represented at all these levels at all times. However, you can rest assured that Korea’s voice will always be heard by the IASB and the IFRS Foundation.
So, I thank you for your significant contribution, in the past 20 years, in the present, and into the future we have ahead of us.
What is the future for financial reporting around the world?
First of all, our collective work of the last 20 or so years has put us in a very good position. IFRS is a capital market standard, and in that market, it is the bottom line that ultimately counts. Because of the comparability and discipline of our Standards, financial statements will remain the main anchor for investors in predicting future cash flows.
However, one of the challenges with getting older—whether as an organisation or as a human being—is to remain relevant as the world around you keeps changing. To remain relevant, we must adapt.
There is certainly plenty going on around us. There is the changing nature of companies – driven by the knowledge economy and huge growth in intangibles. There is also the proliferation of non-GAAP, companies’ self-defined performance measures. We see increasing interest in broader corporate reporting, particularly in the sustainability space. And there is the impact of technology; how it affects the preparation and consumption of financial information.
These are all important developments. The answer to these challenges is to maintain and strengthen the relevance of financial reporting, while remaining true to its core purpose.
For example, it seems unlikely to me that the IASB will venture too deeply into the space of sustainability reporting. Other standard-setting bodies are better equipped to develop sustainability standards. However, for many companies, sustainability factors are likely to have a material effect on their future financial performance. What can we do to ensure that investors are aware of such risks and opportunities?
I have already mentioned the challenge presented by intangibles. How can financial reporting remain relevant when the gap between book value and market value of companies keeps widening? Here, the KASB is pursuing intriguing and courageous research on the possibility of a separate ‘Statement of Key Intangibles’.
Time does not permit a proper discussion of these topics tonight, other than to say both topics fall within the scope of a major update to the IASB’s guidance to companies on writing their management commentaries, our Management Commentary Practice Statement, with proposals published next year.
As I said beforehand, we couldn’t do this without you. Our success is your success. The KASB has been an excellent partner from the very beginning, and the future for cooperation is strong. I wish you a very happy 20th birthday celebration and thank you for continued support.