XBRL in Korea set to expand

Posted on June 2, 2023 by Editor

South Korean authorities are set to tackle the country’s valuation gap with a comprehensive set of reforms that aim to enhance the visibility and attractiveness of Korea’s public markets.

The new rules, announced in March and set to be introduced in stages over the next 3 years, involve new requirements to include the notes to the accounts in XBRL format, digital reporting in XBRL for financial services firms, and the inclusion of financial statements from large unlisted companies in XBRL.The already popular Open DART system (3 million users and counting) will be further enhanced, including new mechanisms to permit companies and retail investors to compare the performance of Korean companies with international peers.

At a conference in Seoul yesterday, a joined up, collaborative effort was on display. Leaders from the Financial Supervisory Service (FSS), the Korean Institute of CPAs (KICPA), the Korean Accounting Institute (KAI), the Korea Listed Companies Association, the Korea Federation of Banks, representatives of data providers and fund managers, together with a substantial number of external reporting professionals from many of Korea’s leading companies gathered to hear about the new plans as well as relevant international experience.

In his opening speech, FSS Governor Lee Bok-hyun emphasised the importance of informing international investors through more comprehensive digital reporting to help tackle the “Korea Discount”, a well-recognised problem that values South Korean firms at a persistently lower level to global peers. Ensuring that more information is available, and available in the English language is part of the multi-faceted reform.

A combination of XBRL’s multi-lingual labels, the use of specifically-trained automatic translation AI system and encouraging companies to provide their reports in English will all be part of this process. Shifting up the obligations of Korean companies to tag the notes to their accounts in XBRL format expands the long-standing requirement to tag the face financials. The FSS and KICPA, helped by leading academics and XBRL Korea are now examining options to shift to Inline XBRL disclosure, to further level up the country’s reporting arrangements with international best practices.

In his address to the conference, XBRL International CEO John Turner underlined the relevance and timelines of the reforms. He suggested that the advent of generational AI means that greatly expanded automated financial analysis of structured data is likely to change the landscape of financial products over the short term. Further, the finalisation of the ISSB standards in coming weeks will be the starting gun for countries right around the world to mandate a range of climate and sustainability disclosures. Investors, data providers, supply chains and regulators all expect that these disclosures will be “digital first”. XBRL International Vice Chair, Yoshiaki Wada described XBRL experiences in Japan, underlying the importance of collaboration across the reporting supply chain to data quality and comparability.

We congratulate the FSS, KICPA and XBRL Korea on this important and timely initiative and look forward to the next steps in the coming months.

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