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Newsletter | December 2013
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CORPORATE |
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Accounting System Reformation Plan and Expansion of External Audit for Limited Liability Company (Yuhan Heosa) |
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On October 28, 2013, the Financial Services Commission (the “FSC”) announced an accounting system reformation plan related to the amendment to the Act on External Audit of Stock Companies (the “Plan”) aiming primarily at improving transparency of limited companies (yuhan heosa) and non-listed large company’s accounting system. |
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Below are the major features of the Plan. |
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Just like joint stock companies (jusik Heosa), limited companies (yuhan heosa) under the Korea Commercial Code will be required to be audited by an external auditor and apply the GAAP (or otherwise choose to be governed by the International Financial Reporting Standards (IFRS)). |
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Non-listed large companies with total assets of KRW 1 trillion or more must (i) be audited by an external accounting firm, (ii) retain an external auditor for at least 3 consecutive years, (iii) submit the financial statements to the auditor and simultaneously to the Securities and Futures Commission, and (iv) be subject to supervision by the Financial Supervisory Service on their accounting and bookkeeping. |
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The minimum thresholds that companies need to satisfy to be subject to mandatory external audit will be adjusted upward as follows. |
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| Current Provisions |
Proposed Amendment |
| KRW 10 billion of total assets or higher |
KRW 12 billion of total assets or higher |
| KRW 7 billion of total assets higher and KRW 7 billion of total liabilities or higher |
KRW 10 billion of total assets or higher and KRW 10 billion of total liabilities or higher |
| KRW 7 billion of total assets or higher and total of 300 employees or more |
KRW 10 billion of total assets or higher and total of 300 employees or more |
| Stock-listed companies or any companies to be stock-listed companies during the following business year |
Same |
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The FSC will hold a public hearing on the Plan to collect the opinions of various industry participants in November 2013, pre-announce the proposed amendment in December 2013, and submit it to the National Assembly in March 2014. The effective date of the Plan will be determined based on the grace period and when the National Assembly will adopt the Plan. |
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