IFRS to benefit local firms

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IFRS to benefit local firms

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The early adoption of global accounting standards, which is under discussion among financial authorities, will benefit some local stocks, according to stock market analysts.

Several brokerages, including Hanwha Securities, Daewoo Securities and IBK Investment and Securities, issued reports yesterday, saying the Financial Supervisory Service and the Financial Services Commission are said to be positively considering a partial introduction of the International Financial Reporting Standards within the year.

Under a Korean government plan set up in March 2007, all listed firms in Korea will be subject to IFRS reporting beginning in 2011, with companies allowed to adopt the new reporting system individually beginning next year.

The FSC and FSS are mulling allowing individual adoption this month because it could reduce the uncertainty local firms are facing amid the ongoing economic downturn, the brokerages said.

The FSC and FSS could not be reached for confirmation yesterday.

The brokerages said early adoption, if allowed, will provide momentum for the shares of several local companies, including those holding assets and real estate purchased a long time ago.

They said under the IFRS system, assets and real estate purchased long ago will be given higher values because the system requires the constant adjustment of asset values into current market values. Under the current system, such assets are valued based on the price at the time of purchase.

Companies that could benefit, according to the brokerages, include SK Energy, Shinsegae, Kia Motors, KT, SK Networks, Hanjin Heavy Industries, LG Electronics, Samsung Heavy Industries, Daewoo Shipbuilding and Marine Engineering, Korea Electric Power Corporation, Lotte Chilsung, Daesung Industrial and Kyungbang.

The IFRS system also allows local firms to establish foreign currencies such as dollars as their main currency, which will benefit companies holding dollar-denominated assets, the brokerages said. Currently, local firms are limited to using the Korean won as their functional currency, so companies have to record assets purchased with dollars in won, which change rapidly according to the won-dollar currency rate.

The brokerages recommended shipping companies, airlines and steelmakers as beneficiaries of the diversification of functional currencies.



By Moon Gwang-lip Staff Reporter [joe@joongang.co.kr]
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