Financial Supervisory Service Establishes Best Practices for Disclosing Electric Error Corrections... Encouraging Accurate Reporting

Financial Supervisory Service, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

The Financial Supervisory Service (FSS) announced on the 30th that it has prepared best practice guidelines for note disclosures related to prior period error corrections to encourage companies to provide thorough note disclosures.

Although the Korean Accounting Standards specify disclosure requirements for prior period error corrections, there has been no standardized disclosure guideline, resulting in diverse disclosure methods across companies. Consequently, it was found that the content and format of note disclosures varied inconsistently among companies, with numerous deficiencies identified.

As many companies were found to have insufficient note disclosures related to prior period error corrections, the FSS has prepared best practice examples outlining key note disclosure items. However, the FSS clarified that the standard wording and templates for note disclosures are provided for reference purposes only and should be adapted according to each company's circumstances and conditions.

First, the FSS specified the disclosure items related to the nature of prior period errors. A standard format was developed to enable detailed disclosure in the financial statement notes, distinguishing error account titles, occurrence background, error details, and related standards.

Additionally, companies are now required to separately disclose the monetary effects of corrections for various types of errors. Some companies had previously aggregated the monetary effects of different error types without distinction, making it difficult to identify detailed correction amounts by type.

Furthermore, a proposal was made to link and display the numbers of related notes affected by the error corrections. Although related notes were also amended when restating financial statements, companies only disclosed the restatement itself without indicating these linked changes, which reduced clarity.

An FSS official stated, "Starting from the 2023 fiscal year, we plan to guide companies through relevant organizations to utilize the best practice examples for prior period error corrections to ensure thorough note disclosures," adding, "We will also work on revising the preparation guidelines to incorporate these best practice examples so that companies can refer to them."

This content was produced with the assistance of AI translation services.