Abstract

The function of financial accounting is to provide related parties of an enterprise with useful informations for their economic decision making. The accounting standards in a country evolve according to the development in its business enterprises and capital market. The purpose of this study is to review the historical evolution of the Korean accounting standards. Before forming the current accounting system, during the period of Japanese colony, Korean businesses were required to apply Japanese accounting system based on Japanese commercial law. After independence Japanese accounting system was widely used among Korean businesses. In 1958 a Korean accounting standard was established for the first time, which was called 'Corporate Accounting Principle and Financial Reporting Principle'. They are contributed to help banks with evaluating financial situations of companies for commercial lending. In 1974 another financial accounting standards for listed companies was set by a Presidential Decree. Thereafter Korea had dual financial accounting standards for listed and unlisted companies. In 1981 the dual standards are merged into the Korean Financial Accounting Standard, which is the general accounting standard for the companies whose total assets are more than some amounts specified in External Audit Law in Korea. Korean Financial Accounting Standard has been amended several times according to the opening of Korean capital markets, in accordance with the International Accounting Standards and the development of Korean financial markets. Now financial accounting standards are set by Financial Supervisory Commission. In the near future a private institute will work and set accounting standards. This institute should amend the existing standards and set new standards for such as not-for-profit organizations.

Keywords

• Korean financial accounting standards
• International Accounting Standards
• capital markets

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