An Analytical Review of Accounting Standards for Small and Medium－sized Entities in the Commercial Act
Asian Tax Journal Vol. 14 No. 5 (2013), pp. 9-39
Abstract
The paper aims to analyze the Accounting Standards for Small and Medium－sized Entities (hereafter, the Standard) in the Commercial Act promulgated by the Ministry of Justice as of February 1, 2013 through archival study methodology. At first, the status of small and medium－sized entities and their current state of accounting practice are reviewed. Historical development of the Accounting Standards for Small and Medium－sized Entities in Korea is also traced. Moreover, the Accounting Standards for Small and Medium－sized Entities in major foreign countries are analyzed via case study. From then on, recently announced Accounting Standards for Small and Medium－sized Entities is scrutinized in respect of individual items. In addition, the Statement of Appropriation of Retained Earnings is reviewed critically relating to the information on distributable income. In this regard, Accounting Standards for Small and Medium－sized Entities, a stand－alone clause－type regulation characterizing positive approach, is thoroughly analyzed comparing with the General Corporate Accounting Standards in terms of individual items. The analysis results in various policy recommendations for the coming revision of the Standards, accepting the reasonable differences from the General Corporate Accounting Standards. Such items are as follows. － classification of financial statements － reporting type of financial statements － object of capitalizing borrowing costs － government grants and construction gifts － inventory costing of units － measurement of amortized cost － recognition timing of interest income － statement of appropriation of retained earnings Finally, accounting for share－based compensation and deferred income tax should be stipulated additionally for the usefulness of the information in the next amendment of the Standards, including the Commercial Act & its Decree.
Keywords
- Commercial Act
- Accounting Standard for Small and Medium－sized Entities
- General Corporate Accounting Standards
- Distributable Income
- Statement of Appropriation of Retained Earnings