New accounting system to aid transparency

This is the third in a series highlighting the strategies of Korea’s leading accounting firms ahead of the full-fledged introduction of the International Financial Reporting Standards in 2011. ? ED.

By Kang Seung-woo

Staff reporter

Deloitte Anjin, one of the leading accounting companies in Korea, is certainly expected to ascend to the No. 1 spot in the sector.

But Anjin, the Korean branch of the U.S.-based Deloitte Touche Tohmatsu group, is not just limited to being branded as the nation’s best accountant, as its CEO Lee Jae-sool leads his firm to earn recognition in other places ― corporate social responsibility (CSR) and future-oriented green businesses.

``I have been interested in CSR and the head office traditionally values it’’ Lee said in a recent interview with The Korea Times.

``The corporate body has done these kinds of works well enough for others to come and benchmark us.’’

Deloitte Anjin signed an agreement with the Ministry of Labor and Social Enterprise Support Network (SESNET) in July 2008 to provide a variety of services for social enterprises.

``Instead of donating money, we take advantage of our talent, by offering professional information, such as in tax affairs, accounting, marketing, management, consulting and personnel management,’’ he said.

Currently, Anjin, which has backed 11 social enterprises, makes their brochures and places them at approximately 3,000 companies that it manages.

``Among the 11 firms is cookie maker, WECAN. We conducted its cost analysis, and we order a cookie on all employees’ birthdays, which is worth tens of millions of won,’’ he said.

Lee is also a director of Um Hong-gil Human Foundation, which established an elementary school in Pangboche, Nepal, standing 3,950 meters above sea level, earlier this month, and the company will pay for a teacher for three years.

In addition to CSR, Lee and his firm have worked on green business.

``Since I became CEO in June 2009, the corporation has focused on four businesses and one of them is green management,’’ said Lee, who is a member of the Green Growth Forum.

``In the coming years, I expect to see a lot of opportunities in green growth focusing on both the economy and the environment and I think that green business should step in as the main item to continue growth.

``Most companies regard green business as a new growth engine and the number of inquiries about consulting on green management from banks and companies is on the rise of late.’’

Facing new changes

A recent financial crisis in Southern Europe has cast a murky outlook on the future of the world economy.

Although decisive action was taken by the European Union (EU)’s central bank and the International Monetary Fund (IMF) to ensure that Greece’s debt problems do not spread to other countries, it still poses a threat to the world.

And Lee thinks that it could last longer than expected.

``The nearly $1 trillion bailout package designed to stabilize a wobbly Europe and ring-fence its debt troubles will be able to staunch contagion fears for the time being, but I doubt if the country can continuously make money to clear its liabilities in the short term,’’ he said.

``Otherwise, they have to cut down their budget on social security, but it might be tough. I also expect several mini-dips, even if not a worldwide double dip similar to the financial crisis of 2008, to take place in Europe, which will question the raison d’etre of the EU.’’

Along with the European crisis, the nation also needs to pay attention to the International Financial Reporting Standard (IFRS).

The IFRS is one of the two dominant accounting standards in the world, but is gaining wider support from countries around the world. It has been notably used in EU member economies, but soon come to rise as the global standard in the accounting world as an alternative to U.S.-style accounting.

By 2011, more than 150 countries are expected to adopt the IFRS, including India, China, Brazil and Korea. Korea, Asia’s fourth-largest economy, mandates listed corporations to adopt the principle-based accounting formats starting next year.

``Although small- and medium-sized enterprises want a delayed implementation of the system, most companies will do well with it,’’ he said.

``There will surely be minor issues in the early stage of enforcement, as other countries did so, but it will be all right as time goes on.’’

And Lee believes it will boost the nation’s transparency in accounting.

``Korea is not rated as a transparent nation in accounting, sitting 28th in the world,’’ he said.

``But by introducing IFRS, it will be able to improve the `Korea Discount,’ which will help Korean stocks rise.’’