Plan to widen English disclosures sparks concerns over companies' translation burdens

Korea Times graphic by Bae So-young

The government's plan to expand English-language disclosures is expected to increase companies' responsibility for providing translations, despite the policy's aim of helping attract foreign investors, according to industry officials and experts.

Such concerns came after the government recently announced measures to improve corporate disclosure practices, which include the English-language disclosure obligation to be applied to all KOSPI-listed firms by 2028. The policy aims to help boost foreign investors’ access to Korea’s capital markets, mitigating the so-called "Korea discount," under which Korean firms are typically valued below their international peers.

Observers also point out that further upgrades to disclosure infrastructure will be necessary to ensure accurate and easy-to-understand English filings for global investors.

Kim Dae-jong, a professor at Sejong University’s School of Business, noted that although the policy represents a meaningful step in strengthening core market infrastructure, Korean companies may face increased compliance burdens, similar to those observed in Japan.

A Reuters survey conducted in April 2024, when Japan pursued a similar policy, found that 91 percent of Japanese companies viewed English-language disclosures as burdensome.

“Similar burdens are likely to emerge in Korea due to translation costs, staffing challenges and differences in interpreting disclosure standards,” Kim said. “Smaller listed companies, particularly those without dedicated translation teams, are expected to incur significant costs and workforce demands when preparing English-language filings.”

Kim added that the anticipated risks include discrepancies between Korean and English disclosures, potential legal liability from translation errors and increased workloads for investor relations personnel.

An accounting expert specializing in consulting for foreign-invested companies, who spoke on condition of anonymity, also said, "Allowing those who need English-language information to find and access it will help improve the Korean capital market. At the same time, however, expanding English disclosures will place a translation burden on companies, a situation that will need continuous monitoring going forward."

Officials are seen at the Financial Services Commission within Government Complex Seoul, Sept. 9. Korea Times photo by Hong In-ki

The Financial Services Commission (FSC), the country’s top financial regulator, unveiled the measures on Sunday.

At present, only large-cap KOSPI-listed firms with assets of at least 10 trillion won ($6.8 billion) are required to provide English disclosures. These companies must submit English versions of 26 key management items to the Korea Exchange (KRX). A total of 111 firms met this threshold as of 2024.

Under the revised rules, which will take effect on May 1 next year, the obligation will be broadened to KOSPI-listed companies with assets of 2 trillion won or more, increasing the number of affected firms to 265.

The disclosure items required in English will also be expanded from the current 26 to all 55 items and other KRX filing categories, including fair disclosures.

The regulator plans to make English disclosures mandatory for all KOSPI-listed companies by 2028, while considering a similar requirement for large-cap Kosdaq firms, such as those with assets of at least 2 trillion won.

Following the announcement, observers also called for improvements to XBRL (eXtensible Business Reporting Language), the international standard for digital financial reporting, as the regulator pledged to gradually expand its use to support broader English-language disclosures.

XBRL digitalizes corporate financial statements in an internationally standardized format, enabling automatic recognition and analysis by computers.

The Financial Supervisory Service (FSS), the country’s financial watchdog, has been expanding the application of XBRL gradually based on firms’ asset size to standardize the diverse financial reporting formats used by different companies and improve capital market transparency.

Korea is the only country that requires the use of an FSS-developed XBRL editor. In August, the FSS announced that the system had received international standard certification. Nevertheless, a flaw has been reported in which Korean text appears in English notes.

During a National Assembly audit on Oct. 21, Rep. Yoo Dong-soo of the ruling Democratic Party of Korea highlighted that KB Financial Group’s English half-year report contained segments written in Korean.

“When using a tool certified by XBRL International to examine XBRL reports submitted to the electronic disclosure system operated by the FSS, nearly 47 percent of the filings were found to contain errors,” Yoo said, urging improvements.

An official from an airline that will be subject to English disclosure requirements in 2028 also noted that although XBRL has been implemented, its practical use remains somewhat limited.

“We hope the system’s scope will be expanded to allow automatic integration with English disclosures and that improvements will be made to enhance system compatibility,” she said.

Clear long-term benefits

While the short-term burdens of expanding English-language disclosures are significant, observers agree that the long-term gains in international credibility outweigh the costs.

Kim stressed that English-language filings allow global investors to reassess Korean companies’ governance, related-party transactions and internal controls according to international standards.

“This could increase pressure to improve opaque governance structures, reduce owner-related risks and strengthen internal controls in line with global best practices, ultimately raising the potential for a revaluation of corporate value. As such, English disclosures are seen as a structural measure that can enhance the global reputation of Korean firms,” he said.

An investor relations official at a Korean financial company echoed that providing clear information on domestic companies’ strategies, financial results and risk factors according to global standards will enable foreign investors to engage more confidently.

“This, in turn, enhances overall transparency in Korea’s financial markets and lays the foundation for attracting new foreign capital,” the official said on condition of anonymity.

Foreign business chambers also welcomed the policy.

“Enhancing the accessibility and transparency of corporate information is vital to strengthening Korea’s appeal to global investors,” said Marie Antonia von Schonburg, president and CEO of the Korean-German Chamber of Commerce and Industry. “The expansion of mandatory English disclosures is a welcome step toward aligning with international standards and reducing information gaps in the market. We view this initiative positively and see it as an important move toward a more transparent and investor-friendly business environment.”

The English-language main page of DART, the electronic disclosure system operated by the Financial Supervisory Service / Captured from DART

To address the increased translation burden, meanwhile, the FSC pledged to expand support to ensure accuracy and timeliness and to reduce compliance pressure on listed firms.

The KRX’s translation service, which currently averages one day per document, will be streamlined to under six hours, and the range of companies eligible for support will be widened.

“Additionally, the FSC will issue and distribute an English disclosure glossary that includes commonly used terms as well as industry- and sector-specific terminology, leveraging artificial intelligence translation and other digital tools to improve consistency and efficiency,” an FSC official said.

The regulator will also continue enhancing the English disclosure platform to improve global investors’ access to corporate information, aiming to complete a dedicated English disclosure infrastructure within the FSS' Data Analysis, Retrieval and Transfer System (DART) by the end of this year.