The federal government’s plan to broaden English-language disclosures is anticipated to extend firms’ duty for offering translations, regardless of the coverage’s intention of serving to appeal to overseas buyers, in line with {industry} officers and specialists.
Such issues got here after the federal government just lately introduced measures to enhance company disclosure practices, which embody the English-language disclosure obligation to be utilized to all KOSPI-listed corporations by 2028. The coverage goals to assist enhance overseas buyers’ entry to Korea’s capital markets, mitigating the so-called “Korea low cost,” beneath which Korean corporations are usually valued beneath their worldwide friends.
Observers additionally level out that additional upgrades to disclosure infrastructure can be mandatory to make sure correct and easy-to-understand English filings for international buyers.
Kim Dae-jong, a professor at Sejong College’s Faculty of Enterprise, famous that though the coverage represents a significant step in strengthening core market infrastructure, Korean firms might face elevated compliance burdens, just like these noticed in Japan.
A Reuters survey carried out in April 2024, when Japan pursued an identical coverage, discovered that 91 % of Japanese firms seen English-language disclosures as burdensome.
“Comparable burdens are prone to emerge in Korea attributable to translation prices, staffing challenges and variations in deciphering disclosure requirements,” Kim mentioned. “Smaller listed firms, significantly these with out devoted translation groups, are anticipated to incur important prices and workforce calls for when making ready English-language filings.”
Kim added that the anticipated dangers embody discrepancies between Korean and English disclosures, potential authorized legal responsibility from translation errors and elevated workloads for investor relations personnel.
An accounting professional specializing in consulting for foreign-invested firms, who spoke on situation of anonymity, additionally mentioned, “Permitting those that want English-language data to seek out and entry it can assist enhance the Korean capital market. On the identical time, nonetheless, increasing English disclosures will place a translation burden on firms, a state of affairs that can want steady monitoring going ahead.”
Officers are seen on the Monetary Providers Fee inside Authorities Complicated Seoul, Sept. 9. Korea Occasions picture by Hong In-ki
The Monetary Providers Fee (FSC), the nation’s high monetary regulator, unveiled the measures on Sunday.
At current, solely large-cap KOSPI-listed corporations with property of not less than 10 trillion received ($6.8 billion) are required to supply English disclosures. These firms should submit English variations of 26 key administration objects to the Korea Trade (KRX). A complete of 111 corporations met this threshold as of 2024.
Beneath the revised guidelines, which is able to take impact on Might 1 subsequent 12 months, the duty can be broadened to KOSPI-listed firms with property of two trillion received or extra, rising the variety of affected corporations to 265.
The disclosure objects required in English will even be expanded from the present 26 to all 55 objects and different KRX submitting classes, together with honest disclosures.
The regulator plans to make English disclosures obligatory for all KOSPI-listed firms by 2028, whereas contemplating an identical requirement for large-cap Kosdaq corporations, reminiscent of these with property of not less than 2 trillion received.
Following the announcement, observers additionally referred to as for enhancements to XBRL (eXtensible Enterprise Reporting Language), the worldwide commonplace for digital monetary reporting, because the regulator pledged to step by step broaden its use to assist broader English-language disclosures.
XBRL digitalizes company monetary statements in an internationally standardized format, enabling computerized recognition and evaluation by computer systems.
The Monetary Supervisory Service (FSS), the nation’s monetary watchdog, has been increasing the applying of XBRL step by step based mostly on corporations’ asset measurement to standardize the various monetary reporting codecs utilized by totally different firms and enhance capital market transparency.
Korea is the one nation that requires the usage of an FSS-developed XBRL editor. In August, the FSS introduced that the system had obtained worldwide commonplace certification. However, a flaw has been reported during which Korean textual content seems in English notes.
Throughout a Nationwide Meeting audit on Oct. 21, Rep. Yoo Dong-soo of the ruling Democratic Get together of Korea highlighted that KB Monetary Group’s English half-year report contained segments written in Korean.
“When utilizing a software licensed by XBRL Worldwide to look at XBRL studies submitted to the digital disclosure system operated by the FSS, practically 47 % of the filings have been discovered to comprise errors,” Yoo mentioned, urging enhancements.
An official from an airline that can be topic to English disclosure necessities in 2028 additionally famous that though XBRL has been applied, its sensible use stays considerably restricted.
“We hope the system’s scope can be expanded to permit computerized integration with English disclosures and that enhancements can be made to reinforce system compatibility,” she mentioned.
Clear long-term advantages
Whereas the short-term burdens of increasing English-language disclosures are important, observers agree that the long-term good points in worldwide credibility outweigh the prices.
Kim harassed that English-language filings permit international buyers to reassess Korean firms’ governance, related-party transactions and inside controls in line with worldwide requirements.
“This might enhance strain to enhance opaque governance buildings, scale back owner-related dangers and strengthen inside controls in step with international greatest practices, finally elevating the potential for a revaluation of company worth. As such, English disclosures are seen as a structural measure that may improve the worldwide popularity of Korean corporations,” he mentioned.
An investor relations official at a Korean monetary firm echoed that offering clear data on home firms’ methods, monetary outcomes and threat elements in line with international requirements will allow overseas buyers to interact extra confidently.
“This, in flip, enhances general transparency in Korea’s monetary markets and lays the inspiration for attracting new overseas capital,” the official mentioned on situation of anonymity.
Overseas enterprise chambers additionally welcomed the coverage.
“Enhancing the accessibility and transparency of company data is important to strengthening Korea’s enchantment to international buyers,” mentioned Marie Antonia von Schonburg, president and CEO of the Korean-German Chamber of Commerce and Business. “The enlargement of obligatory English disclosures is a welcome step towards aligning with worldwide requirements and decreasing data gaps available in the market. We view this initiative positively and see it as an necessary transfer towards a extra clear and investor-friendly enterprise atmosphere.”
The English-language predominant web page of DART, the digital disclosure system operated by the Monetary Supervisory Service / Captured from DART
To handle the elevated translation burden, in the meantime, the FSC pledged to broaden assist to make sure accuracy and timeliness and to cut back compliance strain on listed corporations.
The KRX’s translation service, which at the moment averages at some point per doc, can be streamlined to beneath six hours, and the vary of firms eligible for assist can be widened.
“Moreover, the FSC will problem and distribute an English disclosure glossary that features generally used phrases in addition to industry- and sector-specific terminology, leveraging synthetic intelligence translation and different digital instruments to enhance consistency and effectivity,” an FSC official mentioned.
The regulator will even proceed enhancing the English disclosure platform to enhance international buyers’ entry to company data, aiming to finish a devoted English disclosure infrastructure throughout the FSS’ Knowledge Evaluation, Retrieval and Switch System (DART) by the top of this 12 months.
