"Operating Profit or Loss Definition to Change Next Year"... FSS Urges Companies to Review Disclosure Systems

With the scope of operating profit or loss set to expand next year, financial authorities have urged companies to review their disclosure systems.

The Financial Supervisory Service (FSS) outlined companies' preparations on October 13 ahead of the implementation of Korean International Financial Reporting Standard (K-IFRS) No. 1118 in 2027.

Under the standard, the concept of operating profit or loss is expected to change. Previously, only profit and loss related to operating activities was classified as operating profit or loss. Going forward, all income and expenses that do not fall under the investing or financing categories will be included in operating profit or loss. In addition, management-defined performance measures (MPMs), which have been used outside financial statements in earnings presentations and investor relations (IR) activities, will be disclosed in the notes to the financial statements.

The FSS said companies should assess the impact of the new standard on their businesses. In particular, they should review the classification of income and expenses, their main business activities, and MPMs, and add information required under the new standard. The FSS also urged companies to check whether they can actually calculate the information required under the new standard and to update their systems and closing procedures.

The FSS also advised companies to prepare financial statements in advance under the new standard and verify the results. This would allow them to check in advance whether they have sufficient source data, whether their systems can accurately extract the information, and whether they can appropriately identify differences between amounts calculated under the previous standard and those calculated under the new one.

An FSS official said, "To ensure the smooth implementation of K-IFRS No. 1118, we will work with relevant institutions to encourage companies to prepare for the adoption of the new standard and continue outreach and training on related accounting issues."

This content was produced with the assistance of AI translation services.