국제회계기준 도입이 건설업 재무제표에 미치는 영향

Abstract

The Effects of Construction Enterprise Financial Statements adoption of International Financial Reporting Standards

Jung hyeonggi Advisor : Prof. Kae-Won Lee, ph.D. Department of Business Adminstration Graduate School of Business Administration, Chosun University

Construction has been greatly influenced by the introduction of the Korean International Financial Reporting Standards(K-IFRS). Issues in the construction industry involving the introduction of K-IFRS were: 1) Whether the performance of contractors(companies with specific purposes in construction) or SPEs(Special Purpose Entities) should be included in the consolidation and 2) whether the profit awareness method should be changed from the progression rate to the delivery standard for apartment sales and purchases. In the K-GAAP, SPEs, which has no share interests, are not included in the consolidated financial sheets, but in the K-IFRS, SPEs are included in the coverage when the majority of risk is imposed although there are no share interests.(K-IFRS Manual No. 2012). For the SPEs of the construction industry, as capital is eroded or the debt ratio becomes higher, if these companies are included in the consolidation, there is a high possibility that the financial ratio of the parent companies in construction will deteriorate. In a simulation of one large construction company's cases, the debt ratio was 200% before SPEs were included but that increased to above 600% when the SPEs were included in consolidation. The construction industry, which worries about the rapid increase in debt ratio, presented eight absolute exclusion conditions for which contractors should not be considered as SPEs under the sponsorship of the Korean Construction Association in March, 2011 and the Financial Supervisory Service agreed to these conditions. Consolidation is determined by comparing them with consolidated judgement indexes regardless of autonomous direction exclusion types. As a result, as methods through which the majority of contractors can be excluded from consolidation were developed, the breadth of debt ratio increases tended to be lower than anticipated. The Financial Supervisory Service decided to allow autonomous directions until 2012 and examine how to reinforce them after 2013. K-GAAP was aware of profits using the progression rate as a standard of real estate sales and purchases, but in K-IFRS, fixers can designate main deign elements in construction contracts based on the progression rate or change structures in the process of construction. (K-IFRS manual No. 2115). To interpret these standards strictly, in the sale of domestic apartments, as the people who buy them in lots can decide only on the purchase and have no rights to change the structure, it is considered a reserved sale of a standardized house, and the sale has to be recognized at the point of move-in when delivery is taken on an apartment. In the case of accounting based on the time of delivery, profits during construction which were recognized in a sales project were cancelled, and the cost input to sale shares are summed up as inventory and proceeds received as deferred income. Therefore, during construction, as the capital decreases and the debt increases, the financial ratio, the profits, and the losses deteriorate in the short-term. The standards of recognizing profits in the sale and purchase of real estate were a controversial subject between the construction industry and the related accounting firms. The construction industry suggested that the sale and purchase of real estate is the standard of progression as they satisfy profits they are aware of according to the standards in the K-IFRS although the sale and purchase is made before the point of delivery. However, in the accounting of that as risk and compensation as the corresponding real estate is not satisfactorily delivered to the persons who purchased it, the profit awareness is not satisfied according to standards. However, in the ‘IFRS Pre-clearance’, as it was decided that, past IFRS regulations that apply profit awareness standards as completion standards are not appropriate in the reality of Korea, the standard of progression rate has been continuously applied to the sale and purchase of apartments. Delayed consolidation subjects the application of SPEs and standards of progression rates of sales and purchase awareness of apartment houses contribute to hiding the risk debt ratio rapidly increasing in the construction industry. However, as the exclusion of the consolidation subjects of the SPE is not final, it should be carefully examined in the future. As firms listed on the Korea Stock Exchange apply different standards from those which are not listed, relevant institutions for the evaluation of performance capability should be supplemented. Therefore, it is necessary to fairly asses the management of the appraised values of firms listed on the Korean Stock Exchange as well as those which are not within the basic frame of the present performance capability assessment. It is difficult to develop a logically complete performance assessment model based on financial statements extracted by applying different accounting standards for firms listed on the Korea Stock Exchange as well as those not listed and it is necessary to develop models to minimize statistical errors. In particular, when it is assumed that the point to asses new performance capabilities using the 2011 financial statements is July 2012, a methodology for assessing management appraised value should be decided on by late 2011. In addition, with the introduction of the K-IFRS, as it is expected that the financial status of the construction industry will change, there is the need that institutions involved in bids should be supplemented. In assessment of the construction performance capabilities in construction with estimates of below 10 billion won ordered by the government, assessment of management status should be based on the rates of debt ratio, the current ratio, and the working period in recent years. Also, the scores for evaluation on items such as construction performance, management status, and new deliveries should be summed up for a proper assessment. Meanwhile, in the cases where the estimated cost of construction is over 10 billion won, the construction has to be assessed by credit grades of the Credit Bureau, and the possibility should be considered that the financial status and the credit assessment grades may change through application of IFRS. As the present construction firms have relatively low credit assessment grades, an excessive decrease in opportunities to participate in bids with the introduction of K-IFRS should be prevented. As The K-IFRS shows the minimum accounting subjects to be indicated in the financial statements to accept a diversity of firms, and does not regulate the special orders and types of financial statements, the introduction of K-IFRS can increase the possibility of international comparison, but decrease the possibility of domestic comparison. Thus, the government should consider standardization of public accounting in each type of business respecting the basic rules of IFRS. In particular, through presenting the standard guidelines where characteristics of business types are reflected, the methods to promote the possibility of comparing firms listed in Korea Stock Exchange should be developed.