International Accounting


Discuss about the System Analysis.



The present study focuses on the harmonization of accounting standards and the effects of South Korea’s transition to the International Financial Reporting Standards on the financial declarations of firms.  The rationale behind the harmonization is to have a common set of accounting standards and to give it a professional shape as well as essence (Tarca, Morris and Moy 2013). The present study focuses hereby intends to study the importance of harmonization of accounting standards, issues associated to the process of harmonization of the accounting standards, current state of affairs of the harmonization and effects of the harmonization on the financial declarations process by drawing special reference to the business operations of Daewoo Shipbuilding & Marine Engineering Co., Ltd.

Reasons for Harmonization

The process of harmonization can help in realization of different gains from the global economy and for that it is essential to standardize the accounting policies among different countries (Spector 2012).

The rationale behind the standardization of the accounting policies or in other words known as the harmonization is primarily to facilitate the process of international transactions, lessen the costs associated to the exchanges (Cho et al. 2012). This is done by offering standardized information to the users of the information globally, developing the financial market information and by augmenting the accountability of the government (Phan, Mascitelli and Barut 2013). Again, the harmonization of the accounting regulations can offer a level playing ground worldwide. The regulators as well as auditors can get standardized information and facilitate the overall process of evaluation. Again, in the absence of free trade, the international accounting standards can permit the tariff as well as other trade restraint techniques to be more precise and less risky (Mulyadi et al. 2012).

The harmonization of the accounting standards therefore can help in greater comparability (Patro and Gupta 2012). The corporations that employ similar accounting standards in order to prepare and present financial statements can be compared to one another precisely (Noh and Guiral 2014).

The harmonization of the accounting standards can also help in gaining global acceptance of the firm (Jeong et al. 2014). The companies operating in different nations and using different accounting standards for preparation and presentation of the financial declaration might find it difficult in expansion of the business in other countries. Therefore, it can be said that the harmonization can help in acquiring greater flexibility of the business operations. As rightly put forward by Jeong et al. (2014), the principles based philosophy implies that the aim of the each and every standard is to attain a reasonable valuation that the firms can reach by using different ways. Again, the multinational enterprises also need to incur additional cost for the purpose of preparation and presentation of the financial declarations in the absence of harmonization of the accounting standards (Jang and Rho 2016).

Issues in Harmonization

 As rightly put forward by Choi (2014), the attainment of the global union in the accounting standards is considered to be a difficult task. There exist a number of issues as well as challenges that needs to be eliminated. According to Kang (2012), there is still reluctance among corporations across the world to adopt harmonization for the purpose of standardization of the accounting standard. For example, there is still reluctance among to the companies in US to adopt different norms stipulated by the International Accounting Standards Committee (IASC).

Lee (2013) opines that the accounting standards have been designed in diverse nations under different business environment that takes into account the political, economic, social, technological and legal factors. Therefore, there are reasons for the existence of the difference in the accounting standards among different nations across the globe (Paulo et al. 2013).

In addition to this, the quality of different financial declarations depends on the quality of the specific accounting standards in addition to the usefulness of the procedures by which the standards are implemented. However, the implementation of different accounting standards is not an easy job (Young et al. 2013).

As rightly put forward by Ji (2014), the union of the accounting standards with the international accounting standard will necessarily increase the questions of regulations against different principles. The IASB standards are essentially based on principles; therefore the nations using the rule based accounting principles can face challenges in harmonization of the rules (Parker 2014). Therefore, it can be hereby ascertained that the harmonization of the accounting standard faces the problems of integration. Again, there exist the problems of altering the existing accounting standards to the new international standards as it involves the issue of complexity (Noronha 2014).  

In addition to this, there exist different negative influences on the small businesses of USA (Parker 2012). The small businesses of US already have a particular competitive disadvantage against different larger multinational corporations. As a fraction of revenue, many small enterprises need to spend huge sum of money on different regulatory conformity than the large sized firms.  Therefore, the additional costs for harmonization can harm several small corporations as well as the capability to grow and develop (Ibarra and Suez-Sales 2011). Nevertheless, the assimilation of the accounting standards can lead to rise in the costs for all the small enterprises owing to added conformity mandates.

Furthermore, the harmonization of the accounting standards also involves the issue of the international sovereignty (Choi and Lee 2015). The nations have specific laws of securities, tax laws as well as banking and financial norms that essentially direct different accounting principles. Therefore, the assimilation of the accounting standards can therefore conflict with the statute rules of the US or any other nation and the constitutional laws related to the authority of the state (Jorissen et al. 2014). In addition to this, there also involves issues related to licensing as well as enforcement. The international units lack the enforcement authority and there is no prosecutorial authority for breaking international laws (Kim et al. 2015).

Explanation of the Case Study

Background of the Country: Korea South

South Korea is considered to be the most developed nation in East Asia according to the Human Development Index (Jorissen et al. 2013). The Korean Accounting Standards Board has implemented the IFRS as Korean IFRS (K-IFRS). The Korean IFRS is entirely identical to the IASB IFRS excluding only the time differences for the newly in print IFRS. South Korea altered the accounting standard from the K-GAAP to IFRS in order to make the Korean business even more attractive to the foreign financiers. The financial declaration prepared under the K-GAAP is more transparent than the ones prepared under K-GAAP (Mulyadi et al. 2012).

Background of the Organization

Daewoo shipbuilding & marine engineering co., ltd can be considered to be premium shipbuilding as well as offshore corporation that offers specialized services (Gray 2014). DSME also manufactures different high quality products founded on different IT services, well handled technology on ship-building, excellent preset platform construction capabilities, large-scale know-how regarding project management and advanced sub-marine destroyer technology (Glaum et al. 2013).

Transition Before Adjustment and after Adjustment from Gaap to K-Ifrs

 As rightly put forward by Cho et al. (2012), the transition before and after the adjustment from GAAP to K-IFRS. The transition to the Korean IFRS leads to a more principle based standard that have the need for expert professional judgement as well as trained accountants. The process of transition also includes increased emphasis on the reporting different economic substances of different business dealings recorded in the statements (Florou and Pope 2012). Again, the transition also involves the alterations from the past Korean GAAP and requires increased scope on consolidation, changes in the boundaries of different reporting bodies (Cho et al. 2012). The transition to the K-IFRS refers to major variances in the accounting policies

Impact on Comprehensive Income Statement Before and After Adjustment

The consolidated financial statement as per the previous GAAP declares items in WON in millions (Deegan 2013). The statement declares the assets, liabilities and equity both according to the previous GAAP and the K-IFRS. In addition to this, the consolidated financial statement also makes different adjustments for adoption of the transition from the K-GAAP to K-IFRS (Noh and Guiral 2014). The adjustments that are made for arriving at the K-IFRS figure includes the change in the scope of the consolidation, employment of the deemed cost of the plant, property as well as equipment. In addition to this, the required adjustments to the figure of previous GAAP to arrive at the K-IFRS also includes incorporation of the changes in different methods of depreciation along with the useful economic life of the property, plant as well as equipment (Deegan 2012). The identification of different defined advantage obligation founded on accrual assumptions are also deducted in case of the assets, liabilities and is added to the equity. The alterations in the procedures of identifying with the different commissions are also regarded as a adjustment for arriving at the K-IFRS from the previous GAAP. In this case, the identification of the commissions has led to the deduction of the same from the assets and equity. Again, the adjustments ensuing from the application of different standards on construction agreements also leads to addition to figures for assets and equity (Chen et al. 2016). Furthermore, the modifications also include the addition of the specific transactions that do not gratify different recognition criteria for different financial assets. The identification of the delayed income tax liabilities compared with the highly developed stipulation for depreciation lead to addition to the figure of the liability and the subtraction from the figure of equity. Furthermore, the identification of the financial assurance liabilities are added to the liabilities and deducted from the equity. In addition to this, there includes identification of other adjustments that refers to the deduction of the figures from the assets, liabilities as well as equity. Finally, the tax effect on the net alteration in the assets is taken into consideration. In this particular case, the influences of the tax on the change in net assets leads to deduction from the assets and liabilities and addition to the figure of equity (Camfferman and Zeff 2015). Thus, the adjustments lead to the K-IFRS from the previous regulations as mentioned in GAAP.

Impact on Financial Position Before and After Adjustment

 The adjustments to different consolidated financial position as well as financial performance presented according to the previous GAAP can lead to the figures in k-IFRS. The item asset undergoes adjustment that includes the change in the scope of the consolidation, method of depreciation, alteration in the method of identifying the commissions, application of standards on different construction agreements, adjustment of transactions that do not gratify de-recognition criteria, identification of different financial guarantee and other adjustments including the tax effects (Barth and Israeli 2013). According to the statement for adjustment provided for the financial position on 2010, it can be hereby said that the scope of consolidation leads to addition to assets, deemed cost of the plant, property as well as equipment, changes of standards on construction agreement, adjustment of transactions for satisfaction of the de-recognition criteria and other adjustments.

The adoption of K-IFRS adoption therefore refers to the alteration in the scope of the consolidation. A critical analysis of the consolidated statements reveals the fact that the changes from the K-GAAP to K-IFRS stress the significance of the fair value measurement. The K-GAAP restricts different assets apart from different financial instruments from being revaluated (Arrio, Souza and Niyama 2013). However, the K-IFRS allows the assets and liabilities to be adjusted at the fair value.

The changes in the treatment of different items affect the financial position of the company. For example, as per the K-GAAP, the corporations could subtract expenses for depreciation only if it was for particular book purposes. Again, the treatment of the depreciation under the IFRS remains identical in other state of affairs as well. However, there occurs an increase in the overall burden of tax owing to the decrease in the expense for depreciation. Therefore, in case of the company Daewoo shipbuilding & marine engineering co., ltd, the statement for the financial position for the year 2010 reflects the fact that are adjustments for the changes in the depreciation method and leads to deduction of the amount of 889 from assets and 20327 from the liabilities (Arrio, Souza and Niyama 2013).

Again, the statement for the financial position reflects the fact that the change in the scope of consolidation leads to the total comprehensive income of the 1999. Again, the declaration of the financial position also replicates the fact that the change in the depreciation has led to the deduction of 31657 from the comprehensive income of 900952 calculated as per the previous GAAP in December 2010. This indicates increase in the depreciation expenses when compared to the figure of January 2010. The increase in the depreciation will lead to the decrease in the tax burden for the company Daewoo shipbuilding & marine engineering co., ltd (Glaum et al. 2013).

Again, under the Korean GAAP, the deferred tax as well as liabilities can be categorized as current or else the non-current assets. However, under K-IFRS, the deferred tax assets as well as liabilities are categorized as the non-current. The influence on the tax on the change in the net assets is evident from the statement of the financial position declaration. The tax effect on net change in assets is recorded to be 78088 as per the financial on December 2010 that is deducted from the item asset to arrive at the figure of the assets in K-IFRS (Arrio, Souza and Niyama 2013).

The final figure for assets is recorded to be 16645293 WON in January 2010 after the adjustments of 157464. However, the same item is enumerated to be 15822584 after adjustments of 541819 during December 2010 that is after the transition. The decrease in the figure of the assets in December 2010 is mainly due to the changes (increase) in the income taxes, change (decrease) in the scope of the consolidation, increased expense of depreciation, change (decrease) in the expenses for commissions, increase in the expense for adjustments in the construction agreements and increased expense for the adjustment of different transactions among many others. Therefore, the implementation of the K-IFRS reveals the success of harmonization as the liabilities after adjustment to K-IFRS undertaken after transition have decreased. However, the assets have also decreased after adjustment ad after transition (Glaum et al. 2013). Therefore, there is a mixed effect of the transition that is evident from the statement of the financial position recorded during January 2010 and December 2010.


It is recommended that the comparability of corporations is important at the time when the business concerns are situated at different locations as companies might possibly use different methodologies, rules and regulations for preparations of the financial statements. Moreover, the transactions also become more critical as the transactions can lead to profit under a particular accounting standard and it might perhaps require deferral according to a different accounting standard. Therefore, harmonization can also help in minimization of the cost as well as the critical nature of transactions.


At the end of the study, it is concluded that international accounting explains reason and benefits of harmonization. Entire study explains issues pertaining to harmonization of accounting standards. Main emphasis is given for bringing transition before Korean International Financial Reporting Standard. In addition to this, the expansion of the employment of different fair value accounting can be carried out by providing information that is more pertinent and introducing increased volatility in the financial statements. 

Presentation (Attached in PowerPoint Presentation with notes)


Firstly, I have selected the topic on international accounting to bring overview of research and focus mainly on issues at the same time. I have selected the topic on evaluating success of harmonization. My selected organization is Daewoo Shipbuilding & Marine Engineering Co., Ltd. I have selected South Korea for making these relations with IFRS. I have taken case study for illustrating success or failure of Harmonization. The first meeting helps in reviewing the topic as well as organization selection at the same time. My mentor helped me for critically selecting as well as developing better ideas for future analysis purpose. I took into consideration by careful analyze on the scope of the project for effectively developing the key ideas. This helps me in analyzing the topic in the most appropriate way. I have selected the research topic after detailed investigation on other facts and related assumptions. Conducting this particular research was difficult for me but I received continuous guidance from my teachers and classmates. I was able to develop certain interpersonal skills as I needed to converse with other people at the time of research. I developed analytical skills because comparison and transition was showed in terms of accounting standards. In conducting the research, I faced challenges in communicating with higher authorizes of business organization. I mainly focused in conducting detailed investigation on bringing out underlying issues concerning harmonization of accounting standards. Due to time constraint, it was difficult in analyzing the facts in detailed ways. I have tried my best to accommodate necessary findings and discussions as far as possible. Issues in harmonization accounting standards are rising each single day of business operations and should be considered at top priority. I would like to state the fact that low budgeted finance prohibited me in conducting and using expensive tools as well as sources. I was having low financial resources and that acted as my barrier in the assignment. I have taken academic articles, books for reference purpose. Secondary research was conducted by taking facts from the annual report website of Daewoo Shipbuilding & Marine Engineering Co., Ltd. This particular research helps me to remain confident and self-motivated during the tough times. I made sure that I would utilize my strength and try to minimize my weakness for future analysis purpose. I received opportunity by my professor who has faith in me and given permission to study on the relevant topic. I found the topic interesting because harmonization of accounting standards had vital effect of South Korea transition to IFRS on certain financial declarations. I shared my project title as well as initial outline with my mentor by questioning developing clear framework for answering research questions in an effective way. My mentor discussed on the selected approach as well as information gathering method used in the particular assignment. The above discussion helped me in gaining confidence for continuing with my selected topic on harmonization of accounting standards. I received varied pool of informational sources from authentic websites of the company. 

Reference List

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Camfferman, K. and Zeff, S.A., 2015. Aiming for global accounting standards: the International Accounting Standards Board, 2001-2011. Oxford University Press, USA.

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Choi, S.U. and Lee, W.J., 2015. The Effect Of IFRS Non-Audit Consulting Services On Cost Of Debt: Evidence From Korea. Journal of Applied Business Research, 31(5), p.1889.

Deegan, C., 2012. Australian financial accounting. McGraw-Hill Education Australia.

Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.

Florou, A. and Pope, P.F., 2012. Mandatory IFRS adoption and investor asset allocation decisions. SSRN Working Paper Series.

Glaum, M., Baetge, J., Grothe, A. and Oberdörster, T., 2013. Introduction of International Accounting Standards, disclosure quality and accuracy of analysts’ earnings forecasts. European Accounting Review, 22(1), pp.79-116.

Gray, S.J. ed., 2014. International accounting and transnational decisions. Butterworth-Heinemann.

Ibarra, V. and Suez-Sales, M.G., 2011. A comparison of the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) for Small and Medium-sized Entities (SMES) and Compliances of Some Asian Countries to IFRS. Journal of International Business Research, 10(3), p.35.

Jang, M.H. and Rho, J.H., 2016. IFRS adoption and financial statement readability: Korean evidence. Asia-Pacific Journal of Accounting & Economics, 23(1), pp.22-42.

Jeong, J.S., Na, K.S. and You, Y.Y., 2014. A case study of Financial Statements Reporting System based on XBRL Taxonomy in accordance with Korean Public Institutions adoption of K-IFRS. Cluster Computing, 17(3), pp.817-826.

Ji, H.M., 2014. The effect of consolidated financial statements disclosure grace policy on the value relevance of accounting information. Journal of Convergence Information Technology, 9(1), p.129.

Jorissen, A., Lybaert, N., Orens, R. and Van der Tas, L., 2013. A geographic analysis of constituents’ formal participation in the process of international accounting standard setting: Do we have a level playing field?. Journal of Accounting and Public Policy, 32(4), pp.237-270.

Jorissen, A., Lybaert, N., Orens, R. and van der Tas, L., 2014. Constituents’ Participation in the IASC/IASB’s due Process of International Accounting Standard Setting: A Longitudinal Analysis. In Accounting and Regulation (pp. 79-110). Springer New York.

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Kim, D.H., Oh, K.W. and Park, S.J., 2015. Initial Adoption and Convergence of Accounting System under the K-IFRS by the Quasi-Government Entity: A Case of National Research Foundation of Korea. Journal of Digital Convergence, 13(9), pp.57-75.

Lee, S.Y., 2013. Financial Industries. Korean Economic and Financial Review, 18(2), pp.38-41.

Mulyadi, M.S., Soepriyanto, G. and Anwar, Y., 2012. IFRS adoption and taxation issue. International Journal of Arts and Commerce, 1(7), pp.159-165.

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Patro, A. and Gupta, V.K., 2012. Adoption of International Financial Reporting Standards (IFRS) in accounting curriculum in India-An empirical study. Procedia Economics and Finance, 2, pp.227-236.

Paulo, E., Pontes Girão, L.F.D.A., Carter, D. and De Souza, R.S., 2013. The impact of the adoption of International Financial Reporting Standards on the quality of accounting information of the Brazilian and European public firms. Available at SSRN 2270678.

Phan, D.H.T., Mascitelli, B. and Barut, M., 2013, May. Perceptions of accounting professionals towards international financial reporting standards (IFRS) in developing country: Evidence from Vietnam. In World Business Institute, Proceedings of the 3rd Global Accounting, Finance, and Economics Conference.

Spector, S., 2012. International Accounting Standard 39 (IAS 39), Financial Instruments: Recognition and Measurement. Professional Development Network.

Tarca, A., Morris, R.D. and Moy, M., 2013. An investigation of the relationship between use of international accounting standards and source of company finance in Germany. Abacus, 49(1), pp.74-98.

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