If the Basic Accounting Act is enacted, there are several advantages, such as minimizing blind spots in accounting for the nonprofit institutional sector and increasing the usefulness of accounting information beyond current levels, but above all, it is important that a competent ministry will be designated. This will allow a single ministry to establish and operate consistent and unified accounting policy.
Park Jong-seong, a professor in the Department of Business Administration at Sookmyung Women's University, said this on the 18th regarding the expected effects of enacting the Basic Accounting Act, while attending the "2025 Accounting Trend Symposium" hosted by ChosunBiz at the Westin Josun Hotel in Sogong-dong, Jung-gu, Seoul. At the forum, Park gave a lecture on the need for and the direction of promoting the Basic Accounting Act.
Park said, "The current Act on External Audit is lacking in systematization, with content related to accounting and auditing mixed together, and its scope of application is limited to stock companies, making it impossible to apply standards to limited liability companies or nonprofit corporations," adding, "Researchers have presented several alternatives, including an Accounting Integration Act, to resolve these issues, but there are limits to improving accounting transparency across society, so a new Basic Accounting Act is needed."
The Basic Accounting Act is a law that stipulates principles that can be applied universally and commonly to the accounting of diverse organizations, regardless of for-profit or nonprofit institutional sector. For-profit corporations such as corporations are subject to the Korea International Financial Reporting Standards (K-IFRS) and the Accounting Standards for Non-Public Entities equally under the Capital Markets Act and the Act on External Audit, but nonprofit corporations are different. Accounting regulatory laws differ by field, and the competent ministries in charge are all different.
The Korean Institute of Certified Public Accountants (KICPA) commissioned the first research project related to the enactment of the Basic Accounting Act last year to the Korean Academic Society of Accounting, where Park serves, and held a seminar in May based on the research results. A second research project is currently underway, and because it is the only accounting policy included in President Lee Jae-myung's list of campaign pledges, KICPA plans to accelerate the enactment of the law.
Park went on to explain the purpose of the Basic Accounting Act: ▲ minimizing blind spots in accounting ▲ improving the usefulness of accounting information ▲ minimizing inefficiency and confusion that arise in the process of establishing and operating the accounting system ▲ establishing and operating consistent and unified accounting policy. Accordingly, the Basic Accounting Act is composed of ▲ Chapter 1 General Provisions ▲ Chapter 2 Disclosure of settlement of account and financial statements ▲ Chapter 3 External audit ▲ Chapter 4 Supervision.
Park explained, "In principle, the Basic Accounting Act applies to all organizations or groups, but if the size is small or there are few stakeholders, its application may exceptionally be excluded," while adding, "However, when determining whether to do so, it should be mandatory to consult at least with the competent authority of the Basic Accounting Act."
Park also said, "We should clearly define the accounting treatment standards, which are the reference criteria for producing accounting information, and specify external audits as a mandatory requirement," adding, "All organizations or groups should provide the results of the settlement of account to stakeholders, and it should not exceed five months after the close of settlement."
Park emphasized that to maintain consistency in accounting policy, the competent authority for the Basic Accounting Act should be specified in the law. He said, "There is a plan to utilize an existing government ministry, to establish a new ministry under the president or the prime minister, or to create an entirely new independent body."
He then said, "After gathering experts' opinions, we proposed establishing a National Accounting Policy Committee under the prime minister." He added, "The committee would establish a long-term development roadmap for the overall accounting system and serve as a decision-making body that regularly discusses implementation plans," noting, "It could serve as the control tower for accounting policy at the national level, and it is expected to lay the groundwork for promoting the accounting system under a long-term roadmap."