The Financial Supervisory Service will closely inspect investment property and other areas where accounting errors have repeatedly occurred during next year's financial statement review.
The Financial Supervisory Service (FSS) said on the 21st that in the 2026 financial statement review it will focus on ▲ accounting for overseas sales and trade receivables ▲ appropriateness of recognizing impairment losses on inventories ▲ accounting for investment property ▲ recognition and measurement of provisions and disclosures of contingent liabilities.
Accounting for investment property was included for the first time among the key review accounting issues. This follows repeated cases of misclassifying rental-purpose property as property, plant and equipment or neglecting fair value note disclosures.
The Financial Supervisory Service (FSS) urged corporations to clearly distinguish investment property from owner-occupied property (property, plant and equipment and leases) and to fully disclose in the notes the amounts recognized in profit or loss and related information such as fair value.
The Financial Supervisory Service (FSS) also plans to focus on overseas revenue recognition and the appropriateness of loss allowances for trade receivables amid heightened geopolitical risk and increased exchange-rate volatility.
Given the complexity of overseas transaction delivery terms and assessments of customer credit risk for overseas trade receivables, corporations must recognize revenue and loss allowances for trade receivables under the five-step revenue recognition model. For inventories, they must assess net realizable value reflecting exchange-rate and raw material price volatility and account appropriately under the lower of cost or market method. Provisions and contingent liabilities must be recognized and disclosed without omission, and provisions must be measured based on the best estimate.
The Financial Supervisory Service (FSS) will select review targets by accounting issue after financial statement disclosures and will take strict action if violations of accounting standards are confirmed.
An FSS official said, "We will promote the key review accounting issues so that companies and auditors can be fully aware and exercise caution in their work, and we also plan to provide training for those in charge of accounting tasks."