How to read Korean standard financial statements
Korean standard financial statements (표준재무제표) restate a company's year-end accounts using account names and code numbers fixed by the National Tax Service, and are filed with the corporate or income tax return. Because every company uses the same codes, they are what Korean banks, guarantors and suppliers usually ask for when checking an unaudited SME.
The forms
| Form | Legal basis | Form no. | Last revised |
|---|---|---|---|
| Standard balance sheet (general corporations) | Corporate Tax Act rules | 3-2-1 | 2021-10-28 |
| Standard income statement (general corporations) | Corporate Tax Act rules | 3-3-1 | 2024-03-22 |
| Standard balance sheet (sole proprietors) | Income Tax Act rules | 40-6 | 2014-03-14 |
| Standard income statement (sole proprietors) | Income Tax Act rules | 40-7 | 2025-03-21 |
Form numbers are Caveat's shorthand for the annexed form numbers in the enforcement rules. Depending on the industry, manufacturing, construction, leasing, property-sale or transport cost schedules and a statement of appropriation of retained earnings (or disposition of deficit) are attached. Financial, insurance and securities companies use separate forms with a different chart of accounts.
Reading the account codes
Every line carries a fixed code number next to the account name. Within the same form edition, a code means the same account at every company, so looking up by code avoids confusion over slightly different wording. Codes most used in diagnostics on the general corporate forms:
| Account | Statement | Code |
|---|---|---|
| Trade receivables (매출채권) | Balance sheet | 9 |
| Inventories (재고자산) | Balance sheet | 44 |
| Short-term borrowings (단기차입금) | Balance sheet | 234 |
| Long-term borrowings (장기차입금) | Balance sheet | 289 |
| Retained earnings (이익잉여금) | Balance sheet | 372 |
| Revenue (매출액) | Income statement | 1 |
| Cost of sales (매출원가) | Income statement | 35 |
| Operating profit (영업손익) | Income statement | 129 |
| Interest expense (이자비용) | Income statement | 180 |
| Net profit (당기순손익) | Income statement | 219 |
Accounts are hierarchical: inventories (44) has merchandise, finished goods, raw materials and so on beneath it, so adding the total line and its detail lines double-counts. Revisions can renumber or merge codes, so check which edition a statement uses.
Corporate vs sole-proprietor forms
- Detail: the sole-proprietor forms are much simpler (91 balance-sheet lines vs 287 for general corporations); accounts split on the corporate form are often combined.
- Equity: sole-proprietor equity is just capital (88) plus profit for the year (89), with no retained earnings, so measures that need retained earnings, such as the Altman Z'-Score, cannot be calculated.
- Net profit: sole proprietors pay income tax personally, so profit on the standard income statement (99) is before tax. Compared directly with a corporation's after-tax profit, a sole proprietor's margin looks higher.
Getting and using them
- Obtaining: a company can download its own as a certificate (표준재무제표증명원) from the Hometax portal; for a customer or supplier, ask them to provide it.
- Reliability: the figures were filed with a tax return, which makes them more reliable than self-prepared summaries, but they are not audited statements.
- In Caveat: upload the PDF and Caveat reads values by form and account code first, then maps them to IFRS concepts for analysis.
Both sides: the fixed format makes companies easy to compare, but as a tax form it may hide distinctions useful for judging operating performance, such as one-off items. If a figure looks odd, check the underlying accounts and notes.
How other countries do it
Attaching accounts to tax returns in a standardised form is common, but the approach varies.
- United States: the corporate return (Form 1120) includes a balance sheet per books (Schedule L) and a reconciliation of book income to taxable income (Schedule M-1 or M-3).
- United Kingdom: accounts are filed with the corporation tax return in a machine-readable tagged format (iXBRL).
Korea's distinguishing feature is that the chart of accounts itself is fixed by code number on a standard form that every company uses.
Limitations
- Filed once a year, so the current cash position is not reflected.
- As tax forms, their presentation can differ from accounting-standard statements.
- Across form revisions, the same code can refer to different accounts.
- For reference only; it does not replace tax advice.
FAQ
- How do standard financial statements differ from ordinary accounts?
- They restate the same year-end figures using the National Tax Service's standard account names and code numbers. Unlike ordinary accounts, whose names and layout vary by company, every company uses the same format.
- Where is the certificate issued?
- From the Hometax portal of Korea's National Tax Service, or through the tax accountant who filed the return.
- Can sole-proprietor statements be analysed?
- Most ratios can be calculated. There are no retained earnings, so some measures are unavailable, and profit is pre-tax, so take care when comparing with corporations.
- Why do account codes change between years?
- Form revisions add, remove or merge accounts, which can renumber codes. When comparing several years, check each year's form edition.