S. Korea to change accounting rules for shipbuilders

SEOUL, Oct. 22 (Yonhap) -- South Korea's financial watchdog said Wednesday it
plans to revise accounting rules for local shipbuilders as the sliding local
currency is feared to erode their balance sheets.
Most South Korean shipbuilders, led by Hyundai Heavy Industries Co., sold dollar
forwards to hedge risks after winning contracts. But with the value of local
currency having fallen more than 30 percent to the greenback so far this year,
their foreign exchange losses have snowballed.
Currently, shipbuilders have to deduct from their balance sheets any valuation
losses arising from dollar forward deals. With the won's steep fall, these kinds
of losses will increase, forcing some shipyards to face possible capital erosion
in their balance sheets even though their overall financial health remains sound.
"To help shipbuilders offset such losses, the watchdog plans to allow them to
reflect foreign exchange gains stemming from ship contracts in their books," the
Financial Services Commission (FSC) said in a statement.
The FSC expects the move to help shore up shipbuilders' balance sheets and
sharply lower their debt ratio, it added.
South Korea, home to seven of the world's top 10 shipyards, secured record orders
both last year and this year because of strong demand for crude carriers and
offshore exploration equipment amid high oil prices.