For small and medium-sized enterprises(“SMEs”), the financial statements are generally reviewed by the tax authority and limited number of stakeholders. Thus the generally accepted accounting standards which are developed for larger enterprises with public accountability tend to be too sophisticated for SMEs with limited resources and few interested outsiders. Since the recent introduction of K-IFRS (Korea-adopted International Financial Reporting Standards) that would be applied to large public companies and financial institutions, the need for adopt new reporting system for SMEs has been increased. Other countries like the EU, U.K., the U.S. and Japan have developed various financial reporting standards according to the size or public accountability of an enterprise. Among SMEs, the smaller enterprises with very little size and public responsibility (i.e. micro entities) shall be exempted from the obligation of preparing and disclosing financial statements. Tax accounting should suffice for such micro entities’ need. Should they want to attract outside financing, they may voluntarily prepare financial statements. In order to adopt new financial standard for SMEs, the Korean Commercial Code (the “KCC”) should be revised. More specifically, the KCC and its decree should provide that the SMEs may apply, in addition to the K-IFRS and the Korean GAAP, new financial reporting standard for SMEs. The scope of SMEs need to be defined by the KCC’s decree in consideration of total asset, paid-in capital, turnover and the number of employees. In designing new financial standards for SMEs, the regulator may refer to the Financial Reporting Standards for Smaller Entities (FRSSE) in the U.K. and the Accounting Standards for SMEs in the Japan. In terms of relieving the SMEs from the burdensome process of accounting, new standards need to be simple and flexible.