Your Business in Thailand Must Follow Thai Accounting Standards

The Federation of Accounting Professions (FAP) issues Thai Accounting Standards (TAS). It is a set of accounting principles and guidelines for all businesses in Thailand, be it local or foreign. The TAS establishes the framework and requirements for the preparation and presentation of financial statements.

The primary objective of the TAS is to ensure the consistency and reliability of the financial statements preparation process. Additionally, it provides relevant and valuable information to users for decision-making purposes. The standards cover various aspects of financial reporting, including recognition, measurement, presentation, and disclosure of financial transactions and events.

Some of the most important Thai Accounting Standards (TAS) are as follows:

TAS 1: Presentation of Financial Statements

TAS 1, also known as “Presentation of Financial Statements,” is a standard issued by the International Accounting Standards Board (IASB). It provides guidance on the presentation and disclosure of financial statements. This is to ensure that they are prepared in a consistent and transparent manner.

The objective of TAS 1 is to prescribe the basis for the presentation of general-purpose financial statements. This is to ensure comparability of the entity’s financial statements of previous periods with the financial statements of other entities. It sets out the overall structure and content of financial statements, including the requirements for their presentation, classification, and disclosure.

Here are some key aspects covered by TAS 1:

• General Structure: TAS 1 outlines the minimum components of financial statements. Typically, this includes a statement of financial position (balance sheet) and a statement of comprehensive income (income statement). Additionally, a statement of changes in equity, a statement of cash flows, and accompanying notes are also part of this.
• Fair Presentation and Compliance: Financial statements must present fairly the financial position, financial performance, and cash flows of an entity. They should comply with TASs and other applicable accounting standards.
• Accrual Basis of Accounting: TAS 1 requires the preparation of financial statements on an accrual basis. This means recognizing revenues when earned and expenses when incurred, irrespective of when the related cash flows occur.
• Materiality and Aggregation: Financial statements should present information material to users’ understanding. Additionally, there must be an evaluation of the entity’s financial performance and position. Items that are not material may be aggregated or presented separately, depending on their significance.
• Comparative Information: Entities are generally required to present comparative information for the preceding period. This allows users to assess the entity’s financial performance and position over time and facilitates trend analysis.
• Going Concern Assumption: Unless there is significant uncertainty about the entity’s ability to continue operating as a going concern, financial statements are prepared on the assumption that the entity will continue its operations for the foreseeable future.
• Disclosures: TAS 1 provides guidance on the disclosure requirements for various elements of financial statements. This includes significant accounting policies, key assumptions and judgments, related party transactions, contingencies, and events after the reporting period.

It’s important to note that the specifics of financial statement presentation may vary depending on the jurisdiction. Additionally, it also depends on the specific accounting framework like IFRS or GAAP.

TAS 2: Inventories

The Federation of Accounting Professions (FAP) in Thailand issues the Thai Accounting Standards 2 (TAS 2). TAS 2 provides guidance on accounting for inventories. TAS 2 sets out the principles and rules for recognizing, measuring, and presenting inventories in financial statements.

Here are the key aspects of Thai Accounting Standards 2:

• Definition of Inventories: Inventories are assets for sale in the ordinary course of business. Additionally, it can be in the process of production, or in the form of materials or supplies for the production process.
• Measurement of Inventories: The measurement of inventories is at the lower of cost and net realizable value. Cost includes all costs directly attributable to bringing the inventories to their present location and condition. This includes the costs of purchase, conversion, and other costs incurred in bringing the inventories to their current state.
• Cost Formulas: TAS 2 allows the use of different cost formulas for measuring inventories. Note that, the specific identification method, first-in, first-out (FIFO), and weighted average cost methods are some of such methods. The chosen cost formula should reflect the flow of goods and have consistent records.
• Net Realizable Value: Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs to complete and sell the inventories. If the net realizable value is lower than the cost, the inventories should be in their net realizable value.
• Disclosure Requirements: TAS 2 requires certain disclosures in the financial statements. This includes the accounting policies adopted for inventories, the carrying amount of inventories, the number of inventories recognized as an expense during the period, and any amounts written down to net realizable value.

It’s important to note that TAS 2 applies to all entities in Thailand. Entities can be companies, partnerships, and other organizations that prepare financial statements in accordance with Thai Financial Reporting Standards (TFRS).

You should consult and seek professional advice from a reliable accounting firm in Thailand. This will help you ensure compliance with the most up-to-date accounting requirements and interpretations.

TAS 16: Property, Plant, and Equipment

Thai Accounting Standards 16 (TAS 16) is a financial reporting standard issued by the Federation of Accounting Professions (FAP) in Thailand. TAS 16 provides guidance on the accounting treatment and disclosure requirements for property, plant, and equipment (PPE) held by entities.

Here are the key points of Thai Accounting Standards 16:

• Recognition and Initial Measurement: PPE is an asset when it is probable that future economic benefits from the asset will flow to the entity. Additionally, there must be reliable ways to measure the cost of the asset. The cost of PPE includes its purchase price, import duties, non-refundable taxes, and directly attributable costs to bring the asset to its working condition.
• Subsequent Measurement: The measurement of PPE cost is generally at a cost lesser than accumulated depreciation and impairment losses. The systematic allocation of PPE cost over its useful life using a depreciation method reflects the pattern of consumption of the asset’s future economic benefits.
• Revaluation Model: Alternatively, entities may choose to revalue their PPE to fair value less any subsequent accumulated depreciation and impairment losses. in case of revaluation, it must apply to an entire class of PPE rather than selective items within a class. Entities must conduct revaluations with sufficient regularity to ensure that the carrying amount does not differ materially from the fair value.
• Disposal: At the time of disposal or expiry of a PPE item, any gain or loss arising must have the record in the income statement.
• Disclosure: Entities must disclose significant PPE accounting policies. Additionally, this should include the depreciation methods used, the useful lives or depreciation rates applied, and any revaluation policy. Additionally, disclosures regarding the carrying amount, accumulated depreciation, and impairment losses for each class of PPE are mandatory.

TAS 36: Impairment of Assets

The Federation of Accounting Professions (FAP) in Thailand issues Thai Accounting Standards 36 (TAS 36). It provides guidelines on the recognition, measurement, and disclosure of impairment of assets for entities preparing financial statements under Thai Financial Reporting Standards (TFRS).

The objective of TAS 36 is to ensure that the value of assets is no more than their recoverable amount. It requires entities to assess whether there is any indication of impairment for their assets at each reporting date. An entity can identify impairment of an asset if its carrying amount exceeds its recoverable amount.

The key principles of Thai Accounting Standards 36 are:

• Identification of Indicators of Impairment: Entities need to assess whether there are any indications that prove the impairment of an asset. These indicators may include a significant decline in the asset’s market value, physical damage, changes in technology, economic conditions, legal factors, etc.
• Measurement of Recoverable Amount: The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. Fair value determination is through market evidence, while the value in use is the present value of future cash flows from the asset.
• Recognition of Impairment Loss: If the carrying amount of an asset exceeds its recoverable amount, it is an impairment loss. The impairment loss is the difference between the carrying amount and the recoverable amount and is an expense in the income statement.
• Reversal of Impairment Loss: If the conditions leading to the impairment loss are no longer present, and there has been a change in the estimates to determine the asset’s recoverable amount, there can be a reversal of impairment loss. However, the asset’s carrying amount limits the reversal for assets with no impairment loss.
• Disclosures: TAS 36 requires entities to disclose information about the impairment losses recognized, the recoverable amounts of impaired assets, the key assumptions used in determining recoverable amounts, and any reversals of impairment losses.

It is important to note that TAS 36 applies to all assets except for inventories, assets arising from construction contracts, deferred tax assets, assets arising from employee benefits, financial assets within the scope of TAS 39, and non-current assets held for sale.

Entities in Thailand must comply with TAS 36 when preparing their financial statements. This is mandatory to ensure transparent and reliable reporting of impaired assets.

TAS 38: Intangible Assets

Thai Accounting Standards (TAS) 38: Intangible Assets provides guidelines for the recognition, measurement, presentation, and disclosure of intangible assets in the financial statements of entities in Thailand. Intangible assets are non-monetary assets that lack physical substance and are identifiable.

Here are some key points of Thai Accounting Standards 38:

• Recognition: An asset is an intangible asset only if it meets the following criteria:
  • It is identifiable, and separable from the entity and sold, transferred, licensed, rented, or exchanged.
  • The entity has full control over it to obtain future economic benefits.
  • It is probable that future economic benefits from the asset will flow to the entity.
  • There are reliable ways to measure the cost of the asset.
• Initial Measurement: The measurement of intangible assets is on the basis of their costs, including all directly attributable costs making it useful for business. Acquisition of intangible assets in a business combination must be against the recognition of fair value on the acquisition date.
• Subsequent Measurement: After initial recognition, an entity can choose to measure an intangible asset at cost less accumulated amortization and impairment losses or at its revalued amount. The revaluation model is applicable only if fair price determination is in reference to an active market.
• Amortization: Amortization of intangible assets with finite usefulness is over their useful lives. However, an annual review of the amortization period is mandatory. Furthermore, there must be adjustments if there is a change in the pattern of consumption of future economic benefits. Nevertheless, amortization of intangible assets with indefinite useful lives is not applicable for impairment annually.
• Impairment: Assessment of intangible assets is mandatory whenever there is an indication of impairment. If the carrying amount of an intangible asset exceeds its recoverable amount, it is an impairment loss. This normally happens when a higher fair value has lower costs to sell and value in use.
• Disclosure: The financial statements should disclose information about the nature, useful life, amortization method, gross carrying amount, accumulated amortization, and impairment losses of intangible assets. Additionally, there must be a disclosure of restrictions on the ability to transfer funds to repay liabilities of intangible assets.

TAS 40: Investment Property

Thai Accounting Standards (TAS) 40: Thailand’s Federation of Accounting Professions (FAP) issues the standards of Investment Property. It provides guidelines for the recognition, measurement, presentation, and disclosure of investment properties in the financial statements of entities.

Here are some key points about TAS 40:

• Scope: TAS 40 applies to the accounting treatment of investment properties, which are properties earning rentals or capital appreciation, or both. It does not cover properties that are for sale in the ordinary course of business or for use in the production or supply of goods or services.
• Recognition: Initially, recognition of investment properties is on the basis of their cost of purchase, including transaction costs. Subsequent to initial recognition, the price determination of investment properties is on the basis of fair value. The change in fair value determines profit or loss in the statements.
• Measurement: Fair value price determination is always on the basis of active market prices or valuation techniques. Discounted cash flow models reflecting the market expectations of future cash flows from the property is one such method. The standard provides guidance on the use of different valuation methods and requires regular revaluations.
• Presentation: You must present investment properties as a separate line item in the statement of financial position (balance sheet). They are not subject to depreciation, as their carrying amount is based on fair value rather than cost. Income and expenses regarding investment properties must be in the statement of profit or loss.
• Disclosures: TAS 40 requires specific disclosures related to investment properties, including the fair value of investment properties, methods and significant assumptions used in determining fair value, rental income, and related party transactions involving investment properties.

It’s important to note that this information provides a general overview of TAS 40. Therefore, we recommend you consult with a professional accountant or advisor for specific guidance and interpretation of accounting standards in Thailand. Email us at [email protected] and our best-in-class professional accounting team will get in touch with you within 1 Thai working day. We specialize in corporate and personal income tax along with payroll management services in Thailand.