Change of Accounting Framework

The TFRS for NPAEs is the set of rules most commonly used by non-listed companies in Thailand. However, non-listed companies can also choose to use the TFRS for external reporting purposes, as the International Financial Reporting Standards have been incorporated into the TFRS.

Keywords: Mazars, Thailand, Accounting, Framework, TFRS, Thai Financial Reporting Standards, NPAEs, TAS 18

12 April 2023

There are two sets of accounting standards that companies in Thailand can choose to apply. These are as follows:

The Thai Financial Reporting Standards (“TFRS”)
The TFRS is a set of rules that must be used when preparing and presenting financial statements of publicly accountable entities/listed companies.
The Thai Financial Reporting Standards for Non-publicly Accountable Entities (“TFRS for NPAEs”)

The TFRS for NPAEs is the set of rules most commonly used by unlisted companies in Thailand. However, unlisted companies can also choose to use the TFRS for external reporting purposes, as the International Financial Reporting Standards have been incorporated into the TFRS.

Before deciding which accounting standards to use, companies must consider their business model, level of activities, and accounting transactions from both the mid-term and long-term perspectives, as well as whether they may wish to change to another accounting framework at some point.

Typically, companies might consider moving to TFRS if they are planning to perform one of the following activities:

reporting to a parent company that uses TFRS for its consolidated financial statements;
making an initial public offering, as this would require the adoption of TFRS; or
moving into foreign markets or raising capital with financial institutions that require TFRS-compliant financial statements.

On the other hand, if the level of activities or transactions of a company is not complex, and the company is a small or medium-sized one, or is not planning to perform any of the activities listed above, the TFRS for NPAEs might be the most suitable accounting framework.

Scenario

On 1 January 2020, Company A chose to prepare its financial statements using the TFRS. However, the shareholding structure and business model changed in 2022. Furthermore, Company A will not report to a parent company. As a result, Company A’s management wants to change from the TFRS to the TFRS for NPAEs.

Is it possible for Company A to change its accounting framework? If so, what does it need to do?

Response

The Thai Federation of Accounting Professions has addressed this issue on its website, stating the following:

The accounting standards do not address this issue clearly, but in practice, this is not done often, as using TFRS is more beneficial for financial statement users….

However, paragraph 14 of TAS 18 states the following:

An entity must change its accounting policy if that change:

14.1 is required by the TFRS; or

14.2 results in the financial statements providing reliable and more relevant information about the effects of transactions, other events, or conditions on the entity’s financial position, financial performance, or cash flows.

As a result, if a company wants to change its accounting policy from using TFRS to using TFRS for NPAEs, the company must exercise discretion in selecting standards that are suitable to the company’s business. and must disclose the reasons why such standards are chosen.

References (in Thai): https://www.tfac.or.th and https://www.tfac.or.th/Faq/Detail/1231