Recognizing a government subsidy to SMEs for COVID-19

On 19 October 2021, the Cabinet approved a COVID-19 subsidy for small and medium enterprises (“SMEs") registered in the Social Security system. SMEs are companies with no more than THB 5 million in share capital, and gross income of no more than THB 30 million in any accounting year. The subsidy was THB 3,000 per employee monthly for three months, from November 2021 to January 2022.

Keywords: Mazars, Thailand, Accounting, SMEs, Government Subsidy, COVID-19, IAS 20, TAS 20, TFAC

17 October 2022

SMEs which received such a subsidy might wonder how the subsidy should be recognized in their financial statements. Therefore, on 19 May 2022, the Thai Federation of Accounting Professions published the following guidance on this issue:

1. For entities who apply the Thai Financial Reporting Standards for Publicly Accountable Entities, a government grant that becomes receivable as compensation for expenses or losses already incurred or to give immediate financial support to the entity with no future costs shall be recognized in the profit and loss statement for the period in which it becomes receivable (see paragraph 20 of TAS 20, ‘Accounting for Government Grants and Disclosure of Government Assistance').

The entities must disclose sufficient information related to government grants in the notes to the financial statements. Thus, the following matters must be disclosed:

the accounting policy adopted for government grants, including the methods of presentation adopted in the financial statements; and
the nature and extent of government grants recognized in the financial statements and an indication of other forms of government assistance from which the entity has directly benefited.

2. For entities which apply the Thai Financial Reporting Standards for Non-publicly Accountable Entities, the grant that the entity received from the government with no future costs and increase in future economic benefits in a given period shall be recognized in the profit and loss statement in the period that includes the date on which the entity received the subsidy from the government.

The entities must disclose the effect and sufficient information related to government grants in the notes to the financial statements. Thus, the following matters must be disclosed: grants related to income are presented as part of profit and loss, either separately or under a general heading, such as ‘Other income’. Alternatively, they can be deducted when reporting related expenses.

References (in Thai): IAS 20, TAS 20 and TFAC’s website.