Leo Watanabe
2024年9月23日
The Thai Accounting Professional Council (APC) has published several major updates to the Thai Financial Reporting Standards (TFRS) which are particularly relevant to foreign businesses operating in the country.
These changes by the APC reflect ongoing efforts to enhance transparency, improve comparability, and streamline financial disclosures to converge closer to international accounting standards. This article summarizes the three key announcements and their potential impact on entities preparing financial statements in Thailand.
1. Disclosure of Financial Instruments Risks
The first major update concerns FRS No. 7, which focuses on the disclosure of financial instruments. The updates which were approved by the Accounting Profession Supervision Committee during its August 2024 meeting aim to provide users of financial statements with a clearer understanding of an entity's exposure to various financial risks. In the current increasingly complex financial environment, transparency regarding risks such as credit, liquidity, and market risk has become essential for investors, regulators, and other stakeholders.
FRS No. 7 introduces more detailed qualitative and quantitative disclosures to reflect the risks associated with financial instruments. All entities with substantial financial risk exposure must now provide extensive information on how they manage these risks to offer more insight into their financial health and risk management strategies. This enhanced level of disclosure aims to foster better decision-making among stakeholders in businesses with complex financial structures.
2. Accounting Standard No. 7: Cash Flow Statement Amendments
The second major update concerns Accounting Standard No. 7 which is the preparation of cash flow statements. One of the key features of this update is the inclusion of revisions addressing cash flows related to changes in ownership interests in subsidiaries and other businesses, classifying them under investing activities. The updates also concern alignment with international standards to provide clearer guidance on reporting foreign currency transactions. Companies engaged in international trade will find these updates particularly relevant, as unrealized gains and losses due to currency fluctuations are excluded from cash flows but must still be reconciled for accurate financial overview.
3. Accounting Standard No. 2: Presentation of Financial Statements Amendments
The final major update relates to the presentation of financial statements under Accounting Standard No. 2. This amendment aims to further align Thai standards with the International Accounting Standards (IAS) No. 1 to ensure consistency in financial statement presentation across different regions. The updated standard focuses on the classification of liabilities to help businesses distinguish between current and non-current liabilities more effectively.
The changes ensure that financial statements are easier to read and compare across different periods and entities. These updates will facilitate a smoother transition when aligning local reports with international standards for businesses with complex reporting needs such as those with operations in multiple jurisdictions.
Conclusion
These regulatory updates enhance the transparency, accuracy, and comparability of financial statements, and would thus help businesses in Thailand better communicate their financial performance to a global audience. Stakeholders would also be in a better position to understand the financial risks of an entity through these updated reporting standards. At BizWings, we remain committed to guiding our clients through these regulatory changes to ensure our clients stay compliant while optimizing their financial reporting processes.
Food for Thought: Entities operating in Thailand could benefit from closely monitoring amendments made by the International Accounting Standards Board (IASB) as the country continues to align its accounting standards with international practices. Businesses can anticipate potential regulatory shifts in Thailand and proactively adapt their financial reporting processes to remain compliant with the TFRS and the evolving global standards.