Thailand has made strides in aligning its accounting standards with international practices. Its commitment to global financial standards is managed by the Federation of Accounting Professions or TFAC, the country’s official accounting standards-setting body.
Since 2011, Thailand has been working to align its standards with IFRS as closely as possible. This is relevant for companies, especially start-ups, because of the dual nature of the accounting framework.
Even if the Kingdom has adopted all IFRS standards (including IAS standards and various interpretations, they are implemented as Thai Financial Reporting Standards (TFRS) with some differences in timing and application.
Let’s break down what the relationship between TFRS and IFRS entails and how they will impact your financial reporting.
Basic Framework Comparison
TFRS maintains a one-to-one relationship with IFRS, meaning that every International Financial Reporting Standard has a corresponding Thai standard.
- All IFRS Accounting Standards
- All IAS Standards
- All IFRIC Interpretations
- Al SIC Interpretations
Characteristics of the Framework
Aside from Thailand adopting all effective IFRS standards, standards must be translated from English to Thai before implementation. This is a legal requirement under the Accounting Professions Act B.E. 2547 (2004) (see section 34, p. 10). The translation process is comprehensive and includes a technical review.
As for the implementation timeline, TFRS has a one-year delay from IFRS effective dates. This time window is given due to the translation requirements and local due process. Early adoption is permitted for companies that wish to align more quickly with international standards.
TFAC’s Accounting Standard Setting Committee (ASC) oversees the process. The committee is comprised of 20 members representing different sectors:
- Securities regulators
- Banking industry
- Insurance industry
- Academia
- Audit firms
- Other industry representatives
Quality Control Measures
The framework maintains high standards through the following:
- Oversight from the Committee on Accounting Professions
- Required approval processes for new standards
- Public consultation periods
- Regular review and updates
Practical Implications
This framework means several things for companies, particularly startups:
- You are working with internationally recognised standards
- Your financial statements will be broadly comparable with international companies
- You have access to clear Thai-language versions of all standards
- You get additional time to prepare for new standards implementation
- You can opt for early adoption if it benefits your business strategy
How The One-Year Implementation Delay Works
When IFRS issues a new standard effective January 1, 2023, for example, the corresponding TFRS becomes effective January 1, 2024. This pattern applies to all new standards and major amendments
The Exception: IFRS 17 Implementation
An exception to the standard one-year delay is IFRS 17 or Insurance Contracts. TFRS 17 became effective on January 1, 2025, and special transition provisions are available since it was expected to have a significant effect on the Thai insurance industry.
With these provisions, companies using a full retrospective method can recognise any negative cumulative effects in equity and spread the recognition over up to three years.
Company Classification and Requirements
It is wise that you understand how your company is classified under Thai accounting standards so that you know which reporting requirements to follow.
There are two main categories for businesses in Thailand’s accounting framework: Publicly Accountable Entities (PAEs) and Non-Publicly Accountable Entities (NPAEs). PAEs encompass a broader range than just listed companies.
Your startup would be considered a PAE if it meets any of the following conditions below:
- If your company’s securities trade in a public market (including foreign exchanges)
- If you are in the process of issuing securities, or
- If you hold assets in a fiduciary capacity for a broad group of outsiders
Financial institutions, insurance companies, securities companies and mutual funds all fall under this classification. The requirements for PAEs are strict and clear. You must use Thai Financial Reporting Standards (TFRS) for consolidated and separate financial statements.
NPAEs have more flexibility in their reporting approach. If your startup falls into this category, you have a choice:
- Either adopt the full TFRS,
- Or use the simplified TFRS for NPAEs
You should choose carefully and your decision should be made with consideration of your company’s circumstances, future plans, and resources.
Specific Differences in Standards
There are still areas where the Thai standards include additional guidance or modifications to be able to address local business practices and requirements. It is important that you know this too.
One difference is in the treatment of business combinations under common control. TFRS has clearer direction for companies involved in restructuring or reorganisation within the same group of entities.
In the financial sector, Thailand has specific guidance for financial instruments and disclosure requirements in the insurance business which is relevant during the temporary exemption period of IFRS 9 and will remain in effect until TFRS 17 becomes effective in 2025.
The translation may also be interpreted differently. Some concepts have slightly different nuances in Thai. So if you are a startup working with international partners or investors, you must ensure that the interpretation of accounting treatments is consistent.
Aside from the one-year delay from IFRS effectives, there are standards that have transition provisions, such as TFRS 17 which includes an additional transition option for companies using a full retrospective method.
And lastly, if you are running a company that deals with specialised industries or unique transactions, take note that TFAC may issue additional interpretations or guidance that doesn’t exist in IFRS. These are supplementary materials that are designed to help companies apply the standards appropriately within the Thai business context and at the same time adhere to the overall principles of IFRS.
Practical Implications for Startups
Understanding the international and Thailand’s financial reporting standards is more than compliance. You will be able to make informed decisions about your company’s financial reporting strategy and future plans for growth.
The first major decision you would face is choosing between TFRS and TFRS for NPAEs. Your choice might be TFRS for NPAEs because it seems simpler and more cost-effective at first glance, but also consider your long-term strategy. If you are planning to expand globally, then it’s more advantageous to start with full TFRS despite the higher initial complexity and cost.
Considering the costs also affects this decision. You will need to factor in costs for staff training, software systems, and possibly external audit fees. Weigh the costs against the potential benefits of having internationally comparable financial statements and the costs later on when transitioning from TFRS for NPAEs to full TFRS.
Full TFRS requires more detailed record-keeping and more complex valuations for certain assets and liabilities. Your startup needs to make sure that it has all the needed systems and procedures in place to capture and process all required information. This might mean investing in accounting software that can handle these requirements and training staff to understand and apply the standards correctly.
If you have ambitions to list on a stock exchange or attract foreign investment, your choice of accounting standards today affects these opportunities tomorrow. International investors usually prefer financial statements prepared under full TFRS as they are more comparable with international standards. For company listing ambitions, you will need to use full TFRS. So it is best to start early so that the transition later on is smoother.
Lastly, even if the TFRS is in Thai, many startups working with international stakeholders need to prepare English versions of their financial statements. You might need to invest in bilingual capability within your finance team or budgeting for translation services.
The key is to align your choice of standards with your strategy and growth trajectory.
Compliance and Reporting
There is a structured timeline that all businesses must adhere to. Annual financial statements must be prepared in Thai and filed with the appropriate authorities. Companies may prepare additional versions in other languages for international stakeholders.
If your startup uses full TFRS, you will need to engage with qualified auditors who understand both TFRS and IFRS principles. The audit process is more complex if you are dealing with sophisticated financial instruments or fair value measurements.
Common startup challenges in compliance revolve around resource constraints and technical expertise. Many young companies struggle with implementing the more complex aspects of TFRS, like when dealing with share-based payments and business combinations.
Do not only understand the technical requirements of these financial reporting standards, but also their practical implications for your business operations.
Conclusion
As Thailand continues to integrate with the global economy, the alignment between TFRS and IFRS will likely grow stronger. However, local considerations and requirements will continue to shape how these standards are implemented in Thailand.
Working with qualified accounting service providers in Thailand who understand TFRS and IFRS can help you make the right choices for its current standing and future aspirations.
