Thailand Financial Reporting Standards

What are Thailand Financial Reporting Standards? 

The Thailand Financial Reporting Standards (TFRS) serve as the primary guidelines for preparing and presenting financial statements. These standards provide a uniform accounting framework that businesses must adhere to, ensuring clarity and comparability of financial information. The Federation of Accounting Professions (FAP), under the Royal Patronage, is responsible for issuing and updating Thailand Financial Reporting Standards, bringing them in line with IFRS.

In general, Thailand Financial Reporting Standards apply to businesses that are either publicly listed or required to submit financial reports to regulatory authorities. These include:

• Publicly listed companies on the Stock Exchange of Thailand (SET);
• Financial institutions regulated by the Bank of Thailand (BoT);
• Entities subject to corporate governance regulations;
• Companies seeking international investment or partnerships.

Thailand’s financial reporting regulations ensure that businesses provide accurate, reliable, and transparent financial statements that reflect their financial health. The adoption of TFRS aligns Thailand with international financial reporting practices, making it easier for foreign investors to evaluate Thai businesses.

Legal Framework Governing Thailand Financial Reporting Standards 

The Thailand Financial Reporting Standards are legally mandated by several key legislative instruments. Businesses operating in Thailand must comply with these laws to ensure their financial statements meet regulatory requirements.

The Accounting Act B.E. 2543 (2000) 

The Accounting Act serves as the fundamental legislation governing financial reporting obligations in Thailand. It outlines the requirements for companies to maintain accurate records and comply with TFRS. Under this Act:

• Companies must prepare financial statements in accordance with Thailand Financial Reporting Standards;
• Financial records must be maintained for at least five years;
• Accounting records must be available for inspection by regulatory authorities.

The Securities and Exchange Act B.E. 2535 (1992)

For publicly listed companies, the Securities and Exchange Act requires strict compliance with TFRS to protect investors and maintain market integrity. Companies must submit audited financial reports to the Securities and Exchange Commission and ensure their financial disclosures reflect their actual financial condition.

The Revenue Code

Thailand’s Revenue Code mandates that financial statements used for tax reporting purposes align with Thailand Financial Reporting Standards. Businesses must ensure that their accounting practices comply with both TFRS and taxation laws to avoid penalties.

Compliance Requirements under Thailand Financial Reporting Standards 

Compliance with Thailand Financial Reporting Standards requires businesses to adhere to specific guidelines regarding the preparation and presentation of financial statements. The financial statements required under TFRS include:

Statement of Financial Position (Balance Sheet) 

The Statement of Financial Position, commonly referred to as the Balance Sheet, provides a snapshot of a company’s financial standing at a specific point in time. It details the company’s assets, liabilities, and equity, illustrating its financial health and stability. Businesses in Thailand must prepare their balance sheets in compliance with Thailand Financial Reporting Standards to ensure accuracy and comparability with international financial statements.

A company’s assets are divided into current assets, such as cash, accounts receivable, and inventory, and non-current assets, including property, plant, and equipment. Liabilities include short-term obligations (e.g., accounts payable and short-term loans) and long-term debts (e.g., bonds and long-term loans). Equity represents the residual interest in the assets after deducting liabilities, including share capital and retained earnings.

Regulatory authorities, including the Securities and Exchange Commission (SEC) and the Revenue Department, require businesses to submit properly audited balance sheets, ensuring transparency and reliability in financial reporting.;

Statement of Comprehensive Income (Profit and Loss Statement) 

The Statement of Comprehensive Income, also known as the Profit and Loss Statement, presents the company’s financial performance over a specific period. It details revenues, expenses, and net income, helping stakeholders evaluate the company’s profitability and operational efficiency.

Under TFRS, companies must disclose both operating income and non-operating income, distinguishing between revenue from core business activities and other sources such as investment income. Expenses, including cost of goods sold (COGS), administrative expenses, and taxes, must be clearly outlined. The final section of this statement calculates the net profit or loss for the period, which directly impacts shareholder value.

Publicly listed companies on the Stock Exchange of Thailand (SET) must submit quarterly and annual income statements to the SEC, ensuring compliance with regulatory requirements and investor transparency.;

Statement of Cash Flows 

The Statement of Cash Flows is a crucial financial document that provides insights into a company’s liquidity by detailing the cash inflows and outflows over a period. It is categorized into three key activities: operating activities, investing activities, and financing activities.

• Operating activities reflect the cash generated from primary business operations, including revenue collections and payments to suppliers.
• Investing activities detail expenditures on capital assets and investments in securities.
• Financing activities show cash movements related to borrowing, issuance of shares, or dividend payments.

This statement helps investors and financial regulators assess whether a business has sufficient cash flow to sustain operations and meet financial obligations. Thailand Financial Reporting Standards 7 (Financial Instruments: Disclosures) mandates that businesses present their cash flow statements in accordance with standard reporting principles to ensure financial clarity.;

Statement of Changes in Equity 

The Statement of Changes in Equity outlines the variations in a company’s equity over a given financial period. It details components such as share capital, retained earnings, revaluation reserves, and other comprehensive income.

This statement is essential for investors and stakeholders as it reflects the company’s ability to generate and retain profits. It highlights transactions such as dividends paid to shareholders, issuance or repurchase of shares, and changes due to accounting adjustments. Businesses in Thailand must prepare this statement in compliance with Thailand Financial Reporting Standards 1 (First-time Adoption of Financial Reporting Standards) and other applicable guidelines.

Publicly listed companies are required to submit this statement to the SEC, ensuring that changes in shareholder equity are transparently disclosed.;

Appendix to Financial Statements 

The Appendix to Financial Statements provide additional explanations and disclosures related to a company’s financial reports. These notes enhance the clarity of financial data by offering details on accounting policies, contingent liabilities, lease obligations, and financial risk management.

Thailand Financial Reporting Standards 101 (Presentation of Financial Statements) mandates that businesses include these notes to ensure that financial statements are not misleading. Companies must disclose assumptions made in financial estimates, details about property valuations, depreciation methods, and contingent liabilities such as pending legal disputes.

Investors, auditors, and regulatory bodies rely on these notes to assess the financial health of a business and to verify compliance with TFRS.

Businesses must ensure that these statements provide an accurate representation of their financial position and performance. Non-compliance with Thailand Financial Reporting Standards can result in penalties, reputational damage, and legal liabilities.