Accurate accounting is vital for businesses to provide a true and fair view of their financial status. In Thailand, companies must follow specific accounting standards and regulations to ensure their financial records are compliant with the laws outlined in the Accounting Act and other relevant provisions.
Overview of Accounting Standards in Thailand
Thailand has established distinct accounting standards, known as the Thailand Financial Reporting Standards (TFRS). These standards are designed to ensure transparency, reliability, and comparability of financial statements within Thailand and internationally. TFRS are largely based on the International Financial Reporting Standards (IFRS), with the goal of aligning Thai financial reporting with global practices.
There are two sets of accounting standards: one for Non-Publicly Accountable Entities (NPAEs) and another for Publicly Accountable Entities (PAEs).
TFRS for Publicly Accountable Entities (PAEs)
PAEs are entities that have a significant public interest component, such as publicly traded companies, financial institutions, and large private companies. The accounting standards for PAEs are aligned with International Financial Reporting Standards (IFRS) to ensure high transparency, reliability, and comparability.
TFRS for Non-Publicly Accountable Entities (NPAEs)
NPAEs are generally for businesses that do not have a significant public interest component, such as family-owned businesses, small private companies, and subsidiaries of foreign companies that do not meet the criteria for Publicly Accountable Entities (PAEs). The accounting standards for NPAEs are simpler and less comprehensive than those for PAEs.
Both standards are modeled after the International Financial Reporting Standards (IFRS), allowing a seamless application for foreign companies applying to use IFRS.
Basis of Preparation Between TFRS for NPAE and IFRS
The financial statements of the Target are prepared in accordance with TFRS for NPAE. The key differences between TFRS for NPAE and IFRS are summarized as below:
| Key differences | TFRS for NPAE | TFRS for PAEs (IFRS) |
|---|---|---|
| Statement of Comprehensive Income | Not required | IFRS requires the inclusion of Statement of Comprehensive Income. |
| Statement of Cash Flow | Not required | IFRS requires the inclusion of Statement of Cash Flow. |
| Financial Instruments | Not required | IFRS requires the evaluation of the impact of IFRS 9 – Financial Instruments which would specifically impact Accounts Receivable (AR). IFRS requires valuation of AR with best estimate and apply some assumptions and methods e.g., impairment loss calculation. |
| Leases | Not required | For IFRS, Right-of-Use Asset & Lease Liabilities (ROU) should be calculated and recorded per IFRS 16. If ISE has lease agreements, it should consider changing the method from operating lease to ROU method. |
| Income Taxes | Not required | IFRS requires to evaluate differences between accounting & tax books then calculate deferred tax asset or liability per the requirement of IAS 12. |
| Employee Benefits | Not required | IFRS requires to evaluate post-retirement benefit accrual at the end of the year by engaging external actuary to estimate the employee benefit amount according to IAS 19. |
Essential Accounting Compliance for Thai Companies
Financial Year-End and Accounting Periods
The standard financial year-end for Thai companies is December 31st. Most companies operate on a 12-month accounting period, although there are exceptions for newly incorporated companies or those dissolving or changing their accounting methods. To change the accounting period, companies must submit a request to the Director General of the Revenue Department.
Requirements for Bookkeeping
Thai companies must maintain their accounts following the Thai Accounting Standards issued by the Institute of Certified Accountants and Auditors of Thailand. This includes preparing Balance Sheets and Profit and Loss Accounts.
These financial documents must be kept at the company’s registered office for at least five years or up to seven years depending on business activity.
Mandatory Accounting Documents and Records
Companies must maintain the following accounting records:
- Accounting journals
- Statements of accounts
- Records of payments and receipts, including bank statements and electronic transactions
- Profit and loss statements and Balance sheets
- Internal or external audit reports
Companies can choose to maintain these records either monthly or prepare them at the end of the financial year.
Annual Financial Statements and Auditing Requirements
All companies, whether listed or not, must prepare financial statements that are audited by an independent certified auditor at the end of each fiscal year. This audit is crucial as the auditor’s opinion must be included when submitting the company’s financial statements and tax returns.
For private and public limited companies, it is mandatory for the board of directors to convene an annual shareholders’ meeting within four months after the fiscal year ends to approve these audited financial statements. Once approved, the documents, along with other required documents like the shareholder list, must be submitted to the Revenue Department and the Commercial Registrar within one month after the shareholders’ meeting. Non-compliance may lead to fines of up to 200,000 THB.
Foreign companies, such as branch offices or representative offices, are required to file their financial statements with the Ministry of Commerce (MOC) within 150 days of the fiscal year-end, without the need for shareholder approval.
By understanding and adhering to these auditing and reporting obligations, companies ensure compliance and avoid penalties.
Conclusion
To streamline your bookkeeping and financial statements, outsource your accounting tasks to Kreston Thailand. Our certified accountants specialize in maintaining accurate and compliant financial records, giving you peace of mind and more time to focus on your business. Choose Kreston Thailand for reliable and expert accounting services.