Accounting for debt forgiveness
In 2017, Company A had a debt totalling THB 2,800,000 forgiven by Company Z, a major shareholder of Company A.
Keywords: Mazars, Thailand, Accounting, TFRS, NPAEs, Shareholders’ equity, Debt forgiveness
20 October 2017
- How is debt forgiveness recognized in the financial statements of Company A?
- Is it possible for Company A to recognize this amount as income in the financial statements?
Paragraph 27.1 of the Thai Financial Reporting Standards for Non-Publicly Accountable Entities (“TFRS for NPAEs”) indicates that income is an increase in economic benefits during the reporting period in the form of inflows or enhancements of assets, or decreases in liabilities that result in an increase in equity, other than those related to contributions from equity participants and gains that shall be recognized directly as equity according to this Financial Reporting Standard.
As a result, the Company must recognize the forgiveness of the debt of THB 2,800,000 as a surplus from the waiver of a loan from a related party, and must present it under ’shareholders’ equity’.
For more information, please read TFRS for NPAEs.
Practice in Transition Period of TFRS for NPAEs
The Federation of Accounting Professions (‘FAP’) has launched three announcements with regards to Thai Financial Reporting Standards (‘TFRS’). This is the second amendment and further clarifies the accounting treatment on transition to TFRS for NPAEs.