This section takes a look at how barter transactions should be accounted for. A hotel (“the Company”) launches a new campaign to sell low-price holiday packages. The Company has entered into an advertising agreement for the campaign with a radio broadcaster. The agreement states that the Company can place radio advertisements valued at 500,000 baht. In return, the Company will provide hotel accommodation for the radio broadcaster for the same value.
Keywords: Mazars, Thailand, Accounting, Barter Transactions, IAS 18, TAS 18, VAT, Revenue Code
13 July 2015
How should the Company account for this transaction?
IAS 18, and TAS 18, paragraph 12, would apply in this case. These standards should be applied as follows:
When goods are sold or services are provided in exchange for dissimilar goods or services, the exchange is regarded as a transaction which generates revenue. The value of the revenue is determined as the fair value of the goods or services received, adjusted by the amount of any cash or cash equivalents transferred. When the fair value of the goods or services received cannot be measured reliably, the value of the revenue is determined as the fair value of the goods or services provided, adjusted by the amount of any cash or cash equivalents transferred.
As a result, the Company should recognize revenue of 500,000 baht and advertising expenses, as well as booking 500,000 baht in its financial statements. This is based on the value of the services received, as set out in the agreement.
In addition, such a barter transaction is an exchange, and the services performed are transferred to the customer in accordance with Section 77/1 (8) of the Revenue Code. Thus, this transaction is subject to 7% output VAT, and the Company must submit a VAT return (Form Por. Por. 30) to the Revenue Department.