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.
Keywords: Mazars, Thailand, Accounting, TFRS, NPAE
1) Chapter 9: Investments
Definition of “cost” under TFRS for NPAEs and TAS27 are stated differently. The entity can bring forward the investment cost for those purchased prior to the adoption of TFRS for NPAE to be a new investment cost reporting in FS following TFRS for NPAEs without retrospective application.
2) Chapter 10: Property, Plant and Equipment – Depreciation of Significant Components
An entity can choose to apply one of the following methods for deprecating significant components:
- Adjust retrospectively;
- Adjust prospectively; or
- An entity can depreciate the significant components only for the parts purchased after the adoption of TFRS for NPAEs. However, if the entity subsequently replaces a significant component of the assets purchase before the adoption, the entity shall comply with the method described in this chapter, paragraph 150-152.
3) Chapter 16: Provisions, Contingent Liabilities – Property, Plant and Equipment
When recording the estimated decommissioning costs (costs of dismantling and removing the assets and restoring the site on which it is located) of an asset, the entity can apply the following:
- Recognise retrospectively; or
- Recognise prospectively. The entity shall depreciate the decommissioning cost over its remain useful life and disclose such fact in the notes to financial statements.
4) Chapter 11: Intangible Assets
Paragraph 188, TFRS for NPAEs requires an entity to amortise over 10 years the intangible assets for which the useful life is indefinite. On adoption of TFRS for NPAEs, the entity shall prospectively amortise the remaining net book value of the intangible assets over the next 10 years.
Retrospective application is not permitted.
5) Chapter 16: Provisions, Contingent Liabilities – Employee Benefit (Past Service Cost)
In the first year of TFRS for NPAEs adoption:
In case the past service cost liabilities after the transition period is higher than the amount computed by the previous accounting policy, the entity will treat the past service cost by one of the followings:
- Retrospective recognition;
- Prospective recognition;
- Amortising the cost over a period of 5 years; or
- Adjusting against retained earnings at the beginning of the period.
In case the past service cost liabilities after the transition period are less than the amount computed by the previous accounting policy, the entity should recognise the decrease in full in the profit and loss statement.