Keywords: Mazars, Thailand, TFAC, TFRS, Financial Statements, Accounting Standards, TFRS 9, TFRS 13, TFRS 16, IAS 12, TAS 16, IAS 37
The COVID-19 outbreak has created a great deal of uncertainty, resulting in entities lacking sufficient information in regard to estimating and recognizing expected credit losses, reversing deferred tax assets, measuring fair value, impairing assets, and making provisions for liabilities in order to recognize such expenses in statements of income at the end of the reporting period.
The intention of the guidelines is to reduce the adverse effects of specific accounting standards and guidance. We list below specific accounting standards and guidance to which the new guidelines apply:
1. TFRS 9 — Financial Instruments and Thailand Accounting Guidance - Insurance businesses designating financial instruments at fair value through profit or loss
The entities can implement and choose a simplified approach to measuring and valuing expected credit loss for financial assets and decide whether or not to use forward-looking information to measure an allowance for expected credit losses. Also, the entities can use internal and historical credit loss or other approaches which are able to produce a similar result for supporting a management judgement on estimating and recognizing the allowance.
2. TFRS 13 — Fair Value Measurement
This guideline allows entities that hold non-marketable equity security at the end of the reporting period to measure the security at fair value on 1 January 2020 based on paragraph Kor 5.2.3 of TFRS 9.
3. TFRS 16 — Leases
If an entity is a lessee, and a lessor has reduced a rental fee or changed a lease payment during the COVID-19 outbreak, the entity can choose whether or not to treat this as a change in the lease agreement. If the entity chooses to treat it as unchanged in the lease agreement, it must treat all agreements for which rental fees were reduced the same way for accounting purposes. There is no need to revise the calculation and make an adjustment for a right-of-use asset and a corresponding liability for each lease agreement in the past.
4. IAS 12 — Income Taxes
This guideline allows entities to exclude information that arose during or was affected by the COVID-19 outbreak when making forecasts used for calculating future taxable profit for measuring and recognizing deferred tax assets.
However, the carrying amount of deferred tax assets must be reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be utilized. Any such reduction is subsequently reversed to the extent that it becomes probable that sufficient taxable profit will be available in other circumstances.
5. TAS 36 — Impairment of Assets
The guideline allows entities to exclude information that was affected by the COVID-19 outbreak when determining and recognizing an allowance for the impairment of assets at the end of the reporting period.
However, the entities are required to assess whether there is any indication that assets may be impaired due to other circumstances under TAS 36.
6. IAS 37 — Provisions, Contingent Liabilities and Contingent Assets
The guideline allows entities to exclude events that occurred during the COVID-19 outbreak when determining whether a present obligation exists at the end of the reporting period. In addition, the entities must disclose information about which option the entities chose from the guidelines in the notes to the financial statements.
The guidelines were published in the Royal Gazette and will be effective for annual reporting periods beginning on or after 1 January 2020 to 31 December 2020.
For more information (in Thai) about the guidelines: TFAC Announcement