A new Thai Financial Reporting Standard, TFRS 15, ‘Revenue from contracts with customers’, has been issued and applies to accounting periods beginning on or after 1 January 2019.
Keywords: Mazars, Thailand, Accounting, TFRS 15, IFRS 15, Telecommunications, Real estate, Software development
16 August 2019
Currently, this standard applies only to listed or regulated companies reporting under full TFRS. If smaller entities or non-publicly accountable entities would like to adopt these standards early, they must adopt and apply the full set of TFRS for Publicly Accountable Entities.
Mazars has already issued three publications relating to the equivalent International Financial Reporting Standard, IFRS 15:
- TFRS 15 – A Closer Look
- Transition to IFRS 15
- Mazars Newsletter –September 2018
This standard will have a significant effect on many businesses across a variety of industry sectors, such as telecommunications, manufacturers, real estate and property development and software development and technology.
The main point to focus on for this standard is that an entity will need to exercise judgment when considering the terms of a contract, and all the facts and circumstances, including implied contractual terms.
We set below some examples from various industries:
The telecoms industry typically deals with large numbers of clients, standardized contracts, and multiple offerings (such as customers signing up for an annual plan and getting a handset for free).
Therefore, the main challenge will be to split bundled offerings into individual performance obligations and allocate transaction prices.
In addition, the revenue for individual performance obligations might be recognized over time (over a three-year subscription plan) or at a set point in time (upon delivery of a handset).
2. Real estate and property development
Property developers and construction companies typically conclude long-term contracts with customers.
The biggest challenge is to decide whether the company should recognize revenue over time (spread out over the individual years of construction) or at a set point in time (at the completion of a contract).
3. Software development and technology
The technology sector, especially companies involved in software development, selling software licences, and providing related services, is well known for the diversity of its operations and long-term contracts.
The main challenges are:
- Identifying the individual performance obligations (the sale of a licence + customization + post-delivery support) and setting a price for them
- Assessing the progress made towards meeting the contract
- Assessing the licences for the products sold by software vendors or developers.
TFRS 15 recognizes two types of licences: a licence to use and a licence to access. The accounting treatment is different for both, and the entity should be able to identify the type of licence in question.
For more information, please visit the IFRS website.