Accounting for a non-refundable up-front fee

How to account for a non-refundable up-front fee paid to a customer?

Keywords: Mazars, Thailand, Accounting, TFRS, NPAEs

15 November 2019


Company A (‘the Company”) is a distributor of chemical supplies for medical equipment in Thailand. The Company does the following:

1. It signs a medical supplier’s agreement with the customer. The term of the contract is three years.

2. It provides and installs the medical equipment for the customer at a location specified in the agreement.

3. It pays a non-refundable up-front fee of THB 2 million to the customer to install the equipment. The Company has recorded this transaction as a deferred non-refundable up-front fee cost and presented as an asset in the financial statements.


How should this transaction be treated in the financial statements for the year ended 31 December 2019?


Paragraph 26.1 of the Thai Financial Reporting Standards for Non-Publicly Accountable Entities (TFRS for NPAEs) states that an asset is a resource controlled by an entity as a result of past events, and one from which future economic benefits are expected to flow to the entity. The following criteria must be met for an asset to be recognized: 

  • It is probable that future economic benefits will flow to the entity.
  • The item has a cost or value that can be measured reliably.

It is assessed that due to expected related sales of medical supplies for the medical equipment provided to the customer, that it probable that economic benefits will flow from the asset to the Company. The cost of the asset can also be measured reliably.

Therefore, the non-refundable up-front fee of THB 2 million can be capitalized as part of assets in the financial statements in 2019 and amortized over its economically useful life.

References: TFRS for NPAEs