Exposure draft of TFRS for NPAEs

Keywords: Mazars, Thailand, Accounting, TFRS, NPAEs, TFAC

18 July 2022

Continuing from last month’s article, the details of the main changes in the revised Thai Financial Reporting Standards for Non-publicly Accountable Entities (“TFRS for NPAEs”) which are expected to become effective on 1 January 2023 are set out below.


Current TFRS for NPAEs

Revised TFRS for NPAEs

1. Going-concern basis

The definition of a going concern in the current TRFS for NPAEs is based on the assumption that a company will continue to operate in the future. If continuing as a going concern is in doubt, an entity shall measure items recognized in its financial statements on a basis that differs from that which the TFRS for NPAEs provides.

The revised TRFS for NPAEs state that if the management intends to liquidate the company or to stop operating, or has no realistic alternative but to do so, the financial statements must not be prepared on a going-concern basis. The basis on which the financial statements are prepared and the reason why the company cannot operate as a going concern must be disclosed.

2. Change in accounting policy

When there is a change in accounting policy, and it is impracticable for the company to determine either the period-specific effects or the cumulative effect on one or more prior periods when applying the new accounting policy, the company shall adjust the comparative information to apply the new accounting policy retroactively from the earliest date practical.


Apart from the retroactive adjustments, the revised TRFS for NPAEs allows a company to apply a new accounting policy retroactively to the carrying amounts of assets, liabilities, and equity as at the beginning of the earliest period that it is practical to do so.

In addition, the revised TFRS for NPAEs state that the revaluation method for land, property, and equipment can be used if fair value can be determined reliably. The revised TFRS for NPAEs do not treat this as a change in accounting policy.

3. Definition of cash

The current TRFS for NPAEs defines cash as cash on hand and bank deposits. Cash on hand is banknotes and coins including petty cash, money orders, postal bills of exchange, cheques due but not yet deposited, traveller’s cheques, and bank drafts. Bank deposits include current and savings deposits in bank accounts and excludes fixed deposits and certificates of deposit issued by commercial banks and other financial institutions. The current TFRS for NPAEs also require entities to present these items either as current investments classified as current assets or long-term investments classified as non-current assets.

The revised TRFS for NPAEs makes the definition of cash more concise. Cash is cash on hand and demand deposits in bank accounts. Cash does not include deposits made with banks as collateral, and should not be presented by offsetting bank overdrafts.

4. Bad debts recovered

The current TFRS for NPAEs state that accounts receivable and allowances for doubtful accounts shall be reversed when the receivable has been received. However, the recognition of this item in the financial statements is not clearly explained.

The revised TRFS for NPAEs state clearly that bad debt recovered is recognized as other income in the statement of income. This is in accordance with TFAC’s announcement no. 13/2555.

5. Measurement of inventories

The valuation of inventories held by the following is not stated in the current TFRS for NPAEs:

1)     Producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products

2)     Commodity brokers and dealers

Inventories held by producers of agricultural and forest products, agricultural produce after harvest, and minerals and mineral products are measured at net realizable value, while those held by commodity brokers and dealers are measured at fair value less costs to sell.

6. Definition of investment in subsidiaries

The current TFRS for NPAEs address only how to determine whether a parent company has control of a subsidiary.

The revised TFRS for NPAEs provide a clearer way to determine when a parent company does not have control of a subsidiary, which is when the parent company has less than half of voting rights, either directly or indirectly through other subsidiaries.

7. Definition of transaction costs

The current TFRS for NPAEs state only that all investments must be initially measured at fair value less transaction costs, but the definition of transaction costs is not provided.

The revised TFRS for NPAEs define the term transaction costs as costs that are directly attributable to the acquisition of an investment. Incremental costs are those which would not have been incurred if the entity had not acquired the investment, such as brokerage fees paid to advisors or brokers. Transaction costs, however, do not include a premium or discount of debt instruments, financing costs, or internal administrative expenses.

8. Depreciation of the definite useful life of land

Under the current TFRS for NPAEs, land has an indefinite useful life. As a result, land should not be depreciated.

The revised TFRS for NPAEs state that land used for some purposes, such as mineral exploration and landfill, should be depreciated over their useful lives.

9. Loss on the decline in value of property, plant and equipment

A company must recognize a loss on the decline in value when the carry amount of property, plant and equipment is higher than the recoverable amount. The recoverable amount is the net selling price less cost to sell.

The revised TFRS for NPAEs allow the recoverable amount to be determined by value in use if this can be determined reliably.

10. Classification of assets held for sale

Assets held for sale under the current TFRS for NPAEs are classified as non-current assets.

To classify assets held for sale as current or non-current assets, a company needs to comply with paragraph 4.8 of Chapter 4, “Presentation of financial statements”

11. Definition of net book value of property, plant and equipment

The definition of net book value is not given.

Net book value is defined as the cost of an asset less accumulated depreciation and the allowance for a loss on the decline in value.

12. Measurement of investment property subsequent to initial recognition – Revaluation method

As is the case with property, plant and equipment, only the cost method can be used to recognize the subsequent cost of investment property.

The revised TFRS for NPAEs allow the use of the revaluation method if fair value can be determined reliably. The entire class of assets to which that asset belongs should be revalued. Revaluation should be carried out regularly (every 3 or 5 years) so that the carrying amount of the asset does not differ materially from its fair value at the date of the statement of financial position.

Further details will be published in our next newsletter.

Reference: TFAC (in Thai)