Companies are being urged to prepare for the new international financial reporting standard (IFRS) coming into effect in 2019, as those who do not comply are at risk of having uncertified financial statements, says PwC Thailand.
Chanchai: Many will be affected
Though the new IFRS will be implemented globally next year, in Thailand it will take effect in 2019. Still, Thai companies should start changing their data-collection systems to support the new financial reporting standard from the beginning of 2018, said PwC Thailand.
"Revenue recognition, recordings of accounts receivable and liabilities and many financial ratios will be changed when the new IFRS is implemented as the new accounting standard is considered a forward-looking concept," said Chanchai Chaiprasit, a partner at PwC Thailand.
There are three new IFRS standards that will have a significant impact on companies' accounting process: the IFRS 15, related to recording revenue; the IFRS 9, associated with recording accounts receivable; and the IFRS 16; related to recording liabilities.
Under the new IFRS 15, earnings currently booked as revenue in some transactions might not be recorded as revenue in the future, said Mr Chanchai.
For example, the sale of goods with guaranteed product return within a specified period will be recorded as both revenue and an expense at the date of delivery. At present, companies record expenses when a customer returns the product.
The company must record a discount as an expense at the selling date if there is over a 75% possibility that the customer might get a discount for their purchase on certain products at a specified amount. This is different from the current method, whereby a company will record such a discount as an expense when the purchased amount meets the conditions of sale.
"Revenue of telecommunication and large property companies offering many promotions to customers could be affected. Revenue of 50 billion baht will be diluted to 48 billion without good management of marketing expenses," said Mr Chanchai.
For the new IFRS 9, companies will be required to set aside loan loss reserves when there is a possibility greater than 75% that a debtor's revenue could be affected in the future.
This new accounting standard will directly affect financial institutions, with some impact on certain non-financial companies as well, said Mr Chanchai.
For the new IFRS 16, which is related to leasing operations, companies will be required to book leasing expenses as a liability at the contract signing date.
Hence, the debt level of companies, which have many leasing contracts, will increase when the accounting standard changes, he said.
Companies must also prepare human resources and investment budgets because accountants are unable to handle millions of accounting transactions by hand for the new IFRS, said Mr Chanchai.
