For the accounting year that began 1 January 2011 onwards, the Federation of Accounting Professions of Thailand (FAP) requires all companies in Thailand to use either the new Thai Financial Reporting Standards (TFRS) (all of which are based on the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB)) or the Thai Financial Reporting Standard for Non-Publicly Accountable Entities – NPAEs.
Because the IFRS and by extension, TFRS, are intended for publicly accountable entities (stock exchange listed companies, etc.) and very complicated, especially applying the concept of “Fair Value” in preparing Financial Reports, it will be too costly and burdensome for SMEs or non-publicly accountable entities to adopt those standards. It is estimated that 95% of entities in the world are SMEs and SMEs often produce financial statements only for the use of owner-managers or only for the use of tax authorities or other governmental authorities.
Therefore the IASB developed and published a separate standard intended to apply to small and medium-sized entities (SMEs), private entities, and non-publicly accountable entities. That standard is called the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs). And Thailand’s FAP published the Thai Financial Reporting Standard for Non-Publicly Accountable Entities- NPAEs for the same purpose.
A non-publicly accountable entity is an entity that is not one of the following:
(a) Its debt or equity instruments are traded in a public market or it is in the process of issuing such instruments for trading in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets),
(b) An entity that holds assets in a fiduciary capacity for a broad group of outsiders as one of its primary businesses, such as financial institutions, insurance companies, securities brokers/dealers, mutual funds and Agricultural Futures Exchange of Thailand,
(c) Public companies,
(d) Other entities that may be specified in the future.
Some entities may also hold assets in a fiduciary capacity for a broad group of outsiders because they hold and manage financial resources entrusted to them by clients, customers or members not involved in the management of the entity. However, if they do so for reasons incidental to a primary business (as, for example, may be the case for travel or real estate agents, schools, charitable organizations, co-operative enterprises requiring a nominal membership deposit, and sellers that receive payment in advance of delivery of the goods or services such as utility companies), that does not make them publicly accountable.
It is worth noting that a subsidiary whose parent uses full TFRSs, or that is part of a consolidated group that uses full TFRSs, is not prohibited from using the Thai Financial Reporting Standard for Non-Publicly Accountable Entities – NPAEs in its own financial statements if that subsidiary by itself does not have public accountability. If its financial statements are described as conforming to the TFRS for NPAEs, it must comply with all of the provisions of this TFRS.
If any non-publicly accountable entities choose not to adopt the Thai Financial Reporting Standard for Non-Publicly Accountable Entities – NPAEs, they have to comply with each and every TFRS.
Contact Thailand Accountant, MSNA, for your accounting and audit questions.