The process of presenting financial information to external stakeholders, including as investors, creditors, and regulators, is known as financial reporting. International accounting standards have been designed to guarantee that financial information is similar and uniform across various nations.
These guidelines, referred to as International Financial Reporting Standards (IFRS), are used in a large number of nations worldwide. Thailand has embraced IFRS, like many other nations, however there are certain distinctions between Thai and IFRS that must be recognized. The distinctions between Thai and IFRS and their effects on financial reporting will be covered in this article.
The Conceptual Framework
The conceptual framework used by Thai and IFRS differs the most. The conceptual framework serves as the cornerstone of financial reporting by outlining the fundamental ideas that guide the creation and presentation of financial statements. Thai Financial Reporting Standards (TFRS) are based on International Accounting Standards (IAS), a predecessor of IFRS. Because of this, IFRS's current conceptual framework and TFRS's earlier conceptual framework do not entirely align.
Treatment of financial instruments is another area where Thai and IFRS diverge. Contracts that result in a financial asset for one entity and a financial obligation or equity instrument for another entity are known as financial instruments.
Financial instruments are categorized under TFRS as either financial assets or financial liabilities, with various measurement and recognition standards for each category. In contrast, IFRS uses a more intricate categorization system that includes financial assets that are assessed at amortized cost, at fair value via profit or loss, and at fair value through other comprehensive income. This may lead to discrepancies between Thai and IFRS financial statements regarding the recognition, measurement, and categorization of financial instruments.
The recognition of revenue is yet another area where Thai and IFRS diverge from one other. The income that a company receives through the sale of products or services is known as revenue, and it is an important part of financial statements. Revenue is recorded under TFRS after ownership risks and benefits have been transferred to the buyer,
In contrast, the revenue recognition system under IFRS is more intricate and calls for a business to take into account a number of variables, including the transaction's level of completion, the allocation of risks and benefits, and the likelihood that the consideration would be collectible. This may lead to discrepancies between Thai and IFRS financial statements about the date and volume of revenue recorded.
Implications for Financial Reporting
For financial reporting, the variations between Thai and IFRS might have a big impact. For instance, Thai-based businesses who do business with foreign creditors or investors may be required to submit financial statements in both Thai and IFRS forms. Due to the need to carefully weigh the differences between the two frameworks and their effects on financial statements, this procedure may be expensive and time-consuming.
Furthermore, there may be consequences for regulatory compliance due to the differences between Thai and IFRS. Depending on their size, sector, and other variables, Thai-based businesses may need to adhere to both IFRS and TFRS. To make sure that financial statements are generated in conformity with both standards, this might result in increased compliance costs and resources needs.
In conclusion, there may be considerable effects on financial reporting due to the distinctions between Thai and IFRS. It may be necessary for Thai-based businesses with foreign debtors or investors to compile financial statements in both Thai and IFRS forms, which can be expensive and time-consuming. The discrepancies between Thai and IFRS can also affect how financial statements from other nations can be compared, which may have an impact on investment choices and legal compliance. To ensure that financial reporting is accurate, transparent, and consistent across many nations and jurisdictions, it is crucial for businesses and financial professionals to be aware of these discrepancies and their ramifications.