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  • Choosing the Right Accounting Standards for the Best Strategic Move Forward

Choosing the Right Accounting Standards for the Best Strategic Move Forward

14 October 2021

Kajori Chakraborty, Senior Manager |

Southeast Asia is poised to emerge as a preferential location to foreign investors looking to diversify their supply chains in a post covid world. Thailand with its unique locational advantages and enabling policies is in a sweet spot to develop as a destination of choice.

These unusual times call for the companies to understand and evaluate their unique business needs keeping in mind the stage of the company lifecycle as well as their future plan. This consequently will help to decide which accounting framework to choose from.

Non-listed companies have flexibility when choosing which accounting standards to use. Companies may select from the two options available for their external financial reporting: Thai Financial Reporting Standards for Non-publicly Accountable Entities (TFRS for NPAEs) and Thai Financial Reporting Standards for Publicly Accountable Entities (TFRS) (converged with IFRS).

Picking the right accounting framework isn’t just a compliance matter, it helps the company get to the next level.

Thai Financial Reporting Standards for Non-publicly Accountable Entities (TFRS for NPAEs)

TFRS for NPAEs is the most applied financial reporting framework used by private companies in Thailand.

This set of standards has been issued by Federation of Accounting Professions.

TFRS for NPAEs was designed for private companies; and TFRS is to be applied by public companies and other publicly accountable enterprises. However, private companies may choose to use TFRS, if there is a business need to adopt it.

Thai Financial Reporting Standards (TFRS)

Thai Financial Reporting Standards are substantially converged with International Financial Reporting Standards (IFRS) which are a set of standards used in more than 120 countries. Thailand adopts TFRS/IFRS for publicly accountable enterprises with a one-year delay from the initial adoption date.

Should companies adopt TFRS for NPAEs or TFRS?

There can be many reasons why private companies might need to move to TFRS framework from TFRS for NPAEs or otherwise choose to continue with TFRS for NPAEs. Some of the scenarios are included here.

Types of companies

Accounting standards to choose from

Private organization with a non-complex, non-dynamic business

Simplified TFRS for NPAEs may be less complicated than the extensive volumes of TFRS

Entity with a highly complex, dynamic business

TFRS as TFRS for NPAEs may not address the unique facts and circumstances of that organization’s business in sufficient detail

Investor, lender or buyer’s interest in the accounting standard framework of the company, for ease in comparability with other multinational companies they deal with, who tend to report using TFRS

TFRS even if TFRS for NPAEs is otherwise sufficient

Subsidiary of foreign company looking to expand into global markets or obtain foreign financing


Entity operating solely within Thailand


To decide which accounting framework should be implemented, the primary driver is to see who the users of the financial statements are. That’s why choosing between TFRS for NPAEs and TFRSs should be in tandem with the company’s strategic business decisions. The accounting framework to be chosen should support current business needs and future business moves.

Choosing not to adopt TFRS too soon

Business executives are often uncertain as to whether they should adopt TFRS early in their business lifecycle. They contemplate this because TFRS is an accounting standard option in Thailand and gives companies flexibility to satisfy investors or lenders. However, cost is the main disadvantage of switching accounting frameworks before your company needs to.

It’s not just the one-time cost of converting to a new standard. Businesses often must make changes to accounting and a host of other systems. Ongoing compliance with TFRS will require a full- time financial reporting team that is familiar with these standards. And the volume and pace of change for TFRS is substantial and often companies may require external consultants to act as a sounding board on complex accounting issues surrounding TFRS.

When to change accounting frameworks

Companies should look forward to a low to mid-term horizon, spanning over two to five-year timelines, to consider whether switching accounting frameworks makes sense or not for their plans. By monitoring this medium-term horizon, it’s easier to catch any immediate needs—and also plan ahead.

Typically, companies might consider moving to TFRS, if they are planning for one of the following activities in the medium term:

  • Going for an initial public offering, which would require adoption of TFRS.
  • Plan of selling off the business and exploring a buyout from potential investors who will require adoption of TFRS prior to acquisition.
  • Reporting to a parent company that applies TFRS in their consolidated financial statements; or
  • Moving into foreign markets or raising capital with financial institutions that require TFRS-compliant financial statements.

To pursue this level of activities, organizations need at least two to three years in preparing the company’s financial statements. In the last-minute chaos, the process becomes more difficult, expensive, and unpredictable. Delays will keep the prospective investor, buyer, or lender waiting—first for the company to change frameworks and then for them to complete their financial due diligence. The delay may even jeopardize the transaction, as it stretches into weeks or even months.

Selecting the right accounting framework guides the company’s financial reporting and shapes the financial statements. While selecting the right accounting standards for the financial statements may not be a priority for a lot of organizations, but they form part of the backbone of any good business plan. Together they drive the company’s strategic plan.

If you are interested to learn more, BDO in Thailand is ready to assist your company in the consideration of reporting under TFRS for NPAEs or TFRS. BDO has a vast network of experienced professionals within Thailand and abroad to serve our clients. We have established policies and procedures with respect to audits of financial statements that would apply to both full TFRS and TFRS for NPAEs and continue to provide our professionals and our clients with ongoing technical training in all areas of audit and accounting.