Held To Account - IFRS in Thailand
The globalisation of the world economy has arguably caused a great deal of stress over the last few years, but the introduction of international standards of accounting practice should allow Thai companies to prosper. Greg Lowe writes.
New financial reporting standards for listed companies, being ushered in by the Stock Exchange of Thailand and regulators, will change the local reporting landscape bringing new levels of transparency and enabling investors to more accurately assess a firm’s real value, local accounting experts says.
Locally-listed companies will have to switch from current reporting standards to the International Financial Reporting Standards (IFRS), which are drawn up by the International Accounting Standards Board, an independent accounting standard-setter based in London. No hard date has been set for the transition, but the industry anticipates it will be completed between 2011-13.
What people are sure of is that by adopting IFRS investors will be able to make more qualified investment decisions. Making real world comparisons between a SET-listed firm and an overseas entity that uses IFRS will also be made easier.
Transparent Reporting
As more developed countries shift towards the new standards developing nations will need to follow suit if they are to participate effectively in an increasingly competitive global market.
“The shift of Thai GAAP (Generally Accepted Accounting Principles) towards IFRS-based accounting standards will represent a significant change to the financial reporting landscape in Thailand,” says Mike Fiore, a partner who deals with IFRS at Deloitte Touche Tohmatsu Jaiyos.
“IFRS is a principles-based accounting standard, not rules-based; which means there is less detailed guidance on how to account for transactions and relies more on management judgment to interpret the principles.
“These management judgments will need to be disclosed in a company's financial statements, which should provide a greater level of transparency to the users of the financial statements.”
The greater use of narrative explanations of a company’s figures and operational position will also see the size of corporate reports expand significantly from their current format due to the increased depth of information – a factor that will ultimately make the financial reports more useful tools for investors.
