New accounting standard to affect Thai companies: KPMG
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Thai companies, particularly banks, should witness additional burden to comply with the new accounting standard approved on July 24, said experts from KPMG Thailand.
"The new standard is going to have a significant impact on Thai companies, most notably banks, but also insurers and other corporates. After extensive debate on what is a complex area, it is good that we now have a final standard so planning for implementation can commence," said Somboon Supasiripinyo, senior technical partner.
On July 24, the International Accounting Standards Board issued the fourth and final version of its new standard on financial instruments accounting – IFRS 9 Financial Instruments. This completes a project that was launched in 2008 in response to the global financial crisis. The new standard includes revised guidance on the classification and measurement of financial assets, including impairment, and supplements the new hedge accounting principles published in 2013.
Christopher Saunders, banking partner, noted that adopting the new rules is going to mean a lot of time, effort and money for banks.
“A further issue for banks and investors in banks will be the impact of the new standard on regulatory capital ratios. Banks will need to be prepared to respond to questions from analysts and regulators so factoring this into capital planning activities now is key," Saunders said.
Insurers will also be significantly impacted by IFRS 9, added Nick Bellamy, head of KPMG Financial Services in Thailand.
“Insurers have to plan for adopting new standards on both financial instruments and insurance contracts over the next few years. The overall effect cannot be assessed until the insurance standard is finalised over the next 12 months, but a significant change in financial reporting for most insurers should be expected.”
Piyapong Sangpattarachai, a Financial Risk Management Executive Director in KPMG Thailand, added that other corporates should not automatically assume that the impact of the classification and measurement and impairment requirements of the new standard will be small, as it depends on the exposures they have and how they manage them.
"Furthermore, many Thai corporates do not currently follow fair value accounting or hedging principles in relation to derivatives used in hedging activities so adoption of IFRS 9 could introduce significant earnings volatility and accounting complexity. This will be an important issue for corporate treasurers and accountants generally.”
