Guidelines for Transitioning Accounting Standards from NPAEs to PAEs and Precautions Businesses Should Know 

Due to increased competition and business growth, management of companies classified as Non-Publicly Accountable Entities (NPAEs) may require financial information that can be used for comparison and competition with other businesses in the market. Therefore, companies may need to adopt Financial Reporting Standards for Publicly Accountable Entities (TFRS for PAEs), which involves adjusting financial statements from the simplified accounting principles used in TFRS for NPAEs to the more complex and stringent accounting principles of TFRS for PAEs. This will impact the time required to prepare financial statements and increase various costs. The key changes can be summarized as follows: 

Presentation of Financial Statements 

The following financial statements must be prepared additionally, while NPAEs do not: 

• Consolidated Financial Statements 

• Comprehensive Income Statement 

• Cash Flow Statement. 

Impact on Adjustments to Financial Statement Figures

The following standards contain different principles and measurement methods from those applicable to NPAEs, which will affect the figures in the financial statements.

• Revenue and cost recognition (TFRS 15) 

• Financial instruments (TFRS 9) 

• Recognition of deferred tax assets or liabilities (TAS 12) 

• Recognition of employee benefits obligation (TAS 19) 

• Recognition of right-of-use assets and lease liabilities (TFRS 16) 

• Share-based payment (TFRS 2) 

• First-time adoption of financial reporting standards (TFRS 1) 

Disclosure

PAEs require more detailed and comprehensive disclosure in the notes to the financial statements than NPAEs, including the following additional disclosures: 

• Transactions with related parties or entities 

• Presentation of operating segments

• Financial instruments

Preparation for Adopting PAEs 

• Hire personnel with expertise in financial reporting standards and study the relevant TFRS for PAEs, including understanding the full TFRS for PAEs, which is significantly more complex than TFRS for NPAEs. 

• Develop internal control systems and processes aligned with financial statement preparation. 

• Use computer programs compatible with financial statement preparation. 

Consideration 

• Since financial reporting standards are frequently updated, the latest standards issued by the relevant authorities should always be referenced. 

• Expert assistance: Converting financial statements from NPAEs to PAEs is a complex. Therefore, consultation with an auditor or accounting professional is recommended to obtain appropriate guidance.

Author: Soraya Tintasuwan,

Managing Director, Dharmniti Auditing Co., Ltd.