Thailand

on the road to IFRS

conversion
A comparison of
International Financial Reporting Standard (IFRS)
and Thai Accounting Standards (TAS)
Contents

Introduction 1

I. Comparison of
International Financial Reporting Standard (IFRS)
and Thai Accounting Standards (TAS) 2

II. Section A: TAS with major differences from IFRS 4

III. Section B: IFRS without corresponding TAS 6

Comparison of IFRS and TAS January 2009

 Introduction
The Federation of Accounting Professions plans to fully
align Thai Accounting Standards (TAS) with International
Financial Reporting Standards (IFRS). Alignment will be
effective for large enterprises in Thailand (starting with
the 50 largest listed companies – SET 50) from 2011
onward.
Thai enterprises adopting IFRS face significant change although the
effects of converting from TAS to IFRS will vary significantly from
industry to industry, and even from company to company. This is
because the IFRS standards offer more accounting policy choices –
and in many cases, require greater use of professional judgment.

Purpose of this publication

This publication is intended to provide a comparison between IFRS
and TAS and an overview of the significant differences between the
two standards. It does not attempt to provide an in-depth analysis or
discussion of the topics; rather, the objective is to highlight key
differences and summarize key principles of those IFRS that currently
have no corresponding TAS. In addition, this publication does not
contain an analysis of the interpretations either under IFRS or TAS.
Reference should be made to the full text of the standards and
interpretations before taking any decisions or action.

This publication covers all standards issued by the Federation of

Accounting Professions (FAP) and the International Accounting
Standards Board (IASB) up to December 2008. These are presented
in the following order:

A comparison table contains a list of all IFRS with a comparison to

corresponding TAS, and those TAS with no equivalent IFRS.

Section A: Major differences between IFRS and TAS, in cases where

both IFRS and TAS contain standards discussing the same topics but
encourage different practices.

Section B: Summary of key principles of IFRS that currently have no

corresponding TAS.

Other Ernst & Young publications

Ernst & Young has developed a number of publications that discuss
IFRS-related matters, some references to which are set out at the
back of this publication. Also, you can visit and download all
Ernst & Young publications on IFRS matters from our website
www.ey.com/ifrs.

1 Comparison of IFRS and TAS January 2009

 Comparison of IFRS and TAS
The following is a comparison of IFRS and TAS which have been announced up to the end of 2008:
IFRS Key relevant TAS TAS See
IFRIC / SIC effective date Section
IFRS 1 First-time Adoption of International - - - B
Financial Reporting Standards (revised
2008)
IFRS 2 Share-Based Payment IFRIC 8, IFRIC 11 - - B
IFRS 3 Business Combinations - TAS 43 1 January 2008 -
(revised)
IFRS 3R Business Combinations (revised) - - - A
IFRS 4 Insurance Contracts - - - B
IFRS 5 Non-current Assets Held for Sale and IFRIC 17 TAS 54 1 January 2009 -
Discontinued Operations (revised)
IFRS 6 Exploration for and Evaluation of - - - B
Mineral Resources
IFRS 7 Financial Instruments: Disclosures - - - B
IFRS 8 Operating Segments - TAS 24* 1 January 1994 A
IAS 1 Presentation of Financial Statements IFRIC 17 TAS 35 1 January 2008 -
(revised)
IAS 1R Presentation of Financial Statements - - - A
(revised 2007)
IAS 2 Inventories - TAS 31 1 January 2008 -
(revised)
IAS 7 Cash Flows Statements - TAS 25 1 January 2008 -
(revised)*
IAS 8 Accounting Policies, Changes in - TAS 39 1 January 2008 -
Accounting Estimates and Errors (revised)

IAS 10 Events after the Balance Sheet Date - TAS 52 1 January 2007 -
IAS 11 Construction Contracts IFRIC 12, IFRIC 15 TAS 49 1 January 2008 -
(revised)
IAS 12 Income Taxes SIC 21, SIC 25 - - B
IAS 16 Property, Plant And Equipment IFRIC 1, IFRIC 4, TAS 32 1 January 1999 A
IFRIC 12
IAS 17 Leases IFRIC 4, IFRIC 12, TAS 29 1 January 2008 -
SIC 15, SIC 27 (revised)
IAS 18 Revenue IFRIC 13, IFRIC 15, TAS 26, 1 April 1994 A
SIC 31 TAS 37 (TAS 26)
1 January 1999
(TAS 37)
IAS 19 Employee Benefits IFRIC 14 - - B
IAS 20 Accounting for Government Grants and IFRIC 3, IFRIC 12, - - B
Disclosure of Government Assistance SIC 10
IAS 21 The Effects of Changes in Foreign IFRIC 16, SIC 7 TAS 30 1 January 1996 A
Exchange Rates
IAS 23 Borrowings Costs - TAS 33 1 January 2008 -
(revised)
IAS 23R Borrowing Costs (revised) - - - A

2 Comparison of IFRS and TAS January 2009

 IFRS Key relevant TAS TAS See
IFRIC / SIC effective date Section
IAS 24 Related Party Disclosures - TAS 47* 1 January 2000 A
IAS 26 Accounting and Reporting by - - - B
Retirement Benefit Plans
IAS 27 Consolidated and Separate Financial SIC 12, IFRIC 5 TAS 44 1 January 2007 -
Statements (revised)*
IAS 27 Consolidated and Separate Financial SIC 12, IFRIC 5, - - A
Statements (amended) IFRIC 17
IAS 28 Investments in Associates IFRIC 5 TAS 45 1 January 2007 -
(revised)*
IAS 29 Financial Reporting in Hyperinflationary IFRIC 7 - - B
Economies
IAS 31 Interests in Joint Ventures SIC 13, IFRIC 5 TAS 46 1 January 2007 -
(revised)*
IAS 32 Financial Instruments: Presentation IFRIC 2 TAS 48 1 January 2000 A
IAS 33 Earnings Per Share - TAS 38 1 January 1999 -
IAS 34 Interim Financial Reporting IFRIC 10 TAS 41 1 January 2008 -
(revised)
IAS 36 Impairment of Assets IFRIC 10, IFRIC 12, TAS 36 1 January 2009 -
IFRIC 1, IFRIC 3, SIC 32 (revised)*
IAS 37 Provisions, Contingent Liabilities and IFRIC 1, IFRIC 3, IFRIC 5, TAS 53 1 January 2005 -
Contingent Assets IFRIC 6, IFRIC 13
IAS 38 Intangible Assets IFRIC 3, IFRIC 4, TAS 51 1 January 2008 -
IFRIC 12, SIC 32
IAS 39 Financial Instruments: Recognition and IFRIC 9, IFRIC 10, IFRIC - - B
Measurement 16
IAS 40 Investment Property - - - B
IAS 41 Agriculture - - - B
* Represents TAS which are not mandatory for non-public companies.

In addition, the following TAS have no equivalent IFRS:

TAS TAS Remark

effective date
TAS 11 Doubtful Accounts and Bad Debts 1 July 1989 IAS 39 deals with the measurement and recognition of
doubtful accounts and bad debts, but differs from TAS 11
in certain respects.

TAS 27 Disclosures in the Financial Statements of 1 January 2007 TAS 27 was equivalent to IAS 30, which was replaced by
Banks and Similar Financial Institutions IFRS 7.

TAS 34 Troubled Debt Restructuring 1 January 2002 IAS 39 deals with the recognition and derecognition of
financial assets and financial liabilities, which covers
accounting for troubled debt restructuring, but differs
from TAS 34 in certain respects.

TAS 40 Investment in Debt and Equity Securities 1 January 1999 Recognition and measurement of financial instruments
under IAS 39 covers investment in debt and equity
securities, but the practices prescribed differ from TAS 40.

TAS 42 Accounting for Investment Companies 1 January 2000 This TAS is an industry dedicated standard with no
equivalent IFRS. Under IFRS, reference would be made to
IAS 39.

3 Comparison of IFRS and TAS January 2009

 Section A: TAS with major differences from IFRS
The following illustrates significant differences between existing TAS and their equivalent IFRS.

Topics IFRS TAS Major differences

Operating IFRS 8 TAS 24 f TAS 24, which is based on IAS 14 Segment Reporting, requires
segments disclosure of primary segment based on either business segment
(Segment or geographical segment depending on an entity’s risks and
reporting) returns governing the primary segment.
f IFRS 8 requires disclosure of operating segments based on the
internally reported segments used by the chief operating decision
maker to evaluate performance and decide how to allocate
resources. More disclosure is required under IFRS 8.
Property, plant IAS 16 TAS 32 f Under TAS, entities can choose to record realisation of
and equipment revaluation surplus through profit or loss, while under IAS 16 it
has to be credited directly through retained earnings. As a
consequence of the alternative treatment allowed under TAS,
depreciation can effectively be calculated based on historical
cost, even though property, plant and equipment are revalued.
Revenue IFRIC 15, TAS 26 f Under TAS, percentage of completion can be used as the basis
recognition for IAS 11, for recognition of revenue from real estate sales.
real estate sales IAS 18 f IFRIC 15 provides guidance to determine whether an agreement
(Appendix 9) for the construction of real estate is within the scope of IAS 18 or
IAS 11. When the agreement is within the scope of IAS 11 and its
outcome can be estimated reliably, the entity shall recognize
revenue by reference to the stage of completion of the contract
activity in accordance with IAS 11. When the agreement does not
meet the definition of a construction contract, the entity shall
recognize revenue in accordance with IAS 18 by determining first
whether the agreement is for the rendering of services or for the
sale of goods. Depending on the nature of the agreement,
revenue is recognized by reference to the stage of completion of
the transaction using the percentage of completion method or
when the different criteria mentioned in IAS 18 paragraph 14 are
met.
The effects of IAS 21 TAS 30 f Under IFRS, an entity must determine its functional currency,
changes in which is the currency of the primary economic environment in
foreign exchange which the entity operates. Presentation currency can be chosen.
rates f Functional currency is not currently discussed under TAS.
Entities in Thailand regard all transactions in currencies other
than Thai baht as foreign currency transactions and present their
financial statements in Thai baht.
Related party IAS 24 TAS 47 f Disclosure of compensation for key management is required
disclosures under IFRS, but not under TAS.
f Disclosure of transfer pricing policy is not required under IFRS,
but is required under TAS.
Financial IAS 32 TAS 48 f TAS 48 is based on the previous version of IAS 32 which provides
Instruments: guidance for both presentation and disclosure of financial
Presentation instruments. Disclosure guidance under IAS 32 has now been
superseded by IFRS 7, under which additional disclosure is
required.

4 Comparison of IFRS and TAS January 2009

 A wave of changes of IFRS will become effective in 2009 and result in further significant differences between
IFRS and TAS. The following summarizes key changes in IFRS that currently have a corresponding TAS. More
information about changes in IFRS standards and interpretations can be found in Ernst & Young’s 2008 IFRS
Update (December 2008).
Topics IFRS TAS Key changes of IFRS
Business IFRS 3R TAS 43 Although TAS 43 (revised) is equivalent to the current IFRS 3, the
combinations (effective (revised - revision of IFRS 3 will result in the following major differences:
1 July 2009) effective f IFRS 3R provides a choice to measure non-controlling interests
1 January (previously minority interests) on a transaction-by-transaction
2008) basis, either at fair value or at the non controlling interest’s
proportionate share of the acquiree’s net assets. Under the current
IFRS 3 and TAS 43 Minority Interest is measured at proportionate
interest in the acquiree’s net assets.
f IFRS 3R requires that acquisition-related costs are to be expensed
through profit or loss at the time that services are received. Under
the current IFRS 3 and TAS 43, acquisition-related costs are
included in the cost of business combinations.
f Contingent liabilities of the acquiree are to be recognized at fair
value if there is a present obligation that arises from a past event
and fair value can be measured reliably. Under the current IFRS 3
and TAS 43, contingent liabilities are recognized if their fair value
can be measured reliably.
f Contingent consideration recognised at fair value at the date of
acquisition, with subsequent changes generally reflected in profit or
loss.
f The acquirer is required to reassess the classification of all assets
and liabilities of the acquiree.
f The acquirer is required to separately account for re-acquired rights
of the acquirer and pre-existing relationships between the acquirer
and acquiree, and separately account for indemnities related to
liabilities of the acquiree.
f The acquirer is required to recognise gains or losses from
measuring initial holdings in step acquisitions at fair value.
Presentation IAS 1R TAS 35 f IAS 1 has been revised to enhance the usefulness of information
of financial (effective (revised - presented in the financial statements. Key changes are:
statements 1 January effective f Introduction of new terminology; replacing ‘balance sheet’ with
2009) 1 January ‘statement of financial position’ and ‘cash flow statement’ with
2008) ‘statement of cash flows’, although these titles are not mandatory.
f All non-owner changes such as changes in the revaluation surplus of
property, plant and equipment and gains or losses on revaluation of
available-for-sale asset are presented in the statement of changes in
equity as a single line, with details included in a separate statement
called “Statement of comprehensive income”.
f Requires that all items of income and expense be presented either
in a single statement (a ‘statement of comprehensive income’) or
in two statements (a separate ‘income statement’ and ‘statement of
comprehensive income’). Statement of comprehensive income
combines income and expenses recognized in profit or loss together
with ‘other comprehensive income’, which represents changes in the
non-owner transactions.
f When an entity restates its financial statements or retrospectively
applies a new accounting policy, a statement of financial position
(formerly balance sheet) must be presented as at the beginning of
the earliest comparative period (i.e. a third balance sheet as at 1
January 2008 for the 31 December 2009 year-end) with related
notes.

5 Comparison of IFRS and TAS January 2009

 Topics IFRS TAS Key changes of IFRS
Borrowing IAS 23 TAS 23 f The revision of IAS 23 eliminates the option of expensing all
costs (effective (revised - borrowing costs and requires borrowing costs to be capitalized if
1 January effective they are directly attributable to the acquisition, construction or
2009) 1 January production of a qualifying asset.
2008) f The revision of IAS 23 is not required to be applied to borrowing
costs directly attributable to qualifying assets measured at fair
value and inventories that are manufactured in large quantities on
a repetitive basis.
Consolidation IAS 27 TAS 44 Although TAS 44 (revised) is equivalent to the current IAS 27, the
and separate (effective (revised - revision of IAS 27 will result in the following major differences:
financial 1 July 2009) effective f Changes in ownership interests of a subsidiary that do not result in
statements 1 January loss of control will be accounted for as an equity transaction and
2008) will have no impact on goodwill nor give rise to a gain or loss.
f Losses incurred by a subsidiary will be allocated between the
controlling and non-controlling interests; even if the losses exceed
the non-controlling equity investment in the subsidiary.
f On loss of control of a subsidiary, any retained interest will be
remeasured to fair value and this will impact the gain or loss
recognized on disposal.

6 Comparison of IFRS and TAS January 2009

 Section B: IFRS without corresponding TAS
The following summarizes key principles of each IFRS that currently has no equivalent TAS. Reading of the full IFRS
standards together with further study of common industry practices and interpretations are recommended.
IFRS 1 First-time Adoption of
International Financial
Reporting Standards (IFRS)
IFRS 1 establishes procedures that
an entity must follow when it adopts
IFRS for the first time. A first time
IFRS adopter is an entity that makes
an explicit and unreserved
statement that its financial
statements comply with IFRS.
First time IFRS adopters are to
prepare an opening IFRS statement
of financial position (balance sheet)
at the date of transition to IFRS as a
starting point for its accounting
under IFRS. Generally, retrospective
application to each IFRS standard is
required, but IFRS 1 grants limited
exemptions in specified areas where
the cost of complying would be likely
to exceed the benefits to users of
financial statements (Voluntary
exemptions). The IFRS also
prohibits retrospective application
of IFRSs in some areas, particularly
where retrospective application
would require judgements by
management about past conditions
after the outcome of a particular
transaction is already known
(Mandatory exemptions).
IFRS 2 Share-Based
Payment
IFRS 2 prescribes the accounting for
transactions using equity
instruments as payments or the
amount to be paid that is linked to
equity instruments
7 Comparison of IFRS and TAS
Equity-settled Cash-settled transactions
transactions
Definition An entity issues equity An entity incurs a liability
instruments as consideration for goods and services
for goods or services received based on the value
received of its equity instruments
Measurement ► Fair value of goods or Fair value of the liability
services received; or fair incurred. Fair value is
value of the equity required to be re-measured
instruments issued if the at each reporting date and
first cannot be estimated at the settlement date.
reliably.
► Fair value of the equity
instruments for
transactions with
employees
Fair value is measured at the
grant date (for transactions
with employees) and at the
date it obtains the goods or
as the services are received
(for transactions with
others)
Recognition Over the vesting period as Over the vesting period as
equity, against assets or liability, against assets or
expenses expenses
Share-based payment transactions in which the terms offer a choice for an
entity to settle transactions either in cash or by issuing equity instruments are
called equity-settled with cash alternatives. If the choice belongs to the other
party, the entity has granted a compound financial instrument. If the choice belongs
to the entity, the transactions are accounted for as cash-settled transactions if the
entity has a present obligation to settle in cash (or other assets), or as an equity-
settled transaction if there is no such obligation.
January 2009
IFRS 4 Insurance Contracts IFRS 6 Exploration for and IFRS 7 Financial Instruments:
Evaluation of Mineral Disclosures
IFRS 4 deals with recognition of
insurance contracts (including
Resources
IFRS 7 provides disclosure guidance
reinsurance contracts) by any entity that enable users to evaluate the
IFRS 6 is an industry dedicated
that issues such contracts, and is significance of financial instruments to
standard for the exploration for and
defined under IFRS 4 as an insurer. the entity’s financial position,
evaluation of minerals, oil, natural
gas and similar non-regenerative performance and cash flows, and the
Generally, an insurer is permitted to nature and extent of risks arising from
resources. IFRS 6 covers exploration
continue its existing accounting policies financial instruments to which the
and evaluation costs after the entity
in respect of insurance contracts entity is exposed during the period and
has obtained legal rights to explore
because the IFRS exempts an insurer at the end of the reporting period; and
mineral resources until the technical
temporarily (until completion of Phase how the entity manages those risks.
feasibility and commercial viability of
II of the Insurance Project) from some
extracting a mineral resource is
requirements of other IFRSs, including IFRS 7 requires both qualitative and
demonstrable.
the requirement to consider the IASB’s quantitative disclosures.
Framework in selecting accounting
A comprehensive review of IFRS 6 is ► The qualitative disclosures
policies for insurance contracts.
to be made in the near future, and in describe management’s objectives,
However, IFRS 4 prohibits
line with general IASB Board practice policies and processes for
provisions for possible claims under
not to require major changes or managing those risks, and use of
contracts that do not exist at the end of
retrospectives when a fair value.
the reporting period (such as
comprehensive review is ► The quantitative disclosures
catastrophe and equalization
forthcoming, entities currently provide information about the
provisions).
adopting IFRS 6 are therefore extent to which the entity is
permitted to continue using their exposed to risk, based on
IFRS 4 permits an insurer to change
existing accounting policies. information provided internally to
its accounting policies for
insurance contracts only if, as a the entity's key management
Exploration and evaluation assets personnel.
result, its financial statements
are to be measured either under the ► Together, these disclosures
present information that is more
cost model or revaluation model. provide an overview of the entity's
relevant and no less reliable, or
IFRS 6 requires entities recognising use of financial instruments and
more reliable and no less relevant.
exploration and evaluation assets to the exposures to risks they create.
In particular, an insurer cannot
perform an impairment test on those
introduce any of the following
assets in accordance with IAS 36
practices, although it may continue The principles of this IFRS complement
when facts and circumstances
using accounting policies that the principles for recognising,
suggest that the carrying amount of
involve them: measuring and presenting financial
the assets may exceed their
recoverable amount. assets and financial liabilities in IAS 32
a. measuring insurance liabilities on an Financial Instruments: Presentation
undiscounted basis. and IAS 39 Financial Instruments:
b. measuring contractual rights to Recognition and Measurement.
future investment management fees
at an amount that exceeds their fair
value as implied by a comparison
with current fees charged by other
market participants for similar
services.
c. using non-uniform accounting
policies for the insurance liabilities
of subsidiaries.

IFRS 4 requires a test for the

adequacy of recognized insurance
liabilities and an impairment test for
reinsurance assets. It also requires an
insurer to keep insurance liabilities in
its statement of financial position
until they are discharged or cancelled,
or expire, and to present insurance
liabilities without offsetting them
against related reinsurance assets.

8 Comparison of IFRS and TAS January 2009

 IAS 12 Income Tax
IAS 12 prescribes the accounting
treatment for income tax. Total
income tax expense is the sum of
current tax plus the change in
deferred tax during the period, net
of tax recognized directly in equity
or arising from a business
combination.
Current tax for current and prior
periods is recognized as a liability,
but if the amount already paid in
respect of current and prior
periods exceeds the amount due
for those periods, the excess is to
be recognized as an asset. Current
tax liabilities (assets) are
measured at the amount expected
to be paid to (recovered from) the
taxation authorities, using the tax
rates (and tax laws) that have
been enacted or substantively
enacted by the end of the
reporting period.
Deferred tax is recognized for the
estimated future tax effects of
temporary differences. Temporary
differences, which are differences
between the carrying amount of an
asset or liability in the balance
sheet and its tax base, comprise of
taxable temporary differences and
deductible temporary differences.
Deferred tax liabilities are the
amounts of income tax payable in
future periods in respect of taxable
temporary differences. Deferred
tax assets are the amounts of
income taxes recoverable in future
periods in respect of deductible
temporary differences and the
carryforward of unused tax losses
when it is probable that the asset
can be utilized.
Deferred tax assets and liabilities
are to be measured at the tax rates
that are expected to apply to the
period when the asset is realized or
the liability is settled, based on tax
rates (and tax laws) that have
been enacted or substantively
enacted by the end of the
reporting period. Deferred tax
assets or liabilities shall not be
discounted.
9 Comparison of IFRS and TAS
IAS 19 Employee Benefits
IAS 19 prescribes different accounting treatments for four specified types of
employee benefits, as illustrated in the table below. Employee benefits are
recognized as expenses in the period in which the entity receives service from
the employee, rather than when the benefits are paid or payable.
Types Benefit examples Accounting treatment
Benefits which fall due
Short-term f Recognize the undiscounted amount in
employee wholly within tweleve the period when employment services
months such as:
benefits are rendered.
f Wages and salaries f Profit sharing and bonuses are
f Compensated unused recognized as expenses when there is a
vacation, sick leave legal or constructive obligation to make
f Profit sharing / such payments and the amount can be
bonuses estimated reliably.
f Medical and life
insurance benefits
f Housing benefits
Post- f Defined contribution f Expenses are recognized in the period
employment plans - plans under when the employee renders service in
benefits which an entity pays exchange for the contribution.
fixed contributions and
has no obligation to
pay further
contributions e.g.
provident funds
f Defined benefit plans - f Use actuarial techniques to estimate
post-employment the amount of benefits that employees
benefit plans other have earned, and then discount the
than defined benefit to determine the present value
contribution plans e.g. of defined benefit obligation and
retirement benefits at current service costs.
normal retirement age f Option to defer actuarial gains and
under Thai labor law
losses using “corridor approach”.
f The amount recognized in the balance
sheet should be the present value of
the defined benefit obligation, as
adjusted for unrecognized actuarial
gains and losses and unrecognized past
service cost, and reduced by the fair
value of plan assets at the balance
sheet date.
Other Benefits which do not fall f Same accounting treatment as defined
long-term due wholly within twelve benefit plans but actuarial gains and
employee months such as: losses and past service cost are
benefits recognized immediately in earnings.
f Long-term leave
f Long-term disability
benefits
f Profit sharing and
bonuses paid more
than a year after the
period in which they
are earned
Termination f Severance payment f Expenses are recognized when the
benefits (other than at normal entity is demonstrably committed to
retirement age) either:
f Early retirement f Terminate the employment of an
benefits employee or group of employees
before the normal retirement date
or
f Provide termination benefits as a
result of an offer made in order to
encourage voluntary redundancy
January 2009
 IAS 20 Accounting for
Government Grants and
Disclosure of Government
Assistance
Government grants are assistance
by government in the form of a
transfer of resources to an entity
in return for past or future
compliance with certain conditions
relating to operating activities of
the entity that can be distinguished
from the normal trading
transactions of the entity.
Government grants are recognized
when there is reasonable
assurance that the entity will
comply with the conditions
attached to them, and the grants
will be received.
f Government grants are
recognized as income or a
deduction from the related
expense to match the related
costs that they are intended to
compensate, on a systematic
basis. They are not recognized
directly in shareholders’
equity.
f Government grants related to
assets are recognized as a
deduction from the asset or
deferred income and
recognized as income on a
systematic basis, over the
periods necessary to match
the grants with the related
costs that they are intended to
compensate.
Government assistance that does
not meet the definition of
government grants is required to
be disclosed only.
10
IAS 26 Accounting and IAS 29 Financial Reporting in
Reporting by Retirement Hyperinflationary Economies
Benefit Plans
IAS 29 applies to entities whose
functional currency is the currency of
IAS 26 is applied in the financial
a hyperinflationary economy.
statements of retirement benefit
plans, where such financial
Generally an economy is considered
statements are prepared. A
hyperinflationary when the cumulative
retirement benefit plan, which can be
inflation rate is close to or exceeds
a defined contribution plan or a
100% over three years.
defined benefit plan depending on
the definition of IAS 19, is regarded
Key requirements are as follows: -
by this standard as a separate
reporting entity from the employer of
f Financial statements are stated in
the participants in the plan.
terms of the measuring unit current
at the end of the reporting period.
The financial statements for defined Generally, non-monetary items
contribution plan generally include: carried at historical cost are
f A statement of net assets restated, applying the general price
available for benefits and index at the end of the reporting
period. Certain components of
f A description of the funding
shareholders’ equity and the
policy
earnings statements are also
restated.
The financial statements for defined
benefit plan generally include: f Comparative figures for prior
periods are restated into the same
f A statement that shows:
current measuring unit.
f The net assets available for
benefits
f The actuarial present value of
promised retirement benefits,
distinguishing between vested
benefits and non-vested
benefits and
f The resulting excess or deficit.
Comparison of IFRS and TAS January 2009
 IAS 39 Financial Instruments: Recognition and Fair value option
An entity may designate a financial asset or financial
Measurement liability at FVPL as long as it meets certain criteria and it is
designated as such at initial recognition. An IAS 39
IAS 39 establishes accounting principles for recognition and
amendment issued in June 2005 restricts the use of the
measurement of financial instruments. Accounting principles
fair value option to when the financial instrument meets
for liability and equity classification and requirements for
one of the following criteria:
presenting information about financial instruments are
covered in IAS 32 Financial Instruments: Presentation and
f It eliminates or significantly reduces a measurement or
disclosure of information is covered in IFRS 7 Financial
recognition inconsistency (sometimes referred to as ‘an
Instruments: Disclosures.
accounting mismatch’) that would otherwise arise or
IAS 39 principally discusses three significant topics: f A group of financial assets, financial liabilities or both is
managed and its performance is evaluated on a fair value
f Classification, initial and subsequent recognition and basis or
measurement of financial instruments
f Derecognition of financial assets and financial liabilities f When a hybrid contract contains one or more embedded
f Hedge accounting derivatives

Fair value option and hedge accounting

Classification, initial and subsequent recognition
and measurement of financial instruments The fair value option can be used as an alternative to
fair value hedge accounting to deal with situations
IAS 39 classifies financial instruments into five categories: when, for instance, a bond is hedged by a derivative.
1) Financial assets or financial liabilities at fair value But it can also be used when fair value hedge
through profit or loss (FVPL) accounting would not be possible, such as when an
entity holds AFS fixed rate bonds as a natural hedge of
2) Held-to-maturity investments (HTM) fixed rate liabilities. Without using the fair value
3) Loans and receivables (L&R) and designation option, gains and losses due to changes in
4) Available-for-sale financial assets (AFS) interest rates on the bonds would have to be recorded
in equity while the liabilities remain recorded at
5) Other financial liabilities
amortized cost. Use of the option would enable both the
bonds and the liabilities to be recorded at FVPL and the
Type Initial Subsequent Changes in gains and losses offset.
recognition measurement value
Financial assets Amendments to IAS 39 and IFRS 7 - Reclassification of
FVPL 1)
Fair value Fair value Profit or loss 2) financial assets
HTM3) Fair value4) Amortised cost Profit or loss5)
This amendment was issued in October 2008 and
L&R Fair value4) Amortised cost Profit or loss5)
amended on 27 November 2008 to specifically clarify that
AFS Fair value4) Fair value Equity any reclassification of a financial asset made on or after 1
Profit or loss5) November 2008 shall take effect only from the date when
Financial liabilities the classification is made.
FVPL Fair value Fair value Profit or loss2)
Other Fair value4)
Amortised cost Not applicable This amendment allows an entity to reclassify certain non-
1)
Designation is made on origination recognition and derivative financial assets (other than those designated at
irrevocable. FVPL by the entity upon initial recognition) out of FVPL
2)
Changes in value of derivatives must be recorded in profit category in particular circumstances.
or loss unless hedge accounting is applied.
3)
If HTM are sold or reclassified, an entity cannot use the f Financial assets may be reclassified out of FVPL
category during the current financial year and the next category to AFS or HTM only in rare circumstances.
two financial years (tainting rule). No definition and example of rare circumstances
4)
Transaction costs are included. provide under this amendment.
5)
In case of impairment.
f Reclassification of financial asset from FVPL to L&R is
allowed if such financial asset meets the difinition of
IAS 39 also provides guidance on reclassification of the L&R and the entity has intention and ability to hold the
financial assets and financial liabilities, treatment of financial asset for the foreseeable future or maturity.
embedded derivatives, fair value determination, fair value
The amendment also permits the transfer of financial
option, amortized cost and impairment of financial
assets that has met the definition of L&R but being
instrument.
classified as AFS to L&R category if the entity has
intention and ability to hold that financial asset for the
foreseeable future or until maturity.

11 Comparison of IFRS and TAS January 2009

 The financial asset shall be reclassified at its fair value on
the date of reclassification and the fair value becomes its
new cost or amortised cost. Any gain or loss already
recognised in profit or loss shall not be reversed.
Impairment of financial assets
f Impairment loss on equity instruments can not be
reversed.
f One objective evidence of impairment for an equity
instrument includes a significant or prolonged
decline in the fair value below its cost.

Entities shall assess at each balance sheet date whether

there is objective evidence that financial assets are
impaired. Impairment assessment is applicable to all
categories of financial assets except those in the FVPL
category. Impairment loss incurs when the carrying value is
higher than the recoverable amount, which is measured
differently for each category. Impairment loss should be
recognised based on the incurred loss model, rather than
the expected loss model and loss expected as a result of
future events should not be recognised no matter how
probable they are.
Derecognition of financial assets and financial
liabilities
IAS 39 establishes criteria for determining when a financial
asset or a financial liability should be removed
(derecognized) from financial statements, and is thus
applicable for securitization. Previously, derecognition of a
financial asset had been based on control of the contractual
rights overlaid with a risk and rewards test. Under IAS 39,
derecognition is primarily based on the transfer of risks and
rewards and control is a secondary indicator.

Amortised cost assets

f Impairment loss on amortised cost assets (HTM and
L&R) is the difference between the carrying amount
and the present value of expected future cash flows
discounted at original effective rate.
f Step of impairment assessment (individual vs
collective)
f Assess objective evidence of impairment of
individually significant assets or individually
not significant assets which are chosen to test
impairment individually;
f If there is objective evidence, assess and
determine amount of impairment loss;
f If there is no objective evidence, group these
financial assets with the remainder based on
the similar credit risk characteristics, and
assess impairment on a group basis (collective
assessment).
f Collective assessment is designed to allow
recognition of losses believed to exist in a
portfolio but is not yet evident. The estimated
future cash flows in a group of financial assets
are assessed based on the historical loss rates.
Hedge accounting
Assets carried at cost
f Impairment loss on assets carried at cost is the Hedge accounting is optional, not mandatory, under
difference between the carrying amount and the IAS 39. Hedge accounting tries to match the timing of
present value of expected future cash flows profit or loss recognition on the derivative (hedging
discounted at the current market rate of return for instrument) with that of the item being hedged (hedged
similar financial assets. item) if hedge accounting criteria, such as having proper
AFS hedge documentation and passing effectiveness tests, are
f A decline in value of AFS assets is generally met. It provides an opportunity for an entity to manage
recognised in equity as a part of the normal the presentation of profit and loss statement; however,
measurement process. When there is objective this “opportunity” comes with a “cost”; strict criteria to
evidence of impairment, the cumulative net loss allow hedge accounting.
that had been recognised directly in equity is
removed from equity and recognised in the profit
and loss.
f Impairment loss is the difference between the
acquisition cost (net of any principal repayment
and amortisation) and the current fair value less
any impairment previously recognised in the profit
and loss.

12 Comparison of IFRS and TAS January 2009

 IAS 40 Investment Property
Investment property is property held to earn rental or for
capital appreciation or both, rather than for use in the
production or supply of goods or services or for
administrative purposes; or for selling in the ordinary
course of business.
Initial f Cost including transaction costs
recognition f Purchase price and any directly
attributable expenditure (e.g.
professional fees for legal services,
property transfer taxes and other
transaction costs).
f For property interest held under a lease
and classified as investment property,
initial cost shall be based on IAS 17.
Subsequent An entity can choose either:
measurement f Fair value model: investment property is
measured at fair value and changes in
value are recorded in profit or loss; or
f Cost model: investment property is
measured at depreciated cost (less any
accumulated impairment loss); fair value
of the investment property is disclosed.
f For property interest held under a lease
and classified as investment property,
subsequent measurement shall be based
on “Fair value model”.
13 Comparison of IFRS and TAS
IAS 41 Agriculture
IAS 41 prescribes the accounting treatment for i) biological
assets during the periods of growth, degeneration,
production and procreation and ii) the initial measurement
of agricultural produce at the point of harvest.
Examples of biological assets, agricultural produce, and
products that are the result of processing after harvest are
given below.
Biological Agricultural Products that are the result
assets produce of processing after harvest
(scoped out of IAS41)
Pigs Carcass Sausages, cured hams
Vines Grapes Wine
Bushes Leaf Tea, cured tobacco
IAS 41 prescribes methods for initial recognition and
subsequent measurement of biological assets and
agricultural produce whereby:
f Measurement is at fair value less estimated point-of-sale
costs and recognition of changes in value is made into
profit or loss.
f Point-of-sale costs include commissions to brokers and
dealers and transfer taxes and duties but exclude
transport and other costs necessary to get assets to a
market.
There is a presumption that fair value can be measured
reliably for a biological asset. That presumption can
however be rebutted when market-determined prices or
values are not available and when alternative estimates of
fair value are determined to be clearly unreliable. In such a
case, the biological asset is to be measured at cost less any
accumulated depreciation and any accumulated impairment
losses. Once the fair value of such a biological asset
becomes reliably measurable, an entity is to measure it at
fair value less estimated point-of-sale costs.
January 2009
Ernst & Young’s
IFRS resources
Ernst & Young has developed a number of
publications that contain details and
discussions on IFRS matters, all of which
can be downloaded from our website
www.ey.com/ifrs.
International GAAP® 2009
This publication is a detailed analysis of
standards and interpretations and
provides examples that illustrate how the
requirements are applied. It is updated
annually. The 2009 edition explains the
many significant amendments to IFRS that
become effective in 2009. It provides
expert interpretation together with
practical and industry-specific guidance for
busy professionals, and includes detailed
analysis of how complex financial
reporting problems can be resolved
appropriately and effectively.
Good Group (International) Limited
This publication is an illustrative set of
financial statements (both interim and
annual) incorporating the new disclosures
that arise from the changes required to
standards effective from the December
2008 year-end as well as adoptions of
selected standards that would normally
only be effective for the December 2009
year-end or later. It can also assist in
understanding the impact on the financial
statements. This publication is
supplemented by illustrative financial
statements that are aimed at specific
sectors and industries. These now include
Good Bank (International) Limited, Good
Investment Ltd, Good Insurance
(International) Limited and Good
Petroleum (International) Limited.
IFRS Outlook and Supplement to
IFRS Outlook
Ernst & Young creates this monthly
newsletter to provide our clients with
important information about recent IFRS
developments and emerging issues. IFRS
Outlook has replaced the former
newsletter Global Eye on IFRS since April
2008. Supplement to IFRS Outlook (or
previously IFRS Alert) is additionally
published to provide timely specific
insights on hot IFRS issues.
14
2008 IFRS Update
This publication summarises the new and
amended IFRS standards and
interpretations that are applicable to
financial periods beginning on or after 1
January 2008. It also highlights other
new and amended IFRS standards and
interpretations that have been issued up
to 30 September 2008 but are not yet
effective, and includes a summary of the
IFRIC agenda decisions that provide
accounting guidance on IFRS
interpretations.
Industry-specific or subject
matters surveys and
publications
Consumer Products IFRS Financial
Statements Survey (Nov. 2008) This
survey analyses how industry practice
with respect to key accounting challenges
for consumer product companies has
evolved since the adoption of IFRS in
Europe. The survey looks at the latest
annual consolidated financial statements
of 21 large publicly listed consumer
product companies in seven countries
across Europe.
IFRS from awareness to conversion:
Implementation considerations for US
power and utilities companies (Nov.
2008) analyzes the IFRS implementation
process that US power and utilities
companies will face during the European
implementation and emphasizes the
importance of understanding the key
differences between IFRS and US GAAP,
highlighting lessons learned from
European Union listed companies.
Observations on the
implementation of IFRS 7 in
corporate entities (Nov. 2008) gives
an overview of disclosures made by
European entities in the first year of
mandatory application of IFRS 7 Financial
Instruments: Disclosures, highlighting
challenges faced by companies and
drawing comparisons between them. Our
observations are based on a survey of the
forty largest European corporate
companies reporting under IFRS, as at
31 March 2008.
Comparison of IFRS and TAS
IAS 32-39: An overview (Sep. 2008) is
the second edition of our overview of
IAS 32 Financial Instruments: Presentation
and IAS 39 Financial Instruments:
Recognition and Measurement and the
impact of recent changes to these
standards. We also describe some of the
IFRIC’s recent agenda decisions as we
believe they provide important guidance
where the Standards are felt to lack clarity.
Conversations: IFRS in the
technology industry
The transition to IFRS for the technology
industry is a large undertaking. The high-
level considerations listed in this
publication are meant to help you start
conversations about the IFRS conversion
process with stakeholders throughout your
company.
Caution: Fair values in progress —
Accounting for investment property
under construction discusses the
implications of the IASB's decision to
require investment property under
construction to be accounted for under
IAS 40 Investment Property for annual
periods beginning on or after 1 January
2009.
For more information about IFRS,
please contact one of the
following:
Waraporn Punnopakorn
Waraporn.Punnopakorn@th.ey.com
+66 2264 0777 ext. 77021
Ratana Jala
Ratana.Jala@th.ey.com
+66 2264 0777 ext. 77028
Saifon Inkaew
Saifon.Inkaew@th.ey.com
+ 66 2264 0777 ext. 77025
Pinpaka Akaranuphong
Pinpaka.Akaranuphong@th.ey.com
+ 66 2264 0777 ext. 24033
January 2009
Ernst & Young

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