Accounting and financial reporting requirements
Books of Accounts and Statutory Records
The Accounts Act of 2000 authorizes the Director-General of the Commercial Registration Department, Ministry of Commerce, to issue regulations regarding the books of accounts and supporting documents that must be maintained by business enterprises. Further, Section 12 of the Accounts Act of 2000 provides general rules on the accounts that should be maintained as follows:
· “In keeping accounts, the person with duty to keep accounts must hand over the documents required for making accounting entries to the bookkeeper correctly and completely, in order that the accounts so kept may show the results of operations, financial position or changes of financial position according to facts and accounting standards.”
Accounting entries may be recorded in a foreign language, but there should be an appended Thai translation. All accounting entries should be written in ink, typewritten, or printed.
Accounting Period
A newly established company or partnership should close its accounts within 12 months from the date of its registration. Thereafter, the accounts should be closed every 12 months. If a company wishes to change its accounting period, it must obtain the written approval of the Director-General of the Revenue Department.
Reporting Requirements
In accordance with the Accounts Act of 2000, all juristic companies, partnerships, branches of foreign companies, and joint ventures are required to prepare the financial statement for each accounting period. The financial statement must be audited by and subjected to an opinion of, a certified auditor, except the financial statement of a registered partnership established under Thai law whose capital, assets, or income any one or all of them, are not more than that prescribed in the Ministerial Regulations. Copies of the audited financial statements must also accompany the income tax return that must be filed with the Revenue Department within 150 days from the closing date of each accounting period.
Accounting Principles
Generally, the basic accounting principles practiced in the United States are recognized and accepted in Thailand. In addition, accounting methods and conventions sanctioned by law are considered as generally accepted accounting practices. The Institute of Certified Accountants and Auditors of Thailand is the authoritative group promoting the application of generally accepted accounting principles.
Any accounting method adopted by a company must be used consistently and may be changed only with approval of the Revenue Department.
Certain accounting practices that may be of interest are as follows:
· Depreciation
- The Revenue Code permits the use of varying depreciation rates according to the nature of the classes of assets which have the effect of depreciating the assets over periods that may be shorter than their estimated useful lives. These maximum depreciation rates are not mandatory; a company may use lower rates that approximate the estimated useful lives of the assets. But if lower rates are used in the books of accounts, the same rates must be used in the income tax return.
· Accounting for pension plans
- Contributions to a pension or provident fund are not deductible for tax purposes unless these are actually paid out to the employees, or the fund is approved as a qualified fund by the Revenue Department and is managed by a licensed fund manager. In most cases, contributions to the pension fund are not based on actuarial computations.
· Consolidation
- Local companies with either foreign or local subsidiaries are not required to consolidate their financial statements for tax and other government reporting purposes, except for listed companies which must submit consolidated financial statements to the Securities Exchange of Thailand.
· Statutory reserve
- A statutory reserve of at least five per cent of the annual net profits arising from the business must be appropriated by the company at each distribution of dividends until the reserve reaches at least 10 per cent of the company’s authorized capital.
· Stock dividends
- Stock dividends are taxable as ordinary dividends and may be declared only if there is an approved increase of authorized capital. The law requires the authorized capital to be subscribed in full by the shareholders.
Auditing Requirements and Standards
Audited financial statements of juristic entities (i.e., limited company; registered partnership; branch office, representative office, or regional office of a foreign corporation; and joint venture) must be certified by an authorized auditor and submitted to the Revenue Department and to the Commercial Registrar for each accounting year (except for representative office and regional office). Auditing standards conforming to international auditing standards are, to a large extent, recognized and practiced by authorized auditors in Thailand.