New accounting standard postponed

IFRS 9 rules won’t be enforced until 2020

The government has decided to delay implementation of stringent new accounting rules for another year to prevent any adverse impact on businesses.

Nuntawan Sakuntanaga, the commerce permanent secretary and chairwoman of the Oversight Committee on Accounting Professions, said Ocap agreed to delay the implementation of International Financial Reporting Standard 9 (IFRS 9) to January 2020.

But early adoption is still possible if some businesses feel they are ready to implement the IFRS 9 requirements, she said. These may include SET-listed companies, securities firms, insurance firms, commercial banks and fund management firms.

There is concern that the stricter accounting rules will make it harder for small and medium-sized enterprises (SMEs) to obtain loans, Mrs Nuntawan said, but the two concerns are separate, as loan extension by financial institutions will be based on the country’s economic conditions and the repayment ability of each debtor.

The delay is unlikely to affect investor confidence, particularly that of foreigners, she said. The committee has already assigned related state units to map out working plans or guidelines to proceed with IFRS 9.

WHAT ARE THE NEW RULES?

IFRS 9 is promulgated by the International Accounting Standards Board (IASB). It addresses accounting for financial instruments and contains three main topics: classification and measurement of financial instruments, impairment of financial assets, and hedge accounting. It will replace International Accounting Standard 39 (IAS 39) when it becomes effective. Early adoption is allowed.

Thai business operators, through the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB), earlier called on the Federation of Accounting Professions (FAP) to postpone the effective deadline to submit statements in accordance with IFRS 9 to early 2022, saying industries across the economy had yet to conduct studies of the measure’s impact.

BURDENSOME FOR SMES

A subcommittee assigned by Ocap that met in May suggested Thailand should delay implementation of the stringent IFRS 9 for another year to prevent harm to SMEs.

The subcommittee determined that Thai SMEs would find it harder to obtain loans, as the rigid accounting standards would eventually lead commercial banks and financial institutions to become stricter when considering potential borrowers by setting aside provisions and possibly charging higher interest rates.

The subcommittee’s members include accounting experts and representatives from the Securities and Exchange Commission; the Bank of Thailand; the JSCCIB; the Finance Ministry’s Fiscal Policy Office; the FAP; and the Commerce Ministry’s Business Development Department.

The subcommittee also proposed that the FAP be tasked with setting up a special clinic to provide advisory services and handle queries.

Ocap is supervised by the Commerce Ministry under the Accounting Professions Act of 2004.

Thailand is scheduled to replace IAS 39 with IFRS 9 from Jan 1, 2019, one year after the mandatory effective date for the implementation set by the IASB.

IFRS 9 would not directly cause business operators difficulties in accessing loans from financial institutions, though the new accounting principles will focus on asset quality and economic dimensions, in addition to customers’ debt repayment ability.

Mrs Nuntawan said the JSCCIB is tasked with studying the more in-depth impact on SMEs from the new rules.

EARLY ADOPTION

Paiboon Nalinthrangkurn, president of the Federation of Thai Capital Market Organisations (Fetco), said any companies that are ready to adopt IFRS 9 should go ahead, though the FAP has decided to delay the implementation of the new accounting standard for another year.

“If it’s resolved to put off the implementation, we’ll follow up,” he said. “However, any companies that are ready can start because capital-market-related players, including listed companies, have prepared for the issue for a while.”

The Thai capital market is open to foreign investors and must pursue international standards, Mr Paiboon said.

Fetco last week said the IFRS 9 implementation should stick to the schedule of Jan 1, 2019, noting that the delay could affect investor confidence, the country’s competitiveness and the assessment of Thai financial institutions overall.

Fetco comprises seven groups: the Association of Investment Management Companies, the Association of Thai Securities Companies, the Investment Analysts Association, the Thai Bond Market Association, the Thai Investors Association, the Thai Listed Companies Association and the Stock Exchange of Thailand.

Mr Paiboon said it’s normal practice for Thailand to adopt a new accounting standard one year later than other countries, but he suggested that an explanation for the delay be provided.

Arthit Masathirakul, senior executive vice-president and head of risk management at CIMB Thai Bank (CIMBT), said the delays in the implementation of IFRS 9 would have little effect on the banking industry in terms of investor confidence or credit ratings because the postponement is just one year.

But if the new accounting standard is pushed further back to 2022, as earlier proposed by the JSCCIB, it would have an impact on the banking industry, he said.

Financial institutions are ready to comply with the new accounting standard, but the postponement resulted from concerns over the readiness of SMEs, Mr Arthit said, adding that the delay would give them more time for adjustment.

Like other financial institutions, CIMBT is ready to adopt IFRS 9 but will do so gradually and in line with the readiness of clients in each segment, he said.

Usanee Liurut, executive vice-president of Asia Plus Securities, said the delay matches expectations and will not damage the banking sector, as most institutions have arranged their financial statements in compliance with IFRS 9 for the past two years.

The one-year postponement is not considered too long, she said.