Any business operation requires fixed assets to function. The corporation has made a large investment in these assets, which are utilized to generate income. As a result, it's crucial to keep an accurate record of fixed assets.
Thai fixed asset accounting complies with worldwide accounting standards, although there are some particular guidelines that must be observed. The concept of fixed assets, the accounting treatment of fixed assets, and the legislative framework governing fixed asset accounting in Thailand will all be covered in length in this article.
Definition of Fixed Assets in Thai Accounting
Assets that the business purchases with the intention of using them for ongoing operations are known as fixed assets. These resources are designed to provide income over a long period of time and are not intended for sales. Land, structures, tools, cars, and other tangible assets are all considered fixed assets. Fixed assets are categorized as non-current assets in Thai accounting and are included on the balance sheet.
It is essential to remember that not all tangible assets fall within the category of fixed assets. Current assets are defined as tangible assets that are anticipated to be depleted or utilized within a year. For instance, inventory of completed items, raw materials, and office supplies are not fixed assets but rather current assets.
Accounting Treatment of Fixed Assets in Thai Accounting
The accrual accounting concepts are used in Thai fixed asset accounting. As a result, the cost of acquiring or building fixed assets, which includes all costs associated with putting the item to use for its intended purpose, is reported. Included in this are the purchase price, shipping fees, installation fees, and other associated expenditures.
The fixed asset is susceptible to depreciation once it is put to use. Depreciation is the systematic distribution of the asset's cost over the projected duration of its useful life. The firm determines the projected useful life based on the asset's anticipated longevity, anticipated future economic advantages, and any contractual or legal requirements.
Depreciation is done in Thai accounting in a number of ways, including straight-line, decreasing balance, and units-of-production depreciation. The most popular approach, known as the "straight-line method," distributes the asset's cost evenly across its anticipated useful life. In the early years of an asset's useful life, a larger portion of the asset's cost is allocated using the decreasing balance technique. The units-of-production technique divides up the cost of the item depending on how much it is actually used or produced.
Regulatory Framework Governing Fixed Asset Accounting in Thailand
Thai accounting for fixed assets is governed by a number of legal frameworks, including the Civil and Commercial Code, the Revenue Code, and the Thai Accounting Standards (TAS). These rules control how fixed assets are identified, valued, and disclosed in financial statements.
International Financial Reporting Standards (IFRS) serve as the foundation for the Thai Accounting Standards (TAS), a set of accounting guidelines. The accounting approach for fixed assets, comprising property, plant, and equipment, is described in TAS 16. According to TAS 16, fixed assets must be recognized as assets when it is likely that the entity will receive future economic benefits and when the asset's cost can be accurately determined.
The Revenue Code provides guidelines on tax treatment for fixed assets. For example, companies are allowed to claim tax deductions for depreciation expenses. However, the Revenue Code has specific rules and regulations that must be followed when claiming tax deductions for fixed assets.
The Civil and Commercial Code provides regulations on the legal ownership of fixed assets. The Code stipulates that fixed assets must be registered and transferred according to legal procedures. Failure to follow these procedures can result in legal disputes and financial penalties.
In conclusion, fixed assets are treated as non-current assets on the balance sheet and are subject to depreciation throughout the course of their anticipated useful lives. There are several depreciation techniques available in Thai accounting for fixed assets, which adheres to accrual accounting principles. The recognition, measurement, and disclosure of fixed assets in financial statements, as well as their taxation and legal ownership, are governed by legislative frameworks such the Thai Accounting Standards, Revenue Code, and Civil and Commercial Code.
Understanding the rules regulating fixed asset accounting and making sure that their fixed asset records are correct are crucial for firms operating in Thailand. By doing this, firms may comply with tax laws, invest wisely in fixed assets, and steer clear of ownership-related legal difficulties.
