Providing a good product or service is no longer enough when doing business in this era of technology and information, according to Chanchai Chaiprasit, Partner and Clients and Market Leader for PwC Thailand.
Speaking at the PwC Thailand Symposium 2017: Dealing with accounting challenges, thriving on disruption, Chanchai said: "To sustain yourself in business, embracing digital disruption is crucial, and will contribute to business success.
"With many past examples such as Kodak and Toys R Us, we learned that digital disruption is just unavoidable. The best way to cope with it is to plan ahead for the changes."
Digital has now become the "new normal" for business and will be even more common in the future because it promotes economic efficiency. It also boosts the level of satisfaction of customers in various industries.
"As a result of this, there are also many changes in the financial reporting world on the way as entities report their revenue in order to reflect more complicated business transactions more fairly," Chanchai said.
Revenue will be reported in a way that reflects the transfer of control over goods or services to a customer at an amount that fairly reflects the price of each type of goods or service. This compares with the current requirement that reflects the transfer of significant risks and rewards of ownership.
This one single concept will be applied across all industries and businesses to promote comparability and comprehension of financial statements, Chanchai said.
Impairment allowance on receivables would also be required to be recognised earlier, based on expectations of losses that may arise even at the time the transaction has just been initiated. This takes into consideration forward-looking information such as economic circumstances, and the unemployment rate.
As a result, an earlier and higher recognition of allowance for impairment of receivables is expected. Liability from almost all lease contracts would be required to show on the balance sheet of a lessee.
This would result in a huge liability reported, which would then significantly affect the financial ratios of many entities, such as a lower return on assets (ROA) ratio and a higher debt to equity ratio (D/E ratio).
Through a combination of rapid changes in business and the way many entities do their business – and the accounting development to reflect the true performance of more complicated transactions – it's a question of whether we have enough competent accountants to deal with these challenges.
Many Thai corporations, especially listed companies, need to start thinking about the implications of financial reporting. They must also let stakeholders know about what would be a potential shift or change in revenue and performance reporting.
Doing this would build the trust and creditability of the company in dealing with changes.
"With masses of data and more complicated transactions, management might also need to understand and choose the right method to cope with the challenges more efficiently and effectively," Chanchai said.
Robotic process automation (RPA) and analytical tools might be one of the essential options for management to consider in order to maintain key data for financial reporting purposes, and at the same time to generate relevant and useful information for real-time decision making.
"Although understanding the changes is important, just as crucial is the speed of decision making in dealing with the changes and how to manage them in a more efficient way in this fast growing era," Chanchai said.
Swift decision making would give a competitive advantage to competitors who are more flexible and adaptable, he concluded.