PwC Thailand warns of changes in accounting, sustainability reporting and AI upheavals

Friday 24 November 2023 11:45
In today's hypercompetitive world, business stakeholders need real-time, actionable insights and accurate forecasting to maintain growth and mitigate risks with optimal speed and efficiency.
PwC Thailand warns of changes in accounting, sustainability reporting and AI upheavals

As financial statement users expect far more from companies than just financial information, PwC Thailand advises all management to monitor worldwide trends to stay abreast of market and regulatory changes. This way, they can identify emerging issues and proactively work to keep the business on track while adapting to the evolving needs of investors and other stakeholders.

Chanchai Chaiprasit, CEO of PwC Thailand, expressed at the annual Corporate Reporting Forum 2023 conference, under the theme Decoding the future landscape, that the fiercely competitive business landscape is expected to intensify. 

Stakeholders demand real-time, actionable insights and accurate forecasting to sustain growth and mitigate risks. Currently, users of financial statements require financial information and anticipate more non-financial insights.

Hence, business leaders must stay informed about updates and be vigilant of regulatory changes that impact business, such as new financial standards and evolving sustainability expectations in various countries. They should also focus on preparing sustainability reports and the arrival of emerging technologies like artificial intelligence (AI).

Regarding accounting issues that Thai businesses should be mindful of, considerations include the accounting entries for recognition when a company produces or purchases carbon credits. Notably, this practice lacks a specific accounting standard or framework to guide it. 

Another interesting issue is the TAS 1 amendments, which disclose only material and entity-specific accounting policy information in the financial statements and classify long-term loans that breach loan covenant conditions after the reporting period as current or non-current liabilities. These changes are expected to take effect in Thailand in 2024 and 2025, respectively.

These current and new accounting standards changes will impact how profit or loss statements and related disclosures are presented. There's also a new requirement to disclose the linkages between management performance measures presented outside the financial statements and the subtotals in the statement of profit or loss.

Businesses must prepare for transparent ESG reporting

In addition, environmental, social and governance (ESG) reporting poses another critical consideration for Thai businesses. Although Thailand currently lacks a well-defined sustainability framework, there are the 'big three' new disclosure frameworks issued by various agencies that businesses should study and adopt to guide their reporting practices. These include:

1) International Sustainability Standards Board (ISSB)
2) European Financial Reporting Advisory Group (EFRAG)
3) U.S. Securities and Exchange Commission (SEC).

Notable framework examples include ISSB's IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. EFRAG's Enhanced Sustainability Reporting Standard (ESRS) is also emphasised. 

These reporting frameworks combine environmental, social and financial considerations, offering a comprehensive overview of a business's sustainability initiatives. Additionally, the US SEC's Climate Disclosure mandate is also shaping transparent climate-related reporting practices.

'To enhance transparency and accountability across dimensions, businesses must learn to utilise these requirements and understand the implications for their business. Since there isn't a one-size-fits-all model, CEOs must understand ESG impacts and opportunities associated with these reporting frameworks. This understanding aids in developing a clear reporting strategy, increasing process efficiency and deploying resources most cost-effectively,' Chanchai said.

Studying tools to enhance growth

Chanchai further highlighted that in a situation where the expansion of the Thai economy tends to slow down and external factors continuously impact business operations, seeking opportunities to grow the business goes beyond relying solely on organic growth. 

This approach is also considered a method that global companies are keen on, aiming for value creation. 

AI is increasingly being used in accounting and finance, and not just for managing and processing various financial documents. It also aids in financial predictive and advisory analytics, which helps CFOs use data for decision-making and financial planning.

As such, business leaders should set clear goals before introducing AI into their organisations to unlock their full potential safely. This includes integrating automation and AI aligned with the business's financial strategy. And above all else, leaders should upskill their people and modernise their organisation's financial processes to support AI's agile and flexible use.

Focusing on inorganic growth

In addition, business leaders should consider inorganic growth through mergers and acquisitions (M&A) as a viable means to achieve business expansion and value creation. 

Although Thailand's M&A activities in YTD23 decreased from their recent zenith in YTD21 because of delays in merger plans stemming from macroeconomic factors, including high inflation and interest rates and geopolitical risks. 

'However, we're seeing signs of momentum in M&A activities in Thailand since the second half of this year. For instance, the industrials and technology, media and telecommunications sectors have been the most active for dealmaking,' Chanchai said.

'During periods of slowed deals activity, it's an opportune time for sellers to prepare for comprehensive value creation. There is a growing demand for comprehensive due diligence that goes beyond key financial metrics. For buyers, the focus extends from strategy formulation to business transformation, focusing on long-term, sustainable value creation. Value creation must be a priority on day one to realise and capture the deal's value after closing,' he said.

Source: PwC Thailand