Benefits and Costs for USD Functional Currency Adoption
20 May 2014
1
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Background of IFRS Project
2
Phase & Key Activities of IFRS Project
Year
2009
Year
2011
Phase II:
Design & Development
Phase I:
Assessment
ƒ Set Goal
ƒ Set Team
ƒ Study IFRS
ƒ Evaluate
overall IFRS
impact
ƒ GAAP
Analysis
ƒ Design
Conversion
Plan
ƒ Detailed
Impact
Analysis
ƒ Data
Conversion
ƒ Data
Migration
Phase III:
Implementation
ƒ First
Internal
IFRS F/S
in 2010
ƒ Public IFRS
F/S in 2011
ƒ Parallel
Run
ƒ Quantify
Adjustment
ƒ Develop
Template for
F/S and
Disclosure
3
IFRS Project Team Member
ƒ
PTTEP team : 4 full-time and16 part-time members, with an
additional support team from Finance & Accounting staff
ƒ
Advisor: Big 4 company: 6 members
Advisor
4 members
* Full-time
3 members
4 members
3 members
3 members
3 members
4
PTTEP Convergence Direction
First External IFRS F/S in 2011
First Internal
IFRS F/S
(Q1’10)
Jan 09
Jan 10
May 10
First External
IFRS F/S
(Q1’11)
Sep 10
Apr 11
GAAP Analysis
Quantify Impact in Retained Earning
Internal Communication to MC/ ACM / Board
on IFRS Convergence
Communicate to Investor/ Analyst
on IFRS Convergence, e.g. Roadshow, knowledge sharing session
5
Benefits and Costs for USD Functional
Currency Adoption
6
PTTEP’s Functional Currency
Functional Currency
Determined by
Economic Environment
PTTEP Functional
Currency is US Dollar
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Benefits
ƒ
Reporting in USD to reflect its operation and performance
ƒ
Benchmark against international Oil & Gas companies
ƒ
Positive outlook from investors
ƒ
Better access to global capital market
ƒ
Increase fund-raising capability, e.g. bond issuance
ƒ
Better information for strategic investment decision making
8
Costs
Invest in :
ƒ
System/ Application:
9
Accounting system not designed to fully support multicurrency
together with current business complication
9
Work around and time consuming required for certain
processes
9
Required new system to serve multicurrency, different tax
requirement due to USD functional currency
9
Costs
ƒ
Manpower:
9 More full-time staff dedicated during implementation
9 Sufficient training to staff
ƒ
Consultant:
9 Required consultants with solid expertise in Upstream
Oil & Gas and high quality of service
ƒ
Auditor:
9 Review of data conversion results
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Regulator’s Requirement
Financial Statements submission in THB currency
SET,Sharehoder, DBD (กรมพัฒนาธุรกิจการคา)
Financial Statement
Required in THB
Presentation Currency
(PC)
THB
Currency in which the Financial Statement are presented
Presentation Currency
(PC)
Functional Currency
(FC)
Translation
USD
Assets / Liabilities: Closing Rate
THB
Profit / Loss : Monthly Avg. Rate
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Burden in Financial Statements Preparation
Both USD FC and THB PC
IFRS
USD FC
Previous
Translation
THB
Financial Statement
FC USD
Financial Statement
THB
PC THB
Financial Statement
For SET,Sharehoder,
DBD (กรมพัฒนาธุรกิจการคา)
Financial Statement
For Tax Purpose
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Functional Currency Implementation
Data Conversion
Exchange Rate Analysis
60
Fluctuate
Monthly Average
50
THB / USD
Exchange Rate
40
25 THB/USD
30
20
Quarterly Average
10
0
1 Jul 97
31 Dec 98
Non-Monetary Items and Profit/Loss items
Monetary Items
ƒ
Ex. Property, Plant and Equipment, Intangible
Assets, Inventory
ƒ
Ex. Accounts
Payable, Loan
ƒ
Average Rate
ƒ
Ending Balance / Year-end FX rate
Receivable,
Accounts
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Communications to Stakeholders regarding the Impacts of
USD Functional Currency in Financial Statements
20 May 2014
14
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Communication to Stakeholders
Impact of USD FC Adoption in Financial Statements
1 Jan 2011
USD FC Adoption
23 Feb 2011
26 Apr 2011
Earlier communicate impact of
USD FC in 2010 Notes to F/S
4. Impact of Newly Adopted Accounting Policies
Being Applied on January 1, 2011
Knowledge
sharing session:
Investors
Knowledge
sharing session:
• Analyst
• Press
4.1 Impact of Newly Adopted Accounting Policies
Being Applied Retrospectively
4.1.1 Thai Accounting Standard No. 21
(Revised 2009) “The Effects of Changes in
Foreign Exchange Rates”
Impact on the Consolidated Financial Statements
The net assets as at December 31, 2010 reported under
the current accounting policy are Baht 172,294 million.
After applying this standard, the net assets will be USD
5,405 million and reported as Baht 162,964 million after
being translated into the presentation currency, the Thai
Baht. The decrease in net assets of Baht 9,330 million
results from the exchange rate at the financial statement
date. In addition, the net assets presented in the Thai
Baht presentation currency may increase or decrease due
to the change in the exchange rate as at the end of each
period.
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Deferred Tax on Functional Currency
Change in functional currency from THB to USD
Additional deferred tax from FX translation difference
Deferred Tax adopted
2011
1998
Acc
Tax
Acc
Tax
THB
THB
USD
THB
No Diff. in FX Rate
Diff. in FX Rate
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The End
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