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The world is quickly leaning towards the required use of IFRS for financial reporting, either for public listings, statutory reporting or both. As a result, regulatory and capital markets' demand for IFRS-based information is increasing daily.

The world's second-largest economy has been a major contributor to this pace of change.

Last year, the Accounting Standards Board of Japan (ASBJ) announced what is known as the Tokyo Agreement to accelerate convergence of Japanese accounting standards and IFRS.

The agreement calls for the elimination of major differences between the two accounting bases by this year, with the remaining differences targeted for removal by June 30, 2011.

Back in May 2006, the ASBJ approved a new regime applicable to publicly listed Japanese companies requiring the unification of accounting policies applied to foreign subsidiaries in their consolidated financial statements.

This requirement became effective for periods beginning this past April 1, which for most Japanese companies was the start of their current fiscal year.

As a result of these two factors, many Japanese firms are now requiring their subsidiaries here to convert their financial information to IFRS. These companies are experiencing first hand the challenges of applying IFRS in Thailand.

Many of them have underestimated the effort required for the identification and quantification of significant financial-reporting differences, which typically are in the areas of accounting for income taxes, employee benefits, share-based payments, insurance contracts, derivatives and other financial instruments.

Many of these enterprises have had to engage specialists to assist in calculating complex valuations when such expertise was not resident within their organisation. Also, these companies have needed to revise their training programmes to incorporate IFRS.

Many of these companies have also made the mistake of thinking the conversion to IFRS is only an accounting- or finance-department issue.

The convergence to IFRS will most likely have implications for many other areas of an organisation, such as the information-technology department, which may have to develop computer systems, or modify existing ones, to capture certain required data that may not have been necessary previously.

Some training sessions may also need to involve members from the purchasing, treasury, legal, sales and marketing departments, to make them aware of IFRS implications, especially when entering into contractual arrangements on behalf of the company.

Over the past few years, the Federation of Accounting Professions has adopted selected IFRS quite closely. However, other standards based on new or amended IFRS are under review and will most like be adopted over a period of time.

The Securities and Exchange Commission and the federation are considering requiring full adoption of IFRS for listed Thai companies.

These events signify that the winds of change for financial reporting are starting to swirl in Thailand. Local companies should consider beginning preparations for IFRS convergence now. Many Thai subsidiaries of Japanese public companies would most certainly agree.