Foreign exchange fluctuations: When accounting, tax and group reporting use different rates

In practice, the more challenging question is often not only how to calculate the exchange difference, but which exchange rate basis is being used — and for what purpose. 

This becomes more important when a Thai company is part of an international group. The local accounts may be prepared for Thai statutory reporting, the taxable profit may be computed under the Revenue Code, while the reporting package may use exchange rates determined by the parent company. 

When one balance is used for different calculations 

A foreign currency balance may appear in more than one calculation. It may be included in the Thai statutory financial statements, the corporate income tax computation, and the group reporting package. 

The amounts are not required to be the same, because they are used for different purposes. The issue arises when management cannot explain which basis has been used, why it is appropriate, and where any difference has been recorded. 

From an accounting perspective, foreign currency transactions are initially recorded using the exchange rate at the transaction date. At the reporting date, foreign currency monetary items, such as cash, receivables, payables and loans, are retranslated using the closing rate. 

Tax regulations may require a different basis. 

The method for converting foreign currency money, assets and liabilities into Thai Baht for income tax purposes is set out in section 65 Bis (5) of the Thai Revenue Code, while the calculation methods are more precisely specified in the Revenue Department Notification of 7 July 2026, which was published in the Royal Gazette on 20 August 2026. 

For ordinary companies and juristic partnerships, this does not mean a company is free to choose any exchange rate. The company must use one of the prescribed calculation methods, such as the relevant average buying or selling rates from the Bank of Thailand, depending on the type of item. The selected method should be applied consistently, unless approval is obtained to use a different method. 

One reason why the tax basis may not always coincide with the exchange rate basis employed for accounting or group reporting is that it is necessary to know not only which exchange rate has been used but also the purpose for which it has been used, whether the chosen method is allowed for that purpose, and whether any reconciliation is required. 

Common practices in Thailand 

One common practice is for a Thai company to use Bank of Thailand rates for both accounting and tax purposes. This may help reduce differences between accounting profit and taxable profit and make the tax computation easier to review. However, the company still needs to be clear about the type of rate used, such as buying rate, selling rate, average rate or another reference rate. Even when the source is the same, the type of rate and purpose of use still matter. 

Another common practice is for a Thai subsidiary of a multinational group to use monthly group rates for daily transactions because the ERP system is configured across the group. This may support group reporting and system consistency. However, the finance team still needs to assess whether the group rate reasonably approximates the transaction-date rate for local statutory purposes. 

The issue becomes more visible for non-monetary items. For example, imported inventory may be initially recorded using a group rate. If the inventory remains on hand at year-end, it is generally not retranslated in the same way as cash, receivables or payables. Therefore, year-end retranslation may not correct an inappropriate rate used at initial recognition. 

For import and export transactions, some companies may use the date supported by shipping documents such as an Air Waybill or Bill of Lading. This may be appropriate if that date reflects when the transaction meets the recognition criteria under the contract, delivery terms and Incoterms. However, the shipping document supports the transaction date; it does not determine the exchange rate by itself. 

Group rates need to be clearly defined 

The term “group rate” is commonly used, but it can mean different things. 

It may refer to a rate used to record daily transactions in the local books, a rate used for month-end retranslation, a rate used in the group reporting package, or a rate used to translate the Thai entity’s financial information into the group’s presentation currency. 

These are different processes. 

For local statutory reporting, the company needs to assess whether the rate used in the accounting records is appropriate under the applicable Thai financial reporting framework. For group reporting, the company may also need to prepare adjustments or reclassifications required by head office. For tax purposes, the company must still consider the Revenue Code and prepare tax reconciliations where necessary. 

The practical risk is that a company may assume that a rate accepted in the group system is also automatically acceptable for Thai statutory accounts and tax purposes. This may not always be the case. 

Questions finance teams should be able to answer 

Before finalising the accounts, finance teams should be able to answer three questions. 

First, which exchange rate is used for each purpose — statutory accounting, tax computation and group reporting? 

Second, if group rates, standard rates or average rates are used, are those rates still reasonable in the current exchange rate environment? 

Third, if the numbers are different, where is the difference recorded — in a local GAAP adjustment, tax reconciliation or group reporting adjustment? 

These questions may sound basic, but they often reveal how well the foreign exchange process is controlled. 

The objective is not necessarily to have the same number for all three purposes. The objective is to ensure that each number is calculated on the correct basis, supported by appropriate evidence, and reconciled where necessary. 

Final thought 

Foreign exchange fluctuations are outside management’s control. Exchange rate policies and reconciliations are not. 

For companies with foreign currency exposure, the key question is no longer only, “What exchange rate did we use?” It is also, “Why did we use that rate, for which purpose, and how did we handle the difference?” 

This is where foreign currency accounting becomes more than a bookkeeping task. It becomes a matter of financial reporting discipline. 

Reference (in Thai):  

• TFRS for NPAEs, Chapter 21: The Effects of Changes in Foreign Exchange Rates. Retrieved from the Thailand Federation of Accounting Professions.  
• Revenue Code Section 65 Bis (5). Retrieved from the Revenue Department. 
• Revenue Department Order No. P.132/2548. Retrieved from the Revenue Department. 
• Revenue Department Notification on the calculation of foreign currency money, assets or liabilities remaining at the last day of an accounting period into Thai baht, dated 7 July 2026. Retrieved from the Revenue Department.