Accounting for gold holdings under TFRS: practical guidance
As gold continues to be a popular asset for trading, investing, and preserving wealth, questions often arise regarding its correct accounting treatment under Thai Financial Reporting Standards (TFRS). This article provides a practical guide on how to classify and measure gold holdings in various scenarios.
Key characteristics of gold under TFRS
Gold is unique in that it:
- has no maturity date;
- serves as a store of value; and
- does not qualify as a financial instrument under TFRS 9, since holding gold does not involve contractual rights to receive cash or financial assets.
Therefore, entities must carefully assess the purpose of holding gold to determine the appropriate accounting treatment.
Note: Gold prices are subject to global market fluctuations, forex impacts, and economic factors. Entities must remain vigilant in assessing the carrying value, particularly when applying models requiring impairment reviews.
How to classify and measure gold holdings
1. Held for sale in the ordinary course of business
If gold is held for sale as part of normal operations:
- If you are a gold dealer / trader: Measure at fair value less costs to sell (FVLCTS).
- If you are not a gold dealer / trader: Measure at the lower of cost or net realizable value (NRV), similar to inventory valuation.
2. Held for one’s own use (not for sale)
If gold is not held for sale, but is:
- held for more than 1 year:
- Classify as Property, Plant, and Equipment (PPE) under TAS 16.
- Measure at cost, subject to impairment review.
- Note: Gold typically does not depreciate due to its nature.
- held for less than 1 year or for preserving wealth:
- Currently, there is no specific TFRS covering gold held purely for investing or preserving wealth.
- Apply the accounting policy under TAS 8, ‘Accounting Policies, Changes in Estimates, and Errors’
- Suggested approach: Refer to the principles set out in TAS 40, ‘Investment Property’, by selecting either:
- the cost model; or
- the fair value through profit or loss (FVPL).
This approach aligns with how entities typically manage assets intended for long-term value storage.
Examples of various scenarios and accounting treatments for gold holdings
| Scenario | Purpose of holding | Entity type | Classification | TFRS applied | Measurement basis |
| 1. Gold shop with trading inventory | Sale in normal business operations | Gold trader / dealer | Inventory | TAS 2 | Fair Value Less Costs to Sell (FVLCTS) |
| 2. Manufacturing company which keeps gold as raw material for future production | Used in operations | Manufacturer (not a trader) | Inventory | TAS 2 | Lower of Cost or Net Realizable Value (NRV) |
| 3. Corporate office which keeps gold as part of its office décor and a symbolic asset | Held for use > 1 year | General company
| PPE | TAS 16 | Cost less impairment (no depreciation required) |
| 4. Company which purchases gold as part of treasury asset diversification | Wealth preservation | Investment holding company | Other asset (no specific TFRS) | TAS 8 (Refer to TAS 40) | Cost model (cost less impairment) or FVPL |
| 5. Holding company which acquires gold to speculate on short-term price changes (less than 12 months) | Short-term investment | Non-trader | Other asset (no specific TFRS) | TAS 8 (Refer to TAS 40) | FVPL is more relevant to reflect fair value movement |
| 6. Religious foundation which receives gold donation for long-term holding as a sacred object | Not for sale or use | Non-profit | PPE | TAS 16 | Cost less impairment (symbolic asset) |
Notes:
- Under the cost model, entities must assess for impairment regularly. Fair value changes are not recognized unless FVPL is chosen.
- FVLCTS is only appropriate if the entity is in the business of buying / selling gold, such as a gold shop.
- TAS 8 allows flexibility when there is no specific standard – entities must disclose the chosen policy and apply it consistently.
- No depreciation is required for gold classified as PPE, since it does not lose value over time.
Conclusion
Accounting for gold depends heavily on intent and usage. Whether treated as inventory, PPE, or an investment asset, entities must ensure consistent application of policies and appropriate disclosures.
For entities holding gold primarily for wealth preservation, adopting a clear policy under TAS 8 – with reference to TAS 40 – is essential until specific guidance is issued.
References (in Thai):
- TAS 2. Retrieved from the Federation of Accounting Professions.
- TAS 8. Retrieved from the Federation of Accounting Professions.
- TAS 16. Retrieved from the Federation of Accounting Professions.
- TAS 40. Retrieved from the Federation of Accounting Professions.
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