Key takeaways
Labour cost can go to WIP when it passes 3 questions: it is directly for the project, it falls within the development stage, and there is evidence that measures the time. If the answer to any one is no, that portion is a period expense. For foreign employees, the legal gate must be passed before the accounting is considered.
3 questions to test each person monthly
| # | Questions | Yes | No |
|---|---|---|---|
| 1 | Is the work done directly for a named project? | Site engineer, site QC | Accounting, HR, sales |
| 2 | Is it within the development stage? | After project approval and before the project is ready for sale or use | After handover |
| 3 | Is there evidence? | Project code and timesheet | Lump-sum estimate |
Projects built for sale follow TAS 2 (conversion costs). Buildings held for own use follow TAS 16.
When WIP starts and stops
| Stage | Accounting treatment | Example work |
|---|---|---|
| Feasibility | Period expense | Market study, site selection, project not yet approved |
| Design and permitting | WIP | BIM design, building permit, EIA |
| Construction | WIP | Construction supervision |
| Waiting for sale or transfer | Period expense | Caring for the completed building, security guards, cleaners |
| Handover and warranty | Period expense | Fixing defects, after-sales service |
Project approval = WIP starts; ready for sale = WIP stops
Within the WIP stage but still a period expense
- Unplanned, abnormally long work stoppages
- Idle time, rework, repeated work
- General office administration, even during construction
When the project plan changes
- Cancelled: transfer accumulated WIP to expense immediately
- Postponed: stop recording WIP until work resumes
- Phased: stop WIP as each phase is completed
The accounting department sets the WIP start and stop dates in writing for every project, based on the approval resolution and the certificate of construction completion.
Job groups and recording
| Can go to WIP | Conditional WIP | Always a period expense |
|---|---|---|
| Construction and Technical MEP Architecture and interior design BIM QC QS and surveyor Site safety Site labour | Security guards, only at sites where work is under way Store, only site material stores Purchasing, only purchases for the project Project management, only time spent controlling the project Staff on multiple projects: allocate by timesheet | Sales, marketing, after-sales Accounting, finance, central administration HR, IT, general administration Legal and corporate support Reception, housekeeping, operations Care of the completed building Feasibility team |
A department code does not automatically qualify a cost for WIP. Every person's salary must pass the 3 questions each month.
Which compensation can go to WIP
Can go to WIP, in proportion to project time
- Salaries and wages, including overtime, for site work
- Benefits paid directly to project staff
- Employer's social security contributions
- Bonuses allocated by actual time worked on the project in that year, not at a fixed rate
Not in WIP
- Sales staff commission: not a construction cost; consider it as a cost of obtaining a contract under TFRS 15
- Visa and work permit fees
- Training, uniforms, meals
- Penalties and surcharges, which are not project costs and are not tax-deductible
4 mistakes that overstate WIP
| Mistake | What we find | Correct treatment |
|---|---|---|
| Lump-sum capitalisation | A fixed percentage every month, or a single bonus entry at year-end | Allocate monthly by timesheet or actual project code |
| Not separating staff who work on several projects | Booked to a single project, or office work included | Allocate by actual time; office work is an expense |
| Capitalising wasted time | Idle time, rework and long stoppages treated as cost | Separate the time and book it as a period expense |
| WIP not adjusted when the plan changes | Project cancelled or postponed but WIP remains | Write off to expense and test NRV |
Foreign employees: the legal gate comes first
- Gate 1: Can a foreign national lawfully do this work? If not, stop the work and fix it immediately. Record the cost as a period expense.
- Gate 2: Does the actual work match the work permit? If not, correct the permit first. Record the cost as a period expense in the meantime.
- Gate 3: Does it pass the 3 accounting questions? The criteria are the same as for Thai employees.
Why check the law first: labour cost booked to a project is evidence that the person did that work. If it conflicts with the permit, the accounting entry becomes evidence of the breach.
| Permitted, when the permit matches the actual work | Conditional: a professional licence is required | Prohibited |
|---|---|---|
| Project Director or Project Manager Technical specialist or consultant Quantity Surveyor BIM or Design Coordinator Specialist QA/QC expert | Engineers: under professional law and relevant conventions Architects: special associate licence, or ASEAN MRA Skilled trades and labourers: specify the employer and type of work | Legal work Secretarial and project administrative work that falls within the restrictions Drivers, except forklift operators Security guards, who must comply with the security business law |
Based on the Emergency Decree on Managing the Work of Foreigners 2017 and the Ministry of Labour notification on work prohibited to foreigners 2020, which lists 40 jobs. Details may change; check the latest notification and have a legal adviser review each individual's permit before hiring.
Documents and controls before posting to WIP
| # | Document or control | Responsible party | Frequency |
|---|---|---|---|
| 1 | Project approval letter stating the WIP start and stop dates | Accounting, executives | Every project |
| 2 | Project code for every employee in payroll | HR | On hiring or transfer |
| 3 | Timesheets for staff working on several projects | Project head | Monthly |
| 4 | Copy of the work permit matching the actual work | HR | On hiring and renewal |
| 5 | Review WIP entries against the 3 questions | Account | Monthly |
| 6 | Test that WIP does not exceed NRV | Account | Quarterly |
If a month's documents are incomplete, first record that labour cost as a period expense, then transfer it to WIP once the evidence is complete.