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Vietnam Accounting Standard (VAS) was established based on International Accounting Standards (IAS/IFRS) from the year 2000 to 2005, according to the selective application of International practice principles and matched with the characteristics of the economy and management level of Vietnamese enterprises. Up to now, Vietnam has developed and issued 26 VAS. The setup which based on IAS is to ensure that the VAS system contributes to improving the publicity and transparency in the financial statements of enterprises, reflecting the transactions of the market economy and meet the requirements of International integration. However, there is an opinion that VAS is currently just a simple application of IAS/IFRS in the specific context of Vietnam; in fact, VAS has not been harmonized with IAS/IFRS and has not been updated according to changes of IAS/IFRS in recent years.
Unlike Vietnamese Accounting System (VAS), the International Accounting System (IAS) does not have formal requirements (such as defined reporting form, accounting system, accounting form, accounting books or original documents). Although IAS provides users with extremely detailed definitions, methods, presentation and information that must be presented in the financial statements, IAS is not required to use the same financial reporting forms, account system, voucher systems, accounting books. IAS has a conceptual framework and high consistency among standards. VAS still has many unclear issues, a lack of problems and especially inconsistencies between standards, or inconsistencies between standards and guidelines on those standards.
The reality of the harmonization between Vietnam's Accounting Standards (VAS) and International Accounting Standards (IAS/IFRS)
When developing technical standards, Vietnam's cross-cutting point is to comply with the IAS system. VAS has basically been established based on IAS/IFRS, according to the selective application of International practice principles and matched with the characteristics of the economy and management level of Vietnamese enterprises. Therefore, VAS has basically approached IAS/IFRS, reflecting the majority of transactions of the market economy, improving the publicity and transparency of information on financial statements of enterprises. However, the current VAS still reveals many differences with IAS/IFRS. This is expressed in a number of key manifestations:
The most fundamental difference is that, VAS has not had a regulation to allow revaluation of assets and liabilities at fair value at the reporting time. This dramatically affects the accounting of assets and liabilities classified as financial instruments, reduces the faithfulness and reasonableness of the financial statements and is not suitable with IAS/IFRS;
VAS 21 does not require the presentation of the Statement of Equity in a separate report like IAS 1, but only requires it to be presented in the Notes to the Financial Statements. In addition, Vietnamese Accounting System rigidly regulates reporting formats, which destroys the flexibility and diversity of the financial reporting system, while the IAS/IFRS does not provide specific reporting formats;
According to VAS 21, financial incomes and expenses included in operating profit/loss on the Income Statement are not suitable with International practice, when the profit/loss from selling shares which is not regular activities in the operation of the enterprise is understood as the main business result;
VAS 3 only allows revaluation of fixed assets such as real estate, factories and equipment in case of a decision of the State, bringing assets to contribute capital to joint ventures, associations, Enterprises splits and mergers and cannot be recorded in the annual loss of assets. Meanwhile, according to IAS 16, enterprises are allowed to choose the model of revaluation of assets at fair value and determine the annual loss of assets and record this part of the loss in accordance with IAS 36 at the same times;
Reasons for the difference between VAS and IAS/IFRS
There are many reasons to explain the mismatch between VAS and IAS/IFRS, including direct causes and causes related to the accounting environment.
Direct causes
VAS is essentially prepared based on the respective IAS/IFRS issued up to the end of 2003, but has not been updated with the relevant IAS modifications and new IFRSs issued after 2003;
IAS/IFRS is increasingly moving towards measuring assets on the basis of fair value to ensure the “the relevance” of accounting information to users, while historical cost remains the basis measurement is mainly regulated by VAS;
IAS/IFRS allows using more judgment and estimation than VAS; therefore, IAS/IFRS requires more declaration of information related to the use of judgment and estimation.
Causes belong to the accounting environment
Firstly, the Vietnamese culture is to avoid risk and uncertainty. Applying IAS/IFRS, uncertainty is extremely high because financial statements under IAS/IFRS use many accounting estimates, such as fair value. VAS with fewer and more conservative accounting estimates limits the uncertainties; however, this also considerably reduces the relevance of the information in the financial statements. This cultural feature is an indirect and very important factor affecting the fact that VAS has not fully applied IAS/IFRS;
Secondly, the market economy in Vietnam is still quite young, Vietnam has only developed the market economy since the last years of the 20th century, the capital market of Vietnam is one of the youngest markets in the world, which was formed more than ten years ago. Up to now, it has not clearly shown an important role in the economy, only within the country, not connected to the capital market in the world. Meanwhile, the orientation of IAS/IFRS is to build a system of accounting standards in the whole market and support capital markets, a system of accounting standards serving common interests, with high quality and easy to understand and apply. worldwide, to help participants in the world's different capital markets make economic decisions. Therefore, the development orientation of VAS to serve investors in the capital market is not as strong as IAS/IFRS. That Vietnam's demand for a complex and reasonable accounting system like IAS/IFRS to serve the capital market is not urgent;
Thirdly, Vietnam is a country in the direction of codified law or written law, which is different from other countries in the direction of common law. In the codified countries, in general, the protection of shareholder rights and the requirement for information transparency are lower than in the common law countries. VAS is established in accordance with the characteristics of the legal system of a country in the direction of codification of law, while the IAS/IFRS is developed in accordance with the legal system of countries in the direction of common law. Accordingly, the State has the role of accounting control in terms of methods of measurement, evaluation, preparation and presentation of reports. The drafting and promulgation of technical specifications and implementation guidelines must be carried out by State agencies and placed in laws or legal documents under the law. Meanwhile, in IAS/IFRS - developing countries, accounting principles and bases do not refer to the national accounting regime. State control is implemented through the interpretation of accounting objectives, principles, methods of measurement, evaluation, preparation and presentation of financial statements.