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Opportunities and Threats in applying IFRS in Vietnam


On March 16, 2020, the Minister of Finance issued Decision No. 345/QD-BTC approving the scheme on application of International Financial Reporting Standards in Vietnam.

1. This application process consists of 3 phases:

  • Preparation period: from 2020 to the end of 2021

  • Optional application period: from 2022 to the end of 2025: Apply at the level of consolidated financial statements for a number of specific enterprises such as the parent company of a state economic group, the parent company is a listed company, a large-scale public company is an unlisted parent company; and other large-scale parent company

  • Compulsory period of application: from after 2025: Apply at the level of consolidated financial statements for enterprises in the group of subjects of voluntary application as above.

1.1 Human Resources

Human resources here are not only refer to the accounting staffs of enterprises who are subject to IFRS application, but also include the leaders of these companies, as they are responsible for approving financial statements.

Enterprises applying IFRS will have to set up a separate IFRS implementation project team, including staff who are highly trained in IFRS because it will be very difficult for the current accounting team of enterprises to apply IFRS. They have to fulfill accounting task under VAS (in the transition period) and go to school to learn IFRS so as to have an ability to do accounting task and make IFRS reports on their own. In addition, personnel assigned to implement IFRS also need to achieve a fairly high level of English to be able to self - study IFRS regulations and interpretations in case the IFRS guidelines in Vietnamese have not been fully translated and published.

1.2 Information technology system

To be able to prepare financial statements under IFRS, at least at the Parent Company level, Enterprises applying IFRS will have to set up and maintain a system of accounting software and books according to IFRS.

The difficulty for Vietnam is that in the early stages, Enterprises will continue to prepare separate financial statements under VAS and only prepare consolidated financial statements under IFRS, which means they will have to maintain parallel 2 systems of accounting accounts, separate accounting books according to VAS and IFRS.

2. Negative impact on financial statements when applying IFRS for the first time

There have been many seminars and articles written about the benefits of applying IFRS, and that is also the basis on which the Government of Vietnam develops a project to apply financial reporting standards in Vietnam. However, it is a fact that, when preparing first year financial statements under IFRS, many businesses need to be prepared to face negative effects on financial statements due to large differences between Current VAS and IFRS. Example:

  • Loss of assets: According to International Accounting Standard 36 (IAS 36) – Loss of property, if the carrying amount of the assets of a business is higher than the recoverable value of the assets. assets, the enterprise must immediately recognize the provision for loss of assets in the statement of comprehensive income for the period. In Vietnam, there is currently no Accounting Standard equivalent to IAS 36. Therefore, this will be a standard that can have a lot of negative effects on the first IFRS financial statements of businesses that fail. losses or have loss-making subsidiaries or divisions, indications that their assets may be impaired.

  • Leases: According to VAS 06 – Leases, operating leases are not recognized in the balance sheet. According to the provisions of IFRS 16 – Leases, operating leases will be recognized immediately in the financial position of the enterprise as the right to use the asset and the lease liability. For businesses that have leased assets operating with overseas lessors, the lease liability will be treated as a financial liability denominated in a foreign currency, and in accordance with financial reporting requirements, this foreign currency financial debt will have to be re-evaluated at the actual exchange rate at the enterprise making the financial statements. For businesses operating in the aviation sector, the application of IFRS 16 will have a huge impact because most of the aircraft in their fleet are leased aircraft operating with lease payments in cash. currency.

  • Since companies will prepare separate financial statements according to VAS, and consolidated financial statements under IFRS, there will be a situation where separate reports under VAS will make the enterprise profitable and consolidated reports under IFRS will suffer a loss, and the enterprise will not be able to distribute profits to shareholders, because according to Vietnamese regulations, the portion of profit after tax used to distribute dividends will be calculated on the smaller of the middle of the financial statements. separate and consolidated financial statements.

3. Preparation for the first application of IFRS

According to Decision No. 345/QD-BTC, the Preparation Period will take place from 2020 to the end of 2021, then the Voluntary Application Phase from 2022 to the end of 2025.

It can be understood that the Preparation Period is the time for the Ministry of Finance to prepare and issue IFRS guidelines in Vietnamese, and does not include time for businesses to learn about IFRS, recruit and training personnel on IFRS. In our experience, it takes at least 2-3 years for businesses to apply IFRS for the first time to train and prepare data for their first IFRS financial statements.

4. Fundamental factors for a successful transition into IFRS

From these above analysis, and from the survey results for enterprises that have successfully converted from domestic accounting standards to IFRS, we believe that to be able to effectively and successfully convert to IFRS, businesses need to pay attention to some basic points as follows:

  • Start early: Businesses need to plan the transition to IFRS as soon as the decision to switch is made so that they can plan for changes in business processes, personnel recruitment and financial resources for the job. convert to IFRS instead of waiting until the year of the first IFRS financial statements;

  • It is necessary to set up a project team to convert to IFRS in which the project leader must be one of the members of the business leadership, and involve key departments in the business, such as accounting, business, legal, information technology, etc.

  • It is necessary to carry out an impact assessment of the transition to IFRS in all units in the group that may have a material effect on the consolidated financial statements of the Parent Company so that a plan of training for accounting staffs can be made about how to make financial statements in accordance with IFRS for the purpose of consolidating the parent company's financial statements;

  • Organize and train a team of accountants with IFRS knowledge in both the parent company and key subsidiaries in the group;

  • Working with consulting, auditing firms with extensive experience in auditing IFRS financial statements to get timely support on material technical issues when preparing financial statements according to IFRS.


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