According to financial experts at an accounting seminar held in Hanoi in May 2018, Vietnam is expected to adopt IFRS (International Financial Reporting Standards) to replace the current accounting standards in Vietnam (VAS). This process is expected to be completed by 2020 in order to improve the transparency.

The theme of the seminar focused on experiences in applying IFRS in some notable countries all over the world, providing an appropriate adoption roadmap for Vietnam. The event was a collaboration between the Japan International Cooperation Agency (JICA) with the Ministry of Finance (MoF). Some countries that have been named to draw example from included Japan, Korea, China, Malaysia and the US.

Overall, Vietnam has established 26 accounting standards over the past 10 years. However, these standards have proven to be disadvantageous in comparison with IFRS. In fact, the application of VAS has created various barriers, thus reducing the competitive advantage of Vietnam in the eyes of foreign investors. This fact has been well recognized by Mr Vu Duc Chinh –  Director of the Accounting and Auditing Policies Department – Ministry of Finance.

Under VAS standards, currently the business’ financial statements do not correctly reflect the assets and liabilities’ value. With the globalization trend, it is unavoidable and necessary to apply international accounting system. Nevertheless, the application of international standards in Vietnam is not an easy task due to the co-existence of many different business types.  After the proposal is approved by the Government, IFRS will be translated into Vietnamese in official MoF publications in order to ensure the accurate understanding of new financial reporting norms.

According to Mr Trinh Duc Vinh, deputy director of the Accounting and Auditing Policies Department under MoF, the targets of applying IFRS in Viet Nam are to overcome the disadvantages of VAS, enhancing the accounting legal framework while at the same time improving the transparency of financial information. As a result, the transformation will significantly help Vietnam business to access capital sources from abroad, easier to be listed on the international market due to the improved accountability of Vietnamese enterprises.

In term of the roadmap for Vietnam to follow, it is agreed that in the period from 2018 to 2020, from 10 to 20 simple IFRS standards will be chosen for implementation. Then, from 2020, these standards will officially apply for all the companies which are listed on the stock market. IFRS is also applicable for all other businesses that want to follow. Compared to other countries in the world, the roadmap may vary due to the differences in actual situation of each country.

For example, all listed enterprises in Korea are legally bounded to apply IFRS from 2011. While in the case of China, the Chinese national accounting standards are still main rules, indicating no specific requirements for applying IFRS.

Currently, there are over 90 percent of all nation have publicly confirmed the roadmap for IFRS adoption or already used international standards for accounting practices. For a country like Vietnam, it is inevitable to follow the global trend, However, it would commonly take quite a long time to completes the transition process for international rules application.

Follow S4B Vietnam’s blog to catch up with the latest news regarding the accounting framework in Vietnam. We provide in-depth knowledge about the application of VAS and IFRS, clearly highlighting the differences for enterprises doing business in Vietnam.