Key differences between Vietnamese Accounting Standards (VAS) and International Accounting Standards (IFRS)
A. General differences:
Compared to the VAS accounting standards, IAS is not imposed on the form such as the account system (Chart of Account), the form of reporting (Accounting templates), the form of the accounting book (Ledgers). Most of the IAS / IFRS do not regulate accounting forms. Moreover, enterprises using IAS / IFRS are free to use the account system as well as accounting forms suitable and favorable to the characteristics of the business. For example, enterprises applying VAS will have an account number of 111 in cash, while enterprises applying IAS / IFRS can freely set a number for this account.
The IAS also provides a very coherent conceptual framework and between standards. On the contrary, VAS still has many unclear problems, lacks a framework for the definition as well as the consistency between accounting standards.
2. Chart of Account
IAS / IFRS only regulates the form of financial statements under IAS 1, but does not regulate the chart of accounts. Enterprises are allowed to create their own account system to better match the requirements of financial statements as well as management reports.
Enforcement of the chart of account by enterprises sometimes causes disadvantages for foreign enterprises in Vietnam because businesses often find it difficult to convert and reduce the consistency between companies in the same group.
3. Basic accounting standards
- VAS currently does not have a regulation allowing assets and liabilities to be revalued at their fair values at the time of reporting. The lack of relevant standards reduces the truthfulness and reasonableness of the financial statements and is not consistent with the IAS / IFRS.
- VAS 21 and IAS 01: VAS stipulates that financial statements are not required to report the change of equity like IAS 01. Thus, according to IAS, we have five components: Statement of Financial Position, Statement of Comprehensive Income, Statement of Cashflow, Statement of Changes in Equity, and Notes to Financial Statement. While VAS has four components, the equity change report alone will be treated as part of the financial statement disclosure.
- VAS 03 only allows reassessment of fixed assets such as real estate, factories and equipment in case there is a decision of the State to contribute assets to joint ventures, association, split, merger and not recognized annual loss of asset. In contrast, according to IAS 16, an enterprise is allowed to reevaluate its assets at market prices and to determine the annual loss of asset. At the same time, the enterprise is recognized for this loss according to the provisions of IAS 36.
- VAS 11 stipulates that goodwill is amortized gradually within 10 years from the date of purchase in the business combination transaction. Meanwhile, IFRS 03 stipulates that enterprises must assess the value of goodwill losses.
B. International Accounting Standards (IFRS) do not yet have Vietnamese accounting standards (VAS) equivalent:
Although Vietnam Accounting Standards (VAS) is drafted based on the framework of International Accounting Standards (IAS / IFRS), VAS has only 26 standards. While there are 41 IAS standards and 16 IFRS standards. Thus, VAS will not have accounting standards equivalent to IAS / IFRS. As follows:
1. International accounting standards for financial statement presentation and related matters
- IFRS 01: First time applying International Financial Reporting Standards (general principle is to apply retroactively all IFRS standards in effect at the time of application, with some exceptions and exemptions are allowed).
- IFRS 07: Notes on financial instruments to help users of financial statements evaluate the importance of a financial instrument to the financial position and business results of the entity, assess the nature as well as the scope of risks arising from financial instruments and risk management methods of the entity (IFRS 7 and Circular 210/2009 / TT-BTC have similar basic contents. However, in reality the disclosures required by Circular 210 do not provide much information to readers as VAS does not mention recording and measuring financial instruments and fair value guidelines).
2. Accounting standards for items on statements of business results and reporting on balance sheets
- IAS 19: Stipulates the method of accounting and presenting benefits for employees including short-term, long-term benefits, severance payment.
- IAS 20: Regulates the accounting and presentation of government subsidies and other forms of funding.
- IAS 32: Presentation of financial instruments (Circular 210/2009 / TT-BTC requires enterprises to apply the provisions of IAS 32 and IFRS 7 on presentation and disclosure of financial instruments from in 2011).
- IAS 39: Establishing recognition, stop recognition and valuation principles for financial assets and financial liabilities (to be replaced by IFRS 9, effective from 01/01/2018).
- IFRS 09: Regulations on requirements for recording and stopping recognition, classification and measurement of financial assets and financial liabilities, impairment of general hedging accounting (effective from 01/01/2018).
- IFRS 14: Deferred payments according to law (effective from 01/01/2016).
3. Accounting standards for specific industries or activities
- IAS 26, 41, 06: Industry-specific or activity standards including pension fund accounting and reporting, agriculture, mineral resource exploration and evaluation.
4. Event or transaction-specific accounting standards
- IAS 29, 36, 02, 15: Specific event or transaction: Financial statements under hyperinflation, loss of assets, payments on a stock basis, or assets held for sale and work intermittently.
5. Accounting standards for measurement
- IFRS 13: Fair value measurement.
6. Accounting standards for consolidation, subsidiary or consolidation of other entities
- IAS 27: Accounting method for investments in subsidiaries and associates on separate financial statements.
- IFRS 12: Notes to benefits from other entities in order to assess the nature and risks related to the benefits of the entity in other entities and the impact of these benefits on the financial position , operating results and cash flow of the entity (the presentation of interests in subsidiaries, joint ventures and associates is governed by VAS 25, 08 and 07).