Comparing VAS and IFRS: Key Differences and Their Impact on Businesses

Differences in Objectives, Approach and Practical Application

Converting financial statements from Vietnamese Accounting Standards (VAS) to International Financial Reporting Standards (IFRS) requires enterprises to clearly understand the differences in objectives, principles, and the recognition, measurement and presentation of information. These differences may affect reported figures, financial indicators and how an enterprise’s operating performance is assessed.

This article by Crowe Vietnam analyses the differences between IFRS and VAS from their objectives to their underlying approaches, while highlighting key concepts and seven significant differences in accounting practice. This provides management and accounting teams with a stronger basis for assessing potential impacts and preparing for the conversion process.

IFRS and VAS: Differences in Objectives and Approach

Objectives and Intended Users

IFRS aims to provide information to investors and creditors globally to support their investment and lending decisions. Accordingly, financial information is expected to have strong predictive and confirmatory value. VAS also aims to provide financial information to users of financial statements, while being applied within Vietnam’s legal and regulatory framework.

Qualitative Characteristics

IFRS emphasises qualitative characteristics such as relevance and faithful representation, ensuring that information is not only numerically accurate but also reflects the economic substance of transactions. VAS also establishes requirements relating to faithful presentation, objectivity, completeness and comparability. Differences should therefore be assessed based on the specific requirements of each standard and the relevant implementation guidance.

Approach

IFRS is commonly described as principles-based, meaning that it establishes overarching principles and requires enterprises to apply professional judgement to reflect the economic substance of transactions. This provides greater flexibility but also requires a high level of professional expertise. In practice in Vietnam, VAS is applied together with the applicable accounting regime and detailed guidance, so comparisons often emphasise a rules-based approach. However, VAS also contains general principles. Enterprises therefore need to distinguish between the requirements of accounting standards and detailed implementation guidance, and apply appropriate judgement to each specific circumstance.

7 Key Differences Between VAS and IFRS

1. Conceptual Framework and General Principles

One of the most fundamental differences lies in the position and role of the Conceptual Framework. IFRS has a separate Conceptual Framework that supports the development and interpretation of standards, while VAS has VAS 01, General Standard. The IFRS Conceptual Framework does not override or take precedence over any specific IFRS Standard.

Where no IFRS Standard directly applies to a transaction or event, management is required to consider guidance dealing with similar and related issues and the concepts in the Conceptual Framework in accordance with the hierarchy set out in IAS 8. Enterprises may also refer to pronouncements issued by other standard-setting bodies with similar conceptual frameworks, accounting literature and accepted industry practices, provided these do not conflict with higher-priority sources. Under VAS 01, where a specific standard does not provide relevant guidance, the General Standard applies.

2. Components of Financial Statements

Under IAS 1, a complete set of financial statements includes the following key components, together with comparative information as required:

• Statement of Financial Position (Balance Sheet)
• Statement of Profit or Loss and Other Comprehensive Income
• Statement of Cash Flows
• Statement of Changes in Equity (SOCE)
• Notes to the Financial Statements

The Statement of Profit or Loss and Other Comprehensive Income may be presented as a single statement or as two separate statements. A Statement of Financial Position at the beginning of the comparative period may also be required in circumstances involving retrospective application, restatement or reclassification that meet the relevant IAS 1 requirements.

Under the VAS financial reporting framework for enterprises, the financial statements generally comprise the Balance Sheet, Income Statement, Cash Flow Statement and Notes to the Financial Statements, including disclosures on changes in equity.

This difference is particularly relevant to the Statement of Changes in Equity, under which IFRS provides more detailed information on movements in equity arising not only from profit but also from items of other comprehensive income.

Regarding the reporting period, IFRS requires financial statements to be presented at least annually. Where the reporting period is longer or shorter than one year, the enterprise is required to disclose the reason and address the comparability of the information as applicable.

3. Chart of Accounts and Financial Statement Formats

In Vietnam, the Chart of Accounts (COA) and financial statement formats are guided by the accounting regime applicable to each enterprise. For enterprises within the scope of Circular No. 99/2025/TT-BTC, applicable to financial years beginning on or after 1 January 2026, enterprises are permitted to proactively amend and supplement their Chart of Accounts in accordance with applicable regulations, together with appropriate accounting policies and responsibilities for such adjustments. Any addition or amendment to financial statement line items must also comply with the requirements of the applicable accounting regime.

By contrast, IFRS does not prescribe a specific Chart of Accounts or a fixed set of financial statement templates for all enterprises. It nevertheless establishes minimum content and presentation requirements. Within these requirements, enterprises may organise information in a manner appropriate to their business characteristics and the needs of users of financial statements.

4. Accounting Currency and Functional Currency

Another important difference is the concept of Functional Currency. Under IAS 21, an enterprise determines its functional currency, meaning the currency of the primary economic environment in which it operates. If accounting records are maintained in another currency, the information must be translated into the functional currency in accordance with the Standard. Where an entity wishes to present its financial statements in a currency other than its functional currency, it must apply the translation requirements of IAS 21, The Effects of Changes in Foreign Exchange Rates.

VAS has not fully adopted the concept of functional currency. Although an entity may use a foreign currency for accounting and financial reporting purposes if it satisfies conditions broadly similar to the IFRS concept of functional currency, enterprises are still required to translate their financial statements into VND in accordance with the Vietnamese regulations applicable to them. This may result in significant differences in the recognition and translation of foreign currency transactions, particularly for enterprises with international operations.

5. Fair Value

IFRS applies a range of measurement bases, with Fair Value used for various types of assets and liabilities as required by individual standards. IFRS 13, Fair Value Measurement, provides detailed guidance on fair value measurement. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

By contrast, VAS primarily applies the Historical Cost principle. For certain items, VAS does not provide measurement options equivalent to those available under IFRS. For example, VAS 03, Tangible Fixed Assets, does not provide the revaluation model as a normal accounting policy choice, while VAS 05, Investment Property, permits only the cost model. Although VAS requires fair value to be determined in certain circumstances, such as business combinations and exchanges of non-monetary assets, the related guidance is generally less detailed than under IFRS, potentially creating valuation gaps in the measurement of assets and liabilities.

6. Financial Instruments and IFRS 9

This is one of the areas with the most significant differences. VAS does not have a standard equivalent to IFRS 9, Financial Instruments. Under the general principles of IFRS 9, financial assets and financial liabilities are initially measured at fair value plus or minus transaction costs, except for financial instruments measured at fair value through profit or loss, subject to specific exceptions and requirements under the Standard.

IFRS 9 also requires derivatives to be measured at fair value both at initial recognition and at subsequent reporting dates, with gains or losses arising from changes in fair value recognised in profit or loss unless hedge accounting applies. In Vietnam, the accounting and measurement of such instruments need to be considered based on the regulations applicable to the relevant enterprise, industry and transaction.

ECL model: IFRS 9 introduces the Expected Credit Loss (ECL) model, which is based on expected credit risk rather than the incurred loss model previously applied under IAS 39 and the provisioning requirements under VAS. For items within its scope, the ECL model requires expected credit losses to be recognised from initial recognition rather than waiting until objective evidence of impairment arises.

Hedge Accounting is another complex concept that is addressed in detail under IFRS 9 but is not widely applied under VAS.

7. Leases and IFRS 16

IFRS 16, Leases, fundamentally changed the accounting treatment of lease arrangements. Under IFRS 16, lessees are required to recognise most leases on the balance sheet as Right-of-Use Assets and Lease Liabilities, except where qualifying recognition exemptions are elected, such as for short-term leases of no more than 12 months at the commencement date without a purchase option, and leases of low-value assets.

This removes the distinction between operating leases and finance leases for lessees and may significantly increase the assets and liabilities of enterprises whose arrangements were previously accounted for as operating leases. By contrast, VAS continues to distinguish between operating leases and finance leases, with operating leases generally recognised as lease expenses rather than as lease assets and liabilities on the balance sheet.

This difference can have a significant impact on key financial indicators such as the debt-to-equity ratio, EBITDA and liquidity ratios, potentially affecting access to financing and investor assessments.

Core Concepts Management Should Understand During IFRS Conversion

To effectively "speak the same language" as IFRS, management should clearly understand the following concepts:

Substance over Form

This is one of the fundamental principles underlying IFRS. It requires financial statements to reflect the economic substance of transactions and events rather than relying solely on their legal form. A typical example is a lease arrangement. Under VAS, a lease may be recognised simply as a rental expense. Under IFRS 16, where the contract conveys the right to control the use of an identified asset and falls within the recognition requirements, the lessee recognises a right-of-use asset and a lease liability on the balance sheet.

This principle helps management better understand the actual value and risks associated with transactions, avoiding excessive reliance on complex legal structures and encouraging deeper analysis of business arrangements.

Stewardship

IFRS emphasises the role of financial statements in assessing management’s stewardship of an enterprise’s resources. This means that financial statements are not merely tools for measuring profit, but also provide information on how effectively management has used and protected shareholders’ resources. Such information helps stakeholders make decisions regarding the continued stewardship of existing management.

Significance: This concept strengthens accountability among management and those charged with governance. It requires transparency not only in operating results but also in how assets and resources are managed, thereby supporting confidence among investors and shareholders.

Legal and Constructive Obligations

Under IAS 37, a provision may arise from either a legal obligation or a constructive obligation when the applicable recognition criteria are satisfied. VAS 18 also includes requirements relating to legal and constructive obligations. Accordingly, the identification of an obligation should be based on the substance of the commitment and the recognition conditions under the applicable standard.

Significance: This concept helps management identify and manage potential obligations that may affect cash flows and the financial position at an earlier stage, even where there is no legally binding contract or written agreement. For example, an implied commitment to customers regarding product warranties may need to be assessed against the relevant recognition criteria even where no specific legal document exists.

Practical Impact of Key Standards

The significant differences between VAS and IFRS are not limited to technical accounting matters but may also have broader implications for an enterprise’s operations and strategy:

Impact on financial indicators and business performance: Applying IFRS, particularly standards such as IFRS 16, Leases, and IFRS 9, Financial Instruments, may significantly change important financial indicators on the Balance Sheet and Income Statement. For example, IFRS 16 may increase total assets and total liabilities when arrangements previously treated as operating leases are recognised on the balance sheet, thereby affecting financial leverage ratios. Under IFRS 9, the ECL model may result in impairment expenses being recognised at different amounts or at different times compared with VAS, directly affecting profit.

Compliance and information risks: If enterprises do not properly understand and apply these differences, they may face risks of non-compliance with IFRS requirements, potentially affecting the reliability of financial statements and the enterprise’s reputation. Any legal consequences will depend on the applicable legal framework and specific obligations. At the same time, inaccurate or incomplete financial information prepared under international standards may mislead investors, business partners and financial institutions.

Impact on investment and capital raising decisions: International investors and financial institutions commonly use IFRS financial statements to assess an enterprise’s financial health and prospects. IFRS financial statements can enhance transparency and comparability and may support enterprises in accessing international capital and communicating with investors. However, the outcome of any capital raising initiative will also depend on the enterprise’s financial position, business prospects and the terms of the relevant transaction.

What Should Enterprises Prepare for a Successful Conversion?

To support a successful conversion, enterprises should proactively undertake the following:

• Provide in-depth training: Strengthen the capabilities of accounting and finance teams in IFRS principles and requirements, particularly the key differences from VAS.
• Perform a Gap Analysis: Conduct a detailed analysis of differences between VAS and IFRS across the enterprise’s activities to identify the necessary adjustments.
• Upgrade systems and processes: Ensure that IT systems and internal processes are capable of collecting, processing and reporting data in accordance with IFRS requirements.
• Seek professional advice: Work with experienced IFRS professionals to obtain timely support and guidance throughout the conversion process.

Conclusion

Understanding the differences between IFRS and VAS helps enterprises connect accounting requirements with management objectives and the needs of financial statement users. From their objectives and underlying approaches to differences in recognition, measurement and presentation, enterprises should assess the impact based on their own transactions, data and operating circumstances.

Crowe Vietnam supports enterprises throughout their IFRS learning and conversion journey. Enterprises may explore Crowe Vietnam’s IFRS services to determine the scope of support most appropriate to their reporting objectives and existing capabilities.