The conversion of VAS to IFRS – what businesses should prepare
By David Truong Lang, Viettonkin Consulting
Undeniably, IFRS – the International Financial Reporting Standards – is very popular with businesses worldwide with recommendations as per OECD’s guidelines. Vietnam Accounting Standards, the so-called VAS, is used specifically for the local accounting system under Vietnamese jurisdiction. Under the impact of globalisation, the transition from VAS to IFRS is inevitable. Thus, in 2020, the Vietnam Ministry of Finance issued Decision No. 345/QD-BTC approving the plan to apply IFRS in the country.
Despite being designed in line with the framework of IAS/IFRS, VAS has 26 standards, compared to the 41 of IAS and 16 of IFRS. Hence, VAS is not equivalent to IAS/ IFRS. Most of the differences between the two standards come from accounting operations, and revenue-expense recognition principles, causing disparity in business performance evaluation. Such differences can change salaries and bonuses for employees, and impact market and shareholder expectations (for listed or public companies).
The Ministry of Finance has encouraged Vietnamese companies to switch to IFRS voluntarily in the period 2022-2025. During this period, firms should use parallel VAS financial statements (for individual financial statements) and IFRS (for consolidated ones). This policy familiarises companies with the new accounting standards beyond the VAS, and minimises or eliminates tax compliance risks due to no clear legal framework by identifying exact taxable income calculations based on IFRS and VAS.
Along with this recommendation, companies should invest in training professional accountants. According to Mr. Trinh Duc Vinh, Deputy Director of the Department of Management and Supervision of Accounting and Auditing, training IFRS-proficient staff normally takes about 3 to 5 years. For large corporations, it takes 3 years, and even longer for smaller companies. Additionally, the transition from VAS to IFRS requires the cooperation of different departments and governing bodies, including the board of directors, key managers, and the legal department.
David Truong LangGGI member firm
Auditing & Accounting, Tax, Corporate Finance, Advisory
Ha Noi and Ho Chi Minh City, Vietnam
T: + 84 918 866 858
Founded in 2009, Viettonkin is a multidisciplinary group of consulting firms specialising in accounting, legal, and a one-stop solution to FDI enterprises worldwide. The FDI consulting company aims to facilitate and connect investors in Southeast Asia with the rest of the world.
David Truong Lang is the Founder and CEO of Viettonkin. He has over 10 years of experience, focused on FDI investment and supporting worldwide enterprises.
Published: Auditing, Reporting & Compliance Newsletter, No. 07, Spring 2022 l Photo: HaniSantosa - stock.adobe.com