A newly established company is required to appoint a chief accountant, who meets the qualifications prescribed under the Accounting Law, within the first fiscal year. During this period, a qualified accountant appointed by the Foreign Invested Enterprise (FIE) shall be responsible over all accounting activities.
All FIEs operating in Vietnam are required to apply the Vietnamese Accounting Standards and System (VAS) as statutory financial reporting framework and comply with the relevant statutory requirements.
Provided that VAS is applied without modifications, the registration for the use of VAS with the MOF is not required.
Accounting principles and practices
The VAS is comprised of the Vietnamese Accounting Standards, the Accounting System for Enterprises and any related guidance promulgated by the Department of Accounting and Auditing Policy of the Ministry of Finance (MOF). An official English translation of the VAS had also been published by the MOF and is widely circulated.
The VAS applies to state-owned and private Vietnamese companies as well as to FIEs. The VAS prescribes in detail the method by which transactions are to be accounted for,including the use of specific accounting codes and account names. The VAS also prescribes a standard chart of accounts, the format of internal accounting documentation, the bookkeeping journals for all types of transactions to be used, and a financial statement and disclosure template. All accounting records are required to be maintained in the Vietnamese language or both Vietnamese and a foreign language. The required accounting currency is the Vietnam Dong (VND) and the entity is only allowed to choose a currency other than the VND as accounting currency if it meets certain criteria (e.g. major sales and purchase transactions are made in the chosen accounting currency) as stated in Circular 244/2009/TT-BTC dated 31st December 2009 issued by the MOF. Any financial statements, which are prepared in currency other than VND, are required to be converted into VND using interbank exchange rate as at reporting date and should be certified by an independent auditor.
Any deviations from the VAS require prior approval from the MOF.
VAS and International Financial Reporting Standards
Recognizing the need for the harmonization of the VAS with International Financial Reporting Standards (IFRS), formerly known as International Accounting Standards (IAS), the MOF has released a total of 26 Vietnamese Accounting Standards, which are as follows:
VAS 1 Framework
VAS 2 Inventories
VAS 3 Tangible fixed assets
VAS 4 Intangible fixed assets
VAS 5 Investment property
VAS 6 Leases
VAS 7 Accounting for investments in associates
VAS 8 Financial reporting of interests in joint ventures
VAS 10 The effects of changes in foreign exchange rates
VAS 11 Business combination
VAS 14 Revenues and other incomes
VAS 15 Construction contracts
VAS 16 Borrowing costs
VAS 17 Income tax
VAS 18 Provisions, contingent liabilities and contingent assets
VAS 19 Insurance contracts
VAS 21 Presentation of financial statement
VAS 22 Disclosures in the financial statements of banks and similar financial institutions
VAS 23 Events after the balance sheet date
VAS 24 Cash flow statements
VAS 25 Consolidated financial statements and accounting for investments in subsidiaries
VAS 26 Related parties disclosures
VAS 27 Interim financial reporting
VAS 28 Segment reporting
VAS 29 Changes in accounting policies, accounting estimates and errors
Currently, there are industry-specific accounting guidelines for insurance companies, security trading companies and financial institutions that supplement the VAS.
The accounting and reporting regimes of banks, leasing and financial institutions are further governed by regulations issued by the State Bank of Vietnam.
Disclosure, reporting and filing requirements
Report format and disclosure requirements
The basic set of financial statements prepared under VAS is comprised of the following:
i) Balance sheet, including a separate schedule for off balance sheet items
ii) Income statement
iii) Cash flow statement; and
iv) Notes to the financial statements
Flexibility in the preparation of VAS financial statements is limited in that the report format and disclosure requirements have been prescribed by the MOF. The information required to be disclosed in the notes to the financial statements include among others: a disclosure on the change in equity, calculation of taxable income, commitments and contingencies and related-party transactions.
Reporting and filing requirements
Financial statements must be prepared annually, audited and filed with the following:
i) The city or provincial tax office
ii) The MPI or the relevant delegated investment license-granting authority in the case of FIEs
iii) The General Statistics Office (GSO).
For enterprises located in an Export Processing Zone (EPZ) or Industrial Zone (IZ), financial statements will be filed with EPZ or IZ Management Board if required.
All FIEs and parties to BCCs are required to file annual audited financial statements. Companies must file their audited financial statements within 90 days after the close of their registered financial period.
An enterprise’s financial year is generally the calendar year. A formal notice should be lodged with local tax authorities if there is a change in financial year.
As for the newly established company, if period from the establishment date to the nearest reporting date is less than 90 days, such period will be aggregated with the following reporting year.
It is required that any change in an entity’s legal form, merger, business combination and split require separate reporting at date of the change. If the period from nearest reporting date to the date of change is less than 90 days, such period is to be aggregated with the previous reporting year.
Retention of documents and other accounting records
The following general guidelines apply to the retention of documents and other accounting records:
i) Documents to be kept for at least five years include those used for management or operation of the enterprise
ii) Documents to be kept for at least 10 years include accounting data, accounting books, financial statements and reports of independent auditing firms
iii) Documents to be kept permanently include those that are significant in terms of economics, national security and defense.
Accounting treatment of establishment and pre-operating expenses
Establishment costs are those incurred before the establishment of the FIE, meaning before the date of the Investment Certificate, whereas pre-operating expenses are those incurred from the establishment date to the date the business goes into commercial operation.
VAS prescribes two alternative approaches in accounting for establishment costs and certain pre-operating expenses (including training and advertisement expenses) as follows: (a) charged to the income statement as incurred; or (b) capitalized as deferred assets and amortized over a period not exceeding three years.
Under existing regulations, the annual financial statements of FIEs, listed entities, BCCs, insurance companies, financial institutions and state-owned enterprises are required to be audited by a duly licensed independent audit company.
Audit contracts should be signed with the independent auditors no later than 30 days before the close of the entity’s financial year in accordance with Decree 105/2004/ND- CP dated 30th March 2004 and Law on Independent Auditing with effect from 1 January 2012.