When developing Vietnamese Accounting Standards (VAS), Vietnam's overarching principle was to adhere to the IAS system. VAS was fundamentally built upon IAS/IFRS, following the principle of selectively applying international practices, in accordance with the characteristics of the Vietnamese economy and the management level of Vietnamese businesses. Therefore, VAS has essentially aligned with IAS/IFRS, reflecting most transactions in a market economy, and enhancing transparency. Transparency of information regarding the financial statements of businesses.Nevertheless, many differences still exist between VAS and IAS/IFRS. This is evident in the following key points.
The first difference between VAS and IAS/IFRS lies in the content of the financial statements.
VAS stipulates that financial statements are not required to include a statement of changes in equity as per IAS 01. IAS has five components: Statement of Financial Position, Statement of Comprehensive Income, Statement of Cashflow, Statement of Changes in Equity, and Notes to Financial Statement. VAS, however, only includes four components: Balance Sheet, Income Statement, Cash Flow Statement, and Notes to Financial Statements; the statement of changes in equity is considered part of the notes to the financial statements.
The revaluation of assets and liabilities at fair value is not yet permitted.
The most fundamental difference is that VAS does not yet have provisions allowing the revaluation of assets and liabilities at fair value at the reporting date. This significantly affects the accounting of assets and liabilities classified as financial instruments – undermining the fairness and integrity of financial statements and inconsistent with IAS/IFRS. VAS 21 does not require the presentation of the Statement of Changes in Equity as a separate report, as IAS 1 does, but only requires its presentation in the notes to the financial statements.
Financial reporting format and chart of accounts
The Vietnamese accounting system prescribes rigid reporting forms, reducing the flexibility and diversity of the financial reporting system, while IAS/IFRS No specific report template or account code is provided. Financial reports are prepared and presented according to the company's management style.
IAS/IFRS only specifies the format of financial statements according to IAS 1, and does not prescribe the accounting chart of accounts. Businesses are allowed to create their own accounting chart of accounts to better suit the requirements of financial reporting as well as management reporting.
Mandatory accounting practices for businesses sometimes create disadvantages for foreign businesses in Vietnam because they often face difficulties in transitioning and it reduces consistency among companies within the same group. Differences between VAS and IAS/IFRS
Inventory valuation methods
IAS 2 allows the use of inventory valuation methods such as physical identification, first-in, first-out (FIFO), and weighted average. VAS 2, in addition to these three methods, also allows the application of the Last-In, First-Out (LIFO) method, whereas IAS/IFRS does not permit this method. However, Circular 200 issued in 2014 removed the Last-In, First-Out (LIFO) inventory valuation method.
Initial recorded value
VAS 03 only allows recognition and reporting at cost. IAS 16 allows two accounting methods: (a) recognizing assets at cost or (b) revaluing them at fair value.
- Cost model: Assets are recorded at their original cost less accumulated depreciation and accumulated impairment losses.
- Revaluation model: Assets are recorded at their revalued amount. The revalued amount is the fair value at the revaluation date less accumulated depreciation and accumulated impairment losses. IAS 16 requires this model to be used only if the fair value of the asset can be measured reliably.
VAS 3 only permits the revaluation of fixed assets such as real estate, factory buildings, and equipment in cases where there is a government decision, when the assets are contributed to joint ventures or partnerships, or when businesses are split or merged, and does not allow for the recognition of annual asset impairment losses. Meanwhile, according to IAS 16, businesses are allowed to choose a fair value asset revaluation model and determine annual asset impairment losses, while also recognizing these losses as stipulated in IAS 36.
Distribution of trade advantages
According to VAS 11, when a business combination transaction occurs, goodwill will be amortized gradually over a period not exceeding 10 years from the date of acquisition. Meanwhile, according to IFRS 03, the values of impaired goodwill must be reassessed.Differences between VAS and IAS/IFRS
VAS does not have an equivalent standard in IAS/IFRS.
Many international reporting standards do not have equivalent Vietnamese Standards (VAS). Specifically, these include:
- IAS 19: Regulations on the accounting and presentation of employee benefits, including short-term benefits, long-term benefits, and severance pay;
- IAS 20: Regulations on the accounting and presentation of grants and other forms of government financing;
- IAS 32: Presentation of Financial Instruments (Circular No. 210/2009/TT-BTC requires enterprises to apply the provisions of IAS 32 and IFRS 7 on the presentation and disclosure of financial instruments from 2011);
- IAS 39: Establishing principles for the recognition, cessation of recognition and valuation of financial assets and financial liabilities (replaced by IFRS 9, effective January 1, 2018);
- IFRS 09: Requirements for the recognition and cessation of recognition, classification and measurement of financial assets and financial liabilities, impairment of value in general risk hedging accounting (effective January 1, 2018);
- IFRS 14: Statutory Deferred Transactions (effective January 1, 2016).
- IAS 26, 41, 06: Standards for specific trades or activities including pension fund accounting and reporting, agriculture, mineral exploration and evaluation.
- IAS 29, 36, 02, 15: Standards concerning specific events or transactions: Financial statements under hyperinflation, asset impairment, stock-based settlement, or assets held for sale and going concern.
- IFRS 13: Fair Value Measurement.
- IAS 27: Accounting methods for investments in subsidiaries, joint ventures, and associates in separate financial statements;
- IFRS 12: Disclosure of Interests in Other Entities to assess the nature and risks associated with an entity's interest in other entities and the impact of such interest on the entity's financial position, operating results and cash flow (the presentation of interests in subsidiaries, joint ventures and associates is governed by VAS 25, 08 and 07).
The information above regarding the differences between VAS and IAS/IFRS aims to provide readers with a basic understanding of IFRS standards. For any difficulties encountered during the conversion process, please contact our Consulting Department for assistance.