As the demands from World Bank, IFC and foreign investors become unavoidable, firms in Vietnam are required to adopt International Financing Reporting Standards (IFRS) in 2020. The application of the international system will be required first by firms listed in HCM City and Hanoi’s stock exchanges.
Evidence showed that the switch to IFRS brought important economic results, with long-term benefits outweighing short-term costs and implementation challenges. The benefits include transparency, accounting quality, comparability and market liquidity among others, a finance ministry official has said. By 2018, Vietnam should have the required legal framework for applying international financial reporting standards.
Inefficient financial regulatory controls
In Vietnam, accounting standards are issued by the Ministry of Finance of Vietnam and are known as “Vietnam Accounting Standards”. The Department of Accounting and Auditing Policy of the Ministry of Finance has formed the Vietnamese Accounting Standards Board (VASB) to develop and approve the standards.
The Ministry of Finance states that it takes International Financial Reporting Standards (IFRS) into account in developing Vietnamese Accounting Standards . However, the IASB website states clearly that Vietnam has not yet adopted the IFRS or the IFRS for SMEs. Some Vietnamese companies prepare IFRS financial statements for the purpose of reporting to foreign investors. However, those IFRS financial statements are supplementary financial statements published in addition to – not instead of – financial statements prepared using VAS.
The lack of the international reporting standard subject businesses in the country to additional work for their statutory reporting commitments and harm the domestic Vietnamese business by restricting their access to foreign capital.
This change in regulation hopes to attract more foreign investment in Vietnam.
A version of this appeared in AmCham Vietnam on June 17. Read the full article here.