IFRS and VAS Part 1: Introduction to Vietnamese Accounting Standards

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In part one of this three-part series, Vietnam Briefing introduces the differences between IFRS and VAS.

International Financial Reporting Standards (IFRS) are global accounting standards issued and regulated by the International Accounting Standard Board (IASB) to guide the preparation and presentation of financial reports. Vietnam uses IFRS as a basis for its own system, the Vietnamese Accounting Standards (VAS), yet there are key differences between the two.

Vietnam’s government has issued 26 VAS based on IFRS. To provide guidance for local and foreign enterprises in Vietnam on these standards, the Ministry of Finance recently issued Circulars, No. 200/2014/TT-BTC and No. 202/2014/TT-BTC, which enhance the comparability and transparency of corporate financial statements and bring the two systems closer.

Key differences between IFRS and VAS include terminology, applied methods or presentation scope. Below are several critical differences between the two financial reporting systems.

Presentation of Financial Statements

A complete set of financial statements based on IASB’s International Accounting Standard (IAS) 1 includes the following:

  • Balance Sheet;
  • Income Statement;
  • Cash Flow Statement;
  • Statement of Changes in Equity; and
  • Notes, including a summary of significant accounting policies and other notes.

The components of financial statements under VAS are:

  • Balance Sheet;
  • Income Statement;
  • Cash Flow Statement; and
  • Notes.

According to VAS 21, the Statement of Changes in Equity is enclosed in the Notes, rather than as a primary component of the financial statement. Furthermore, VAS does not require disclosure of management’s key judgments, assumptions about the future and sources of estimation uncertainty.

Cash Flow Statements

Under IFRS 7, cash flow statements are based on the balance sheets from the first and final period accounting reports, and can include some information from the ledger. IFRS stipulate that receivable accounts and trade payables can be separated from receivable accounts and payables on the sale of fixed assets or long-term assets; hence, cash flow from business is distinct from cash flow from financial investment.

Based on VAS 24, cash flow statements are taken from the cashbook and ledger bank deposits corresponding to the side account. VAS 24 gives guidance on setting up cash flow statement using the indirect method starting from pre-tax profits plus or minus the adjustment including differences of payables excluding payables related to financial investment activities.

Chart of Accounts

Vietnam’s Ministry of Finance issued a uniform chart of accounts for enterprises’ financial statements. Circular No. 200/2014/TT-BTC introduced new accounts, including corporate restricting funds (Account 417) and prize stabilization funds (Account 357), while some are omitted or amended.

Further Support for Your Business

As all foreign and local companies operating in Vietnam are obliged to conform to VAS, foreign investors should be well aware of unique fundamental characteristics of VAS to fully comprehend compliance requirements and make informed investment decisions.

About Us

Vietnam Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Hanoi and Ho Chi Minh City. Readers may write to vietnam@dezshira.com for more support on doing business in Vietnam.

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