Vietnam IFRS roadmap: how accounting standards are changing

Vietnam IFRS roadmap is the Ministry of Finance plan to move the country from its own accounting standards to International Financial Reporting Standards, known as IFRS. The plan was approved in Decision 345/QD-BTC on 16 March 2020. It does not switch everyone over at once. It moves in steps, with a preparation stage first, then a voluntary stage, then a mandatory stage for selected groups of companies.

This article explains the steps in plain terms. It also shows what finance teams can do now, while most of the work is still optional.

Where Vietnam stands today

Vietnam uses its own set of accounting rules called Vietnamese Accounting Standards, or VAS. The Ministry of Finance issued 26 standards in the years after 2001. Most companies also follow the accounting regime in Circular 200/2014/TT-BTC, which covers charts of accounts and the form of financial statements.

The Law on Accounting, number 88/2015/QH13, has applied since 1 January 2017. It sets the basic duties for keeping books and preparing statements. It also gives the Ministry of Finance the job of issuing accounting standards and guidance.

VAS is based on older versions of international standards. Over the years, IFRS has added many new rules, for example on fair value, leases and revenue. That gap is the main reason for the plan.

Sources: Law on Accounting No. 88/2015/QH13, National Assembly of Vietnam; Ministry of Finance, Circular 200/2014/TT-BTC; Ministry of Finance, Vietnamese Accounting Standards, first issued in 2001.

What Decision 345 says

Decision 345/QD-BTC approves a plan, often called a scheme, for applying IFRS in Vietnam. A plan is not a law. It tells the ministry and the market where policy is heading and in what order the work should happen.

The plan sets three broad stages. The first is preparation, which covers drafting guidance, translating the standards and training staff. The second is a voluntary stage that begins in 2022. The third is a mandatory stage that follows the voluntary one for chosen groups of entities.

The plan says the voluntary stage runs for four years. After that, the rules for the mandatory stage depend on further steps by the ministry, so firms should expect more detail to come.

Sources: Ministry of Finance, Decision 345/QD-BTC of 16 March 2020 approving the plan to apply IFRS in Vietnam.

Which firms are affected, and when

The first firms in line are the larger and more visible ones. These include parent companies that must produce consolidated statements, state-owned groups and public companies, along with firms that already report to foreign parents or lenders. Smaller firms stay on VAS for now.

During the voluntary stage, a company that meets the conditions may choose to adopt IFRS. It tells the Ministry of Finance first, and it does so by choice, not by order. The company still has to meet local tax and legal reporting rules, which remain based on VAS. That means many firms will keep two sets of books for a time.

In the mandatory stage, which follows the voluntary stage, news reports of the decision say IFRS would be required for the consolidated statements of state-owned corporations, listed companies and large unlisted public companies. Detailed guidance is still to come. Any firm that is unsure should check each new circular as it appears, rather than assume it is inside or outside the scope.

Sources: Ministry of Finance, Decision 345/QD-BTC of 16 March 2020; Viet Nam News, report on Decision 345/QD-BTC, 18 March 2020.

What changes in the numbers

Moving to IFRS can change reported results, not just the layout of the reports. Some of the common areas are listed below.

• Revenue is recognised under a five step model, so timing can shift.
• Leases usually move onto the balance sheet.
• Many financial assets and some other items are measured at fair value.
• Notes to the accounts become longer and more detailed.

Profit, debt ratios and loan covenants can all move. A company should test its key ratios on an IFRS basis before it talks to lenders or investors about the change.

Sources: IFRS Foundation, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases, both published before 2022.

How to prepare now

Most of the work is people and systems, not paperwork. A simple plan has four moves.

1. Pick one person to lead and read Decision 345 in full.
2. Run a gap review of your current VAS policies against IFRS, starting with revenue, leases and financial instruments.
3. Check that your accounting software can keep a second set of books or run IFRS adjustments.
4. Train the team. Qualifications such as those offered by professional accounting bodies are a common route.

Talk with your auditor early. They can tell you how long a conversion takes for a company of your size and what it costs.

Sources: Ministry of Finance, Decision 345/QD-BTC; Law on Accounting No. 88/2015/QH13.

The bottom line

The plan is real, public and in motion, but the hard deadlines are still to come. Treat the voluntary stage as practice time. Firms that start the gap review now will have fewer surprises when the ministry sets the mandatory rules.

This article gives general information, not accounting, tax or legal advice. Check the original decisions and talk to a qualified adviser before you act.

Sources: Ministry of Finance, Decision 345/QD-BTC of 16 March 2020.