Financial Reporting Standards in Vietnam

I. Question 1
The Scheme to apply financial reporting standards in Vietnam, according to Decision No.
345 / QD-BTC dated March 16, 2020, has outlined a detailed roadmap for Vietnamese
accounting area to apply International Financial Reporting Standards (IFRS). This plan has
divided into two stages (Bui, Le, & Dao, 2020) based on the timeline as follows:
1.Preparation Phase (2020 – 2021)
The scheme of Vietnamese financial statements standards applying is developed
and issued.
Translating, reviewing, developing, and issuing a translation of IFRS into
Vietnamese and submitting to competent authorities to promulgate of legislative
documents on how to apply IFRS.
Provide training courses for the workforce and implementation processes for
enterprises.
2.Phase 1: Voluntary Application (2022 – 2025)
For consolidated financial statements:
The Ministry of Finance encourages enterprises that have enough demands and
resources and shall inform before voluntarily applying IFRS, such as:
i. Parent companies of state-owned economic groups operating on a large scale
or having loans funded by international financial institutions;
ii. Parent companies which are listed companies;
iii. Large-scale public companies which are unlisted parent companies;
iv. Other parent corporations.
(Vanbanphapluat, 2020)
For separate financial statements:
Any enterprises having overseas investment, which are subsidiaries of the
overseas companies that have the need and resources, willingly apply IFRS to
prepare the financial statements (must inform the Ministry of Finance before
voluntarily applying IFRS).
Student ID: HAN20110028
Total word count: 3145

3.Phase 2: Compelled Application (After 2025)
For consolidated financial statements:
Base on the result of Phase 1 on the demand and willingness of enterprises in
some actual situation or specific plans and preliminary period for mandatory IFRS
application, The Ministry of Finance would be prepare financial statements for
enterprises including:
i. Parent companies of state-owned economic groups;
ii. Parent companies which are listed companies;
iii. Large-scale public companies which are unlisted parent companies;
iv. Other parent corporations.
(Vanbanphapluat, 2020)
For separate financial statements:
With the result of Phase 1, the demand and willingness of enterprises in
some actual situation or specific plans and preliminary period will be a foundation
for IFRS applying. Base on this, the Ministry of Finance would be prepare financial
statements.
Accounting is no longer an isolated concern of each country in the area of economic
globalization, IFRS has become more and more widespread. In this context, Vietnam has
also initially launched the IFRS application roadmap (Vanbanphapluat, 2020). Applying IFRS
into Vietnam will open up a development opportunity, along with specific challenges for
accounting in particular and the development of not only public enterprises, listed
companies, or large scales unlisted companies but also of small and medium-sized entities
(SMEs) in general.
According to VIR (2020), when Vietnamese accounting applies the IFRS system, it will
mark an enormous transformation, and Vietnamese accounting would be prompted to be
closer to the development of accounting in the world. Making a roadmap will help
businesses operating in Vietnam have a proper development orientation, mostly the result
of an accounting team.
With the change in domestic economic institutions and the IFRS system in this period,
Vietnamese Accounting Standards (VAS) is being applied under the Ministry of France issue
from 2001 to 2005, which showcases many drawbacks (Pham, 2012). For example, VAS has
not resolved some transactions related to the recognition of assets losses, payables at fair
Student ID: HAN20110028
Total word count: 3145

value. Meanwhile, IFRS with acceptable value determination standards will allow businesses
and other financial statements’ users to have an actual view of the operations, financial
situation and the enterprise's current value.
Next, the global accounting language IFRS application helps international financial
transactions reduce costs and increase transparency, thereby improving governance quality.
At the same time, businesses can increase profits more, attract investment, expand business
cooperation opportunities. Applying IFRS will help investors or partners, especially foreign,
to compare, and evaluate the unit's financial information but in the same language and
standard. Thereby, this common practice from which to make appropriate business or
investment decisions.
Applying the IFRS system, every businesses can easily compare the activities and and
evaluate the financial situation more accurately. Hence, each business can easily have a fair
comparison with their competitors that also applying IFRS, or have a deeper look into their
customers, suppliers.
On the other hand, follow the IFRS application roadmap - Decision No. 345 / QD-BTC on
applying financial reporting standards in Vietnam from 2020 to after 2025, the
encouragement and mandatory application of IFRS for financial reporting is emphasized on
"demand", "resources" and the actual situation in large enterprises (Bui, Le, & Dao, 2020).
However, for other SMEs in the current economic context of Vietnam, they should be
considered when applying the IFRS accounting standards for some reasons.
First, IFRS is relatively complex for users, even in developed economies. IFRS has been
developed by the International Accounting Standards Committee and the International
Accounting Standards Board (Mirza, Holt, & Orrell, 2010). Moreover, English is the official
language of the IFRS (Huerta, Petrides & Braun, 2013). One of the barriers in applying IFRS is
reading, understanding, and applying the accounting team in Vietnam. Therefore, most of
the accounting staff at SMEs in Vietnam has not been trained and have authorized access to
IFRS.
According to Carmona & Trombetta in their research (2008), accountants who have a
good grasp of business operations, and analyzing information skill can use IFRS system. The
application of accounting methods, or IFRS presentation may require a more detailed
information recording. As a result, the workload to increase and SMEs in Vietnam is unlikely
to have enough human resources to meet this.
Lastly, the application of IFRS requires businesses to have a forceful information
technology system to support collecting, processing and presenting financial information
from all departments within the enterprise, even information outside the company (Phan,
Student ID: HAN20110028
Total word count: 3145

Joshi & Mascitelli, 2018). However, in a developing economy, not all SMEs are capable and
qualified enough to deploy such synchronous information technology systems.
In summary, the application of international accounting standards IFRS for SMEs in
Vietnam is still a big issue. However, with the application roadmap has outlined, and the
change of IFRS in the world application process, the Vietnamese Ministry of Finance should
continue to coordinate with other departments, agencies and organizations, to facilitate,
and encourage SMEs to apply IFRS for the foreseeable future.
II. Question 2
(i.)
Under IAS 39:
Financial assets or financial liabilities are measured to the initial fair value without
any deduction for expected transaction costs on disposal (Gornjak, 2017). An“available for
sale” is a financial asset that does not fall within one of these categories, including held-to-
maturity, fair value through profit and loss (FVTPL) and loans and receivables, and will be
measure at fair value (Gornjak, 2017).
Under IFRS 9:
A default financial asset is measured at amortized cost and at fair value. Just in case
it is carried at FVTPL, transaction costs are immediately expensed (Huian, 2012). As for the
financial assets, it must be measured at amortized cost just in case two tests including
busines model test and contractual cash flow characteristics test were passed (Gebhardt,
2016).
 Under IAS 39, B-Co recognized the investment as an “available for sale” which
means B-Co can sale this asset any time (does not have to hold it). Under IFRS 9, this
“available for sale” that B-Co invested does not pass the two tests (business model test and
contractual cash flow characteristics). Hence, B-Co recognizes and measures at fair value.
(ii.)
Under IAS 39:
Student ID: HAN20110028
Total word count: 3145