In the trend of global integration, countries around the world are shifting from applying national standards to international standards to ensure businesses have a common voice to serve investors globally, so adopting IFRS will be of great benefit in all respects.

According to the document of the International Accounting Standards Board (IASB), up to now 131/143 countries and territories (around 93% of countries surveyed by IASB) have declared that IFRS is allowed to apply in different forms.

The necessity of applying IFRS in the current context

Financial market (to mobilize capital) includes: Money market (short-term capital, which is mainly the participation of commercial banks) and Capital market (long-term investment capital).

Capital Market instruments include:

• Share;
• Company bonds;
• Loans provided by commercial banks and financial companies;
• Government securities and government agencies securities.

Currently, foreign partners (indirect investors and international financial institutions) can only invest into Vietnam through the Capital Market. 

Investors make capital decisions based on many factors, but most importantly the information presented and published on the financial statements. Therefore, to promote the ability to mobilize capital flows from the international market, Vietnamese enterprises must disclose financial information (financial statements) in accordance with international standards (IFRS) instead of applying Viet Nam accounting standards (VAS).

That is also the reason why in the first stage application objects towards IFRS are mainly enterprises listed on the stock market.

Benefits of applying IFRS:

• Help improve the ability of international organizations to upgrade the Vietnamese stock market;
• Favorable for businesses to attract indirect investment and loans from international financial institutions such as the WB, ADB, and IMF;
• Minimize the cost of converting the Financial Statements of foreign-invested enterprises on the consolidation of the financial statements with the parent company.

Roadmap of application

The fact that the parent companies (listed on the stock market) are applying IFRS also requires that the subsidiaries also apply the standards in accordance with IFRS practices to avoid huge discrepancies in the consolidation of the financial statements. Such discrepancies are limitations of VAS which need to be changed, such as recognition of assets and liabilities at cost, not fair value (market value)…

Along with the implementation of IFRS, VFRS has also been implemented to replace VAS:

Object of application

Difficulties and obstacles when applying IFRS:

• Vietnam’s capital market has not developed strongly enough, so it may face some difficulties in the short term;
• Lack of experts has deep understanding of IFRS;
• Differences between financial mechanism and financial statements standards for state-owned enterprises.