IFRS Adoption Roadmap in Vietnam: What You need to know?

The IFRS Adoption Roadmap in VietNam has become a pressing concern for Vietnam, as the country gradually moves towards enhancing its financial transparency and international financial integration. The transition to IFRS is a careful process that requires thorough preparation. In this article, we will explore in detail of the IFRS Adoption Roadmap in VietNam, the necessary preparations, and the steps to transition from Vietnamese Accounting Standards (VAS) to IFRS. Don't miss this article!

The IFRS Adoption Roadmap in VietNam

On March 16, 2020, the Ministry of Finance of Vietnam officially issued Decision No. 345/QD-BTC, approving the "Scheme on Applying International Financial Reporting Standards (IFRS) in Vietnam". This is an important step in Vietnam's journey of transitioning from the Vietnamese Accounting Standards (VAS) to IFRS - a global set of standards.

According to this Decision, the roadmap for IFRS adoption in Vietnam is divided into 3 main phases:

Preparation Phase (2020 - 2021):

During this phase, the relevant agencies and organizations will focus on developing the legal framework, improving the accounting system, training human resources, and raising awareness about IFRS.

Voluntary IFRS Adoption Phase (2022 - 2025):

Starting from 2022, enterprises will be able to voluntarily choose to apply IFRS. This is an important stage for entities to experiment, evaluate, and refine the transition process.

Mandatory IFRS Adoption Phase (From 2025 onward):

From 2025, the application of IFRS will become mandatory for Vietnamese enterprises will be based on their readiness, the needs of the businesses, as well as the actual situation and specific cases.

The roadmap for IFRS adoption in Vietnam is divided into 3 main phases.

This roadmap creates both opportunities and challenges for Vietnamese organizations and enterprises. Proactively understanding and adapting to the new requirements of IFRS will help businesses strengthen their competitiveness and position in the global market.

>>> See Also: What is IFRS? What is the significance of IFRS today?

Preparing for IFRS Implementation

For successful IFRS adoption in Vietnam, enterprises need to undertake the following critical preparation steps:

1. Assess the Differences between IFRS vs VAS:

• Clearly identify the key differences between VAS vs IFRS in areas such as revenue recognition, asset/liability measurement, financial statement presentation, etc.
  
• This will help determine the necessary changes in accounting processes, systems, and data.

2. Develop a Conversion Plan:

• Establish a detailed plan for the conversion process, including implementation steps, timelines, required resources, and budgets.
  
• This plan should be developed with the involvement of all relevant departments within the enterprise.

3. Provide Training and Build Capacity:

• Accounting and finance personnel need to be trained on IFRS requirements and principles.
  
• Training should cover basic concepts, key standards, and skills for applying IFRS in practice.
  
• Enterprises should establish a continuous training plan to ensure employees stay up-to-date.

4. Update Information Technology Systems:

• Evaluate and update information technology systems to meet IFRS data and reporting requirements.
  
• Accounting, finance, and reporting systems should be reviewed and upgraded to ensure IFRS compatibility.

5. Establish Accounting Policies and Internal Controls:

• Develop accounting policies aligned with IFRS and ensure effective internal control systems are in place.
  

• This will help ensure the accuracy, completeness, and transparency of financial information.
  

Training employees on IFRS is one of the most crucial preparations in the roadmap for IFRS adoption in Vietnam

>>> See Also: IFRS vs VAS (Part 1): An Overview of Key Differences

Process of converting from VAS to IFRS

The main steps in the process of converting from Vietnamese Accounting Standards (VAS) to International Financial Reporting Standards (IFRS) are:

1. Selecting the time of conversion:

• The enterprise needs to clearly determine the time of conversion, which is usually the beginning of the fiscal year.

• Choosing the appropriate timing will help the enterprise manage the conversion process effectively.
  

2. Preparing the opening financial statements:

• The enterprise needs to prepare the opening financial statements according to IFRS requirements, using appropriate accounting policies.
• This opening financial statement will be used as a basis for comparison and adjustment in subsequent reporting periods.

3. Implementing the conversion adjustments:

• The enterprise needs to make necessary adjustments to convert from VAS to IFRS, affecting various items on the financial statements.
• These adjustments may include the recognition of assets, liabilities, equity, revenue, expenses, etc.
  

4. Preparing the financial statements under IFRS:

• The enterprise will prepare financial statements according to the requirements and principles of IFRS, including reports such as the Statement of Financial Position, Statement of Comprehensive Income, Statement of Cash Flows, and Notes to the Financial Statements.

5. Disclosure and audit:

• The enterprise needs to disclose financial information according to IFRS and have it audited by independent entities.
• The audit will verify the accuracy, completeness, and compliance of the financial statements with IFRS.
  

Enterprises need to identify the exact transition steps in order to successfully transition from VAS to IFRS

Conclusion

The IFRS Adoption Roadmap in Vietnam outlines a well-defined path for enterprises to successfully transition from Vietnamese Accounting Standards to the global financial reporting framework. While the process involves meticulous planning and preparation, the long-term benefits of improved transparency, comparability, and access to international capital markets make it a strategic imperative for Vietnamese businesses. By addressing the key steps, from selecting the conversion timeline to ensuring proper disclosure and audit, and by investing in employee training, organizations can navigate the complexities of this transformation and position themselves for sustainable growth in the evolving global economy.

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