IFRS implementation in Vietnam: Building a bridge to international investment

In the context of the current global economic integration, financial management and financial reporting require standards and consistency to ensure transparency and reliability. To meet this development, International Financial Reporting Standards (IFRS) became a hot topic, changing the way businesses worldwide conduct accounting and financial reporting. Along this journey, we would like to provide an in-depth knowledge about IFRS, its scope and the significant impact it has on the world of accounting and finance.

Definition

International Financial Reporting Standards is a system of international accounting standards developed by the International Accounting Standards Board (IASB). IFRS is considered the “global financial language” that is guiding businesses and accountants in preparing financial reports; helping investors and report readers understand the information in financial statements consistently.

Roadmap for IFRS application in Vietnam

PhaseContent

Preparation phase

2020 – 2021

The Ministry of Finance prepared necessary conditions such as:

  • Publishing Vietnamese translations of IFRS;
  • Developing and issuing guidance documents for the application of IFRS;
  • Establishing related financial mechanisms;
  • Training human resources and implementing processes for businesses.

Voluntary phase

2022 – 2025

Some businesses with the need and sufficient resources voluntarily selected by the Ministry of Finance, including:

  • The parent company of large-scale state-owned economic groups with loans funded by international financial institutions.
  • Listed company.
  • Large-scale public companies that are unlisted parent companies.
  • Other parent companies with the need and sufficient resources voluntarily applying the IFRS.

Separate financial reporting

  • Businesses with 100% foreign direct investment with the need and sufficient resources are voluntarily selected by the Ministry of Finance.

Compulsory implementation phase

From 2025 onwards

The Ministry of Finance will determine specific mandatory implementation timelines for each specific entity based on their needs, readiness, and the practical situation.

 

Advantages of Implementing IFRS in Vietnam

  • Global applicability and harmonization: IFRS is a widely applied global accounting standard, enabling businesses in Vietnam to align with international rules and standards. This creates favourable conditions for companies when they want to merge with international companies or attract foreign investments.
  • Transparency: Using IFRS enhances comparability and transparency in a company’s financial reports as financial information is then presented in accordance with internationally recognized standards. This allows investors, regulatory bodies, and partners to easily compare the financial situations of Vietnamese companies with those in other countries.
  • Enhanced access to capital: Applying IFRS makes it easier for investors and stakeholders to assess the businesses performance of companies in Vietnam. This provides favourable conditions for raising capital from foreign investors or international banks, thereby enhancing the competitiveness of businesses.

In summary, the adoption of International Financial Reporting Standards in Vietnam is an essential part of the nation’s integration and economic development process. IFRS not only helps Vietnamese businesses enhance their competitiveness and attract international investments but also creates favourable conditions for sustainable growth and comprehensive development. By mastering and effectively implementing IFRS, Vietnamese companies have the opportunity to keep pace with the development of the global financial market, contributing to the improvement of the country’s economic image on the international market.