The role and applicatory scope of the Vietnamese Accounting Standards

In the current business environment, financial and accounting management capabilities are indispensable for any business, not only essential for maintaining effective operations but also for attracting investments and ensuring transparency in business activities. In this context, Vietnamese Accounting Standards (VAS) have become an important tool that shapes how businesses in Vietnam conduct their accounting and prepare financial reports. This article will explore the scope and significance of the VAS in financial and accounting management in Vietnam.

What are Vietnamese Accounting Standards (VAS)?

The Vietnamese Accounting Standards (VAS) System is a set of regulations and guidance on accounting principles issued by the Ministry of Finance of Vietnam. It is designed to govern and interpret information presented on a company’s financial statements.

Number of VAS standards

Currently, the VAS system comprises a total of 26 standards, along with Accounting Regimes and Circulars divided based on their scope and application goals. These are:

• Standard 1: General principles
• Standard 2: Inventory
• Standard 3: Tangible assets
• Standard 4: Intangible assets
• Standard 5: Investment properties
• Standard 6: Leases
• Standard 7: Accounting for investments by associates
• Standard 8: Financial reporting of Interest in joint ventures
• Standard 9: Effects of changes in foreign exchange rate
• Standard 10: Business combination
• Standard 11: Revenue and other income
• Standard 12: Construction contracts
• Standard 13: Borrowing costs
• Standard 14: Income taxes
• Standard 15: Provision, contingent liabilities and contingent assets
• Standard 16: Insurance contract
• Standard 17: Presentation of financial statements
• Standard 18: Disclosures in the financial statements for banks and similar financial institutions
• Standard 19: Events after balance sheet date
• Standard 20: Statement of cash flows
• Standard 21: Consolidated financial statements and accounting for investments in subsidiaries
• Standard 22: Related parties’ disclosures
• Standard 23: Interim financial reporting
• Standard 24: Segment reporting
• Standard 25: Net profit or loss for the period, fundamental errors and changes in accounting policies
• Standard 26: Earnings per share

Scope of Application

Accounting standards in Vietnam typically apply to organizations and enterprises operating in in the fields of business and finance, such as auditing and accounting firms. Specifically:

Based on geographical location:

These are businesses headquartered in Vietnam, including foreign-invested enterprises operating in Vietnam.

Based on business sector:

The scope of application of accounting standards covers most business sectors, including manufacturing, services, trade, banking, real estate, transportation, and many other industries.

Based on business scale:

The scope of application varies according to the scale of business, which can be based on revenue, assets, or other criteria.

Based on financial conditions:

If a business does not meet the required financial conditions, they may apply simpler  methods, such as tax accounting.

Based on type of business entity:

The scope of application of accounting standards may vary for different types of business entity, such as joint-stock companies, state-owned enterprises, private enterprises, and foreign-invested enterprises.

The role of VAS

• Guiding accounting practices: VAS provides specific guidance on how to prepare financial reports, handle accounting transactions, and conduct audits. This helps ensure the accuracy and reliability of the information contained in financial reports.
• Facilitating investment attraction: VAS helps create favorable conditions for attracting foreign investment. Businesses that adhere to VAS are often highly regarded by international investors because their financial information is easily comparable and assessable.
• Ensuring legal compliance: Compliance with VAS is mandatory for businesses and organizations in Vietnam as stipulated by the Accounting Law and related legal documents.
• Supporting auditing: VAS is an integral part of the auditing process in Vietnam. Audit projects often rely on these standards to provide opinions on the compliance of financial reports with accounting standards and accounting policies.

Vietnamese Accounting Standards set out accounting standards that help businesses, investors, accounting units, and auditors have a unified understanding of the information in financial reports and handle related issues appropriately. Therefore, VAS is seen as an important tool to ensure transparency and accuracy in financial reporting and financial management for businesses.