On 16th March 2020, the Vietnam Ministry of Finance issued the Decision 345/QD-BTC on approval of proposal to Financial Reporting Standard (“FRS”) application in Vietnam. Key information and impacts of this decision are summarized as follows.
Objectives of proposal
The proposal overall objectives are to enhance accounting and financial frameworks, transparency and effectiveness of the corporate’s financial environment. The proposal objectives are also to develop plan and schedule to apply International Financial Reporting Standards (“IFRS”) in Vietnam applicable to selected entities; and publish and implement Vietnamese Financial Reporting Standards (“VFRS”) in accordance with international accounting practices.
Under the scope of proposal, IFRS would be applicable for all entities incorporated in Vietnam which have demands and resources to apply in line with the announced application schedule. VFRS would be applicable for all type of entities in all sectors except for super-small, small and medium entities without demand to apply IFRS or VFRS.
Plan to apply IFRS
Foreign Direct Investment entities would also apply IFRS in preparation of their statutory financial statements if they have demands and sufficient resources.
Plan to apply VFRS
Our recommendation on proposal impacts to entities
IFRS application and VAS replacement by VFRS are the Government’s efforts to reduce gaps of accounting treatments between Vietnam and IFRS applied countries and jurisdictions. By applying new standards, Vietnamese entity would enhance its transparency and effectiveness of financial information as well as harmonization with the international financial reporting framework. However, there are some challenges that Vietnamese entities would overcome to adopt new accounting standards:
Above is our summary of key information of proposal to FRS application in Vietnam in coming periods and potential impacts to entities. If you have any queries or would like further clarity, please kindly send email to us.
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