Vietnam Ministry of Finance speeds up the adoption of international financial reporting standards

Vietnam Ministry of Finance speeds up the adoption of international financial reporting standards 11/11/2020 05:06:00 404

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The Accounting and Auditing Supervisory Department (AASD) of the Ministry of Finance organized a workshop on the application of financial reporting standards to provide information to enterprises, particularly public interest entities and foreign-investment enterprises and support them in their efforts to develop financial statements in line with international financial reporting standards (IFRS) on November 11, 2020 in Ha Noi.

The Accounting and Auditing Supervisory Department (AASD) of the Ministry of Finance organized a workshop on the application of financial reporting standards to provide information to enterprises, particularly public interest entities and foreign-investment enterprises and support them in their efforts to develop financial statements in line with international financial reporting standards (IFRS) on November 11, 2020 in Ha Noi.

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Mr. Vu Duc Chinh – Head of the AASD spoke at the workshop

In his keynote speech, Mr. Vu Duc Chinh, Head of the AASD noted that the Ministry of Finance issued Decision No. 345/QD-BTC to approve the Project on application of financial reporting standards in Vietnam on March 16, 2020. The Decision spells out the scenario and road map to IFRS adoption and revision, re-issuance and new issuance of IFRS-oriented Vietnam financial reporting standards (VFRS). It aims to improve the legal framework for finance and accounting, develop effective tools for business administration as well as State management and supervision in the new period and therefore, contribute to the realization of national socio-economic development objectives.

“After the project was approved, the Ministry of Finance intends to organize a series of activities to provide information to all relevant enterprises and entities and also to hear from them. This workshop is one of them” – Mr. Vu Duc Chinh said.

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Participants in the workshop

In his turn, Mr. Trinh Duc Vinh - Deputy head of the AASD introduced an overview of the road map to IFRS and VFRS application as well as solutions for enterprises. There are three phases, including: preparatory phase from 2020 to 2021, 1st phase (voluntary application) from 2022 to 2025, and 2nd phase (compulsory application) after 2025.

In the preparatory phase, tasks to be undertaken include: To develop and issue the Project on application of financial reporting standards in Vietnam; to set up the Translation and Review board and complete the IFRS translation into Vietnamese; to develop, issue or submit the IFRS translation to the higher authorized issuer; to develop, issue or submit the modality of IFRS application to the higher authorized issuer; to add, amend and issue a range of financial mechanisms that pertain to IFRS application; to build capacity for enterprises and train them to adopt the standards.

With regard to the voluntary phase from 2022 to 2025: The target groups of this phase are enterprises which are parent companies of large-scale State-owned corporations or have loans granted by international financial institutions; or whose parent company is a listed company; large-scale unlisted public companies which are parent companies and other parent companies which have enough resources and want to apply IFRS voluntarily to develop consolidated financial statements; fully foreign-owned companies which are subsidiary companies of foreign parent companies, have enough resources and want to apply IFRS voluntarily to develop separate financial statements.

With regard to the compulsory phase after 2025, based on the evaluation of the first phase, the Ministry of Finance will draw on the needs and readiness of enterprises and the actual context to decide on the game plan and the timing when IFRS application becomes binding on consolidated financial statements or separate financial statements for each group of enterprises to ensure effectiveness and feasibility.

The road map to VFRS application consists of the preparatory phase from 2020 to 2024 and the application phase from 2025. It is expected that VFRS will be applied to every enterprise in Vietnam, regardless of sector and ownership. With regard to micro enterprises, the Ministry of Finance will issue separate accounting guidance.

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Mr. Trinh Duc Vinh, AASD deputy head introduced

an overview of the road map to IFRS and VFRS application

Mr. Trinh Duc Vinh stated that, IFRS application in Vietnam will bring benefits not only to the macroeconomy but also to enterprises that want to apply IFRS and users of financial statements. 93 percent (or 131 out of 143) of countries and territories in the world have officially announced the adoption of IFRS, though to different extents. Among them, 83,2 percent (or 119 out of 143) required IFRS application in all or most of public interest entities.

In order to successfully adopt IFRS, enterprises need to develop seven groups of key solutions. They include (i) strategy and budget development, (ii) human resource development, (iii) organization of the accounting apparatus and development of internal coordination mechanism, (iv) IT system development; (v) data infrastructure development, (vi) development of the process to convert financial statements from Vietnam Accounting Standards to IFRS, and (vii) Technical preparation for development and presentation of financial statements in line with IFRS.

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Mr. Ngo Hoang Ha, Vice CFO of Techcombank shared his experience of adopting IFRS.

Mr. Ngo Hoang Ha, Vice CFO of Techcombank shared that his bank has adopted IFRS for 10 years in quarterly and annual reporting as well as financial statements, which have been disclosed on the bank’s website.

“Among all important components of IFRS application, the development of the data insfrastructure is a real headache. Techcombank has accumulated basic data since it complied with IAS 39, which is the predecessor of IFRS 9. The bank has also implemented Basel II since 2014 – 2015. Compliance with Basel II can satisfy 70 – 80 percent of data used for ECL model in IFRS 9. In parallel, Techcombank continuously review, add and clean missing or incomplete data fields. This is a long-term process with historical data of 5 – 10 years and future data”, said Mr. Ha.

A lot of questions from enterprises were posed during the Q&A session. They focused on the frequency of disclosure of reports, the road map for changing accounting principles, IFRS application in state-own enterprises, usage of old accounting software in IFRS, concerns about expenses, policies, financial assistance, ect. The questions were thoroughly answered by AASD leaders.

To better inform enterprises of the Financial reporting standards project in Vietnam, a similar workshop was held in Ho Chi Minh city on November 12, 2020.

The project has received technical support from development partners, including the World Bank, the Swiss Secretariat for Economic Affairs (SECO), Global Affairs Canada (GAC), Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA).

Thu Trang