The most used language in communication today is English. When using this language, people can easily access many different types of knowledge, and easily exchange between people from different countries. For finance, IFRS is the common language used by businesses, financiers and accountants in one country to read and understand the financial statements of other countries when "exchanging" with each other.

What is IFRS?

IFRS (International Financial Reporting Standards) known as International Financial Reporting Standards including accounting standards issued by International Accounting Standards Council (International Accounting Standards Board - IASB) with the goal of setting general rules for possible financial reporting unified, transparent , and comparable all around the world. Creating a global accounting language makes financial statements no longer distinguishable between countries and territories, becoming transparent, unified, reliable for analysis and reference.

IFRS defines how companies maintain and report their accounts, identifying other types of transactions and events that have a financial impact. The International Financial Reporting Standards (IFRS) were established to create a common accounting language, so that businesses and their financial statements can be consistent and reliable from company to company. another, country to country.

International Accounting Standards Board (IASB)

The International Accounting Standards Board (IASB) consists of a group of independent experts from many fields such as experts with experience in the field of accounting standards development, audit experts, accounting training specialists and experts in the preparation and practice of financial statements. In addition, according to the provisions of the IFRS Foundation Constitution, experts must also come from different geographical regions.

Committee members are responsible for developing and publishing IFRS Standards including the IFRS Standards for Small and Medium Enterprises. The Committee is also responsible for approving the IFRS Guidelines developed by the International Financial Reporting Standards Interpretation Committee (IFRIC). The members of the Committee are appointed by the Trustees of the Foundation through open and rigorous recruitment programs.

Why is there a transition from IAS to IFRS?

There used to be International Accounting Standards (IAS) but why is there a transition to IFRS. There are three possible explanations for this:

The original price principle is no longer relevant in the current context

IAS is mainly based on the original price principle. Meanwhile, IFRS leans towards the principle of fair value.

Currently, financial instruments, especially derivatives, information technology change every second, and investment in value-added fields, etc. is increasing day by day. This leads to the difference between the original price and the actual value of assets and liabilities. Therefore, the original price principle is no longer relevant in the current context and economy.

Although the IAS also has fair value principles in some standards. But, these are considered to be not enough, do not solve many problems, difficult to think and synchronize.

Therefore, International Financial Reporting Standards (IFRS) were born as a necessity to help accurately represent the fair value of assets and liabilities.

Inadequacies in conversion between accounting standards of each country and IAS

Previously, despite having IAS, countries had their own accounting standards that needed to be followed. This creates a significant inadequacy for companies operating in many countries. Even the case of a company incorporated in one country but listed on a stock exchange in another country is an impediment to the evaluation of the information presented and the consolidation of the reports.

Therefore, moving to a common standard like IFRS is absolutely necessary to save society's resources and help increase information transparency.

IFRS is an attempt to change from harmony to convergence

In the past, people working in the Accounting - Auditing - Finance - Tax industry will often talk about how to make accounting standards of one country can be harmonized with other countries. This means that standards are much different and we are moving towards reconciliation.

Meanwhile, IFRS was born as an effort to help countries' accounting standards get closer to each other. And in the future, accounting standards may meet, converging at a point.

In a nutshell, IFRS is understood as accounting standards in the preparation of financial statements that are commonly used by many countries around the world to remove barriers to differences in previous accounting standards, supporting transparency. , reliable for businesses. And IFRS has a great importance in the integration period like today.

The importance of IFRS in the current context

International Financial Reporting Standards – IFRS is of great importance in a period of deep economic integration and development.

• Create a common accounting language and an international framework to prepare and present financial statements in a consistent and reliable way around the world;
• Helping all businesses, organizations, investors, auditors and accountants in the world to understand, use and have an overview of corporate and organizational finance;
• Helps to reflect the values ​​of organizations and businesses more reasonably than each country's own accounting standards such as Vietnam's Vietnamese Accounting Standards (VAS) and old international accounting standards such as IAS ( 1973 – 2000);
• Save the cost of converting financial statements for companies and businesses with branches in many countries. By following IFRS standards, organizations and businesses can simplify accounting procedures in a common language.
• There are many countries in the world that have begun to mandate or plan to move to IFRS international standards. In 2016, more than 100 countries requested or authorized the use of International Financial Reporting Standards (IFRS). As of April 4, according to IFRS.org, up to 2018/144 surveyed countries (accounting for 166%) have mandated the use of international accounting standards IFRS. Most of the remaining 87 countries are either on track to implement or have already approved IFRS.
• Currently, Vietnam has started translating IFRS from 2020 and published the translation from 2021. Application period IFRS voluntary from 2020 to 2025 and from 2025 to apply IFRS in Vietnam based on the orientation of the Ministry of Finance.

Before this importance, thinking about IFRS only needs to be mastered and known if working in multinational companies, now IFRS can be applied in many different business objects. Thereby, professionals in the field of Accounting - Auditing - Finance - Tax in Vietnam need to understand what IFRS means to catch up with the trend of converting from Vietnamese Accounting Standards (VAS) to IFRS according to the Ministry of Finance.