Why apply IFRS in Vietnam and why Operators should care about IFRS
Applying International Financial Reporting Standards (IFRS) in financial statements is becoming more and more popular on a global scale and Vietnam cannot stand aside. Currently, Vietnam is entering the period of world economic integration and the application of IFRS has become urgent. That is the first answer to the question why should IFRS be applied in Vietnam.
Here are some reasons why Vietnam needs to apply International Financial Reporting Standards.
Vietnam's economy is increasingly integrating with the world economy
The application of IFRS is not only limited to subsidiaries of multinational corporations in Vietnam, but also begins to affect companies in Vietnam. In the current period of strong globalization, through the application of IFRS, the Vietnamese economy in general and Vietnamese enterprises in particular will benefit from economic integration, such as access to capital, maintain competitiveness and develop in a sustainable way, develop accounting and auditing staff, etc.
The use of financial statements with a consistent, comparable method of preparation and presentation enhances the position of Vietnamese enterprises.
Prepare financial statements according to IFRS reflecting the fair value of the enterprise
Vietnamese companies are still applying Vietnamese Accounting Standards (VAS). But understanding IFRS helps business owners have a better view of the value of their businesses, especially in the cases of mergers and acquisitions, new shareholders, investors, etc. Along with the increase of For foreign investors, as well as for the purpose of calling for investment capital, enterprises need to have a complete, transparent, accurate and reliable IFRS financial statement.
This helps markets improve their ability to attract foreign investment flows, and helps the economy significantly reduce the cost of issuing stocks and bonds to raise capital, due to the high credit rating.
IFRS has many guidelines that VAS and related regulations do not have
Currently, many international reporting standards do not have an equivalent VAS standard. Examples are IAS 19: Regulations on accounting and presentation of employee benefits including short-term, long-term benefits, severance pay; IFRS 13: Measuring fair value;…
By adopting IFRS, businesses have more opportunities to access appropriate guidelines. Thereby, the preparation and presentation of financial statements are more accurate, clear and transparent.
Vietnamese standards will change in the direction of international integration
To keep up with the pace of the world economy and the roadmap to apply IFRS, Vietnam will make changes to Vietnamese Accounting Standards. Whereby, the application of IFRS will help Vietnam stay on track with Vietnam 2035 vision, ASEAN policies as well as keep up with the development momentum of other successful economies in the region and the world.
Why apply IFRS because IFRS is the universal mainstream language
Understanding IFRS helps businesses have useful information about other businesses in the same industry, with similar levels of activity in other countries. IFRS (International Financial Reporting Standards) known as International Financial Reporting Standards, whose goal is to set general rules so that financial reporting can be 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.
That's why, why applying IFRS in Vietnam seems to be an obvious story to do, in order to have a common voice in economic integration.
Why apply IFRS: for the consolidation of financial statements in the parent company
Particularly for foreign direct investment (FDI) enterprises whose parent company uses IFRS, the application of IFRS is a mandatory requirement to serve the consolidation of financial statements in the parent company. Subsidiaries applying IFRS will save time in converting reports to IFRS, as well as having the reports presented in a uniform way to help the parent company quickly grasp the business situation of the subsidiary.
Helps to enhance comparability and transparency of financial statements
The fact that the financial statements are prepared and presented on the same standards makes the financial statements indistinguishable, comparable and reliable. Relevant, comparable financial statements that faithfully reflect an organization's financial position are what investors are looking for in making their investment decisions. IFRS helps to ensure global consistency of financial reporting standards applicable to organizations across different jurisdictions, different countries in financial measurement, disclosure and transparency
Increase the competitiveness of the business
With the use of global accounting standards, it will create global activities, which will increase fair competition and increase investor confidence in the market. Financial statements also provide comprehensive, correct and timely information and thus businesses can be compared with competitors, thereby knowing strengths and weaknesses compared to competitors, at which time enterprises will strengthen their advantages and overcome their weaknesses to be more complete and competitive.
With many advantages when applying IFRS as above, surely we understand why to apply IFRS in Vietnam. In fact, Vietnam has been taking positive steps to be ready for the widespread application of IFRS. However, implementing IFRS is not a simple and very important issue, so Vietnam needs the advice and support of the IASB and experts of international professional organizations and take appropriate transitional steps. appropriate when applicable.
