5 Essential Know-How To Comply With Vietnam Accounting Standards

vietnam accounting standards

Wherever you have your business incorporated, you must follow all the rules and legislation involved as it applies to taxation and accounting.

All international and local businesses in Vietnam must legally adhere to the Vietnamese Accounting Standards (VAS) in documenting fiscal transactions.

The Ministry of Finance developed the Vietnamese Accounting Standards and provides financial statement preparation, reporting, and bookkeeping guidelines. These guidelines are also industry-specific, with unique regulations for asset management, securities, and insurance businesses.

By 2025, International Financial Reporting Standards (IFRS) will replace Vietnamese Accounting Standards applied for large enterprises activities in Vietnam.

Entities subject to Vietnam Accounting Standards

The following entities are subject to the regulations stipulated in the Vietnam Accounting Standards:

  • Foreign-owned businesses
  • Branches and subsidiaries of foreign companies incorporated in Vietnam under Vietnamese Law
  • Accountants and like professionals
  • Corporation groups
  • Individuals’ business households
  • Non-business enterprises and organizations, including government-funded enterprises.

Framework for Vietnam Accounting Standards

As stated before, all foreign-invested and local businesses operating in Vietnam must have their accounting practices comply with the Vietnam Accounting Standards.

Foreign companies have two options. They may opt to manage one account record for their overseas head branch and another specifically for the Vietnam Accounting Standard. However, most foreign companies use the latter option and only handle quarterly financial statements according to the global accounting standard (International Financial Reporting Standards) for the head office’s reference.

Additionally, all organizations incorporated in Vietnam that operate by conducting transactions such as sales, supply of goods and services, and purchases using foreign currencies have to stick to a monetary unit for accounting purposes. Once they do this, they must go on to notify the  tax authorities. It should be noted that this monetary unit selection cannot be altered except for special circumstances in the organization’s transactions operations.

The Vietnam Accounting Framework can be summarized thus:

  • All accounting records must be documented at least partly in Vietnamese.
  • The Vietnamese Dong (VND) is the standard accounting currency, with exceptions made for foreign-invested enterprises that can choose a foreign currency for the same purpose.
  • All accounting records must comply with the Vietnam Chart of Accounts.
  • All accounting records must include all the financial reports specified in the Vietnam Accounting Framework, printed monthly and signed by the company General Director, complete with the company seal.

Accounting Period and Timeline

According to Vietnam Accounting Standards, all enterprises have to ready their accounting records per month, quarter, or annually. The accounting period and timeline are as follows:

Annual Accounting Period

This period reads from the 1st of January to the 31st of December annually.

Quarterly Accounting Period 

This timeline lasts three months, from the first day of the first month to the last day of the last month of the quarter.

Monthly Accounting Period 

This duration lasts from the first day to the last day of each month.

Language and Currency Requirements

As stated earlier, Vietnam Accounting standards require that all accounting records be done at least partly in Vietnamese and may be combined with a popular foreign language such as English.

The Vietnamese Dong is the designated accounting currency, with special exceptions for foreign-invested enterprises transacting in foreign currency. All foreign currency must be converted to local fiat for statutory reporting.

Vietnam Accounting Standards Concerning GAAP and IFRS

Between 2001 and 2005, Vietnam introduced 26 Vietnamese Accounting Standards (VAS), which were initially modeled on earlier versions of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). While VAS were derived from IAS or IFRS, they were not comprehensive adaptations, leading to significant deviations in accounting practices. Vietnam’s approach included modifications and selective adoption of IAS or IFRS, influenced by local regulatory interpretations that differed from global standards. Unlike the dynamic and evolving nature of IFRS, VAS have remained static since their initial issuance. This divergence has created notable disparities in accounting practices between Vietnam and international standards, impacting financial reporting and analysis within the global context.

Vietnam Accounting Standards: Differentiating Factors Between VAS and IFRS

Vietnamese Accounting Standards (VAS) and International Financial Reporting Standards (IFRS) exhibit notable differences across several key areas. Firstly, in terms of financial statement structure, VAS mandates a simplified format with fewer required statements compared to the comprehensive framework under IFRS. VAS includes the balance sheet, income statement, cash flow statement, and notes, whereas IFRS adds statements like the statement of changes in equity and requires comprehensive income reporting.

Another significant contrast lies in the treatment of currency and the chart of accounts. VAS adheres strictly to the Vietnamese Dong for accounting purposes and mandates the use of a specified chart of accounts approved by the Ministry of Finance, limiting flexibility compared to IFRS, which allows entities to choose their functional currency and does not prescribe specific chart of accounts formats.

Regarding fair value measurement, IFRS incorporates extensive guidelines (e.g., IFRS 13) on fair value, requiring entities to assess assets and liabilities at their current market values, whereas VAS generally relies on historical cost, with limited exceptions and disclosure requirements for fair value assessments.

Lastly, the treatment of financial instruments and share-based payments diverges significantly. IFRS, through standards like IFRS 9 and IFRS 2, mandates detailed recognition, measurement, and disclosure requirements for financial instruments and share-based payments, considering fair value and equity impacts. In contrast, VAS offers less detailed guidance and may recognize share-based payments at nominal values, potentially leading to different financial reporting outcomes.

To sum up, while VAS serves the specific regulatory and economic context of Vietnam with its structured approach and currency constraints, IFRS provides a globally recognized framework with more extensive provisions for fair value, financial instruments, and share-based payments, offering greater flexibility and transparency in international financial reporting.

Adopting IFRS by 2025 

The Ministry of Finance plans to replace VAS with the IFRS by 2025, with the transition aimed at boosting comparability and transparency of corporate fiscal documents in line with international accounting standards.

The transition will be in two phases:

Phase I: Voluntary application period from 2022 to 2025

In this phase, robust companies will begin to apply IFRS to prepare their financial statements or consolidated financial statements, such as parent entities which are State-owned enterprise (SOEs), listed companies, large unlisted public companies, other parent companies have the need and enough resource to voluntarily apply IFRS and 100% foreign-invested companies which are pre-approval by the Ministry of Finance. Understanding that, all the enterprises subject to VAS are legible to adopt this new approach to accounting.

Phase II: Compulsory application (after 2025)

This refers to the phase after voluntary application where enterprises have fully adopted IFRS in their financial reporting. Therefore, Enterprises are subject to IFRS on compulsory consolidated Financial statements and/or compulsory/voluntary separate financial statements. Except for those which were subject to accounting rules for small and medium and micro sized enterprises are subject to VFRS (Vietnam financial reporting standards).

How can we help?

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From incorporating and registering your business to complying with local taxation and accounting regulations, you need experts to help you stay ahead without compromising your business operations.

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