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.

Key differences between VAS and IFRS

Vietnam’s Ministry of Finance has plans to blend the Vietnam Accounting Standards and International Financial Reporting Standards (IFRS) to eliminate most of the key differences ahead of its 2025 release date.

However, major differences remain with contingencies management, revenue recognition, debt covenant management, inventory costing, and impairment write-downs.

Cash Flow Statements (CFS)

The IFRS is more restrictive in its cash flow treatment than the VAS. Per the IFRS, dividends received and interest paid must be categorized as cash flows. On the other hand, VAS allows more flexibility in how organizations handle interest, overdrafts, and dividends.

Inventories

Businesses that use average cost and LIFO (last-in, first-out) methods as VAS allows will have to use a weighted average or FIFO (first-in, last-out) methods to comply with IFRS.

Presentation of financial statements

VAS does not require the company to disclose key assumptions and other sources of estimating uncertainty. Instead, all that’s needed is an analysis of equity changes rather than the primary financial statement that the IFRS requires.

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, 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?

Setting up a business in a new country can be difficult if you don’t have help. Asides from getting office space and recruiting new workers, you have to navigate the sea of legal paperwork and requirements, most of which you may be unfamiliar with.

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.

At Premia TNC, we specialize in company incorporation and help new companies in Vietnam handle financial reporting, tax returns filing, and other corporate legal requirements.